Xeriant, Inc. XERI US Equity☆

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Table of Contents

Financial Results

The following discussion of the results of operations constitutes management’s review of the factors that affected the financial and operating performance for the fiscal years ended June 30, 2023 and 2022. This discussion should be read in conjunction with the consolidated financial statements and notes thereto contained elsewhere in this report. The Company has a June 30 fiscal year end.

Executive Summary

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

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

Joint Venture with XTI Aircraft

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

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

Xeriant would be entitled to compensation for its role in introducing XTI to Inpixon, a Nasdaq-listed company, contingent upon the occurrence of any merger, combination, or transactional event between XTI and Inpixon.

Table of Contents

XTI would assume the financial obligations related to the Senior Secured Note with Auctus Fund, LLC, including the $6.05 million principal balance of the note and warrant obligations. Additionally, Xeriant was to be granted a fully diluted equity interest amounting to 6% in XTI, issued immediately prior to any prospective combination with Inpixon.

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

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

We also found out that, as a condition of closing of the merger with Inpixon, XTI’s obligations to Xeriant would need to be settled. The July 25, 2023, Inpixon 8-K, Exhibit 2–1 - the Agreement of Plan and Merger, Section 8(g) – Conditions Precede–t - page 67 states “The Company [XTI], Parent and their respective successors, assigns and Affiliates shall have received an unconditional full release of claims from Xeriant and its Affiliates in form and substance acceptable to Parent and the Company.”

The chronology of key meetings and events disclosed in the Inpixon and XTI S-4/A filing of October 6, 2023, discloses that discussions between Inpixon and XTI started May 18, 2022, one day after the Letter Agreement was executed between Xeriant and XTI. That meeting included Mr. Ali, CEO of Inpixon, and Mr. LaBelle, CEO of XTI.

Due to the disclosures in the XTI and Inpixon filings, we believe Xeriant is entitled to the compensation provided in its Letter Agreement with XTI.

In Inpixon’s July 25, 2023, 8-K, Exhibit 99.5 – Unaudited financial statements of XTI Aircraft Company as of and for the three months ended March 31, 2023, note 8, page 19, XTI states that it “believes it has no obligation to Xeriant under the May 17, 2022 letter agreement and intends to vigorously defend any litigation filed.”

Under the XTI JV Operating Agreement, under Management Committee, section 5.1I requires approval of all of the members of the Management Committee for determination of a Liquidity Event, Acceleration Event or Completion Event as defined in the JV Agreement. This approval has not been obtained by XTI. In addition, section 10.3 specifies the procedures regarding liquidation of the XTI JV, which are to be directed unanimously by the Management Committee. Section 11.3, under Equitable Remedies, the breach of any obligations by one of the parties shall “be entitled to equitable relief, including a temporary restraining order, and injunction, specific performance and any other relief that may be available from a court of competent jurisdiction (without and requirement to post bond).”

The Joint Venture Agreement, under section–8 - Dispute Resolution outlines the procedures to follow in the event of dispute between the parties. Xeriant has followed sections 8.1 and 8.2 regarding notice given and attempts to resolve the dispute between executive management. Non-binding mediation is the next step provided in the JV Agreement, followed by arbitration. These procedures need to be followed by Xeriant and XTI.

Section 10 of the JV Agreement, under Assignability of a Party’s Interest, states that “no party shall, without the prior written consent of the majority of the members of the Management Committee including at least one member from each Party (which consent may be withheld for any reason) sell, transfer, assign, hypothecate or make a gift of all or any portion of such Party’s interest in the JV.” Xeriant has not provided its consent through the Management Committee to XTI’s pending transfer of interest to Inpixon nor to any transfer of the intellectual property created in the XTI JV, including but not limited to the VTOL technology as defined in the JV Agreement. In the Security and Pledge Agreement between XTI and Inpixon, XTI pledged all of its assets to Inpixon in connection with its Senior Secured Note with Inpixon in violation of the XTI JV’s Operating Agreement and JV Agreement with Xeriant.

Due to the disclosures in the XTI and Inpixon filings, we believe Xeriant is entitled to the compensation provided in its Letter Agreement with XTI. XTI and Inpixon are disputing the fact that the Letter Agreement gives rise to compensation to the Company. As of the date of this filing, we remain engaged in dialogue with XTI to enforce compliance with the Letter Agreement and to find an amicable resolution, although no assurance can be given that such a resolution will be achieved.

Recent Developments

Joint Venture with Movychem

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

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

Table of Contents

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

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

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

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

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

Stock Sales

During the year ended June 30, 2023, the Company received $0 by selling shares common stock.

Convertible Notes Issued

During the year ended June 30, 2023, the Company received $370,000 from issuance of convertible debt.

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, which was subsequently dismissed.

Table of Contents

Fiscal Year 2023 Results of Operations Compared with Fiscal Year 2022

For the years ended

Operating expenses:

Other expenses:

Table of Contents

Consulting and advisory fees

Total consulting and advisory expenses were $1,101,573 and $3,031,959 for the years ended June 30, 2023 and 2022, respectively. In the prior period, there were increased expenses due to stock issuances.

Related Party Consulting Fees

Total related party consulting fees were $353,000 and $432,425 for the years ended June 30, 2023 and 2022, respectively. The related party consulting fees for the year ended June 30, 2023, consisted of (i) $170,000 to Ancient Investments, LLC, a company owned by Keith Duffy, CEO and Scott Duffy, Executive Director of Operations, (ii) $56,000 for AMP Web Services, LLC, a company owned by Pablo Lavigna, CIO, (iii) $102,000 to Edward DeFeudis, Director, and (iv) $25,000 for Keystone Business Development Partners, LLC, a company owned by Brian Carey, CFO. The related party consulting fees for the year ended June 30, 2022, consisted of (i) $184,000 to Ancient Investments, LLC, (ii) $86,000 for AMP Web Services, LLC, (iii) $122,000 to Edward DeFeudis, and (iv) $40,425 for Keystone Business Development Partners, LLC,

General and administrative expenses

Total general and administrative expenses were $302,693 and $1,184,654 for the years ended June 30, 2023 and 2022, respectively.

Professional Fees

Total professional fees were $271,021 and $444,012 for the years ended June 30, 2023 and 2022, respectively. The prior period increased amount was due to legal fees relating to increased JV activity.

Advertising and marketing expenses

Total advertising and marketing expenses were $23,348 and $651,567 for the years ended June 30, 2023, and 2022, respectively. During the year ended June 30, 2022, the Company’s advertising and marketing expenses were associated with social media marketing campaigns, events and press releases that were not continued in the fiscal year ended June 30, 2023.

Research and Development Expenses

Total research and development expenses were $0 and $5,267,581 for the years ended June 30 2023, and 2022, respectively. The research and development expenses in the fiscal year ended June 30, 2022, were in connection with our Eco-Aero, LLC joint venture with XTI Aircraft Company for funding the preliminary design phase in the development of an aircraft, called the TriFan 600. There were no expenses for the joint venture for the year ended June 30, 2023. Research & Development Expenses relating to Movychem/Ebenberg JV are accounted for through Ebenberg, LLC.

Other (Expenses)

Total other expenses consist of amortization of debt discount related to convertible notes, interest expense related to convertible notes, change in fair value of the convertible bridge loans, loss on impairment of investment, loss from Ebenberg JV and loss on extinguishment of debt. Total other expenses were $5,045,004 for the year ended June 30, 2023, compared to $4,869,997 for the year ended June 30, 2022. The increase was primarily due to recording the loss on extinguishment of debt for the year ended June 30, 2023, in the amount of $4,259,987.

