Loading...
Docoh

Xeriant (XERI)

Filed: 15 Feb 22, 4:53pm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended December 31, 2021

 

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

 

XERIANT, INC.

(Exact name of registrant as specified in its charter).

 

Nevada

27-1519178

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

Innovation Centre #13998 FAU Boulevard, Suite 309

Boca Raton, Florida

33431

(Address of principal executive offices)

(Zip code)

 

Registrant’s telephone number, including area code: (561) 491-9595

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading symbol

 

Name of exchange

on which registered

N/A

 

N/A

 

N/A

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, and an “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated Filer

Smaller reporting company

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition 13(a) of the Securities Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of February 12, 2022, the Registrant had outstanding 364,278,386 shares of common stock.

 

 

 

 

XERIANT, INC.

FORM 10-Q

TABLE OF CONTENTS

 

 

Page

 

 

Special Note regarding Forward-looking Statements

 

 3

 

 

PART I – Financial Information

 

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

 

4

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

5

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

10

 

Item 4.

Controls and Procedures

10

 

PART II – Other Information

Item 1.

Legal Proceedings

 

11

 

Item 1A.

Risk Factors

 

11

 

Item 2.

Unregistered Sales of Equity Securities

 

11

 

Item 3.

Defaults Upon Senior Securities

 

11

 

Item 4.

Mine Safety Disclosures

 

11

 

Item 5.

Other Information

 

11

 

Item 6.

Exhibits

 

12

 

 

Signatures

 

13

 

 
2

Table of Contents

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This document contains certain statements of a forward-looking nature. Such forward-looking statements, including but not limited to statements regarding projected growth, trends and strategies, future operating and financial results, financial expectations and current business indicators are based upon current information and expectations and are subject to change based on factors beyond the control of the Company. Forward-looking statements typically are identified by the use of terms such as “look,” “may,” “should,” “might,” “believe,” “plan,” “expect,” “anticipate,” “estimate” and similar words, although some forward-looking statements are expressed differently. The accuracy of such statements may be impacted by a number of risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including but not limited to those set forth herein and in our Annual Report on Form 10-K.

 

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Except as required by the federal securities laws, we undertake no obligation to update forward-looking information. Nonetheless, the Company reserves the right to make such updates from time to time by press release, periodic report or other method of public disclosure without the need for specific reference to this Report. No such update shall be deemed to indicate that other statements not addressed by such update remain correct or create an obligation to provide any other updates.

  

 
3

Table of Contents

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial statements

 

XERIANT, INC.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

(UNAUDITED)

 

INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Condensed Consolidated Balance Sheets as of December 31, 2021 (Unaudited) and June 30, 2021

F-1

 

 

 

Condensed Consolidated Statements of Operations for the three and six months ended December 31, 2021 and 2020 (Unaudited)

 

F-2

 

 

 

 

 

Condensed Consolidated Statements of Stockholder’s Deficit for the three and six months ended December 31, 2021 and 2020 (Unaudited)

 

F-3

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 2021 and 2020 (Unaudited)

 

F-5

 

 

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

F-6

  

 
4

Table of Contents

 

XERIANT, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

As of

December 31, 2021

 

 

As of

June 30, 2021

 

Assets

 

(Unaudited)

 

 

 

 

Current assets

 

 

 

 

 

 

Cash

$2,110,549

 

 

$962,540

 

Deposits

 

 

12,546

 

 

 

12,546

 

Prepaids

 

 

2,823

 

 

 

1,234

 

Total current assets

 

 

2,125,918

 

 

 

976,320

 

Property & equipment, net

 

 

4,907

 

 

 

 

 

Operating lease right-of-use asset

 

 

149,310

 

 

 

169,209

 

Total assets

 

$2,280,135

 

 

$1,145,529

 

 

 

 

 

 

 

 

 

 

Liabilities & stockholders’ deficit

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$23,744

 

 

$73,224

 

Accrued liabilities, related party

 

 

30,000

 

 

 

25,000

 

Convertible notes payable, net of discount

 

 

721,055

 

 

 

158,196

 

Lease liability, current

 

 

45,720

 

 

 

42,643

 

Total current liabilities

 

 

820,519

 

 

 

299,063

 

 

 

 

 

 

 

 

 

 

Lease liability, long-term

 

 

117,585

 

 

 

141,160

 

Total liabilities

 

 

938,104

 

 

 

440,223

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 8)

 

 

 -

 

 

 

 -

 

 

 

 

 

 

 

 

 

 

Stockholders’ deficit

 

 

 

 

 

 

 

 

Series A Preferred stock, $0.00001 par value; 100,000,000 authorized; 3,500,000 designated; 781,132 and 793,279 shares issued and outstanding at December 31, 2021 and June 30, 2021, respectively

 

 

8

 

 

 

8

 

Series B Preferred stock, $0.00001 par value; 100,000,000 authorized; 1,000,000 designated; 1,000,000 shares issued and outstanding at December 31, 2021 and June 30, 2021, respectively

 

 

10

 

 

 

10

 

Common stock, $0.00001 par value; 5,000,000,000 shares authorized; 358,202,770 and 292,815,960 shares issued and outstanding at December 31, 2021 and June 30, 2021, respectively

 

 

3,577

 

 

 

2,925

 

Common stock to be issued

 

 

347,900

 

 

 

51,090

 

Additional paid in capital

 

 

14,451,855

 

 

 

4,138,194

 

Accumulated deficit

 

 

(10,029,764)

 

 

(3,270,235)

Total Xeriant stockholder’s deficit

 

 

4,773,586

 

 

 

921,992

 

Non-controlling interest

 

 

(3,431,555)

 

 

(216,686)

Total stockholders’ deficit

 

 

1,342,031

 

 

 

705,306

 

Total liabilities and stockholders’ deficit

 

$2,280,135

 

 

$1,145,529

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

  

 
F-1

Table of Contents

 

XERIANT, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

 

For the three months ended

 

 

For the three months ended

 

 

For the six

 months ended

 

 

 

December 31,

 2021

 

 

December 31,

2020

 

 

December 31,

2021

 

 

December 31,

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing expense

 

$46,623

 

 

$1,027,109

 

 

$645,218

 

 

$1,027,109

 

General and administrative expenses

 

 

1,120,250

 

 

 

37,469

 

 

 

2,321,252

 

 

 

73,439

 

Professional fees

 

 

102,484

 

 

 

14,637

 

 

 

132,025

 

 

 

35,237

 

Related party consulting fees

 

 

130,925

 

 

 

41,500

 

 

 

213,425

 

 

 

78,000

 

Research and development expense

 

 

2,859,644

 

 

 

0

 

 

 

5,200,219

 

 

 

0

 

Total operating expenses

 

 

4,259,926

 

 

 

1,120,715

 

 

 

8,512,139

 

