UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K10-K/A
(Mark One)
x ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 20162021
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¨ ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 000-54277
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(Exact name of registrant as specified in its charter). |
Nevada |
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Registrant's telephone number, including area code: (855) 245-1613(561) 491-9595
Securities registered under Section 12(b) of the Act:
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Securities registered under Section 12(g) of the Act:
Common Stock, $0.00001 par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o ☐ No x☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o ☐ No x☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o ☒ No x☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x ☒ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes x No o☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Non-accelerated filer |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ ☐ No x☒
The aggregate market value of the voting and non-votingregistrant’s common equity of the registrantstock held by non-affiliates computed by reference toas of December 31, 2020, the price at whichlast day of the common equity was last sold, orregistrant’s most recently completed second fiscal quarter, based upon the average bid and askedclosing price of the registrant’s common stock as reported by the OTC:QB Marketplace on such date, was approximately $36.6 million. Shares of common equity,stock held by each officer and director, and by each person who owns 10% or more of the outstanding common stock, have been excluded in that such persons may be deemed to be affiliates. This calculation does not reflect a determination that persons are affiliates for any other purposes.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the last business day of the registrant's second fiscal quarter ended December 31, 2015 was $423,511.latest practicable date.
As of December 31, 2016,October 7, 2021, the registrant had 322,574,504 outstanding 58,823,116 shares of common stock.
Documents Incorporated by Reference: None.
EXPLANATORY NOTE
Xeriant, Inc. is filing this Amendment on Form 10-K/A to its Annual Report on Form 10-K for the fiscal year ended June 30, 2021, originally filed with the U.S. Securities and Exchange Commission (the “SEC”) on October 13, 2021 (the “Original Filing”), to amend its previously-issued audited consolidated financial statements and related financial information for the fiscal year ended June 30, 2021 for the purpose of inserting or correcting certain amounts which changes are in the aggregate not material, and to provide a corrected audit opinion.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (this “Report”) contains “forward-looking statements” within the meaning of the Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Any statements about our expectations, beliefs, plans, predictions, forecasts, objectives, assumptions, or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “intends,” and similar words or phrases. Accordingly, these statements are only predictions and involve estimates, known and unknown risks, assumptions, and uncertainties that could cause actual results to differ materially from those expressed in them. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of several factors more fully described in Item 1A of this Report under the caption “Risk Factors” and elsewhere in this Report, including the exhibits hereto.
All forward-looking statements are necessarily only estimates of future results, and actual results may differ materially from expectations. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates, or expectations contemplated by us will be achieved. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, and financial needs. You are cautioned not to place undue reliance on such statements which should be read in conjunction with the other cautionary statements that are included elsewhere in this Report. Any forward-looking statement speaks only as of the date on which it is made and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws.
Use of Certain Defined Terms
Except where the context otherwise requires and for the purposes of this Report only:
| · | In this annual report, references to “Xeriant”, “Banjo”, “XERI”, “BANJ” or “the Company,” or “we,” |
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| · | “Exchange Act” refers to the Securities Exchange Act of 1934, as amended. |
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| · | “SEC” refers to the Securities and Exchange Commission. |
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| · | “Securities Act” refers to the Securities Act of 1933, as amended. |
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Banjo & Matilda (www.banjoandmatilda.com)Xeriant, Inc. d.b.a. Xeriant Aerospace (“Xeriant” or the “Company”) is an e-commerce only, directaerospace company dedicated to consumer,the emerging aviation market called Advanced Air Mobility (AAM), the transition to eco-friendly, on demand flight, making air transportation more accessible luxury brand targeting high value consumersand a greater part of our daily lives. Xeriant is focused on the acquisition, development, and proliferation of next generation hybrid-electric and fully electric aircraft with vertical takeoff and landing (eVTOL) capabilities, performance enhancing aerospace technologies and advanced materials, as well as critical support infrastructure. Some advanced materials impact global industries beyond aerospace, and Xeriant is also focused on securing near-term cash flow opportunities with major national and international companies. Xeriant is located at the Research Park at Florida Atlantic University in Boca Raton, Florida adjacent to the Generation X & Baby Boomer demographics.Boca Raton Airport.
Corporate History
Banjo & Matilda, Inc.The Company was originally incorporated in Nevada on December 18, 2009 under the name Eastern World Group,Solutions, Inc. andThe name changed its name to Banjo & Matilda, Inc. on September 24, 2013 and is now located in Santa Monica, California.
Acquisition of2013. Effective June 22, 2020, the Company changed its name from Banjo & Matilda, Pty Ltd.
PriorInc. to the acquisition of Banjo & Matilda Pty Ltd. under the Exchange Agreement defined below, we were a development stage company without any operating revenues or earnings. Time and resources of the then-management was dedicated to organize the Registrant, obtaining interim financing, and developing a business plan.Xeriant, Inc.
On November 14, 2013, weThe Company entered into a share exchange agreement (the “Exchange Agreement”) with Banjo & Matilda Pty Ltd, (“Banjo & Matilda”) and the shareholders of Banjo & Matilda (“B&M Shareholders”). Pursuant to the Exchange Agreement, 100% of the issued and outstanding capital stock of Banjo & Matilda was acquired, making it a wholly-owned subsidiary of ours (the “Transaction”). There was no prior relationship between the Company and its affiliates and Banjo & Matilda and its affiliates.
wholly owned subsidiary. In consideration for the purchase of 100% of the issued and outstanding capital stock of Banjo & Matilda under the Exchange Agreement, wethe Company issued B&M Shareholders an aggregate of 24,338,872 restricted shares of common stock of the Company.
On November 15, 2013, we entered into an employment agreement with the Banjo & Matilda co-founders: Brendan Macpherson, as the chief executive officer of the Registrant, and Belynda Storelli Macpherson, as its chief creative officer. Each employment agreement has an initial term of three years and will automatically renew for an additional term of three years. Either party may elect not to renew the Employment Agreement by written notice delivered to the other party no later than August 30th of the final year of the term. In addition, either employee may terminate the employment agreement upon 30 days written notice.
On July 1,st 2015, the operations of Banjo & Matilda Pty Ltd were transferred to Banjo & Matilda (Australia) Pty Ltd. A, a wholly owned subsidiary of the Company.
Following the global transition of the retail clothing business from an in-store experience to an online direct-to-consumer model, in June of 2017, Banjo & Matilda began to seek additional business opportunities to expand and refocus its operations to generate more revenue and profit.
On April 16, 2019, the Company entered into a Share Exchange Agreement with American Aviation Technologies, LLC (“AAT”), an aircraft design and development company focused on the emerging segment of the aviation industry of autonomous and semi-autonomous vertical take-off and landing (VTOL) and unmanned aerial vehicles (UAVs).
On June 28, 2019, the Company spun out two wholly owned subsidiaries: Banjo & Matilda (USA), Inc. and Banjo & Matilda Australia Pty LTD.
Effective September 30, 2019, the acquisition of AAT closed and AAT became a wholly owned subsidiary of the Company. On June 22, 2020, the name was changed from Banjo & Matilda, Inc. to Xeriant, Inc. The Company will be referred to as “Xeriant, Inc.” and or “Xeriant” throughout the document.
On May 31, 2021, the Company Overviewentered into a 50-50 Joint Venture Agreement with XTI Aircraft Company, to form a new company, called Eco-Aero, LLC, for 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.
Banjo & Matilda was founded by Australian born creative director Belynda Storelli Macpherson in 2009, after an extensive career in publicity, fashion publishing and marketing. Prior companies where Belynda worked include Grazia, Harpers Bazaar and Maddison fashion magazines, major film studios including Warner Brothers, Universal Studios and Columbia Tri-Star Pictures; and, the Australian tourism industry marketing body Tourism Australia. Belynda also founded her own publicity firm “Global Artist” which she successfully sold to a larger group in 2002.OUR BUSINESS SUMMARY
Belynda identifiedIntroduction
Throughout history, aerospace has been at the emerging casualizationleading edge of the luxury fashion marketmany important technological, design and combined her passion for cashmere, the Australian beach lifestyleengineering breakthroughs. The ability to evolve and frustration over the lack of accessible quality cashmere to create a new, more relevant luxury brand. One that was born on line as a direct to consumer e-commerce model thereby eliminating the unnecessary margin's that department and specialty stores take, enabling the brand to focus on a luxury quality product, but without inflated luxury prices. The brands heritage centered on its easy luxury lifestyle of beach, travel, and health and wellness which Australia is best known forinnovate has been a key drivercritical factor in the brands growing popularityindustry’s tremendous growth and the position it has securedled to a more prosperous and interconnected global economy. Aerospace continues to adapt to ongoing challenges and opportunities with technology-based solutions in the market.areas of design, safety, efficiency, maintenance and environmental impact. These advancements are producing next generation aircraft with more specialized features to create niche markets to improve service in response to changing consumer demands, further demonstrating the industry’s ability to impact and disrupt the global economy.
General Market issues; Market opportunity
Total global apparel sales reached $1.2T+ in 2015, with total sales expected to grow at 5-6%+ over the next 5 years. The traditional apparel market sales model is experiencing significant challenges due to the structural issues physical store retailers face. Increasing competition and market share taken by e-commerce retailers, overbuilt expensive retail store networks, falling foot traffic, and greater competition and discounting has meant many retailers margins are decreasing, at the same time gross physical store sales are static or declining. There are an increasing number of physical retailers experiencing declining profitability and business failure mostly affected by these issues.
These issues are also negatively impacting traditional apparel and lifestyle brands and not just retailers. Traditional brands rely heavily on the traditional wholesale-to-retail sales model. The cost of higher returns from major retailers who are struggling to sell through product, discounts demanded by retailers to suppliers and brands, and higher bad debts as a result of smaller retailers failing, is driving decreased profitability and failure.
This market is ripe for disruption. E-commerce direct-to-consumer (or vertical) brands can now provide a higher quality product at a lower price than traditional brands by avoiding the traditional retail mark-up taken by department and specialty stores. This proposition provides a significant consumer benefit. Combine the price-to-quality product advantage with sophisticated digital marketing efficiently acquiring and re-engaging customers via online marketing, digitally media rich story-telling, social media and technology, is driving a rapid expansion of the digital vertical brands.
Sales via e-commerce for apparel, luxury and well-being related goods is now the fastest growing sales channel for these consumer segments. Purchasing online has now reached a critical mass which should enable brands like Banjo & Matilda to build a successful large scale direct-to-consumer e-commerce centric business.
Banjo & Matilda is known as a modern luxury brand specializing in luxury quality casual cashmere knitwear which retails for 1/2 to 1/3rd of the price of a traditional luxury brand of similar quality. It has an authentic brand heritage founded in Australia in 2009, encapsulating the iconic surf, sand, sun and healthy living lifestyle that Australia has become known for. Streamlining the production process by partnering with cashmere yarn producers in inner Mongolia (where 98% of the world’s cashmere originates), and manufacturing in specialist factories with deep knitting expertise, the Company sells directly to customers online, avoiding the typical costs of wholesale/retailer mark-up -- conveniently delivering a luxury quality product at an accessible price point.
Our Products
Banjo & Matilda offers a comprehensive line of luxury women's cashmere knitwear including sweaters and pants, and accessories such as cashmere scarves, slippers, eye-masks and travel blankets. Banjo & Matilda also collaborates with high profile artists and celebrities to create exclusive limited edition pieces. In 2015, the Company collaborated with Gwyneth Paltrow and her successful lifestyle blog GOOP, with prior collaborations including singer Bryan Adams, prominent businesswoman, television host, model and actress Elle Macpherson, British artist Tracey Emin and Australian singer/songwriter, model and actress Natalie Imbruglia. The Company is planning to expand its product lines to include broader lifestyle offering of apparel items, home products, menswear, children's apparel, and gifts.
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Company Overview
Product ManufacturingXeriant, Inc. (d.b.a. Xeriant Aerospace) is an aerospace technology dedicated to the emerging aviation market called Advanced Air Mobility (AAM), the transition to eco-friendly on-demand flight. The Company plans to partner with and acquire strategic interests in visionary companies that accelerate this mission. Xeriant is focused on the development and deployment of next-generation electrically powered aircraft capable of vertical takeoff and landing (VTOL), breakthrough technologies and advanced materials which can be successfully integrated and commercialized, and the critical infrastructure components needed to support operations. The Company plans to source and acquire complementary and strategic interests in visionary companies developing, integrating, and commercializing critical breakthrough technologies which enhance performance, increase safety, and enable and support more efficient, autonomous, and sustainable flight operations, including electrically powered passenger and cargo transport aircraft capable of vertical takeoff and landing.
Banjo & Matilda use third party contract manufacturers rather than owning operating low margin manufacturing facilities itself. All yarnsThrough its joint venture agreement with XTI Aircraft Company (“XTI”) based in Englewood, Colorado, Xeriant is involved in completing the preliminary design of their TriFan 600 eVTOL aircraft. XTI is a privately owned OEM and fabrics are sourced from reputable suppliers. Materials used are typicallydeveloper of next generation, cleantech VTOL aircraft. The TriFan 600 is being designed to become the highest grade that canfastest, longest-range VTOL hybrid-electric aircraft in the world and the first commercial fixed-wing VTOL airplane, with current pre-orders exceeding $1.3 billion in gross revenues upon delivery of those aircraft. This aircraft will be sourced. Banjo & Matilda works with various manufacturers at any one time, with two manufacturers each accounting for 10% or more of annual manufacturing costs; however, the Company believes that all ofan important component in Xeriant plan to further its manufacturers are replaceable without adversely affecting its business. Our manufacturers provide us with the speed to market necessary to respond quickly to changing trends and increased demand. While we believe that we have a good relationship with our manufacturers, we do not have any long-term agreements requiring us to use any manufacturer, and no manufacturer is required to produce our products pursuant to a long-term contract. We regularly secure and test new manufacturing partners and believe that the services of additional, or other, manufacturers and/or suppliers of our fabrics are available.position in AAM.
Product DistributionAdvancements in structural design, propulsion systems, materials, sensors, artificial intelligence (AI), batteries and high-speed connectivity have dramatically enhanced energy efficiency, acoustics, emissions, safety and autonomy, making feasible a broad range of electrically powered VTOL capable aircraft, and transitioning aviation into a new era.
Subject to available capital, Xeriant intends to acquire strategic interests in the most promising of these technological breakthroughs and next-generation aircraft configurations to accelerate the development of economically viable products that address specific market demands.
The Company was founded asis an e-commerce only direct to consumer model – distribution only online via its e-commerce store www.banjoandmatilda.com. In 2012 we opened a “guide store” in Sydney Australia. In 2013 we embarked on a strategic wholesale program to assist driving brand awareness and revenue growth inOTC Markets publicly traded company trading under the Northern Hemisphere markets. Through the 2015 period in conjunction with our relocation to the US, we scaled the wholesale business and operations reaching 200+ retail outlets, stocked in major department stores and key independent boutiques.stock symbol, XERI. As a resultholding and operating company, Xeriant is positioned to own a portfolio of the increased overheads and falling gross margins from wholesale sales due to the shifts and issues occurringassets in the physical retail landscape,a number of entities at various stages of maturity, including well-established revenue-generating enterprises. Currently, the Company withdrew fromis in active negotiations with several parties and performing due diligence on these opportunities.
The holding and operating company structure has several advantages and will enable the wholesale distribution channelCompany to grow rapidly, acquiring assets primarily through acquisitions, joint ventures, strategic investments, and licensing arrangements. As a publicly traded company, Xeriant offers its subsidiaries such benefits as providing shareholder liquidity, 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 January 2016their distinct operations to focus on its core e-commerce business model.
Competition
There is meaningful competition in the luxury apparel industry with emphasis on the brand imagetheir fields of expertise. Cost savings and recognitionefficiencies may be realized from sharing non-operational functions such as finance, legal, tax, marketing, human resources, purchasing power, as well as productinvestor and public relations. Xeriant is focused on the impact of technology, the strength of patents and IP, the quality style,of management, and distribution. Banjo & Matilda successfully competes thanksa clear path to a premiumprofitability.
Industry Overview
The aerospace industry is proving that it can expand its traditional boundaries and unique brand, uniquemeet today’s challenges with exciting new aircraft designs and attainable price pointsbusiness models. VTOL aircraft, which comprise a diverse array of small UAVs (unmanned aerial vehicles or drones) and larger airframes for passenger and cargo transport, are a vibrant aviation niche market, attracting substantial investment and spurring technological innovation in virtually every aspect of aircraft development. The quintessence of contemporary aeronautical science and engineering, these mostly electric aircraft (eVTOL) are leading the green transformation in air travel. Given the current state of battery technology, however, larger eVTOL aircraft designs must be optimized for efficiency, which includes reducing engine energy consumption and structural weight where possible, often through utilizing advanced composite materials, additive manufacturing (3D printing) processes for some components, and the miniaturization of electronics. Duration, speed and payload capacity of eVTOL aircraft are dependent on the energy density and weight of batteries. The use of electric aircraft is also being considered for regional routes, flights generally under 500 miles between smaller regional airports. Hybrid electric and fuel cell systems may bridge the transition from petroleum-based fuels to fully electric power from batteries.
Multirotor UAVs have proven to be a viable, low-cost alternative in many applications previously not availabledominated by the helicopter, including surveying, inspections, aerial photography and videography. In the future, larger eVTOL aircraft such as air taxis are poised to become a replacement for light helicopters for inter and intracity passenger travel and cargo delivery and possibly even for military transport. Among the advantages are clean emissions, better acoustics, less complex flight controls, autonomous capability, increased safety on the ground, superior maneuverability and reduced expenses related to maintenance, repair and operations. Because of the explosive growth of VTOL aircraft development over the past few years and their likely ubiquity in the luxury product sector. This enablesfuture, new regulations are being formulated to allow their safe integration into civil airspace. As with UAVs, the brand to acquireflights of all new aircraft in civil airspace must also be regulated and keep customers which would not typically purchase traditional luxury products due tosafely integrated through some type of low-altitude traffic management system. Stakeholders shaping this integration process include aircraft manufacturers, ride-sharing companies, governmental regulatory agencies and civil transportation authorities, all of whom are working toward establishing standards and overcoming the much higher price points. Theremultitude of issues involved with its implementation. Key technologies impacting the development and implementation of autonomous guidance, navigation and flight control systems, deemed the next technological revolution in air transportation, are limited entrants into the market with similar cashmere focused e-commerce offerings which directly compete in terms of product qualityhigh speed (5G) data transmission and price point.AI.
Intellectual Property
Banjo & Matilda has registered trademarks in Australia and the USA. We believe we own the material trademarks used in connection with the marketing, distribution and sale of all of our products in Australia, the United States, and Europe (and in the other countries in which our products are currently or intended to be either sold or manufactured). We also own the (i) website URL's including and associated to banjoandmatilda.com (as well as banjoandmatilda.au, banjoandmatilda.com, thesweaterexchange.com etc.), (ii) account “@BanjoMatilda” on Twitter, (iii) account “@Banjoandmatilda” on Instagram and (iv) Facebook page “Banjo & Matilda”. We also maintain an account on Pinterest.com.
Employees
As of December 1, 2016, we had 6 employees located in the United States and Australia.
Key Management
In addition to Belynda Storelli Macpherson, the Company considers its CEO, Brendan Macpherson, a key member of its management team. Brendan Macpherson oversees operations, finance, and marketing.
An investment in our common stock involves a high degree of risk. In evaluating us and our business, you should carefully consider the risks and uncertainties described below and the other information and our consolidated financial statements and related notes included herein. The risks provided below may not be all the risks we face. If any of events described in the risks below actually occurs, our financial condition or operating results may be materially and adversely affected, the price of our common stock may decline, perhaps significantly, and you could lose all or a part of your investment.
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All of the game-changing trends and technical challenges cited above represent significant areas of opportunity for Xeriant, which plans to play a leadership role in this critical transitional period in the evolution of aviation, and specifically the rapidly growing eVTOL aircraft industry. Below are some compelling statistics and forecasts in support of the development and future growth of electrically powered aircraft:
Risks Related to Our Business
History of Losses and Expectation of Future Losses
For the fiscal years ended June 30, 2016 and 2015, we had a net loss of $1,115,977 and $2,004,722, respectively, and we expect losses in future periods. There can be no assurance that we will ever become profitable.
Our fiscal 2016 audited financial statements contain a going-concern qualification, raising questions as to our continued existence.
The Company’s financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern. This contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Currently, the Company does not have sufficient cash, nor does it have operations or a source of revenue sufficient to cover its operation costs and allow it to continue as a going concern. The Company has reported accumulated deficit as of June 30, 2016, of $4,217,982. Further losses are anticipated as we continue in the development stage of our business. We will be dependent upon the raising of additional capital through placement of our equity and/or debt securities in order to implement our business plan. There can be no assurance that we will be successful in either situation in order to continue as a going concern. Failure to raise the required capital to fund operations, on favorable terms or at all, will have a material adverse effect on our operations, and will likely cause us to curtail or cease operations.
As a result, in their audit report contained in this Annual Report, our independent auditors expressed substantial doubt about our ability to continue as a going concern. As of the date of this Annual Report, we will require additional funds for fiscal 2017. If we cannot raise these funds, we may be required to cease business operations or alter our business plan. These 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 result from this uncertainty.
Our business plan requires additional capital, which we may be unable to raise on acceptable terms, if at all, in the future, which may in turn limit our ability to execute our business strategy.
As of June 30, 2016, we had a cash balance of $11,056 and a working capital deficit of $2,241,374. Our net loss of $1,115,977 in the year ended June 30, 2016 was mostly funded by proceeds raised from debt financings.
The Company has entered into an equity line funding agreement with Spider Investments, LLC to sell up to $1,500,000 of our common stock, subject to certain terms and conditions some of which are out of our control, including the (i) filing and obtaining effectiveness of a registration statement registering the issuance of our shares of common stock under the Act to be issued pursuant to the equity line and (ii) certain volume and other trading conditions of our common stock. We plan to file the registration statement within 30 days from the date hereof and to obtain effectiveness thereof as soon as practicable.
We will need to raise working capital of between $2 million to $3 million (or refinance existing short-term debt to long-term debt) to fund operations in 2017. Future equity financings may be dilutive to our stockholders. Alternative forms of future financings may include preferences or rights superior to our common stock. Debt financings may involve a pledge of assets and will rank senior to our common stock. We have historically financed our operations through best-efforts private equity and debt financings. We do not have any credit or equity facilities available with financial institutions, stockholders or third party investors, and will continue to rely on best efforts financings. The failure to raise sufficient capital could cause us to cease operations.
Any material disruption of our information systems could disrupt our business and reduce our sales. We are dependent on information systems to operate our e-commerce websites, process transactions, respond to guest inquiries, manage inventory, purchase, sell and ship goods on a timely basis and maintain cost-efficient operations. Any material disruption or slowdown of our systems, including a disruption or slowdown caused by our failure to successfully upgrade our systems, system failures, viruses, computer “hackers” or other causes, could cause information, including data related to customer orders, to be lost or delayed which could result in delays in the delivery of products to our retail and wholesale customers or lost sales, which could reduce demand for our products and cause our sales to decline. If changes in technology cause our information systems to become obsolete, or if our information systems are inadequate to handle our growth, we could lose retail or wholesale customers.
