UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
For the quarterly period ended
For the transition period from __________ to __________.
Commission File Number:
(Exact name of registrant as specified in its charter). |
| ||
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
|
|
|
| ||
(Address of principal executive offices) |
| (Zip code) |
Registrant's telephone number, including area code: (
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.
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).
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 | ☐ |
☒ | 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
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of May 15, 2023, the Registrant had outstanding
XERIANT, INC.
FORM 10-Q
TABLE OF CONTENTS
Page | ||||
| ||||
3 |
| |||
|
| |||
| ||||
4 |
| |||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 5 |
| ||
9 |
| |||
9 | ||||
| ||||
10 |
| |||
10 |
| |||
10 |
| |||
10 |
| |||
10 |
| |||
10 |
| |||
11 |
| |||
| ||||
| 12 |
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. Financial statements
XERIANT, INC.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2023
(UNAUDITED)
INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of March 31, 2023 (Unaudited) and June 30, 2022 |
| F-1 |
|
|
| ||
F-2 |
| ||
|
|
|
|
F-3 |
| ||
|
|
|
|
| F-5 |
| |
|
|
|
|
Notes to Unaudited Condensed Consolidated Financial Statements | F-6 |
4 |
Table of Contents |
XERIANT, INC. | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
|
|
|
|
|
|
| ||
|
| As of |
|
| As of |
| ||
|
| March 31, 2023 |
|
| June 30, 2022 |
| ||
Assets |
| (Unaudited) |
|
|
|
| ||
Current assets |
|
|
|
|
|
| ||
Cash |
| $ |
|
| $ |
| ||
Deposits |
|
|
|
|
|
| ||
Prepaids |
|
|
|
|
|
| ||
Total current assets |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Property & equipment, net |
|
|
|
|
|
| ||
Operating lease right-of-use asset |
|
|
|
|
|
| ||
Investment in JV with Ebenberg LLC |
|
|
|
|
|
| ||
Total assets |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Liabilities & stockholders' deficit |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
| $ |
|
| $ |
| ||
Accrued liabilities, related party |
|
|
|
|
|
| ||
Shares to be issued |
|
|
|
|
|
| ||
Convertible notes payable, net of discount - in default |
|
|
|
|
|
| ||
Convertible bridge loans, at fair value |
|
|
|
|
|
| ||
Lease liability, current |
|
|
|
|
|
| ||
Total current liabilities |
|
| |
|
|
|
| |
|
|
|
|
|
|
|
|
|
Lease liability, long-term |
|
|
|
|
|
| ||
Total liabilities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 9) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' deficit |
|
|
|
|
|
|
|
|
Series A Preferred stock, $ |
|
|
|
|
|
| ||
Series B Preferred stock, $ |
|
|
|
|
|
| ||
Common stock, $ |
|
|
|
|
|
| ||
Common stock to be issued |
|
|
|
|
|
| ||
Additional paid in capital |
|
|
|
|
|
| ||
Accumulated deficit |
|
| ( | ) |
|
| ( | ) |
Total Xeriant stockholder's deficit |
|
| ( | ) |
|
| ( | ) |
Non-controlling interest |
|
| ( | ) |
|
| ( | ) |
Total stockholders' deficit |
|
| ( | ) |
|
| ( | ) |
Total liabilities and stockholders' deficit |
| $ |
|
| $ |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
F-1 |
Table of Contents |
XERIANT, INC. | ||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
(UNAUDITED) | ||||||||||||||||
| ||||||||||||||||
|
| For the three months ended |
|
| For the nine months ended |
| ||||||||||
|
| March 31, 2023 |
|
| March 31, 2022 |
|
| March 31, 2023 |
|
| March 31, 2022 |
| ||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
General and administrative expenses |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Professional fees |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Related party consulting fees |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Research and development expense |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Sales and marketing expense |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total operating expenses |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of debt discount |
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | |
Financing fees |
|
| ( | ) |
|
|
|
|
| ( | ) |
|
| ( | ) | |
Interest expense |
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | ||
Decrease (increase) in fair value of convertible bridge loans |
|
| ( | ) |
|
|
|
|
| ( | ) |
|
|
| ||
Loss from Ebenberg JV |
|
|
|
|
|
|
|
| ( | ) |
|
|
| |||
Loss on extinguishment of debt |
|
|
|
|
| ( |
|
|
| ( | ) |
|
| ( | ) | |
Total other (expense) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less net loss attributable to noncontrolling interest |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share - basic and diluted |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding - basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
F-2 |
Table of Contents |
XERIANT, INC. | ||||||||||||||||||||||||||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT | ||||||||||||||||||||||||||||||||||||||||||||
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||
(UNAUDITED) | ||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
|
| Series A Preferred Stock |
|
| Series B Preferred Stock |
|
| Common Stock |
|
| Additional Paid in |
|
| Common stock |
|
| Accumulated |
|
| Non-Controlling |
|
|
| |||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital | to be issued | Deficit | Interest | Total |
| |||||||||||||||||||
Balance June 30, 2022 |
|
|
|
| $ |
|
|
|
|
| $ |
|
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued for services |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of Series A Preferred to Common Stock |
|
| ( | ) |
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of warrants associated with convertible debt |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment for rounding |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock option compensation |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of Series A Preferred to Common Stock |
|
| ( | ) |
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of warrants associated with convertible debt |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock option compensation |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of Series A Preferred to Common Stock |
|
| ( | ) |