Net loss

Total net loss was $7,096,639 for the year ended June 30, 2023, compared to $15,882,195 for the year ended June 30, 2022. The decrease was primarily related to amortization of debt discount of $4,629,089 and $5,267,581 of research and development expenses in the prior period versus $0 of research and development expenses and $461,842 of amortization of debt discount in the current period. The difference was partially offset by the loss on extinguishment of debt in the amount of $4,259,987 for the current period.

Liquidity and Capital Resources

The Company's 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 June 30, 2023 and 2022, the Company had $61,625 and $1,065,945 in cash, respectfully, and $6,684,867 and $3,072,483 in negative working capital, respectively. On June 30, 2023, the principal balance of the Auctus Senior Secured Promissory Note was $5,850,000 including accrued liability of $50,000. The Note matured on March 15, 2023, and the company has been in discussions with Auctus to resolve the liability. For the years ended June 30, 2023 and 2022, the Company had a net loss of $7,096,639 and $15,882,195, 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 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 consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s existence is dependent upon management’s ability to develop profitable operations and resolve its liquidity problems.

During the fiscal year ended June 30, 2023, our operating activities used $1,174,190 of net cash used compared to using $6,927,249 of net cash used in our operating activities during the fiscal year ended June 30, 2022. This difference primarily related to a decrease in stock-based compensation and stock issued for services and amortization of debt discount and offset by increase in loss on extinguishment of debt in fiscal year 2023. During the fiscal year ended June 30, 2023, our investing activities used $200,130 of net cash compared to using $135,346 of net cash used in our investing activities during the fiscal year ended June 30, 2022. This difference related to an increase in investment in Movychem JV and offset by decrease in purchase of property and equipment in fiscal year 2023. During the fiscal year ended June 30, 2023, our financing activities added $370,000 of net cash compared to adding $7,166,000 of net cash in our financing activities during the fiscal year ended June 30, 2022. This difference related to a substantial decrease in the issuance of convertible notes and no sales of stock or cash from exercise of warrants in fiscal year 2023.

Table of Contents

Funding Strategy

To date, our operations have been funded primarily through private investors. Some of these investors have verbally committed additional funding for the Company, as needed. 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.

Off Balance Sheet Items

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

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these 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 consolidated financial statements for the years ended June 30, 2023 and 2022 contained in this filing). On an ongoing basis, we evaluate our estimates. We base our estimates on historical experience and on various other assumptions which we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities which are not readily apparent from other sources. Actual results may differ from these estimates based upon different assumptions or conditions; however, we believe that our estimates are reasonable.

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

Table of Contents

Item 8. Financial Statements and Supplementary Data

XERIANT, INC.

CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023 and 2022

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID # 3289) F-1

Consolidated Balance Sheets as of June 30, 2023 and 2022 F-3

Notes to Consolidated Financial Statements F-7

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Xeriant, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Xeriant, Inc. (the Company) as of June 30, 2023 and 2022, and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for each of the years in the two-year period ended June 30, 2023, and the related notes and schedules (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended June 30, 2023, in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2, the Company has incurred net losses and negative cash flow from operations since inception. These factors, and the need for additional financing in order for the Company to meet its business plans raises substantial doubt about the Company’s ability to continue as a going concern. Our opinion is not modified with respect to that matter.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Derivatives

As described in Note 2 to the Company’s consolidated financial statements, during the year ended June 30, 2022, prior to the adoption of ASU 2020-06, when the Company issues debt that contains a conversion feature that provided for a rate of conversion that is below market value at issuance, this feature was characterized as a 3001 N. Rocky Point Dr. East, Suite 200 i Tampa, Florida 33607 i 813.367.3527 beneficial conversion feature and recorded as a debt discount pursuant to ASC 470-20, Debt with Conversion and Other Options. When the Company issues debt that contains a warrant feature, the Company estimates and records the fair value using the Black-Scholes valuation model. Also, as discussed in Note 12 to the Company’s consolidated financial statements, the Company evaluates warrants issued through debt under ASC 815, Derivatives and Hedging, to determine if they require liability classification.

We identified the Company’s application of the accounting for convertible notes and debt modification as a critical audit matter. The principal considerations for our determination of this critical audit matter related to the high degree of subjectivity in the Company’s judgments in determining the qualitative factors. Auditing these judgments and assumptions by the Company involves auditor judgment due to the nature and extent of audit evidence and effort required to address these matters.

Table of Contents

The primary procedures we performed to address these critical audit matters included the following:

- Reviewed agreements for all relevant terms.

- Tested management’s identification and treatment of agreement terms.

- Recalculated management’s fair value based on the terms in the agreements.

Stock-Based Compensation

As described in Note 2 to the Company’s consolidated financial statements, the Company measures the cost of employee services rendered in exchange for equity incentive awards based on the grant date fair value of the award. The Company uses the Black-Scholes valuation model to calculate the fair value of stock options granted to employees or consultants. Stock-based compensation expense is recognized over the period during which the employee is required to provide services in exchange for the award, which is usually the vesting period.

We identified the Company’s application of equity incentive awards as a critical audit matter. The principal considerations for our determination of this critical audit matter related to the high degree of subjectivity in the Company’s judgments in determining the qualitative factors. Auditing these judgments and assumptions by the Company involves auditor judgment due to the nature and extent of audit evidence and effort required to address these matters.

The primary procedures we performed to address these critical audit matters included the following:

· We obtained related agreements and performed the following procedures:

- Reviewed agreements for all relevant terms.

- Tested management’s identification and treatment of agreement terms.

- Recalculated management’s fair value based on the terms in the agreements.

Variable Interest Entities

As described in Note 3 to the Company’s consolidated financial statements, the Company analyzes investment transactions under ASC 810, Consolidation, to determine if the transaction classifies as a variable interest entity (VIE). According to ASC 810-25-38, a reporting entity shall consolidate a VIE when that reporting entity has a variable interest that provides the reporting entity with a controlling financial interest on the basis of the provisions in paragraphs 810-10-25-38A – 25-38J. The reporting entity that consolidates a VIE is called the primary beneficiary of that VIE.

We identified the Company’s accounting for its investments and determination of whether a VIE exists as a critical audit matter. The principal considerations for our determination of this critical audit matter related to the significant risks associated with the proper accounting for these transactions, as well as the nature and extent of audit effort required to address the matter.

The primary procedures we performed to address these critical audit matters included the following:

- Reviewed the analysis.

We have served as the Company’s auditor since 2023.

Tampa, Florida

October 15, 2023

PCAOB ID# 3289

Table of Contents

XERIANT, INC.

