XERIANT INC

Previous wording

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.

Current wording

The following discussion of our financial condition and results of operations should be read in conjunction with the audited and unaudited consolidated 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.

Previous wording

This section of the report should be read together with Footnotes of the Company’s audited financials for the year ended June 30, 2023. The unaudited statements of operations for the nine months ended March 31, 2024 and 2023 are compared in the sections below.

Current wording

This section of the report should be read together with Footnotes of the Company’s audited consolidated financials for the year ended June 30, 2024. The unaudited condensed consolidated statements of operations for the three months ended September 30, 2024 and 2023 are compared in the sections below.

Previous wording

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

Current wording

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

Previous wording

On May 31, 2021, we entered into a Joint Venture Agreement (the “Agreement”) with XTI Aircraft Company (“XTI”), a Delaware corporation, to form the XTI JV, named Eco-Aero, LLC, with the purpose of completing the preliminary design review (“PDR”) of XTI’s TriFan 600, a 5-passenger plus pilot, hybrid electric, vertical takeoff, and landing (eVTOL) fixed wing aircraft. Under the Agreement, Xeriant contributed capital, technology, and strategic business relationships, and XTI contributed intellectual property licensing rights and know-how. XTI and the Company each own 50 percent of the XTI JV, and it is managed by a management committee consisting of five members, three appointed by Xeriant and two by XTI. The Agreement was effective on June 4, 2021, with an initial deposit of USD1 million into the XTI JV. Our financial commitment was up to USD10 million, contributed as needed to complete the preliminary design of the aircraft. XTI completed Preliminary Design Review during the first quarter of 2022, which was the purpose of the XTI JV. On May 31, 2023, the joint venture terminated in accordance with the Agreement. However, as of the date of this filing, Eco-Aero, LLC has not been dissolved and the distribution of the TriFan 600 design IP has not been executed. As per the Agreement, Xeriant is entitled to receive shares of XTI, the number of which is in the process of being determined by the parties involved.

Current wording

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 joint venture with XTI (the “XTI JV”), named Eco-Aero, LLC, with the purpose of completing the preliminary design review (“PDR”) of XTI’s TriFan 600, a 5-passenger plus pilot, hybrid electric, eVTOL fixed wing aircraft. Under the Agreement, Xeriant would contribute capital, technology, and strategic business relationships, and XTI contributed intellectual property licensing rights and know-how. XTI and the Company each owned 50 percent of the XTI JV and would be managed by a management committee consisting of five members, three appointed by Xeriant and two by XTI. The Company invested approximately $5.5 million into the joint venture after borrowing the funds from Auctus Fund LLC (“Auctus”) through a Senior Secured Promissory Note, through an introduction from Maxim Group, LLC, the Company’s investment banker at the time. The borrowed funds from Auctus were intended to be a bridge loan that would be resolved through an IPO (Initial Public Offering) and uplist to Nasdaq in a merger with XTI, which did not occur because XTI refused to move forward with the merger. The PDR was completed during the first quarter of 2022 according to XTI.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

On July 25, 2023, Inpixon filed an 8-K announcing that they had signed an Agreement of Plan and Merger with XTI. Despite the Company’s pivotal role in facilitating this merger, as memorialized in a formal agreement, XTI repeatedly publicly disclaimed any obligation to compensate Xeriant.

Previous wording

Prior to filing of complaint noted below, the Company had been in active negotiations with Auctus Fund, LLC, to extend the maturity date of the Senior Secured Promissory Note which became due and payable on March 15, 2023. Please see Note 6 to the financial statements. On June 1, 2023, the SEC filed a complaint against Auctus claiming that the company was operating as an unlicensed broker-dealer, and its loans could result in cancellation. On October 19, 2023, the Company filed a complaint in the United States Southern District of New York against Auctus to invalidate allegedly illegally designed contractual agreements, including contesting the enforceability of the related note and amendments, and to set aside improper and unlawful securities transactions effectuated in violation of Section 15(a)(1) of the Exchange Act (15 U.S.C. § 78o(a)(1)) by the Defendant, alleging breaches of fiduciary duty and related claims. The case was dismissed on February 9, 2024. The Company filed a Notice of Civil Appeal on March 13, 2024, in allow filing of an appeal primarily based on public welfare because of the pending litigation between the SEC and Auctus Fund Management, LLC. If either the Company or the SEC are unsuccessful in their legal actions and there is no settlement reached with Auctus, the Company will be required to continue negotiations with Auctus as to extension or satisfaction of the Note, or Auctus may elect to convert the Note into shares of our Common Stock, or seek a judgment against the Company for amounts due under the Note, as amended. In that event, our shareholders could experience substantial dilution, or the Company could lose substantially all of its assets.