The fluctuating cost of raw materials, particularly cashmere, could increase our cost of goods sold and cause our results of operations and financial condition to suffer. The fabric used to make our products is primarily cashmere, although we also use natural fibers, including cotton. Our costs for raw materials are affected by, among other things, weather, consumer demand, speculation on the commodities market, the relative valuations and fluctuations of the currencies of producer versus consumer countries and other factors that are generally unpredictable and beyond our control. Increases in the cost of raw materials, including petroleum or the prices we pay for our yarn, could have a material adverse effect on our cost of goods sold, results of operations, financial condition and cash flows.
The apparel industry is heavily influenced by general macroeconomic cycles that affect consumer spending, and a prolonged period of depressed consumer spending could have a material adverse effect on our business, financial condition and operating results. The apparel industry has historically been subject to cyclical variations, recessions in the general economy and uncertainties regarding future economic prospects that can affect consumer spending habits. Purchases of luxury items, such as our products, tend to decline during recessionary periods, when disposable income is lower. The success of our operations depends on a number of factors impacting discretionary consumer spending, including general economic conditions, consumer confidence, wages and unemployment, housing prices, consumer debt, interest rates, fuel and energy costs, taxation and political conditions. A continuation or worsening of the current weakness in the global economy or the economy in our key markets (Australia, the United States and Europe) may negatively affect consumer and wholesale purchases of our products and could have a material adverse effect on our business, financial condition and operating results.
Privacy breaches and other cyber security risks related to our e-commerce business could negatively affect our reputation, credibility and business. We are responsible for storing data relating to our customers and employees and rely on third parties for the operation of parts of our e-commerce website, banjoandmatilda.com, and for the various social media tools and websites we use as part of our marketing strategy. Our online store on our website is operated by a third-party provider. Consumers, lawmakers and consumer advocates alike are increasingly concerned over the security of personal information transmitted over the Internet, consumer identity theft and privacy. We require that our third-party service provider implements reasonable security measures to protect our customers' identity and privacy. We do not, however, control these third-party service providers and cannot guarantee that no electronic or physical computer break-ins and security breaches will occur in the future. Likewise, our systems and technology are subject to the risk of system failures, viruses, “hackers” and other causes that are out of our control. Any perceived or actual unauthorized disclosure of personally identifiable information regarding our customers or website visitors could harm our reputation and credibility, reduce our online sales, impair our ability to attract website visitors and reduce our ability to attract and retain customers, and potentially expose us to significant related liability. Finally, we could incur significant costs in complying with the multitude of local, national and foreign laws regarding the use and unauthorized disclosure of personal information (to the extent they are applicable). We also may incur significant costs in our implementation of additional security measures to comply with applicable laws and industry standards and to further protect customer data.
The departure of our co-founders could have a material adverse effect on our business. We depend on the services and management experience of our co-founders, Belynda Storelli Macpherson and Brendan Macpherson, who have substantial experience and expertise in our business. In particular, Ms. Macpherson has provided design leadership to Banjo & Matilda since its inception. She is instrumental to our marketing and publicity strategy and is closely identified with both our brand and Company. Our ability to maintain our brand image and leverage the goodwill associated with Ms. Macpherson may be damaged if we were to lose her services. We have an employment agreement with Ms. Macpherson, but she has the right to terminate her employment agreement at any time upon 30 days written notice. The employment agreement contains a covenant not to compete, but it is only applicable if her severance payments equal at least $100,000 and is limited to six months’ duration and geographically to within a five-mile radius of any location where we design, manufacture or sell our knitwear. Accordingly, Ms. Macpherson could terminate her employment agreement with us and within a short time engage in a competing business, which could materially adversely affect us. In addition, the leadership of Brendan Macpherson, our Chief Executive Officer, has been a critical element of Banjo & Matilda's success. Mr. Macpherson also has the right, under his employment agreement with us, to terminate his employment at any time upon 30 days written notice. The loss of services of Mr. Macpherson and/or Ms. Macpherson or any negative public perception with respect to, or relating to, the loss of one or more of these individuals could have a material adverse effect on our business, financial condition and operating results.
If our manufacturing contractors fail to use acceptable, ethical business practices, our business and reputation could suffer. We do not own or operate any manufacturing facilities. We use third-party contract manufacturers, mostly in China. We require our manufacturing contractors to operate in compliance with applicable laws, rules and regulations regarding working conditions, employment practices and environmental compliance. Additionally, we impose upon our business partners operating guidelines that require additional obligations in those three areas in order to promote ethical business practices, and our staff and third parties we retain for such purposes periodically visit and monitor the operations of our manufacturing contractors to determine compliance. However, we do not control our manufacturing contractors or their labor and other business practices. If one of our manufacturing contractors violates applicable labor or other laws, rules or regulations or implements labor or other business practices that are generally regarded as unethical in our markets, such as Australia, Europe or the United States, the shipment of finished products to us could be interrupted, orders could be cancelled, relationships could be terminated and our reputation could be damaged. Any of these events could have a material adverse effect on our business, financial condition and operating results.
Due to the highly competitive nature of the apparel industry, our success depends on our ability to meet consumer demands, respond to fashion trends, and provide superior quality. There is intense competition in the sector of the apparel industry in which Banjo & Matilda participates. Banjo & Matilda competes with many other apparel companies, some of which are larger and have greater financial resources, more comprehensive product lines; longer-standing relationships with suppliers, manufacturers, and retailers; greater distribution and marketing capabilities; and, stronger brand recognition and loyalty than Banjo & Matilda. Our competitors' greater capabilities in these areas may enable them to better differentiate their products from Banjo & Matilda, withstand periodic downturns in the apparel industry, compete more effectively on the basis of price and production and more quickly develop new products. Management of Banjo & Matilda believes in order to be successful in this industry we must be able to evaluate and respond to changing consumer demand and taste and to remain competitive in the areas of style and quality while operating within the significant domestic and foreign production and delivery constraints of the industry.
Our inability to successfully manage the growth of our business may have a material adverse effect on our business, results of operations and financial condition. We intend to continue our growth strategy to grow our online customer base and sales, wholesale customer base, expand our product offerings and add retail stores. Our ability to execute this growth strategy is subject to significant risks, some of which are beyond our control, including:
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Our future success will be highly dependent upon our ability to manage successfully the expansion of our operations. Our ability to manage and support our growth effectively will be substantially dependent on our ability to implement adequate improvements to our financial, inventory, and management controls, and hire sufficient numbers of effective financial, accounting, administrative, and management personnel. We may not succeed in our efforts to identify, attract and retain such personnel.
We are already highly leveraged and our growth strategies require significant capital investments and may require us to seek external financing, which may not be available on terms favorable to us. Our business operations and growth strategies require substantial capital investments, the availability of which depends on our ability to generate cash flow from operations, borrow funds on satisfactory terms and raise funds in the capital markets. Our ability to arrange for financing to support our capital expenditures and the cost of such financing are dependent on numerous factors, including general economic and capital markets conditions, interest rates and credit availability from banks or other lenders, many of which are beyond our control. In addition, increases in interest rates or the failure to obtain external financing on terms favorable to us will affect our financing costs and our results of operations. We are already highly leveraged and rely on capital contributions and loans from our principal shareholders and third parties. We may not be able to obtain future financing in amounts or on terms acceptable to us. The failure to obtain financing to fund operations, on favorable terms or at all, will have a material adverse effect on our operations and will likely cause us to curtail operations.
Fluctuations in exchange rates could adversely affect our business as well as result in foreign currency exchange losses in our U.S. dollar financials. During the year ended June 30, 2016, the transactions of the Company were denominated in US dollars. All the transactions which were denominated in other currencies were converted to US$ on the date of settlement and the exchange gains and losses were recorded in the statement of operations. No change was recorded in the comprehensive income (loss). During the year ended June 30, 2015, the accounts of the Company were maintained, and its financial statements were expressed, in AUD. Such financial statements were translated into USD with the AUD as the functional currency. All assets and liabilities were translated at the exchange rate at the balance sheet date, stockholder’s equity is translated at the historical rates and income statement items are translated at the average exchange rate for the period. Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of transaction, and valuation can be affected by, among other things, changes in political and economic conditions and U.S. and Australian foreign exchange policies.
We are required to make significant estimates and assumptions in the preparation of our financial statements and our estimates and assumptions may not be accurate. The preparation of our financial statements in conformity with generally accepted accounting principles in the United States of America (“GAAP”) requires our management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Critical estimates include, among other things, the collectability of accounts receivable, accounts payable, sales returns and recoverability of long-term assets. If our underlying estimates and assumptions prove to be incorrect, our financial condition and results of operations may be materially different from that reported in our financial statements.
Risks Related to Our Common Stock and Our Status as a Public Company
We may need to raise additional capital by sales of our common stock, which may adversely affect the market price of our common stock and your rights in us may be reduced. We will need to raise additional funds to expand our online sales, increase wholesale sales, expand our product lines and add retail stores. In order to satisfy our funding requirements, we may consider issuing additional debt or equity securities. If we issue equity or convertible debt securities to raise such additional funds, our existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders. If we incur additional debt, it may increase our leverage relative to our earnings or to our equity capitalization, requiring us to pay additional interest expenses and potentially lower our credit ratings. We may not be able to market such issuances on favorable terms, or at all, in which case, we may not be able to develop or enhance our products, execute our business plan, take advantage of future opportunities or respond to competitive pressures.
There is a limited public trading market for our common stock, which may have an unfavorable impact on our stock price and liquidity. Our common stock is not listed on any exchange; it is quoted on the OTCPink quotation service. As of the date of this Form 10-K, our trading symbol has a “stop” designation meaning that we currently do not provide disclosure. We plan to bring our public disclosure current and to use our best efforts to remove this “stop” designation. We have not engaged a broker-dealer to make a market in our common stock. There has been a limited trading market for our common stock in the past and there can be no assurance that a trading market in our shares of common stock will develop and be sustained. The trading market for securities of companies quoted on the OTCPink or other quotation systems is substantially less liquid than the average trading market for companies listed on Nasdaq or a national securities exchange. The quotation of our shares on the OTCPink or other quotation system may result in a less liquid market available for existing and potential shareholders to trade shares of our common stock, could depress the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital in the future. Holders of our common stock should be willing to hold onto their shares for a long period of time.
State securities laws may limit secondary trading, which may restrict the states in which and conditions under which you can sell the shares offered by this prospectus. Secondary trading in our common stock will not be possible in any state until the common stock is qualified for sale under the applicable securities laws of the state or there is confirmation that an exemption, such as listing in certain recognized securities manuals, is available for secondary trading in the state. If we fail to register or qualify, or to obtain or verify an exemption for the secondary trading of, the common stock in any particular state, the common stock could not be offered or sold to, or purchased by, a resident of that state. In the event that a significant number of states refuse to permit secondary trading in our common stock, the liquidity for the common stock could be significantly impacted thus causing you to realize a loss on your investment.
The Registrant's board of directors designated a series of preferred stock without shareholder approval that has voting rights that adversely affect the voting power of holders of the Registrant's common stock and may have an adverse effect on its stock price. The Registrant's Certificate of Incorporation provides for the authorization of 100,000,000 shares of “blank check” preferred stock. Pursuant to our Articles of Incorporation, the Registrant's Board of Directors is authorized to issue such “blank check” preferred stock with rights that are superior to the rights of stockholders of the Registrant's common stock, including a conversion price then approved by our Board of Directors, which conversion price may be substantially lower than the market price of shares of the Registrant's common stock, without stockholder approval. In connection with the Registrant's employment agreement with its Chief Executive Officer, Brendan Macpherson, the Board of Directors authorized 1,000,000 shares of preferred stock with each share having 100 votes until Mr. Macpherson's employment agreement expires or terminates. The Registrant issued the 1,000,000 shares of preferred stock to Mr. Macpherson pursuant to his employment agreement and, upon the filing of a certificate of designation for such preferred shares and the subsequent issuance of such shares, Mr. Macpherson gained voting control of the Registrant, which has a negative effect on the voting power of the holders of the Registrant's common stock and may cause its stock price to decline.
Brendan Macpherson, our Chief Executive Officer, has significant influence over us, including control over decisions that require the approval of stockholders, which could limit your ability to influence the outcome of key transactions, including a change of control. Brendan Macpherson, our Chief Executive Officer, owns significant portion of our outstanding shares of common stock, and 1,000,000 shares of super-voting preferred stock until his employment agreement expires or terminates, and consequently has effective control over our business, including matters requiring the approval of our stockholders, such as election of directors, approval of significant corporate transactions and the timing and distribution of dividends, if any, on our common stock. In addition, Mr. Macpherson controls our policies and operations, including, among other things, the appointment of management, future issuances of our common stock or other securities, the incurrence of debt by us, and the entering into of extraordinary transactions.
Mr. Macpherson may have interests that do not align with the interests of our other stockholders, including with regard to pursuing acquisitions, divestitures, and other transactions that, in his judgment, could enhance his equity value, even though such transactions might involve risks to our other stockholders. For example, Mr. Macpherson could cause us to make acquisitions that increase our indebtedness. Mr. Macpherson will have effective control over our decisions to enter into such corporate transactions regardless of whether others believe that any transaction is in our best interests. Such control may have the effect of delaying, preventing, or deterring a change of control of our Company, could deprive stockholders of an opportunity to receive a premium for their common stock as part of a sale of our Company, and might ultimately affect the market price of our common stock.
We will incur significant costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance requirements, including establishing and maintaining internal controls over financial reporting, and we may be exposed to potential risks if we are unable to comply with these requirements. As a public company, we will incur significant legal, accounting and other expenses under the Sarbanes-Oxley Act of 2002, together with rules implemented by the Securities and Exchange Commission and applicable market regulators. These rules impose various requirements on public companies, including requiring certain corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these requirements. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial reporting and disclosure controls and procedures. In particular, we must perform system and process evaluations and testing of our internal controls over financial reporting to allow management to report on the effectiveness of our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Compliance with Section 404 may require that we incur substantial accounting expenses and expend significant management efforts. We have concluded that our disclosure controls and procedures and our internal controls over financial reporting are not effective due to material weaknesses identified in our internal controls over financial reporting. These material weaknesses include: lack of a full-time Chief Financial Officer with accounting expertise, lack of a formal review process and ineffective oversight due to the lack of an audit committee comprised of independent directors. Remediating these weaknesses will require the expenditure of capital to hire additional staff and other measures. If we cannot take steps to timely remediate the weaknesses in our internal controls, the market price of our stock could decline if investors and others lose confidence in the reliability of our financial statements. Similarly, we could have difficulty attracting third-party lenders and market-makers in our common stock if such lenders or broker-dealers believe they cannot rely on our financial statements as materially accurate. In addition, we could be subject to sanctions or investigations by the SEC or other applicable regulatory authorities.
Our management is not familiar with the United States securities laws. Our management is generally unfamiliar with the requirements of the United States securities laws, our Chief Executive Officer and Chief Financial Officer, Brendan Macpherson, does not possess accounting expertise which could adversely impact our ability to comply with legal, regulatory, and financial reporting requirements under the U.S. securities laws. Our management may not be able to implement programs and policies in an effective and timely manner to adequately respond to such legal, regulatory and reporting requirements, including the establishment and maintenance of internal control over financial reporting. Any such deficiencies, weaknesses or lack of compliance could have a materially adverse effect on our ability to comply with the reporting requirements of the Exchange Act, which are necessary to maintain public company status, and could result in investigations by the Securities and Exchange Commission, and other regulatory authorities that could be costly, divert management's attention and disrupt our business. If we were to fail to fulfill those obligations, our ability to operate as a public company would be in jeopardy, in which event you could lose your entire investment in our Company. The Company utilized a third-party consultant to help with reporting in accordance with US GAAP and filing with SEC.
If a trading market in our common stock ever develops, the market price of our common stock can become volatile, leading to the possibility of its value being depressed at a time when you may want to sell your holdings. If a trading market in our common stock develops, the market price of our common stock could become volatile. Numerous factors, many of which are beyond our control, may cause the market price of our common stock to fluctuate significantly. These factors include:
| · | Investment bank Morgan Stanley forecasts a $1 trillion total addressable market |
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| · | Nearly half of all flights globally are short-haul routes, less than 500 miles, which presents a significant opportunity for electrically powered aircraft. |
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These airports can be utilized for flights by electrically powered to connect underserved areas, ultimately creating a more distributed air transportation network.
· | Between now and 2040, there will be an estimated global demand for almost 40,000 new passenger and cargo aircraft, 75 percent of which are smaller airliners targeting short-haul routes, according to Airbus. | |
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| · | Optimization of airframe configurations to |
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| · | In December 2019, the FAA (Federal Aviation Administration) issued new proposed rules for remote identification of |
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| · | Agility Prime was recently created by the U.S. Air Force to help accelerate the regulatory process for the integration of commercial advanced air mobility vehicles, like flying cars, into our |
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| · | In June 2020, the FAA in collaboration with NASA (National Aeronautics and Space Administration) and industry organizations published the Concept of |
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| · | The United Nations projects that by 2050, 68 percent of the |
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| · | Airlines for America (A4A), the industry trade organization representing the leading U.S. airlines, has committed to the recommendations of the International Civil Aviation Organization (ICAO), the United Nations body that sets standards and |
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| · | The Advisory Council for Aeronautics Research in |
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The Research Park at Florida Atlantic University
In August 2019, Xeriant was approved by the Florida Atlantic Research and Development Authority to become a member and tenant of the Research Park at Florida Atlantic University (FAU) in Boca Raton, Florida, which is part of the university and adjacent to the Boca Raton Airport. FAU is one of the top engineering schools in the state, and part of the National Science Foundation’s Industry/University Cooperative Research Center Program called the Center for Advanced Knowledge Enablement (CAKE). The 70-acre Research Park, home to many technology companies and research-based organizations, is the site of Xeriant’s main office. FAU recently opened a center for Artificial Intelligence and Connected Assured Autonomy through their College of Engineering and Computer Science, which is applicable to advanced aircraft systems. The Company is engaging with FAU’s academic team, both faculty and students, to assist in screening and validating various technologies and to work together in a series of joint research initiatives. The relationship with FAU gives Xeriant credibility, since few companies are selected for membership in its research park and may provide access to grant programs and financing opportunities. Universities continue to be an indispensable source for novel discoveries in science and technology, with an impressive history of innovations that changed the world. Research parks have become the intermediaries between these academic institutions and industry, a hybrid of two diverse cultures that fosters a dynamic innovation ecosystem of technology transfer, economic development and the generation of skilled labor. Faculty members often play a direct role in furthering the commercialization of technologies by launching new companies.
Intellectual Property
Xeriant owns a 64% interest in its subsidiary, American Aviation Technologies, LLC (AAT). AAT owns a patented VTOL drone/aircraft concept called Halo. All intellectual property rights to Halo, including patents and applications for patents, were acquired on October 2, 2018. A Halo utility patent was filed on September 28, 2018, which was a continuation of U.S. Patent Application Serial No. 12/157,180, filed June 5, 2008, which claimed the benefit of and priority to U.S. Patent Application Serial No. 60/941,965, filed June 5, 2007, with both prior applications fully incorporated in their entireties and for all purposes. The Company received a Notice of Allowance from the U.S. Patent and Trademark Office dated June 10, 2019 on the major claims in the patent application, which indicated the agency’s intent to issue a patent. Xeriant received an additional Notice of Allowance dated June 22, 2020 covering additional Halo claims. AAT received patent US 2020/0062385 A1 on February 27, 2020 and patent US 10,814,974 B2 on October 27, 2020.
Xeriant has filed trademark applications with the U.S. Patent and Trademark office for the following marks, including names, logos and slogans: Xeriant name, Xeriant logo, “Innovation Soaring,” “Evolution in Flight,” and “Evolution of Flight.” The Company is in the process of filing trademark applications for “Sustainable Aerospace” and “EcoFlite.”
Market Opportunity
Xeriant has identified emerging areas of technology with exceptional market opportunity, which is the basis for potential acquisitions, strategic partnerships or licensing arrangements. The Company has identified early-stage technology companies, as well as established companies that have been confined to a limited geographical area, have developed breakthrough, high-market-potential technologies, and that are past the concept/seed capital stage. Some companies are already generating revenue while others have a clear path to revenue. Many are acquisition targets or have the potential for a combination or roll-up. In some cases, their technology originated and was developed out of an academic environment. Most of these companies have dynamic management teams that would prefer to focus on their areas of expertise rather than the financial market or non-operational demands. As a strategic and financial partner, Xeriant could provide these companies with access to capital, liquidity through an exchange of equity, new market opportunities and synergistic contacts, and university relationships for research and grants, while maintaining their operational independence. Xeriant understands entrepreneurial spirit, passion, and vision are critical to success, and can provide an extension of the affiliated company’s management team, with strategic guidance, access to financial markets, and investor liquidity.
Xeriant entered a 50-50 joint venture with XTI Aircraft Company to complete the development of the TriFan 600, a hybrid-electric fixed-wing VTOL aircraft that uses three ducted fans for vertical lift. The TriFan 600 would be the fastest and longest-range eVTOL aircraft in the world, and the first commercial fixed-wing VTOL airplane. The TriFan 600 has a maximum cruise speed of 345 mph and a range of 1,380 miles with conventional takeoff and landing, and 750 miles when taking off and landing vertically, which is far superior to other leading eVTOL aircraft in development. In comparison, Lilium Jet, Joby Aviation’s S4, and the Archer Maker have maximum cruise speeds of 175 mph, 200 mph, and 200 mph respectively, with ranges of 150 miles, 150 miles, and 60 miles. The TriFan 600 can be configured with the standard six seats (5 passengers + pilot), nine seats for air taxi routes (8 passengers + pilot), or as an emergency medical aircraft. As a scalable platform, there is also a cargo variant called the TriFan 200 and a 12-15 seat model. XTI’s management team includes the former top executives of AgustaWestland North America, Cessna Aircraft, and AVX Aircraft who, combined, have developed and certified over 40 new aircraft designs over their careers. There are over 200 presales for the TriFan 600 representing over $1.3 billion, with $260 million in firm purchases.
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Target companies will have disruptive technologies with applications in aerospace or innovative aircraft concepts with improved capabilities, efficiency, performance, sustainability, and safety. Categories of technology include a broad range of disciplines impacting areas such as structural design, aerodynamics, propulsion systems, advanced materials, autonomy, artificial intelligence (AI), sensors, communications, and navigation. Target companies also should have significant upside potential, unique I/P, roll up or combination potential, have a quality team in place to execute their business plan, and need funding for execution or growth, etc.
