XTI Aerospace, Inc. Stock Compensation Disclosure
Note 12 - Stock Award Plans and Stock-Based Compensation
The Company has three Employee Stock Incentive plans. The Company assumed Legacy XTI’s 2017 Employee and Consultant Stock Ownership Plan (the “2017 Plan”) in connection with the XTI Merger. Legacy Inpixon had put in place a 2011 Employee Stock Incentive Plan (the “2011 Plan”) and a 2018 Employee Stock Incentive Plan (the “2018 Plan” and together with the 2011 Plan, the “Legacy Inpixon Option Plans”). The Company determined that activity within the 2011 Plan is not material.
2017 Plan
During 2017, Legacy XTI adopted the 2017 Plan, which was amended in 2021 to increase the maximum shares eligible to be granted under the 2017 Plan. The Company may issue awards in the form of restricted stock units and stock options to employees, directors, and consultants. Under the 2017 Plan, stock options are generally granted with an exercise price equal to the estimated fair value of the Company’s common stock, as determined by the Company’s Board of Directors on the date of grant. Options generally have contractual terms of ten years. Incentive stock options (ISO) may only be granted to employees, whereas all other stock awards may be granted to employees, directors, consultants and other key stakeholders. As of December 31, 2024, there are shares available for future grants under the 2017 Plan.
2018 Plan
In February 2018, Legacy Inpixon adopted the 2018 Plan which is utilized for employees, corporate officers, directors, consultants and other key persons employed. The 2018 Plan provides for the granting of incentive stock options, NQSOs, stock grants and other stock-based awards, including Restricted Stock and Restricted Stock Units (as defined in the 2018 Plan). As of December 31, 2024, there are unvested Restricted Stock or Restricted Stock Units outstanding under the 2018 Plan.
Incentive stock options granted under the Legacy Inpixon Option Plans are granted at exercise prices at a minimum of 100% of the estimated fair market value of the underlying common stock at date of grant. For any individual possessing more than 10% of the total outstanding common stock of the Company, the exercise price per share for incentive stock options is a minimum 110% of the estimated fair value of the underlying common stock on the grant date. Options granted under these Legacy Inpixon Option Plans vest over periods ranging from immediately to four years and are exercisable over period sup to ten years from the grant date.
The aggregate number of shares that may be awarded under the 2018 Plan as of December 31, 2024 was 280,593. As of December 31, 2024, 38,359 shares of common stock were available for future grant under the 2018 Plan.
See below for a summary of the stock options granted under the 2011, 2017, and 2018 plans:
| Weighted | Weighted | Aggregate | ||||||||||||||
| Average | Average | Intrinsic | ||||||||||||||
| Number of | Exercise | Remaining | Value | |||||||||||||
| Shares | Price | Life (Years) | (in millions) | |||||||||||||
| Outstanding at January 1, 2023 | 3,615 | $ | 4,425.28 | 7.7 | $ | |||||||||||
| Granted | 1,089 | $ | 4,677.36 | |||||||||||||
| Exercised | $ | |||||||||||||||
| Expired | $ | |||||||||||||||
| Forfeitures | (58 | ) | $ | 4,901.42 | ||||||||||||
| Outstanding at December 31, 2023 | 4,646 | $ | 4,481.30 | 6.7 | $ | |||||||||||
| Legacy Inpixon stock options from merger | 5 | $ | 16,917.50 | |||||||||||||
| Granted | 55,434 | $ | 117.50 | |||||||||||||
| Exercised | (371 | ) | $ | 0.25 | ||||||||||||
| Expired | (3 | ) | $ | 700.00 | ||||||||||||
| Forfeitures | (8,526 | ) | $ | 484.00 | ||||||||||||
| Outstanding at December 31, 2024 | 51,185 | $ | 455.00 | 9.3 | $ | |||||||||||
| Exercisable at December 31, 2024 | 3,803 | $ | 3,330.00 | 7.7 | $ | |||||||||||
Forfeitures during the year ended December 31, 2024 were primarily due to the departures of Legacy XTI’s former Chief Executive Officer and the Company’s former Chief Legal Officer. The weighted average grant-date fair value of options granted during the years ended December 31, 2024 and 2023 was approximately $0.2 million and $0.6 million, respectively.