CONSOLIDATED BALANCE SHEETS

As of As of

Assets

Current assets

Investment in JV with Ebenberg LLC - 57,678

Liabilities and stockholders' deficit

Current liabilities

Accounts payable and accrued liabilities $ 402,568 $ 56,836

Convertible notes payable, net of discount - in default 5,850,000 3,936,185

Convertible notes payable, net of discount 100,000 -

Convertible bridge loans, at fair value 247,254 -

Commitments and contingencies (Note 11)

Stockholders' deficit

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

Table of Contents

XERIANT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the years ended

Operating expenses:

Research and development expense - 5,267,581

Other expenses:

Financing fees - (43,750 )

Change in fair value of convertible bridge loans (57,368 ) -

Loss on impairment of investment (156,460 ) -

Less net loss attributable to noncontrolling interest (29,683 ) (2,580,925 )

Net income attributable to common stockholders $ (7,066,956 ) $ (13,301,270 )

Net loss per common share - basic and diluted $ (0.02 ) $ (0.04 )

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

Table of Contents

XERIANT, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

Series A Preferred Stock Series B Preferred Stock Common Stock

Warrants associated with convertible debt - - - - - - 2,777,081 - - - 2,777,081

Warrants associated with convertible debt - - - - - - 2,688,128 - - - 2,688,128

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

Table of Contents

XERIANT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended

Cash Flows from Operating Activities

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

Inducement of conversion of debt - 134,929

Change in fair value of convertible bridge loans 57,368 -

Loss on extinguishment of debt 4,259,987 -

Loss on impairment of investment 156,460 -

Changes in operating assets and liabilities:

Accounts payable and accrued liabilities 145,722 (7,120 )

Accrued liability, related party (2,000 ) (3,000 )

Shares to be issued - 75,200

Cash Flows from Investing Activities

Purchase of property and equipment (2,567 ) (19,990 )

Cash Flows from Financing Activities

Cash from exercise of warrants - 128,550

Proceeds from convertible notes payable - 4,958,950

Proceeds from convertible bridge loans 370,000 -

Supplemental Cash Flow Information

Cash paid for interest $ - $ -

Cash paid for income taxes $ - $ -

Non-cash investing and financing activities:

Conversion of convertible notes payable and accrued interest $ - $ 426,819

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

Table of Contents

XERIANT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS

Company Overview

Xeriant, Inc. (the “Company”) 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 is marketed under the DUREVERTM brand, and includes NexBoardTM, an eco-friendly, patent-pending composite building panel made from plastic and cellulose waste, designed to replace products such as drywall, plywood, OSB, MDF, MgO board and other materials used in construction.

Operating History

The Company is a development-stage enterprise with a limited operating history with no sales, and operating losses since its inception. The Company has had two joint ventures, one in the area of aerospace that was effective May 27, 2021, and the other involving advanced materials that was effective April 2, 2022, and terminated June 30, 2023.

Advanced Materials

A primary focus of the Company is the acquisition and commercial exploitation of eco-friendly, advanced materials and chemicals which have applications across a broad range of industries and the potential to generate significant near-term revenue. The Company’s commercialization strategy encompasses licensing arrangements and joint ventures, which would allow for more rapid access to the market with reduced capital requirements and financial risk. In addition to providing the production and distribution infrastructure, these established partnering companies can streamline testing and certification and add brand recognition value. The advanced materials and chemicals may be sold as standalone products, enhancements to existing products, or used in the development of proprietary products under a new trademarked brand owned by the Company. The Company is exploring manufacturing and branding opportunities for specific products derived from advanced materials and chemicals acquired or developed, which would involve setting up production facilities, equipment, systems and supply chain.

Effective April 2, 2022, the Company entered into a Joint Venture Agreement with Movychem s.r.o, a Slovakian chemicalcompany, setting forth the terms for a joint venture (referred to herein as the Movychem JV) to exploit the Movychem Intellectual Property and Purchased Patents. The Movychem JV, owned 50% by Xeriant and 50% by Movychem, subject to certain funding conditions, was granted the exclusive worldwide rights to the intellectual property related to Retacell®, an industrial flame-retardant, and would be responsible for developing applications and commercializing products.

On June 8, 2022, Xeriant announced the development of a multi-purpose, high-strength fire- and water-resistant composite panel made from a formulation of Retacell® and a cardboard fiber-reinforced polymeric resin. The panel described in the press release was initially produced in a benchtop setting.

After experiencing a number of issues, including but not limited to Movychem’s unwillingness to provide material documentation, processes and information required for the exploitation of Retacell®, the Company independently developed an upcycled construction panel, without the inclusion of Retacell®, outside of the Movychem JV.

On July 11, 2023, Xeriant announced the successful testing of a proprietary high-volume production process for an environmentally friendly patent-pending composite construction panel (NexBoard”) that can be produced in the United States at industrial scale. This approach will enable the Company to unlock existing demand indicated by several homebuilders and developers seeking environmentally friendly construction panels in varying thicknesses and sizes, including standard 48” x 96” sheets, economically and with consistency and efficiency.

Table of Contents

On August 12, 2022, the Company filed the trademark “NexBoard,” for construction panels, namely, composite sheets and panels composed primarily of plastic, reinforcement materials and fire-retardant chemicals for use in walls, ceilings, flooring, framing, siding, roofing and decking. The trademark filing was intentionally broad and based upon demand for a general all-purpose construction panel made from a mixture of fire-retardant and recycled materials.

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

On March 31, 2023, the Company filed a provisional patent application titled “Multilayered Fire-Resistant Polymer Composite and Method for Producing Same,” for a method of producing a unique fire-resistant thermoplastic and fiber composite material which may be formed or shaped into various construction products of different thicknesses and dimensions. This green material will be composed primarily of recycled plastic, cellulose and ecofriendly fire-retardant chemicals, including but not limited to use in walls, ceilings, flooring, framing, siding, roofing, molding, and decking, used in construction. Subject to available capital, the Company is planning to build manufacturing facilities in the United States for the production of NexBoard in order to meet market demand, or alternatively license the technology and process. The Company has identified potential sites for near-term contract manufacturing, a pilot plant, and larger manufacturing facilities, received bids for specialized manufacturing equipment, developed timetables related to the action plan, and hired a managing director with decades of experience to oversee the projects.

Aerospace

Another area of interest for the Company is the emerging aviation market called Advanced Air Mobility (AAM), the transition to more efficient, eco-friendly, automated and convenient flight operations enabled by the convergence of technological advancements in design and engineering, composite materials, propulsion systems, battery energy density and manufacturing processes. Next-generation aircraft being developed for this market offer low-cost, on-demand flight for passengers and cargo, utilizing lower altitude airspace and bypassing the traditional hub and spoke airport network with vertical takeoff and landing (VTOL) capabilities. Many of these lightweight aircraft are electrically powered through either hybrid or pure battery systems, which allows for quieter, low emission flights over urban areas, however with limited speed and range. The adoption and integration of niche aerial services through AAM is expected to provide benefits throughout the economy. The Company plans to partner with and acquire strategic interests in visionary companies that accelerate our mission of commercializing critical breakthrough AAM technologies which enhance performance, increase safety, and enable and support more efficient, autonomous, and sustainable flight operations, including electric and hybrid-electric passenger and cargo transport aircraft capable of vertical takeoff and landing. The Company’s plan to source and acquire strategic interests in leading aerospace companies developing breakthrough VTOL aircraft began in the second quarter of fiscal year 2021.

Effective May 27, 2021, the Company entered into a Joint Venture Agreement with XTI Aircraft Company (“XTI”), a privately owned OEM based in Englewood, Colorado for 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.

Through the joint venture with XTI, (referred to hereinafter as the “XTI JV”), the Company was involved in the successful completion of the preliminary design of the TriFan 600 eVTOL aircraft. The TriFan 600 is being designed to become the fastest, longest-range VTOL aircraft in the world and the first commercial fixed-wing VTOL airplane, with current pre-orders of approximately $7 billion in gross revenue upon delivery of those aircraft.