An emerging segment of the aviation industry attracting significant investment is the development of autonomous and semi-autonomous vertical take-off and landing (VTOL) unmanned aerial vehicles (UAVs). The quintessence of contemporary aeronautical science and engineering, these mostly electric or hybrid-electric aircraft include small remotely controlled UAVs as well as larger passenger and cargo UAVs, which are targeting the short-haul, on-demand transport of passengers and freight, called urban aerial mobility (UAM). The feasibility of these more lightweight and efficient aircraft designs is made possible through advancements in composite materials, additive manufacturing (3D printing), miniaturization of electronics, computer processing speed, battery power and electromagnetic propulsion. The UAV has become a viable, low-cost alternative in many VTOL applications previously dominated by the helicopter, including aerial photography and videography. Because of UAVs’ explosive growth over the past few years and their anticipated ubiquity in the future, new regulations are being formulated to allow their safe integration into low altitude civil airspace. Stakeholders shaping this integration process include aircraft manufacturers, ridesharing companies, governmental regulatory agencies, and civil transportation authorities, all of whom are working toward establishing standards and overcoming the variety of issues involved with its implementation. Key technologies impacting the development and implementation of this VTOL aircraft segment for fully autonomous applications include high speed (5G) data transmission and artificial intelligence. Also drawing interest is the development of VTOL and hover capable rotorcraft that can accomplish many of the civilian and military transport functions of a helicopter, but are faster, quieter, less complex to operate, and safer on the ground. Helicopters have served this mission for over 80 years and have improved significantly with advanced flight control systems but remain extremely complicated to fly and have performance limitations based on their fundamental flight principles. Due to a condition called retreating blade stall, also known as dissymmetry of lift, helicopters have a maximum forward speed of approximately 250 miles per hour. Additionally, helicopters produce high noise levels, due primarily to rotor blade vortex interaction and vibration, and have high operating costs. Most modernization in vertical lift aircraft design over the past few decades has been directed toward the modification of existing platforms.
The UAV industry has experienced remarkable growth worldwide over the past decade, across the military, civilian governmental and commercial sectors. Industry forecasters view the booming UAV market as early-stage with significant potential, and as a result, expect the strong performance to extend well into the foreseeable future. A November 2018 market study by Teal Group Corporation, a leading U.S. aerospace and defense market analysis firm, predicts that UAVs will be the most dynamic growth sector of the global aerospace industry, more than tripling over the next decade. Critical factors driving the market’s continuing fast-paced surge include worldwide military adoption of UAVs, increased use of UAVs in commercial and civil government applications, ongoing high capital investments in UAV technologies, consolidation of UAV businesses through acquisitions and synergistic partnerships, and the changing regulatory environment for UAVs’ operation in manned airspace. The commercial sector is forecast to register the fastest compound annual growth rate (CAGR), outpacing both the military and civilian sectors; however, military spending will continue to be dominant, representing over 70 percent of all UAV industry revenue.
The U.S. is the world’s leader in the deployment and development of military UAVs, with some of the most sought-after systems in the world. A decade of extensive operational work with UAVs has given the U.S. military tremendous experience with the architecture, design, and deployment of UAV technology. Based on an assessment by Global Market Insights, the larger, higher value systems procured by the U.S. will drive the relative strength of the U.S. military market in the coming years. Military UAV manufacturing in the U.S. is led by General Atomics and Northrop Grumman with over 50 percent of the market. Spurred by new venture capital funding, UAV startups are continuing to enter the market while existing companies are consolidating, introducing new products and components, and shifting toward software and end-to end-solutions for niche markets to maintain market relevance. As UAVs become more widely deployed and accepted, regulatory agencies will need to begin identifying and tracking them as with other aircraft, ultimately bringing them into the air traffic networks. While there are 195 countries in the world, each at a different stage of UAV implementation, the UAV industry will likely be dominated by the largest economies, led by the U.S., China, Japan, Germany and the U.K. India will become the fastest growing commercial market for UAVs, having legalized their use in December 2018. According to Fortune Business Insights, the global unmanned aerial vehicle (UAV) market size was valued at $10.72 Bn in 2019 & is projected to reach $25.13 Bn by 2027, with a CAGR of 12.23%. Military activities represent the most significant market share, followed by the growth in the commercial sectors like the construction and agriculture industries, which require UAVs for mapping, inspections, surveying and maintenance.
Securities class action litigationUAVs were originally developed by the military to provide aerial surveillance without risk to personnel and evolved into highly capable aircraft for deployment in a variety of missions, including combat, replacing more expensive aircraft. The foundational technologies pioneered and implemented in military UAV programs, as well as smartphone technology and other advancements within the past decade, have enabled UAVs to become powerful tools and a cost effective, reliable, and safer option in an expanding list of business applications across almost every industry. Among the areas experiencing dramatic improvements in recent years are electric propulsion, batteries, navigation systems, computer processing, camera systems, stabilization equipment, imaging sensors and analytics software. Many companies, realizing the value of UAVs, are incorporating them into their business processes, through purchasing complete hardware and software packages or through third party service providers. The growing commercial use of UAVs has led to the FAA and other agencies to begin formulating standards and regulations which will enable these aircraft to be identified by air traffic control and integrated into the National Airspace System. The benefits of UAV technology for commercial use will only be optimized, however, when both technological capabilities and regulations allow for fully autonomous operation beyond visual line of sight. Smart UAVs are the next big evolution in UAV technology, particularly with the arrival of 5G’s high-speed transmission across mobile networks. High-speed, secure wireless network connectivity, such as 5G, is often instituted against companies following periodsrequired to safely expand UAV operations and unlock the true potential of volatilityUAVs in their stock price. Should this typecommercial applications. Latency, or transmission delay, is one of litigationthe technical issues which has limited fully autonomous deployment but can be instituted against us, it could resultalmost completely overcome through 5G.
An application whose implementation will be dependent upon the development of autonomous enabling technologies is the use of UAVs in substantial costs to us and divert our management'sdelivery services, or logistics. This application field is receiving significant attention and resources. Moreover, securities marketsinvestment worldwide, and progress is being made on several fronts. According to analysts at Research and Markets, the market for delivery UAV services is projected to reach $29.06 billion by 2027. UAVs have the potential to change last-mile delivery economics for smaller and lighter packages as they could replace many deliveries currently made by traditional delivery vehicles. Since UAVs are not constrained by road infrastructure and congestion, they can theoretically deliver packages faster than a car/truck from a close-by storage location. UAVs can fly over difficult terrain, water or rural areas with poor infrastructure in many cases or take a much shorter route. Improving the speed of package delivery with lower cost of operation and environmentally friendly technology using unmanned aerial transport systems is currently an area of intense interest among major e-commerce and mass market retailers like Amazon and Walmart, tech giants like IBM and Google, and logistics companies like DHL and UPS. Even some fast-food restaurant chains like Domino’s are looking at the potential for food delivery using UAVs. Leading aircraft manufacturers, including Boeing, Airbus and Bell, are designing unmanned vehicles and systems for package and cargo transport and delivery, with several prototypes in the process of field testing. Over the past few years, thousands of patents and applications for patents relating to UAV package delivery systems have been granted and filed.
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In addition to participating in the small UAV market, the Company is exploring larger, scaled-up aircraft, both manned or unmanned, and other potential applications in aviation. The prospective VTOL applications include short-haul on-demand or scheduled passenger or cargo transport, called urban aerial mobility (UAM). Urban aerial transport vehicles are designed for efficient, low-altitude, inter- and intra-city flights through electrically powered VTOL aircraft (eVTOL). UAM is receiving the attention of major aircraft manufacturers like Airbus, Bell and Boeing, and transportation services companies like Uber, with several prototypes already built. While the technology to develop, produce and fly these aircraft on a manned or semi-autonomous basis is available today, and a number of companies are well along in the process, like Lilium, Archer and Joby, the actual implementation will likely take many years due to lagging regulatory and infrastructure reforms. Most of the major issues related to regulations, airspace integration and infrastructure that will impact the rollout and penetration of these UAM systems are being addressed and seem to be moving in the right direction. Fully autonomous versions are dependent on real time data transmission, such as 5G technology, and would be even further out. Given the expected lag in federal regulations, integration policies and infrastructure, the Company believes that it has the opportunity to become one of the early players in the urban aerial mobility (UAM) market, which may from timeinclude air taxi service, personal air travel, air ambulance and cargo transportation. Anticipating the materialization of this new market, well-established aircraft manufacturers and entrepreneurial entries, are in the process of designing and developing short and medium range VTOL-capable aerial vehicles for civilian on-demand and scheduled point-to-point urban transport. These companies are vying for the billions of dollars being invested into the space and want to time experience significant pricebe part of this emerging aviation segment, which is considered to represent the next frontier in commercial aviation. The convergence of several key trends has enabled the viability of lightweight VTOL aircraft as an option in urban transit, if only on a limited or niche basis. Morgan Stanley predicts Urban Air Mobility could have a total addressable market of $1tn by 2040 and volume fluctuations$9tn by 2050
Another VTOL market that may be targeted is the more powerful long-range, heavy lift manned commercial or military transport aircraft, which is dominated by the helicopter. New aircraft designed for reasons unrelatedthis market would be built for payload capacity, higher altitude and endurance, and would likely be powered by engines used for conventional manned aircraft with similar performance outcomes. There have been very few successful aircraft designs in this general category, particularly designs that have matched the capabilities of heavy lift helicopters, however the U.S. military’s adoption of the V-22 Osprey and V-280 Valor, as well as the AW609’s anticipated entry in civilian transport service, have renewed the interest in powered lift aircraft configurations. According to research firms ReportBuyer and GlobalData, the global helicopter market, which includes both military and commercial aircraft, was valued at $31.5 billion in 2017 and is projected to increase to $40.4 billion by 2027.
Development Strategy
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Xeriant is an aerospace technology and advanced materials holding and operating company focused on Advanced Air Mobility (“AAM”) and the transition to green aerospace. The Company plans to source and acquire complementary and strategic interests in visionary companies developing, integrating, and commercializing critical breakthrough technologies which enhance performance, increase safety, and enable and support more efficient, autonomous, and sustainable flight operations, including electrically powered passenger and cargo transport aircraft capable of vertical takeoff and landing. To date, the Company has signed Letters of Intent with companies specializing in advanced aircraft concepts, artificial intelligence, satellite retrieval technology, and ultra-high efficiency airfoil technology. Some green technologies related to advanced materials and chemicals, have potential uses impacting multiple global industries beyond aerospace. The Company is pursuing immediate cash flow opportunities with both its fire protectant and nano-lubricant technologies and is in the process of testing them with national and international companies.
Xeriant is taking a comprehensive approach to the operating performancevarious operational challenges in AAM, understanding that the economic feasibility and widespread implementation of particular companies. These market fluctuationson-demand aerial mobility, the main purpose of which is to provide convenience and time savings through greater accessibility to aviation services, requires the establishment of a supporting ecosystem, including a distributed network of public access points. In addition to the almost 19,000 existing commercial and general aviation airports and helipads (vertipads), both public and private, Xeriant is considering locations such as parking garage roofs and vacant land near highways for potential VTOL sites. Xeriant is seeking to collaborate with leading companies in the aviation industry that have the relationships, facilities, logistics expertise, and capabilities to supply, maintain and support this emerging VTOL aviation segment.
Additionally, Xeriant is leveraging its 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 adversely affectprovide access to various grants through the price of our common stockSBIR (Small Business Innovation Research), STTR (Small Business Technology Transfer, NSF (National Science Foundation) and other interests in our Company atprograms, and if warranted, introductions into a time when you wantnumber of government agencies, such as DOD (Department of Defense) and DARPA (Defense Advanced Research Projects Agency). Xeriant is pursuing strategic alliances with companies that provide complementary technologies and access to sell your interest in us.new markets.
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CONSIDERATIONS RELATED TO OUR BUSINESS
The Company is in its development stage and has limited operating history.
The Company is a development-stage enterprise with a limited operating history with no sales, and operating losses since its inception. The Company will need to continue building its organization and team to competently evaluate and secure business opportunities for the development of sophisticated aerospace and other technologies, including new aircraft. As an early-stage business we will likely encounter unforeseen costs, expenses, competition and other problems to which such businesses are often subject. Our likelihood of success will depend on the problems, uncertainties, unexpected costs, difficulties, complications and delays frequently encountered in developing and expanding a new business and the competitive environment in which we plan to operate. If we fail to successfully address these risks, our business, financial condition and results of operations would be materially harmed.
The Company anticipates significant operating losses into the future and additional capital may be required.
Since the Company is still in the process of acquiring and developing technologies, including a new type of aircraft, there is no revenue and there will be significant operating losses into the foreseeable future. There is no assurance that the Company will be able to raise the capital that will be required to sustain operations and execute its business plan, which involves raising capital for acquisitions. Furthermore, any equity or debt financings, if available at all, may be on terms which are not favorable to the Company (and therefore its shareholders) and, in the case of a new equity offering by the Company, existing shareholders will be diluted unless they purchase their proportionate share of the equity offering. If adequate capital is not available on economically viable terms and conditions, the Company’s business, operating results and financial condition may be materially adversely affected.
There is no assurance that the Company or its affiliates will be able to accomplish the design and engineering needed to demonstrate that the technologies that are undertaken, including new aircraft in development, will perform or operate as planned.
Because of unanticipated technological hurdles or the inability to assemble a qualified team to address these challenges, the Company may not be able to meet the technology development and performance objectives that are needed to be competitive in the various targeted markets.
The development timeline for the development of certain technologies, including new aircraft, could expand.
Due to unexpected challenges, the length of time to develop certain technologies, including a new aircraft, may become expanded, causing cost overruns and potentially demanding the infusion of large amounts of capital and other financing, which may not be available. Because of the long timeline, there is also uncertainty regarding the uniqueness or advantages of the technologies at the time they are introduced into the market.
Some technologies are still being developed and specific market applications have not been finalized.
Because some of the anticipated technologies will be in an early stage of development, there is no certainty as to which market applications will be prioritized and targeted as well as the associated timelines and costs involved when the Company reaches that point of determination after a technology has been proven. There is no assurance that the required selling price of our technologies will be competitive.
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The Company will face significant industry competition.
Most of the targeted technologies will face significant competition from industry leaders who control most of the aerospace industry or from well-funded entrants in the marketplace. The Company will compete with hundreds of domestic and international aircraft companies, many well-capitalized, including some who are among the largest aerospace companies in the world, developing VTOL aircraft. The Company could face significant competition from companies who have developed or are developing alternative technologies that could render any acquired technologies, including the Halo aircraft, less competitive than planned. Many existing potential competitors are well-established, have or may have longer-standing relationships with customers and potential business partners, have or may have greater name recognition, and have or may have access to substantially greater financial, technical and marketing resources.
If we are unable to effectively manage our growth, our ability to implement our business strategy and our operating results will likely be materially adversely affected.
Implementation of our business plan will likely place a significant strain on our management who must develop administrative, operating and financial infrastructures. To manage our business and planned growth effectively, we must successfully develop, implement, maintain and enhance our financial and accounting systems and controls, identify, hire and integrate new personnel and manage expanded operations. Salary and benefits of additional personnel can be expected to place significant stress on our financial condition, and the availability of such qualified personnel may be limited. There is no assurance that we will be able to manage the operational requirements related to implementing our business strategy
The Company is dependent on key personnel.
The success of the Company depends on its ability to identify, hire, train and retain highly qualified, specialized and experienced management and technical personnel. In addition, as the Company enters new areas of aerospace technology, it will need to hire additional highly skilled personnel. Competition for personnel with the required knowledge, skill and experience may be significant, and the Company may not be able to attract, assimilate or retain such personnel. The inability to attract and retain the necessary managerial and technical personnel could have a material adverse effect on the business, results of operations and financial condition of the Company.
Operations could be adversely affected by interruptions from suppliers of components that are beyond the Company’s control.
Whenever possible, the Company intends to use tested and certified systems, components and parts developed and manufactured by third-party suppliers. The Company’s technology development could be adversely affected by interruptions in the supply of these components. If any of these third parties experience difficulties, it may have a direct negative impact on our development process.
Changes in the economy could have a detrimental impact on the Company.
Changes in the general economic climate could have a detrimental impact on the Company’s revenue. It is possible that recessionary pressures and other economic factors (such as declining incomes, future potential rising interest rates, higher unemployment and tax increases) may adversely affect the Company. A worsening economy such as we are currently experiencing due to the Covid-19 pandemic may have a material adverse effect on the Company’s financial results and on your investment.
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Our business, results of operations and financial condition may be adversely impacted by the recent COVID-19 pandemic.
The COVID-19 pandemic has negatively affected the U.S. and global economy, resulting in significant travel restrictions, including mandated closures and orders to “shelter-in-place,” and created significant disruption of supply chains and the financial markets. We are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business, including how it will impact our employees and customers. We are unable to predict the ultimate impact that it may have on our business, future results of operations, financial position, or cash flows.
The extent to which our operations may eventually be impacted by the COVID-19 pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including new information which may emerge concerning the severity of the outbreak and actions by government authorities to contain the outbreak or treat its impact. Even after the COVID-19 pandemic has subsided, we may experience materially adverse impacts to our business due to a number of potential economic conditions. Furthermore, the impacts of a potential worsening of global economic conditions and the continued disruptions to and volatility in the financial markets remain unknown. The impact of the COVID-19 pandemic may also exacerbate other risks discussed in these risk factors, any of which could have a material effect on us. This situation is changing rapidly, and additional impacts may arise that we are not aware of currently.
Success of the Company is dependent upon it keeping pace with the advances in technology.
The Company is positioned as a technology company. Some of its initiatives will be dependent on the technology of other companies. Systems and components may be impacted by rapid changes in technology, including the emergence of new industry standards and practices that could require the Company to make modifications to its platform. The performance of the Company will depend, in part, on its ability to continue to enhance its existing technology or develop new technology that addresses the increasingly sophisticated and varied needs of the market, license leading technologies and respond to technological advances and emerging industry standards and practices on a timely and cost-effective basis. The development of the Company’s proprietary technology entails significant technical as well as business risks. The Company may be unsuccessful in using new technologies effectively or adapting its systems or other proprietary technology to the requirements of emerging industry standards. If the Company is unable to adapt to these changes and demands, the results of operations and financial condition could be materially and adversely affected.
The Company could face liability or disruption from security breaches.
The Company’s technology and development process involves the storage of critical, secure and proprietary information. The Company’s communications and computer infrastructure is potentially vulnerable to both physical and electronic invasions, such as cyberattacks and security breaches. The Company may be required to expend significant capital and other resources to defend against and lessen or correct the adverse effects of these invasions. Any such invasion could result in significant damage to the Company. A person who is able to circumvent the security measures employed by the Company could capture proprietary information; alter or destroy the information of the Company; or cause interruptions of the operations of the Company.
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Misappropriation of the intellectual property and proprietary rights of the Company could impair the competitive position of the Company.
The success of the Company will depend to some extent upon its proprietary patented technology. The legal protections available to the Company can afford only limited protection, and these means of protecting the intellectual property of the Company may be inadequate. The Company relies and will continue to rely on patent, trademark, trade secret and copyright laws, confidentiality agreements, employment agreements, work for hire agreements, and technical measures to protect its intellectual property. The Company cannot assure that the steps taken by it will prevent misappropriation of its technology or that the agreements entered into for that purpose will be enforceable. Effective trademark, service mark, copyright and trade secret protection may not be available in every jurisdiction in which the Company’s products and services are made available online. The intellectual property of the Company may be subject to even greater risk in foreign jurisdictions, as the laws of many countries do not protect intellectual property to the same extent as the laws of the United States. As part of its confidentiality procedures, the Company generally will enter into agreements with its employees and consultants and limit access to its trade secrets and technology. The Company cannot assure or assume, however, that former employees will not seek to start or enhance other competing products or services to the detriment of the Company, its business, results of operations and financial condition. Nevertheless, management believes that the technical and creative skills of its personnel, continued development of its proprietary systems and technology, as well as brand name recognition and development are more essential in establishing and maintaining a competitive market position.
Despite efforts to protect its proprietary rights, unauthorized persons may attempt to copy aspects of its products or services or to obtain and use information that the Company regards as proprietary. Policing unauthorized use of its proprietary rights is difficult and requires constant attention. The Company may be required to spend significant resources to monitor and police its intellectual property rights. The Company may not be able to detect infringement and may lose its competitive position in the market before it is able to ascertain any such infringement. In addition, competitors may design around the Company’s proprietary technology or develop competing technologies.
Intellectual property litigation may be necessary in the future to enforce the intellectual property rights of the Company, to protect its trade secrets, to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement by the Company. Other companies, including competitors, may obtain patents or other proprietary rights that would prevent, limit or interfere with the ability of the Company to make, use or sell its products and services. Any such litigation by or against the Company, whether the claims are valid or not, could result in the Company incurring substantial costs and diversion of resources, including the attention of senior management. If the Company is unsuccessful in such legal proceedings, the Company could be subjected to significant damages; be required to license technology that is critical to the operations of the Company, if a license is available at a cost which the Company can pay; or be required to develop replacement technologies at substantial cost to the Company in money and time. Any of these results could materially and adversely affect the business, results of operations and financial condition of the Company.
The Company has broad discretion in the use of capital.
The Company has broad discretion with respect to the specific application of capital. There can be no assurance that determinations made by the Company relating to the specific allocation of capital will permit the Company to achieve its business objectives.
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Many of the regulations involving Advanced Air Mobility (AAM), including VTOL (Vertical Takeoff and Landing) aircraft and Unmanned Aerial Vehicles (UAV) are still being established.
The USDOT, FAA (Federal Aviation Administration) and other agencies at the federal, state and local levels are beginning to address some of the numerous certification, regulatory and legal challenges associated with AAM, including VTOL aircraft, UAV and unmanned aerial systems (UAS). A comprehensive set of standards and enforcement procedures for these new transport systems will need to be developed. New aircraft and their operators must undergo rigorous testing and certification, which may require new or modified airworthiness certification standards. These aircraft will also need to comply with existing regulations or be the subject of new regulations to cover their activities. Current regulations govern operating BVLOS (beyond visual line of sight), passenger transport, operating over people and public streets, privacy, transporting commercial cargo across state lines and instrument-based flight. The integration of UAS and UAM into the National Airspace System and air traffic management is a critical factor, requiring a remote identification process for these aircraft. The FAA’s Unmanned Aircraft System Integration Pilot Program (IPP) will provide certification necessary to operate UAVs for certain applications. It is uncertain how new or changed laws and regulations will affect the introduction of new aerial platforms into the marketplace. The time and costs involved in obtaining these certifications and regulatory compliance may adversely impact the development process.
There are demanding regulatory requirements involved in producing, testing and certifying a new aircraft.
Aircraft must go through a detailed design phase, prototype manufacturing and flight testing, to achieve FAA will be required. The process to obtain such certification is expensive and time consuming and has inherent engineering risks, which includes testing for structural strength and fatigue resistance under various conditions, flight tests to assess stability and handling, performance under various extremes controllability, and failure safety. Delays in FAA certification of aircraft or aircraft related technology that the Company develops will likely incur increased costs in attempting to correct any issues to obtain the necessary certification.
