# Xeriant, Inc.: Form 10-Q for the period ended Mar 31, 2023

- Company: [Xeriant, Inc.](/companies/xeri.md) (CIK 1481504)
- Form: 10-Q
- Filed: 2023-05-23
- Accepted by EDGAR: May 22, 2023, 20:49 ET
- Period: 2023-03-31
- Accession: 0001477932-23-003889
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1481504/000147793223003889/xeri_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1481504/000147793223003889/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Research and development | 3 months, 2023-01-01 to 2023-03-31 | $0 | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2022-07-01 to 2023-03-31 | $0 | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2023-01-01 to 2023-03-31 | −$387.2k | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2022-07-01 to 2023-03-31 | −$1.7m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-01-01 to 2023-03-31 | $0 | us-gaap:InterestExpense |
| Interest expense | 9 months, 2022-07-01 to 2023-03-31 | $0 | us-gaap:InterestExpense |
| Net income | 3 months, 2023-01-01 to 2023-03-31 | −$369.1k | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2022-07-01 to 2023-03-31 | −$6.5m | us-gaap:NetIncomeLoss |
| Operating cash flow | 9 months, 2022-07-01 to 2023-03-31 | −$1.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2022-07-01 to 2023-03-31 | $2.6k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-03-31 | $104.1k | us-gaap:Cash |
| Current assets | at 2023-03-31 | $118.8k | us-gaap:AssetsCurrent |
| Total assets | at 2023-03-31 | $373.3k | us-gaap:Assets |
| Current liabilities | at 2023-03-31 | $6.4m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-03-31 | $6.4m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-03-31 | −$3.2m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 20,989 characters.

*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.

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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.

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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.

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#### 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.

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#### 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).

## Controls and procedures

As filed, 1,675 characters.

### 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.

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## Risk factors

As filed, 157 characters.

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.

Filed May 23, 2023.
Source: SEC EDGAR, the filing index for accession 0001477932-23-003889. Last ingested by Listed: Oct 24, 2026, 15:08 ET. No prices; not investment advice.