The Board approved awards of options to certain Company executives under the 2018 Plan. Each option has an exercise price of $118.25 per share. The options will vest 1/3rd annually over three years starting from the vesting commencement date. The options expire ten years from the grant date. Options were granted as follows:
| Grantee | Grant Date | Vesting Start Date | Options Granted | |||||
| Chief Executive Officer of XTI Aerospace, Inc. | 6/12/2024 | 6/12/2024 | 11,250 | |||||
| Chief Financial Officer of XTI Aerospace, Inc. | 6/12/2024 | 6/12/2024 | 6,563 | |||||
| Chief Executive Officer of the XTI Aerospace, Inc. Real-Time Location System Division | 6/12/2024 | 6/12/2024 | 3,900 | |||||
| Chief Strategy Officer of XTI Aerospace, Inc. | 9/19/2024 | 8/1/2024 | 4,688 | |||||
| Chief Legal Officer of XTI Aerospace, Inc. | 10/28/2024 | 10/28/2024 | 4,688 | |||||
| Total Granted | 31,089 | |||||||
The following assumptions were used in estimating the fair values of options awarded during the year ended December 31, 2024:
| For
the Year Ended December 31, 2024 | ||||
| Fair value of common stock | $10.75 - $118.25 | |||
| Exercise price | $10.75 - $118.25 | |||
| Expected term | 6 years | |||
| Volatility | 95.06% -103.3% | |||
| Risk-free interest rate | 3.51% - 4.43% | |||
| Dividend yield |
During the year ended December 31, 2023, Legacy XTI granted 1,089 stock options to members of its management team, which vest based on the achievement of certain performance-based conditions as outlined in the option award agreements. The exercise price of the stock options granted to the management team was $4,677.36.
The following assumptions were used in estimating the fair values of options awarded during the year ended December 31, 2023:
| For the Year Ended December 31, 2023 | ||||
| Fair value of common stock | $4,677.36 | |||
| Exercise price | $4,677.36 | |||
| Expected term | 5 years | |||
| Volatility | 74.10% | |||
| Risk-free interest rate | 3.54% | |||
| Dividend yield | ||||
Stock Option Exercises
To induce option holders to exercise stock options ahead of the XTI Merger so to assist the Company in qualifying for a listing on the Nasdaq Capital Market, Legacy XTI entered into exercise letter agreements with several option holders in February 2024 at reduced exercise prices from the original option agreements. The net impact of these option inducements to the condensed consolidated statement of operations was not material. In total, 1,038,871 stock options granted under the 2017 Plan were net exercised into pre-exchange common shares of Legacy XTI immediately prior to the XTI Merger closing time, which resulted in the issuance of 371 post-merger exchange and post 1-for-250 reverse split common shares.
Stock-based Compensation Expense
The Company incurred the following stock-based compensation charges for the periods indicated below (in thousands):
| Year Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Employee and consultant stock options1 | $ | (1,798 | ) | $ | 1,645 | |||
| Professional fees1 | 270 | |||||||
| Vesting of previously unvested warrants2 | 496 | |||||||
| Merger-related professional fees2 | 5,153 | |||||||
| Total | $ | 4,121 | $ | 1,645 | ||||
| 1 | amount included in general and administrative expenses on the consolidated statements of operations |
| 2 | amount included in merger-related transaction costs on the consolidated statements of operations |
As of December 31, 2024, the total unrecognized compensation expense related to unvested awards was approximately $5.8 million, which the Company expects to recognize over an estimated weighted average period of 1.78 years.
Stock-based Compensation Related to Professional Fees
On July 31, 2024, the Company entered into an advisory agreement with a third-party advisor, pursuant to which the Company issued 4,000 shares valued at approximately $0.3 million of restricted common stock to the advisor in consideration for financial advisory and business development services agreed to be rendered to the Company pursuant to the agreement.
Stock-based Compensation Related to the XTI Merger
Shares of Legacy XTI common stock were issued to Scott Pomeroy, Chief Executive Officer of the Company and former CFO and board member of Legacy XTI, as transaction compensation immediately prior to the XTI Merger closing time equal to 1,429 post merger shares of Company common stock. As a result of this share issuance transaction, the Company recorded $1.9 million of stock-based compensation expense included in the consolidated statement of operations during the year ended December 31, 2024.
Shares of Legacy XTI common stock were issued to Maxim as transaction compensation immediately prior to the XTI Merger closing time equal to 1,542 post merger shares of Company common stock. As a result of this share issuance transaction, the Company recorded approximately $2.0 million of stock-based compensation expense included in the consolidated statement of operations during the year ended December 31, 2024.
Shares of Legacy XTI common stock were issued to Chardan Capital Markets LLC as transaction compensation immediately prior to the XTI Merger closing time equal to 757 post merger shares of Company common stock. As a result of this share issuance transaction, the Company recorded $1.0 million of stock-based compensation expense included in the consolidated statement of operations during the year ended December 31, 2024.
Shares of Legacy XTI common stock were issued to a non-executive officer as transaction compensation immediately prior to the XTI Merger closing time equal to 186 post merger shares of Company common stock. As a result of this share issuance transaction, the Company recorded approximately $0.2 million of stock-based compensation expense included in the consolidated statement of operations during the year ended December 31, 2024.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.