UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

     Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended September 30, 2023

 

     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: 000-54277

 

XERIANT, INC.

(Exact name of registrant as specified in its charter).

 

Nevada

 

27-1519178

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

Innovation Centre 1

3998 FAU Boulevard, Suite 309

Boca Raton, Florida

 

33431

(Address of principal executive offices)

 

(Zip code)

 

Registrant's telephone number, including area code: (561) 491-9595

 

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

 

Title of each class

 

Trading symbol

 

Name of exchange on which registered

N/A

 

N/A

 

N/A

 

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 (§232.405 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, and an “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 13(a) of the Securities Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of November 10, 2023, the Registrant had outstanding 421,044,644 shares of common stock.

 

 

 

 

XERIANT, INC.

FORM 10-Q

TABLE OF CONTENTS

  

Page

 

Special Note regarding Forward-looking Statements

3

 

 

 

PART I – Financial Information

 

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

F-1

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

4

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

10

 

Item 4.

Controls and Procedures

10

 

PART II – Other Information

Item 1.

Legal Proceedings

11

 

Item 1A.

Risk Factors

11

 

Item 2.

Unregistered Sales of Equity Securities

11

 

Item 3.

Defaults Upon Senior Securities

11

 

Item 4.

Mine Safety Disclosures

11

 

Item 5.

Other Information

11

 

Item 6.

Exhibits

12

 

 

Signatures

 

13

  

 

2

Table of Contents

    

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This document contains certain statements of a forward-looking nature. Such forward-looking statements, including but not limited to statements regarding projected growth, trends and strategies, future operating and financial results, financial expectations and current business indicators are based upon current information and expectations and are subject to change based on factors beyond the control of the Company. Forward-looking statements typically are identified by the use of terms such as “look,” “may,” “should,” “might,” “believe,” “plan,” “expect,” “anticipate,” “estimate” and similar words, although some forward-looking statements are expressed differently. The accuracy of such statements may be impacted by a number of risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including but not limited to those set forth herein and in our Annual Report on Form 10-K.

 

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Except as required by the federal securities laws, we undertake no obligation to update forward-looking information. Nonetheless, the Company reserves the right to make such updates from time to time by press release, periodic report or other method of public disclosure without the need for specific reference to this Report. No such update shall be deemed to indicate that other statements not addressed by such update remain correct or create an obligation to provide any other updates.

 

 

3

Table of Contents

    

PART I – FINANCIAL INFORMATION

 

Item 1. Condensed Consolidated Financial statements

 

XERIANT, INC.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(UNAUDITED)

 

INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Condensed Consolidated Balance Sheets as of September 30, 2023 (Unaudited) and June 30, 2023

 

F-2

 

 

 

Condensed Consolidated Statements of Operations for the three months ended September 30, 2023 and 2022 (Unaudited)

F-3

 

 

 

 

 

Condensed Consolidated Statements of Stockholder’s Deficit for the three months ended September 30, 2023 and 2022 (Unaudited)

F-4

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2023 and 2022 (Unaudited)

 

F-6

 

 

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

F-7

 

 
F-1

Table of Contents

    

XERIANT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

As of

 

 

As of

 

 

 

September 30,

2023

 

 

June 30,

2023

 

 

 

Unaudited

 

 

 

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash

 

$24,551

 

 

$61,625

 

Prepaids

 

 

3,714

 

 

 

4,529

 

Note receivable

 

 

139,947

 

 

 

-

 

Total current assets

 

 

168,212

 

 

 

66,154

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

12,546

 

 

 

12,546

 

Property & equipment, net

 

 

5,129

 

 

 

5,507

 

Operating lease right-of-use asset

 

 

70,765

 

 

 

82,911

 

Total assets

 

$256,652

 

 

$167,118

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders' deficit

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$437,842

 

 

$402,568

 

Accrued liabilities, related party

 

 

10,000

 

 

 

20,000

 

Shares to be issued

 

 

75,200

 

 

 

75,200

 

Convertible notes payable- in default

 

 

5,850,000

 

 

 

5,850,000

 

Convertible notes payable

 

 

451,000

 

 

 

100,000

 

Convertible bridge loans, at fair value

 

 

249,702

 

 

 

247,254

 

Lease liability, current

 

 

57,876

 

 

 

55,999

 

Total current liabilities

 

 

7,131,620

 

 

 

6,751,021

 

 

 

 

 

 

 

 

 

 

Lease liability, long-term

 

 

21,144

 

 

 

36,197

 

Total liabilities

 

 

7,152,764

 

 

 

6,787,218

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' deficit

 

 

 

 

 

 

 

 

Series A Preferred stock, $0.00001 par value; 100,000,000 authorized; 3,500,000 designated; 752,395 and 757,395 shares issued and outstanding at September 30, 2023 and June 30, 2023, respectively

 

 

8

 

 

 

8

 

Series B Preferred stock, $0.00001 par value; 100,000,000 authorized; 1,000,000 designated; 1,000,000 issued and outstanding

 

 

10

 

 

 

10

 

Common stock, $0.00001 par value; 5,000,000,000 shares authorized; 401,033,144 and 389,433,144 shares issued and outstanding at September 30, 2023 and June 30, 2023, respectively

 

 

4,010

 

 

 

3,894

 

Common stock to be issued

 

 

51,950

 

 

 

51,950

 

Additional paid in capital

 

 

19,855,677

 

 

 

19,789,793

 

Accumulated deficit

 

 

(23,972,551)

 

 

(23,638,461)

Total stockholders’ deficit

 

 

(4,060,896)

 

 

(3,792,806)

Non-controlling interest

 

 

(2,835,216)

 

 

(2,827,294)

Total stockholders' deficit

 

 

(6,896,112)

 

 

(6,620,100)

Total liabilities and stockholders' deficit

 

$256,652

 

 

$167,118

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

 
F-2

Table of Contents

    

XERIANT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED

 

 

 

For the three months ended

 

 

 

September 30,

 

 

 

2023

 

 

2022

 

Operating expenses:

 

 

 

 

 

 

Consulting and advisory fees

 

$51,695

 

 

$455,573

 

Related party consulting fees

 

 

97,500

 

 

 

94,000

 

General and administrative expenses

 

 

49,877

 

 

 

89,996

 

Professional fees

 

 

90,314

 

 

 

90,060

 

Advertising and marketing expense

 

 

2,522

 

 

 

6,356

 

Research and development expense

 

 

26,982

 

 

 

-

 

Total operating expenses

 

 

318,890

 

 

 

735,985

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(318,890)

 

 

(735,985)

 

 

 

 

 

 

 

 

 

Other expenses:

 

 

 

 

 

 

 

 

Amortization of debt discount

 

 

-

 

 

 

(461,842)

Interest expense

 

 

(20,674)

 

 

-

 

Change in fair value of convertible bridge loans

 

 

(2,448)

 

 

-

 

Loss from Ebenberg JV

 

 

-

 

 

 

(49,328)

Loss on extinguishment of debt

 

 

-

 

 

 

(3,570,366)

Total other expense

 

 

(23,122)

 

 

(4,081,536)

 

 

 

 

 

 

 

 

 

Net loss

 

 

(342,012)

 

 

(4,817,521)

 

 

 

 

 

 

 

 

 

Less net loss attributable to noncontrolling interest

 

 

(7,922)

 

 

(7,425)

 

 

 

 

 

 

 

 

 

Net loss attributable to common stockholders

 

$(334,090)

 

$(4,810,096)

 

 

 

 

 

 

 

 

 

Net loss per common share - basic and diluted

 

$(0.00)

 

$(0.01)

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding - basic and diluted

 

 

393,756,221

 

 

 

361,552,863

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

 
F-3

Table of Contents

     

XERIANT, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2023

UNAUDITED

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Series A Preferred Stock

 

 

 Series B Preferred Stock

 

 

 Common Stock

 

 

 Common stock  to be

 

 

 Additional Paid in

 

 

 Accumulated 

 

 

 Non-Controlling

 

 

 

 

 

Shares

 

 

 Amount

 

 

Shares

 

 

 Amount

 

 

Shares

 

 

Amount

 

 

issued

 

 

Capital

 

 

Deficit

 

 

Interest

 

 

Total

 

Balance June 30, 2023

 

 

757,395

 

 

$8

 

 

 

1,000,000

 

 

$10

 

 

 

389,433,144

 

 

$3,894

 

 

$51,950

 

 

$19,789,793

 

 

$(23,638,461)

 

$(2,827,294)

 

$(6,620,100)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of Series A Preferred to Common Stock

 

 

(5,000)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,000,000

 

 

 

50

 

 

 

-

 

 

 

(50)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of convertible notes payable and accrued interest into common stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

6,600,000

 

 

 

66

 

 

 

-

 

 

 

65,934

 

 

 

-

 

 

 

-

 

 

 

66,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(334,090)

 

 

(7,922)

 

 

(342,012)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance September 30, 2023

 

 

752,395

 

 

$8

 

 

 

1,000,000

 

 

$10

 

 

 

401,033,144

 

 

$4,010

 

 

$51,950

 

 

$19,855,677

 

 

$(23,972,551)

 

$(2,835,216)

 

$(6,896,112)

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

 
F-4

Table of Contents

    

XERIANT, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2022

UNAUDITED  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A Preferred Stock

 

 

Series B Preferred Stock

 

 

Common Stock

 

 

Common stock to be

 

 

Additional

Paid in

 

 

Accumulated

 

 

Non-Controlling

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

issued

 

 

Capital

 

 

Deficit

 

 

Interest

 

 

Total

 

Balance June 30, 2022

 

 

781,132

 

 

$8

 

 

 

1,000,000

 

 

$10

 

 

 

365,239,001

 

 

$3,652

 

 

$51,950

 

 

$16,351,791

 

 

$(16,571,505)

 

$(2,797,611)

 

$(2,961,705)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock issued for services

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

457,143

 

 

 

5

 

 

 

-

 

 

 

47,995

 

 

 

-

 

 

 

-

 

 

 

48,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of Series A Preferred to Common Stock

 

 

(1,000)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,000,000

 

 

 

10

 

 

 

-

 

 

 

(10)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of warrants associated with convertible debt

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,918,393

 

 

 

-

 

 

 

-

 

 

 

1,918,393

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustment for rounding

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5

 

 

 

-

 

 

 

(5)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock option compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

306,170

 

 

 

-

 

 

 

-

 

 

 

306,170

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(4,810,096)

 

 

(7,425)

 

 

(4,817,521)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance September 30, 2022

 

 

780,132

 

 

$8

 

 

 

1,000,000

 

 

$10

 

 

 

366,696,144

 

 

$3,672

 

 

$51,950

 

 

 

18,624,349

 

 

$(21,381,601)

 

$(2,805,036)

 

$(5,506,663)

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 
F-5

Table of Contents

    

XERIANT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

 

 

 

 

 

 

 

For the three months ended

 

 

 

September 30,

 

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

Cash Flows from Operating Activities

 

 

 

 

 

 

Net loss

 