 

 

1,213,785

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

 

(4,259,926)

 

 

(1,120,715)

 

 

(8,512,139)

 

 

(1,213,785)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of debt discount

 

 

(1,264,931)

 

 

(66,449)

 

 

(1,413,959)

 

 

(112,410)

Amortization of debt discount, related party

 

 

(0)

 

 

 

(3,044)

 

 

(0)

 

 

 

(5,000)

Financing fees

 

 

0

 

 

 

 

 

 

 

(43,750)

 

 

0

 

Interest expense

 

 

(1,625)

 

 

(1,139)

 

 

(4,014)

 

 

(2,196)

Interest expense, related party

 

 

0

 

 

 

(46)

 

 

0

 

 

 

(76)

Gain on forgiveness of accounts payable

 

 

0

 

 

 

(1,956)

 

 

0

 

 

 

0

 

Loss on settlement of debt

 

 

(4)

 

 

0

 

 

 

(536)

 

 

(186,954)

Total other (expense)

 

 

(1,266,560)

 

 

(72,634)

 

 

(1,462,259)

 

 

(306,636)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-controlling interest

 

 

(2,037,053)

 

 

 

 

 

 

(3,214,869)

 

 

0

 

Common stockholders

 

 

(3,489,430)

 

 

 

 

 

 

(6,759,529)

 

 

0

 

Net loss

 

$(5,526,486)

 

$(1,193,349)

 

$(9,974,398)

 

$(1,520,421)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share - basic and diluted

 

$(0.02)

 

$(0.01)

 

$(0.03)

 

$(0.01)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding - basic and diluted

 

 

352,796,331

 

 

 

234,451,953

 

 

 

328,392,903

 

 

 

176,685,459

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 
F-2

Table of Contents

  

XERIANT, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT

'FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2021

(UNAUDITED)

  

 

 

 Series A Preferred Stock

 

 

 Series B

Preferred Stock

 

 

 Common stock 

 

 

 Additional

 Paid in

 

 

  Stock

 

 

 Accumulated 

 

 

 Non-Controlling

 

 

 

 

 

 

Shares

 

 

 Amount

 

 

Shares

 

 

 Amount

 

 

Shares

 

 

 Amount

 

 

 Capital

 

 

 

 

 

 Deficit

 

 

 Interest

 

 

  Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock committed in prior period

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

400,000

 

 

 

4

 

 

 

47,996

 

 

 

(48,000)

 

 

0

 

 

 

0

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sale of common stock

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

7,500,000

 

 

 

75

 

 

 

499,925

 

 

 

1,168,500

 

 

 

0

 

 

 

0

 

 

 

1,668,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued as equity kicker

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

250,000

 

 

 

3

 

 

 

43,750

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

43,753

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of warrants

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

4,185,000

 

 

 

41

 

 

 

125,509

 

 

 

3,000

 

 

 

0

 

 

 

0

 

 

 

128,550

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of Series A Preferred to Common Stock

 

 

(4,000)

 

 

0

 

 

 

0

 

 

 

0

 

 

 

4,000,000

 

 

 

40

 

 

 

(40)

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of convertible notes and accrued interest

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

10,598,544

 

 

 

106

 

 

 

176,054

 

 

 

(3,090)

 

 

0

 

 

 

0

 

 

 

173,070

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock issued for services

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

2,825,000

 

 

 

27

 

 

 

449,173

 

 

 

91,900

 

 

 

0

 

 

 

0

 

 

 

541,100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock option compensation

 

 

-

 

 

 

0

 

 

 

-

 

 

 

0

 

 

 

-

 

 

 

0

 

 

 

1,060,324

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

1,060,324

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of beneficial conversion feature associated with convertible debt

 

 

-

 

 

 

0

 

 

 

-

 

 

 

0

 

 

 

-

 

 

 

0

 

 

 

250,000

 

 

 

0

 

 

 

0

 

 

0

 

 

 

250,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

 

-

 

 

 

0

 

 

 

-

 

 

 

0

 

 

 

-

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

(3,270,099)

 

 

(1,177,816)

 

 

(4,447,915)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance September 30, 2021

 

 

784,270

 

 

$8

 

 

 

1,000,000

 

 

$10

 

 

 

322,574,504

 

 

$3,221

 

 

$6,790,885

 

 

$1,263,400

 

 

$(6,540,334)

 

$(1,394,502)

 

$122,688

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock committed in prior period

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

23,266,666

 

 

 

233

 

 

 

1,162,267

 

 

 

(1,162,500)

 

 

0

 

 

 

0

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sale of common stock

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

8,200,000

 

 

 

82

 

 

 

409,918

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

410,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of warrants

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

123,600

 

 

 

1

 

 

 

2,999

 

 

 

(3,000)

 

 

0

 

 

 

0

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of Series A Preferred to Common Stock

 

 

(3,138)

 

 

0

 

 

 

0

 

 

 

0

 

 

 

3,138,000

 

 

 

31

 

 

 

(31)

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of convertible notes and accrued interest

 

 

-

 

 

 

0

 

 

 

-

 

 

 

0

 

 

 

-

 

 

 

0

 

 

 

0

 

 

 

250,000

 

 

 

0

 

 

 

0

 

 

 

250,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock issued for services

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

900,000

 

 

 

9

 

 

 

116,095

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

116,104

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock option compensation

 

 

-

 

 

 

0

 

 

 

-

 

 

 

0

 

 

 

-

 

 

 

0

 

 

 

827,221

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

827,221

 

Fair value of warrants associated with convertible debt

 

 

-

 

 

 

0

 

 

 

-

 

 

 

0

 

 

 

-

 

 

 

0

 

 

 

2,777,081

 

 

 

0

 

 

 

0

 

 

0

 

 

 

2,777,081

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of beneficial conversion feature associated with convertible debt

 

 

-

 

 

 

0

 

 

 

-

 

 

 

0

 

 

 

-

 

 

 

0

 

 

 

2,365,419

 

 

 

0

 

 

 

0

 

 

0

 

 

 

2,365,419

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

 

-

 

 

 

0

 

 

 

-

 

 

 

0

 

 

 

-

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

(3,489,430)

 

 

(2,037,053)

 

 

(5,526,483)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance December 31, 2021

 

 

781,132

 

 

$8

 

 

 

1,000,000

 

 

$10

 

 

 

358,202,770

 

 

$3,577

 

 

$14,451,855

 

 

$347,900

 

 

$(10,029,764)

 

$(3,431,555)

 

$1,342,031

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 
F-3

Table of Contents

 

XERIANT, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

For the six months ended

 

 

 

December 31,

2021

 

 

December 31,

2020

 

 

 

 

 

 

 

 

Cash Flows from Operating Activities

 

 

 

 

 

 

Net Loss

 

$(9,974,398)

 