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants associated with convertible bridge loans |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock option compensation |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2023 |
|
|
|
| $ |
|
|
|
|
| $ |
|
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
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 AND NINE MONTHS ENDED MARCH 31, 2022
(UNAUDITED)
|
| Series A Preferred Stock |
|
| Series B Preferred Stock |
|
| Common Stock |
|
| Additional Paid in |
|
| Common stock |
|
| Accumulated |
|
| Non-Controlling |
|
|
|
| ||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| to be issued |
|
| Deficit |
|
| Interest |
|
| Total |
| |||||||||||
Balance June 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock committed in prior period |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of common stock |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued as equity kicker |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of warrants |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of Series A Preferred to Common Stock |
|
| ( | ) |
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of convertible notes and accrued interest |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued for services |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock option compensation |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of beneficial conversion feature associated with convertible debt |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance September 30, 2021 |
|
|
|
| $ |
|
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock committed in prior period |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of common stock |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of warrants |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of Series A Preferred to Common Stock |
|
| ( | ) |
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of convertible notes and accrued interest |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued for services |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock option compensation |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of warrants associated with convertible debt |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of beneficial conversion feature associated with convertible debt |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2021 |
|
|
|
| $ |
|
|
|
|
| $ |
|
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock committed in prior period |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of Series A Preferred to Common Stock |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inducement of conversion - interest expense |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock option compensation |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued for services |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2022 |
|
|
|
| $ |
|
|
|
|
| $ |
|
|
|
|
|
|
|
| $ |
|
| 0 |
|
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-4 |
Table of Contents |
XERIANT, INC. | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(UNAUDITED) | ||||||||
|
|
| ||||||
|
| For the nine months ended |
| |||||
|
| March 31, 2023 |
|
| March 31, 2022 |
| ||
|
|
|
|
|
|
| ||
Cash Flows from Operating Activities |
|
|
|
|
|
| ||
Net Loss |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net loss to net |
|
|
|
|
|
|
|
|
cash used by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and Amortization |
|
|
|
|
|
| ||
Stock option expense |
|
|
|
|
|
| ||
Stock issued for services |
|
|
|
|
|
| ||
Financing fees |
|
|
|
|
|
| ||
Decrease in fair value of Convertible Bridge Loans |
|
|
|
|
|
| ||
Loss on settlement of debt |
|
|
|
|
|
| ||
Loss from equity-method investments |
|
|
|
|
|
| ||
Amortization of Debt Discount |
|
|
|
|
|
| ||
Changes in Operating Assets & Liabilities |
|
|
|
|
|
|
|
|
Operating lease right of use asset |
|
|
|
|
|
| ||
Lease liabilities |
|
| ( | ) |
|
| ( | ) |
Deposits and prepaids |
|
| ( | ) |
|
| ( | ) |
Accounts payable and accrued liabilities |
|
| ( | ) |
|
| ( | ) |
Accrued liability, related party |
|
|
|
|
|
| ||
Accrued expenses |
|
| ( | ) |
|
|
| |
Net cash used by operating activities |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
Investment in JV Movychem |
|
| ( | ) |
|
|
| |
Purchase of property and equipment |
|
| ( | ) |
|
| ( | ) |
Net cash used in financing activities |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
Sale of common stock |
|
|
|
|
|
| ||
Cash from exercise of warrants |
|
|
|
|
|
| ||
Proceeds from convertible notes payable |
|
|
|
|
|
| ||
Net cash provided by financing activities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
(Decrease) Increase in Cash |
|
| ( | ) |
|
|
| |
|
|
|
|
|
|
|
|
|
Cash at beginning of period |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Cash at end of period |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
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 |
| $ |
|
| $ |
| ||
Warrants issued with convertible notes payable |
| $ |
|
| $ |
| ||
Beneficial conversion feature arising from convertible notes payable |
| $ |
|
| $ |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
F-5 |
Table of Contents |
XERIANT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
NOTE 1 - ORGANIZATION AND NATURE OF BUSINESS
Company Overview
Xeriant, Inc. is dedicated to the acquisition, development and commercialization of transformative aerospace technologies, including eco-friendly advanced materials which can be successfully deployed and integrated into products across multiple industry sectors. One of our current initiatives involves the development of a proprietary line of green composite construction materials using environmentally-friendly flame-retardants designed for aerospace applications, branded NEXBOARDTM. These construction materials are primarily made from recycled plastic and cardboard waste and offer unparalleled fire resistance, as well as strength, durability and protection against water, mold, and insects.
Operating History
We are a development-stage enterprise with a limited operating history with no sales, and operating losses since our inception. The Company has two existing 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.
