# Xeriant, Inc.: Form 10-Q for the period ended Mar 31, 2024

- Company: [Xeriant, Inc.](/companies/xeri.md) (CIK 1481504)
- Form: 10-Q
- Filed: 2024-05-14
- Accepted by EDGAR: May 14, 2024, 13:20 ET
- Period: 2024-03-31
- Accession: 0001477932-24-002829
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1481504/000147793224002829/xeri_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1481504/000147793224002829/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Research and development | 3 months, 2024-01-01 to 2024-03-31 | $67.5k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2023-07-01 to 2024-03-31 | $147.3k | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2024-01-01 to 2024-03-31 | −$353.0k | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-07-01 to 2024-03-31 | −$1.0m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-01-01 to 2024-03-31 | $28.6k | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-07-01 to 2024-03-31 | $895.9k | us-gaap:InterestExpense |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | −$384.1k | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-07-01 to 2024-03-31 | −$1.9m | us-gaap:NetIncomeLoss |
| Operating cash flow | 9 months, 2023-07-01 to 2024-03-31 | −$1.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-07-01 to 2024-03-31 | $0 | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Current assets | at 2024-03-31 | $389.4k | us-gaap:AssetsCurrent |
| Total assets | at 2024-03-31 | $451.8k | us-gaap:Assets |
| Current liabilities | at 2024-03-31 | $8.6m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-03-31 | $8.6m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-03-31 | −$8.2m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 22,638 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 nine months ended March 31, 2024 and 2023 are compared in the sections below.

### Executive Summary

Xeriant 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.

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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 contributed capital, technology, and strategic business relationships, and XTI contributed 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 31, 2023, the joint venture terminated in accordance with the Agreement. However, as of the date of this filing, Eco-Aero, LLC has not been dissolved and the distribution of the TriFan 600 design IP has not been executed. As per the Agreement, Xeriant is entitled to receive shares of XTI, the number of which is in the process of being determined by the parties involved.

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.

On December 7, 2023, the Company initiated legal proceedings against XTI Aircraft Company (“XTI”) in the Federal District Court for the Southern District of New York (Case no. 1:23-cv-10656-JPO), along with other unnamed defendants, alleging fraudulent acts, breach of contract and misappropriation of intellectual property. In the complaint, the Company contends that XTI, utilizing false promises, induced substantial investments from the Company, in terms of millions of dollars together with valuable intellectual property, for the development of the TriFan 600 vertical takeoff and landing (VTOL) aircraft.

The Company believes that the completed designs of the TriFan 600, a product of the Company’s significant investment, were integral to XTI’s merger with Inpixon. Despite the Company’s pivotal role in facilitating this merger, as memorialized in a formal agreement, XTI has publicly disclaimed any obligation to compensate the Company. In response to XTI’s alleged fraudulent conduct, deceptive maneuvers and intentional breaches, the Company is seeking a range of remedies. These include the recovery of losses, expenses, attorneys’ fees, punitive damages and a compensatory damage award exceeding $500 million. The legal action aims to address the alleged misconduct comprehensively and to protect the Company’s interests in the face of XTI’s actions.

The foregoing description of the legal action does not purport to be complete and is subject in its entirety by the full text of the Complaint, a copy of which was filed in an 8-K on December 12, 2023, Exhibit 99.1.

#### 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 its 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. The case was dismissed on February 9, 2024. The Company filed a Notice of Civil Appeal on March 13, 2024, in allow filing of an appeal primarily based on public welfare because of the pending litigation between the SEC and Auctus Fund Management, LLC. 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, or seek a judgment against the Company for amounts due under the Note, as amended. In that event, our shareholders could experience substantial dilution, or the Company could lose substantially all of its assets.

#### Stock Sales

None.

#### Convertible Notes Issued

During the nine months ended March 31, 2024, the Company received $1,380,000 from issuance of convertible debt.

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### Three months ended March 31, 2024, Results of Operations Compared with three months ended March 31, 2023

#### Consulting and advisory fees

Total consulting and advisory expenses were $39,650 and $177,726 for the three months ended March 31, 2024 and 2023, respectively, a decrease of $138,076. In the prior period, there were increased expenses due to stock issuances and services relating to advisory agreements.

#### Related Party Consulting Fees

Total related party consulting fees were $89,500 and $84,000 for the three months ended March 31, 2024 and 2023, respectively, an increase of $5,500. The reason for the increase was increased available funds for payment of consulting fees and travel and research and development costs relating to the launch of NEXBOARD over the same period last fiscal year. The related party consulting fees for the three months ended March 31, 2024, consisted of (i) $50,000 to Ancient Investments, LLC, a company owned by Keith Duffy, CEO and Scott Duffy, Executive Director of Operations, (ii) $17,000 for AMP Web Services, LLC, a company owned by Pablo Lavigna, CIO, (iii) $15,000 to Edward DeFeudis, Director, and (iv) $7,500 for Keystone Business Development Partners, LLC, a company owned by Brian Carey, CFO. The related party consulting fees for the three months ended March 31, 2023, consisted of (i) $40,000 to Ancient Investments, LLC, (ii) $14,000 for AMP Web Services, LLC, (iii) $25,000 to Edward DeFeudis, and (iv) $5,000 for Keystone Business Development Partners, LLC.

#### General and administrative expenses

Total general and administrative expenses were $67,761 and $48,381 for the three months ended March 31, 2024 and 2023, respectively, an increase of $19,380. The primary reason for the increase was increased travel and research and development costs relating to the launch of NEXBOARD over the same period last fiscal year.

#### Professional Fees

Total professional fees were $87,981 and $62,445 for the three months ended March 31, 2024 and 2023, respectively, an increase of $25,536. The primary reason for the increase was increased legal fees relating to current business operations.