$(1,520,421)

Adjustments to reconcile net loss to net  cash used by operating activities:

 

 

 

 

 

 

 

 

Depreciation and Amortization

 

 

83

 

 

 

0

 

Stock compensation expense

 

 

1,887,545

 

 

 

1,027,109

 

Stock issued for services

 

 

657,204

 

 

 

-

 

Financing fees

 

 

43,750

 

 

 

0

 

Loss on settlement of debt

 

 

0

 

 

 

186,954

 

Amortization of Debt Discount

 

 

1,413,959

 

 

 

112,410

 

Amortization of Debt Discount, Related Party

 

 

0

 

 

 

5,000

 

Changes in operating assets & liabilities

 

 

 

 

 

 

 

 

Operating lease right of use asset

 

 

19,899

 

 

 

247

 

Lease liabilities

 

 

(20,498)

 

 

0

 

Deposits and prepaids

 

 

(1,589)

 

 

271

 

Accounts payable and accrued liabilities

 

 

(49,475)

 

 

25,873

 

Accrued liability, related party

 

 

5,000

 

 

 

0

 

Accrued expenses

 

 

5,520

 

 

 

0

 

Net cash used by operating activities

 

 

(6,013,001)

 

 

(162,557)

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(4,990)

 

 

0

 

Net cash used in financing activities

 

 

(4,990)

 

 

0

 

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

Sale of common stock

 

 

2,078,500

 

 

 

51,000

 

Cash from exercise of warrants

 

 

128,550

 

 

 

0

 

Proceeds from convertible notes payable

 

 

4,958,950

 

 

 

92,300

 

Net cash provided by financing activities

 

 

7,166,000

 

 

 

143,300

 

 

 

 

 

 

 

 

 

 

Increase in Cash

 

 

1,148,009

 

 

 

(19,257)

 

 

 

 

 

 

 

 

 

Cash at beginning of period

 

 

962,540

 

 

 

38,893

 

 

 

 

 

 

 

 

 

 

Cash at end of period

 

$2,110,549

 

 

$19,636

 

 

 

 

 

 

 

 

 

 

Supplemental Cash Flow Information

 

 

 

 

 

 

 

 

Cash paid for interest

 

$0

 

 

$0

 

Cash paid for income taxes

 

$0

 

 

$0

 

 

 

 

 

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Conversion of convertible notes payable and accrued interest

 

$437,246

 

 

$129,859

 

Warrants issued with convertible notes payable

 

$2,777,081

 

 

$42,795

 

Beneficial conversion feature arising from convertible notes payable

 

$2,615,419

 

 

$49,505

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 
F-4

Table of Contents

 

XERIANT, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED 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), the transition to eco-friendly, on demand flight, making air transportation more accessible and 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. 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 and the members of American Aviation Technologies, LLC (“AAT”) entered into a Share Exchange Agreement (“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 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

 

Basis of Presentation

 

The unaudited condensed consolidated financial statements of the Company and the accompanying notes included in this Quarterly Report are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the unaudited consolidated condensed financial statements have been included. Such adjustments are of a normal, recurring nature. The unaudited condensed consolidated financial statements, and the accompanying notes, are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). Results for the interim periods presented are not necessarily indicative of the results that might be expected for the entire fiscal year. These financial statements should be read in conjunction with the company’s latest annual financial statements.

 

Principles of Consolidation

 

The condensed consolidated unaudited financial statements include the accounts of Xeriant, Inc., American Aviation Technologies, LLC, and Eco-Aero, LLC. All material intercompany accounts, transactions and profits were eliminated in consolidation. These financial statements should be read in conjunction with the company’s latest annual financial statements.

 

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-5

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 December 31, 2021 and 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 against 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 December 31, 2021 and June 30, 2021 there are no accounts receivable.

  

 
F-6

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 six months ended December 31, 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 six months ended December 31, 2021, the Company recorded a BCF in the amount of $2,365,419.

 

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 $5,200,219 and $0 for the six months ended December 31, 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 $164,713 and $0 for the six months ended December 31, 2021 and 2020, respectively. These expenses are included within sales in marketing expenses in the statements of operations.

 

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 six months ended December 31, 2021 and 2020, respectively.

  

 
F-7

Table of Contents

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

 

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 August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2024 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The adoption of ASU 2020-06 is expect to have material impact on the Company’s 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 December 31, 2021, the Company had $1,855,883 in excess of FDIC insurance.

  

 
F-8

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 2022 as COVID-19 cases went up significantly in the first quarter 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:

 

 

 

December 31,

 

 

 

2021

 

Office lease

 

$220,448

 

Less: accumulated amortization

 

 

(71,138)

Right-of-use asset, net

 

$149,310

 

 

Operating lease liability is summarized below:

 

 

 

December 31,

2021

 

Office lease

 

$163,305

 

Less: current portion

 

 

(45,720)

Long term portion

 

 

117,585

 

 

Maturity of the lease liability is as follows:

 

Fiscal year ending June 30, 2022

 

$29,607

 

Fiscal year ending June 30, 2023

 

 

60,392

 

Fiscal year ending June 30, 2024

 

 

62,201

 

Fiscal year ending June 30, 2025

 

 

37,112

 

 

 

 

189,312

 

Present value discount

 

 

(26,007)

Lease liability

 

$163,305

 

  

 
F-9

Table of Contents

 

NOTE 6 - CONVERTIBLE NOTES PAYABLE

 

The carrying value of convertible notes payable, net of discount, as of December 31, 2021 and June 30, 2021 was $721,055 and $158,196, respectively, as summarized below:

 

The following table illustrates the carrying values for the convertible notes payable as of December 31, 2021 and June 30, 2021:

 

 

 

December 31,

 

 

June 30,

 

Convertible Notes Payable

 

2021

 

 

2021

 

Convertible notes payable issued January 5, 2021 (6% interest)

 

$0

 

 

$25,000

 

Convertible notes payable issued January 11, 2021 (6% interest)

 

 

0

 

 

 

142,550

 

Convertible notes payable issued August 9, 2021 (6% interest)

 

 

0

 

 

 

0

 

Convertible notes payable issued August 10, 2021 (6% interest)

 

 

0

 

 

 

0

 

Convertible notes payable issued October 27, 2021 (0% interest) – Auctus Fund LLC

 

 

6,050,000

 

 

 

0

 

Total face value

 

 

6,050,000

 

 

 

167,550

 

Less unamortized discount

 

 

(5,328,945)

 

 

(9,354)

Carrying value

 

$721,055

 

 

$158,196

 

 

Between September 27, 2019 and August 10, 2021, the Company issued convertible notes payable with an aggregate face value of $892,300, of which $342,950 were issued by our subsidiary AAT. The notes have a coupon rate of 6% and maturity dates between 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 $892,300, $342,950 is convertible at $.0033 per share, $87,000 is convertible at $0.025 per share, $180,550 is convertible at $.03 per share, $31,800 is convertible at $0.003 per share, and the remaining $250,000 is convertible at $.06 per share

 

Between March 27, 2020 and July 11, 2021, holders of the convertible notes converted the $342,950 in principal (the full balance of the AAT Notes) and $10,290 in accrued interest into 107,042,708 shares of common stock. Between November 10, 2020 and July 11, 2021, holders of the convertible notes converted $299,350 in principal and $7,224 in accrued interest into 19,641,327 shares of common stock. During the six months ended December 31, 2021, holders of the convertible notes converted $417,550 in principal and $5,520 in accrued interest into 10,598,544 shares of common stock. The remaining principal balance of the notes as of December 31, 2021 was $0. The Company have not issued the stock for the conversion of $100,000 convertible notes payable issued on August 9, 2021 and $150,000 convertible notes payable issued on August 10, 2021 and recorded under common stock to be issued as of December 31, 2021.