Advanced Materials
A primary focus of our 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. Our 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. We are 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, we 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 develop applications and commercialize Retacell®, an internationally patented flame-retardant technology developed by Movychem. 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 will be responsible for developing applications and commercializing products. Retacell® is a versatile, biodegradable, non-toxic, high-performance thermal and fire protection chemical agent that is custom formulated for each application, based on the specific properties of the base material and the fire protection requirements. Retacell® can be applied as a coating, treatment, or infused during manufacturing into a variety of materials. In addition to becoming heat and fire resistant, the resulting Retacell®-enhanced materials are also water resistant.
F-6 |
Table of Contents |
On June 8, 2022, we announced the development of a multi-purpose, high-strength fire- and water-resistant composite panel made from a formulation of Movychem’s industrial flame-retardant, Retacell®, and a cardboard fiber-reinforced polymeric resin. The panel described in the press release was initially produced in a laboratory setting. However, since the announcement date, the Movychem JV has been unable to fabricate 48" x 96" Retacell®-infused panels with the quality demanded by Xeriant and its clients.
On August 12, 2022, we 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.
After working with Movychem over this period of time and experiencing a number of issues, including supply chain interruptions, mechanical failures, and the general inability to produce an industrial-sized composite wall panels made with Retacell®, we have been in development of an upcycled wallboard panel that can be produced in the United States at industrial scale outside of the Movychem JV. This approach will enable us to unlock existing demand indicated by several homebuilders and developers. Industrial production requires the panels to be cut in varying thicknesses and sizes, including standard 48” x 96” sheets, economically and with consistency and efficiency.
On March 31, 2023, we filed a provisional patent application 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, cardboard 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, we are 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. We have 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 our 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. We plan 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. Our plan to source and acquire strategic interests in leading aerospace companies developing breakthrough VTOL aircraft began in the second quarter of 2021.
Effective May 27, 2021, we entered into a Joint Venture Agreement with XTI Aircraft Company (“XTI”), a privately owned OEM based in Englewood, Colorado for the purpose of completing the preliminary design of XTI’s TriFan 600, a 5-passenger plus pilot, hybrid electric vertical takeoff and landing (eVTOL) fixed-wing aircraft.
F-7 |
Table of Contents |
Through our joint venture with XTI, (referred to hereinafter as the “XTI JV”), we were involved in the successful completion of the preliminary design of their TriFan 600 eVTOL aircraft. The TriFan 600 is being designed to become the fastest, longest-range VTOL aircraft in the world and the first commercial fixed-wing VTOL airplane, with current pre-orders of approximately $7 billion in gross revenue upon delivery of those aircraft.
Although the purpose of the XTI JV has been achieved, Xeriant may continue to collaborate with XTI in the area of Advanced Ari Mobility. Should XTI and Xeriant determine it is in their best interest to terminate the XTI JV, then it will be dissolved. Should the XTI JV be dissolved, as of March 31, 2023, Xeriant would receive 5.5% equity ownership of XTI.
Management believes that our holding and operating company structure has several advantages and will enable us to grow rapidly, acquiring assets primarily through acquisitions, joint ventures, strategic investments, and licensing arrangements. As a publicly traded company, we offer our 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.
Additionally, we are leveraging our relationship with Florida Atlantic University to provide a collaborative research arm for technologies that require additional validation and the backing of a respected research institution for credibility. The university also may provide access to various grants through the SBIR (Small Business Innovation Research), STTR (Small Business Technology Transfer, NSF (National Science Foundation) and other programs, and if warranted, introductions into a number of government agencies, such as DOD (Department of Defense) and DARPA (Defense Advanced Research Projects Agency). We are pursuing strategic alliances with companies that provide complementary technologies and access to new markets.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements, which include the accounts of the Company, American Aviation Technologies, LLC, and Eco-Aero, 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 consolidated financial statements, which include the accounts of the Company and its wholly owned subsidiaries, and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The Financial Statements have been prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and presented in US dollars. The fiscal year end is June 30.
Going Concern
The Company's 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. At March 31, 2023 and June 30, 2022, the Company had $
F-8 |
Table of Contents |
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Principles of Consolidation
The consolidated financial statements include the accounts of Xeriant, Inc., American Aviation Technologies, LLC (“AAT”), and Eco-Aero, LLC. The Company owns a
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 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 beneficial conversion features and warrants associated with convertible debt. Actual results could differ from these estimates.
Fair Value Measurements and Fair Value of Financial Instruments
The Company adopted 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.
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 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 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. The following table represents the Company’s assets and liabilities by level measured at fair value on a recurring basis at March 31, 2023 and June 30, 2022.
|
| March 31, 2023 |
|
| June 30, 2022 |
| ||||||||||||||||||
Description |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Convertible Bridge Loans |
| $ |
|
|
|
|
|
|
|
| $ |
|
|
|
|
|
|
|
F-9 |
Table of Contents |
Cash and Cash Equivalents
For purposes of the 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.
Convertible Debentures
If the conversion features of conventional convertible debt provide for a rate of conversion that is below market value at issuance, this feature is characterized as a beneficial conversion feature ("BCF"). A BCF is 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 is recorded net of the discount related to the BCF, and the Company amortizes the discount to interest expense, over the life of the debt. During the year ended June 30, 2022, the Company recorded a BCF in the amount of $
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.