There is no assurance that there will be a liquid public market for our stock.
Our common stock trades on the OTCQB, which is not a qualified exchange. There can be no assurance that a regular and established market will be developed and maintained and there can also be no assurance as to the level of liquidity of any market for our common stock or the prices at which our stockholders may be able to sell their shares.
We will need to raise additional capital that may not be available on acceptable terms.
We will require substantial additional capital over the next several years in order to implement our business plan, especially as it relates to developing new aircraft. We expect capital outlays and operating expenditures to increase as we expand our product offerings and marketing activities. Our business or operations may change in a manner that would consume available funds more rapidly than anticipated, and substantial additional funding may be required to maintain operations, fund expansion, develop new or enhanced products or services, acquire complementary products, businesses or technologies or otherwise respond to competitive pressures and opportunities.
We will raise additional capital through a variety of sources, including the public equity markets, additional private equity financings, collaborative arrangements, and/or private debt financings. Additional capital may not be available on terms acceptable to us, if at all. If additional capital is raised through the issuance of equity securities, our stockholders will experience dilution, and such securities may have rights, preferences or privileges senior to those of the holders of our common stock. If we raise additional capital through the issuance of debt securities, the debt securities would have rights, preferences and privileges senior to holders of common stock, and the terms of that debt could impose restrictions on our operations.
We do not intend to pay dividends for the foreseeable future. We have never declared or paid any cash dividends on our common stock and do not intend to pay any cash dividends in the foreseeable future.
We currently anticipate that we will retain all of our future earnings, for use inif any, to finance the growth and development of our business and for general corporate purposes. Any determination to paydo not anticipate paying cash dividends on our common stock in the futureforeseeable future. Any payment of cash dividends will be at the discretion ofdepend upon our financial condition, capital requirements, earnings and other factors deemed relevant by our board of directors. Accordingly, investors must rely on sales of their common
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Our stock after price appreciation, which may never occur, as the only waybe subject to realize any future gains on their investments.certain risks associated with low-priced stocks.
Our common stock is considered “a penny stock” and,expected to continue to trade on the over-the-counter (OTC) market in the near future. The Company is a development-stage company with no present revenues, so the trading price of our common stock may remain below $5.00. So long as our common stock trades below $5.00 per share, the stock will be treated as a result, it“penny stock.” Broker-dealers who sell penny stocks to their established customers must deliver a disclosure schedule explaining the penny stock market and the risks associated with investing in penny stocks prior to any transaction. Additional restrictions apply to broker-dealers who sell penny stocks to persons other than established customers and accredited investors (generally defined as an investor with a net worth in excess of $1,000,000 or annual income exceeding $200,000 individually or $300,000 together with a spouse). For these types of transactions, the broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to the sale. The broker-dealer also must disclose the commissions payable to the broker-dealer, current bid and offer quotations for the penny stock and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market. Such information must be provided by the broker-dealer to the customer orally or in writing before or with the written confirmation of trade sent to the customer. Monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Broker-dealers may be difficultdiscouraged from dealing with our common stock if they have to tradebear these additional burdens, which could severely limit the market liquidity of the common stock and the ability of our stockholders to sell their shares.
Our stock price is likely to be volatile.
The market price for our common stock will be influenced by many factors and will be subject to significant fluctuations in response to variations in our operating results and other factors such as investor perceptions of the prospects for the aerospace industry, especially as it relates to Advanced Air Mobility (AAM), including VTOL (Vertical Takeoff and Landing) aircraft, UAV (Unmanned Aerial Vehicles, UAS (Unmanned Aerial Systems), as well as economic conditions, the financial markets, the regulatory environment, and/or changes in management.
There will be a significantsubstantial number of common shares eligible for future sale from the conversion of Series A Preferred shares.
There were 788,270 shares of our Series A Preferred Stock outstanding as of June 30, 2021. Each preferred share is convertible into 1,000 common stock. The SEC has adopted regulations that generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share, subject to specific exemptions. Since our common stock has beenshares. Once converted, these shares are eligible for quotation onresale under Rule 144. The sale, or availability for sale, for the OTC markets (such as the bulletin board),foregoing shares could adversely affect the market price of our common stock has been less than $5.00 per share. We expect the market price foror impair our common stock will remain less than $5.00 per share for the foreseeableability to raise capital through future and, therefore, may be a “penny stock” according to SEC rules. This designation requires any broker or dealer selling these securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules may restrict the ability of brokers or dealers to sell our common stock and may affect the ability of investors hereunder to sell their shares. In addition, because our stock is quoted on the OTC markets, investors may find it difficult to obtain accurate quotations of the stock and may experience a lack of buyers to purchase such stock or a lack of market makers to support the stock price.
As a former shell company, holders of restricted sharessales of our common stock cannot rely on Rule 144stock.
Litigation may adversely affect our business, financial condition, and results of operations.
From time to resell their shares untiltime in the conditionsnormal course of our business operations, we may become subject to litigation that may result in liability material to our financial statements as a whole or may negatively affect our operating results if changes to our business operations are required. The cost to defend such litigation may be significant and may require a diversion of our resources. There also may be adverse publicity associated with litigation that could negatively affect customer perception of our business, regardless of whether the ruleallegations are met. Prior to the consummation of the Exchange Agreement, we were considered a shell company. As a result,valid or whether we are subjectultimately found liable. Insurance may not be available at all or in sufficient amounts to cover any liabilities with respect to these or other matters. A judgment or other liability in excess of our insurance coverage for any claims could adversely affect our business and the provisionsresults of Rule 144(i) which limit reliance on Rule 144 by shareholders owning stock in a shell company (or a former shell company). Under current interpretations, unregistered shares issued after we first became a shell company cannotour operations.
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Our insurance coverage may be resold under Rule 144 until the following conditions are met:inadequate to cover all significant risk exposures.
Consequently, until the first anniversary of the filing of our Current Report on Form 8-K, filed November 18, 2013, reflecting that we ceased to be a shell company, holders of restricted shares of our common stock cannot rely on Rule 144 to sell such shares, and may do so then only if we have then filed all required Exchange Act reports during the preceding 12 months.Item 1B. Unresolved Staff Comments
N/A.
The Company currently subleases facilityCompany’s headquarters consists of 2,911 square feet of leased office space located in Santa Monica United States as its principle operational headquarters and executive offices on an as needed basis. Banjo & Matilda (Australia) Pty Ltd leases a 1,076 square foot retail store locatedthe Research Park at 76 William Street, Paddington, New South Wales, Australia. Banjo & Matilda leases these premises on a month to month basis. The monthly fixed rent for this space is approximately $3,471 per month. Management believes that the facilities are adequate for the Company's current needs and for the foreseeable future. In addition, management believes the terms of the leases are consistent with market standards and were arrived at through arm's-length negotiation.Florida Atlantic University, Innovation Centre 1, 3998 FAU Blvd., Suite 309 Boca Raton, FL 33431.
We are not a party to anyThere is no pending litigation against the Company and to our knowledge no such litigation is contemplated or threatened. To our knowledge, none of our directors, officers, 5% shareholders or affiliates are party to any legal proceedings that would have a material adverse effect on our business, financial condition, or operating results.
Item 4.4. Mine Safety Disclosures.
Not Applicable.
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Market Information
Our common stock is quoted on the OTCPink quotationOTC Markets under the symbol “BANJ.“XERI.”
Shares of our common stock have historically been thinly traded, and currently there is no active trading market for our common stock. Asas a result, our stock price as quoted by the OTCPinkOTC Markets may not reflect an actual or perceived value. The following table sets forth the approximate high and low bid prices for our common stock for the last two fiscal years and interim periods. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
Period |
| High Bid |
|
| Low Bid |
| ||
|
|
|
|
|
|
| ||
July 1, 2020 through September 30, 2020 |
| $ | 0.2535 |
|
| $ | 0.0355 |
|
October 1, 2020 through December 31, 2020 |
| $ | 0.2400 |
|
| $ | 0.0331 |
|
January 1, 2021 through March 31, 2021 |
| $ | 0.5700 |
|
| $ | 0.1251 |
|
April 1, 2021 through June 30, 2021 |
| $ | 0.3725 |
|
| $ | 0.1300 |
|
Period High Bid Low Bid July 1, 2016 through September 30, 2016 October 1, 2016 through December 31, 2016 $ 0.035 $ 0.0162 $ 0.035 $ 0.0216
Period |
| High Bid |
|
| Low Bid |
| ||
|
|
|
|
|
|
| ||
July 1, 2019 through September 30, 2019 |
| $ | 0.0610 |
|
| $ | 0.0038 |
|
October 1, 2019 through December 31, 2019 |
| $ | 0.0499 |
|
| $ | 0.0220 |
|
January 1, 2020 through March 31, 2020 |
| $ | 0.0370 |
|
| $ | 0.0150 |
|
April 1, 2020 through June 30, 2020 |
| $ | 0.0899 |
|
| $ | 0.0165 |
|
Our Transfer Agent
Period High Bid Low Bid July 1, 2015 through September 30, 2015 October 1, 2015 through December 31, 2015 January 1, 2016 through March 31, 2016 April 1, 2016 through June 30, 2016 $ 0.09 $ 0.02 $ 0.08 $ 0.02 $ 0.08 $ 0.02 $ 0.035 $ 0.02
Period High Bid Low Bid July 1, 2014 through September 30, 2014 October 1, 2014 through December 31, 2014 January 1, 2015 through March 31, 2015 April 1, 2015 through June 30, 2015 $ 0.37 $ 0.20 $ 0.35 $ 0.10 $ 0.12 $ 0.01 $ 0.20 $ 0.04
Our Transfer Agent
We have appointed Olde Monmouth Stock Transfer Company, with offices at 200 Memorial Parkway, Atlantic Highlands, New Jersey 07716, phone number 732-872-2727, asis the transfer agent for our shares of common stock. The transfer agent is responsible for all record-keeping and administrative functions in connection with our shares of common stock.
Holders
As of December 31, 2016,June 30, 2021, there arewere approximately 129219 holders of record of our common stock.
Dividends
We have not declared any cash dividends, nor do we intend to do so in the foreseeable future.
Penny Stock Regulations
The SEC has adopted regulations which generally define so-called “penny stocks” to be an equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. The Registrant's common stock is a “penny stock” and is subject to Rule 15g-9 under the Exchange Act, or the Penny Stock Rule. This rule imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers and “accredited investors” (generally, individuals with a net worth in excess of $1,000,000 or annual incomes exceeding $200,000, or $300,000 together with their spouses). For transactions covered by Rule 15g-9, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction prior to sale. As a result, this rule may affect the ability of broker-dealers to sell our securities and may affect the ability of purchasers to sell any of our securities in the secondary market, thus possibly making it more difficult for us to raise additional capital.
For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in penny stock, of a disclosure schedule required by the SEC relating to the penny stock market. Disclosure is also required to be made about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stock.
There can be no assurance that the Registrant's common stock will qualify for exemption from the Penny Stock Rule. Even if the Registrant's common stock were exempt from the Penny Stock Rule, the Registrant would remain subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of penny stock, if the SEC finds that such a restriction would be in the public interest.
Rule 144
The Registrant was considered a shell company. As a result, the Registrant is subject to the provisions of Rule 144(i) which limit reliance on Rule 144 by shareholders owning stock in a shell company (or a former shell company). Under current interpretations, unregistered shares issued after the Registrant first became a shell company cannot be resold under Rule 144 until the following conditions were met:
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Consequently, until the Company becomes current in its Exchange Act filings, holders of the Registrant's common stock cannot rely on Rule 144 to sell restricted shares of common stock, and may do so then only if we have then filed all required Exchange Act reports during the preceding 12 months.
Securities Authorized for Issuance under Equity Compensation Plans
The Registrant does not have any equity compensation plans and accordingly there are no shares authorized for issuance under an equity compensation plan.
Issuer Purchases of Our Equity Securities
In July 2014, the Company issued 55,200 shares of the Company stock for $13,800 or $0.25 per share to an individual investor.
In October 2014, the Company issued (i) 5,833,333 shares of the Company stock to the original shareholders of Banjo & Matilda Pty Ltd related to the merger and reorganization based on the original agreement, and (ii) 92,593 shares of common stock to an individual for compensation from Banjo Australia, valued at $15,339 or approximately $0.17 per share.
In November 2014, the Company issued 25,000 shares of common stock to an individual in exchange for interest expense. The shares were valued at $5,000 or $.25 per share.
During the quarter ended March 31, 2015, the Company converted $92,800 of convertible debt into 3,345,537 shares of common stock at prices from $0.02 to $0.0901 per share.
During the quarter ended March 31, 2015, the Company issued 400,000 shares of the Company stock for $60,000 or $0.15 per share for consulting services.
During the first and second quarter of 2015, the Company issued 21,039,970 shares of the Company stock for $450,799 or approximately $0.02 per share to five investors.
During the year ended June 30, 2016, the Company issued 500,000 shares of the Company’s common stock for settlement of an outstanding vendor balance amounting to USD $27,123.
The sales and issuances of the securities described above were made pursuant to the exemptions from registration contained in to Section 4(a)(2) of the Securities Act, Regulation D under the Securities Act and Regulation S under the Securities Act. Each purchaser represented that such purchaser’s intention to acquire the shares for investment only and not with a view toward distribution. We requested our stock transfer agent to affix appropriate legends to the stock certificate issued to each purchaser and the transfer agent affixed the appropriate legends. Each purchaser was given adequate access to sufficient information about us to make an informed investment decision. Except as described in this prospectus, none of the securities were sold through an underwriter and accordingly, there were no underwriting discounts or commissions involved.
Item 6.6. Selected Financial Data.
Not applicable because we are a smaller reporting company.
Item 7. 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.
Financial Results
The following discussion of the results of operations constitutes management's review of the factors that affected the financial and operating performance for the fiscal years ended June 30, 20162021 and 2015.2020. This discussion should be read in conjunction with the financial statements and notes thereto contained elsewhere in this report. The Company has a June 30 fiscal year end.
Executive summary
Xeriant is an aerospace technology and advanced materials holding and operating company focused on Advanced Air Mobility (“AAM”) and the transition to green aerospace. The Company plans to source and acquire complementary and strategic interests in visionary companies developing, integrating, and commercializing critical breakthrough technologies which enhance performance, increase safety, and enable and support more efficient, autonomous, and sustainable flight operations, including electrically powered passenger and cargo transport aircraft capable of vertical takeoff and landing. The Company is located at the Research Park at Florida Atlantic University in Boca Raton, Florida.
The Company was originally incorporated in Nevada on December 18, 2009 under the name Eastern World Solutions, Inc. The name changed to Banjo & Matilda, Inc. on September 24, 2013. Effective June 22, 2020 the Company changed its name from Banjo & Matilda, Inc. to Xeriant, Inc.
On April 16, 2019, the Company entered into a Share Exchange Agreement with American Aviation Technologies, LLC (“AAT”), an aircraft design and development company focused on the emerging segment of the aviation industry of autonomous and semi-autonomous vertical take-off and landing (VTOL) and unmanned aerial vehicles (UAVs).
On June 28, 2019, the Company spun out two wholly owned subsidiaries: Banjo & Matilda (USA), Inc. and Banjo & Matilda Australia Pty LTD.
On September 30, 2019, the acquisition of AAT closed, and AAT became a wholly owned subsidiary of the Company.. On June 22, 2020, the name was changed from Banjo & Matilda, Inc. to Xeriant, Inc.
On May 31, 2021, the Company entered into a Joint Venture Agreement with XTI Aircraft Company, to form a new company, called Eco-Aero, LLC, for 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.
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Recent Developments
Stock Sales
During the period of August 10, 2021 through August 24, 2021, the Company received $853,000 by selling 11,555,000 shares common stock, which includes 4,305,000 shares issued based on the exercise of warrants.
During the period of September 13, 2021 through September 29, 2021, the Company received $943,500 by selling 23,716,667 shares of common stock.
Convertible Notes Issued
On August 9, 2021, a 3-month, 6 percent interest convertible note was issued in the amount of $100,000.
On August 10, 2021, a 3-month, 6 percent interest convertible note was issued in the amount of $150,000.
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 in the above-mentioned action has not asserted any counterclaims to-date.
Fiscal Year 2021 Results of Operations Compared with Fiscal Year 2020
|
| For the years ended |
|
|
| |||||||||||
|
| June 30, 2021 |
|
| June 30, 2020 |
|
| $ |
|
| % |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Sales and marketing expense |
| $ | 1,047,120 |
|
| $ | 0 |
|
| $ | 1,047,120 |
|
|
| 100 | % |
General and administrative expenses |
|
| 368,296 |
|
|
| 94,013 |
|
|
| 274,283 |
|
|
| 292 | % |
Professional fees |
|
| 190,693 |
|
|
| 137,250 |
|
|
| 53,443 |
|
|
| 39 | % |
Related party consulting fees |
|
| 220,000 |
|
|
| 125,100 |
|
|
| 94,900 |
|
|
| 100 | % |
Research and development expense |
|
| 373,112 |
|
|
| 6,376 |
|
|
| 366,736 |
|
| 5752 | % | |
Total operating expenses |
|
| 2,199,221 |
|
|
| 362,739 |
|
|
| 1,836,482 |
|
| 6323 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
| (2,199,221 | ) |
|
| (362,739 | ) |
|
| (1,836,482 | ) |
|
| 506 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of debt discount |
|
| (303,912 | ) |
|
| (324,034 | ) |
|
| 20,122 |
|
|
| 100 | % |
Amortization of debt discount, related party |
|
| (5,000 | ) |
|
| (27,242 | ) |
|
| 22,242 |
|
|
| 200 | % |
Interest expense |
|
| (7,439 | ) |
|
| (9,722 | ) |
|
| 2,283 |
|
|
| -23 | % |
Interest expense, related parties |
|
| (76 | ) |
|
| (3,983 | ) |
|
| 3,907 |
|
|
| -98 | % |
Gain on forgiveness of accounts payable |
|
| 0 |
|
|
| 28,156 |
|
|
| (28,156 | ) |
|
| -100 | % |
Loss on settlement of debt |
|
| (186,954 | ) |
|
| 0 |
|
|
| (186,954 | ) |
|
| 100 | % |
Total other income (expense) |
|
| (503,381 | ) |
|
| (336,825 | ) |
|
| (166,556 | ) |
|
| 49 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (2,702,602 | ) |
| $ | (699,564 | ) |
| $ | (2,003,038 | ) |
|
| 286 | % |
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| Table of Contents |
Sales and marketing expenses
Total sales and marketing expenses were $1,047,120 for the year ended June 30, 2021 compared to $0 for the year ended June 30, 2020. During the year ended June 30, 2016, the transactions of2021, the Company were denominated in US Dollars. Allissued 20,000,000 shares valued at $1,000,000 to advisors that assist the transactions which were denominated in other currencies were converted to US$ on the date of settlement and the exchange gains and losses were recorded in the statement of operations. No change was recorded in the comprehensive income (loss). DuringCompany with raising capital. Additionally, during the year ended June 30, 2015, the accounts of2021 the Company had expenses associated with social media marketing campaigns, events and press releases, and videography expenses.
General and administrative expenses
Total general and administrative expenses were maintained, and its financial statements were expressed, in AUD. Such financial statements were translated into USD with the AUD as the functional currency. All assets and liabilities were translated at the exchange rate at the balance sheet date, stockholder's equity is translated at the historical rates and income statement items are translated at the average exchange rate$368,296 for the period. Transactionsyear ended June 30, 2021 compared to $94,013 for the year ended June 30, 2020. The increase of 292% was primarily due to an increase in foreign currencies are initially recorded atconsulting fees, advisory board fees, and an increase in travel, meetings and conferences to promote the functional currency rate ruling atcompany.
Professional Fees
Total professional fees were $190,693 for the dateyear ended June 30, 2021 compared to $137,250 for the year ended June 30, 2020, an increase of transaction. Any differences between39%. The increase was due to legal fees.
Related Party Consulting Fees
Total related party consulting fees were $220,000 for the initially recorded amountyear ended June 30, 2021 compared to $125,100 for the year ended June 30, 2020. The consulting fees for June 30, 2021 consisted of i) $98,000 to Ancient Investments, LLC, a company owned by Keith Duffy, CEO and Scott Duffy, Executive Director of Operations, (ii) $54,000 for AMP Web services, a company owned by Pablo Lavigna, CTO, $38,000 to Edward DeFeudis, Director, and (iii) $30,000 for Keystone Business Development Partners, a company owned by Brian Carey, CFO. The consulting fees for June 30, 2020 consisted of (i) $73,400 for Ancient Investments, LLC, a company owned by Keith Duffy, CEO and Scott Duffy, Executive Director of Operations, (ii) $44,700 for AMP Web services, a company owned by Pablo Lavigna, CTO and (iii) $7,000 paid for Keystone Business Development Partners, a company owned by Brian Carey, CFO.
Research and Development Expenses
Total research and development expenses were $373,112 for the settlement amount are recorded asyear ended June 30, 2021 compared to $6,376 for the year ended June 30, 2020. The research and development expenses of $373,112 paid during the year ended June 30, 2021 were in connection with our Eco-Aero joint venture for the development of an aircraft. The research and development expenses of $6,376 paid during the year ended June 30, 2020 was paid for work on the Vertical Takeoff and Landing (“VTOL”) Halo aircraft technology.
Other Income (Expenses)
Total other expenses consist of amortization of debt discount related to convertible notes, interest expense related to convertible notes, gain on forgiveness of accounts payable and a gain or loss on foreign currency transactionsettlement of debt. Total other income (expenses) was $503,381 for the year ended June 30, 2021 compared to $336,825 for the year ended June 30, 2020. The increase was primarily due to recording a loss on settlement of debt in the statementsamount of operations. The resulting translation adjustments are reported under other comprehensive income as a component of shareholders' equity. There were no significant fluctuations in the exchange rate186,954.
Net loss
Total net loss was $2,702,602 for the conversionyear ended June 30, 2021 compared to $699,564 for the year ended June 30, 2020. The increase of AUD286% was due to USD after the balance sheet date.sales and marketing expenses of $1,047,120, increased general and administrative expenses and a loss on settlement of debt.
Executive summary
The fiscal year 2016 represented a strategic transition period for the Company. While the Company started in 2009 as an e-commerce only brand, it embarked upon a strategic brand building wholesale distribution program in 2013. In 2015 the Company made the decision to exit this distribution channel due to the increasing issues brands like Banjo & Matilda were facing in working with retailers via wholesale. The Company experienced lower margins, carried higher risks and viewed an uncertain future due to the increasing difficulties occurring in the physical retail landscape. In 2016 the Company began to focus fully on its higher value, higher margin, lower risk direct-to-consumer e-commerce centric business model. By initiating this change, we believe that the Company is now much better positioned to build a sustainable, and significantly more valuable business. However, in the short term this revised strategy necessitates a reduction of sales revenue from the wholesale channel. Commensurately, the Company’s wholesale related overheads have been eliminated thereby substantially reducing total overheads. In the medium term, this sales decline should be reversed via growth from the direct to consumer e-commerce model. In 2017 the Company plans to grow and scale its new e-commerce centric business model. To do this the Company plans to raise capital to invest in marketing and customer acquisition, technology, people, product development and inventory.