 

The Company evaluated these notes 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.

 

In connection with the notes, the Company issued warrants to purchase 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 $512,906 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 six months ended December 31, 2021 and 2020, the Company recorded $1,413,959 and $112,410 in amortization of debt discount related to the notes. For the six months ended December 31, 2021 and 2020, the Company recorded $4,014 and $2,196 in interest expense related to the notes, respectively.

 

Auctus Fund LLC

 

On October 27, 2021, the Company issued a convertible note payable with Auctus Fund, LLC (the “Auctus Note”) with the principal sum of $6,050,000, which amount is the $5,142,500 actual amount of the purchase price, hereof plus an original issue discount in the amount of $907,500 and to pay interest on the unpaid principal amount hereof at the rate of zero percent per annum from the issue date until the note becomes due and payable, and $433,550 for professional fees in completing the transactions, so the net proceeds from the Auctus Fund LLC was $4,708,950. The note has a maturity date of twelve 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 lesser of (i) $0.1187 or (ii) 75% of the offering price per share divided by the number of shares of common stock.

 

In connection with the notes, the Company issued warrants indexed to an aggregate 50,968,828 shares of common stock. The warrants have a term of five years and an exercise price of $0.1187. The warrants were recorded at fair value of $2,777,081 to additional-paid-in-capital in accordance with ASC 815-10 based upon the allocation of the debt proceeds. The Company estimated the fair value of the warrants using a Black-Scholes option-pricing model, which is based, in part, upon subjective assumptions including but not limited to stock price volatility, the expected life of the warrants, the risk-free interest rate and the fair value of the common stock underlying the warrants. The Company estimates the volatility of its stock based on the average of three similar size public companies peer group historical volatility that is in line with the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon bond for a maturity similar to the expected remaining life of the warrants. The expected remaining life of the warrants is assumed to be equivalent to their remaining contractual term.

 

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 $2,365,419 conversion feature in additional paid-in capital. The BCF resulted in a debt discount and are amortized over the life of the note.

 

For the six months ended December 31, 2021, the Company recorded $1,154,605 amortization of debt discount related to the Auctus note.

  

 
F-10

Table of Contents

 

NOTE 7 - 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 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 six months ended December 31, 2021 and 2020, the Company recorded $0 and $5,000 in amortization of debt discount related to the note. For the six months ended December 31, 2021 and 2020, the Company recorded $0 and $76 in interest expense related to the note, respectively.

 

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.

  

 
F-11

Table of Contents

 

Consulting fees

 

During the three months ended December 31, 2021 and 2020, the Company recorded $41,000 and $36,000 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 three months ended December 31, 2021 and 2020, the Company recorded $28,000 and $0 respectively, in consulting fees to Edward DeFeudis, a Director of the Company.

 

During the three months ended December 31, 2021 and 2020, the Company recorded $19,000 and $22,500 respectively, in consulting fees to AMP Web Services, a Company owned by the Company’s CTO, Pablo Lavigna.

 

During the three months ended December 31, 2021 and 2020, the Company recorded $7,500 and $15,000 respectively, in consulting fees to Keystone Business Development Partners, a Company owned by the Company’s CFO, Brian Carey. As of December 31, 2021 and June 30, 2021, $30,000 and $25,000 was recorded in accrued liabilities related to Keystone Business Development Partners, respectively.

 

NOTE 8 - COMMITMENTS AND CONTINGENCIES

 

During the normal course of business, the Company may be exposed to litigation. When the Company becomes aware of potential litigation, it evaluates the merits of the case in accordance with FASB ASC 450-20-50, Contingencies. The Company evaluates its exposure to the matter, possible legal or settlement strategies and the likelihood of an unfavorable outcome. If the Company determines that an unfavorable outcome is probable and can be reasonably estimated, it establishes the necessary accruals.

 

Joint Venture

 

In connection with the Eco-Aero, LLC Joint Venture, discussed in Note 3, the Company is obligated to invest $10,000,000 into the joint venture.

 

Financial Advisory Agreements

 

On August 10, 2021, the Company entered into an Advisory Agreement with a firm to assist the Company with fundraising activities. In connection with the agreement, the Company has the following commitments:

 

 

·

to issue 500,000 shares payable at the date of the agreement, 500,000 shares payable three months from the date of the agreement, 500,000 shares payable six months from the date of the agreement.

 

 

 

 

·

Pay a financing fee of 1.5% of gross proceeds received by the Company up to $100,000,000; a financing fee of 1.25% of gross proceeds received by the Company from $100,000,000-$200,000,000, and a financing fee of 1% of gross proceeds received by the Company over $200,000,000

 

 

 

 

·

M&A fee of 1.5% of the value of a business or asset sold up to $50,000,000; an M&A fee of 1.25% of value of a business or asset sold from $50,000,000-$100,000,000, an M&A fee of 1% of value of a business or asset sold from $100,000,000-$200,000,000, and an M&A fee of 0.5% of value of a business or asset sold over $200,000,000

 

During the three and six months ended December 31, 2021, the Company issued the initial 500,000 shares and second tranche of 500,000 shares.

 

On August 19, 2021, the Company entered into an Advisory Agreement with a firm to assist the Company with fundraising activities. In connection with the agreement, the Company has the following commitments:

 

 

·

Issue 2,225,000 common shares payable at the date of the agreement, and 2,225,000 common shares payable upon an uplisting of the Company’s common stock to a national exchange.

 

 

 

 

·

Pay a cash fee of seven percent 7% of the amount of capital raised, invested or committed; and deliver a warrant (the “Agent Warrant”) to purchase shares of the Common Stock equal to seven percent (7%) of the number of shares of Common Stock underlying the securities issued in the Financing.

 

 

 

 

·

Pay a cash fee for entering into a transaction including, without limitation, a merger, acquisition or sale of stock or assets equal to one and one half percent (1.5%), or in the event a transaction is consummated with a party that was in communication with the Company prior to the date of this contract, then the fee shall equal one half percent (0.5%).

