XTI Aerospace, Inc. XTIA US Equity☆

UNITED

STATES

SECURITIES

AND EXCHANGE COMMISSION

Washington,

D.C. 20549

FORM

10-K

(Mark

One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For

the fiscal year ended December 31, 2024

OR

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For

the transition period from ______________ to _______________

Commission

File Number 001-36404

XTI

AEROSPACE, INC.

(Exact

name of registrant as specified in its charter)

8123

InterPort Blvd., Suite C

Englewood,

CO80112

(Address

of principal executive offices)

(Zip

Code)

(303)503-5660

(Registrant’s

telephone number, including area code)

Securities

registered pursuant to Section 12(b) of the Act:

Common Stock, par value $0.001 XTIA The Nasdaq Stock Market LLC

Securities

registered pursuant to Section 12(g) of the Act:

None

(Title

of class)

Indicate

by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate

by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate

by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange

Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2)

has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate

by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule

405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant

was required to submit such files). Yes ☒ No ☐

Indicate

by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting

company or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller

reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐

Non-accelerated filer ☒ Smaller reporting company ☒

Emerging growth company ☐

If

an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying

with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate

by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness

of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered

public accounting firm that prepared or issued its audit report. ☐

If

securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant

included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate

by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation

received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the issuer is a

shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of the voting and non-voting

common equity held by non-affiliates of the registrant as of June 28, 2024, the last business day of the registrant’s most

recently completed second fiscal quarter, was $10,996,269 based upon the closing price reported for such date on the Nasdaq Capital Market.

As of April 11, 2025, there were 5,537,540 shares of the registrant’s

common stock outstanding.

DOCUMENTS

INCORPORATED BY REFERENCE

None.

XTI

AEROSPACE, INC.

TABLE

OF CONTENTS

PART I 1

ITEM 1: BUSINESS 1

ITEM 1A: RISK FACTORS 10

ITEM 1B: UNRESOLVED STAFF COMMENTS 36

ITEM 1C: CYBERSECURITY 37

ITEM 2: PROPERTIES 38

ITEM 3: LEGAL PROCEEDINGS 38

ITEM 4: MINE SAFETY DISCLOSURES 38

ITEM 6: [RESERVED] 39

ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 52

ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA F-1

ITEM 9A: CONTROLS AND PROCEDURES 53

ITEM 9B: OTHER INFORMATION 53

ITEM 9C: DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 53

PART III 54

ITEM 10: DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 54

ITEM 11: EXECUTIVE COMPENSATION 60

ITEM 14: PRINCIPAL ACCOUNTING FEES AND SERVICES 81

ITEM 15: EXHIBITS, FINANCIAL STATEMENT SCHEDULES 82

SIGNATURE 88

i

SPECIAL

NOTE REGARDING FORWARD-LOOKING STATEMENTS AND OTHER INFORMATION

CONTAINED

IN THIS REPORT

This

report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions

of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange

Act of 1934, as amended (the “Exchange Act”). Forward-looking statements give our current expectations or forecasts of future

events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. You can find many

(but not all) of these statements by looking for words such as “approximates,” “believes,” “hopes,”

“expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,”

“would,” “should,” “could,” “may,” or other similar expressions in this report. In particular,

these include statements relating to future actions; prospective products, anticipated expenses, applications, customers and technologies;

future performance or results of anticipated products; and projected expenses and financial results. These forward-looking statements

are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and

our present expectations or projections. Factors that could cause actual results to differ from those discussed in the forward-looking

statements include, but are not limited to:

● our history of losses;

● our ability to achieve profitability;

● our ability to obtain adequate financing in the future as needed;

● customer demand for the products and services we develop;

ii

● our ability to develop other new products and technologies;

● our ability to attract customers and/or fulfill customer orders;

● the outcome of any known and unknown litigation and regulatory proceedings;

● impact of any changes in existing or future tax regimes;

● our success at managing the risks involved in the foregoing items; and

● other factors discussed in this report.

The

forward-looking statements are based upon management’s beliefs and assumptions and are made as of the date of this report. We undertake

no obligation to publicly update or revise any forward-looking statements included in this report. You should not place undue reliance

on these forward-looking statements.