Even though the Company incurred losses in wholesale during fiscal 2016, we considered this an investment in building a US e-commerce customer base. Although we have made the decision to forego unprofitable revenue in the short term in wholesale, the wholesale business we built was instrumental in positioning us as an e-commerce business & brand in the USA by exposing our brand to key retailers, customers and the press and to capitalize on the growth of digitally native, vertically integrated brands.
We believe that we have a growing brand awareness and a high value customer base, a pipeline of developed product, and 7 years of experience in product development, sourcing, e-commerce, and operations. We believe that we can efficiently deploy future capital injected to maximize e-commerce sales and build firm value.
In 2017 we expect to see further positive results of the migration to the new digital business model including significantly higher gross margins, lower overheads, increased sales and improved overall profitability.
Banjo & Matilda. A new, more relevant modern luxury brand
Over the past few years the apparel industry has begun to be disrupted by newer, more relevant e-commerce enabled vertical brands who can provide a similar quality product to traditional brands but at lower prices.
As the Company experienced the impact of the deteriorating physical retail market and the emergence of successful digitally native brands, the Company saw the opportunity to fully capitalize on a gap in the market where there is demand for luxury quality products, but at more accessible prices, increase even further than first identified in 2009 when the brand was born. To enable the Company to take full advantage of this opportunity it exited its wholesale business to enable it to solely focus on its e-commerce business model.
By selling directly to the consumer via its e-commerce platform the Company eliminated the unnecessary wholesale/retailer mark-up thereby enabling the Company to sell their luxury quality products at a fraction of what traditional luxury brands do. This creates a compelling value proposition for consumers and therefore ultimately drives higher sales demand and potential than the traditional pricing model.
By focusing primarily on targeting the underserved “Gen X” power spending consumer as well as the digitally native millennial emerging consumer, the Company’s customer unit economics including average order value, gross margins, and customer life time value are higher than fast fashion and non-premium brands. For an e-commerce business model these superior metrics are crucial in developing a profitable and valuable business model.
Other vital benefits of this model are that the Company can now instigate a much quicker product development and deployment cycle which generates higher sales. Releasing products weekly without restriction from the traditional “seasonal” sales model designed to meet the wholesale market needs where collections are only designed four times a year means that continuous fresh product drives continuous engagement and more opportunities to generate sales. The digital data rich customer relationship enables it to also better identify products which customers are more likely to purchase, and develop a deeper more customer centric relationship which the Company can act upon without restriction. The combination of creating a traditional luxury quality sensibilities, with a new digitally centric business model creates an unprecedented opportunity to create a highly valuable and sustainable brand and business.
2016 Financial Highlights
As a result of this shift to an e-commerce centric business, the Company decreased 2016 sales by 17% to $2,285,361 from $2,756,459 driven by the Company’s exit from its wholesale operations. Commensurately, overheads which were primarily related to the wholesale business decreased by 44%. Further, we reduced spending on corporate overhead by 20% and interest expense by 12%. Inventory vs sales ratio was reduced, therefore reducing future working capital requirements by increasing inventory turnover.
E-commerce
Online sales decreased 8% as a result of discounting excess wholesale stock, reduced inventory of key lines and a decrease in overall marketing resources and spend.
Retail “Guide Store”
Store “Guide Store” sales decreased 13% as a result of reduced available inventory. We maintain our store in Paddington Australia because of the higher margin retail sales and we continue to use the resources to manage Australian customer support for online sales, and where possible local shipping & returns to/from Australian based customers, which comprises a meaningful portion of overall revenue. We also use this store as a customer touch point and to test customer feedback to new products which is a useful input into our design team. We may open more “Guide Store” in the future once we are appropriately capitalized.
Wholesale
Wholesale sales decreased 22% as a result of exiting the wholesale business as described above.
Gross Margins
During the 2016 fiscal year, gross margins decreased 2% from 35% to 33%. as we cleared aged inventory and closed our wholesale accounts and orders. With the withdrawal from the wholesale business channel, we have seen margins improve significantly. In addition, we have implemented other opportunities to improve margins:
| ||
|
Expenses
During the 2016 fiscal year, total operating expenses decreased 40% from $2,636,568 to $1,576,872 which includes one-time expenses, finance costs, public company, depreciation and amortization: The key reasons for this decrease was:
| ||
|
Extraordinary Items
During the three months to June 2016, as part of the Company’s exit from its wholesale operations, we wrote down a net value of $198,769 of Accounts Receivables.
EBITDA & Net Income
Removing the impact of extraordinary expense adjusted Net Income was $917,208 and EBITDA was $615,288.
Liquidity and Capital Resources
As of June 30, 2016,2021, we had a cash balance of $11,056$962,540 and a working capital deficit of $2,241,374.$677,257. Our net loss of $1,115,977$2,702,602 in the year ended June 30, 20162021 was mostly funded by proceeds raised from debt financings. We will need to raise working capital of between $2 million to $3 million (or refinance existing short-term debt to long-term debt) to fund operations. The Company has entered into an equity line funding agreement with Spider Investments, LLC to sell up to $1,500,000 of our common stock, subject to certain terms and conditions some of which are out of our control, including the (i) filing and obtaining effectiveness of a registration statement registering the issuance of our shares of common stock under the Act to be issued pursuant to the equity line and (ii) certain volume and other trading conditions of our common stock. We plan to file the registration statement within 30 days from the date hereof and to obtain effectiveness thereof as soon as practicable. Future equity financings may be dilutive to our stockholders. Alternative forms of future financings may include preferences or rights superior to our common stock. Debt financings may involve a pledge of assets and will rank senior to our common stock. We have historically financed our operations through best-efforts private equity and debt financings. We do not have any credit or equity facilities available with financial institutions, stockholders or third partythird-party investors, and will continue to rely on best efforts financings. The failure to raise sufficient capital couldwill likely cause us to cease operations.
During the twelve months ended June 30, 2016,fiscal year 2021, our operating activities provided $230,245used $1,012,233 of net cash compared to using $1,193,455$349,586 of net cash flow in our operating activities for theduring fiscal year ended June 30, 2015.2020. This difference primarily resulted from our larger investment in inventory, including deposits for purchases in 2015, as well as anthe increase in trade payables during 2016.of operations.
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Commitments for Capital Expenditures
We do notTo date, our operations have substantial commitments for capital expenditures. All of our products are manufactured by third parties, enabling us to scale up operations without acquiring substantial production equipment. Although we will need to increase our design capabilities and augment our sales and administrative staff as we grow, the rate of growthbeen funded primarily through private investors. Some of these expenses should be less thaninvestors have verbally committed additional funding for the rateCompany, as needed. We have had a number of growthdiscussions 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. We are in the process of our revenue. Further, we anticipate that as we expand our sales, the interest rates, fees and other expenses we payissuing an offering document to obtain credit, should be lower than those we incur presently. Of course, any substantial growth in our revenues will require additional equity which, if available, will dilute the interests of our current shareholders. We do anticipate a slight increasefunding for certain acquisitions that are in the rate of growth of our operating expenses this year due to, among other factors, the fact that our historical financial statements do not include the expenses associated with being a public company.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
Basis of Presentation
The consolidated financial statements, which include the accounts of the Company and American Aviation Technologies, LLC, its subsidiary, and Eco-Aero, LLC, its joint venture, and 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 subsidiary, 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.
Principles of Consolidation
The consolidated financial statements include the accounts of Xeriant, Inc., and American Aviation Technologies, LLC, and Eco-Aero, LLC. All significant intercompany balances and transactions have been eliminated.
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 period covered byreporting period. The most significant assumptions and estimates relate to the financial statements.valuation of beneficial conversion features and warrants associated with convertible debt. Actual results could differ from these estimates. Significant estimates include collectability
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.
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Deferred Taxes
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.
Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse and are considered immaterial. As of June 30, 2021 there are no deferred tax assets.
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.
Accounts Receivable and Allowance for Doubtful Accounts
The Company monitors outstanding receivables based on factors surrounding the credit risk of specific customers, historical trends, and other information. The allowance for doubtful accounts is estimated based on an assessment of the Company's ability to collect on customer accounts receivable. There is judgment involved with estimating the allowance for doubtful accounts and if the financial condition of the Company's customers were to deteriorate, resulting in their inability to make the required payments, the Company may be required to record additional allowances or charges against revenues. The Company writes-off accounts receivable valuationagainst the allowance when it determines a balance is uncollectible and no longer actively pursues its collection. The allowance for doubtful accounts is created by forming a credit balance which is deducted from the total receivables balance in the balance sheet. As of inventory, sales returnJune 30, 2021 and recoverability of long-term assets.2020 there are no accounts receivable.
Revenue Recognition
Revenue is recognizedincludes product sales. The Company recognizes revenue from product sales in accordance with Topic 606 "Revenue Recognition in Financial Statements" which considers revenue realized or realizable and earned when persuasive evidenceall of an arrangement exists, delivery has occurred, the feefollowing criteria are met:
(i) | persuasive evidence of an arrangement exists, | |
(ii) | the services have been rendered and all required milestones achieved, | |
(iii) | the sales price is fixed or determinable, and | |
(iv) | Collectability is reasonably assured. |
For the years ended June 30, 2021 and collectability is probable. Revenue generally is recognized net of allowances for returns and any taxes collected from customers to be remitted to governmental authorities.2020, the Company had no revenue.
Cost of SalesConvertible Debentures
CostIf the conversion features of sales consists primarilyconventional convertible debt provide for a rate of inventoryconversion 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, 2021, the Company recorded a BCF in the amount of $171,957.
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Fair Value of Financial Instruments
Accounting Standards Codification subtopic 825-10, Financial Instruments ("ASC 825-10") requires disclosure of the fair value of certain financial instruments. The carrying value of cash, 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 Accounting Standards Codification subtopic 820-10, Fair Value Measurements and Disclosures ("ASC 820-10") and Accounting Standards Codification subtopic 825-10, Financial Instruments ("ASC 825-10"), which permits entities to choose to measure many financial instruments and certain other items at fair value.
Research and Development Expenses
Expenditures for research and development are expensed as incurred. The Company incurred research and development expenses of $311,112 and $6,376 for the years ended June 30, 2021 and 2020, respectively.
Advertising, Marketing and Public Relations
The Company expenses advertising and marketing costs as they are incurred. The Company recorded advertising expenses in the amount of $1,047,120 and $1,211 for the years ended June 30, 2021 and 2020, respectively.
Offering Costs
Costs incurred in connection with raising capital by the issuance of common stock are recorded as contra equity and deducted from the capital raised. There were no offering costs for the years ended June 30, 2021 and 2020, respectively.
Income Taxes
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely 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.
The Company has adopted FASB ASC 740-10, Accounting for Income Taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually from differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
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Recent Accounting Pronouncements
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, issued as a new Topic, ASC Topic 606. The new revenue recognition standard supersedes all existing revenue recognition guidance. Under this ASU, an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2015-14, issued in August 2015, deferred the effective date of ASU 2014-09 to the first quarter of 2018, with early adoption permitted in the first quarter of 2017.
In February 2016, FASB issued ASC 842 that requires lessees to recognize lease assets and corresponding lease liabilities on the balance sheet for all leases with terms of more than 12 months. The update, which supersedes existing lease guidance, will continue to classify leases as either finance or operating, with the classification determining the pattern of expense recognition in the income statement.
The ASU will be effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted, and is applicable on a modified retrospective basis with various optional practical expedients. The Company has assessed the impact of this standard. The Company entered into a new lease agreement commencing on November 1, 2019 and implemented this guidance on November 1, 2019.
In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This update addresses a diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period.
On June 20, 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 is intended to reduce cost and complexity and to improve financial reporting for share-based payments to nonemployees (for example, service providers, external legal counsel, suppliers, etc.). Under the new standard, companies will no longer be required to value non-employee awards differently from employee awards. Meaning that companies will value all equity classified awards at their grant-date under ASC 718 and forgo revaluing the award after this date. The Company adopted ASU 2018-07 on August 6, 2018. The adoption of this standard did not have a material impact on the financial statements.
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the consolidated financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
| 25 |
| Table of Contents |
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 and 2020
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| F-1 |
| Table of Contents |
Report of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of Xeriant, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Xeriant, Inc. (the "Company") as of June 30, 2021 and 2020, the related statements of operations, stockholders’ equity (deficit), and cash flows for the years ended June 30, 2021 and 2020, and the related notes (collectively referred to as the "financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2021 and 2020, and the results of its operations and its cash flows for the years ended June 30, 2021 and 2020, in conformity with accounting principles generally accepted in the United States.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 11 to the consolidated financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as warehousing costsevaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Creation of Variable Interest Entity
As described in Note 3 to the consolidated financial statements, management applied FASB Topic 810, Consolidation (“ASC 810”) to recognize if a Joint Venture (“JV”) classifies as a Variable Interest Entity (“VIE”). Management recognizes a VIE when the Company has a controlling financial interest in the VIE and, thus, is the VIE’s primary beneficiary. The Company’s assessment includes determining the characteristics of the reporting entity’s variable interest(s) and other involvements (including involvement of related parties and de facto agents), if any, in the costVIE, as well as the involvement of warehouse labor)other variable interest holders. Additionally, the assessment, considers the VIE’s purpose and design, including the risks that the VIE was designed to create and pass through to its variable interest holders.
The principal considerations for our determination that performing procedures over determination if a VIE relationship exits is a critical audit matter as there are more significant risks associated with no recognition of. This in turn led to significant effort in performing our audit procedures which were designed to evaluate whether the beneficiary has the power, through voting rights or similar right, to direct the activities of an entity that most significantly impact the entity’s economic performance, the obligation to absorb the expected losses of the entity and the right to receive the expected residual returns of the entity were appropriately considered by management under ASC 810.
Our audit procedures included, among others, determining the activities that most significantly affect the VIE’s economic performance and the Company retaining the power to most affect those activities, whether the Company’s economic interest, including its obligation to absorb losses or receive benefits, “is disproportionately greater than its power to direct the activities of the VIE that significantly influence its economic performance and if the JV has sufficient equity to operate without financial support from the Company.
/s/ BF Borgers CPA PC
BF Borgers CPA PC
Served as Auditor since 2019
Lakewood, CO
October 15, 2021
| F-2 |
| Table of Contents |
CONSOLIDATED BALANCE SHEETS | ||||||||
|
|
|
|
| ||||
|
| As of June 30, 2021 |
|
| As of June 30, 2020 |
| ||
Assets |
|
|
|
|
|
| ||
Current assets |
|
|
|
|
|
| ||
Cash |
| $ | 962,540 |
|
| $ | 38,893 |
|
Deposits |
|
| 12,546 |
|
|
| - |
|
Prepaids |
|
| 1,234 |
|
|
| 13,893 |
|
Total current assets |
|
| 976,320 |
|
|
| 52,786 |
|
|
|
|
|
|
|
|
|
|
Operating lease right-of-use asset |
|
| 169,209 |
|
|
| 206,111 |
|
Total assets |
| $ | 1,145,529 |
|
| $ | 258,897 |
|
|
|
|
|
|
|
|
|
|
Liabilities & stockholders' deficit |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
| $ | 73,224 |
|
| $ | 27,621 |
|
Accrued liabilities, related party |
|
| 25,000 |
|
|
| 9,000 |
|
Convertible notes payable, net of discount |
|
| 158,196 |
|
|
| 32,734 |
|
Lease liability, current |
|
| 42,643 |
|
|
| 36,963 |
|
Total current liabilities |
|
| 299,063 |
|
|
| 106,318 |
|
|
|
|
|
|
|
|
|
|
Lease liability, long-term |
|
| 141,160 |
|
|
| 183,803 |
|
Total liabilities |
|
| 440,223 |
|
|
| 290,121 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 9) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' deficit |
|
|
|
|
|
|
|
|
Series A Preferred stock, $0.00001 par value; 100,000,000 authorized; 3,500,000 designated; 788,270 and 3,113,637 shares issued and outstanding at June 30, 2021 and 2020, respectively |
|
| 8 |
|
|
| 31 |
|
Series B Preferred stock, $0.00001 par value; 100,000,000 authorized; 1,000,000 designated; 1,000,000 and 0 shares issued and outstanding at June 30, 2021 and 2020, respectively |
|
| 10 |
|
|
| - |
|
Common stock, $0.00001 par value; 5,000,000,000 shares authorized; 292,815,960 and 69,584,149 shares issued and outstanding at June 30, 2021 and 2020, respectively |
|
| 2,925 |
|
|
| 696 |
|
Common stock to be issued |
|
| 51,090 |
|
|
| 372,397 |
|
Additional paid in capital |
|
| 4,138,194 |
|
|
| 379,971 |
|
Accumulated deficit |
|
| (3,270,235 | ) |
|
| (784,319 | ) |
Controlling interest |
|
| 921,992 |
|
|
| (31,224 | ) |
Non-controlling interest |
|
| (216,686 | ) |
|
| - |
|
Total stockholders' deficit |
|
| 705,306 |
|
|
| (31,224 | ) |
Total liabilities and stockholders' deficit |
| $ | 1,145,529 |
|
| $ | 258,897 |
|
The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
| Table of Contents |
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
| ||||||||
|
| For the years ended |
| |||||
|
| June 30, 2021 |
|
| June 30, 2020 |
| ||
|
|
|
|
|
|
| ||
Operating expenses: |
|
|
|
|
|
| ||
Sales and marketing expense |
| $ | 1,047,120 |
|
| $ | - |
|
General and administrative expenses |
|
| 368,296 |
|
|
| 94,013 |
|
Professional fees |
|
| 190,693 |
|
|
| 137,250 |
|
Related party consulting fees |
|
| 220,000 |
|
|
| 125,100 |
|
Research and development expense |
|
| 373,112 |
|
|
| 6,376 |
|
Total operating expenses |
|
| 2,199,221 |
|
|
| 362,739 |
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
| (2,199,221 | ) |
|
| (362,739 | ) |
|
|
|
|
|
|
|
|
|
Other expenses: |
|
|
|
|
|
|
|
|
Amortization of debt discount |
|
| (303,912 | ) |
|
| (324,034 | ) |
Amortization of debt discount, related party |
|
| (5,000 | ) |
|
| (27,242 | ) |
Interest expense |
|
| (7,439 | ) |
|
| (9,722 | ) |
Interest expense, related party |
|
| (76 | ) |
|
| (3,983 | ) |
Gain on forgiveness of accounts payable |
|
| - |
|
|
| 28,156 |
|
Loss on settlement of debt |
|
| (186,954 | ) |
|
| - |
|
Total other (expense) |
|
| (503,381 | ) |
|
| (336,825 | ) |
|
|
|
|
|
|
|
|
|
Net loss attributable: |
|
|
|
|
|
|
|
|
Non-controlling interest |
|
| (216,686 | ) |
|
| - |
|
Common stockholders |
|
| (2,485,916 | ) |
|
| - |
|
Net loss |
| $ | (2,702,602 | ) |
| $ | (699,564 | ) |
|
|
|
|
|
|
|
|
|
Net loss per common share - basic and diluted |
| $ | (0.01 | ) |
| $ | (0.01 | ) |
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding - basic and diluted |
|
| 225,497,197 |
|
|
| 52,426,414 |
|
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
| Table of Contents |
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT | ||||||||||||||||||||||||||||||||||||||||||||
FOR THE YEARS ENDED JUNE 30, 2021 AND 2020 |
|
| Series A Preferred Stock |
|
| Series B Preferred Stock |
|
| Common Stock |
|
| Additional Paid in |
|
| Common stock to |
|
| Accumulated |
|
| Non- Controlling |
|
|
| |||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| be issued |
|
| Deficit |
|
| Interest |
|
| Total |
| |||||||||||
Balance July 1, 2019 |
|
| - |
|
| $ | - |
|
|
| - |
|
| $ | - |
|
|
| - |
|
| $ | - |
|
| $ | 50,907 |
|
| $ | - |
|
| $ | (84,755 | ) |
| $ | - |
|
|
| (33,848 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of reverse merger |
|
| 3,113,637 |
|
|
| 31 |
|
|
| - |
|
|
| - |
|
|
| 69,584,149 |
|
|
| 696 |
|
|
| (50,629 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (49,902 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of beneficial conversion feature associated with convertible debt |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 379,693 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 379,693 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes and accrued interest converted into common stock |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes and accrued interest, related party converted into common stock |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 372,397 |
|
|
| - |
|
|
| - |
|
|
| 372,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
| (699,564 | ) |
|
| - |
|
|
| (699,564 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30, 2020 |
|
| 3,113,637 |
|
| $ | 31 |
|
|
| - |
|
| $ | - |
|
|
| 69,584,149 |
|
| $ | 696 |
|
| $ | 379,971 |
|
| $ | 372,397 |
|
| $ | (784,319 | ) |
| $ | - |
|
| $ | (31,224 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of common stock |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 16,308,334 |
|
|
| 163 |
|
|
| 1,599,837 |
|
|
| 48,000 |
|
|
| - |
|
|
| - |
|
|
| 1,648,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of convertible notes and accrued interest |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 25,168,183 |
|
|
| 251 |
|
|
| 183,905 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 184,156 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of convertible notes and accrued interest |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 3,090 |
|
|
| - |
|
|
| - |
|
|
| 3,090 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of Series A Preferred to Common Stock |
|
| (44,367 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 44,366,919 |
|
|
| 443 |
|
|
| (443 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancellation of Series A Preferred shares issued in AAT merger |
|
| (2,240,000 | ) |
|
| (22 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 22 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancellation of Series A Preferred shares issued for compensation in prior year |
|
| (41,000 | ) |
|
| (1 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued for services |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 24,540,909 |
|
|
| 244 |
|
|
| 1,275,459 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,275,703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of warrants with convertible notes |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 117,893 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 117,893 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of warrants for advisory board services |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 38,332 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 38,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of beneficial conversion feature associated with convertible debt |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 171,957 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 171,957 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares reclassed from common stock to be issued |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 112,847,466 |
|
|
| 1,128 |
|
|
| 371,270 |
|
|
| (372,397 | ) |
|
| - |
|
|
| - |
|
|
| 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Series B Preferred Stock in connection with CEO's Employment Agreement |
|
| - |
|
|
| - |
|
|
| 1,000,000 |
|
|
| 10 |
|
|
| - |
|
|
| - |
|
|
| (10 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
| (2,485,916 | ) |
|
| (216,686 | ) |
|
| (2,702,602 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30, 2021 |
|
| 788,270 |
|
| $ | 8 |
|
|
| 1,000,000 |
|
| $ | 10 |
|
|
| 292,815,960 |
|
| $ | 2,925 |
|
| $ | 4,138,194 |
|
| $ | 51,090 |
|
| $ | (3,270,235 | ) |
| $ | (216,686 | ) |
| $ | 705,306 |
|
The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
| Table of Contents |
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
|
|
|
|
| ||||
|
| For the years ended |
| |||||
|
| June 30, 2021 |
|
| June 30, 2020 |
| ||
|
|
|
|
|
|
| ||
Cash Flows from Operating Activities |
|
|
|
|
|
| ||
Net Loss |
| $ | (2,702,602 | ) |
| $ | (699,564 | ) |
Adjustments to reconcile net loss to net cash used by operating activities: |
|
|
|
|
|
|
|
|
Stock compensation |
|
| 1,275,703 |
|
|
| - |
|
Warrants issued for services |
|
| 38,332 |
|
|
| - |
|
Amortization of debt discount |
|
| 303,912 |
|
|
| 324,034 |
|
Amortization of debt discount, related party |
|
| 5,000 |
|
|
| 27,242 |
|
Loss on settlement of debt |
|
| 186,954 |
|
|
| - |
|
Gain on forgiveness of accounts payable |
|
| - |
|
|
| (28,156 | ) |
Operating lease right of use asset |
|
| (62 | ) |
|
| 14,654 |
|
Changes in operating assets & liabilities |
|
|
|
|
|
| - |
|
Deposits |
|
| (12,546 | ) |
|
| (13,893 | ) |
Prepaid expenses |
|
| 12,659 |
|
|
| - |
|
Accounts payable and accrued expenses |
|
| (124,553 | ) |
|
| 4,892 |
|
Accrued expenses, related parties |
|
| - |
|
|
| 21,205 |
|
Net cash used by operating activities |
|
| (1,012,203 | ) |
|
| (349,586 | ) |
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
Sale of common stock |
|
| 1,648,000 |
|
|
| - |
|
Proceeds from convertible notes payable |
|
| 287,850 |
|
|
| 352,450 |
|
Proceeds from convertible notes payable, related party |
|
| - |
|
|
| 33,000 |
|
Net cash provided by financing activities |
|
| 1,935,850 |
|
|
| 385,450 |
|
|
|
|
|
|
|
|
|
|
Increase in Cash |
|
| 923,647 |
|
|
| 35,864 |
|
|
|
|
|
|
|
|
|
|
Cash at beginning of period |
|
| 38,893 |
|
|
| 3,029 |
|
|
|
|
|
|
|
|
|
|
Cash at end of period |
| $ | 962,540 |
|
| $ | 38,893 |
|
|
|
|
|
|
|
|
|
|
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 |
| $ | 187,246 |
|
| $ | 372,397 |
|
Warrants issued with convertible notes payable |
| $ | 117,893 |
|
| $ | - |
|
Beneficial conversion feature arising from convertible notes payable |
| $ | 171,957 |
|
| $ | 397,693 |
|
The accompanying notes are an integral part of these consolidated financial statements.