Research and Development Expenses
Expenditures for research and development are expensed as incurred. The Company incurred research and development expenses of $
Advertising and Marketing Expenses
The Company expenses advertising and marketing costs as they are incurred. The Company recorded advertising expenses in the amount of $
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. Our consolidated federal tax return and any state tax returns are not currently under examination.
F-10 |
Table of Contents |
The Company follows Accounting Standards Codification 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.
|
| Nine Months Ended March 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Warrants |
|
|
|
|
|
| ||
Stock options |
|
|
|
|
|
| ||
Convertible notes payable |
|
|
|
|
|
| ||
Preferred stock |
|
|
|
|
|
| ||
Total |
|
|
|
|
|
|
NOTE 3 – JOINT VENTURE
JV with XTI Aircraft
On May 31, 2021, the Company entered into a Joint Venture Agreement (the “Agreement”) with XTI Aircraft Company (“XTI”), a Delaware corporation, to form a new company, called Eco-Aero, LLC (the “JV”), a Delaware limited liability company, with the purpose of completing the preliminary design 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
F-11 |
Table of Contents |
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 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 has a right to invest $
The Company includes the assets and liabilities related to the VIE in the unaudited Condensed Consolidated Balance Sheets. Xeriant, Inc. provides cash to the VIE to fund its operations. The carrying amounts of consolidated VIE's assets and liabilities associated with the VIE subsidiary were as follows:
|
| March 31, 2023 |
|
| June 30, 2022 |
| ||
Assets |
|
|
|
|
|
| ||
Cash |
| $ |
|
| $ |
| ||
Total Assets |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
Due from Xeriant Inc. |
| $ |
|
| $ |
| ||
Total Liabilities |
| $ |
|
| $ |
|
JV with Movychem
On April 2, 2022, the Company entered into a Joint Venture Agreement with Movychem s.r.o., a Slovakian limited liability company setting forth the terms for the establishment of a joint venture (the “Joint Venture”) to develop applications and commercialize a series of flame-retardant products in the form of polymer gels, powders, liquids and pellets derived from technology developed by Movychem under the name Retacell™. The Joint Venture is organized as a Florida limited liability company under the name Ebenberg, LLC and is owned
For its capital contribution to the Joint Venture, pursuant to a Patent and Exclusive License and Assignment Agreement (the “Patent Agreement”),
F-12 |
Table of Contents |
Concurrently with the execution of the Joint Venture Agreement, Movychem will provide technical services to the Joint Venture related to the exploitation of the Retacell intellectual property and corporate, marketing, business development, communications and administrative services as requested by the Joint Venture in exchange for 40% of all royalty payments received by the Joint Venture for the licensing of Retacell products.
Under the Joint Venture Agreement, the Company has agreed to grant to certain individuals affiliated with Movychem five-year warrants (the “Warrants”) to purchase an aggregate of
Assuming that Movychem has fulfilled its obligations, the Joint Venture Agreement grants 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. Additionally, the Services Agreement will be amended to provide that the 40% of royalties to be paid by to the Company will be limited to licensees who were first introduced to the Joint Venture or Movychem, as the case may be. The Company’s position is that Movychem has not met its obligations under the Joint Venture Agreement and has notified Movychem of same. It is uncertain whether or not the Joint Venture will move forward as it is currently organized.
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. The Company has elected to account for the joint venture as an equity method investment in accordance with ASC 323 Investments – Equity Method and Joint Ventures.
As of March 31, 2023, and June 30, 2022, the Company contributed $
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 March 31, 2023, and June 30, 2022, the Company had $
NOTE 5 – OPERATING LEASE RIGHT-OF-USE ASSET AND OPERATING LEASE LIABILITY
F-13 |
Table of Contents |
Base Rent Periods
November 1, 2019 to October 31, 2020 |
| $ |
| |
November 1, 2020 to October 31, 2021 |
| $ |
| |
November 1, 2021 to October 31, 2022 |
| $ |
| |
November 1, 2022 to October 31, 2023 |
| $ |
| |
November 1, 2023 to October 31, 2024 |
| $ |
| |
November 1, 2024 to January 31, 2025 |
| $ |
|
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 our incremental borrowing rate, estimated to be
Right-of-use asset is summarized below: |
|
|
| |
|
| March 31, 2023 |
| |
Office lease |
| $ |
| |
Less: accumulated amortization |
|
| ( | ) |
Right -of- use asset, net |
| $ |
|
Operating lease liability is summarized below: | ||||
|
| March 31, 2023 |
| |
Office lease |
| $ |
| |