 

During the six months ended December 31, 2021, the Company issued the initial 2,225,000 shares.

  

 
F-12

Table of Contents

 

Litigation

 

On September 1, 2021, Xeriant Inc. brought a cause of action in the Southern District of Florida against a former shareholder for claims, including but not limited to, breach of contract, misrepresentation, and asserting claims to recoup monetary and in-kind distributions made to the shareholder by the Company. The defendant submitted an affirmative defense and counterclaim on October 29, 2021.

 

Board of Advisor Agreements

 

The Company has entered into advisor agreements with various advisory board members. The agreements provide for the following:

 

On October 27, 2020, the Company agreed to issue 300,000 common shares immediately, 2-year cashless warrants to purchase 300,000 common shares at the current price, and $2,500 per meeting paid 50% in cash and 50% in common shares.

 

On January 18, 2021, the Company agreed to issue 50,000 common shares, two-year cashless warrants to purchase 25,000 common shares at the current price, and $2,500 per meeting paid in cash, common shares, or a combination.

 

On January 22, 2021, the Company agreed to issue 50,000 common shares, two-year cashless warrants to purchase 25,000 common shares at the current price, and $2,500 per meeting paid in cash, common shares, or a combination.

 

On March 7, 2021 the Company paid an advisor $2,500 and issued 50,000 common shares.

 

On July 1, 2021, the Company agreed to issue 100,000 common shares, and $2,500 per meeting paid in cash, common shares, or a combination, an additional bonus of $25,000 paid in common shares issued at the end of each year of service, an option to purchase 5,000,000 common shares at $0.12 per share, vesting quarterly over 24 months, and for each of the following three years (beginning July 1, 2022), an option to purchase an additional 1,000,000 common shares per year thereafter at a 25% discount to the average market price for the preceding 10 trading days.

 

On July 6, 2021, provided an option to purchase 5,000,000 common shares at $0.12 per share, vesting quarterly over 24 months, a bonus of 250,000 common shares issued upon a strategic partnership with a major airline, $2,500 per formal meeting paid in common shares, and an additional bonus of $25,000 paid in common shares issued at the end of each year of service.

 

On July 28, 2021, the Company agreed to issue 250,000 common shares immediately, an option to purchase 5,000,000 common shares at $0.12 per share, vesting quarterly over 24 months, a bonus of 5,000,000 common shares for bringing in a strategic partner that significantly strengthens the Company’s market position, $2,500 per formal meeting paid in cash, common shares or a combination, and an additional bonus of $25,000 paid in common shares issued at the end of each year of service

 

On August 9, 2021, the Company agreed to issue 50,000 common shares, $2,500 per meeting paid in cash, common shares, or a combination, and an additional bonus of $25,000 paid in common shares issued at the end of each year of service.

 

On August 20, 2021, the Company agreed to issue 100,000 common shares, and $2,500 per meeting paid in cash, common shares, or a combination, an additional bonus of $25,000 paid in common shares issued at the end of each year of service, an option to purchase 4,000,000 common shares at $0.12 per share, vesting quarterly over 24 months.

 

Other Previously Announced Joint Ventures and Letters of Intent

 

The Company has announced its intention to enter into certain joint ventures and partnerships over the past 12 months, namely Praga Avia, CoFlow Jet, and TheIncLab. Due to the Company’s focus on its joint development with XTI Aircraft Company, the advancement of these partnerships has been put on hold. The Company anticipates revisiting these opportunities after the completion of a public offering when the Company is fully staffed and adequately financed. The Company signed a term sheet in January 2022 with Movychem s.r.o. for a joint venture. Both parties expect to sign a final definite agreement in February 2022.

  

 
F-13

Table of Contents

 

NOTE 9 - EQUITY

 

Common Stock

 

During the three months ended September 30, 2021, the Company issued 400,000 shares of common stock related to a subscription agreement from the previous fiscal year, which were previously recorded in common stock to be issued at $48,000.

 

During the three months ended September 30, 2021, the Company sold 7,500,000 shares of common stock for aggregate proceeds of $500,000, or $0.10per share.

 

In connection with one of the subscription agreements, the Company issued 250,000 shares as an equity kicker valued at $43,750, which has been expensed as a financing costs.

 

During the three months ended September 30, 2021, the Company issued 4,185,000 shares of common stock as a result of warrant exercises in the aggregate proceeds of $125,550.

 

During the three months ended September 30, 2021, the Company issued 4,000,000 shares of common stock in exchange for the conversion of 4,000 shares of Series A Preferred Stock.

 

During the three months ended September 30, 2021, the Company issued 10,598,544 shares of common stock for the conversion of $167,550 in principal and $4,985 in accrued interest. This resulted in a loss on extinguishment of debt in the amount of $535.

 

During the three months ended September 30, 2021, the Company issued 2,825,000 shares of common stock for services, valued at $449,200.

 

During the three months ended December 31, 2021, the Company sold 8,200,000 shares of common stock for aggregate proceeds of $410,000, or $0.05 per share.

 

During the three months ended December 31, 2021, the Company issued 23,266,666 shares of common stock for aggregate proceeds of $1,162,500, or $0.05 per share for the sale of common shares that has not been issued in the quarter ended September 30, 2021.

 

During the three months ended December 31, 2021, the Company issued 123,600 shares of common stock for the $3,000 exercise of warrants in the quarter ended September 30, 2021.

 

During the three months ended December 31, 2021, the Company issued 3,138,000 shares of common stock in exchange for the conversion of 3,318 shares of Series A Preferred Stock.

 

During the three months ended December 31, 2021, the Company issued 900,000 shares of common stock for services, valued at $116,105.

 

Common Stock to be Issued

 

During the three months ended September 30, 2021, the Company sold 200,000 shares of common stock for aggregate proceeds of $6,000, or $0.03 per share. As of December 31, 2021, these shares are categorized in common stock to be issued.

 

During the three months ended September 30, 2021, the Company agreed to pay a consultant 250,000 shares in exchange to $45,500 in services. As of December 31, 2021, these shares are categorized in common stock to be issued.

 

During the three months ended September 30, 2021, the Company agreed to issue advisory board members 250,000 shares in exchange for $46,400 in services. 200,000 shares vest on a quarterly basis over one year and 50,000 shares vest completely after a year. As of December 31, 2021, these shares are categorized in common stock to be issued.

 

During the three months ended December 31, 2021, the Company received conversion of convertible notes payable of total $250,000.

  

 
F-14

Table of Contents

 

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 December 31, 2021 and June 30, 2021, the Company has 781,132 and 788,270 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 rescinded 990,000 Series A Preferred Shares, which represented all preferred shares issued to one of the shareholders in the 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 AAT by the value of these preferred shares.