| F-6 |
| Table of Contents |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND NATURE OF BUSINESS
Xeriant, Inc. (“Xeriant” or the “Company”) is an aerospace company dedicated to the emerging aviation market called Advanced Air Mobility (AAM), shipping, importation dutiesthe transition to eco-friendly, on demand flight, making air transportation more accessible and charges, third party royalties,a greater part of our daily lives. Xeriant is focused on the acquisition, development, and product samples.proliferation of next generation hybrid-electric and fully electric aircraft with vertical takeoff and landing (eVTOL) capabilities, performance enhancing aerospace technologies and advanced materials, as well as critical support infrastructure. Xeriant is located at the Research Park at Florida Atlantic University in Boca Raton, Florida adjacent to the Boca Raton Airport, and trades on OTC Markets under the stock symbol, XERI.
The Company was incorporated in Nevada on December 18, 2009.
On April 16, 2019, the Company entered into a Share Exchange Agreement with American Aviation Technologies, LLC (“AAT”), an aircraft design and development company focused on the emerging segment of the aviation industry of autonomous and semi-autonomous vertical take-off and landing (VTOL) unmanned aerial vehicles (UAVs).
On September 30, 2019, the acquisition of AAT closed, and AAT became a wholly owned subsidiary of the Company.
On June 22, 2020, the name of the Company was changed to Xeriant, Inc. in the State of Nevada and subsequently approved by FINRA effective July 30, 2020 for the name and symbol change (XERI).
On May 27, 2021, the Company entered into a Joint Venture Agreement with XTI Aircraft Company, to form a new company, called Eco-Aero, LLC, for 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.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
InventoryBasis of Presentation
InventoriesThe consolidated financial statements, which include the accounts of the Company, American Aviation Technologies, LLC, and Eco-Aero, LLC, its subsidiaries, are valued atprepared in conformity with generally accepted accounting principles in the lowerUnited States of cost (determined on a weighted average basis) or market. Management comparesAmerica (U.S. GAAP). All significant intercompany balances and transactions have been eliminated. The consolidated financial statements, which include the costaccounts of inventoriesthe 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 market valueUnited States of America (“GAAP”) and allowancepresented in US dollars. The fiscal year end is made to write down inventories to market value, if lower.June 30.
Principles of Consolidation
The consolidated financial statements include the accounts of Xeriant, Inc., American Aviation Technologies, LLC, and Eco-Aero, LLC. All significant intercompany balances and transactions have been eliminated.
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.
| F-7 |
| Table of Contents |
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
Deferred Taxes
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.
Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse and are considered immaterial. As of June 30, 2021 there are no deferred tax assets.
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.
Accounts Receivable and Allowance for Doubtful Accounts
The Company maintains reservesmonitors outstanding receivables based on factors surrounding the credit risk of specific customers, historical trends, and other information. The allowance for potential credit lossesdoubtful accounts is estimated based on an assessment of the Company's ability to collect on customer accounts receivable. Management reviewsThere is judgment involved with estimating the allowance for doubtful accounts and if the financial condition of the Company's customers were to deteriorate, resulting in their inability to make the required payments, the Company may be required to record additional allowances or charges against revenues. The Company writes-off accounts receivable against the allowance when it determines a balance is uncollectible and analyzes historical bad debts, customer concentrations, customerno longer actively pursues its collection. The allowance for doubtful accounts is created by forming a credit worthiness, current economic trendsbalance which is deducted from the total receivables balance in the balance sheet. As of June 30, 2021 and changes in customer payment patterns to evaluate the adequacy of these reserves.2020 there are no accounts receivable.
| F-8 |
| Table of Contents |
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition
Revenue includes product sales. The Company recognizes revenue from product sales in accordance with Topic 606 "Revenue Recognition in Financial Statements" which considers revenue realized or realizable and earned when all of the following criteria are met:
(i) | persuasive evidence of an arrangement exists, | |
(ii) | the services have been rendered and all required milestones achieved, | |
(iii) | the sales price is fixed or determinable, and | |
(iv) | Collectability is reasonably assured. |
For the years ended June 30, 2021 and 2020, the Company has no revenue.
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, 2021, the Company recorded a BCF in the amount of $171,957.
Fair Value of Financial Instruments
Accounting Standards Codification subtopic 825-10, Financial Instruments ("ASC 825-10") requires disclosure of the fair value of certain financial instruments. The carrying value of cash, 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 Accounting Standards Codification subtopic 820-10, Fair Value Measurements and Disclosures ("ASC 820-10") and Accounting Standards Codification subtopic 825-10, Financial Instruments ("ASC 825-10"), which permits entities to choose to measure many financial instruments and certain other items at fair value.
Research and Development Expenses
Expenditures for research and development are expensed as incurred. The Company incurred research and development expenses of $373,112 and $6,376 for the years ended June 30, 2021 and 2020, respectively.
Advertising, Marketing and Public Relations
The Company expenses advertising and marketing costs as they are incurred. The Company recorded advertising expenses in the amount of $1,047,120 and $1,211 for the years ended June 30, 2021 and 2020, respectively.
Offering Costs
Costs incurred in connection with raising capital by the issuance of common stock are recorded as contra equity and deducted from the capital raised. There were no offering costs for the years ended June 30, 2021 and 2020, respectively.
| F-9 |
| Table of Contents |
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 greater than 50% likely 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.
The Company has adopted FASB ASC 740-10, Accounting for Income Taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually from differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
Recent Accounting Pronouncements
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, issued as a new Topic, ASC Topic 606. The new revenue recognition standard supersedes all existing revenue recognition guidance. Under this ASU, an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2015-14, issued in August 2015, deferred the effective date of ASU 2014-09 to the first quarter of 2018, with early adoption permitted in the first quarter of 2017.
In February 2016, FASB issued ASC 842 that requires lessees to recognize lease assets and corresponding lease liabilities on the balance sheet for all leases with terms of more than 12 months. The update, which supersedes existing lease guidance, will continue to classify leases as either finance or operating, with the classification determining the pattern of expense recognition in the income statement.
The ASU will be effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted, and is applicable on a modified retrospective basis with various optional practical expedients. The Company has assessed the impact of this standard. The Company entered into a new lease agreement commencing on November 1, 2019 and implemented this guidance on November 1, 2019.
In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This update addresses a diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period.
| F-10 |
| Table of Contents |
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
On June 20, 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 is intended to reduce cost and complexity and to improve financial reporting for share-based payments to nonemployees (for example, service providers, external legal counsel, suppliers, etc.). Under the new standard, companies will no longer be required to value non-employee awards differently from employee awards. Meaning that companies will value all equity classified awards at their grant-date under ASC 718 and forgo revaluing the award after this date. The Company adopted ASU 2018-07 on August 6, 2018. The adoption of this standard did not have a material impact on the financial statements.
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the consolidated financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
NOTE 3 – JOINT VENTURE
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 $10 million, contributed over a period of less than one year, as required by the aircraft development timeline and budget.
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 an obligation to invest $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.
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 June 30, 2021, the Company had $712,540 in excess of FDIC insurance.
| F-11 |
| Table of Contents |
NOTE 5 – OPERATING LEASE RIGHT-OF-USE ASSET AND OPERATING LEASE LIABILITY
The Company leases 2,911 square feet of office space located in the Research Park at Florida Atlantic University, Innovation Centre 1, 3998 FAU Boulevard, Suite 309, Boca Raton, Florida. The Company entered into a lease agreement commencing on November 1, 2019 through January 1, 2025 in which the first three months of rent were abated. Due to the COVID-19 pandemic, the company decided to have all employees work from home and intends to build out the office space by the end of 2021 to allow employees to work from the office in January of 2022. The following table illustrates the base rent amounts over the term of the lease:
|
| Base |
| |
Rent Periods |
| Rent |
| |
February 1, 2020 to October 1, 2020 |
| $ | 4,367 |
|
November 1, 2020 to October 1, 2021 |
| $ | 4,498 |
|
November 1, 2021 to October 1, 2022 |
| $ | 4,633 |
|
November 1, 2021 to October 1, 2022 |
| $ | 4,771 |
|
November 1, 2023 to October 1, 2024 |
| $ | 4,915 |
|
November 1, 2024 to January 1, 2025 |
| $ | 5,063 |
|
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 10%, as the interest rate implicit in most of our leases is not readily determinable. Operating lease expense is recognized on a straight-line basis over the lease term. Since the common area maintenance expenses are expenses that do not depend on an index or rate, they are excluded from the measurement of the lease liability and recognized in other general and administrative expenses on the statements of operations. At inception the Company paid prepaid rent in the amount of $4,659, which was netted against the operating lease right-of-use asset balance until it was applied in February 2020.
Right-of-use asset is summarized below:
|
| June 30, 2021 |
| |
Office lease |
| $ | 220,448 |
|
Less: accumulated amortization |
|
| (51,239 | ) |
Right-of-use asset, net |
| $ | 169,209 |
|
Operating lease liability is summarized below:
|
| June 30, 2021 |
| |
Office lease |
| $ | 183,803 |
|
Less: current portion |
|
| (42,644 | ) |
Long term portion |
|
| 141,160 |
|
|
|
|
|
|
Maturity of the lease liability is as follows: |
|
|
|
|
Fiscal year ending June 30, 2022 |
| $ | 58,635 |
|
Fiscal year ending June 30, 2023 |
|
| 60,392 |
|
Fiscal year ending June 30, 2024 |
|
| 62,201 |
|
Fiscal year ending June 30, 2025 |
|
| 37,112 |
|
|
|
| 218,340 |
|
Present value discount |
|
| (34,537 | ) |
Lease liability |
| $ | 183, 803 |
|
| F-12 |
| Table of Contents |
NOTE 6 – EXCHANGE AGREEMENT
On April 16, 2019, the Company and the members of American Aviation Technologies, LLC (“AAT”) entered into a Share Exchange Gain (LossAgreement (“Agreement”). The agreement, which became effective on September 30, 2019, was pursuant to which the Company acquired 100% of the issued and outstanding membership units in exchange for the issuance of shares of the Company’s Series A Preferred Stock constituting 86.39% of the total voting power of the Company’s capital stock to be outstanding upon closing, after giving effect to the consummation of concurrent debt settlement and other capital stock issuances but before the issuance of shares of capital stock for investor relations purposes. As a result of the Exchange Agreement, AAT became a wholly owned subsidiary of the Company.
On September 30, 2019 just prior to the exchange, the Company issued 170,000 shares of preferred stock as compensation and 193,637 shares of preferred stock in satisfaction of $2,608,224 in liabilities.
NOTE 7 – CONVERTIBLE NOTES PAYABLE
The carrying value of convertible notes payable, net of discount, as of June 30, 2021 and 2020 was $158,196 and $32,734, respectively, as summarized below:
The following table illustrates the carrying values for the convertible notes payable as of June 30, 2021 and 2020:
|
| June 30, |
|
| June 30, |
| ||
Convertible Notes Payable |
| 2021 |
|
| 2020 |
| ||
Convertible notes payable issued March 2, 2020 (6% interest) |
| $ | - |
|
| $ | 22,000 |
|
Convertible notes payable issued March 3, 2020 (6% interest) |
|
| - |
|
|
| 10,000 |
|
Convertible notes payable issued March 7, 2020 (6% interest) |
|
| - |
|
|
| 1,650 |
|
Convertible notes payable issued March 10, 2020 (6% interest) |
|
| - |
|
|
| 15,000 |
|
Convertible notes payable issued April 9, 2020 (6% interest) |
|
| - |
|
|
| 1,000 |
|
Convertible notes payable issued April 23, 2020 (6% interest) |
|
| - |
|
|
| 2,000 |
|
Convertible notes payable issued May 11, 2020 (6% interest) |
|
| - |
|
|
| 1,500 |
|
Convertible notes payable issued January 4, 2021 (6% interest) |
|
| - |
|
|
| 8,000 |
|
Convertible notes payable issued January 5, 2021 (6% interest) |
|
| 25,000 |
|
|
| 8,000 |
|
Convertible notes payable issued January 11, 2021 (6% interest) |
|
| 142,550 |
|
|
| 8,000 |
|
Total face value |
|
| 167,550 |
|
|
| 61,150 |
|
Less unamortized discount |
|
| (9,354 | ) |
|
| (28,416 | ) |
Carrying value |
| $ | 158,196 |
|
| $ | 32,734 |
|
Between September 27, 2019 and April 23, 2020, AAT issued convertible notes payable with an aggregate face value of $342,950 with a coupon rate of 6%. The notes have a maturity date of six months. The agreements provided that in the event AAT is merged into Xeriant (“Company”), at any time prior to the Maturity Date, the holder has the option to convert the principal balance and any accrued interest to common stock of the Company at a conversion price of $.0033 per share. In the event the holder does not elect to convert the note prior to maturity, the note will automatically convert to common stock at a price of $.0033 per share.
| F-13 |
| Table of Contents |
NOTE 7 – CONVERTIBLE NOTES PAYABLE (CONTINUED)
The Company evaluated the agreement under ASC 815 Derivatives and Hedging (“ASC 815”). ASC 815 generally requires the analysis embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. None of the embedded terms required bifurcation and liability classification. However, the Company was required to determine if the debt contained a beneficial conversion feature (“BCF”), which is based on the intrinsic value on the date of issuance. The Company recorded a beneficial conversion feature in the amount of $342,950 related to these notes. Additionally, for the years ended June 30, 2021 and 2020 the Company recorded $19,368 and $323,582 in amortization of debt discount related to the BCF, respectively. For the years ended June 30, 2021 and 2020, the Company recorded $584 and $9,708 in interest expense.
Between March 27, 2020 and October 23, 2020, holders of the convertible notes converted $342,950 in principal and $10,290 in accrued interest into 107,042,708 shares of common stock.
Notes issued between August 10, 2020 and January 19, 2021
Between May 11, 2020 and January 19, 2021, the Company issued convertible notes payable with an aggregate face value of $299,350 with a coupon rate of 6%. The notes have a maturity date of three and six months. The agreements provided the holder has the option to convert the principal balance and any accrued interest to common stock of the Company. In the event the holder does not elect to convert the note prior to maturity, the note will automatically convert to common stock. Of the $299,350, $87,000 is convertible at $0.025 per share, $180,550 is convertible at $.03 per share, and the remaining $31,800 is convertible at $0.003 per share.
The Company evaluated the agreement under ASC 815 Derivatives and Hedging (“ASC 815”). ASC 815 generally requires the analysis embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. None of the embedded terms required bifurcation and liability classification.
In connection with the notes, the Company issued warrants indexed to an aggregate 8,848,333 shares of common stock. The warrants have a term of two years and an exercise price of $.025. 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 value of $156,225.
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. After the allocation of $156,225 to the warrants, the remaining $169,956 in proceeds resulted in a beneficial conversion feature recorded in additional paid-in capital. Both the BCF and warrants resulted in a debt discount and are amortized over the life of the note.
Amortization of debt discount and interest expense related to all notes excluding related party notes
For the years ended June 30, 2021 and 2020, the Company recorded $304,121 and $453 in amortization of debt discount related to the notes. For the years ended June 30, 2021 and 2020, the Company recorded $ 7,409 and $14 in interest expense related to the notes, respectively.
| F-14 |
| Table of Contents |
NOTE 8 – RELATED PARTY TRANSACTIONS
Convertible notes
On August 25, 2020, the Company issued a convertible note payable with a face value of $5,000 with a coupon rate of 6% to Keystone Business Development Partners, a Company owned by the Company’s CFO, Brian Carey. The note has a maturity date of three months. The agreement provides the holder has the option to convert the principal balance and any accrued interest to common stock of the Company at a conversion price of $.025 per share. In the event the holder does not elect to convert the note prior to maturity, the note will automatically convert to common stock at a price of $.025 per share. The note was converted into 203,025 common shares on November 25, 2020, which were issued on February 8, 2021.
The Company evaluated the agreement under ASC 815 Derivatives and Hedging (“ASC 815”). ASC 815 generally requires the analysis embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. None of the embedded terms required bifurcation and liability classification.
In connection with the note, the Company issued warrants indexed to an aggregate 200,000 shares of common stock. The warrants have a term of two years and an exercise price of $.025. 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 relative fair value of $2,461.
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. After the allocation of $2,461 to the warrants, the remaining $2,539 in proceeds resulted in a beneficial conversion feature recorded in additional paid-in capital. Both the BCF and warrants resulted in a debt discount and are amortized over the life of the note.
For the years ended June 30, 2021, the Company recorded $5,000 in amortization of debt discount related to the note. For the years ended June 30, 2021, the Company recorded $76 in interest expense related to the note.
On November 25, 2020, Keystone Business Development Partners converted $5,000 in principal and $76 in accrued interest into 203,024 shares of common stock.
Consulting fees
During the years ended June 30, 2021 and 2020, the Company recorded $98,000 and $73,300 respectively, in consulting fees to Ancient Investments, LLC, a Company owned by the Company’s CEO, Keith Duffy and the Company’s Executive Director of Corporate Operations, Scott Duffy.
For the years ended June 30, 2021 and 2020, the Company recorded $38,000 and $7,000 respectively, in consulting fees to Edward DeFeudis, a Director of the Company.
During the years ended June 30, 2021 and 2020, the Company recorded $54,000 and $44,700 respectively, in consulting fees to AMP Web Services, a Company owned by the Company’s CTO, Pablo Lavigna. On August 26, 2020, the Company issued 4,090,909 shares of common stock for payment of $13,500 for services performed in May, June and July 2020.
During the years ended June 30, 2021 and 2020, the Company recorded $30,000 and $7,000 respectively, in consulting fees to Keystone Business Development Partners, a Company owned by the Company’s CFO, Brian Carey. As of June 30, 2021, $25,000 was recorded in accrued liabilities.
| F-15 |
| Table of Contents |
NOTE 9 – 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. As of June 30, 2021, the Company is not aware of any contingent liabilities that should be reflected in the financial statements.
NOTE 10 – EQUITY
Common Stock
Fiscal Year 2021 Issuances)
On July 30, 2020, the Company issued 16,011,818 shares of common stock related to conversions of debt from the previous fiscal year, which were previously recorded in common stock to be issued.
On August 26, 2020, the Company issued 4,090,909 shares of common stock for payment of $13,500 for services performed in May, June and July 2020. The shares were valued at $200,454 or $0.049 per share. As of result the Company recorded a loss on settlement in debt in the amount of $186,954.
On September 8, 2020, the Company issued 96,835,648 shares of common stock related to conversions of debt from the previous fiscal year, which were previously recorded in common stock to be issued.
On October 30, 2020, the Company issued 300,000 shares of common stock to an advisory board member for services. The shares were valued at $13,200 or $0.044 per share.
On November 17, 2020, the Company sold 1,700,000 shares of common for $25,500, or $0.015 per share.
On November 24, 2020, the Company sold 1,700,000 shares of common for $25,500, or $0.015 per share.
On December 1, 2020, the Company issued 2,000,000 shares of common stock for investment relation services valued at $100,000, or $0.05 per share.
On December 1, 2020, the Company issued 18,000,000 shares of common stock for investment relation services valued at $900,000, or $0.05 per share.
On January 29, 2021, the Company issued 50,000 shares of common stock to an advisory board member for services. The shares were valued at $25,500 or $0.51 per share.
On February 9, 2021, the Company issued 19,595,442 shares of common stock for the conversion of $127,150 in principal and $2,709 in accrued interest.
In March of 2021, the Company sold 12,075,001 shares of common for $1,497,000, or $0.12 per share.
On March 22, 2021, the Company issued 50,000 shares of common stock to an advisory board member for services. The shares were valued at $13,800 or $0.28 per share.
On March 22, 2021, the Company issued 50,000 shares of common stock to an advisory board member for services. The shares were valued at $22,750 or $0.46 per share.
On March 22, 2021, the Company issued 4,557,943 shares of common stock for the conversion of $23,000 in principal and $853 in accrued interest.
| F-16 |
| Table of Contents |
NOTE 10 – EQUITY (CONTINUED)
On April 26, 2021, the Company issued 1,014,798 shares of common stock for the conversion of $30,000 in principal and $444 in accrued interest.
On May 7, 2021, the Company sold 833,333 shares of common for $100,000, or $0.12 per share.