Less: current portion |
|
| ( | ) |
Long term portion |
|
|
| |
|
|
|
|
|
Maturity of the lease liability is as follows: |
|
|
|
|
Fiscal year ending June 30, 2023 |
|
|
| |
Fiscal year ending June 30, 2024 |
|
|
| |
Fiscal year ending June 30, 2025 |
|
|
| |
|
|
|
| |
Present value discount |
|
| ( | ) |
Lease liability |
| $ |
|
NOTE 6 – CONVERTIBLE NOTES PAYABLE
The carrying value of convertible notes payable, net of discount, as of March 31, 2023, and June 30, 2022, was $
|
| March 31, |
|
| June 30, |
| ||
Convertible Notes Payable |
| 2023 |
|
| 2022 |
| ||
Convertible notes payable issued October 27, 2021 (0% interest) – Auctus Fund LLC |
| $ |
|
| $ |
| ||
Total face value |
|
|
|
|
|
| ||
Less unamortized discount |
|
|
|
|
| ( | ) | |
Carrying value |
| $ |
|
| $ |
|
F-14 |
Table of Contents |
Between September 27, 2019 and August 10, 2021, the Company issued convertible notes payable with an aggregate face value of $
Auctus Fund, LLC Senior Secured Note
On October 27, 2021, the Company issued a convertible note payable with Auctus Fund, LLC (the “Auctus Note”) with the principal sum of $
In connection with the notes, the Company issued warrants indexed to an aggregate
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 $
Effective July 26, 2022, the Company entered into an Amendment to Senior Secured Promissory Note (the “Amendment”) with Auctus Fund, LLC (“Auctus”) pursuant to which the parties agreed to amend the Company’s Senior Secured Convertible Promissory Note in the principal amount of $
The Company tested the modification 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 $
F-15 |
Table of Contents |
Reacquisition Price: |
|
|
| |
Modified convertible debt instrument |
|
|
| |
Fair value of warrants |
|
|
| |
Cash payment |
|
|
| |
|
|
|
| |
Carrying Value of Original Instrument |
|
|
|
|
Original convertible debt instrument |
|
|
| |
Debt discount - warrant |
|
| ( | ) |
Original issue discount |
|
| ( | ) |
Debt discount - BCF |
|
| ( | ) |
Carrying value of original debt |
|
|
| |
Loss on extinguishment |
|
|
|
Effective December 27, 2022, the Company entered into an Amendment to Senior Secured Promissory Note (the “Amendment”) with Auctus Fund, LLC (“Auctus”) pursuant to which the parties agreed to amend the Company’s Senior Secured Convertible Promissory Note in the principal amount of $
Reacquisition Price: |
|
|
| |
Modified convertible debt instrument |
|
|
| |
Fair value of warrants |
|
|
| |
Accrued Short-term Liability |
|
|
| |
|
|
|
| |
Carrying Value of Original Instrument |
|
|
|
|
Carrying value of original debt |
|
|
| |
Loss on extinguishment |
|
|
|
For the nine months ended March 31, 2023, the Company recorded $
The Note matured on
F-16 |
Table of Contents |
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 $
In addition to the Notes, the holders received an aggregate
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 arrangements, 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 March 31, 2023 and June 30, 2022, the fair value of the Convertible Bridge Loans were $
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 $
NOTE 8 – 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 March 31, 2023 and as of June 30, 2022:
|
| March 31, 2023 |
|
| June 30, 2022 |
| ||||||||||||||||||
Description |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Convertible Bridge Loans |
| $ |
|
|
|
|
|
|
|
| $ |
|
|
|
|
|
|
|
Fair values determined by Level 1 inputs utilize unadjusted quoted prices in active markets for identical assets. 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 Loan has 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.
F-17 |
Table of Contents |
Significant inputs and results arising from the Monte Carlo Simulations process are as follows for the Redemption Feature Component of the Convertible Bridge Loans:
|
| Inception Dates |
| Quarter Ended |
| |
Quoted market price on valuation date |
| $ |
| $ |
| |
Effective contractual conversion rates |
| $ |
| $ |
| |
Contractual term to maturity |
|
|
| |||
Market volatility: |
|
|
|
|
|
|
Volatility |
|
| ||||
Risk-adjusted interest rate |
|
The following table summarizes the total carrying value of the Company’s Level 3 instruments held as of March 31, 2023 including cumulative unrealized gains and losses recognized during the nine months ended March 31, 2023:
|
| Period Ended |
| |
| March 31, 2023 | |||
Balances at beginning of period |
| $ |
| |
Issuances: |
|
|
|
|
Convertible Bridge Loans |
|
|
| |
Interest accruals |
|
|
| |
Changes in fair value inputs and assumptions reflected in income |
|
| ( | ) |
Balances at end of period |
| $ |
|
NOTE 9– RELATED PARTY TRANSACTIONS
Consulting fees
During the nine months ended March 31, 2023, and 2022, the Company recorded $
For the nine months ended March 31, 2023, and 2022, the Company recorded $
During the nine months ended March 31, 2023, and 2022, the Company recorded $
During the nine months ended March 31, 2023, and 2022, the Company recorded $
F-18 |
Table of Contents |
NOTE 10 – 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.