$(342,012)

 

$(4,817,521)

Adjustments to reconcile net loss to net cash used by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

378

 

 

 

335

 

Stock option expense

 

 

-

 

 

 

306,170

 

Stock issued for services

 

 

-

 

 

 

48,000

 

Change in fair value of convertible bridge loans

 

 

2,448

 

 

 

 

 

Loss on extinguishment of debt

 

 

-

 

 

 

3,570,366

 

Loss from Ebenberg JV

 

 

-

 

 

 

(49,328)

Amortization of debt discount

 

 

-

 

 

 

461,842

 

Amortization of right of use asset

 

 

12,146

 

 

 

10,905

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaids

 

 

815

 

 

 

(7,476)

Accounts payable and accrued liabilities

 

 

41,274

 

 

 

(87,139)

Accrued liability, related party

 

 

(10,000)

 

 

10,000

 

Lease liabilities

 

 

(13,176)

 

 

(11,493)

Net cash from operating activities

 

 

(308,127)

 

 

(565,339)

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities

 

 

 

 

 

 

 

 

Cash issued for notes receivable

 

 

(139,947)

 

 

-

 

Purchase of property and equipment

 

 

-

 

 

 

(2,567)

Net cash from financing activities

 

 

(139,947)

 

 

(2,567)

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

Proceeds from convertible bridge loans

 

 

411,000

 

 

 

-

 

Net cash from financing activities

 

 

411,000

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Net change in cash

 

 

(37,074)

 

 

(567,906)

 

 

 

 

 

 

 

 

 

Cash at beginning of period

 

 

61,625

 

 

 

1,065,945

 

 

 

 

 

 

 

 

 

 

Cash at end of period

 

$24,551

 

 

$498,039

 

 

 

 

 

 

 

 

 

 

Supplemental Cash Flow Information

 

 

 

 

 

 

 

 

Cash paid for interest

 

$-

 

 

$-

 

Cash paid for income taxes

 

$-

 

 

$-

 

 

 

 

 

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Conversion of convertible notes payable and accrued interest

 

$66,000

 

 

$-

 

Warrants issued with convertible notes payable extinguishment

 

$-

 

 

$1,918,393

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 
F-6

Table of Contents

    

XERIANT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

 

NOTE 1 - ORGANIZATION AND NATURE OF BUSINESS

 

Company Overview

 

Xeriant, Inc. (the “Company”) is dedicated to the discovery, development and commercialization of advanced materials and technology related to next generation air and spacecraft, which can be successfully integrated and commercialized for deployment across multiple industrial sectors. The Company seeks to partner with and acquire strategic interests in visionary companies that accelerate this mission. The Company plans to market its advanced materials line under the DUREVER™ brand, which includes NexBoard™, an eco-friendly, patent-pending composite building panel made from plastic and cellulose waste, designed to replace products such as drywall, plywood, OSB, MDF, MgO board and other materials used in construction.

 

Operating History

 

The Company is a development-stage enterprise with a limited operating history with no sales, and operating losses since its inception.  The Company has had two joint ventures, one in the area of aerospace that was effective May 27, 2021, and the other involving advanced materials that was effective April 2, 2022, and terminated on June 30, 2023. 

 

Advanced Materials

 

A primary focus of the Company is the acquisition and commercial exploitation of eco-friendly, advanced materials and chemicals which have applications across a broad range of industries and the potential to generate significant near-term revenue. The Company’s commercialization strategy encompasses licensing arrangements and joint ventures, which would allow for more rapid access to the market with reduced capital requirements and financial risk. In addition to providing the production and distribution infrastructure, these established partnering companies can streamline testing and certification and add brand recognition value. The advanced materials and chemicals may be sold as standalone products, enhancements to existing products, or used in the development of proprietary products under a new trademarked brand owned by the Company. The Company is exploring manufacturing and branding opportunities for specific products derived from advanced materials and chemicals acquired or developed, which would involve setting up production facilities, equipment, systems and supply chain.

 

Effective April 2, 2022, the Company entered into a Joint Venture Agreement with Movychem s.r.o, a Slovakian chemical company, setting forth the terms for a joint venture (referred to herein as the Movychem JV) to exploit the Movychem Intellectual Property and Purchased Patents. The Movychem JV, owned 50% by Xeriant and 50% by Movychem, subject to certain funding conditions, was granted the exclusive worldwide rights to the intellectual property related to Retacell®, an industrial flame-retardant, and would be responsible for developing applications and commercializing products.

 

On June 8, 2022, Xeriant announced the development of a multi-purpose, high-strength fire- and water-resistant composite panel made from a formulation of Retacell® and a cardboard fiber-reinforced polymeric resin. The panel described in the press release was initially produced in a benchtop setting.

 

After experiencing a number of issues, including but not limited to Movychem’s unwillingness to provide material documentation, processes and information required for the exploitation of Retacell®, the Company independently developed an upcycled construction panel, without the inclusion of Retacell®, outside of the Movychem JV.

 

 
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On August 12, 2022, the Company filed the trademark “NexBoard,” for construction panels, namely, composite sheets and panels composed primarily of plastic, reinforcement materials and fire-retardant chemicals for use in walls, ceilings, flooring, framing, siding, roofing and decking. The trademark filing was intentionally broad and based upon demand for a general all-purpose construction panel made from a mixture of fire-retardant and recycled materials.

 

On July 11, 2023, Xeriant announced the successful testing of a proprietary high-volume production process for an environmentally friendly patent-pending composite construction panel (NexBoard”) that can be produced in the United States at industrial scale. This approach will enable the Company to unlock existing demand indicated by several homebuilders and developers seeking environmentally friendly construction panels in varying thicknesses and sizes, including standard 48” x 96” sheets, economically and with consistency and efficiency. 

 

Because of Movychem’s non-performance, as described above, Xeriant ceased paying Movychem $25,000 per month as required in the Joint Venture beginning December 2022 (see Note 3).  On February 13, 2023, Movychem formally requested dissolution of its Joint Venture with Xeriant, Ebenberg, LLC.  On February 24, 2023, Xeriant provided a formal response to Movychem, highlighting its multiple and sustained lapses in collaborative efforts related to the commercialization of the Retacell® technology.  Subsequent to this communication, Xeriant expressly repudiated Movychem’s proposition for dissolution and their proposition to take an exclusive territory to market Retacell®.  Because Xeriant is focused on the commercialization and industrial-level production of eco-friendly composite construction panels, and has moved past the Retacell® technology, the Company agreed to dissolution of the Ebenberg, LLC Joint Venture effective June 30, 2023.

 

On March 31, 2023, the Company filed a provisional patent application titled “Multilayered Fire-Resistant Polymer Composite and Method for Producing Same,” for a method of producing a unique fire-resistant thermoplastic and fiber composite material which may be formed or shaped into various construction products of different thicknesses and dimensions. This green material will be composed primarily of recycled plastic, cellulose and ecofriendly fire-retardant chemicals, including but not limited to use in walls, ceilings, flooring, framing, siding, roofing, molding, and decking, used in construction. Subject to available capital, the Company is planning to build manufacturing facilities in the United States for the production of NexBoard in order to meet market demand, or alternatively license the technology and process. The Company has identified potential sites for near-term contract manufacturing, a pilot plant, and larger manufacturing facilities, received bids for specialized manufacturing equipment, developed timetables related to the action plan, and hired a managing director with decades of experience to oversee the projects.

 

Aerospace

 

Another area of interest for the Company is the emerging aviation market called Advanced Air Mobility (AAM), the transition to more efficient, eco-friendly, automated and convenient flight operations enabled by the convergence of technological advancements in design and engineering, composite materials, propulsion systems, battery energy density and manufacturing processes. Next-generation aircraft being developed for this market offer low-cost, on-demand flight for passengers and cargo, utilizing lower altitude airspace and bypassing the traditional hub and spoke airport network with vertical takeoff and landing (VTOL) capabilities. Many of these lightweight aircraft are electrically powered through either hybrid or pure battery systems, which allows for quieter, low emission flights over urban areas, however with limited speed and range. The adoption and integration of niche aerial services through AAM is expected to provide benefits throughout the economy. The Company plans to partner with and acquire strategic interests in visionary companies that accelerate our mission of commercializing critical breakthrough AAM technologies which enhance performance, increase safety, and enable and support more efficient, autonomous, and sustainable flight operations, including electric and hybrid-electric passenger and cargo transport aircraft capable of vertical takeoff and landing. The Company’s plan to source and acquire strategic interests in leading aerospace companies developing breakthrough VTOL aircraft began in the second quarter of fiscal year 2021. Reference is made to Note 3 concerning the joint venture with XTI Aircraft Company.

 

 
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In the area of aerospace, management believes that Xeriant can grow expeditiously by acquiring technology and assets primarily through acquisitions, joint ventures, strategic investments, and licensing arrangements. As a publicly traded company, the Company offers its subsidiaries such benefits as improved access to capital, higher valuations and lower risk through the shared ownership of a diversified portfolio, while allowing these entities to maintain independence in their distinct operations to focus on their fields of expertise. Cost savings and efficiencies may be realized from sharing non-operational functions such as finance, legal, tax, sales & marketing, human resources, purchasing power, as well as investor and public relations.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The condensed consolidated financial statements, which include the accounts of the Company, American Aviation Technologies, LLC, Eco-Aero, LLC, BlueGreen Composites, LLC, its subsidiaries, are prepared in conformity with generally accepted accounting principles in the United States of America (U.S. GAAP). All significant intercompany balances and transactions have been eliminated. The condensed consolidated financial statements, which include the accounts of the Company and its subsidiaries, and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The condensed consolidated financial statements have been prepared using the accrual basis of accounting in accordance with U.S. GAAP, and presented in US dollars. The fiscal year end is June 30.

 

Going Concern

 

These condensed consolidated financial statements have been prepared on a going concern basis, which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred net losses since inception and has an accumulated deficit of $23,972,551 as of September 30, 2023. During the three months ended September 30, 2023, the Company’s net loss was $342,012 and at September 30, 2023, the Company had a working capital deficit of $6,963,408. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Based on its historical rate of expenditures, the Company expects to expend its available cash in approximately two months from November 14, 2023. Management’s plans include raising capital through the issuance of common stock and debt to fund operations and, eventually, the generation of revenue through its business. The Company does not expect to generate any significant revenue in the foreseeable future. The Company is in immediate need of further working capital and is seeking options, with respect to financing, in the form of debt, equity or a combination thereof.

 

 
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Failure to raise adequate capital and generate adequate revenues could result in the Company having to curtail or cease operations. The Company’s ability to raise additional capital through the future issuances of the common stock is unknown. Additionally, even if the Company does raise sufficient capital to support its operating expenses and generate adequate revenues, there can be no assurances that the revenue will be sufficient to enable it to develop to a level where it will generate profits and cash flows from operations. These matters raise substantial doubt about the Company’s ability to continue as a going concern; however, the accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. These condensed consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classifications of the liabilities that might be necessary should the Company be unable to continue as a going concern. 