During the year ended June 30, 2016,2021, certain holders of preferred stock converted 44,367 shares into 44,366,919 shares of common stock.
Common Stock to be Issued
On March 12, 2021, the transactionsCompany sold 400,000 shares of common stock for $48,000, or $0.12 per share. As of June 30, 2021, the shares were not yet issued. As a result, these amounts were held in common stock to be issued.
In April 2021, a holder converted $3,000 in principal and $90 in accrued interest into 123,590 shares of common stock. As of June 30, 2021, the shares were not yet issued. As a result, these amounts were held in common stock to be issued.
Series A Preferred Stock
There are 100,000,000 shares authorized as preferred stock, of which 3,500,000 are designated as Series A Preferred Stock having a par value of $0.00001 per share. The Series A preferred stock has the following rights:
· | Voting: The preferred shares shall be entitled to 100 votes to every one share of common stock. | |
· | 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 1:1,000 basis. | |
· | The shares of Series A Preferred Stock are redeemable at the option of the Corporation at any time after September 30, 2022 upon not less than 30 days written notice to the holders. It is not mandatorily redeemable. |
As of June 30, 2021 and 2020, the Company has 788,270 and 3,113,638 shares of Series A Preferred Stock issued and outstanding, respectively.
On February 15, 2021, in accordance with Florida Law and conversations with counsel, the Board of Directors of the Company were denominatedrescinded 990,000 Series A Preferred Shares, which represented all preferred shares issued to one of the shareholders in US Dollars. Some transactions were denominatedthe Share Exchange between American Aviation Technologies, LLC and Xeriant, Inc. entered into on April 19, 2019, due to breach of contract.
During March of 2021, the remaining former members of American Aviation Technologies, LLC agreed to allow the Company to rescind an aggregate of 1,250,001 of their 1,760,000 Series A Preferred Shares issued pursuant to the Share Exchange between American Aviation Technologies, LLC and Xeriant, Inc., as a result of said breach. As a result of the cancellation, the Company reduced the investment in AUD and British poundsAAT by the value of these preferred shares.
| F-17 |
| Table of Contents |
On March 27, 2021, Spider Investments, LLC returned 41,000 Series A Preferred Shares to the treasury of the Company.
Series B Preferred Stock
On March 25, 2021, the Certificate of Designation for the sales made outside USSeries B Preferred was recorded by the State of Nevada. There are 100,000,000 shares authorized as preferred stock, of which 1,000,000 are designated as Series B Preferred Stock having a par value of $0.00001 per share. The Series B preferred stock is not convertible, does not have any voting rights and for rent paid for the Australian store. Such transactions were converted to US$ on the date of transaction and the exchange gains or losses were recorded in the statement of operations. During the year ended June 30, 2015, the transactions of the Company were denominated in foreign currency and were recorded in Australian dollar (AUD) at the rates of exchange in effect when the transactions occurred. Exchange gains and losses are recognized for the different foreign exchange rates applied when the foreign currency assets and liabilities are settled.
Foreign Currency Translation and Comprehensive Income (Loss)no liquidation preference.
During the year ended June 30, 2016, the transactions of2021, the Company were denominatedissued 1,000,000 shares of Series B Preferred Stock to the Company’s CEO as part of his employment agreement.
AAT membership unit adjustment
On May 12, 2021, on further advice of counsel and in US Dollars. Allgood faith, the transactionsCompany returned 3,600,000 membership units of American Aviation Technologies, LLC to a former shareholder, which were denominated in other currencies were converted to US$ on the date of settlement and the exchange gains and losses were recordedwas his consideration provided in the statementShare Exchange between American Aviation Technologies, LLC and Xeriant, Inc. As a result, this former shareholder was restored to his original shareholding position in American Aviation Technologies, LLC.
AAT Subsidiary
On May 12, 2021, the Company’s position in American Aviation Technologies, LLC was reduced to 64%, and therefore the subsidiary is now classified as majority owned.
NOTE 11 – GOING CONCERN MATTERS
The Company's financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of operations. No change was recordedassets and liquidation of liabilities in the comprehensive income (loss). Duringnormal course of business. At June 30, 2021 and 2020, the Company had $962,540 and $38,893 in cash and $677,257 in working capital and $53,532 in negative working capital, respectively. For the year ended June 30, 2015,2021 and 2020, the accountsCompany had a net loss of $2,702,602 and $699,564, respectively. Continued losses may adversely affect the liquidity of the Company were maintained, and its financial statements were expressed, in AUD. Such financial statements were translated into USD with the AUD as the functional currency. All assets and liabilities were translated at the exchange rate at the balance sheet date, stockholder's equity is translated at the historical rates and income statement items are translated at the average exchange rate for the period. Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of transaction. Any differences between the initially recorded amount and the settlement amount are recorded as a gain or loss on foreign currency transaction in the statements of operations. The resulting translation adjustments are reported under other comprehensive income as a component of shareholders' equity. There were no significant fluctuations infuture. Therefore, the exchange rate for the conversion of AUD to USD after the balance sheet date.
Recently Issued Accounting Pronouncements
In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (ASU 2014-15). The guidance in ASU 2014-15 sets forth management’s responsibility to evaluate whether there isfactors noted above raise substantial doubt about an entity’sour ability to continue as a going concern as well as required disclosures. ASU 2014-15 indicates that, when preparingconcern. 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 for interimdo not include any adjustments relating to the recoverability and annual financial statements, managementclassification of recorded asset amounts or amounts and classification of liabilities that might be necessary should evaluate whether conditions or events, in the aggregate, raise substantial doubt about the entity’s abilityCompany be unable to continue as a going concernconcern. The Company’s existence is dependent upon management’s ability to develop profitable operations and resolve its liquidity problems.
NOTE 12 – INCOME TAXES
The Company accounts for one year fromincome taxes in accordance with the provisions of FASB ASC 740, Accounting for Uncertainty in Income Taxes. Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
| F-18 |
| Table of Contents |
At June 30, 2021 and 2020, the financialsignificant components of the deferred tax assets are summarized below:
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Deferred income tax asset |
|
|
|
|
|
| ||
Net operating loss carryforwards |
| $ | 3,237,960 |
|
| $ | 2,929,710 |
|
Book to tax differences in intangible assets |
|
| - |
|
|
| (95 | ) |
Total deferred income tax asset |
|
| 3,237,960 |
|
|
| 2,929,615 |
|
Less: valuation allowance |
|
| (3,237,960 | ) |
|
| (2,929,615 | ) |
Total deferred income tax asset |
| $ | — |
|
| $ | — |
|
Income tax expense reflected in the consolidated statements are issued or are available to be issued. This evaluation should include consideration of conditionsincome consist of the following for 2021 and events that are either known or are reasonably knowable at the date the financial statements are issued or are available to be issued, as well as whether it is probable that management’s plans to address the substantial doubt will be implemented and, if so, whether it is probable that the plans will alleviate the substantial doubt. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods and annual periods thereafter. Early application is permitted. 2020:
2021 | 2020 | |||||||
Current | ||||||||
Federal | $ | — | $ | — | ||||
State | — | — | ||||||
| — | — | |||||||
Deferred | ||||||||
Federal | — | — | ||||||
State | — | — | ||||||
Income tax expense | $ | — | $ | — | ||||
The Company is currently evaluatingperiodically evaluates the impactlikelihood of the adoptionrealization of this standard on its consolidated financial statements.
In November 2015, the Financial Accounting Standards Board (FASB) issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes” (ASU 2015-17), which changes how deferred taxes are classified on the balance sheet and is effective for financial statements issued for annual periods beginning after December 15, 2016, with early adoption permitted. ASU 2015-17 requires all deferred tax assets, and liabilitiesadjusts the carrying amount of the deferred tax assets by the valuation allowance to the extent the future realization of the deferred tax assets is not judged to be classified as non-current.more likely than not. The Company is currently evaluatingconsiders many factors when assessing the impactlikelihood of future realization of its deferred tax assets, including its recent cumulative earnings experience by taxing jurisdiction, expectations of future taxable income or loss, the adoption of this standard on its consolidated financial statements.carryforward periods available to the Company for tax reporting purposes, and other relevant factors.
In January 2016,Future changes in the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” (ASU 2016-01), which requires equity investments that are not accounted for under the equity method of accounting to be measured at fair value with changes recognized in net income and updates certain presentation and disclosure requirements. ASU 2016-01 is effective beginning after December 15, 2017. The adoption of this guidance is not expected tounrecognized tax benefit will have a materialno impact on the Company’s resultseffective tax rate due to the existence of operations, financial positionthe valuation allowance. The Company estimates that the unrecognized tax benefit will not change significantly within the next twelve months. The Company will continue to classify income tax penalties and interest as part of general and administrative expense in its consolidated statements of operations. There were no interest or disclosures.penalties accrued as of June 30, 2021.
In February 2016, the FASB issued ASU No. 2016-02, “Leases,” which requires lessees to recognize right-of-use assets and lease liabilities, for all leases, with the exception of short-term leases, at the commencement date of each lease. This ASU requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. This ASU is effective for annual periods beginning after December 15, 2018 and interim periods within those annual periods. Early adoption is permitted. The amendments of this update should be applied using a modified retrospective approach, which requires lessees and lessors to recognize and measure leases at the beginning of the earliest period presented. The adoption of this guidance is not expected to have a material impact on the Company’s results of operations, financial position or disclosures.
In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting.” The guidance simplifies accounting for share-based payments, most notably by requiring all excess tax benefits and tax deficiencies to be recorded as income tax benefits or expense in the income statement and by allowing entities to recognize forfeitures of awards when they occur. This new guidance is effective for annual reporting periods beginning after December 15, 2016 and may be adopted prospectively or retroactively. The Company is currently evaluating the impact the adoption of this standard would have on its financial condition, results of operations and cash flows.
| F-19 |
| Table of Contents |
NOTE 13 – SUBSEQUENT EVENTS
In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” (“ASU 2016-12”), which amends the guidanceLegal Proceedings
On September 1, 2021, Xeriant Inc. brought a cause of action in the new revenue standard on collectability, noncash consideration, presentationSouthern District of sales tax,Florida against a former shareholder for claims, including but not limited to, breach of contract, misrepresentation, and transition.asserting claims to recoup monetary and in-kind distributions made to the shareholder by the Company. The amendments are intended to address implementation issues and provide additional practical expedients to reducedefendant in the cost and complexity of applying the new revenue standard. The new guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods, which will be our interim period beginning January 1, 2018. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods with that reporting period. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements.above-mentioned action has not asserted any counterclaims to-date.
In August 2016, the FASB issued ASU 2016-15, regarding ASC Topic 230 “StatementSale of Cash Flows.” This update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted. The Company does not expect the adoption of this standard to have a significant effect on its consolidated financial statements.common stock
There were no other new accounting pronouncements during the year endedSubsequent to June 30, 2016 that we believe would have a material impact on our financial position or results2021, the Company sold an aggregate 30,966,667 shares of operations.common stock to multiple investors for $1,668,500.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.Exercise of warrants
Not applicable because we are a smaller reporting company.Subsequent to June 30, 2021, an aggregate 4,185,000 warrants were exercised for $125,550.
Item 8. Financial Statements and Supplementary Data.Convertible notes
On August 9, 2021, the Company issued a convertible note with a face value of $100,000. The financial statements startnote matures on page F-1.November 9, 2021, has an interest rate of 6% and has a conversion price of $0.06 per share.
��
On August 10, 2021, the Company issued a convertible note with a face value of $150,000. The note matures on November 10, 2021, has an interest rate of 6% and has a conversion price of $0.06 per share.
| F-20 |
| Table of Contents |
Item 9.9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Dismissal of Lichter, Yu & Associates, Inc.Effective December 4, 2019, the Company engaged BF Borgers CPA P.C. (“BF”), as Principal Accountant
On August 10, 2015, we advised Lichter, Yu & Associates, Inc. (“LY”), engaged on January 14, 2014, that it had been dismissed as ourthe Company’s independent registered public accounting firm. The dismissal of LYengagement was approved by ourthe Company’s Board of Directors.
LY audited our consolidated financial statements as atItem 9A. Controls and for the years ended June 30, 2014 and 2013, and their report thereon did not contain an adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles.Procedures.
Engagement of Farber Hass Hurley LLP as Principal Accountant
On August 10, 2015, we engaged Farber Hass Hurley LLP (“FHH”) as our registered independent public accountants for the fiscal year ended June 30, 2015. The decision to engage FHH was approved by our Board of Directors.
In connection with this change of registered independent public accountants, there were no disagreements between the Registrant and our former accountants, Lichter Yu & Associates LLP, of the type described in Item 304 (a)(1)(iv) of Regulation S-K and the related instructions, or any reportable event as described in Item 304(a)(1)(v) of Regulation S-K.
Item 9A. Controls and Procedures.
Evaluation of 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 June 30, 2016,2021, 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 Brendan MacphersonKeith 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 June 30, 2016,2021, our disclosure controls and procedures are not effective due to material weaknesses in our internal controls over financial reporting discussed directly below.
Management's Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP.
Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; (iii) provide reasonable assurance that receipts and expenditures of company assets are made in accordance with management authorization; and (iv) provide reasonable assurance that unauthorized acquisition, use or disposition of Company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because changes in conditions may occur or the degree of compliance with the policies or procedures may deteriorate.
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| Table of Contents |
Our management has conducted an evaluation, under the supervision and with the participation of Brendan MacphersonKeith Duffy our Chief Executive Officer and Chief Financial Officer of the effectiveness of our internal control over financial reporting as of June 30, 2016.2021. This evaluation was based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, Internal Control-Integrated Framework. Based upon such assessment, Brendan MacphersonKeith Duffy concluded that our internal controls over financial reporting are not effective due to material weaknesses in our internal controls over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. Our material weaknesses relate to the following:
· | Lack of a full-time Chief Financial Officer. We do not have a dedicated full-time Chief Financial Officer in charge of our financial reporting. Financial reporting is performed by our Chief Executive Officer and Chief Financial Officer, | |
|
|
|
| · | Lack of formal review process. We do not possess a formal, multi-level process with respect to our financial reporting. |
|
|
|
| · | Ineffective oversight. We do not have an audit committee comprised of independent directors to oversee our financial reporting and internal control over financial reporting. |
These weaknesses are due to the Company's historical lack of working capital to hire a full-time, dedicated Chief Financial Officer. The Company plans to hire a full-time Chief Financial Officer by June 30, 2017.Officer. Further, the Company intends to appoint additional Directors and form an audit committee comprised of independent directors.
This Report shall not be deemed to be filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, and is not incorporated by reference into any filing of the Registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. The rules of the Securities and Exchange Commission do not require an attestation of the Management's report by our registered public accounting firm in this annual report.
Changes in Internal Controls
There have been no changes in our internal control over financial reporting that occurred during the fourth quarter of our fiscal year ended June 30, 20162021 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.
None.
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Item 10.10. Directors, Executive Officers and Corporate Governance.
Directors and Executive Officers
The Board is comprised of Brendan Macpherson and Belynda Storelli Macpherson, the co-founders of Banjo & Matilda. In addition to serving on the Board of Directors, Brendan Macpherson has been elected as Chief Executive Officer, and Secretary of the Registrant and Belynda Storelli Macpherson has been elected Chief Creative Officer of the Registrant.Xeriant, Inc.
The following sets forth information about our directors and executive officers:
Name | Age | Position | ||
| ||||
Keith Duffy | 60 | Chairman of the Board and CEO | ||
|
| Executive | ||
|
| Director | ||
Pablo Lavigna | 50 | Chief | ||
Brian Carey | 48 | Chief Financial Officer | ||
Michael Harper | 56 | Director | ||
Lisa Ruth | 56 | Director |
Keith Duffy, Chairman of the Board and CEO
Brendan Macpherson isMr. Duffy has over thirty years of experience in investment banking, management, finance, strategic planning and operations, and has been a co-founderprincipal in a number of Banjo & Matilda.start-up companies. He arranged the merger of American Aviation Technologies with a public company and established the relationship with Florida Atlantic University (FAU), preparing the white paper that was presented to the Research Park at FAU Authority. He was formerly the founder and CEO of a public company and the founder and CEO of two bank holding companies, a software development company and a biotech company now trading on NASDAQ. Mr. Macpherson has served as chief executive officer of Banjo & Matilda since January 2013 andDuffy trained to be a private pilot when he was 16 years old and worked at an FBO at the executive director from May 2009Palm Beach International Airport after college to October 2009. From April 2009 until June 2013, he wasfurther his knowledge of the chief marketing officer for Pie Face Pty Ltd. which operates bakeryaviation industry. He has held a variety of management, accounting, and café storesfinance positions over the years. He has been a licensed securities broker and currently holds a real estate license and a NMLS mortgage broker’s license in Australia. From June 2002 until January 2009, he was chief executive officer of Brightstars Education, the largest educator of children's performing arts in Australia.Florida. He has also served on the Florida Bar Grievance Committee. Mr. Duffy attended Wake Forest University and Rollins College, where he earned a B.A. Degree in Business Administration and Mathematics in 1982.
Scott M. Duffy, Executive Director, Corporate Operations
Scott Duffy has over thirty years of experience in management, operations, strategic planning, information technology, statistical analysis, marketing and promotion, and sales development. He has collaborated with his brother Keith over many years to develop plans and research for a wide range of start-up companies, including American Aviation Technologies and the Halo project. As Senior Vice President, Operations and Administration at Globe Marketing Services, he was responsible for planning and coordinating the activities of internal management and the support staff to meet corporate objectives. As Newsstand Circulation Director at American Media, one of the largest publishers in North America, he was responsible for the $545 million retail sales division, overseeing both international and domestic distribution. Over his career he has been instrumental in increasing profitability though optimizing core competencies. Mr. Duffy was a co-founder and principal in a number of real estate development projects beginning in 2006. Mr. Duffy trained to be a private pilot when he was 16 years old and has always been interested in aviation. He attended Wake Forest University and Rollins College, where he earned a B.A. in Business Administration and Mathematics in 1982.
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Edward C. DeFeudis, Director
Mr. DeFeudis is a venture investor and serial entrepreneur spanning multiple industries. His investments focus on late seed, bridge, and Series A rounds. He has a knack for understanding complex disruptive technology and enjoys finding rare opportunities that create first mover advantage. Mr. DeFeudis is a financial professional who has served on the executive management team and board of directors of several early-stage companies. He has structured and chief executive officersecured multiple financings while serving as point person to investors, funds, and investments banks, which has led to hundreds of Artist & Entertainment Group Limited, an ASX (Australia) listed company. Mr. Macpherson has a historymillions of successful startups, growthdollars in capital formation. He is extremely detail oriented and exits of businesses in media, technology, education and retail.understands complex legal positioning.
Belynda Storelli Macpherson is a co-founder of Banjo & Matilda. Ms. Macpherson has been the creative director of Banjo & Matilda since May 2009 and she began Banjo & Matilda in May 2008. Prior to founding Banjo & Matilda, Ms. Macpherson had an extensive career in publicity, fashion publishing and marketing. Prior company's where Belynda worked include Grazia, Harper’s Bazaar and Maddison fashion magazines, major film studios including Warner Brothers, Universal Studios and Columbia Tri-Star Pictures; and, the Australian tourism industry marketing body Tourism Australia. Belynda also founded her own publicity firm “Global Artist” which she successfully sold to a larger group in 2002.Pablo Lavigna, Chief Information Officer
There are no family relationships among our directors or executive officers, except thatPablo Lavigna has over twenty years of experience in the Information Technology and Software Engineering field. He developed extensive experience as Director of Information Technology operations at a private firm. Mr. MacphersonLavigna has developed and implemented network security procedures and developed software for multiple industries. He holds several Microsoft and CompTIA certifications including Microsoft Certified System Engineer (MCSE), Microsoft Certified System Administrator (MCSA), and Microsoft Certified Professional (MCP), and CompTIA Security+. Mr. Lavigna attended Florida International University where he earned his degree in Information Technology and Business with Magna Cum Laude Honors.
Brian Carey, Chief Financial Officer
Brian Carey is an entrepreneur and business development specialist who built and ran a successful accounting, tax and business management firm for over 30 years. He started a financial management/insurance and investment firm in 1984, then expanded it to add accounting, tax preparation and business planning and management services in 1986 called Carey Associates Accounting and Tax Services. More recently, Mr. Carey was the owner and manager of BCGR Tax and Financial Services. This company also provides business start-up and development services to a limited number of client/partner companies. He holds a Bachelor of Accounting Degree from Penn State University.
Michael Harper, Director
Michael Harper is a 36-year technology veteran operating within emerging and highly competitive technology markets. Mr. Harper began his career at IBM and went on to lead four companies to successful exits with AT&T, CitiBank, Actimize, and Red Hat. Currently, Mr. Harper is the husbandExecutive VP, COO & CMO of Ms. Macpherson.zSpace, which improves STEAM and CTE performance by delivering zSpace Experiential Learning™ with AR/VR 2000 to schools around the globe, over 200 Higher Ed institutions and numerous enterprises ranging from Healthcare to the Military. Inc. listed zSpace one of the 500 fastest growing companies for two consecutive years. Mr. Harper received a Bachelor of Science in Electrical Engineering from Tulane University and graduated with Summa cum Laude, Departmental Honors, and the EE Merit Award, Tau Beta Pi, Phi Eta Sigma, Eta Kappa Nu, and then attended the Wharton School of Business at University of Pennsylvania and received his Master of Business Administration where he Graduated with Distinction.
Each of our Directors is elected annually and serves until his/her successor is duly elected and qualified or until his/her earlier death, resignation or removal. Our officers are elected annually and serve at the discretion of our Board of Directors.Lisa M. Ruth, Director
Lisa M. Ruth is a 35-year professional intelligence, operations, and analysis expert. She maintains an exceptional global network of intelligence, operations, and security professionals, and is highly regarded in all phases of intelligence, counterintelligence, security and investigations. Ms. Ruth is recognized by intelligence, media, and professionals as a top international security and intelligence officer and is regularly quoted in press and on television regarding international and security developments. For the past 20 years, Ms. Ruth has worked as an executive at CTC International Group, Inc. and currently serves as its President and CEO, where she manages a global resource team of 8,500 individuals in every country in the world with the exception of North Korea. She has been an expert witness on more than 100 cases involving death squad activity, peace and reconciliation commissions, human trafficking, trade secret violations, espionage, and conducted security assessments, counter-espionage assessments, and cyber assessments for Disney, Apple, Google, and other major companies. In the 15 years prior to CTC, Ms. Ruth worked as an intelligence officer for the Central Intelligence Agency and served in both the intelligence and operations directorates. She was deployed in 26 countries in Latin America, Asia, the Middle East, and Africa to track and monitor terrorist activities, their financial networks, and communications networks and provided reporting and analysis to the highest levels of the US government. She was called from the field on four occasions to brief the President of the United States and the Joint Chiefs of Staff regarding highly classified information in my programs of expertise. Ms. Fuller received a Bachelor of Arts in International Relations from George Mason University, a Master of Arts in International Relations from University of Virginia, and PhD coursework in Conflict Resolution from George Mason University.