This

report also contains or may contain estimates, projections and other information concerning our industry and our business, including

data regarding the estimated size of our markets and their projected growth rates. Information that is based on estimates, forecasts,

projections or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially

from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained these industry, business,

market and other data from reports, studies and similar data prepared by third parties, industry and general publications, government

data and similar sources. In some cases, we do not expressly refer to the sources from which these data are derived.

iii

EXPLANATORY

NOTE

On March 12, 2024 (the “Closing

Date”), XTI Aerospace, Inc. (formerly known as Inpixon (“Legacy Inpixon”)), Superfly Merger Sub Inc., a Delaware corporation

and a wholly owned subsidiary of XTI Aerospace (“Merger Sub”), and XTI Aircraft Company, a Delaware corporation (“Legacy

XTI”), completed their previously announced merger transaction pursuant to that certain Agreement and Plan of Merger, dated as of

July 24, 2023 and amended on December 30, 2023 and March 12, 2024 (the “XTI Merger Agreement”), pursuant to which Merger Sub

merged with and into Legacy XTI with Legacy XTI surviving the merger as a wholly-owned subsidiary of XTI Aerospace (the “XTI Merger”).

In connection with the closing of the XTI Merger, our corporate name changed to “XTI Aerospace, Inc.”

In

this report, unless otherwise noted, or the context otherwise requires, the terms “XTI Aerospace,” the “Company,”

“we,” “us,” and “our” refer to XTI Aerospace, Inc. (formerly known as Inpixon), Inpixon GmbH, IntraNav

GmbH and, prior to the closing of the XTI Merger, Merger Sub, and after the XTI Merger, Legacy XTI.

The

Company determined the XTI Merger should be accounted for as a reverse acquisition with Legacy XTI being considered the accounting acquirer.

Therefore, the consolidated financial statements included in this report represent a continuation of the financial statements of Legacy

XTI and the results of operations of the accounting acquired entity, Legacy Inpixon, are included in the consolidated financial statements

as of the Closing Date and through the December 31, 2024 reporting date.

Note

Regarding Reverse Stock Splits

The

Company effected a reverse stock split of its outstanding common stock, par value $0.001, at a ratio of 1-for-100, effective as of March

12, 2024, for the purpose of complying with Nasdaq Listing Rule 5550(a)(2) and satisfying the bid price requirements applicable for initial

listing applications in connection with the closing of the XTI Merger. The Company also effected a reverse stock split of its outstanding

common stock at a ratio of 1-for-250, effective as of January 10, 2025, for the purpose of complying with Nasdaq Listing Rule 5550(a)(2).

We have reflected the reverse stock splits herein, unless otherwise indicated.

iv

PART

I

ITEM

1: BUSINESS

Overview

We

are primarily an aircraft development company. We also provide real-time location systems (“RTLS”) for the industrial sector,

which was Legacy Inpixon’s focus prior to the closing of the XTI Merger.

Headquartered in Englewood, Colorado, the Company is developing a vertical

takeoff and landing (“VTOL”) airplane that is designed to take off and land like a helicopter and cruise like a fixed-wing

business airplane. We believe our initial configuration, the TriFan 600 airplane, will be one of the first civilian fixed-wing VTOL airplane

that offers the speed and comfort of a business airplane and the range and versatility of VTOL for a wide range of customer applications,

including private aviation for business and high net worth individuals, emergency medical services, and regional charter air travel. Since

2013, we have been engaged primarily in developing the aerodynamic performance and top-level engineering design of the TriFan 600, building

and testing a two-thirds scale unmanned version of the TriFan 600, generating pre-orders for the TriFan 600, and seeking funds from investors

to enable the Company to advance the detailed design and certification of the TriFan 600, and to eventually engage in commercial production

and sale of the TriFan 600.

We continue to work to optimize our airplane design for both manufacturing

and certification. The development of a VTOL airplane that meets our business requirements demands significant design and development

efforts on all facets of the airplane. We believe that by bringing together a mix of talent with VTOL and traditional commercial aerospace

backgrounds, we have built a team that enables us to move through the design, development, and certification of our VTOL airplane with

the FAA in an efficient manner, thus allowing us to achieve our end goal of bringing to market our airplane as efficiently as possible.

To date, we have not generated revenue from the sale of aircraft, as

we continue to design, develop, and seek the governmental approvals necessary for our VTOL airplane to enter into service. We will need

to raise capital for the foreseeable future to continue to fund our efforts to bring our VTOL airplane to market. The amount and timing

of any future capital requirements will depend on many factors, including the pace and results of the design and development of our airplane

and future manufacturing operations, as well as our progress in obtaining necessary FAA certifications and other government approvals.

For example, any significant delays in obtaining such FAA certifications and other government approvals will likely require us to raise

additional capital and delay our generation of revenues from aircraft sales.

Our

RTLS solutions leverage cutting-edge technologies such as IoT, AI, and big data analytics to provide real-time tracking and monitoring

of assets, machines, and people within industrial environments. With our RTLS solutions, businesses can achieve improved operational

efficiency, enhanced safety and reduced costs. By having real-time visibility into operations, industrial organizations can make informed,

data-driven decisions, minimize downtime, and ensure compliance with industry regulations.