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#### Advertising and marketing expenses

Total advertising and marketing expenses were $548 and $14,688 for the three months ended March 31, 2024 and 2023, respectively, a decrease of $14,140. The decrease was attributed to the cancellation of a marketing program that was initiated in the first quarter of fiscal year 2023.

#### Research and Development Expenses

Total research and development expenses were $67,524 and $0 for the three months ended March 31 2024 and 2023, respectively, an increase of $67,524. 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 $31,132 and $2,498 for the three months ended March 31, 2024 and 2023, respectfully, an increase of $28,634. The increase was due to increased interest expense related to new and previously issued convertible notes, offset by a gain from Edenberg JV of $18,919 in the prior period.

#### Net loss

Total net loss was $384,096 for the three months ended March 31, 2024, compared to $389,738 for the three months ended March 31, 2023, a decrease of $5,642.

### Nine months ended March 31, 2024 Results of Operations Compared with nine months ended March 31, 2023

#### Consulting and advisory fees

Total consulting and advisory expenses were $193,995 and $904,187 for the nine months ended March 31, 2024 and 2023, respectively, a decrease of $710,192. 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 $264,000 and $296,000 for the nine months ended March 31, 2024 and 2023, respectively, a decrease of $32,000. The primary reason for the decrease was the desire of Management to reduce the need for additional investment and to preserve funds for payments of increased travel and research and development costs relating to the launch of NEXBOARD. The related party consulting fees for the nine months ended March 31, 2024, consisted of (i) $149,500 to Ancient Investments, LLC, a company owned by Keith Duffy, CEO and Scott Duffy, Executive Director of Operations, (ii) $46,000 for AMP Web Services, LLC, a company owned by Pablo Lavigna, CIO, (iii) $51,000 to Edward DeFeudis, Director, and (iv) $17,500 for Keystone Business Development Partners, LLC, a company owned by Brian Carey, CFO. The related party consulting fees for the nine months ended March 31, 2023, consisted of (i) $150,000 to Ancient Investments, LLC, (ii) $49,000 for AMP Web Services, LLC, (iii) $77,000 to Edward DeFeudis, and (iv) $20,000 for Keystone Business Development Partners, LLC.

#### General and administrative expenses

Total general and administrative expenses were $189,151 and $207,997 for the nine months ended March 31, 2024 and 2023, respectively, a decrease of $18,846. The primary reason for the decrease was the desire of Management to reduce the need for additional investment and to preserve funds for payments of increased travel and research and development costs relating to the launch of NEXBOARD.

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#### Professional Fees

Total professional fees were $212,986 and $231,073 for the nine months ended March 31, 2024 and 2023, respectively a decrease of $18,087. The primary reason for the decrease was the desire of Management to reduce the need for additional investment and to preserve funds for payments of increased travel and research and development costs relating to the launch of NEXBOARD.

#### Advertising and marketing expenses

Total advertising and marketing expenses were $4,406 and $22,987 for the nine months ended March 31, 2024 and 2023, respectively, a decrease of $18,581. The decrease was attributed to the cancellation of a marketing program that was initiated in the first quarter of fiscal year 2023.

#### Research and Development Expenses

Total research and development expenses were $147,259 and $0 for the nine months ended March 31, 2024 and 2023, respectively, an increase of $147,259. 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 amortization of debt discount, interest expense related to convertible notes, change in fair value of the convertible bridge loans, loss from Edenberg JV, and loss on extinguishment of debt. Total other expenses were $921,206 for the nine months ended March 31, 2024, compared to $4,839,377 for the nine months ended March 31, 2023. The primary reason for the $3,918,171 decrease was due to the loss on extinguishment of debt of $4,259,987 in the prior period partially offset by default interest of $825,030 and loss on extinguishment of debt in the current period amounting to $20,298.

#### Net loss

Total net loss was $1,933,003 for the nine months ended March 31, 2024, compared to $6,501,621 for the nine months ended March 31, 2023. The decrease of $4,568,618 related primarily to the loss on extinguishment of debt of $4,259,987 in the prior period and higher consulting and advisory fees in the prior period. This was partially offset by default interest of $825,030 and loss on extinguishment of debt in the current period amounting to $20,298.

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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 March 31, 2024 and June 30, 2023, the Company had $373,568 and $61,625 in cash, respectively, and $8,227,696 and $6,684,867 in negative working capital, respectively. On March 31, 2024, the principal balance of the Auctus Senior Secured Promissory Note was $5,850,000. The Note matured on March 15, 2023. For the three months ended March 31, 2024 and 2023, the Company had a net loss of $384,096 and $389,738, respectively. For the nine months ended March 31, 2024 and 2023, the Company had a net loss of $1,933,003 and $6,501,621, respectively. Continued losses will 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 nine months ended March 31, 2024, the Company’s operating activities used $1,059,894 of net cash used compared to using $1,037,036 of net cash used in our operating activities during the nine months ended March 31, 2023. During the nine months ended March 31, 2024, our investing activities used $8,163 of net cash compared to using $194,829 of net cash in our investing activities during the nine months ended March 31, 2023. This primary reason for the difference is the $192,262 in the prior period related to Investment in JV Movychem. During the nine months ended March 31, 2024, our financing activities added $1,380,000 of net cash compared to $270,000 of net cash in our financing activities during the nine months ended March 31, 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. No assurance can be given that the Company will be able to raise the necessary capital to implement its business plan.

### 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 nine months ended March 31, 2024 and 2023 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, 1,680 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, 2024, 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 their evaluation of our disclosure controls and procedures, they concluded that at March 31, 2024, 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, 2024, 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 14, 2024.
Source: SEC EDGAR, the filing index for accession 0001477932-24-002829. Last ingested by Listed: Oct 24, 2026, 15:08 ET. No prices; not investment advice.