Joint Venture
In connection with the Eco-Aero, LLC Joint Venture, discussed in Note 3, the Company has the right to invest up to $
Financial Advisory Agreements
On August 10, 2021, the Company entered into an Advisory Agreement with an outside firm to assist the Company with fundraising activities. In connection with the agreement, the Company has the following commitments:
| · | to issue |
|
|
|
| · | |
|
|
|
| · |
During the year ended June 30, 2022, the Company issued all
On August 19, 2021, the Company entered into an Advisory Agreement with an outside firm to assist the Company with fundraising activities. In connection with the agreement, the Company has the following commitments:
| · | Issue |
| · | Pay a cash fee of seven percent |
| · |
During the year ended June 30, 2022, the Company issued the initial 2,225,000 shares.
F-19 |
Table of Contents |
Litigation
On September 1, 2021, Xeriant Inc. brought a cause of action in the Southern District of Florida against a former shareholder for claims, including but not limited to, breach of contract, misrepresentation, and asserting claims to recoup monetary and in-kind distributions made to the shareholder by the Company. The defendant submitted an affirmative defense and counterclaim on October 29, 2021.
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
On July 6, 2021, provided an option to purchase
On July 28, 2021, the Company agreed to issue
On August 9, 2021, the Company agreed to issue
On August 20, 2021, the Company agreed to issue
F-20 |
Table of Contents |
On January 20, 2022, the Company agreed to issue
On March 28, 2022, the Company agreed to issue
NOTE 11 – EQUITY
Common Stock
As of March 31, 2023 and June 30, 2022, the Company had
Fiscal Year 2022 Issuances
During the year ended June 30, 2022 in connection with one of the subscription agreements, the Company issued
During the year ended June 30, 2022, the Company issued
During the year ended June 30, 2022, the Company issued
During the year ended June 30, 2022, the Company sold
During the year ended June 30, 2022, the Company issued
During the year ended June 30, 2022, the Company issued
During the year ended June 30, 2022, the Company issued
During the year ended June 30, 2022, the Company issued
Nine Months Ended March 31, 2023
On July 11, 2022, the Company issued
On July 13, 2022, the Company issued
On October 24, 2022, the Company issued
On March 17, 2023, the Company issued
F-21 |
Table of Contents |
Common Stock to be Issued
During the year ended June 30, 2022, the Company sold
During the year ended June 30, 2022, the Company agreed to pay a consultant
Series A Preferred Stock
There are
| · | Voting: The preferred shares shall be entitled to |
|
|
|
| · | Dividends: The Series A Preferred Stockholders are treated the same as the Common Stock holders 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 |
|
|
|
| · | 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 March 31, 2023, and June 30, 2022, the Company has
On February 15, 2021, in accordance with Florida Law and conversations with counsel, the Board of Directors of the Company rescinded
During March of 2021, the remaining former members of American Aviation Technologies, LLC agreed to allow the Company to rescind an aggregate of
On March 27, 2021, Spider Investments, LLC returned
On July 11, 2022, the Company issued
On October 24, 2022, the Company issued
On March 17, 2023, the Company issued
F-22 |
Table of Contents |
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
During the year ended June 30, 2021, the Company issued
Stock Options
In connection with certain advisory board compensation agreements, the Company issued an aggregate
As of March 31, 2023, there are
Significant inputs and results arising from the Black-Scholes process are as follows for the options:
Quoted market price on valuation date |
| $ |
| |
Exercise prices |
|
| $ |
|
Range of expected term |
|
| ||
Range of market volatility: |
|
|
|
|
Range of equivalent volatility |
|
| ||
Range of interest rates |
|
|
Warrants
As of March 31, 2023, and June 30, 2022, the Company had
Warrants Issued with Convertible Notes | Warrants Issued with Convertible Bridge Loans | |||
Shares indexed to common stock |
|
| ||
Exercise price |
| $ |
| $ |
Contractual term to maturity |
|
| ||
Relative fair values |
| $ |
| $ |
F-23 |
Table of Contents |
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, 2022, holders of warrants exercised warrants for
NOTE 12 - NON-CONTROLLING INTEREST
AAT membership unit adjustment
On May 12, 2021, on further advice of counsel and in good faith, the Company returned
AAT Subsidiary
On May 12, 2021, the Company’s position in American Aviation Technologies, LLC was reduced to
NOTE 13 – SUBSEQUENT EVENTS
F-24 |
Table of Contents |
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 audited financials for the year ended June 30, 2022. The unaudited statements of operations for the nine months ended March 31, 2023 and 2022 are compared in the sections below.
Executive Summary
Xeriant, Inc. is dedicated to the acquisition, development and commercialization of transformative 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.
JV with XTI Aircraft
On May 31, 2021, the Company entered into a Joint Venture Agreement (the “Agreement”) with XTI Aircraft Company (“XTI”), a Delaware corporation, to form a new company, called Eco-Aero, LLC (the “JV”), a Delaware limited liability company, with the purpose of completing the preliminary design 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 JV. The JV is managed by a management committee consisting of five members, three appointed by the Company and two by XTI. The Agreement was effective on June 4, 2021, with an initial deposit of $1 million into the JV. Xeriant’s financial commitment is up to $10 million, contributed as needed based on the aircraft development timeline and budget. To date, as of March 31, 2023, Xeriant has contributed $5,475,155 to the Joint Venture.
5 |
Table of Contents |
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 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 has the right to invest up to $10,000,000 into 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.