Corporate

Strategy

In

addition to advancing the design and certification of the TriFan 600 for commercial production and sale, and in order to continue to respond

to rapid changes and required technological advancements, increase our opportunities for revenue generation, and increase shareholder

value, we are exploring strategic transactions and opportunities that we believe will enhance shareholder value. We are particularly focused

on delivering leading, business-focused solutions that seek to shape the future across powered-lift aircraft solutions. Expanding into

autonomous, remotely operated drones is key to our strategic vision. By combining drone technology with VTOL innovation, we believe we

are positioning XTI to accelerate the development of both unmanned aerial vehicles (UAV) and VTOL solutions, expand its market presence,

and create new opportunities across multiple industries. We will also be opportunistic and may consider other strategic and/or attractive

transactions, which may include, but not be limited to other alternative investment opportunities, such as minority investments and joint

ventures. If we make any acquisitions in the future, we expect that we may pay for such acquisitions with cash, equity securities and/or

debt in combinations appropriate for each acquisition. In this regard, in January of this year, we entered into a non-binding memorandum

of understanding to acquire a minority equity interest in an AI-powered, autonomous drone company. We may enter into one or more additional

non-binding letters of intent in connection with our due diligence and strategic transaction evaluation process. In addition to these

strategic initiatives, we also intend to invest in a variety of thought leadership marketing and branding initiatives to increase market

visibility and enhance our brand strength and credibility within the powered lift aircraft market.

1

The

Air Travel Market

In today’s regional air travel market, customers have two choices

– either a fixed-wing airplane, which requires a runway, or a helicopter, which is slower, comparatively expensive, and relatively

range limited. What we intend to bring to market is a unique airplane combining the speed, range and comfort of a fixed-wing business

airplane with the point-to-point VTOL capability of a helicopter. Our target customers for the TriFan 600 include corporate and individual

business aircraft and helicopter operators, charter operators, major and regional airlines, and air medical operators. In terms of current

market size, the 2024 year-end General Aviation Aircraft Shipment Reports of the General Aviation Aircraft Manufacturers Association

(“GAMA”) reports total general (civilian, non-commercial) aircraft and helicopter shipments billings at approximately $31.2

billion for 2024, an approximate 12% increase from 2023.

We believe the anticipated differentiating performance capabilities

of the TriFan 600 – the unique versatility delivered by combining the best of a helicopter and a business airplane in one platform

which we expect will result in significant time and cost savings – will be attractive to customers and disruptive in existing markets.

As of the date of this filing, we have conditional pre-orders under a combination of aircraft purchase agreements, non-binding reservation

deposit agreements and options for the delivery of more than 290 airplanes. See “- Customers - TriFan 600” for more information.

In contrast to the eVTOL (electric vertical takeoff and landing) aircraft,

which are short-range air taxis for urban transport being developed by other companies (and not yet certified by the FAA), the TriFan

600 is expected to have significantly greater range of 700 miles in addition to the flexibility to take off and land vertically (VTOL),

conventionally (CTOL), or on short runways (STOL). With our initial configuration of two turboshaft engines, we expect that our customers

will be able to use much of the existing infrastructure on the ground, including more than 5,000 existing helipads in the U.S. alone,

as well as other landing areas where it is safe and legal to land and take off, including job sites, grassy areas, driveways, backyards,

other paved and improved surfaces, hospital helipads and regional airports, which may not contain the requisite charging infrastructure

for eVTOL aircraft. We expect that the TriFan’s speed, range, and comfort, as well as its flexibility in takeoff and landing sites

will offer a significant competitive advantage over eVTOL aircraft because eVTOL aircraft depend on the availability of battery or hydrogen

charging infrastructure which is not commercially available yet. We expect that the TriFan 600 will provide increased connectivity between

communities as well as generate time savings for travelers. As technology matures, we envision a transition to hybrid-electric propulsion

for future TriFan configurations in our pursuit of taking aviation to a greener future. We believe our phased, measured-risk approach

is prudent given the lack of technology readiness of battery and hydrogen propulsion, limited and slow progress with respect to regulatory

guidance regarding novel propulsion technologies, and expected long timelines to develop a widespread charging network. With time, we

anticipate that owners and users of the TriFan will be able to access many of the landing pads, vertiports, and other VTOL aircraft infrastructure

that we expect will accommodate eVTOL air taxis, which should allow the Company to participate to some extent in the future Advanced Air

Mobility market.