Current wording

On October 19, 2023, Xeriant filed a complaint in the United States Southern District of New York (Case no.1:23-cv-09200) against Auctus Fund LLC, to invalidate allegedly illegally designed contractual agreements, including contesting the enforceability of the related note and amendments, and to set aside improper and unlawful securities transactions effectuated in violation of Section 15(a)(1) of the Exchange Act (15 U.S.C. § 78o(a)(1)) by the Defendant, alleging breaches of fiduciary duty and related claims. On February 9, 2024, the case was dismissed. The Company filed a Notice of Civil Appeal on March 13, 2024, primarily based on public welfare because of the pending litigation between the SEC and Auctus Fund Management, LLC, which complaint was filed on June 1, 2023. On June 19, 2024, the Company filed an appeal in the United States Court of Appeals for the Second Circuit (Case no. 24-682-cv), which is still pending. The foregoing descriptions of the legal actions do not purport to be complete and are subject in their entirety by the full text of the court filings.

Previous wording

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

Current wording

On December 6, 2023, the Company initiated legal proceedings against XTI Aircraft Company in the Federal District Court for the Southern District of New York (Case no. 1:23-cv-10656-JPO), along with other unnamed defendants, seeking to enforce the terms of the Letter Agreement, and alleging fraudulent acts, deceptive maneuvers and intentional breaches, seeking a range of remedies. These include the recovery of losses, expenses, attorneys’ fees, punitive damages and a compensatory damage award exceeding $500 million. The legal action aims to address the alleged misconduct comprehensively and to protect the Company’s interests in the face of XTI’s actions. The foregoing description of the legal action does not purport to be complete and is subject in its entirety by the full text of the complaint, a copy of which was filed in an 8-K on December 12, 2023, Exhibit 99.1. On February 29, 2024, the Company filed a Second Amended Complaint against XTI, along with other unnamed defendants, on February 29, 2024, and on March 13, 2024, XTI filed a partial Motion to Dismiss. On April 10, 2024, the Company filed a Memorandum of Law in Opposition to XTI’s Motion to Dismiss the Company’s Second Amended Complaint and is waiting for the court to rule on the matter.

Previous wording

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

Current wording

Total consulting and advisory expenses were $88,983 and $51,695 for the three months ended September 30, 2024 and 2023, respectively. In the prior period, there were increased expenses due to stock issuances for services relating to advisory agreements.

Previous wording

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

Current wording

Total related party consulting fees were $123,000 and $97,500 for the three months ended September 30, 2024 and 2023, respectively. The related party consulting fees for the three months ended September 30, 2024, consisted of (i) $55,000 to Ancient Investments, LLC, (ii) $23,000 for AMP Web Services, LLC, (iii) $30,000 to Edward DeFeudis, and (iv) $15,000 for Keystone Business Development Partners, LLC. The related party consulting fees for the three months ended September 30, 2023, consisted of (i) $57,500 to Ancient Investments, LLC, a company owned by Keith Duffy, CEO and Scott Duffy, Executive Director of Operations, (ii) $14,000 for AMP Web Services, LLC, a company owned by Pablo Lavigna, CIO, (iii) $21,000 to Edward DeFeudis, Director, and (iv) $5,000 for Keystone Business Development Partners, LLC, a company owned by Brian Carey, CFO. In the prior period, there were decreased expenses relating to reduced available funds. Related party consulting fees are paid to Company management to their respective entities for managerial and consulting services relating to Company operations.

Previous wording

Total other expenses consist of interest expense related to convertible notes and change in fair value of the convertible bridge loans. Total other expenses were $31,132 and $2,498 for the three months ended March 31, 2024 and 2023, respectfully, an increase of $28,634. The increase was due to increased interest expense related to new and previously issued convertible notes, offset by a gain from Edenberg JV of $18,919 in the prior period.

Current wording

Total other expenses consist of interest expense related to convertible notes, amortization of debt discount, gain on extinguishment of debt and change in fair value of the convertible bridge loans. Total other expenses were $13,427 for the three months ended September 30, 2024, compared to $23,122 for the three months ended September 30, 2023. The increase was primarily due to increased interest expense related to additional convertible notes offset by gain on loss on extinguishment of debt.