Table of Contents

The purpose of the XTI JV, preliminary design review (PDR), had been achieved during the first quarter of fiscal year 2022. At that point, Xeriant had funded approximately $5.5 million into the XTI JV. On May 17, 2022, Xeriant signed a Letter Agreement with XTI related to the introduction of XTI to Inpixon, a Nasdaq-listed company. Under this Letter Agreement, if there was a combination or other transaction between XTI and Inpixon, Xeriant would receive compensation of 6 percent of XTI fully diluted pre-merger shares, and XTI would assume the obligations of Xeriant’s Senior Secured Note with Auctus Fund, LLC. On July 25, 2023, Inpixon filed an 8-K, announcing their intention to merge with XTI having executed an Agreement of Plan and Merger with XTI. The filing also showed that XTI had engaged in a transaction with Inpixon on March 10, 2023, receiving $300,000 in funding. Inpixon subsequently filed an S-4/A registration statement on October 6, 2023.

In the area of aerospace, management believes that Xeriant can grow expeditiously by acquiring technology and assets primarily through acquisitions, joint ventures, strategic investments, and licensing arrangements. As a publicly traded company, the Company offers its subsidiaries such benefits as improved access to capital, higher valuations and lower risk through the shared ownership of a diversified portfolio, while allowing these entities to maintain independence in their distinct operations to focus on their fields of expertise. Cost savings and efficiencies may be realized from sharing non-operational functions such as finance, legal, tax, sales & marketing, human resources, purchasing power, as well as investor and public relations.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements, which include the accounts of the Company, American Aviation Technologies, LLC, and Eco-Aero, LLC, its subsidiaries, are prepared in conformity with generally accepted accounting principles in the United States of America (U.S. GAAP). All significant intercompany balances and transactions have been eliminated. The consolidated financial statements, which include the accounts of the Company and its subsidiaries, and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The financial statements have been prepared using the accrual basis of accounting in accordance with U.S. GAAP and presented in US dollars. The fiscal year end is June 30.

Going Concern

These consolidated financial statements have been prepared on a going concern basis, which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred net losses since inception and has an accumulated deficit of $23,638,461 as of June 30, 2023. During the year ended June 30, 2023, the Company’s net loss was $7,096,639 and at June 30, 2023, the Company had a working capital deficit of $6,684,867. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Based on its historical rate of expenditures, the Company expects to expend its available cash in approximately two months from October 12, 2023. Management’s plans include raising capital through the issuance of common stock and debt to fund operations and, eventually, the generation of revenue through its business. The Company does not expect to generate any significant revenue the foreseeable future. The Company is in immediate need of further working capital and is seeking options, with respect to financing, in the form of debt, equity or a combination thereof.

Table of Contents

Failure to raise adequate capital and generate adequate revenues could result in the Company having to curtail or cease operations. The Company’s ability to raise additional capital through the future issuances of the common stock is unknown. Additionally, even if the Company does raise sufficient capital to support its operating expenses and generate adequate revenues, there can be no assurances that the revenue will be sufficient to enable it to develop to a level where it will generate profits and cash flows from operations. These matters raise substantial doubt about the Company’s ability to continue as a going concern; however, the accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. These consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classifications of the liabilities that might be necessary should the Company be unable to continue as a going concern.

Principles of Consolidation

The consolidated financial statements include the accounts of Xeriant, Inc., American Aviation Technologies, LLC (“AAT”), and Eco-Aero, LLC. The Company owns a 64% controlling interest of AAT; and a 50% interest in Eco-Aero, LLC, with control exercised through a majority membership in the management committee. All significant intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP 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 consolidated 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.

Fair Value Measurements and Fair Value of Financial Instruments

The Company adopted Accounting Standards Codification (“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.

The inputs to the valuation methodology of stock options and warrants were under level 3 fair value measurements.

ASC subtopic 825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments. The carrying value of cash and cash equivalents, accounts payable and accrued liabilities as reflected in the consolidated 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 consolidated 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.

Table of Contents

The Company follows ASC subtopic 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”) and ASC 825-10, which permits entities to choose to measure many financial instruments and certain other items at fair value.

Cash and Cash Equivalents

For the purposes of the consolidated 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.

Impairment of Long-Lived Assets

In accordance with ASC 360-10, Impairment and Disposal of Long Lived Assets, the Company, on a regular basis, reviews the carrying amount of long-lived assets for the existence of facts or circumstances, both internally and externally, that suggest impairment. The Company determines if the carrying amount of a long-lived asset is impaired based on anticipated undiscounted cash flows, before interest, from the use of the asset. In the event of impairment, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the asset. Fair value is determined based on appraised value of the assets or the anticipated cash flows from the use of the asset, discounted at a rate commensurate with the risk involved. During the year ended June 30, 2023, the Company fully impaired its investment in JV with Ebenberg LLC in the amount of $156,460.

Convertible Debentures

The Company adopted the guidance in Accounting Standards Updated (“ASU”) 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity on July 1, 2022. ASU 2020-06 simplifies an issuer’s accounting for convertible instruments and its application of the derivatives scope exception for contracts in its own equity. Additionally, ASU 2020-06 removes the requirements for accounting for beneficial conversion features.

The Company adopted ASU 2020-06 utilizing the modified retrospective method, which resulted in an immaterial impact to the Company. Prior to adoption of ASU 2020-06, if the conversion features of conventional convertible debt provided for a rate of conversion that is below market value at issuance, this feature was characterized as a beneficial conversion feature ("BCF").

A BCF was 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 was recorded net of the discount related to the BCF, and the Company amortized the discount to interest expense, over the life of the debt. During the year ended June 30, 2022, the Company recorded a BCF in the amount of $2,615,419.

Stock-based Compensation

The Company measures the cost of employee services received in exchange for equity incentive awards based on the grant date fair value of the award. The Company uses the Black-Scholes valuation model to calculate the fair value of stock options granted to employees or consultants. Stock-based compensation expense is recognized over the period during which the employee is required to provide services in exchange for the award, which is usually the vesting period. During the years ended June 30, 2023 and 2022, the Company recognized $702,116 and $3,248,181 in stock-based compensation expense, respectively.

Leases

The Company accounts for leases under ASU 2016-02. At the inception of a contract the Company assesses whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether it has the right to direct the use of the asset. The Company will allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments.

Operating lease right of use (“ROU”) assets represents the right to use the leased asset for the lease term and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the adoption date in determining the present value of future payments. Lease expense for minimum lease payments is amortized on a straight-line basis over the lease term and is presented in operating expenses on the unaudited condensed consolidated statements of operations.

Finance leases are recorded as a finance lease liability and property, plant and equipment asset, based on the present value of lease payments. The asset is depreciated, and the liability is amortized with interest expense incurred over the life of the lease.

As permitted under the new guidance, the Company has made an accounting policy election not to apply the recognition provisions of the guidance to short term leases (leases with a lease term of twelve months or less that do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise); instead, the Company will recognize the lease payments for short term leases on a straight-line basis over the lease term.

Investments

The Company follows ASC 325-20, Cost Method Investments, to account for its ownership interest in noncontrolled entities. Under ASC 325-20, equity securities that do not have readily determinable fair values (i.e., non-marketable equity securities) and are not required to be accounted for under the equity method are typically carried at cost (i.e., cost method investments). Investments of this nature are initially recorded at cost. Income is recorded for dividends received that are distributed from net accumulated earnings of the noncontrolled entity subsequent to the date of investment. Dividends received in excess of earnings subsequent to the date of investment are considered a return of investment and are recorded as reductions in the cost of the investment. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred. During the year ended June 30, 2023, the Company fully impaired its investment in JV with Ebenberg LLC in the amount of $156,460.