As of the date of this filing, the base price of the TriFan 600 airplane

is approximately $10 to $12 million. The announced price for our only known direct competitor for a civilian fixed-wing VTOL airplane

is between $20 million and $30 million. The TriFan 600’s $10 to $12 million base price falls within the price range ($6.5 million

- $12 million) for many of the business airplanes with whom we expect the TriFan 600 to compete. Unlike the TriFan 600, these airplanes

require runways for takeoff and landing, which adds to total trip times. The $10 to $12 million base price is above the initial purchase

price range ($5.5 million to $8.2 million) for helicopters with whom the TriFan 600 expects to compete. However, the TriFan 600 will be

capable of completing missions at approximately twice the speed of competing helicopters. Therefore, the mission time compared to helicopters

is expected to be reduced by 40% - 50% and mission costs and emissions will also be reduced. As a result, we expect the TriFan 600’s

five-year cost of ownership (initial base purchase price plus annual direct operating costs) to be lower than much of the helicopter competition.

Products

and Services

TriFan

600

2

Real-Time

Location Systems (RTLS) & IIoT Solutions

Our real-time location systems (RTLS) & IIoT solutions consist of the following software and hardware products. During the quarter

ended December 31, 2024, the Company began exploring strategic options to wind down and/or sell the hardware portions of the Company’s

Industrial IoT business segment in order to shift its focus towards sales of software products.

3

Positioning

Innovation Powered by Machine Learning

In

2025, we intend to continue to explore the use of machine learning and artificial intelligence (“AI”) to improve positioning

accuracy, reliability and range which would provide additional benefits to existing customers and unlock new opportunities for our RTLS

technology. Here is an example of how we are utilizing AI to enhance our technology: due to fluctuating frequency plotting in the beginning

of a project, but after applying advanced AI filter methods and machine learning algorithms we can better understand the radio frequency

(RF) behavior as to how the time difference of arrival (TDoA) sync path should be configured in the specific environment considering

several attributes. Following these enhancements, we believe our products will be able to assist in providing predictive, more accurate,

bidirectional location information to secure and optimize our deployments using hardware that includes iOS and Android smartphones, IoT

sensors, access points or BLE beacons.

5G

Building

on research and development (R&D) efforts in 2024, we intend to continue to study the worldwide 5G deployments, both public and private,

to identify a robust hardware and software solution to detect and position new handsets based on this technology and explore software

defined radio solutions, as well as enhancements in antenna technology to provide our customers with additional capabilities in the security

field. This is a complex challenge and we are working with partners and customers to understand requirements, use cases and solutions.

Analytics

and Insights

Inpixon

Analytics on-premises or in the cloud, along with specially-optimized algorithms and industry specific dashboards that are intended to

provide better visibility, predictive maintenance, process optimization, security and safety, and data-driven decision-making. Improved

visibility gives real-time locations and status of assets, people, and equipment both indoors and outdoors. By collecting and analyzing

data from RTLS systems, organizations gain insights from asset movements and use this information to optimize their operations. Predictive

maintenance reduces downtime and maintenance costs, as well as improve the lifespan of equipment. Process optimization helps improve

productivity, reduce costs, and enhance customer satisfaction. Security and safety helps prevent accidents, reduce the risk of theft,

and enhance the overall safety of employees and customers. Data-driven decision making by analyzing data from RTLS systems, organizations

gains a better understanding of their operations, identify areas for improvement, and make data-driven decisions that drive business

value. Furthermore, we are continuing to enhance the integration of ChatGPT, a generative artificial intelligence (AI), into our RTLS

solutions. This innovative integration expands the capabilities of our RTLS, enabling rapid, AI-assisted insights as well as interactive

discussions in a conversational medium. Operations managers in production and logistics, in particular, stand to benefit from this transformative

development.

Research

and Development

TriFan

600

4

In 2022, Legacy XTI updated the exterior design of the TriFan 600,

including the location of the wing fans and the horizontal tail, to improve the performance and efficiency of the airplane. Design and

engineering for other systems, including the propulsion system, landing gear, cockpit visibility, cabin sizing and structural integrity

were also advanced during 2022 and 2023. Legacy XTI identified the initial supply chain and began negotiating with key suppliers globally.

As a result of these efforts, Legacy XTI has established a baseline bill-of-materials.

Following

a series of scaled model tests and Computational Fluid Dynamic (CFD) analysis, the engineering team further enhanced the aerodynamic

performance and stability of the TriFan 600 and released its latest configuration, C211.2, and included a larger vertical stabilizer,

enhanced duct and stator designs, new engine air inlets and exhaust, an updated drive train, and additional system design. The C211.2

configuration is currently undergoing CFD analysis at Oak Ridge National Laboratory. In addition, the engineering team continues to evolve

the Digital Mockup (DMU), mass properties (i.e., weight) and Global Finite Element Modeling (GFEM) analysis.