 

During the six months ended December 31, 2021, the Company issued 3,138,000 shares of common stock in exchange for the conversion of 3,138 shares of Series A Preferred Stock.

 

Series B Preferred Stock

 

On March 25, 2021, the Certificate of Designation for the Series B Preferred was recorded by the State of Nevada. There are 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 no liquidation preference.

 

 
F-15

Table of Contents

 

Stock Options

 

In connection with certain advisory board compensation agreements, the Company issued an aggregate 19,000,000 options at an exercise price of $0.12 per share. These options vest quarterly over twenty-four months and have a term of three years. The grant date fair value was $3,543,787. The Company recorded compensation expense in the amount of $1,887,545 for the six months ended December 31, 2021 for these options.

 

As of December 31, 2021, there are 19,000,000 options outstanding, of which 2,375,000 are exercisable. The weighted averaged remaining term is 2.55 years.

 

Significant inputs and results arising from the Black-Scholes process are as follows for the options:

 

Quoted market price on valuation date

 

$0.169 - $0.23

 

Exercise prices

 

$0.12

 

Range of expected term

 

1.55 Years – 2.49 Years

 

Range of market volatility:

 

 

 

 

Range of equivalent volatility

 

215.12%-275.73

Range of interest rates

 

0.20%-0.47

 

Warrants

 

As of December 31, 2021 and June 30, 2021, the Company had 55,512,161 and 8,848,333 warrants outstanding, respectively. The warrants were issued in connection with the Convertible Notes (See Note 6). The warrants have a term of two to five years and an exercise price range from $0.1187 to $.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 $2,933,305. During the six months ended December 31, 2021, holders of warrants exercised warrants for 4,305,000 shares of common stock for aggregate proceeds of $128,550. As of December 31, 2021, the weighted average remaining useful life of the warrants was 1.08.

 

NOTE 10 - NON-CONTROLLING INTEREST

 

AAT membership unit adjustment

 

On May 12, 2021, on further advice of counsel and in good faith, the Company returned 3,600,000 membership units of American Aviation Technologies, LLC to a former shareholder, which was his consideration provided in the Share 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.

  

 
F-16

Table of Contents

 

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 assets and liquidation of liabilities in the normal course of business. As of December 31, 2021 and June 30, 2021, the Company had $2,110,549 and $962,540 in cash and $1,305,399 and $677,257 in working capital, respectively. For the six months ended December 31, 2021 and 2020, the Company had a net loss of $9,974,398 and $1,520,421, respectively. Continued losses may adversely affect the liquidity of the Company in the future. Therefore, the factors noted above raise substantial doubt about our ability to continue as a going concern. The recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheets is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to raise additional capital, obtain financing and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s existence is dependent upon management’s ability to develop profitable operations and resolve its liquidity problems.

 

NOTE 12 - SUBSEQUENT EVENTS

   

In February 2022, the Company issued 4,229,680 common shares for the conversion of convertible notes payable of total $250,000 and additional 845,936 common shares as additional financing costs to these two convertible holders.

 

In February 2022, the Company issued 1,000,000 common shares from the conversion of 1,000 Series A preferred stock.

  

 
F-17

Table of Contents

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 

 

The following discussion of our financial condition and results of operations should be read in conjunction with the audited and unaudited financial statements and the notes to those statements included elsewhere in this Report. This discussion contains forward-looking statements that involve risks and uncertainties. You should specifically consider the various risk factors identified in this Report that could cause actual results to differ materially from those anticipated in these forward-looking statements.

 

Forward-Looking Statements

 

This Quarterly Report on Form 10-Q contains forward looking statements, including without limitation, statements related to our plans, strategies, objectives, expectations, intentions and adequacy of resources. Investors are cautioned that such forward-looking statements involve risks and uncertainties including without limitation the following: (i) our plans, strategies, objectives, expectations and intentions are subject to change at any time at our discretion; (ii) our plans and results of operations will be affected by our ability to manage growth; and (iii) other risks and uncertainties indicated from time to time in our filings with the Securities and Exchange Commission.

 

In some cases, you can identify forward-looking statements by terminology such as ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘could,’’ ‘‘expects,’’ ‘‘plans,’’ ‘‘intends,’’ ‘‘anticipates,’’ ‘‘believes,’’ ‘‘estimates,’’ ‘‘predicts,’’ ‘‘potential,’’ or ‘‘continue’’ or the negative of such terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We are under no duty to update any of the forward-looking statements after the date of this Report.

 

This section of the report should be read together with Footnotes of the Company audited financials for the year ended June 30, 2021. The unaudited statements of operations for the three and six months ended December 31, 2021 and 2020 are compared in the sections below.

 

Brief Corporate History

 

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 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.

  

 
5

Table of Contents

 

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.

 

Three months ended December 31, 2021 compared to the three months ended December 31, 2020

 

 

 

For the three months ended

 

 

 

 

 

December 31,

2021

 

 

December 31,

2020

 

 

 $

 

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing expense

 

$46,623

 

 

$1,027,109

 

 

$(980,486)

 

 

95%

General and administrative expenses

 

 

1,120,250

 

 

 

37,469

 

 

 

1,082,781

 

 

 

2889.80%

Professional fees

 

 

102,484

 

 

 

14,637

 

 

 

87,848

 

 

 

600.18%

Related party consulting fees

 

 

130,925

 

 

 

41,500

 

 

 

89,425

 

 

 

215.48%

Research and development expense

 

 

2,859,644

 

 

 

-

 

 

 

2,859,644

 

 

 

100%

Total operating expenses

 

 

4,259,926

 

 

 

1,120,715

 

 

 

3,139,211

 

 

 

280.11%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(4,259,926)

 

 

(1,120,715)

 

 

3,139,211

 

 

 

280.11%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of debt discount

 

 

(1,264,931)

 

 

(66,449)

 

 

(1,198,482)

 

 

1,803.61%

Amortization of debt discount, related party

 

 

-

 

 

 

(3,044)

 

 

3,044

 

 

 

100%

Interest expense

 

 

(1,625)

 

 

(1,139)

 

 

(486)

 

 

42.67%

Interest expense, related parties

 

 

-

 

 

 

(46)

 

 

(46)

 

 

100%

Gain on forgiveness of accounts payable

 

 

-

 

 

 

(1,956)

 

 

1,956

 

 

 

100%

Loss on settlement of debt

 

 

(4)

 

 

-

 

 

 

(4)

 

 

100%

Total other income (expense)

 

 

(1,266,560)

 

 

(72,634)

 

 

(1,193,926)

 

 

1,643.76%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$(5,526,486)

 

 

(1,193,349)

 

 

(4,333,137)

 

 

363.11%

 

Sales and Marketing Expense

 

Sales and marketing expense was $46,623 for the three months ended December 31, 2021 compared to $1,027,109 for the three months ended December 31, 2020. During the three months ended December 31, 2021, the Company was putting less money into investor relationship to market the Company.