Previous wording

The Company's condensed consolidated financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. On March 31, 2024 and June 30, 2023, the Company had $373,568 and $61,625 in cash, respectively, and $8,227,696 and $6,684,867 in negative working capital, respectively. On March 31, 2024, the principal balance of the Auctus Senior Secured Promissory Note was $5,850,000. The Note matured on March 15, 2023. For the three months ended March 31, 2024 and 2023, the Company had a net loss of $384,096 and $389,738, respectively. For the nine months ended March 31, 2024 and 2023, the Company had a net loss of $1,933,003 and $6,501,621, respectively. Continued losses will adversely affect the liquidity of the Company in the future. Therefore, the factors noted above raise substantial doubt about our ability to continue as a going concern. The recoverability of a major portion of the recorded asset amounts shown in the accompanying condensed consolidated balance sheets is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to raise additional capital, obtain financing and to succeed in its future operations. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s existence is dependent upon management’s ability to develop profitable operations and resolve its liquidity problems.

Current wording

The Company’s condensed consolidated financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. On September 30, 2024, and June 30, 2024, the Company had $300,002 and $653,117 in cash, respectively, and $8,532,513 and $8,661,248 in negative working capital, respectively. On September 30, 2024, the principal balance of the Auctus Senior Secured Promissory Note was $5,850,000. The Note matured on March 15, 2023, and the company has been in discussions with Auctus to resolve the liability. For the three months ended September 30, 2024 and 2023, the Company had a net loss of $372,222 and $342,012, 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 unaudited condensed consolidated balance sheets is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to raise additional capital, obtain financing and to succeed in its future operations. The unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. To implement its business plan, the Company must raise sufficient funds in the form of equity, debt, or a combination thereof. Until the Company develops profitable operations, it is dependent upon management continually raising funds.

Previous wording

During the nine months ended March 31, 2024, the Company’s operating activities used $1,059,894 of net cash used compared to using $1,037,036 of net cash used in our operating activities during the nine months ended March 31, 2023. During the nine months ended March 31, 2024, our investing activities used $8,163 of net cash compared to using $194,829 of net cash in our investing activities during the nine months ended March 31, 2023. This primary reason for the difference is the $192,262 in the prior period related to Investment in JV Movychem. During the nine months ended March 31, 2024, our financing activities added $1,380,000 of net cash compared to $270,000 of net cash in our financing activities during the nine months ended March 31, 2023.

Current wording

During the three months ended September 30, 2024, the Company’s operating activities used $353,095 of net cash used compared to using $308,127 of net cash used in our operating activities during the three months ended September 30, 2023. This difference primarily related to stock issued for services in the current period. During the three months ended September 30, 2024, our investing activities were $0 compared to $139,947 of net cash used in our investing activities during the three months ended September 30, 2023. This difference related to cash issued for notes receivable during the three months September 30, 2023. During the three months ended September 30, 2024, our financing activities were $0 compared to $411,000 of net cash added in our financing activities during the three months ended September 30, 2023. This difference related to the issuance of convertible notes during the three months ended September 30, 2023.

Previous wording

To date, our operations have been funded primarily through private investors. Some of these investors have verbally committed additional funding for the Company, as needed. The Company has had a number of discussions with broker-dealers regarding the funding required to execute the Company’s business plan, which is to acquire and develop breakthrough technologies or business interests in those companies that have developed these technologies. The Company plans on issuing an offering document to obtain funding for certain acquisitions that are in the discussion stages. No assurance can be given that the Company will be able to raise the necessary capital to implement its business plan.

Current wording

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

Previous wording

Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments which affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities (see Note 2, Summary of Significant Accounting Policies, contained in the notes to the Company’s condensed consolidated financial statements for the nine months ended March 31, 2024 and 2023 contained in this filing). On an ongoing basis, we evaluate our estimates. The Company bases our estimates on historical experience and on various other assumptions which we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities which are not readily apparent from other sources. Actual results may differ from these estimates based upon different assumptions or conditions; however, we believe that our estimates are reasonable.

Current wording

Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments which affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities (see Note 2, Summary of Significant Accounting Policies, contained in the notes to the Company’s unaudited condensed consolidated financial statements for the three months ended September 30, 2024 and 2023 contained in this filing). On an ongoing basis, we evaluate our estimates. The Company bases our estimates on historical experience and on various other assumptions which we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities which are not readily apparent from other sources. Actual results may differ from these estimates based upon different assumptions or conditions; however, we believe that our estimates are reasonable.