Research and Development Expenses

Expenditures for research and development are expensed as incurred. The Company incurred research and development expenses of $0 and $5,267,581 for the years ended June 30, 2023 and 2022, respectively.

Advertising and Marketing Expenses

The Company expenses advertising and marketing costs as they are incurred. The Company recorded advertising expenses in the amount of $23,348 and $651,567 for the years ended June 30, 2023, and 2022, respectively.

Income Taxes

The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is more likely than not 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. The Company’s consolidated federal tax return and any state tax returns are not currently under examination.

Table of Contents

The Company follows ASC 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.

Basic Income (Loss) Per Share

Under the provisions of ASC 260, “Earnings per Share”, basic loss per common share is computed by dividing net loss available to common shareholders by the weighted average number of shares of common stock outstanding for the periods presented. Diluted net loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that would then share in the income of the Company, subject to anti-dilution limitations. The following potential common shares were excluded from the calculation of diluted net income (loss) per share available to common stockholders because their effect would have been antidilutive:

Years ended June 30,

Recent Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (FASB”) issued Accounting Standards Updated (“ASU”) 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which will simplify an issuer’s accounting for convertible instruments and its application of the derivatives scope exception for contracts in its own equity. Additionally, ASU 2020-06 removes the requirements for accounting for beneficial conversion features. The guidance is effective for smaller reporting companies for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company adopted this guidance effective July 1, 2022.

On June 2016, the FASB issued ASU No. 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 requires entities to use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. The Company implemented ASU 2016-13 on July 1, 2022. The impact on the consolidated financial statements was not material.

Table of Contents

NOTE 3 – JOINT VENTURE

Joint Venture with XTI Aircraft

On May 31, 2021, we entered into a Joint Venture Agreement (the “Agreement”) with XTI Aircraft Company (“XTI”), a Delaware corporation, to form the XTI JV, named Eco-Aero, LLC, with the purpose of completing the preliminary design review (“PDR”) of XTI’s TriFan 600, a 5-passenger plus pilot, hybrid electric, eVTOL fixed wing aircraft. Under the Agreement, Xeriant is contributing capital, technology, and strategic business relationships, and XTI is contributing intellectual property licensing rights and know-how. XTI and the Company each own 50 percent of the XTI JV, and it is managed by a management committee consisting of five members, three appointed by Xeriant and two by XTI. The Agreement was effective on May 27, 2021, with an initial deposit of $1 million into the XTI JV. The Company’s financial commitment is up to $10 million, contributed as needed to complete the preliminary design of the aircraft. XTI completed Preliminary Design Review during the first quarter of fiscal year 2022, which was the purpose of the XTI JV.

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

• Xeriant would be entitled to compensation for its role in introducing XTI to Inpixon, a Nasdaq-listed company, contingent upon the occurrence of any merger, combination, or transactional event between XTI and the Nasdaq company.

• XTI would assume the financial obligations related to the Senior Secured Note with Auctus Fund, LLC, including the $6.05 million principal balance of the note and warrant obligations. Additionally, Xeriant was to be granted a fully diluted equity interest amounting to 6% in XTI, issued immediately prior to any prospective combination with Inpixon.

On June 5, 2023, after suspecting that the obligations under the Letter Agreement were possibly being evaded, 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.

Table of Contents

As of the date of this filing, we remain engaged in dialogue with XTI to enforce compliance with the Letter Agreement and to find an amicable resolution.

The Company analyzed the transaction under ASC 810, Consolidation, to determine if the joint venture classifies as a Variable Interest Entity (“VIE”). The JV 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 had a right to invest up to $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.

The Company includes the assets and liabilities related to the VIE in the consolidated balance sheets. Xeriant, Inc. provides cash to the VIE to fund its operations. The carrying amounts of consolidated VIE's assets and liabilities associated with the VIE subsidiary were as follows:

Assets

Total Assets $ - $ 4,516

Liabilities

Table of Contents

Joint Venture with Movychem

On April 2, 2022, the Company entered into a Joint Venture Agreement with Movychem s.r.o., a Slovakian limited liability company, to exploit the Movychem Intellectual Property and the Purchased Patents. The Joint Venture is organized as a Florida limited liability company under the name Ebenberg, LLC, owned 50% by each of the Company and Movychem.

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

Under the Joint Venture Agreement, the Company agreed to grant to certain individuals affiliated with Movychem five-year warrants (the “Warrants”) to purchase an aggregate of 170,000,000 shares of the Company’s common stock at an exercise price of $0.01 per share with vesting depending on the satisfaction of various milestones as described therein. of which none have yet to occur.

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

The Joint Venture Agreement granted to Movychem the right to dissolve the Joint Venture in the event that the Company fails to make any of its capital contributions in which case the Joint Venture will be required to grant back to Movychem all joint venture intellectual property and the assignment to Movychem of any outstanding licenses. After working with Movychem over the past year and experiencing a number of issues, including but not limited to Movychem’s unwillingness to provide material documentation, processes and information required for the exploitation of Retacell®, the Company independently developed an upcycled construction panel, without the inclusion of Retacell®, outside of the Movychem JV.

On August 12, 2022, the Company filed the trademark “NexBoard,” for construction panels, namely, composite sheets and panels composed primarily of plastic, reinforcement materials and fire-retardant chemicals for use in walls, ceilings, flooring, framing, siding, roofing and decking. The trademark filing was intentionally broad and based upon demand for a general all-purpose construction panel made from a mixture of fire-retardant and recycled materials.

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

Table of Contents

As of June 30, 2023 and 2022, the Company contributed $312,919 and $115,356 to the joint venture.

During the year ended June 30, 2023, the Company fully impaired its investment in JV with Ebenberg LLC in the amount of $156,460.

NOTE 4 – CONCENTRATION OF CREDIT RISKS

The Company maintains accounts with financial institutions. All cash in checking accounts is non-interest bearing and is fully insured by the Federal Deposit Insurance Corporation (FDIC). At times, cash balances may exceed the maximum coverage provided by the FDIC on insured depositor accounts. The Company believes it mitigates its risk by depositing its cash and cash equivalents with major financial institutions. On June 30, 2023 and 2022, the Company had $0 and $811,429 in excess of FDIC insurance, respectively.

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 October 2023 to allow employees to work from the office beginning in November of 2023. The following table illustrates the base rent amounts over the term of the lease:

Base Rent Periods

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 the Company’s incremental borrowing rate, estimated to be 10%, as the interest rate implicit in most of the Company’s 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 consolidated statement of operations. During the years ended June 30, 2023 and 2022, the Company recorded $53,327 and $54,393 in rent expense, respectively in other general and administrative expenses on the consolidated statement of operations.

Table of Contents

Right-of-use asset is summarized below:

Operating lease liability is summarized below:

Maturity of lease liabilities are as follows:

Total future minimum lease payments 99,313

Less: Present value discount (7,117 )

NOTE 6 – CONVERTIBLE NOTES PAYABLE, IN DEFAULT

The carrying value of convertible notes payable, net of discount, as of June 30, 2023 and 2022, was $5,850,000 and $3,936,185, respectively.