 

Principles of Consolidation

 

The condensed consolidated financial statements include the accounts of Xeriant, Inc., American Aviation Technologies, LLC (“AAT”), Eco-Aero, LLC and BlueGreen Composites, LLC. The Company owns a 64% controlling interest in AAT; a 50% interest in Eco-Aero, LLC, with control exercised through a majority membership in the management committee and a 100% interest in BlueGreen Composites, LLC. All intercompany balances and transactions have been eliminated.

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant assumptions and estimates relate to the valuation of  warrants associated with convertible debt. Actual results could differ from these estimates.

 

Fair Value Measurements and Fair Value of Financial Instruments

 

The Company adopted Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements. ASC Topic 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

 

Level 1: Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

 

Level 2: Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

 

Level 3: Inputs are unobservable inputs which reflect the reporting entity's own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

 

The estimated fair value of certain financial instruments, including all current liabilities are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

 

The inputs to the valuation methodology of stock options and warrants were under level 3 fair value measurements.

 

 
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ASC subtopic 825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments. The carrying value of cash and cash equivalents, accounts payable and accrued liabilities as reflected in the condensed consolidated balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the condensed consolidated financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only available information pertinent to fair value has been disclosed.

 

The Company follows ASC subtopic 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”) and ASC 825-10, which permits entities to choose to measure many financial instruments and certain other items at fair value.

 

Cash and Cash Equivalents

 

For the purposes of the condensed consolidated statements of cash flows, the Company considers highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company has no cash equivalents.

 

Impairment of Long-Lived Assets

 

In accordance with ASC 360-10, Impairment and Disposal of Long Lived Assets, the Company, on a regular basis, reviews the carrying amount of long-lived assets for the existence of facts or circumstances, both internally and externally, that suggest impairment. The Company determines if the carrying amount of a long-lived asset is impaired based on anticipated undiscounted cash flows, before interest, from the use of the asset. In the event of impairment, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the asset. Fair value is determined based on appraised value of the assets or the anticipated cash flows from the use of the asset, discounted at a rate commensurate with the risk involved. During the three months ended September 30, 2023 and 2022, there were no impairments.

 

Convertible Debentures

 

The Company adopted the guidance in Accounting Standards Updated (“ASU”) 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity on July 1, 2022. ASU 2020-06 simplifies an issuer’s accounting for convertible instruments and its application of the derivatives scope exception for contracts in its own equity. Additionally, ASU 2020-06 removes the requirements for accounting for beneficial conversion features.

 

The Company adopted ASU 2020-06 utilizing the modified retrospective method, which resulted in an immaterial impact to the Company. Prior to adoption of ASU 2020-06, if the conversion features of conventional convertible debt provided for a rate of conversion that is below market value at issuance, this feature was characterized as a beneficial conversion feature ("BCF").

 

A BCF was recorded by the Company as a debt discount pursuant to ASC Topic 470-20 "Debt with Conversion and Other Options." In those circumstances, the convertible debt was recorded net of the discount related to the BCF, and the Company amortized the discount to interest expense, over the life of the debt. There were no BCFs recorded during the three months ended September 30, 2023 or 2022.

 

Stock-based Compensation

 

The Company measures the cost of employee services received in exchange for equity incentive awards based on the grant date fair value of the award. The Company uses the Black-Scholes valuation model to calculate the fair value of stock options granted to employees or consultants. Stock-based compensation expense is recognized over the period during which the employee is required to provide services in exchange for the award, which is usually the vesting period. During the three months ended September 30, 2023 and 2022, the Company recognized $0 and $306,170 in stock-based compensation expense, respectively.

 

 
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Leases

 

The Company accounts for leases under ASU 2016-02. At the inception of a contract the Company assesses whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether it has the right to direct the use of the asset. The Company will allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments.

 

Operating lease right of use (“ROU”) assets represents the right to use the leased asset for the lease term and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the adoption date in determining the present value of future payments. Lease expense for minimum lease payments is amortized on a straight-line basis over the lease term and is presented in operating expenses on the unaudited condensed consolidated statements of operations.

 

Finance leases are recorded as a finance lease liability and property, plant and equipment asset, based on the present value of lease payments. The asset is depreciated, and the liability is amortized with interest expense incurred over the life of the lease.

 

As permitted under the new guidance, the Company has made an accounting policy election not to apply the recognition provisions of the guidance to short term leases (leases with a lease term of twelve months or less that do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise); instead, the Company will recognize the lease payments for short term leases on a straight-line basis over the lease term.

 

Investments

 

The Company follows ASC 325-20, Cost Method Investments, to account for its ownership interest in noncontrolled entities. Under ASC 325-20, equity securities that do not have readily determinable fair values (i.e., non-marketable equity securities) and are not required to be accounted for under the equity method are typically carried at cost (i.e., cost method investments). Investments of this nature are initially recorded at cost. Income is recorded for dividends received that are distributed from net accumulated earnings of the noncontrolled entity subsequent to the date of investment. Dividends received in excess of earnings subsequent to the date of investment are considered a return of investment and are recorded as reductions in the cost of the investment. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred.

 

Research and Development Expenses

 

Expenditures for research and development are expensed as incurred. The Company incurred research and development expenses of $26,982 and $0 for the three months ended September 30, 2023 and 2022, respectively.

 

Advertising and Marketing Expenses

 

The Company expenses advertising and marketing costs as they are incurred. The Company recorded advertising expenses in the amount of $2,522 and $6,356 for the three months ended September 30, 2023 and 2022, respectively.

 

Income Taxes

 

The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is more likely than not of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to unrecognized tax benefits as a component of general and administrative expenses. The Company’s consolidated federal tax return and any state tax returns are not currently under examination.

 

 
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The Company follows ASC subtopic 740-10, Income Taxes ("ASC 740-10") for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability during each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods.

 

Basic Income (Loss) Per Share

 

Under the provisions of ASC 260, “Earnings per Share”, basic loss per common share is computed by dividing net loss available to common shareholders by the weighted average number of shares of common stock outstanding for the periods presented. Diluted net loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that would then share in the income of the Company, subject to anti-dilution limitations. The following potential common shares were excluded from the calculation of diluted net income (loss) per share available to common stockholders because their effect would have been antidilutive:

 

 

 

Three months ended

September 30,

 

 

 

2023

 

 

2022

 

Warrants

 

 

104,802,161

 

 

 

80,512,161

 

Stock options

 

 

21,250,000

 

 

 

21,250,000

 

Convertible notes payable

 

 

103,383,909

 

 

 

49,283,909

 

Preferred stock

 

 

752,395,000

 

 

 

779,132,000

 

Total

 

 

981,831,070

 

 

 

930,178,070

 

 

Recent Accounting Pronouncements

 

All other recent accounting pronouncements issued by the FASB, did not or are not believed by management to have a material impact on the Company’s present or future condensed consolidated financial statements.  

 

 
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NOTE 3 – JOINT VENTURE

 

Joint Venture with XTI Aircraft

 

On May 31, 2021, we entered into a Joint Venture Agreement (the “Agreement”) with XTI Aircraft Company (“XTI”), a Delaware corporation, to form the XTI JV, named Eco-Aero, LLC, with the purpose of completing the preliminary design review (“PDR”) of XTI’s TriFan 600, a 5-passenger plus pilot, hybrid electric, eVTOL fixed wing aircraft. Under the Agreement, Xeriant is contributing capital, technology, and strategic business relationships, and XTI is contributing intellectual property licensing rights and know-how. XTI and the Company each own 50 percent of the XTI JV, and it is managed by a management committee consisting of five members, three appointed by Xeriant and two by XTI. The Agreement was effective on May 27, 2021, with an initial deposit of $1 million into the XTI JV. The Company’s financial commitment is up to $10 million, contributed as needed to complete the preliminary design of the aircraft.  XTI completed Preliminary Design Review during the first quarter of fiscal year 2022, which was the purpose of the XTI JV.

 

On May 17, 2022, the Company executed a confidential Letter Agreement with XTI, the material terms of which are briefly delineated as follows:

 

 

·

Xeriant would be entitled to compensation for its role in introducing XTI to a Nasdaq-listed company, contingent upon the occurrence of any merger, combination, or transactional event between XTI and the Nasdaq company, which has since been identified as Inpixon.

 

 

 

 

·

XTI would assume the financial obligations related to the Senior Secured Note with Auctus Fund, LLC, including the $6.05 million principal balance of the note and warrant obligations. Additionally, Xeriant was to be granted a fully diluted equity interest amounting to 6% in XTI, issued immediately prior to any prospective combination with Inpixon.

 

On July 25, 2023, Inpixon filed an 8-K, announcing their intention to merge with XTI having executed an Agreement of Plan and Merger with XTI. The filing also showed that XTI had engaged in a transaction with Inpixon on March 10, 2023, receiving $300,000 in funding.  Inpixon filed an S-4 registration statement on August 14, 2023, and subsequently filed an S-4/A amended registration statement on October 6, 2023.

 

On June 5, 2023, after suspecting that the obligations under the Letter Agreement were possibly being evaded, the Company transmitted a formal demand letter to XTI requesting compliance with the provisions outlined in the Letter Agreement, and in accordance with section 8 of the JV Agreement with XTI.

 

As of the date of this filing, we remain engaged in dialogue with XTI to enforce compliance with the Letter Agreement and to find an amicable resolution.

 

The Company analyzed the transaction under ASC 810, Consolidation, to determine if the joint venture classifies as a Variable Interest Entity (“VIE”). The JV qualifies as a VIE based on the fact the JV does not have sufficient equity to operate without financial support from Xeriant. According to ASC 810-25-38, a reporting entity shall consolidate a VIE when that reporting entity has a variable interest (or combination of variable interests) that provides the reporting entity with a controlling financial interest on the basis of the provisions in paragraphs 810-10-25-38A through 25-38J. The reporting entity that consolidates a VIE is called the primary beneficiary of that VIE. According to the JV operating agreement, the ownership interests are 50/50. However, the agreement provides for a Management Committee of five members. Three of the five members are from Xeriant. Additionally, Xeriant had a right to invest up to $10,000,000 in the JV. As such, Xeriant has substantial capital at risk. Based on these two factors, the conclusion is that Xeriant is the primary beneficiary of the VIE. Accordingly, Xeriant has consolidated the VIE.

 

 
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The Company includes the assets and liabilities related to the VIE in the condensed consolidated balance sheets. Xeriant, Inc. provides cash to the VIE to fund its operations. The carrying amounts of the consolidated VIE's assets and liabilities associated with the VIE subsidiary were as follows:

 

 

 

September 30,

2023

 

 

June 30,

2023

 

Assets

 

 

 

 

 

 

Cash

 

$-

 

 

$-

 

Total Assets

 

$-

 

 

$-

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Due from Xeriant Inc.