In 2024, the Company engaged

the FAA in a General Familiarization (Gen Fam) briefing for the TriFan 600. Follow-up meetings with FAA Subject Matter Experts (SME) began

in early 2025 and will continue throughout the year to help assess safety, certification standards and potential certification challenges

and obstacles. In March 2025, the Company submitted its TriFan 600 Type Certification application and G-1 “basis of certification”

to the FAA for review. The G-1 addresses the latest draft Powered Lift Category guidelines and identifies areas unique to the TriFan 600

and intended means of safety and compliance.

The

Company is currently working through the TriFan 600’s Preliminary Design Review (“PDR”) update, which we expect to

complete in early 2026. During this PDR update, the Company will be refreshing the TriFan 600 vendor / supplier list. For critical suppliers,

we will begin signing phased contracts during the first half of 2025. Once the PDR phase is completed, we expect that almost all suppliers

for the TriFan 600 will have been identified and most under contract. Supplier systems and subsystems will be integrated into our PDR

configuration, C212. We will engage a handful of outside experts to be part of our PDR participants to help assess our PDR “exit”

readiness.

After PDR, we will launch our detailed design phase culminating in

a Critical Design Review (“CDR”). This phase will include further interactions with suppliers to develop and mature major

structures and systems of the airplane. With input from industry-respected suppliers, we believe all systems of the TriFan 600 can be

incorporated into the airframe to deliver a fully integrated solution. The fulfillment of this phase is expected to pave the way for approving

engineering designs used to build the airplane. The CDR phase will also include ongoing communication with the FAA to discuss and maintain

awareness of our compliance with federal regulations. We expect this phase to take approximately 12 to 18 months.

Following the completion of the CDR phase, we will begin fabricating

and constructing our full-scale flight test airplane and working towards first flight. After a successful first flight activities, the

certification from the FAA is expected to take an additional 18 to 24 months to achieve. As such, we anticipate FAA type certification

of the TriFan 600 in 2030.

RTLS

& IIoT Solutions

Our

management believes that we must continue to dedicate a significant amount of resources to research and development efforts to maintain

a competitive position. Our RTLS products intersect many emerging fields including metaverse, augmented reality, occupancy planning,

industry 4.0, smart cities, and more, and we continue to innovate and patent new methods to solve problems for our customers.

5

Sales

and Marketing

TriFan

600

We intend to market our airplane through customer-targeted marketing

campaigns (e.g., EMS, land management, oil & gas) utilizing our digital presence, webinars, podcasts, national and regional trade

shows, conferences, and other media. To best identify target customers, we intend to utilize a Customer Advisory Board – a focus

group to solidify the “voice of the customers” and allow us to map customer requirements and use cases to our available features,

functions and options.

RTLS

& IIoT Solutions

Our

sales channels include direct sales as well as indirect sales through channel partners including original equipment manufacturers (OEMs),

integrators, resellers and distributors. Indirect sales partners may provide a range of pre- and post-sales services to our customers

including system design, installation, commissioning and service.

Direct

sales representatives are compensated with a base salary and may participate in incentive plans such as commissions or bonuses.

We

market our products through industry-focused as well as account-based marketing strategies which utilize SEO, advertising, social media,

trade shows, conferences, webinars and other media.

Our

RTLS products are primarily sold on a license and SaaS mode, which we call “location as a service” or “LaaS.”

In our licensing model, we also typically charge an annual maintenance fee. The LaaS model is typically for a 3-5 year contract and includes

license to use, maintenance and hardware upgrades. The LaaS model generates a recurring revenue stream.

Customers

TriFan

600

We previously had a pre-sales program that included refundable deposits

for the TriFan 600 airplane that we intend to reopen later in 2025. Most pre-orders do not include deposits. Pre-sale agreements generally

provide customers a delivery slot for their airplanes. The deposits we have received do not create an obligation on the part of the customer

to purchase an airplane, and a customer may request the full return of its refundable deposit. Most pre-orders are subject to the execution

of a definitive purchase agreement between us and each party that contains the final terms for the purchase of our TriFan 600 airplane,

including, but not limited to, the final number of airplanes to be purchased and the timing for delivery of the airplanes. As of the date

of this filing, we have conditional pre-orders under a combination of aircraft purchase agreements, non-binding reservation deposit agreements

and options for the delivery of more than 290 airplanes.