Less unamortized discount - (2,113,815 )

Table of Contents

Auctus Fund LLC Senior Secured Note

Through Maxim Group, LLC, Xeriant was introduced to Auctus Fund, LLC (“Auctus”) for the purpose of providing a bridge loan funding to satisfy the requirements of a pending merger with XTI Aircraft under a binding term sheet signed in September 2021. On October 27, 2021, the Company was issued a convertible note payable with Auctus Fund, LLC (the “Auctus Note”) with the principal of $6,050,000, consisting of $5,142,500, which was the actual amount funded, plus an original issue discount in the amount of $907,500 for interest on the unpaid principal amount at the rate of zero percent per annum from the issue date until the note becomes due and payable. The closing costs were $433,550, which included $308,550 in fees paid to Maxim and professional fees for completing the transaction. The Note had an initial due date of October 27, 2022. The Auctus Note provides the holder has the option to convert the principal balance to common stock of the Company at a conversion price of the lesser of (i) $0.1187 or (ii) 75% of the offering price per share divided by the number of shares of common stock. The Auctus Note is secured by the grant of a first priority security interest in the assets of the Company. In connection with the Auctus Note, the Company issued warrants indexed to an aggregate of 50,968,828 shares of common stock. The warrants have a term of five years and an exercise price of $0.1187.

Effective August 1, 2022, the Company entered into an Amendment to the Senior Secured Promissory Note (the “First Amendment”) with Auctus pursuant to which the parties agreed to amend the Auctus Note. The Amendment (i) extended the maturity date of the Auctus Note to November 1, 2022, and (ii) extended the dates for the completion of the acquisition of XTI Aircraft and the uplist of the Company’s common stock to a national securities exchange to November 1, 2022. In consideration of the Amendment, the Company agreed to (i) grant to Auctus a new Warrant to purchase 25,000,000 shares of common stock dated July 26, 2022 (the “Warrant”) at an exercise price of $0.09 per share and 5-year term; (ii) make a prepayment of the Note in the amount of $100,000; and (iii) cause a director of the Company to cancel his 10b-5(1) Plan.

Effective December 27, 2022, the Company entered into a Second Amendment to the Senior Secured Promissory Note (the “Second Amendment”) with Auctus pursuant to which the parties agreed to further amend the Auctus Note. The Second Amendment (i) extended the maturity date of the Note, the obligation to uplist to a national securities exchange and acquisition of XTI Aircraft Company to March 15, 2023, and (ii) extended the date to file an S-1 registration statement to uplist the Company’s common stock to a national securities exchange to January 15, 2023. In consideration of the Amendment, the Company agreed to (i) grant to Auctus a new Warrant to purchase 250,000,000 shares of Common Stock dated December 27, 2022 (the “New Warrant”) at an exercise price of $0.09 per share and 5-year term, and (ii) make two pre-payment installments of $50,000 on January 15, 2023, and February 15, 2023. As of June 30, 2023, a total of $50,000 remains outstanding and is recorded within accounts payable and accrued liabilities in the consolidated balance sheets.

Table of Contents

Since the Note was issued pre-adoption of ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, the Company was required to determine if the debt contained a beneficial conversion feature (“BCF”), which is based on the intrinsic value on the date of issuance. The Company recorded a beneficial conversion feature in the amount of $2,365,419 in additional paid-in capital. The BCF resulted in a debt discount and is amortized over the life of the note.

The Company tested the first modification (“First Amendment”) under ASC 470-50-40 to determine if the modification resulted in an extinguishment. It was determined the present value of the cash flows under the terms of the new debt instrument was at least 10 percent different from the present value of the remaining cash flows under the terms of the original instrument. As a result, the modification resulted in a loss on an extinguishment in the amount of $3,570,366 for the year ended June 30,2023. The loss on extinguishment was determined as follows:

Reacquisition Price:

Modified convertible debt instrument $ 5,950,000

Carrying Value of Original Instrument

Original convertible debt instrument $ 6,050,000

Debt discount - warrant (707,585 )

Original issue discount (341,692 )

Carrying value of original debt 4,398,027

The Company tested the second modification (“Second Amendment”) under ASC 470-50-40 to determine if the modification resulted in an extinguishment. It was determined the present value of the cash flows under the terms of the new debt instrument was at least 10 percent different from the present value of the remaining cash flows under the terms of the original instrument. As a result, the modification resulted in a loss on an extinguishment in the amount of $689,621. The loss on extinguishment was determined as follows:

Table of Contents

Reacquisition Price:

Modified convertible debt instrument $ 5,850,000

Accrued Short-term Liability 100,000

Carrying Value of Original Instrument

Carrying value of original debt 5,950,000

Loss on extinguishment $ 689,621

For the years ended June 30, 2023 and 2022, the Company recorded $461,842 and $4,369,735 in amortization of debt discount related to the Auctus note, respectively. As of June 30, 2023 and 2022, the carrying value of the Auctus note was $5,850,000 and $3,936,185, respectively.

NOTE 7 – CONVERTIBLE BRIDGE LOANS – AT FAIR VALUE

Between January 13, 2023, and March 31, 2023, the Company issued convertible bridge loans with an aggregate face value of $270,000. The notes have a coupon rate of 10% and a maturity date of one year. If the Company has a liquidity event (i.e. the Company a public offering of common stock (or units consisting of common stock and warrants to purchase common stock), resulting in the listing for trading of the common stock on the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange), the notes and any accrued interest automatically convert into common stock. The Liquidity Event Conversion Price is the lesser of (a) $0.09 and (b) the product of (x) the Liquidity Event Price multiplied by (z) 75%. In the event a liquidity event does not occur, the Holder has the option to convert the Notes on the maturity date at a conversion price of $0.09.

In addition to the Notes, the holders received an aggregate 2,700,000 warrants. The warrants have an exercise price of $0.09 per share and have a five-year exercise term.

The Company analyzed the Convertible Bridge Loans to determine if they were within the scope of ASC 480 Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity. The Contract embodies a conditional obligation to transfer a variable number of shares in which the monetary value of the obligation is based solely or predominantly on, among other things, a fixed monetary amount known at inception. Additionally, the obligation is, in substance, a “traditional” debt arrangement, with the stock of the issuer used as the form of currency for repayment. As a result, the instruments are recorded at fair value pursuant to ASC 480-10-30-7. As of June 30, 2023 and 2022, the fair value of the Convertible Bridge Loans was $247,254 and $0, respectively. During the years ended June 30, 2023, and 2022, the Company recorded $10,083 and $0 in interest expense related to these loans, respectively. During the years ended June 30, 2023, and 2022, the Company recorded $57,368 and $0 in decrease in fair value of Convertible Bridge Loans, respectively.

The Company evaluated the detachable warrants under the requirements of ASC 480 and concluded that the warrants do not fall within the scope of ASC 480. The Company next evaluated the notes under the requirements of ASC 815 “Derivatives and Hedging” and concluded the warrants meet equity classification. The warrants were valued using Black-Scholes Merton (“BSM”) and were determined to have a value of $80,114, which is recorded in the consolidated statement of stockholders’ equity.

Table of Contents

NOTE 8 – CONVERTIBLE NOTES PAYABLE

Between May 13, 2023, and June 28, 2023, the Company issued convertible bridge loans with an aggregate face value of $100,000. The notes have a coupon rate of 10% and a maturity date of one year. The Notes are convertible at a fixed price of $0.01 per share. Since the Company adopted ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, on July 1, 2022, it was not required to determine if the debt contained a beneficial conversion feature (“BCF”). As such, the Note was recorded as straight debt. During the year ended June 30, 2023, the Company recorded $483 in interest expense related to these notes.