   

General and Administrative Expenses

 

Total general and administrative expenses were $1,120,250 for the three months ended December 31, 2021 compared to $37,469 for the three months ended December 31, 2020. The increase of $1,082,781 primarily relates to options valued at $827,221 for advisory board services.

 

Professional Fees

 

Total professional fees were $102,484 for the three months ended December 31, 2021 compared to $14,637 for the three months ended December 31, 2020. The increase of $87,847 primary relates to legal fees.

  

 
6

Table of Contents

 

Related Party Consulting Fees

 

Total related party consulting fees were $130,925 for the three months ended December 31, 2021 compared to $41,500 for the three months ended December 31, 2020. The increase of $89,425 was primarily related to $28,000 in new related party expenses coupled with an increase in the pay of existing related party.

 

Research and Development Expenses

 

Total research and development expenses were $2,859,644 for the three months ended December 31, 2021 compared to $0 for the three months ended December 31, 2020. The research and development costs were mainly related to the development of an aircraft through our Eco-Aero joint venture and $92,746 expenditure to Movychem, a Slovakian limited liability company for research and development in advanced materials and chemicals.

   

Other Expenses

 

Total other income (expenses) were ($1,266,560) for the three months ended December 31, 2021 compared to ($72,634) for the three months ended December 31, 2020. Total other expenses consist of interest expense on debt, amortization of debt and loss on settlement of debt. The increase of $1,193,926 was primarily related the Company recording amortization of debt discount during the three months ended December 31, 2021 in the amount of $1,264,931.

 

Net loss

 

Total net loss was $5,526,486 for the three months ended December 30, 2021 compared to $1,193,349 for the three months ended December 31, 2020. The increase of $4,333,137 was primarily due to research and development expenses of $2,766,898 and equity based compensation of $943,326.

 

Six months ended December 31, 2021 compared to the six months ended December 31, 2020

 

 

 

For the six months ended

 

 

 

 

 

December 31,

2021

 

 

December 31,

2020

 

 

$

 

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing expense

 

$645,218

 

 

$1,027,109

 

 

$(381,891)

 

 

37.18%

General and administrative expenses

 

 

2,321,252

 

 

 

73,439

 

 

 

2,247,813

 

 

 

3060.79%

Professional fees

 

 

132,025

 

 

 

35,237

 

 

 

96,788

 

 

 

274.68%

Related party consulting fees

 

 

213,425

 

 

 

78,000

 

 

 

135,425

 

 

 

173.62%

Research and development expense

 

 

5,200,219

 

 

 

-

 

 

 

5,200,219

 

 

 

100%

Total operating expenses

 

 

8,512,139

 

 

 

1,213,785

 

 

 

7,298,354

 

 

 

601.29%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(8,512,139)

 

 

(1,213,785)

 

 

7,298,354

 

 

 

601.29%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of debt discount

 

 

(1,413,959)

 

 

(112,410)

 

 

(1,301,549)

 

 

1,157.86%

Amortization of debt discount, related party

 

 

-

 

 

 

(5,000)

 

 

5,000

 

 

 

100%

Financing fees

 

 

(43,750)

 

 

-

 

 

 

(43,750)

 

 

100%

Interest expense

 

 

(4,014)

 

 

(2,196)

 

 

(1,818)

 

 

82.79%

Interest expense, related parties

 

 

-

 

 

 

(76)

 

 

76

 

 

 

100%

Loss on settlement of debt

 

 

(536)

 

 

(186,954)

 

 

186,418

 

 

 

99.71%

Total other income (expense)

 

 

(1,462,259)

 

 

(306,636)

 

 

(1,155,623)

 

 

376.87%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$(9,974,398)

 

 

(1,520,421)

 

 

(8,453,977)

 

 

556.03%

 

 
7

Table of Contents

 

Sales and Marketing Expense

 

Sales and marketing expense was $645,218 for the six months ended December 31, 2021 compared to $1,027,109 for the six months ended December 31, 2020. During the six months ended December 31, 2021, the Company was putting money into sales and marketing expenses to actively market the brand.

 

General and Administrative Expenses

 

Total general and administrative expenses were $2,321,252 for the six months ended December 31, 2021 compared to $73,439 for the six months ended December 31, 2020. The increase of $2,247,813 primarily relates to options valued at $1,887,545 for advisory board services and $657,204 from stock issued for services.

 

Professional Fees

 

Total professional fees were $132,025 for the six months ended December 31, 2021 compared to $35,237 for the six months ended December 31, 2020. The increase of $96,789 primary relates to legal fees.

 

Related Party Consulting Fees

 

Total related party consulting fees were $213,425 for the six months ended December 31, 2021 compared to $78,000 for the six months ended December 31, 2020. The increase of $135,425 was primarily related to $28,000 in new related party expenses coupled an increase in the pay of existing related party.

 

Research and Development Expenses

 

Total research and development expenses were $5,200,219 for the six months ended December 31, 2021 compared to $0 for the six months ended December 31, 2020. The research and development costs were related to the development of an aircraft through our Eco-Aero joint venture and $142,790 expenditure to Movychem, a Slovakian limited liability company for research and development in advanced materials and chemicals.

   

Other Expenses

 

Total other income (expenses) were ($1,462,259) for the six months ended December 31, 2021 compared to ($306,636) for the six months ended December 31, 2020. Total other expenses consist of interest expense on debt, amortization of debt and loss on settlement of debt. The increase of $1,155,623 was primarily related the Company recording amortization of debt discount during the six months ended December 31, 2021 in the amount of $1,413,959.

 

Net loss

 

Total net loss was $9,974,398 for the six months ended December 30, 2021 compared to $1,520,421 for the six months ended December 31, 2020. The increase of $8,453,977 was primarily due to research and development expenses of $5,200,219 and equity based compensation of $2,544,750.

 

Liquidity and Capital Resources

 

Operating Activities

 

Cash used in operations of $6,013,001 during the six months ended December 31, 2021 was primarily resulted from the increase cash used in operations resulted from increased expenditures on research and development expense. The Company has a net loss of $9,974,398 during the six months ended December 31, 2021 and offset by non-cash expenses such as stock compensation expense of $1,887,545, stock issued for services of $657,204, and amortization of debt discounts of $1,413,959.

    

Cash used in operations of $162,557 during the six months ended December 31, 2020 was primarily a result of our $1,520,421 net loss reconciled with our net non-cash expenses relating to amortization of debt discount and our changes in operating assets and liabilities relating to accounts payable and accrued liabilities.

 

Investing Activities

 

Net cash used in investing activities for the six months ended December 31, 2021 was $4,990, which consisted of purchase of new equipment.