We have non-binding purchase orders for the purchase of 140 TriFan

600 airplanes, including a non-binding pre-order for the purchase of 100 TriFan 600 airplanes by Mesa Airlines, Inc. (“Mesa”)

pursuant to that certain conditional aircraft purchase agreement, dated February 2, 2022, by and among Legacy XTI, Mesa Airlines and Mesa

Air Group, Inc. Mesa’s purchase obligations under such agreement are conditioned upon, among other things, certification of our

airplane by the FAA and the agreement by the parties of all material terms of the transaction including, but not limited to, delivery

dates, airplane specifications, warranties, remedies, milestones relating to the development of the TriFan 600, the type and extent of

assistance to be provided by Mesa in obtaining certification of the TriFan 600, branding and marketing matters, and optional equipment

in the airplane. If the parties do not agree on such material terms, either party has the right to terminate the agreement if such party

determines in its discretion that it is not likely that the material terms will be agreed to in a manner consistent with such party’s

business and operational interests (as those interests may change from time to time).

6

Additionally, we have entered into non-binding options to purchase

an aggregate of 40 airplanes with potential purchasers located in the United States and Europe. We have entered into non-binding aircraft

reservation deposit agreements for an aggregate of 114 airplanes with potential purchasers located in the United Kingdom, Ireland, Australia,

Dubai, India, Japan, Brazil, and the United States. Customers making reservation deposits are not obligated to purchase any airplanes

until they execute a definitive purchase agreement. We have written letters of intent (without deposits) with customers for an additional

105 airplanes. Customers may request a return of their refundable deposits any time up until the execution of a purchase agreement. These

conditional orders and reservations represent the potential of more than $3.0 billion in future gross revenue upon delivery of those airplanes,

assuming the low end of our current list price range of $10 million per airplane assuming we can execute on the development program for

the TriFan 600, secure FAA certification, and deliver these airplanes.

RTLS

& IIoT Solutions

Our

RTLS offerings which include real-time location tracking, collision avoidance and wireless device detections are used around the world

in automotive factories, heavy equipment factories, logistics and distribution warehouses, mining operations, government and military

buildings, and corporate offices.

During

the year ended December 31, 2024, four customers accounted for over 10% of revenue (23%, 14%, 13%, and 11%, respectively). The Company

had no revenue during the year ended December 31, 2023.

Competition

TriFan

600

The private jet and private business aircraft markets are highly competitive,

and we face a significant number of original equipment manufacturer competitors, most of which are larger, better known and have better

financial resources than us. When the TriFan 600 goes into production, we believe it will compete with other aircraft manufacturers by

providing our customers with what we believe is a unique airplane with distinct and largely unique performance capabilities at a competitive

purchase price. We believe the TriFan 600 airplane will be one of a small number of aircraft that offers the speed, range and comfort

of a business airplane with the versatility of VTOL. As we expect that the TriFan 600 will be capable of flying greater distances and

on average at twice the speed and three times the range of competing helicopters, we expect the TriFan 600 to offer lower direct operating

costs (cost per flight hour) and be able to fly almost twice as many missions, thus generating additional cost savings and revenue for

airlines and aircraft operators when compared with helicopters.

RTLS &

IIoT Solutions

Our

RTLS business is characterized by innovation and rapid change. Our RTLS Indoor Intelligence products compete with companies such as Aruba,

Cisco, Juniper Networks/Mist Systems, Ubisense, Sewio, Kinexon, Zebra Technologies and other mostly vertical focused RTLS companies.

Some competitors determine positioning primarily using BLE or Wi-Fi and, therefore, we believe they cannot achieve the same accuracy

that we do and so cannot meet some customers’ needs. Many RTLS competitors are focused on one technology and/or vertical and, at

this time, we believe none of them have as complete an offering of tags, anchors, positioning, engine, software, integrations and analytics.

We

believe we offer a unique and differentiated approach to the market with our industrial RTLS which is:

7

Intellectual

Property

TriFan

600

We have received a utility

patent (US Patent 9,676,479) and a design patent (US Patent D741247) for a VTOL airplane that includes a pair of ducted lift/thrust fans

that are rotatably moveable between the lift and thrust positions. Based on those U.S. patents, the Company has also applied for and has

been issued multiple additional foreign utility patents, including from China, Japan, Europe and Canada. We have sought to protect our

intellectual property using patents and trade secrets. Employee and third-party consultants have signed non-disclosure agreements with

Legacy XTI which include standard provisions related to assignment of work product and other requirements to further protect its proprietary

rights. We are continuing to develop intellectual property, and we intend to aggressively protect our position in key technologies. We

own several trademarks protecting Legacy XTI’s name and logo. Our intellectual property also includes extensive data, engineering

analyses and other know-how.

We have obtained broad patent

protection in both respects through the above-referenced patents. Under the European patent, we have applied for issuance of patents

in the U.K., France, Germany, and Italy, where we expect the airplane will be sold and used. Patents are also pending in Brazil.

RTLS

To

establish and protect our proprietary rights, we rely on a combination of patents, trademarks, copyrights, trade secrets, including know-how,

license agreements, confidentiality procedures, non-disclosure agreements with third parties, employee disclosure and invention assignment

agreements, and other contractual rights. We do not believe that our proprietary technology is dependent on any single patent or copyright

or groups of related patents or copyrights. We believe the duration of our patents is adequate relative to the expected lives of our

products.