NOTE 9 – FAIR VALUE MEASUREMENTS

The following table presents the fair value hierarchy for the Company’s assets and liabilities measured at fair value on a recurring basis as of June 30, 2023 and 2022:

Description Level 1 Level 2 Level 3 Level 1 Level 2 Level 3

Assets

Convertible Bridge Loans $ — $ — $ 247,254 $ — $ — $ —

Fair values determined by Level 1 inputs utilize unadjusted quoted prices in active markets for identical assets. Level 3 instruments are characterized by unobservable inputs that are supported by little or no market activity, which require management judgment or estimation. The fair value of the Convertible Bridge Loans have three components: (i) principal, (ii) interest, and (iii) a redemption feature. The first two components (i.e. principal and interest) were valued using an income approach. For the Redemption Feature, the Company uses a Black-Scholes Merton (“BSM”) valuation technique because it believes that this technique is reflective of all significant assumption types, and ranges of assumption inputs, that market participants would likely consider in transactions involving this component. Such assumptions include market price, strike price, term, market trading volatility and risk-free rates.

Significant inputs and results arising from the BSM process are as follows for the redemption feature component of the Convertible Bridge Loans:

Inception Dates Year Ended

Quoted market price on valuation date $0.027 - $0.05 $ 0.024

Effective contractual conversion rates $0.09 - $0.012 $ 0.09

Contractual term to maturity 0.4 -1 year 0.25 – 0.75 year

Market volatility:

Table of Contents

The following table summarizes the total carrying value of the Company’s Level 3 instruments held as of June 30, 2023, including cumulative unrealized gains and losses recognized during the years ended June 30, 2023 and 2022:

Period Ended

Balances at beginning of period $ - $ -

Issuances:

Convertible Bridge Loans 189,886 -

Changes in fair value inputs and assumptions reflected in income 57,368 -

Balances at end of period $ 247,254 $ -

NOTE 10 – RELATED PARTY TRANSACTIONS

Consulting fees

During the years ended June 30, 2023 and 2022, the Company recorded $170,000 and $184,000 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. As of June 30, 2023 and 2022, $10,000 and $15,000 was recorded in accrued liabilities respectfully.

For the years ended June 30, 2023 and 2022, the Company recorded $102,000 and $122,000 respectively, in consulting fees to Edward DeFeudis, a Director of the Company. As of June 30, 2023 and 2022, $5,000 and $0 was recorded in accrued liabilities respectfully.

During the years ended June 30, 2023 and 2022, the Company recorded $56,000 and $86,000 respectively, in consulting fees to AMP Web Services, a Company owned by the Company’s CTO, Pablo Lavigna. As of June 30, 2023, and 2022, $0 and $7,000 was recorded in accrued liabilities respectfully.

During the years ended June 30, 2023 and 2022, the Company recorded $25,000 and $40,425 respectively, in consulting fees to Keystone Business Development Partners, a Company owned by the Company’s CFO, Brian Carey. As of June 30, 2023 and 2022, $5,000 and $0 was recorded in accrued liabilities respectfully.

NOTE 11 – 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.

Table of Contents

Financial Advisory Agreements

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

During the year ended June 30, 2022, the Company issued all 1,500,000 shares under the agreement.

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

During the year ended June 30, 2022, the Company issued the initial 2,225,000 shares. There were no additional shares issued during the fiscal year ended June 30, 2023.

Board of Advisors Agreements

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

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. The agreement also provides for a 1% finders fee.

Table of Contents

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. The agreement also provides for a 30% commission.

On August 9, 2021, the Company agreed to issue 50,000 common shares vesting over the first year, $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.

On March 1, 2022, the Company agreed to issue 150,000 common shares vesting monthly over one year, $2,500 per meeting paid in cash, and an additional bonus of $25,000 paid in common shares issued at the end of each year of service.

On January 20, 2022, the Company agreed to issue 150,000 common shares vesting monthly over one year, and $2,500.00 per meeting paid in cash and an additional bonus of $25,000 paid in common shares issued at the end of each year of service.

On March 20, 2022, the Company agreed to issue 150,000 common shares vesting monthly over one year, and $2,500.00 per meeting paid in cash and an additional bonus of $25,000 paid in common shares issued at the end of each year of service.

There were no additional Advisory Agreements executed during the fiscal year ended June 30, 2023.

NOTE 12 – EQUITY

Common Stock

As of June 30, 2023 and 2022, the Company had 5,000,000,000 shares of common stock authorized with a par value of $0.00001. There were 389,433,144 and 365,239,001 shares issued and outstanding as of June 30, 2023 and 2022, respectively.

Fiscal Year 2022 Issuances

During the year ended June 30, 2022, in connection with one of the subscription agreements, the Company issued 250,000 shares as an equity kicker valued at $43,753, which has been expensed as financing costs.

During the year ended June 30, 2022, the Company issued 4,308,600 shares of common stock as a result of warrant exercises in the aggregate proceeds of $128,550.

During the year ended June 30, 2022, the Company issued 4,685,615 shares of common stock for services, valued at $761,954.

During the year ended June 30, 2022, the Company sold 39,366,666 shares of common stock for aggregate proceeds of $2,078,501.

During the year ended June 30, 2022, the Company issued 7,138,000 shares of common stock in exchange for the conversion of 7,138 shares of Series A Preferred Stock.

During the year ended June 30, 2022, the Company issued 10,598,544 shares of common stock for the conversion of $167,550 in principal and $4,984 in accrued interest. This resulted in a loss on extinguishment of debt in the amount of $536.

Table of Contents

During the year ended June 30, 2022, the Company issued 4,229,680 shares of common stock for the conversion of $250,000 principal balance of convertible notes payable and $3,749 accrued interest.

During the year ended June 30, 2022, the Company issued 845,936 shares of common stock in exchange for the inducement to the convertible notes holders to convert at fair value of $134,929.

Fiscal Year 2023 Issuances

During the year ended June 30, 2023, the Company issued 1,000,000 shares of common stock in exchange for the conversion of 1,000 shares of Series A Preferred Stock.

During the year ended June 30, 2023, the Company issued 457,143 shares to a consultant for services valued at $48,000.

During the year ended June 30, 2023, the Company issued 10,237,000 shares of common stock in exchange for the conversion of 10,237 shares of Series A preferred stock.

During the year ended June 30, 2023, the Company issued 5,000,000 shares of common stock in exchange for the conversion of 500 shares of Series A preferred stock.

During the year ended June 30, 2023, the Company issued 7,500,000 shares of common stock in exchange for the conversion of 7,500 shares of Series A preferred stock.

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:

As of June 30, 2023 and 2022, the Company had 757,395 and 781,132 shares of Series A preferred stock issued and outstanding, respectively.

Table of Contents

On July 11, 2022, the Company issued 1,000,000 shares of common stock in exchange for the conversion of 1,000 shares of Series A preferred stock.

On October 24, 2022, the Company issued 10,237,000 shares of common stock in exchange for the conversion of 10,237 shares of Series A preferred stock.

On March 17, 2023, the Company issued 5,000,000 shares of common stock in exchange for the conversion of 5,000 shares of Series A preferred stock.

On May 26, 2023, the Company issued 7,500,000 shares of common stock in exchange for the conversion of 7,500 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, grants 5,000 votes and no liquidation preference.

Stock Options

In connection with certain advisory board compensation agreements, the Company issued an aggregate 21,250,000 options at an exercise price of $0.12 per share for the year ended June 30, 2022. These options vest quarterly over twenty-four months and have a term of three years. The grant date fair value was $3,964,207. The Company recorded compensation expense in the amount of $702,116 and $3,248,181 for these options for the years ended June 30, 2023 and 2022, respectively. As of June 30, 2023, there was $0 of total unrecognized compensation cost related to non-vested portion of options granted.