 

Financing Activities

 

Net cash provided by financing activities for the six months ended December 31, 2021 was $7,166,000, which consisted of proceeds from the sale of common stock of $2,078,500, cash in the amount of $128,550 from the exercise of warrants, and issuance of convertible debt of $4,958,950.

 

Net cash provided by financing activities for the six months ended December 31, 2020 was $143,300, which consisted of proceeds from the sale of common stock of $51,000 and issuance of convertible debt of $92,300.

  

 
8

Table of Contents

 

The Company’s financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. At December 31, 2021 and June 30, 2021, the Company had $2,110,549 and $962,540 in cash and $1,305,399 and $677,257 in working capital, respectively. For the six months ended December 31, 2021 and 2020, the Company had a net loss of $9,974,398 and $1,520,421, respectively. Continued losses may adversely affect the liquidity of the Company in the future. Therefore, the factors noted above raise substantial doubt about our ability to continue as a going concern. The recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheets is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to raise additional capital, obtain financing and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s existence is dependent upon management’s ability to develop profitable operations and resolve its liquidity problems.

 

Commitments for Capital Expenditures

 

To date, our operations have been funded primarily through private investors. We have had a number of discussions with investment banker and institutional investment, which is to acquire and develop breakthrough technologies or business interests in those companies that have developed these technologies. There is no assurance that the Company will be able to obtain such funding and/or working capital. To the extent that funding is not available, the Company will be required to scale back or discontinue its business plan. Even if the Company is able to obtain financing, it may contain undue restrictions of the Company’s operations, or there may be substantial dilution for our shareholders in the case of equity financing or convertible debt financing.

 

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).

 

Quantitative and Qualitative Disclosures about Market Risk

 

In the ordinary course of our business, we are not exposed to market risk of the sort that may arise from changes in interest rates or foreign currency exchange rates, or that may otherwise arise from transactions in derivatives.

 

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.

 

 
9

Table of Contents

  

Contingencies

 

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. Our management, in consultation with its legal counsel as appropriate, assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against us or unasserted claims that may result in such proceedings, we, in consultation with legal counsel, evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in our financial statements. If the assessment indicates a potentially material loss contingency is not probable, but is reasonably possible, or is probable, but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.

 

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.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

As a smaller reporting company, the Company has elected not to provide the disclosure required by this item.

 

Item 4. Controls and Procedures.

 

Disclosure Controls and Procedures

 

Our management is responsible for maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that the Registrant files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. In addition, the disclosure controls and procedures must ensure that such information is accumulated and communicated to the Registrant’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial and other required disclosures.

 

At December 31, 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 Keith Duffy our Chief Executive Officer and Brian Carey our Chief Financial Officer. Based on his evaluation of our disclosure controls and procedures, he concluded that at December 31, 2021, our disclosure controls and procedures are not effective due to material weaknesses in our internal controls over financial reporting discussed directly below.

 

Changes in Internal Control Over Financial Reporting

 

There has been no change in the Company’s internal control over financial reporting, as defined in Rules 13a-15(f) of the Exchange Act, during the Company’s most recent fiscal quarter ended December 31, 2021, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

  

 
10

Table of Contents

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

None.

 

Item 1A. Risk Factors

 

Our business is subject to numerous risks and uncertainties including but not limited to those discussed in “Risk Factors” in our Annual Report on Form 10-K.

 

Item 2. Unregistered Sales of Equity Securities

 

During the three months ended September 30, 2021, the Company issued 400,000 shares of common stock related to a subscription agreement from the previous fiscal year, which were previously recorded in common stock to be issued at $48,000.

 

During the three months ended September 30, 2021, the Company sold 2,500,000 shares of common stock for aggregate proceeds of $250,000, or $0.10 per share.

 

During the three months ended September 30, 2021, the Company sold 5,000,000 shares of common stock for aggregate proceeds of $250,000, or $0.05 per share.

 

In connection with one of the subscription agreements, the Company issued 250,000 shares as an equity kicker valued at $43,750, which has been expensed as a financing costs.

 

During the three months ended September 30, 2021, the Company issued 4,185,000 shares of common stock as a result of warrant exercises in the aggregate proceeds of $125,550.

 

During the three months ended September 30, 2021, the Company issued 4,000,000 shares of common stock in exchange for the conversion of 4,000 shares of Series A Preferred Stock.

 

During the three months ended September 30, 2021, the Company issued 10,598,544 shares of common stock for the conversion of $167,550 in principal and $4,985 in accrued interest. This resulted in a loss on extinguishment of debt in the amount of $535.

 

During the three months ended September 30, 2021, the Company issued 2,825,000 shares of common stock for services, valued at $449,200.

During the three months ended December 31, 2021, the Company sold 8,200,000 shares of common stock for aggregate proceeds of $410,000, or $0.05 per share.

 

During the three months ended December 31, 2021, the Company issued 23,266,667 shares of common stock for aggregate proceeds of $1,162,500, or $0.05 per share for the sale of common shares that has not been issued in the quarter ended September 30, 2021.

 

During the three months ended December 31, 2021, the Company issued 4,305,000 shares of common stock for the $3,000 exercise of warrants in the quarter ended September 30, 2021.

 

During the three months ended December 31, 2021, the Company issued 3,138,000 shares of common stock in exchange for the conversion of 3,318 shares of Series A Preferred Stock.

 

During the three months ended December 31, 2021, the Company issued 900,000 shares of common stock for services, valued at $116,105.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

None.

 

Item 5. Other Information

 

None.

 

 
11

Table of Contents

 

Item 6. Exhibits

 

The following exhibits are filed herewith

 

Exhibit

Number

 

Document

 

4.1

 

Senior Secured Promissory Note *

 

 

 

4.2

 

Warrant *

 

 

 

10.1

 

Securities Purchase Agreement *

 

 

 

10.2

 

Security Agreement *

 

 

 

31.1

 

Certification of the principal executive officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

31.2

 

Certification of the principal financial officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

32.1

 

Certification of the principal executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.2

 

Certification of the principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

101.INS

 

Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).

 

 

 

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document

 

 

 

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

101.DEF

 

Inline XBRL Taxonomy Extension Definition Document

 

 

 

101.LAB

 

Inline XBRL Taxonomy Extension Label Linkbase Document

 

 

 

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

104

 

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

 

*

Incorporated by reference to the Company’s Current Report on Form 8-K filed on November 4, 2021

 

 
12

Table of Contents

 

SIGNATURES

 

In accordance with the requirements of the Exchange Act, the Company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

XERIANT, INC.

 

 

 

Date: February 14, 2022

By:

/s/ Keith Duffy

 

Keith Duffy

Chief Executive Officer

(Principal Executive)

 

Date: February 14, 2022

By:

/s/ Brian Carey

 

Brian Carey

Chief Financial Officer

 

 
13