# Xeriant, Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [Xeriant, Inc.](/companies/xeri.md) (CIK 1481504)
- Form: 10-Q
- Filed: 2023-11-13
- Accepted by EDGAR: Nov 13, 2023, 17:05 ET
- Period: 2023-09-30
- Accession: 0001477932-23-008302
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1481504/000147793223008302/xeri_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1481504/000147793223008302/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Research and development | 3 months, 2023-07-01 to 2023-09-30 | $27.0k | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$318.9k | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $20.7k | us-gaap:InterestExpense |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | −$342.0k | us-gaap:NetIncomeLoss |
| Operating cash flow | 3 months, 2023-07-01 to 2023-09-30 | −$308.1k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-07-01 to 2023-09-30 | $0 | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Current assets | at 2023-09-30 | $168.2k | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $256.7k | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $7.1m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $7.2m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-09-30 | −$6.9m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 23,880 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’s audited financials for the year ended June 30, 2023. The unaudited statements of operations for the three months ended September 30, 2023 and 2022 are compared in the sections below.

### Executive Summary

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

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

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#### Joint Venture with XTI Aircraft

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

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

- Xeriant would be entitled to compensation for its role in introducing XTI to a Nasdaq-listed company, contingent upon the occurrence of any merger, combination, or transactional event between XTI and the Nasdaq company, which has since been identified as Inpixon.
- XTI would assume the financial obligations related to the Senior Secured Note with Auctus Fund, LLC, including the $6.05 million principal balance of the note and warrant obligations. Additionally, Xeriant was to be granted a fully diluted equity interest amounting to 6% in XTI, issued immediately prior to any prospective combination with Inpixon.

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

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

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

#### Recent Developments

#### Joint Venture with Movychem

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

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

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

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

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

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

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

#### Auctus Senior Secured Promissory Note

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

#### Stock Sales

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

#### Convertible Notes Issued

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

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#### Litigation

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

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

| Operating expenses: | For the three months ended September 30, 2023 | September 30, 2022 | $ |
| --- | ---: | ---: | ---: |
| Consulting and advisory fees | $51,695 | $455,573 | $(403,878) |
| Related party consulting fees | 97,500 | 94,000 | 3,500 |
| General and administrative expenses | 49,877 | 89,996 | (40,119) |
| Professional fees | 90,314 | 90,060 | 254 |
| Advertising and marketing expense | 2,522 | 6,356 | (3,834) |
| Research and development expense | 26,982 | - | 26,982 |
| Total operating expenses | 318,890 | 735,985 | (417,095) |
| Operating loss | (318,890) | (735,985) | 417,095 |
| Other expenses: |  |  |  |
| Amortization of debt discount | - | (461,842) | 461,842 |
| Interest expense | (20,674) | - | (20,674) |
| Change in fair value of convertible bridge loans | (2,448) | - | (2,448) |
| Loss from Ebenberg JV | - | (49,328) | 49,328 |
| Loss on extinguishment of debt | - | (3,570,366) | 3,570,366 |
| Total other (expense) | (23,122) | (4,081,536) | 4,058,414 |
| Net loss | $(342,012) | $(4,817,521) | $4,475,509 |

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#### Consulting and advisory fees

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

#### Related Party Consulting Fees

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

#### General and administrative expenses

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

#### Professional Fees

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

#### Advertising and marketing expenses

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

#### Research and Development Expenses

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

#### Other (Expenses)

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

#### Net loss

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

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### Liquidity and Capital Resources

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

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

### Funding Strategy

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

### Off Balance Sheet Items

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

### Critical Accounting Policies

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

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

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## Controls and procedures

As filed, 1,688 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 September 30, 2023, an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)-15(e) of the Exchange Act) was carried out under the supervision and with the participation of Keith Duffy our Chief Executive Officer and Brian Carey our Chief Financial Officer. Based on his evaluation of our disclosure controls and procedures, he concluded that at September 30, 2023, our disclosure controls and procedures are not effective due to material weaknesses in our internal controls over financial reporting.

### Changes in Internal Control Over Financial Reporting

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

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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 Nov 13, 2023.
Source: SEC EDGAR, the filing index for accession 0001477932-23-008302. Last ingested by Listed: Oct 24, 2026, 15:08 ET. No prices; not investment advice.