 

$4,475,155

 

 

$4,475,155

 

Total Liabilities

 

$4,475,155

 

 

$4,475,155

 

 

Joint Venture with Movychem

 

On April 2, 2022, the Company entered into a Joint Venture Agreement with Movychem s.r.o., a Slovakian limited liability company, to exploit the Movychem Intellectual Property and the Purchased Patents. The Joint Venture is organized as a Florida limited liability company under the name Ebenberg, LLC, owned 50% by each the Company and Movychem.

 

For its capital contribution to the Joint Venture, pursuant to a Patent and Exclusive License and Assignment Agreement (the “Patent Agreement”), Movychem would transfer to the Joint Venture all of its interest to the know-how and intellectual property relating to Retacell® exclusive of all patents, and the Company would contribute the amount of $2,600,000 payable (a) $600,000 at the rate of $25,000 per month over a 24 month period and (b) $2,000,000 within five business days of a closing of a financing in which the Company receives net proceeds of at least $3,000,000 but in no event later than six months from the Effective Date. At such time as the Company makes a $2,000,000 payment (and assuming the Company is current with its then monthly capital contributions), pursuant to the Patent Agreement, Movychem would transfer all of its rights, title and interest to all of the patents related to Retacell for an amount equal to aggregate cash contributions of the Company to the Joint Venture plus 40% of all royalty payments received by the Joint Venture for the licensing of Retacell products. Pending assignment of the patents to the Joint Venture, pursuant to the Patent Agreement, Movychem would grant to the Joint Venture an exclusive worldwide license under the patents.

 

Under the Joint Venture Agreement, the Company agreed to grant to certain individuals affiliated with Movychem five-year warrants (the “Warrants”) to purchase an aggregate of 170,000,000 shares of the Company’s common stock at an exercise price of $0.01 per share with vesting depending on the satisfaction of various milestones as described therein, of which none have yet to occur.

 

The Company analyzed the transaction under ASC 810, Consolidation, to determine if the joint venture classifies as a Variable Interest Entity (“VIE”). The Joint Venture qualifies as a VIE based on the fact the JV does not have sufficient equity to operate without financial support from both parties. According to ASC 810-25-38, a reporting entity shall consolidate a VIE when that reporting entity has a variable interest (or combination of variable interests) that provides the reporting entity with a controlling financial interest on the basis of the provisions in paragraphs 810-10-25-38A through 25-38J. The reporting entity that consolidates a VIE is called the primary beneficiary of that VIE. According to the JV operating agreement, the ownership interests are 50/50 and the agreement provides for a Management Committee of five members. Two of the five members are from Xeriant and Movychem, respectively and one is appointed by mutual agreement of the parties. Movychem is transferring to the Joint Venture all of its interest to the know-how and intellectual property relating to Retacell exclusive of all patents, and the Company is contributing cash. As such, both parties do not have substantial capital at risk. Based on these two factors, the conclusion is that no one is the primary beneficiary of the VIE. Accordingly, Xeriant has not consolidated the VIE.

 

 
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The Joint Venture Agreement granted to Movychem the right to dissolve the Joint Venture in the event that the Company fails to make any of its capital contributions in which case the Joint Venture will be required to grant back to Movychem all joint venture intellectual property and the assignment to Movychem of any outstanding licenses. After working with Movychem over the past year and experiencing a number of issues, including but not limited to Movychem’s unwillingness to provide material documentation, processes and information required for the exploitation of Retacell®, the Company independently developed an upcycled construction panel, without the inclusion of Retacell®, outside of the Movychem JV. 

 

Because of Movychem’s non-performance as described above, Xeriant ceased paying Movychem $25,000 per month as provided in the Joint Venture beginning December 2022.  On February 13, 2023, Movychem formally requested dissolution of its Joint Venture with Xeriant, named Ebenberg, LLC.  On February 24, 2023, Xeriant provided a formal response to Movychem, highlighting its multiple and sustained lapses in collaborative efforts related to the commercialization of the Retacell technology.  Subsequent to this communication, Xeriant expressly repudiated Movychem’s proposition for dissolution and their proposition to take an exclusive territory to market Retacell®.  Because Xeriant is focused on commercialization and industrial-level production of eco-friendly composite construction panels, and has moved beyond the Retacell® technology, the Company agreed to dissolution of the Ebenberg, LLC Joint Venture effective June 30, 2023.

 

As of June 30, 2023, the Company contributed $312,919 to the joint venture. 

 

During the year ended June 30, 2023, the Company fully impaired its investment in JV with Ebenberg LLC in the amount of $156,460.

 

NOTE 4 – CONCENTRATION OF CREDIT RISKS

 

The Company maintains accounts with financial institutions. All cash in checking accounts is non-interest bearing and is fully insured by the Federal Deposit Insurance Corporation (FDIC). At times, cash balances may exceed the maximum coverage provided by the FDIC on insured depositor accounts. The Company believes it mitigates its risk by depositing its cash and cash equivalents with major financial institutions. On September 30, 2023, and June 30, 2023, the Company had $0 in excess of FDIC insurance.

 

NOTE 5 – OPERATING LEASE RIGHT-OF-USE ASSET AND OPERATING LEASE LIABILITY

 

The Company leases 2,911 square feet of office space located in the Research Park at Florida Atlantic University, Innovation Centre 1, 3998 FAU Boulevard, Suite 309, Boca Raton, Florida. The Company entered into a lease agreement commencing on November 1, 2019, through January 1, 2025, in which the first three months of rent were abated. Subsequent to the COVID-19 pandemic, the Company decided to continue to have all employees work from home and intends to build out the office space by the end of December 2023 to allow employees to work from the office beginning in January of 2024. The following table illustrates the base rent amounts over the term of the lease:

 

Base Rent Periods

 

November 1, 2019 to October 31, 2020

 

$4,367

 

November 1, 2020 to October 31, 2021

 

$4,498

 

November 1, 2021 to October 31, 2022

 

$4,633

 

November 1, 2022 to October 31, 2023

 

$4,772

 

November 1, 2023 to October 31, 2024

 

$4,915

 

November 1, 2024 to January 31, 2025

 

$5,063

 

  

 
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Operating lease right-of-use asset and liability are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value is the Company’s incremental borrowing rate, estimated to be 10%, as the interest rate implicit in most of the Company’s leases is not readily determinable. Operating lease expense is recognized on a straight-line basis over the lease term. Since the common area maintenance expenses are expenses that do not depend on an index or rate, they are excluded from the measurement of the lease liability and recognized in general and administrative expenses on the condensed consolidated statements of operations. During the three months ended September 30, 2023 and 2022, the Company recorded $13,285 and $13,626 in rent expense, respectively in general and administrative expenses on the condensed consolidated statements of operations.

 

Right-of-use asset is summarized below:

 

 

 

September 30,

2023

 

 

June 30,

2023

 

Office lease

 

$220,448

 

 

$220,448

 

Less accumulated amortization

 

 

(149,683 )

 

 

(137,537 )

Right of use assets, net

 

$70,765

 

 

$82,911

 

 

Operating lease liability is summarized below:

 

 

 

September 30,

2023

 

 

June 30,

2023

 

Office lease

 

$79,020

 

 

$92,196

 

Less: current portion

 

 

(57,876 )

 

 

(55,999 )

Long term portion

 

$21,144

 

 

$36,197

 

 

Maturity of lease liabilities are as follows:

 

Year ended June 30, 2024

 

$46,955

 

Year ended June 30, 2025

 

 

37,112

 

Total future minimum lease payments

 

 

84,067

 

Less: Present value discount

 

 

(5,047 )

Lease liability

 

$79,020

 

 

NOTE 6 – CONVERTIBLE NOTES PAYABLE, IN DEFAULT

 

The carrying value of convertible notes payable as of September 30, 2023, and June 30, 2023, was $5,850,000.

 

 

 

September 30,

 

 

June 30,

 

Convertible Notes Payable

 

2023

 

 

2023

 

Convertible notes payable issued October 27, 2021 (0% interest) – Auctus Fund LLC

 

$5,850,000

 

 

$5,850,000

 

Total face value

 

 

5,850,000

 

 

 

5,850,000

 

 

 
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Auctus Fund LLC Senior Secured Note

 

Through Maxim Group, LLC, Xeriant was introduced to Auctus Fund, LLC (“Auctus”) for the purpose of providing bridge loan funding to satisfy the requirements of a pending merger with XTI Aircraft under a binding term sheet signed in September 2021.  On October 27, 2021, the Company was issued a convertible note payable with Auctus Fund, LLC (the “Auctus Note”) with the principal of $6,050,000, consisting of $5,142,500, which was the actual amount funded, plus an original issue discount in the amount of $907,500 for interest on the unpaid principal amount at the rate of zero percent per annum from the issue date until the note becomes due and payable.  The closing costs were $433,550, which included $308,550 in fees paid to Maxim and professional fees for completing the transaction. The Note had an initial due date of October 27, 2022. The Auctus Note provides the holder has the option to convert the principal balance to common stock of the Company at a conversion price of the lesser of (i) $0.1187 or (ii) 75% of the offering price per share divided by the number of shares of common stock. The Auctus Note is secured by the grant of a first priority security interest in the assets of the Company. In connection with the Auctus Note, the Company issued warrants indexed to an aggregate of 50,968,828 shares of common stock. The warrants have a term of five years and an exercise price of $0.1187.

 

Effective August 1, 2022, the Company entered into an Amendment to the Senior Secured Promissory Note (the “First Amendment”) with Auctus pursuant to which the parties agreed to amend the Auctus Note. The Amendment (i) extended the maturity date of the Auctus Note to November 1, 2022, and (ii) extended the dates for the completion of the acquisition of XTI Aircraft and the uplist of the Company’s common stock to a national securities exchange to November 1, 2022. In consideration of the Amendment, the Company agreed to (i) grant to Auctus a new Warrant to purchase 25,000,000 shares of common stock dated July 26, 2022 (the “Warrant”) at an exercise price of $0.09 per share and 5-year term; (ii) make a prepayment of the Note in the amount of $100,000; and (iii) cause a director of the Company to cancel his 10b-5(1) Plan.

 

Effective December 27, 2022, the Company entered into a Second Amendment to the Senior Secured Promissory Note (the “Second Amendment”) with Auctus pursuant to which the parties agreed to further amend the Auctus Note. The Second Amendment (i) extended the maturity date of the Note, the obligation to uplist to a national securities exchange and acquisition of XTI Aircraft Company to March 15, 2023, and (ii) extended the date to file an S-1 registration statement to uplist the Company’s common stock to a national securities exchange to January 15, 2023. In consideration of the Amendment, the Company agreed to (i) grant to Auctus a new Warrant to purchase 250,000,000 shares of Common Stock dated December 27, 2022 (the “New Warrant”) at an exercise price of $0.09 per share and 5-year term, and (ii) make two pre-payment installments of $50,000 on January 15, 2023, and February 15, 2023. As of September 30, 2023, a total of $50,000 remains outstanding, and is recorded within accounts payable and accrued liabilities on the condensed consolidated balance sheets.

 

Since the Note was issued pre-adoption of ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, the Company was required to determine if the debt contained a beneficial conversion feature (“BCF”), which is based on the intrinsic value on the date of issuance. The Company recorded a beneficial conversion feature in the amount of $2,365,419 in additional paid-in capital. The BCF resulted in a debt discount and is amortized over the life of the note.