In connection with the Company’s

disposition of its enterprise app business lines to CXApp, Inc. in March 2023 (see Part III, Item 11 “Executive Compensation —

Completed Transaction Bonus Plan” for more information about this disposition), each of the Company and CXApp, Inc. granted the other

party (each, a “Licensee”) a limited worldwide, non-exclusive, irrevocable, royalty free, fully paid up, perpetual license

to use, practice and otherwise exploit such intellectual property (with certain exceptions) that is owned, controlled or purported to

be owned or controlled by the other party (the “Licensor”) to the extent used, practiced or otherwise exploited in the business

of the Licensee during the twelve (12) months prior to the separation or is reasonably anticipated to be used after the separation for

the conduct of any business of the Licensee as conducted on or prior to the separation and reasonably anticipated extension or evolutions

thereof that are not substitutes for any product or service of the Licensor.

Government

Regulation

In

general, we are subject to numerous federal, state and foreign legal requirements on matters as diverse as data privacy and protection,

employment and labor relations, immigration, taxation, anticorruption, import/export controls, trade restrictions, internal and disclosure

control obligations, securities regulation and anti-competition.

Violations

of one or more of these diverse legal requirements in the conduct of our business could result in significant fines and other damages,

criminal sanctions against us or our officers, prohibitions on doing business and damage to our reputation. Violations of these regulations

or contractual obligations related to regulatory compliance in connection with the performance of customer contracts could also result

in liability for significant monetary damages, fines and/or criminal prosecution, unfavorable publicity and other reputational damage,

restrictions on our ability to compete for certain work and allegations by our customers that we have not performed our contractual obligations.

To date, compliance with these regulations has not been financially burdensome.

Aviation

Regulations

In

the U.S., civil aviation is regulated by the FAA, which controls virtually every aspect of flight from pilot licensing to aircraft design

and construction, and use of the public air space within the boundaries and territorial waters of the United States. The FAA requires

that every civilian aircraft that flies in the U.S. carry a valid “type certificate” and airworthiness certificate issued

by the FAA or a foreign civil aviation authority.

We intend to seek approval for the design of the TriFan 600 by obtaining

a standard Type Certificate under Federal Aviation Regulations, in particular the criteria set forth under the “Powered Lift”

regulations. In March 2025, the Company submitted its Type Certification application to the FAA. The FAA will oversee extensive testing

and analysis of the TriFan 600 to confirm the airplane’s safety, stability, reliability, performance, and compliance with the applicable

airworthiness standards.

8

In addition, once the FAA issues a type certificate to the Company,

we intend to apply for a production certificate, the FAA’s approval required for the manufacture of an FAA-approved type design,

to enable the Company to manufacture the TriFan in commercial quantities. TriFan 600 airplane that are manufactured by XTI in accordance

with the type certificate and the production certificate will be delivered to customers along with a certificate of airworthiness. To

obtain a production certificate from the FAA, we must demonstrate that our organization and our personnel, facilities, and quality system

can produce the airplane such that they conform to the approved design.

Since

we are not permitted to deliver commercially produced aircraft to customers until any such aircraft has obtained FAA certification, no

material aircraft sales revenue will be generated before receipt of FAA certification. The process of obtaining a valid type certificate,

production certificate and airworthiness certificate for the TriFan 600 will take several years.

In

addition to the FAA, customers’ operation of the TriFan 600 will be regulated by various state, county, and municipal agencies.

Specifically, flight of the TriFan 600 will be regulated by the FAA, while the ability to take off and land will be governed by the FAA

and various zoning restrictions imposed by non-federal agencies in each location where an owner of the TriFan 600 intends to operate.

These restrictions vary by location. Some government and private locations in the U.S. and around the world limit or prohibit the use

of aircraft. There are currently over 5,000 helipads in the U.S. where helicopters are allowed to land. Thus, we expect that customers

will be able to legally land the TriFan 600 in these locations and at thousands of other paved areas or grassy areas, job sites, residential

and commercial locations in the U.S. and around the world where it’s safe and legal to land VTOL aircraft, as well as smaller general

aviation airports unavailable to conventional business aircraft and jets.

Employees

As of April 11, 2025, we have 47 employees, including 4 part-time employees,

which includes all employees of our subsidiaries. This includes 3 officers, 7 sales personnel, 4 marketing personnel, 20 technical and

engineering personnel and 9 finance, other executive, legal and administration personnel.