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Director Independence
We are not currently a “listed company” under SEC rules and are therefore not required to have a Board comprised of a majority of independent directors or separate committees comprised of independent directors. We currently do not have any
Director Independence; Standing Committees
The Company has two independent directors serving on its Board of Directors, including Michael Harper and Lisa Ruth, as the term “independent” is defined by the rules ofunder the Nasdaq Stock Market.Market’s listing standards, effective they joined the Board of Directors in May 2021 upon reconstitution of the Board as described in this Information Statement.
The Company’s common stock is traded on OTCQB under the symbol “XERI.” The OTCQB trading platform does not maintain any standards regarding the “independence” of the directors for our Board of Directors, and we are not otherwise subject to the requirements of any national securities exchange or an inter-dealer quotation system with respect to the need to have a majority of our directors be independent.
The Company’s Board presently has no functioning standing committees.
Board Leadership Structure and Role in Risk Oversight
Although we have not adopted a formal policy on whether the Chairman and Chief Executive Officer should be separate or combined, we have traditionally determined that it is in the best interests of the Company and its shareholders to combine these roles due to the small size and early stage of the Company
Family Relationships
Keith Duffy, Chairman and CEO, and Scott Duffy, Executive Director, are brothers.
Board Committees
Audit Committee
We do not have a separately-designatedseparately designated audit committee of the board. Audit committee functions are performed by our board of directors. None of our directors are deemed independent. AllTwo directors also hold positions as our officers. Our audit committeeBoard of Directors is responsible for: (1) selection and oversight of our independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; (3) establishing procedures for the confidential, anonymous submission by our employees of concerns regarding accounting and auditing matters; (4) engaging outside advisors; and, (5) funding for the outside auditory and any outside advisors engagement by the audit committee.
Our board of directors has determined that we do not have an audit committee financial expert serving on our board.
Disclosure Committee
We have a disclosure committee and disclosure committee charter. Our disclosure committee is comprised of all of our directors. The purpose of the committee is to provide assistance to the Chief Executive Officer and the Chief Financial Officer in fulfilling their responsibilities regarding the identification and disclosure of material information about us and the accuracy, completeness and timeliness of our financial reports.
Nominees
There have been no material changes to the procedures by which security holders may recommend nominees to the Registrant's board.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our directors, executive officers and beneficial owners of more than 10% of our common stock to file with the SEC reports of their holdings of, and transactions in, our common stock. Based solely upon our review of copies of such reports and written representations from reporting persons that were provided to us, we believe that our officers, directors and 10% stockholders complied with these reporting requirements with respect to our fiscal year ended June 30, 2016.2021.
Code of Ethics
The Registrant has adopted a corporate code of ethics. The Registrant believes its code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code.
Item 11. Executive Compensation.
The following summary compensation table sets forth information concerning the compensation paid by the Company for the fiscal years ended June 30, 2016 and June 30, 2015 to those persons who were, at June 30, 2016, (i) the chief executive officer, (ii) the chief financial officer, (iii) all executive officers and (ii) the other most highly compensated executive officers of Banjo & Matilda, whose total compensation was in excess of $100,000 (the “named executive officers”):
Summary Compensation Table
Name and Principal Position Year Salary ($) Bonus ($) Stock Awards ($) Option Awards ($) Non-Equity Incentive Plan Compensation ($) Nonqualified Deferred Compensation Earnings All Other Compensation ($) Total Brendan Macpherson 2016 Chief Executive Officer 2015 Belynda Storelli Macpherson, Chief 2016 Creative Officer 2015
($)$ 156,237 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 156,237 $ 147,393 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 147,393 $ 115,731 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 115,731 $ 109,180 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 109,180
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Compensation of Directors
The Registrant did not pay and cash or other compensation to its directors for the years ended June 30, 2016 and June 30, 2015.
Outstanding Equity Awards at Fiscal Year EndItem 11. Executive Compensation.
For the year ended June 30, 2016,2021, no director or executive officer has received compensation from the Registrant pursuant to any compensatory or benefit plan. There is no plan or understanding, express or implied, to pay any compensation to any director or executive officer pursuant to any compensatory or benefit plan, although we anticipate that we will compensate our officers and directors for services to us with stock or options to purchase stock, in lieu of cash.
Executive Compensation Policies as They Relate to Risk Management
The Compensation Committee and Management have considered whether our compensation policies might encourage inappropriate risk taking by the Company's executive officers and other employees. The Compensation Committee has determined that the current compensation structure aligns the interests of the executive officers with those of the Company without providing rewards for excessive risk taking by awarding a mix of fixed and performance based or discretionary bonuses with the performance basedperformance-based compensation focused on profits as opposed to revenue growth.
Option Exercises and Fiscal Year-End Option Value Table
None of the named executive officers exercised any stock options during the year ended June 30, 2016,2021 or held any outstanding stock options as of June 30, 2016.2021.
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Incentive Plan
The Registrant does not have any equity compensation plans.
Employment Agreements
Brendan Macpherson Employment Agreement
Under hisOn February 19, 2021, the Company executed an employment agreement Mr. Macpherson is engagedwith Keith Duffy to act as our chief executive officerthe Chief Executive Officer of the Company and AAT, with a currentan annual base salary of $160,787. His base salary will be increased by$180,000 (subject to increases at least six percent each January 1the discretion of the Board of Directors) and the issuance of 1,000,000 Series B Preferred Shares.
Consulting Agreements
None, although some of the officers are currently paid as consultants of the Company.
Director Compensation
Edward DeFeudis, one of the Company’s Directors, was compensated $38,000 during the termfiscal year ended June 30, 2021 because of the employment agreement. The agreement provided that Mr. Macpherson received a signing bonusamount of 1,000,000 shares of preferred stock. During the term of his employment agreement, the preferred stock issued to Mr. Macpherson has super voting rights of 100 votes for every share of preferred stock he owns. Upon the expiration or termination of his employment agreement, allinvolvement in assisting management of the preferred shares issued to Mr. Macpherson will automatically be cancelled and returned to authorized but unissued preferred stock.Company.
Mr. Macpherson is entitled to receive health and life insurance pursuant to his employment agreement.
In the event that Mr. Macpherson and the Registrant determine not to pay Mr. Macpherson's base salary in cash, his unpaid salary will accrue interest at the rate of 12% per annum (which interest shall be paid in cash). Mr. Macpherson has the option to convert his unpaid salary into shares of the Registrant's common stock. The conversion price will equal 50% of the Registrant's average closing bid price for the thirty-day period prior to the Registrant's receipt of a conversion notice from Mr. Macpherson.
Mr. Macpherson may terminate his employment agreement upon thirty days' written notice (or such shorter period if agreed to by the Registrant). The Registrant may terminate the employment agreement with Mr. Macpherson with or without cause upon 180 days’ prior notice. Upon any termination of the employment agreement by the Registrant, Mr. Macpherson is entitled to receive as severance fifty percent (50%) of the total salary compensation he would have been entitled to receive for the reminder of the term of the employment agreement.
Upon any termination (with or without cause) or expiration of the employment agreement, the Registrant must provide Mr. Macpherson, at the Registrant's expense, life, disability and family health insurance for a period of thirty-six months. In the event of Mr. Macpherson's death during the term of his employment agreement, the Registrant will pay to Mr. Macpherson's designee the greater of (x) $225,000 and (y) fifty percent (50%) of the total salary compensation he would have been entitled to receive for the reminder of the term of the employment agreement. In addition, the Registrant must also continue to pay for medical and health insurance for Mr. Macpherson's family for three years (which payments are in addition to the payments for family health insurance described in the preceding paragraph).
Upon any termination or expiration of the employment agreement, if Mr. Macpherson will receive severance payments of at least $150,000, he will be subject to non-compete and non-solicitation restrictions for a period of six months after such expiration or termination. The non-compete will apply to any area within five miles of any location where the Registrant designs, manufactures or sells premium contemporary knitwear.
Belynda Storelli Macpherson Employment Agreement
Under her employment agreement Ms. Macpherson is engaged as our chief creative officer with a base salary of $119,102. Her base salary will be increased by at least six percent each January 1 during the term of the employment agreement.
Ms. Macpherson receives health and life insurance pursuant to her employment agreement. In the event that Ms. Macpherson and the Registrant determine not to pay Ms. Macpherson's base salary in cash, her unpaid salary will accrue interest at the rate of 12% per annum (which interest shall be paid in cash). Ms. Macpherson has the option to convert her unpaid salary into shares of the Registrant's common stock. The conversion price will equal 50% of the Registrant's average closing bid price for the thirty-day period prior to the Registrant's receipt of a conversion notice from Ms. Macpherson.
Ms. Macpherson may terminate her employment agreement upon thirty days' written notice (or such shorter period if agreed to by the Registrant). The Registrant may terminate the employment agreement with Ms. Macpherson with or without cause upon 180 days’ prior notice. Upon any termination of the employment agreement by the Registrant, Ms. Macpherson is entitled to receive as severance fifty percent (50%) of the total salary compensation she would have been entitled to receive for the reminder of the term of the employment agreement.
Upon any termination (with or without cause) or expiration of the employment agreement, the Registrant must provide Ms. Macpherson, at the Registrant's expense, life, disability and family health insurance for a period of thirty-six months.
Upon any termination (with or without cause) or expiration of the employment agreement, the Registrant must provide Ms. Macpherson, at the Registrant's expense, life, disability and family health insurance for a period of thirty-six months.
In the event of Ms. Macpherson's death during the term of her employment agreement, the Registrant will pay to Ms. Macpherson's designee the greater of (x) $200,000 and (y) fifty percent (50%) of the total salary compensation she would have been entitled to receive for the reminder of the term of the employment agreement. In addition, the Registrant must also continue to pay for medical and health insurance for Ms. Macpherson's family for three years (which payments are in addition to the payments for insurance described in the preceding paragraph).
Upon any termination or expiration of the employment agreement, if Ms. Macpherson will receive severance payments of at least $100,000, she will be subject to a non-compete and non-solicitation restrictions for a period of six months after such expiration or termination. The non-compete will apply to any area within five (5) miles of any location where the Registrant designs, manufactures or sells premium contemporary knitwear.
Security Ownership
The following table below sets forth as of June 30, 2021, information about thewith respect to beneficial ownership of ourthe Company’s common stock as of December 31, 2016 by:
· | Each person known to |
· | Each of the post-Merger directors and executive officers of the Company. | |
| ||
· | ||
Unless otherwise noted below, the address of each beneficial owner listed on the tableBeneficial ownership is c/o Banjo & Matilda, Inc., 1221 2nd St, Santa Monica, CA, 90401 USA, Australia. We have determined beneficial ownership in accordance with the rules of the SEC. ExceptSecurities and Exchange Commission. Shares of common stock subject to any warrants or options that are presently exercisable or exercisable within 60 days of June 30, 2021, are deemed outstanding for the purpose of computing the percentage ownership of the person holding the warrants or options, but are not treated as indicated byoutstanding for the footnotes below, we believe,purpose of computing the percentage ownership of any other person. The numbers reflected in the percentage ownership columns are based on a fully diluted basis of the information furnished to us, thatCompany’s common stock outstanding after a conversion of the Series A Preferred Stock into Common Shares. The persons and entities named in the tables belowtable have sole voting and sole investment power with respect to all shares of common stock that they beneficially own,owned, subject to applicable community property laws where applicable.
Name of Beneficial Owner |
| Number of Series A Preferred Stock |
|
| Percentage Represented on a Fully Diluted Basis |
| ||
Micha Holdings, LLC (1) |
|
| 99,000 |
|
|
| 9.16 | % |
Ancient Investments, LLC (2) |
|
| 200,000 |
|
|
| 18.68 | % |
Basil Consulting, LLC (3) |
|
| 100,000 |
|
|
| 9.25 | % |
Christopher Sawchuk |
|
| 100,000 |
|
|
| 11.28 | % |
Spider Investments, LLC (4) |
|
| 100,000 |
|
|
| 9.25 | % |
All directors and executive officers as a group (four persons) |
|
| 300,000 |
|
|
| 29.01 | % |
_____________
(1) | Mr. Alberto Silva has control and dispositive power over Micha Holdings, LLC and is the beneficial owner of Micha Holdings, LLC. |
(2) | Mr. Keith Duffy is the Chairman and Chief Executive Officer of the Company, and is a beneficial owner of Ancient Investments, LLC. |
(3) | Mr. Cameron Cox is an Advisor to the Company and has control and dispositive power over the shares owned by Basil Consulting, LLC and is the beneficial owner of Basil Consulting, LLC. |
(4) | Mr. Edward C. DeFeudis is a Director of the Company, and has control and dispositive power over Spider Investments, LLC and is the beneficial owner of Spider Investments, LLC. |
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As of December 31, 2016, there was a total of 60,223,116 shares of common stock outstanding.
Name and Address Shares Owned Percent of Class Brendan Macpherson Belinda Storelli Macpherson (Jibon Trust) Raymond Key 396 Ladies Mile Lane Lake Hayes, Queenstown New Zealand 9304 All directors & officers as a group (2 persons) 18,551,916 (1),(2) 31.8 % 19,095,639 (3) 32.7 % 18,551,916 (1)(2) 31.8 %
_______________
(1) Shares are held by Jibon Trust of which Brendan Macpherson is the trustee. Does not include 1,000,000 shares of super-voting preferred stock issued to Mr. Macpherson under his employment agreement.
(2) Consists of shares held by Jibon Trust of which Brendan Macpherson, Ms. Macpherson's husband, is the trustee.
(3) Gives no effect to shares issuable upon conversion of convertible note owned by Mr. Kay.
Item 13.13. Certain Relationships and Related Transactions, and Director Independence
In July 2013, Banjo & Matilda entered into a loan facility agreement with Harboursafe Holdings, an affiliate of our chief executive officer. As of June 30, 2016, the principal amount owed under the loan facility was $183,269, bearing interest at the rate of 3% per annum (an aggregate of $29,653 of accrued interest as of June 30, 2016), which loan has matured and is currently due on demand. To secure the loan, Banjo & Matilda granted Harboursafe Holdings a security interest in the intellectual property acquired by Banjo & Matilda under the intellectual property sale agreement pursuant to which Banjo & Matilda acquired numerous clothing designs from Harboursafe Holdings.
In November 2013, Raymond Key made an unsecured loan to Banjo & Matilda. The loan matured in December 2013, and in January 2014,On August 25, 2020, the Company issued Raymond Key a one-year secured convertible note inpayable with a face value of $5,000 with a coupon rate of 6% to Keystone Business Development Partners, a Company owned by the Company’s CFO, Brian Carey. The note has a maturity date of three months. The agreement provides the holder has the option to convert the principal amount of $250,000 (the “Convertible Note”) in consideration of the rollover of the November 13, 2013 notebalance and an additional loan of $150,000. As of June 30, 2016, the Company owed Mr. Key a principal amount of $387,329, and the Convertible Note bears interest at the rate of 9% per annum (an aggregate of $50,709 ofany accrued interest was also owed as of June 30, 2016). All or any portion of the principal amount of the Convertible Note and all accrued interest is convertible at the option of the holder intoto common stock of the Company at a conversion price of $.05$.025 per share. In the event the holder does not elect to convert the note prior to maturity, the note will automatically convert to common stock at a price of $.025 per share. The Company's obligation under the Convertible Note is secured by a first liennote was converted into 203,025 common shares on substantially all of its assets, including its inventory, receivables, trademarks and trade names.November 25, 2020, which were issued on February 8, 2021.
Director Independence
We are not currently a “listed company” under SEC rules and are therefore not required to have a Board comprised of a majority of independent directors or separate committees comprised of independent directors. We currently do not have any independent directors as the term “independent” is defined by the rules of the Nasdaq Stock Market.
Item 14.14. Principal Accounting Fees and Services.
The following is a summary of the fees billed to us by Farber Hass Hurley LLPBF Borgers CPA, PC for professional services rendered for the fiscal yearsyear ended June 30, 20162021 and 2015:2020:
Fiscal Year Ended June 30, June 30, Audit Fees Audit Related Fees Tax Fees All Other Fees
2016
2015$ 32,000 $ 22,000 - - - - $ 32,000 $ 22,000
|
| Fiscal Year Ended |
| |||||
|
| June 30, |
|
| June 30, |
| ||
|
| 2021 |
|
| 2020 |
| ||
Audit Fees |
| $ | 34,900 |
|
| $ | 14,500 |
|
Audit Related Fees |
|
| - |
|
|
| - |
|
Tax Fees |
|
| - |
|
|
| - |
|
All Other Fees |
|
| - |
|
|
| - |
|
|
| $ | 34,900 |
|
| $ | 14,500 |
|
Audit Fees. Consists of fees billed for professional services rendered for the audit of our consolidated financial statements and review of interim consolidated financial statements included in quarterly reports and services that are normally provided in connection with statutory and regulatory filings or engagements.
Audit Related Fees. Consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit Fees”.
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Tax Fees. Consists of fees billed for professional services for tax compliance, tax advice and tax planning. These services include preparation of federal and state income tax returns.
All Other Fees. Consists of fees for product and services other than the services reported above.
Board of Directors' Pre-Approval Policies
Our Board of Directors' policy is to pre-approve all audit and permissible non-audit services provided by the independent auditors. These services may include audit services, audit related services, tax services, and other services. Pre-approval is generally provided for up to one year, and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent auditors and management are required to periodically report to the Board of Directors regarding the extent of services provided by the independent auditors in accordance with this pre-approval and the fees for the services performed to date. The Board of Directors may also pre-approve particular services on a case-by-case basis.
Our Board of Directors has reviewed and discussed with Farber Hass Hurley LLP,BF Borgers CPA P.C. (“BF”), our audited consolidated financial statements contained in this Annual Report on Form 10-K for the fiscal years ended June 30, 20162021 and 2015.2020. The Board of Directors also has discussed with Farber Hass Hurley LLPBF the matters required to be discussed pursuant to SAS No. 61 (Codification of Statements on Auditing Standards, AU Section 380), which includes, among other items, matters related to the conduct of the audit of our consolidated financial statements.
Our Board of Directors has received and reviewed the written disclosures and the letter from Farber Hass Hurley LLPBF required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), and has discussed with Farber Hass Hurley LLP its independence from our company.
Based on the review and discussions referred to above, the Board of Directors determined that the audited consolidated financial statements be included in our Annual Report on Form 10-K for our fiscal year ended June 30, 20162021 for filing with the SEC.
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Item 15.15. Exhibits Financial Statement Schedules.
(a) The following documents are filed as part of this report:
The audited consolidated balance sheet of the Company and its subsidiaries as of June 30, 2015 and June 30, 2014, the related consolidated statements of operations, changes in stockholders' equity and cash flows for the years then ended, the footnotes thereto, and the report of Farber Hass Hurley, LLP, independent auditors,following exhibits are filed herewith.herewith:
BANJO & MATILDA INC. AND SUBSIDIARIES June 30, June 30, 2016 2015 ASSETS CURRENT ASSETS Cash and cash equivalents Trade receivables, net Inventory, net Deposit on purchases Other assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Intangible assets, net Deferred financing costs, net Other receivable Property, plant and equipment, net TOTAL NON-CURRENT ASSETS TOTAL ASSETS LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES Trade and other payables Deposit payable Trade financing Accrued interest Loans payable Loan from related parties Convertible loan from related parties (net of related discount) TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Loans payable (net of related discount) (net of current portion) TOTAL LIABILITIES STOCKHOLDERS' DEFICIT Preferred stock, $0.00001 par value, 100,000,000 shares authorized and 1,000,000 shares issued and outstanding, respectively Common stock, $0.00001 par value, 100,000,000 shares authorized and 58,823,116 and 58,323,116 shares issued and outstanding, respectively Additional paid in capital Other accumulated comprehensive gain Accumulated deficit TOTAL STOCKHOLDERS' DEFICIT TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
BANJO & MATILDA, INC. AND SUBSIDIARIES FOR THE YEARS ENDED JUNE 30, 2016 AND 2015 June 30, 2016 June 30, 2015 Revenue Cost of sales Gross profit Payroll and employee related expenses Operating expense Marketing expense Samples & design expense Occupancy expenses Depreciation and amortization expense Finance Charges Corporate and public company expense Loss from operations Other Income (Expense) Other income Amortization of debt discount Interest expense Total Other Expense Loss before income tax Provision for income taxes Net loss Net loss per share Basic Diluted Weighted average number of shares outstanding: Basic Diluted
BANJO & MATILDA, INC. AND SUBSIDIARIES FOR THE YEARS ENDED JUNE 30, 2016 AND 2015 June 30, 2016 June 30, 2015 Net loss Other comprehensive income Foreign currency translation Total other comprehensive income Comprehensive loss
Additional Common Stock Preferred Stock Paid in Comprehensive Accumulated Stockholders' Shares Amount Shares Amount Capital Income Deficit Deficit Balance June 30, 2014 Adjustments to share issuances Issuance of share capital at merger Share issued Debt Discount Conversion of debt to equity Shares Issued in exchange for services Net (loss) income for the year ended June 30, 2015 - Balance June 30, 2015 Conversion of debt to equity Change in debt discount on modification of debt Change in estimate of debt discount Net (loss) income for the year ended June 30, 2016 Balance June 30, 2016
BANJO & MATILDA, INC. AND SUBSIDIARIES FOR THE YEARS ENDED JUNE 30, 2016 AND 2015 June 30, 2016 June 30, 2015 Net loss Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation Amortization Effect of exchange rate changes on cash and cash equivalents AR allowance Inventory Reserve Shares issued in exchange for services Debt discount amortization Amortization of deferred finance fee (Increase) / decrease in assets: Trade receivables Inventory Deposit on Purchases Other assets Other receivable Increase/ (decrease) in current liabilities: Trade payables and other liabilities Accrued interest Deposits payable Net cash provided by (used in) operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of stock Net proceeds (net payments) on related party loan Net proceeds from loan payables Deferred Financing Costs Net trade financing Net cash provided by (used in) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period SUPPLEMENTAL DISCLOSURES: Cash paid during the year for: Income tax payments Interest payments SUPPLEMENTAL DISCLOSURES FOR NON CASH: FINANCING AND INVESTING ACTIVITIES Debt converted to equity
June 30 June 30 2016 2015 Property, plant & equipment Accumulated depreciation
June 30 June 30 Basic and diluted 2016 2015 Net (loss) income Weighted average number of shares in computing basic and diluted net (loss) income Basic Diluted Net (loss) income per share basic and diluted Basic
June 30 June 30 2016 2015 Website Accumulated amortization
June 30 June 30 2016 2015 Trade payable Officer compensation Payroll payable Payroll taxes Employee benefits Other liabilities
Year ending June 30, Loan 1 Loan 2 Loan 3 Loan 4 Misc Total 2017 2018
June 30, June 30, Net loss carryforward Valuation allowance Total deferred tax assets
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