 

The Company tested the first modification (“First Amendment”) under ASC 470-50-40 to determine if the modification resulted in an extinguishment. It was determined the present value of the cash flows under the terms of the new debt instrument was at least 10 percent different from the present value of the remaining cash flows under the terms of the original instrument. As a result, the modification resulted in a loss on an extinguishment in the amount of $3,570,366 for the year ended June 30, 2023.

 

 
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The Company tested the second modification (“Second Amendment”) under ASC 470-50-40 to determine if the modification resulted in an extinguishment. It was determined the present value of the cash flows under the terms of the new debt instrument was at least 10 percent different from the present value of the remaining cash flows under the terms of the original instrument. As a result, the modification resulted in a loss on an extinguishment in the amount of $689,621.

 

On October 19, 2023, Xeriant, Inc. filed a complaint in the United States Southern District of New York against Auctus Fund, LLC, to invalidate allegedly illegally designed contractual agreements, including contesting the enforceability of the related note and amendments, and to set aside improper and unlawful securities transactions effectuated in violation of Section 15(a)(1) of the Exchange Act (15 U.S.C. § 78o(a)(1)) by the Defendant, alleging breaches of fiduciary duty and related claims.

 

NOTE 7 – CONVERTIBLE BRIDGE LOANS – AT FAIR VALUE

 

Between January 13, 2023, and March 31, 2023, the Company issued convertible bridge loans with an aggregate face value of $270,000. The notes have a coupon rate of 10% and a maturity date of one year. If the Company has a liquidity event (i.e. the Company a public offering of common stock (or units consisting of common stock and warrants to purchase common stock), resulting in the listing for trading of the common stock on the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange), the notes and any accrued interest automatically convert into common stock. The Liquidity Event Conversion Price is the lesser of (a) $0.09 and (b) the product of (x) the Liquidity Event Price multiplied by (z) 75%. In the event a liquidity event does not occur, the Holder has the option to convert the Notes on the maturity date at a conversion price of $0.09.

 

In addition to the Notes, the holders received an aggregate 2,700,000 warrants. The warrants have an exercise price of $0.09 per share and have a five-year exercise term.

 

The Company analyzed the Convertible Bridge Loans to determine if they were within the scope of ASC 480 Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity. The Contract embodies a conditional obligation to transfer a variable number of shares in which the monetary value of the obligation is based solely or predominantly on, among other things, a fixed monetary amount known at inception. Additionally, the obligation is, in substance, a “traditional” debt arrangement, with the stock of the issuer used as the form of currency for repayment. As a result, the instruments are recorded at fair value pursuant to ASC 480-10-30-7. As of September 30, 2023, and June 30, 2023, the fair value of the Convertible Bridge Loans was $249,702 and $247,254, respectively. During the three months ended September 30, 2023 and 2022, the Company recorded $6,900 and $0 in interest expense related to these loans, respectively. During the three months ended September 30, 2023 and 2022, the Company recorded $2,448 and $0 in increase in fair value of Convertible Bridge Loans, respectively.

 

The Company evaluated the detachable warrants under the requirements of ASC 480 and concluded that the warrants do not fall within the scope of ASC 480. The Company next evaluated the notes under the requirements of ASC 815 “Derivatives and Hedging” and concluded the warrants meet equity classification. The warrants were valued using Black-Scholes Merton (“BSM”) and were determined to have a value of $80,114.

 

NOTE 8 – CONVERTIBLE NOTES PAYABLE

 

Between May 13, 2023, and September 22, 2023, the Company issued convertible bridge loans with an aggregate face value of $511,000. The notes have a coupon rate of 10% and a maturity date of one year. The Notes are convertible at a fixed price of $0.01 per share. During the three months ended September 30, 2023, the Company recorded $13,774 in interest expense related to these notes.

 

During the three months ended September 30, 2023, $60,000 in principal and $6,000 in accrued interest was converted into 6,600,000 shares of common stock.

 

 
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NOTE 9 – FAIR VALUE MEASUREMENTS

 

The following table presents the fair value hierarchy for the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2023 and June 30, 2023:

 

 

 

September 30, 2023

 

 

June 30, 2023

 

Description

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible Bridge Loans

 

$

 

 

$

 

 

$249,702

 

 

$

 

 

$

 

 

$247,254

 

 

Fair values determined by Level 1 inputs utilize unadjusted quoted prices in active markets for identical assets. Level 2 inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data. Level 3 instruments are characterized by unobservable inputs that are supported by little or no market activity, which require management judgment or estimation. The fair value of the Convertible Bridge Loans have three components: (i) principal, (ii) interest, and (iii) a redemption feature. The first two components (i.e. principal and interest) were valued using an income approach. For the redemption feature, the Company uses a Black-Scholes Merton (“BSM”) valuation technique because it believes that this technique is reflective of all significant assumption types, and ranges of assumption inputs, that market participants would likely consider in transactions involving this component. Such assumptions include market price, strike price, term, market trading volatility and risk-free rates.

 

Significant inputs and results arising from the BSM process are as follows for the redemption feature component of the Convertible Bridge Loans:

 

 

 

Inception Dates

 

Three months ended

 

Quoted market price on valuation date

 

$0.027 - $0.05

 

$0.024

 

Effective contractual conversion rates

 

$0.09 - $0.012

 

$0.09

 

Contractual term to maturity

 

0.4 -1 year

 

0.250.75 year

 

Market volatility:

 

 

 

 

 

 

Volatility

 

115% - 135%

 

93.58% - 105.56%

 

Risk-adjusted interest rate

 

4.32% - 5.14%

 

5.40% – 5.47%

 

 

 
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The following table summarizes the total carrying value of the Company’s Level 3 instruments held as of September 30, 2023, including cumulative unrealized gains and losses recognized during the period ended September 30, 2023 and the year ended June 30, 2023:

 

 

 

Period Ended

September 30,

 

 

Year Ended

June 30,

 

 

 

2023

 

 

2023

 

Balances at beginning of period

 

$247,254

 

 

$-

 

Issuances:

 

 

 

 

 

 

 

 

Convertible Bridge Loans

 

 

 

 

 

 

189,886

 

Changes in fair value inputs and assumptions reflected in income

 

 

2,448

 

 

 

57,368

 

Balances at end of period

 

$249,702

 

 

$247,254

 

 

NOTE 10 – RELATED PARTY TRANSACTIONS

 

Consulting fees

 

During the three months ended September 30, 2023 and 2022, the Company recorded $57,500 and $55,000 respectively, in consulting fees to Ancient Investments, LLC, a Company owned by the Company’s CEO, Keith Duffy and the Company’s Executive Director of Corporate Operations, Scott Duffy. As of September 30, 2023 and June 30, 2023, $5,000 and $10,000 was accrued, respectively.

 

For the three months ended September 30, 2023 and 2022, the Company recorded $21,000 and $20,000 respectively, in consulting fees to Edward DeFeudis, a Director of the Company. As of September 30, 2023 and June 30, 2023, $5,000 was accrued.

 

During the three months ended September 30, 2023 and 2022, the Company recorded $14,000 in consulting fees to AMP Web Services, a Company owned by the Company’s CTO, Pablo Lavigna. As of September 30, 2023 and June 30, 2023, $0 was accrued.

 

During the three months ended September 30, 2023 and 2022, the Company recorded $5,000 in consulting fees to Keystone Business Development Partners, a Company owned by the Company’s CFO, Brian Carey. As of September 30, 2023 and June 30, 2023, $0 and $5,000 was accrued, respectively.

 

NOTE 11 – COMMITMENTS AND CONTINGENCIES

 

During the normal course of business, the Company may be exposed to litigation. When the Company becomes aware of potential litigation, it evaluates the merits of the case in accordance with FASB ASC 450-20-50, Contingencies. The Company evaluates its exposure to the matter, possible legal or settlement strategies and the likelihood of an unfavorable outcome. If the Company determines that an unfavorable outcome is probable and can be reasonably estimated, it establishes the necessary accruals.

 

 
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Board of Advisors Agreements

 

The Company has entered into Advisor Agreements with various advisory board members. The agreements provide for the following:

 

On July 1, 2021, the Company agreed to issue to an advisor 100,000 common shares, and $2,500 per meeting paid in cash, common shares, or a combination, an additional bonus of $25,000 paid in common shares issued at the end of each year of service, an option to purchase 5,000,000 common shares at $0.12 per share, vesting quarterly over 24 months, and for each of the following three years (beginning July 1, 2022), an option to purchase an additional 1,000,000 common shares per year thereafter at a 25% discount to the average market price for the preceding 10 trading days. The agreement also provides for a 1% finder’s fee.

   

On July 6, 2021, the Company provided an option to an advisor to purchase 5,000,000 common shares at $0.12 per share, vesting quarterly over 24 months, a bonus of 250,000 common shares issued upon a strategic partnership with a major airline, $2,500 per formal meeting paid in common shares, and an additional bonus of $25,000 paid in common shares issued at the end of each year of service.  Advisory agreement is open ended and can be terminated by consent of both parties upon written notice.

 

On July 28, 2021, the Company agreed to issue to an advisor 250,000 common shares immediately, an option to purchase 5,000,000 common shares at $0.12 per share, vesting quarterly over 24 months, a bonus of 5,000,000 common shares for bringing in a strategic partner that significantly strengthens the Company’s market position, $2,500 per formal meeting paid in cash, common shares or a combination, and an additional bonus of $25,000 paid in common shares issued at the end of each year of service. The agreement also provides for a 30% commission. Advisory agreement is open ended and can be terminated by consent of both parties upon written notice.

 

On August 9, 2021, the Company agreed to issue to an advisor 50,000 common shares vesting over the first year, $2,500 per meeting paid in cash, common shares, or a combination, and an additional bonus of $25,000 paid in common shares issued at the end of each year of service. Advisory agreement is open ended and can be terminated by consent of both parties upon written notice.

 

On August 20, 2021, the Company agreed to issue to an advisor 100,000 common shares, and $2,500 per meeting paid in cash, common shares, or a combination, an additional bonus of $25,000 paid in common shares issued at the end of each year of service, an option to purchase 4,000,000 common shares at $0.12 per share, vesting quarterly over 24 months. Advisory agreement is open ended and can be terminated by consent of both parties upon written notice.

 

On March 1, 2022, the Company agreed to issue to an advisor 150,000 common shares vesting monthly over one year, $2,500 per meeting paid in cash, and an additional bonus of $25,000 paid in common shares issued at the end of each year of service. Advisory agreement is open ended and can be terminated by consent of both parties upon written notice.

 

On January 20, 2022, the Company agreed to issue to an advisor 150,000 common shares vesting monthly over one year, and $2,500 per meeting paid in cash and an additional bonus of $25,000 paid in common shares issued at the end of each year of service. Advisory agreement is open ended and can be terminated by consent of both parties upon written notice.