JV with Movychem
On April 2, 2022 (Amended November 7, 2022), the Company entered into a Joint Venture Agreement with Movychem s.r.o., a Slovakian limited liability company setting forth the terms for the establishment of a joint venture (the “Joint Venture”) to develop applications and commercialize a series of flame-retardant products in the form of polymer gels, powders, liquids and pellets derived from technology developed by Movychem under the name Retacell™. The Joint Venture is organized as a Florida limited liability company under the name Ebenberg, LLC and is owned 50% by each of 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 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 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 February 15, 2023. The Company is currently in discussions with Movychem with the intent of extending the February 15, 2023 date. At such time as the Company makes its $2,000,000 payment (and assuming the Company is current with its then monthly capital contributions), pursuant to the Patent Agreement, Movychem will 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 has granted to the Joint Venture an exclusive worldwide license under the patents.
Concurrently with the execution of the Joint Venture Agreement, the Joint Venture has entered into a Services Agreement (the “Services Agreement”) with the Company pursuant to which the Company will provide to the Joint Venture technical services related to the exploitation of the Retacell intellectual property and corporate, marketing. business development, communications and administrative services as requested by the Joint Venture in exchange for 40% of all royalty payments received by the Joint Venture for the licensing of Retacell products.
Under the Joint Venture Agreement, the Company has 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.
Assuming that Movychem has fulfilled its obligations, the Joint Venture Agreement grants 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. Additionally, the Services Agreement will be amended to provide that the 40% of royalties to be paid by to the Company will be limited to licensees who were first introduced to the Joint Venture or Movychem, as the case may be. The Company’s position is that Movychem has not met its obligations under the Joint Venture Agreement and has notified Movychem of same. It is uncertain whether or not the Joint Venture will move forward as it is currently organized.
6 |
Table of Contents |
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.
As of March 31, 2023 and June 30, 2022, the Company contributed $ $307,619 and $115,356 to the joint venture, respectively.
Litigation
On September 1, 2021, Xeriant Inc. brought a cause of action in the Southern District of Florida against a former shareholder for claims, including but not limited to, breach of contract, misrepresentation, and asserting claims to recoup monetary and in-kind distributions made to the shareholder by the Company. The defendant submitted an affirmative defense and counterclaim on October 29, 2021.
Three months ended March 31, 2023, compared to the three months ended March 31, 2022
General and administrative expenses
Total general and administrative expenses were $226,107 and $799,520 for the three months ended March 31, 2023, and 2022, respectively. In the prior period, there were increased expenses due to stock issuances related to consulting fees and advisory board fees.
Professional Fees
Total professional fees were $62,445 and $102,646 for the three months ended March 31, 2023, and 2022, respectively. The decrease was primarily due to less legal fees in the current period.
Related Party Consulting Fees
Total related party consulting fees were $84,000 and $135,500 for the three months ended March 31, 2023, and 2022, respectively. The related party consulting fees for the three months ended March 31 2023 consisted of (i) $40,000 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) $25,000 to Edward DeFeudis, Director, and (iiv) $5,000 for Keystone Business Development Partners, LLC, a company owned by Brian Carey, CFO. The consulting fees for the three months ended March 31, 2022 consisted of i) $60,000 to Ancient Investments, LLC, a company owned by Keith Duffy, CEO and Scott Duffy, Executive Director of Operations, (ii) $28,000 for AMP Web Services, LLC, a company owned by Pablo Lavigna, CIO, (iii) $40,000 to Edward DeFeudis, Director, and (iv $7,500 for Keystone Business Development Partners, LLC, a company owned by Brian Carey, CFO.
Sales and marketing expenses
Total sales and marketing expenses were $14,688 and $25,771 for the three months ended March 31, 2023, and 2022, respectively. During the three months ended March 31, 2023, the Company’s sales and marketing expenses were associated with social media marketing campaigns, events and press releases.
7 |
Table of Contents |
Research and Development Expenses
Total research and development expenses were $0 and $7,587 for the three months ended March 31, 2023, and 2022, respectively. These research and development expenses were in connection with our Eco-Aero, LLC joint venture with XTI Aircraft Company for funding the preliminary design phase in the development of an aircraft, called the TriFan 600. There were no expenses for the joint venture for the three months ended March 31, 2023. Research & Development Expenses relating to Movychem/Ebenberg JV are accounted for through Ebenberg, LLC.
Other Income (Expenses)
Total other expenses consist of amortization of debt discount related to convertible notes, interest expense related to convertible notes, and a loss on settlement of debt. Total other expenses were $2,498 for the three months ended March 31, 2023, compared to $1,733,610 for the three months ended March 31, 2022. The decrease was primarily due to recording the amortization of debt discount from the Auctus convertible note signed in October 2021 and the loss on extinguishment of debt due to the Auctus Note modification.
Net loss
Total net loss was $389,738 for the three months ended March 31, 2023, compared to $2,808,634 for the three months ended March 31, 2022. The decrease was primarily related to amortization of debt discount of $1,598,683 in the prior period versus $0 in the current period.