Business

Combination

On

July 24, 2023, we entered into an Agreement and Plan of Merger (amended on December 30, 2023 and March 12, 2024, the “XTI Merger

Agreement”) by and among us, Superfly Merger Sub Inc., a Delaware corporation and our then wholly-owned subsidiary (“Merger

Sub”), and XTI Aircraft Company, a Delaware corporation (“Legacy XTI”). Pursuant to the XTI Merger Agreement, on March

12, 2024 (the “Closing Date”), Merger Sub merged with and into Legacy XTI (the “XTI Merger”), with Legacy XTI

surviving the XTI Merger as our wholly-owned subsidiary. Following the effective time of the XTI Merger (the “Effective Time”)

on the Closing Date, we amended our articles of incorporation to change our name from “Inpixon” to “XTI Aerospace,

Inc.” and the combined company opened for trading on the Nasdaq Capital Market on March 13, 2024 under the new ticker symbol “XTIA”.

Immediately prior to the Effective

Time, we effected a 1-for-100 reverse split of our outstanding shares of common stock.

Corporate

Information

We

currently have two direct, wholly-owned operating subsidiaries: XTI Aircraft Company, based in Englewood, Colorado (at our corporate

headquarters), and Inpixon GmbH (previously Nanotron Technologies GmbH), based in Berlin, Germany. IntraNav GmbH, based in Eschborn,

Germany (“IntraNav”), is an indirect subsidiary of the Company and the wholly-owned subsidiary of Inpixon GmbH.

Our

principal executive offices are located at Centennial Airport at 8123 InterPort Blvd., Suite C, Englewood, Colorado 80112. This facility

houses our principal executive office, finance, and other administrative activities, although our employees and consultants mostly work

remotely. Our engineers are working remotely throughout the U.S.

We

believe that our facility in Colorado meets our needs for the immediate future. During 2024, we commenced a site selection process to

identify a facility located at an airport within the continental U.S. that will allow us to consolidate engineers and other administrative

employees, perform flight simulations, perform propulsion rig and prototype flight tests, and potentially expand to a full production

site with a facility for pilot training. It is not yet determined whether our corporate headquarters will change from the current location

at Centennial Airport.

Our

telephone number is (800) 680-7412. We have also agreed to sublease office space in Palo Alto, California. Two of our subsidiaries, Inpixon

GmbH and IntraNav, maintain offices in Berlin Germany, and Eschborn, Germany, respectively. Our Internet website is www.xtiaerospace.com.

The information on, or that can be accessed through, our website is not part of this report, and you should not rely on any such information

in making any investment decision relating to our common stock.

9

ITEM

1A: RISK FACTORS

We

are subject to various risks and uncertainties that may materially harm our business, prospects, financial condition and results of operations.

An investment in our common stock is speculative and involves a high degree of risk. In evaluating an investment in shares of our common

stock, you should carefully consider the risks described below, together with the other information included in this report.

If

any of the events described in the following risk factors actually occurs, or if additional risks and uncertainties later materialize,

that are not presently known to us or that we currently deem immaterial, then our business, prospects, results of operations and financial

condition could be materially adversely affected. In that event, the trading price of our common stock could decline, and investors in

our common stock may lose all or part of their investment in our shares. The risks discussed below include forward-looking statements,

and our actual results may differ substantially from those discussed in these forward-looking statements.

Summary

Risk Factors

The

following summarizes the risks and uncertainties that could materially adversely affect our business, financial condition, results of

operation and stock price. You should read this summary together with the more detailed description of each risk factor contained below.

Risks

Related to Our Business and Industry

10

Risks

Related to Our Securities

11

Risks

Related to Our Business and Industry

We

have a limited operating history and have not yet manufactured any non-prototype aircraft, delivered any aircraft to customers or generated

any revenues from our aircraft business, and we may never develop or manufacture any VTOL aircraft according to our current development

schedule, or at all.

We have a limited operating history in the VTOL aircraft industry.

Our primary VTOL aircraft product is the TriFan 600 airplane, which is currently in the developmental stage. If we are successful in commercially

producing the TriFan 600 according to our current development schedule, we do not expect to be able to obtain approval from the FAA and

regulatory bodies in other countries, and commence deliveries until 2030 at the earliest, if at all. We have no experience as an organization

in high volume manufacturing of the TriFan 600 or any other type of aircraft. We cannot assure you that we or our partners will be able

to develop efficient, automated, cost-efficient manufacturing capabilities and processes and reliable sources of component supplies that

will enable us to meet the quality, price, engineering, design and production standards, as well as the production volumes, required to

successfully mass market our aircraft. You should consider our business and prospects in light of the risks and significant challenges

we face as a new entrant into our industry, including, among other things, with respect to our ability to:

● design and produce safe, reliable and quality aircraft on an ongoing basis;