 

On March 20, 2022, the Company agreed to issue to an advisor 150,000 common shares vesting monthly over one year, and $2,500 per meeting paid in cash and an additional bonus of $25,000 paid in common shares issued at the end of each year of service. Advisory agreement is open ended and can be terminated by consent of both parties upon written notice.

 

There were no Advisory Agreements executed during the three months ended September 30, 2023.

 

NOTE 12 – EQUITY

 

Common Stock

 

As of September 30, 2023 and June 30, 2023, the Company had 5,000,000,000 shares of common stock authorized with a par value of $0.00001. There were 401,033,144 and 389,433,144 shares issued and outstanding as of September 30, 2023 and June 30, 2023, respectively.

 

During the three months ended September 30, 2023, the Company issued 5,000,000 shares of common stock in exchange for the conversion of 5,000 shares of Series A Preferred Stock.

 

During the three months ended September 30, 2023, $60,000 in principal and $6,000 in accrued interest was converted into 6,600,000 shares of common stock.

 

 
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Series A Preferred Stock

 

There are 100,000,000 shares authorized as preferred stock, of which 3,500,000 are designated as Series A preferred stock having a par value of $0.00001 per share. The Series A preferred stock has the following rights:

 

 

·

Voting: The preferred shares shall be entitled to 1,000 votes to every one share of common stock.

 

 

 

 

·

Dividends: The Series A preferred stockholders are treated the same as the common stockholders except at the dividend on each share of Series A convertible preferred stock is equal to the amount of the dividend declared and paid on each share of common stock multiplied by the Conversion Rate.

 

 

 

 

·

Conversion: Each share of Series A Preferred Stock is convertible, at the option of the holder thereof, at any time into shares of Common Stock on a 1:1,000 basis.

 

 

 

 

·

The shares of Series A Preferred Stock are redeemable at the option of the Corporation at any time after September 30, 2022 upon not less than 30 days written notice to the holders. It is not mandatorily redeemable.

 

As of September 30, 2023 and June 30, 2023, the Company had 752,395 and 757,395 shares of Series A preferred stock issued and outstanding, respectively.

 

Series B Preferred Stock

 

On March 25, 2021, the Certificate of Designation for the Series B Preferred was recorded by the State of Nevada. There are 100,000,000 shares authorized as preferred stock, of which 1,000,000 are designated as Series B Preferred Stock having a par value of $0.00001 per share. The Series B preferred stock is not convertible, grants 5,000 votes and no liquidation preference.

 

Stock Options

 

In connection with certain advisory board compensation agreements, the Company issued an aggregate 21,250,000 options at an exercise price of $0.12 per share for the year ended June 30, 2022. These options vest quarterly over twenty-four months and have a term of three years. The grant date fair value was $3,964,207. The Company recorded compensation expense in the amount of $0 and $306,170 for these options for the three months ended September 30, 2023 and 2022, respectively. As of June 30, 2023, there was $0 of total unrecognized compensation cost related to non-vested portion of options granted.

 

As of September 30, 2023, there are 21,250,000 options outstanding, of which 20,968,750 are exercisable. The weighted average remaining term is 0.76 years.

 

 
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A summary of the Company’s stock options activity is as follows:

 

 

 

Number of

Options 

 

 

Weighted-

Average

Exercise

Price

 

 

Weighted-

Average

Contractual

Term

(in years)

 

 

Aggregate

Intrinsic

Value

 

Outstanding at June 30, 2023

 

 

21,250,000

 

 

$0.12

 

 

 

1.11

 

 

 

 

Granted

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

Exercised

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

Canceled

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

Outstanding at September 30, 2023

 

 

21,250,000

 

 

$0.12

 

 

 

0.76

 

 

$-

 

Exercisable at September 30, 2023

 

 

20,968,750

 

 

$0.12

 

 

 

0.76

 

 

$-

 

 

Significant inputs and results arising from the Black-Scholes process are as follows for the options:

 

Quoted market price on valuation date

 

$0.169 - $0.23

 

Exercise prices

 

$0.12

 

Range of expected term

 

1.55 Years – 2.49 Years

 

Range of market volatility:

 

 

 

 

Range of equivalent volatility

 

181.21% - 275.73%

 

Range of interest rates

 

0.20% - 1.08%

 

 

Warrants

 

As of September 30, 2023 and June 30, 2023, the Company had 104,802,161 warrants outstanding. The warrants have a term of two to five years and an exercise price range from $0.021 and $0.1187. The Company evaluated the warrants under ASC 815, Derivatives and Hedging (“ASC 815”) and determined that they did not require liability classification. The warrants were recorded in additional paid-in capital under their aggregate relative fair values. During the year ended June 30, 2023, holders of warrants exercised warrants for 4,308,600 shares of common stock for aggregate proceeds of $128,550. As of September 30, 2023, the weighted average remaining useful life of the warrants was 3.54. The warrants are detailed as follows:

 

Number of Warrants

 

Number of Warrants

 

 

Weighted-

Average

Exercise

Price

 

 

Weighted-

Average

Contractual

Term

(in years)

 

 

Aggregate

Intrinsic

Value

 

Outstanding at June 30, 2023

 

 

104,802,161

 

 

$0.1015

 

 

 

3.79

 

 

$-

 

Granted

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercised

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Canceled

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at September 30, 2023

 

 

104,802,161

 

 

$0.1015

 

 

 

3.54

 

 

$-

 

Vested at September 30, 2023

 

 

104,802,161

 

 

$0.1015

 

 

 

3.54

 

 

$-

 

Exercisable at September 30, 2023

 

 

104,802,161

 

 

$0.1015

 

 

 

3.54

 

 

$-

 

       

NOTE 13 – SUBSEQUENT EVENTS

 

On October 19, 2023, Xeriant, Inc. filed a complaint in the United States Southern District of New York against Auctus Fund, LLC, to invalidate allegedly illegally designed contractual agreements, including contesting the enforceability of the related note and amendments, and to set aside improper and unlawful securities transactions effectuated in violation of Section 15(a)(1) of the Exchange Act (15 U.S.C. § 78o(a)(1)) by the Defendant, alleging breaches of fiduciary duty and related claims.

 

 
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 

 

The following discussion of our financial condition and results of operations should be read in conjunction with the audited and unaudited financial statements and the notes to those statements included elsewhere in this Report. This discussion contains forward-looking statements that involve risks and uncertainties. You should specifically consider the various risk factors identified in this Report that could cause actual results to differ materially from those anticipated in these forward-looking statements.

 

Forward-Looking Statements

 

This Quarterly Report on Form 10-Q contains forward-looking statements, including without limitation, statements related to our plans, strategies, objectives, expectations, intentions and adequacy of resources. Investors are cautioned that such forward-looking statements involve risks and uncertainties including without limitation the following: (i) our plans, strategies, objectives, expectations and intentions are subject to change at any time at our discretion; (ii) our plans and results of operations will be affected by our ability to manage growth; and (iii) other risks and uncertainties indicated from time to time in our filings with the Securities and Exchange Commission.

 

In some cases, you can identify forward-looking statements by terminology such as ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘could,’’ ‘‘expects,’’ ‘‘plans,’’ ‘‘intends,’’ ‘‘anticipates,’’ ‘‘believes,’’ ‘‘estimates,’’ ‘‘predicts,’’ ‘‘potential,’’ or ‘‘continue’’ or the negative of such terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We are under no duty to update any of the forward-looking statements after the date of this Report.

 

This section of the report should be read together with Footnotes of the Company’s audited financials for the year ended June 30, 2023. The unaudited statements of operations for the three months ended September 30, 2023 and 2022 are compared in the sections below.

 

Executive Summary

 

Xeriant, Inc. is dedicated to the discovery, development and commercialization of advanced materials and technology related to next generation air and spacecraft, which can be successfully integrated and commercialized for deployment across multiple industrial sectors. We seek to partner with and acquire strategic interests in visionary companies that accelerate this mission. Xeriant’s advanced materials line will be marketed under the DUREVER™ brand, and includes NexBoard™, an eco-friendly, patent-pending composite building panel made from plastic and cardboard waste, designed to replace products such as drywall, plywood, OSB, MDF, MgO board and other materials used in construction.

 

Xeriant, Inc. is dedicated to the acquisition, development and commercialization of transformative aerospace technologies, including eco-friendly specialty materials which can be successfully deployed and integrated across multiple industry sectors, and disruptive innovations related to the emerging aviation market called Advanced Air Mobility, which include next-generation aircraft. We seek to partner with and acquire strategic interests in visionary companies that accelerate this mission. The Company is located at the Research Park at Florida Atlantic University in Boca Raton, Florida.

 

 
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Table of Contents

    

Joint Venture with XTI Aircraft

 

On May 31, 2021, we entered into a Joint Venture Agreement (the “Agreement”) with XTI Aircraft Company (“XTI”), a Delaware corporation, to form the XTI JV, named Eco-Aero, LLC, with the purpose of completing the preliminary design review (“PDR”) of XTI’s TriFan 600, a 5-passenger plus pilot, hybrid electric, vertical takeoff, and landing (eVTOL) fixed wing aircraft. Under the Agreement, Xeriant is contributing capital, technology, and strategic business relationships, and XTI is contributing intellectual property licensing rights and know-how. XTI and the Company each own 50 percent of the XTI JV, and it is managed by a management committee consisting of five members, three appointed by Xeriant and two by XTI. The Agreement was effective on June 4, 2021, with an initial deposit of USD1 million into the XTI JV. Our financial commitment was up to USD10 million, contributed as needed to complete the preliminary design of the aircraft.  XTI completed Preliminary Design Review during the first quarter of 2022, which was the purpose of the XTI JV.

 

On May 17, 2022, we executed a confidential Letter Agreement with XTI, the material terms of which are briefly delineated as follows:

 

 

·

Xeriant would be entitled to compensation for its role in introducing XTI to a Nasdaq-listed company, contingent upon the occurrence of any merger, combination, or transactional event between XTI and the Nasdaq company, which has since been identified as Inpixon.

 

 

 

 

·

XTI would assume the financial obligations related to the Senior Secured Note with Auctus Fund, LLC, including the $6.05 million principal balance of the note and warrant obligations. Additionally, Xeriant was to be granted a fully diluted equity interest amounting to 6% in XTI, issued immediately prior to any prospective combination with Inpixon.

 

On June 5, 2023, after suspecting that the obligations under the Letter Agreement were possibly being evaded, we transmitted a formal demand letter to XTI requesting compliance with the provisions outlined in the Letter Agreement and in accordance with Section 8 of the JV Agreement with XTI.

 

On July 25, 2023, Inpixon publicly disclosed the execution of a definitive merger agreement with XTI in the 8-K filing, confirming our suspicions. We learned in that filing that XTI was funded $300,000 by Inpixon on March 10, 2023, followed by additional fundings aggregating, at the time of Inpixon’s July 25, 2023, 8-k filing, to $525,000 under a $2,313,407 Senior Secured Promissory Note from Inpixon to fund XTI. We believe this transaction is covered under the Letter Agreement as a trigger for compensation due to Xeriant as outlined above.