Nine months ended March 31, 2023, compared to the nine months ended March 31, 2022
General and administrative expenses
Total general and administrative expenses were $1,112,184 and $3,120,772 for the nine months ended March 31, 2023, and 2022, respectively. In the prior period, there were increased expenses due to stock issuances related to consulting fees and advisory board fees.
Professional Fees
Total professional fees were $231,073 and $234,671 for the nine months ended March 31, 2023, and 2022, respectively.
Sales and marketing expenses
Total sales and marketing expenses were $22,987 and $670,889 for the nine months ended March 31, 2023, and 2022, respectively. During the nine months ended March 31, 2022 the Company’s sales and marketing expenses were associated with social media marketing campaigns, events and press releases.
Related Party Consulting Fees
Total related party consulting fees were $296,000 and $348,925 for the nine months ended March 31, 2023, and 2022, respectively. The related party consulting fees for the nine months ended consisted of (i) $150,000 to Ancient Investments, LLC, a company owned by Keith Duffy, CEO and Scott Duffy, Executive Director of Operations, (ii) $49,000 for AMP Web Services, LLC, a company owned by Pablo Lavigna, CIO, (iii) $77,000 to Edward DeFeudis, Director, and (iiii) $20,000 for Keystone Business Development Partners, LLC, a company owned by Brian Carey, CFO. The consulting fees for the nine months ended March 31, 2022 consisted of i) $134,000 to Ancient Investments, LLC, a company owned by Keith Duffy, CEO and Scott Duffy, Executive Director of Operations, (ii) $65,000 for AMP Web Services, LLC, a company owned by Pablo Lavigna, CIO, (iii) $92,000 to Edward DeFeudis, Director, and (iiii) $22,500 for Keystone Business Development Partners, LLC, a company owned by Brian Carey, CFO.
8 |
Table of Contents |
Research and Development Expenses
Total research and development expenses were $0 and $5,207,806 for the nine months ended March 31, 2023, and 2022, respectively. These research and development expenses were in connection with our Eco-Aero, LLC joint venture with XTI Aircraft Company for funding the preliminary design phase in the development of an aircraft, called the TriFan 600. There were no expenses for the joint venture for the nine months ended March 31, 2023. Research & Development Expenses relating to Movychem/Ebenberg JV are accounted for through Ebenberg, LLC.
Other Income (Expenses)
Total other expenses consist of amortization of debt discount related to convertible notes, interest expense related to convertible notes, and a loss on settlement of debt. Total other expenses were $4,839,377 for the nine months ended March 31, 2023, compared to $3,195,869 for the nine months ended March 31, 2022. The increase was primarily due to recording the amortization of debt discount from the Auctus convertible note signed in October 2021 and the loss on extinguishment of debt due to the Auctus Note modification.
Net loss
Total net loss was $6,501,621 for the nine months ended March 31, 2023, compared to $12,779,032 for the nine months ended March 31, 2022. The decrease was primarily related amortization of debt discount of $3,012,642 and $5,207,806 of research and development expenses in the prior period versus $0 of research and development expenses and $461,842 of amortization of debt discount in the current period. The difference was partially offset by the loss on extinguishment of debt in the amount of $4,259,987 for the current period.
Liquidity and Capital Resources
The Company's 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 March 31, 2023 and June 30, 2022, the Company had $104,080 and $1,065,945 in cash and $6,093,241 and $3,002,259 in negative working capital, respectively. On March 31, 2023, the principal balance of the Auctus Senior Secured Promissory Note was $5,900,000 including Accrued Liability of $50,000. The Note matured on March 15, 2023, and the company has been in discussions with Auctus to resolve the liability. For the nine months ended March 31, 2023, and 2022, the Company had a net loss of $6,501,621 and $12,779,032, 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 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 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 nine months ended March 31, 2023, our operating activities used $1,037,035 of net cash used compared to using $6,415,055 of net cash used in our operating activities during the nine months ended March 31 2022. This difference primarily related to a decrease in stock-based compensation and stock issued for services offset by higher amortization of debt discount and loss on settlement of debt.
Funding Strategy
To date, our operations have been funded primarily through private investors. The company continues to obtain funding from private investors as needed. We have 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. An S-1 Registration Statement was filed on January 18, 2023, for the purpose of raising capital for the Company to execute its business plan. No assurance can be given that funds will be available, or, if available, will be on terms acceptable to The Company.
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).
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 March 31, 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 March 31, 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 March 31, 2023, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
9 |
Table of Contents |
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
None.
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
None.
Item 5. Other Information
On May 2, 2023, the Company filed an S-1/A and a response to the SEC's February 15, 2023, comment letter regarding the S-1 filed on January 18, 2023. To date there have been no other significant subsequent events.
10 |
Table of Contents |
Item 6. Exhibits
The following exhibits are filed herewith
Exhibit Number |
| Document |
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
|
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) |
11 |
Table of Contents |
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: May 22, 2023 | By: | /s/ Keith Duffy | |
| Keith Duffy Chief Executive Officer (Principal Executive) |
Date: May 22, 2023 | By: | /s/ Brian Carey | |
| Brian Carey Chief Financial Officer |
12 |