       

As of the date of this filing, we remain engaged in dialogue with XTI to enforce compliance with the Letter Agreement and to find an amicable resolution, although no assurance can be given that such a resolution will be achieved.

 

Recent Developments

 

Joint Venture with Movychem

 

On April 2, 2022, the Company entered into a Joint Venture Agreement with Movychem s.r.o., a Slovakian limited liability company, to develop and commercialize a flame-retardant called Retacell®. The Joint Venture is organized as a Florida limited liability company under the name Ebenberg, LLC, owned 50% by each the Company and Movychem.

 

For its capital contribution to the Joint Venture, pursuant to a Patent and Exclusive License and Assignment Agreement (the “Patent Agreement”), Movychem would transfer to the Joint Venture all of its interest to the know-how and intellectual property relating to Retacell exclusive of all patents, and the Company would contribute the amount of $2,600,000 payable (a) $600,000 at the rate of $25,000 per month over a 24-month period and (b) $2,000,000 within five (5) business days of a closing of a financing in which the Company receives net proceeds of at least $3,000,000, but in no event later than six months from the Effective Date. At such time as the Company makes a $2,000,000 payment (and assuming the Company is current with its then monthly capital contributions), pursuant to the Patent Agreement, Movychem would transfer all of its rights, title and interest to all of the patents related to Retacell for an amount equal to aggregate cash contributions of the Company to the Joint Venture plus 40% of all royalty payments received by the Joint Venture for the licensing of Retacell products. Pending assignment of the patents to the Joint Venture, pursuant to the Patent Agreement, Movychem would grant to the Joint Venture an exclusive worldwide license under the patents.

 

 
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Under the Joint Venture Agreement, the Company had agreed to grant to certain individuals affiliated with Movychem five-year warrants (the “Warrants”) to purchase an aggregate of 170,000,000 shares of the Company’s common stock at an exercise price of $0.01 per share with vesting depending on the satisfaction of various milestones as described therein.

 

The Joint Venture Agreement granted to Movychem the right to dissolve the Joint Venture in the event that the Company fails to make any of its capital contributions in which case the Joint Venture will be required to grant back to Movychem all joint venture intellectual property and the assignment to Movychem of any outstanding licenses. After working with Movychem over the past year and experiencing a number of issues, including but not limited to Movychem’s unwillingness to provide material documentation, processes and information required for the exploitation of Retacell®, the Company has independently developed an upcycled construction panel, without the inclusion of Retacell®, outside of the Movychem JV. This approach will enable us to unlock existing demand indicated by several homebuilders and developers for industrial scale production of environmentally friendly construction panels in varying thicknesses and sizes, including standard 48” x 96” sheets. 

 

The Company analyzed the transaction under ASC 810 Consolidation, to determine if the joint venture classifies as a Variable Interest Entity (“VIE”). The Joint Venture qualifies as a VIE based on the fact the JV does not have sufficient equity to operate without financial support from both parties. According to ASC 810-25-38, a reporting entity shall consolidate a VIE when that reporting entity has a variable interest (or combination of variable interests) that provides the reporting entity with a controlling financial interest on the basis of the provisions in paragraphs 810-10-25-38A through 25-38J. The reporting entity that consolidates a VIE is called the primary beneficiary of that VIE. According to the JV operating agreement, the ownership interests are 50/50 and the agreement provides for a Management Committee of five members. Two of the five members are from Xeriant and Movychem, respectively and one is appointed by mutual agreement of the parties. Movychem is transferring to the Joint Venture all of its interest to the know-how and intellectual property relating to Retacell exclusive of all patents, and the Company is contributing cash. As such, both parties do not have substantial capital at risk. Based on these two factors, the conclusion is that no one is the primary beneficiary of the VIE. Accordingly, Xeriant has not consolidated the VIE.

 

Because of Movychem’s non-performance as described above, Xeriant ceased paying Movychem $25,000 per month as required in the Joint Venture beginning December 2022.  On February 13, 2023, Movychem formally requested dissolution of its Joint Venture with Xeriant, named Ebenberg, LLC.  On February 24, 2023, Xeriant provided a formal response to Movychem highlighting its multiple and sustained lapses in collaborative efforts related to the commercialization of the Retacell technology.  Subsequent to this communication, Xeriant expressly repudiated Movychem’s proposition for dissolution and their proposition to take an exclusive territory to market Retacell®.  Because Xeriant is focused on the commercialization and industrial-level production of the eco-friendly composite construction panels, and has moved beyond the Retacell® technology, the Company agreed to dissolution of the Ebenberg, LLC Joint Venture effective June 30, 2023.  As such, the accumulated “Investment in Ebenberg JV” as of June 30, 2023, of $156,460 was fully impaired as of that date and reported as “Loss on Impairment of Investment”.

 

As of June 30, 2023, the Company had paid $312,919 to the Joint Venture.

 

Auctus Senior Secured Promissory Note

 

Prior to filing of complaint noted below, the Company had been in active negotiations with Auctus Fund, LLC, to extend the maturity date of the Senior Secured Promissory Note which became due and payable on March 15, 2023. Please see Note 6 to the financial statements. On June 1, 2023, the SEC filed a complaint against Auctus claiming that the company was operating as an unlicensed broker-dealer, and the loans could result in cancellation.  On October 19, 2023, the Company filed a complaint in the United States Southern District of New York against Auctus to invalidate allegedly illegally designed contractual agreements, including contesting the enforceability of the related note and amendments, and to set aside improper and unlawful securities transactions effectuated in violation of Section 15(a)(1) of the Exchange Act (15 U.S.C. § 78o(a)(1)) by the Defendant, alleging breaches of fiduciary duty and related claims. If either the Company or the SEC are unsuccessful in their legal actions and there is no settlement reached with Auctus, the Company will be required to continue negotiations with Auctus as to extension or satisfaction of the Note, or Auctus may elect to convert the Note into shares of our Common Stock.  In that event, our shareholders could experience substantial dilution, or the Company could lose substantially all of its assets.

 

Stock Sales

 

During the three months ended September 30, 2023, the Company received $0 by selling shares of common stock.

 

Convertible Notes Issued

 

During the three months ended September 30, 2023, the Company received $411,000 from issuance of convertible debt.

 

 
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Litigation

 

On October 19, 2023, Xeriant, Inc. filed a complaint in the United States Southern District of New York against Auctus Fund, LLC, to invalidate allegedly illegally designed contractual agreements, and to set aside improper and unlawful securities transactions effectuated in violation of Section 15(a)(1) of the Exchange Act (15 U.S.C. § 78o(a)(1)) by the Defendant, alleging breaches of fiduciary duty and related claims.

 

Three Months Ended September 30, 2023 Results of Operations Compared with Three Months Ended September 30, 2022

 

 

 

For the three months ended

 

 

 

 

 

September 30,

2023

 

 

September 30,

2022

 

 

$

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Consulting and advisory fees

 

$51,695

 

 

$455,573

 

 

$(403,878)

Related party consulting fees

 

 

97,500

 

 

 

94,000

 

 

 

3,500

 

General and administrative expenses

 

 

49,877

 

 

 

89,996

 

 

 

(40,119)

Professional fees

 

 

90,314

 

 

 

90,060

 

 

 

254

 

Advertising and marketing expense

 

 

2,522

 

 

 

6,356

 

 

 

(3,834)

Research and development expense

 

 

26,982

 

 

 

-

 

 

 

26,982

 

Total operating expenses

 

 

318,890

 

 

 

735,985

 

 

 

(417,095)

Operating loss

 

 

(318,890)

 

 

(735,985)

 

 

417,095

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of debt discount

 

 

-

 

 

 

(461,842)

 

 

461,842

 

Interest expense

 

 

(20,674)

 

 

-

 

 

 

(20,674)

Change in fair value of convertible bridge loans

 

 

(2,448)

 

 

-

 

 

 

(2,448)

Loss from Ebenberg JV

 

 

-

 

 

 

(49,328)

 

 

49,328

 

Loss on extinguishment of debt

 

 

-

 

 

 

(3,570,366)

 

 

3,570,366

 

Total other (expense)

 

 

(23,122)

 

 

(4,081,536)

 

 

4,058,414

 

Net loss

 

$(342,012)

 

$(4,817,521)

 

$4,475,509

 

 

 
7

Table of Contents

    

Consulting and advisory fees

 

Total consulting and advisory expenses were $51,695 and $455,573 for the three months ended September 30, 2023 and 2022, respectively. In the prior period, there were increased expenses due to stock issuances for services relating to advisory agreements. 

 

Related Party Consulting Fees

 

Total related party consulting fees were $97,500 and $94,000 for the three months ended September 30, 2023 and 2022, respectively. The related party consulting fees for the three months ended September 30, 2023, consisted of (i) $57,500 to Ancient Investments, LLC, a company owned by Keith Duffy, CEO and Scott Duffy, Executive Director of Operations, (ii) $14,000 for AMP Web Services, LLC, a company owned by Pablo Lavigna, CIO, (iii) $21,000 to Edward DeFeudis, Director, and (iv) $5,000 for Keystone Business Development Partners, LLC, a company owned by Brian Carey, CFO. The related party consulting fees for the three months ended September 30, 2022, consisted of (i) $55,000 to Ancient Investments, LLC, (ii) $14,000 for AMP Web Services, LLC, (iii) $20,000 to Edward DeFeudis, and (iv) $5,000 for Keystone Business Development Partners, LLC.

 

General and administrative expenses

 

Total general and administrative expenses were $49,877 and $89,996 for the three months ended September 30, 2023 and 2022, respectively. The primary reason for the decrease was related to investor fees paid in prior period not incurred in the current period.

 

Professional Fees

 

Total professional fees were $90,314 and $90,060 for the three months ended September 30, 2023 and 2022, respectively.

 

Advertising and marketing expenses

 

Total advertising and marketing expenses were $2,522 and $6,356 for the three months ended September 30, 2023 and 2022, respectively.

 

Research and Development Expenses

 

Total research and development expenses were $26,982 and $0 for the three months ended September 30 2023 and 2022, respectively. Research & Development Expenses are accounted for through BlueGreen Composites, LLC, which was formed on August 7, 2023.  All research and development expenses were related to the production and distribution of sample NEXBOARDs for presentation to potential customers.

 

Other (Expenses)  

 

Total other expenses consist of interest expense related to convertible notes and change in fair value of the convertible bridge loans. Total other expenses were $23,122 for the three months ended September 30, 2023, compared to $4,081,536 for the three months ended September 30, 2022. The decrease was primarily due to recording the loss on extinguishment of debt for three months ended September 30, 2022, in the amount of $3,570,366, and amortization of debt discount of $461,842.

 

Net loss

 

Total net loss was $342,012 for the three months ended September 30, 2023, compared to $4,817,521 for the three months ended September 30, 2022. The decrease was primarily related to amortization of debt discount of $461,842,  loss on extinguishment of debt in the amount of $3,570,366, and consulting fees of $455,573.

 

 
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Liquidity and Capital Resources

 

The Company's condensed consolidated financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. On September 30, 2023 and June 30, 2023, the Company had $24,551 and $61,625 in cash, respectively, and $6,963,408 and $6,684,867 in negative working capital, respectively. On September 30, 2023, the principal balance of the Auctus Senior Secured Promissory Note was $5,850,000. The Note matured on March 15, 2023, and the company has been in discussions with Auctus to resolve the liability. For the three months ended September 30, 2023 and 2022, the Company had a net loss of $342,012 and $4,817,521, respectively. Continued losses may adversely affect the liquidity of the Company in the future. Therefore, the factors noted above raise substantial doubt about our ability to continue as a going concern. The recoverability of a major portion of the recorded asset amounts shown in the accompanying condensed consolidated balance sheets is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to raise additional capital, obtain financing and to succeed in its future operations. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s existence is dependent upon management’s ability to develop profitable operations and resolve its liquidity problems.

 

During the three months ended September 30, 2023, the Company’s operating activities used $308,127 of net cash used compared to using $565,339 of net cash used in our operating activities during the three months ended September 30, 2022. This difference primarily related to a decrease in stock-based compensation and stock issued for services and amortization of debt discount and a loss on extinguishment of debt the prior period. During the three months ended September 30, 2023, our investing activities used $139,947 of net cash compared to using $2,567 of net cash used in our investing activities during the three months ended September 30, 2022. This difference related to cash issued for notes receivable during the three months September 30, 2023.  During the three months ended September 30, 2023, our financing activities added $411,000 of net cash compared to $0 of net cash in our financing activities during the three months ended September 30, 2022. This difference related to the issuance of convertible notes during the three months ended September 30, 2023.

   

Funding Strategy

 

To date, our operations have been funded primarily through private investors. Some of these investors have verbally committed additional funding for the Company, as needed. The Company has had a number of discussions with broker-dealers regarding the funding required to execute the Company’s business plan, which is to acquire and develop breakthrough technologies or business interests in those companies that have developed these technologies. The Company plans on issuing an offering document to obtain funding for certain acquisitions that are in the discussion stages.

 

Off Balance Sheet Items

 

We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities” (SPEs).

 

Critical Accounting Policies

 

Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments which affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities (see Note 2, Summary of Significant Accounting Policies, contained in the notes to the Company’s condensed consolidated financial statements for the three months ended September 30, 2023 and 2022 contained in this filing). On an ongoing basis, we evaluate our estimates. The Company bases our estimates on historical experience and on various other assumptions which we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities which are not readily apparent from other sources. Actual results may differ from these estimates based upon different assumptions or conditions; however, we believe that our estimates are reasonable.

 

Management is aware that certain changes in accounting estimates employed in generating financial statements can have the effect of making the Company look more or less profitable than it actually is. Management does not believe that the Company has made any such changes in accounting estimates.

 

 
9

Table of Contents

    

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

As a smaller reporting company, the Company has elected not to provide the disclosure required by this item.

 

Item 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

Our management is responsible for maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that the Registrant files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. In addition, the disclosure controls and procedures must ensure that such information is accumulated and communicated to the Registrant's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial and other required disclosures.

 

At September 30, 2023, an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)-15(e) of the Exchange Act) was carried out under the supervision and with the participation of Keith Duffy our Chief Executive Officer and Brian Carey our Chief Financial Officer. Based on his evaluation of our disclosure controls and procedures, he concluded that at September 30, 2023, our disclosure controls and procedures are not effective due to material weaknesses in our internal controls over financial reporting.

 

Changes in Internal Control Over Financial Reporting

 

There has been no change in the Company’s internal control over financial reporting, as defined in Rules 13a-15(f) of the Exchange Act, during the Company’s most recent fiscal quarter ended September 30, 2023, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 
10

Table of Contents

    

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

On October 19, 2023, Xeriant, Inc. filed a complaint in the United States Southern District of New York against Auctus Fund, LLC, to invalidate illegally designed contractual agreements, including contesting the enforceability of the related note and amendments, and to set aside improper and unlawful securities transactions effectuated in violation of Section 15(a)(1) of the Exchange Act (15 U.S.C. § 78o(a)(1)) by the Defendant, alleging breaches of fiduciary duty and related claims.

 

There is no pending litigation against the Company and to our knowledge no litigation is contemplated or threatened. To our knowledge, none of our directors, officers, 5% shareholders or affiliates are party to any legal proceedings that would have a material adverse effect on our business, financial condition, or operating results.

 

Item 1A. Risk Factors

 

Our business is subject to numerous risks and uncertainties including but not limited to those discussed in “Risk Factors” in our Annual Report on Form 10-K.

 

Item 2. Unregistered Sales of Equity Securities

 

None.

 

Item 3. Defaults Upon Senior Securities

 

Refer to Note 6 relating to Auctus Senior Secured Promissory Note

 

Item 4. Mine Safety Disclosures

 

Not Applicable.

 

Item 5. Other Information

    

To the best of the Company’s knowledge, during the fiscal quarter ended September 30, 2023, no director or officer (as defined in Rule 16a-1(f) of the Exchange Act) of the Company adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements. 

 

 
11

Table of Contents

 

Item 6. Exhibits

 

The following exhibits are filed herewith

 

Exhibit

Number

 

Document

31.1

 

Certification of the principal executive officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

31.2

 

Certification of the principal financial officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.1

 

Certification of the principal executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.2

 

Certification of the principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

101.INS

 

Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).

 

 

 

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document

 

 

 

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

101.DEF

 

Inline XBRL Taxonomy Extension Definition Document

 

 

 

101.LAB

 

Inline XBRL Taxonomy Extension Label Linkbase Document

 

 

 

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

104

 

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

 

 
12

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SIGNATURES

 

In accordance with the requirements of the Exchange Act, the Company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

XERIANT, INC.

 

 

 

Date: November 13, 2023

By:

/s/ Keith Duffy

 

Keith Duffy

Chief Executive Officer

(Principal Executive)

 

Date: November 13, 2023

By:

/s/ Brian Carey

 

Brian Carey

Chief Financial Officer

 

 
13

 

nullnullnullnullv3.23.3
Cover - shares
3 Months Ended
Sep. 30, 2023
Nov. 10, 2023
Cover [Abstract]    
Entity Registrant Name XERIANT, INC.  
Entity Central Index Key 0001481504  
Document Type 10-Q  
Amendment Flag false  
Current Fiscal Year End Date --06-30  
Entity Small Business true  
Entity Shell Company false  
Entity Emerging Growth Company false  
Entity Current Reporting Status Yes  
Document Period End Date Sep. 30, 2023  
Entity Filer Category Non-accelerated Filer  
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2024  
Entity Common Stock Shares Outstanding   421,044,644
Document Quarterly Report true  
Document Transition Report false  
Entity File Number 000-54277  
Entity Incorporation State Country Code NV  
Entity Tax Identification Number 27-1519178  
Entity Address Address Line 1 Innovation Centre 1  
Entity Address Address Line 2 3998 FAU Boulevard, Suite 309  
Entity Address City Or Town Boca Raton  
Entity Address State Or Province FL  
Entity Address Postal Zip Code 33431  
City Area Code 561  
Local Phone Number 491-9595  
Entity Interactive Data Current Yes  
v3.23.3
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)
Sep. 30, 2023
Jun. 30, 2023
Current assets    
Cash $ 24,551 $ 61,625
Prepaids 3,714 4,529
Note receivable 139,947 0
Total current assets 168,212 66,154
Deposits 12,546 12,546
Property & equipment, net 5,129 5,507
Operating lease right-of-use asset 70,765 82,911
Total assets 256,652 167,118
Current liabilities    
Accounts payable and accrued liabilities 437,842 402,568
Accrued liabilities, related party 10,000 20,000
Shares to be issued 75,200 75,200
Convertible notes payable- in default 5,850,000 5,850,000
Convertible notes payable 451,000 100,000
Convertible bridge loans, at fair value 249,702 247,254
Lease liability, current 57,876 55,999
Total current liabilities 7,131,620 6,751,021
Lease liability, long-term 21,144 36,197
Total liabilities 7,152,764 6,787,218
Stockholders' deficit    
Common stock, $0.00001 par value; 5,000,000,000 shares authorized; 401,033,144 and 389,433,144 shares issued and outstanding at September 30, 2023 and June 30, 2023, respectively 4,010 3,894
Common stock to be issued 51,950 51,950
Additional paid in capital 19,855,677 19,789,793
Accumulated deficit (23,972,551) (23,638,461)
Total stockholders' deficit (4,060,896) (3,792,806)
Non-controlling interest (2,835,216) (2,827,294)
Total stockholders' deficit (6,896,112) (6,620,100)
Total liabilities and stockholders' deficit 256,652 167,118
Preferred Shares Series A Member    
Stockholders' deficit    
Preferred stock 8 8
Preferred Shares Series B Member    
Stockholders' deficit    
Preferred stock $ 10 $ 10
v3.23.3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares
Sep. 30, 2023
Jun. 30, 2023
Common stock, shares par value $ 0.00001 $ 0.00001
Common stock, shares authorized 5,000,000,000 5,000,000,000
Common stock, shares issued 401,033,144 389,433,144
Common stock, shares outstanding 401,033,144 389,433,144
Series B Preferred Shares [Member]    
Preferred stock, shares par value $ 0.00001 $ 0.00001
Preferred stock, shares authorized 100,000,000 100,000,000
Preferred stock, shares designated 1,000,000 1,000,000
Preferred stock, shares issued 1,000,000 1,000,000
Preferred stock, shares outstanding 1,000,000 1,000,000
Series A Preferred Shares [Member]    
Preferred stock, shares par value $ 0.00001 $ 0.00001
Preferred stock, shares authorized 100,000,000 100,000,000
Preferred stock, shares designated 3,500,000 3,500,000
Preferred stock, shares issued 752,395 757,395
Preferred stock, shares outstanding 752,395 757,395
v3.23.3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($)
3 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Operating expenses:    
Consulting and advisory fees $ 51,695 $ 455,573
Related party consulting fees 97,500 94,000
General and administrative expenses 49,877 89,996
Professional fees 90,314 90,060
Advertising and marketing expense 2,522 6,356
Research and development expense 26,982 0
Total operating expenses 318,890 735,985
Loss from operations (318,890) (735,985)
Other expenses:    
Amortization of debt discount 0 (461,842)
Interest expense (20,674) 0
Change in fair value of convertible bridge loans (2,448) 0
Loss from Ebenberg JV 0 (49,328)
Loss on extinguishment of debt 0 (3,570,366)
Total other expense (23,122) (4,081,536)
Net loss (342,012) (4,817,521)
Less net loss attributable to noncontrolling interest (7,922) (7,425)
Net loss attributable to common stockholders $ (334,090) $ (4,810,096)
Net loss per common share - basic and diluted $ (0.00) $ (0.01)
Weighted average number of common shares outstanding - basic and diluted 393,756,221 361,552,863