As of June 30, 2023, there are 21,250,000 options outstanding, of which 20,687,500 are exercisable. The weighted average remaining term is 1.11 years.

Table of Contents

A summary of the Company’s stock options activity is as follows:

Outstanding at June 30, 2021 - -

Exercised - -

Canceled - -

Granted -

Exercised - -

Canceled - -

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 interest rates 0.20% - 1.08%

Warrants

As of June 30, 2023, and 2022, the Company had 104,802,161 and 55,512,161 warrants outstanding, respectively. The warrants have a term of two to five years and an exercise price range from $0.021 and $0.1187. 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 values. During the year ended June 30, 2022, holders of warrants exercised warrants for 4,308,600 shares of common stock for aggregate proceeds of $128,550. As of June 30, 2023, the weighted average remaining useful life of the warrants was 3.79.

Table of Contents

As of June 30, 2023 and 2022, the Company had 104,802,161 and 55,512,161 warrants outstanding respectively. The warrants are detailed as follows:

Canceled -

Exercised -

NOTE 13 - NON-CONTROLLING INTEREST

None

NOTE 14 – INCOME TAXES

The Company accounts for income taxes in accordance with the provisions of FASB ASC 740, Accounting for Uncertainty in Income Taxes. Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Table of Contents

At June 30, 2023 and 2022, the significant components of the deferred tax assets are summarized below:

Net Deferred Tax Asset (Liability) $ - $ -

The Company periodically evaluates the likelihood of the realization of deferred tax assets and adjusts the carrying amount of the deferred tax assets by the valuation allowance to the extent the future realization of the deferred tax assets is not judged to be more likely than not. The Company considers many factors when assessing the likelihood of future realization of its deferred tax assets, including its recent cumulative earnings experience by taxing jurisdiction, expectations of future taxable income or loss, the carryforward periods available to the Company for tax reporting purposes, and other relevant factors.

Future changes in the unrecognized tax benefit will have no impact on the effective tax rate due to the existence of the valuation allowance. The Company estimates that the unrecognized tax benefit will not change significantly within the next twelve months. The Company will continue to classify income tax penalties and interest as part of general and administrative expenses in its consolidated statements of operations. There were no interest or penalties accrued as of June 30, 2023.

NOTE 15 – SUBSEQUENT EVENTS

On August 7, 2023, the Company established a wholly owned subsidiary, BlueGreen Composites, LLC, to better manage the business operations of the green building products business line. As of the date of this filing, no bank account was opened, no contracts or agreements were executed, and no business operations were undertaken.

On July 30, 2023, we filed the trademark BlueGreen for ecofriendly composite building products and “Durever” for the same categories on July 31, 2023.

From July 1, 2023, through October 12, 2023, a total of $461,000 in convertible notes were issued.

Table of Contents

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Effective August 31, 2023, the Company engaged Accell Audit & Compliance, PA, replacing BF Borgers CPA P.C. as the Company’s independent registered public accounting firm. The engagement was approved by the Company’s Board of Directors.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

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

At June 30, 2023, an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)-15(e) of the Exchange Act) was carried out under the supervision and with the participation of Keith Duffy our Chief Executive Officer and Brian Carey our Chief Financial Officer. Based on his evaluation of our disclosure controls and procedures, he concluded that, at June 30, 2023, our disclosure controls and procedures are effective.

Management's Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP.

Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; (iii) provide reasonable assurance that receipts and expenditures of company assets are made in accordance with management authorization; and (iv) provide reasonable assurance that unauthorized acquisition, use or disposition of Company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because changes in conditions may occur or the degree of compliance with the policies or procedures may deteriorate.

Table of Contents

Our management has conducted an evaluation, under the supervision and with the participation of Keith Duffy, our Chief Executive Officer, and Brian Carey, our Chief Financial Officer, of the effectiveness of our internal control over financial reporting as of June 30, 2023. This evaluation was based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, Internal Control-Integrated Framework. Based upon such assessment, Keith Duffy concluded that our internal controls over financial reporting are effective based upon the Company’s size and staff size, and that there are no apparent material weaknesses in our internal controls over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.

This Report shall not be deemed to be filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, and is not incorporated by reference into any filing of the Registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. The rules of the Securities and Exchange Commission do not require an attestation of the Management's report by our registered public accounting firm in this annual report.

Changes in Internal Controls

There have been no changes in our internal control over financial reporting that occurred during the fourth quarter of our fiscal year ended June 30, 2023, that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

Table of Contents

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Directors and Executive Officers of Xeriant, Inc.

The following sets forth information about our directors and executive officers:

Name Age Position

Keith Duffy 62 Chairman of the Board and CEO

Scott Duffy 62 Executive Director

Edward C. DeFeudis 50 Director

Pablo Lavigna 52 Chief Information Officer

Brian Carey 61 Chief Financial Officer

Keith Duffy, Chairman of the Board and CEO

Mr. Duffy has over thirty years of experience in investment banking, management, finance, strategic planning and operations, and has been a principal in a number of start-up companies. He arranged the merger of American Aviation Technologies with a public company and established the relationship with Florida Atlantic University (FAU), preparing the white paper that was presented to the Research Park at FAU Authority. He was formerly the founder and CEO of a public company and the founder and CEO of two bank holding companies, a software development company and a biotech company now trading on NASDAQ. Mr. Duffy trained to be a private pilot when he was 16 years old and worked at an FBO at the Palm Beach International Airport after college to further his knowledge of the aviation industry. He has held a variety of management, accounting, and finance positions over the years. He has been a licensed securities broker and currently holds a real estate license and a NMLS mortgage broker’s license in Florida. He has also served on the Florida Bar Grievance Committee. Mr. Duffy attended Wake Forest University and Rollins College, where he earned a B.A. Degree in Business Administration and Mathematics in 1982.

Scott M. Duffy, Executive Director, Corporate Operations

Scott Duffy has over thirty years of experience in management, operations, strategic planning, information technology, statistical analysis, marketing and promotion, and sales development. He has collaborated with his brother Keith over many years to develop plans and research for a wide range of start-up companies, including American Aviation Technologies and the Halo project. As Senior Vice President, Operations and Administration at Globe Marketing Services, he was responsible for planning and coordinating the activities of internal management and the support staff to meet corporate objectives. As Newsstand Circulation Director at American Media, one of the largest publishers in North America, he was responsible for the $545 million retail sales division, overseeing both international and domestic distribution. Over his career he has been instrumental in increasing profitability though optimizing core competencies. Mr. Duffy was a co-founder and principal in a number of real estate development projects beginning in 2006. Mr. Duffy trained to be a private pilot when he was 16 years old and has always been interested in aviation. He attended Wake Forest University and Rollins College, where he earned a B.A. in Business Administration and Mathematics in 1982.

Table of Contents

Edward C. DeFeudis, Director

Mr. DeFeudis is a venture investor and serial entrepreneur spanning multiple industries. His investments focus on late seed, bridge, and Series A rounds. He understands complex disruptive technology and enjoys finding rare opportunities that create first mover advantage. Mr. DeFeudis is a financial professional who has served on the executive management team and board of directors of several early-stage companies. He has structured and secured multiple financings while serving as point person to investors, funds, and investments banks, which has led to hundreds of millions of dollars in capital formation. He is extremely detail oriented and understands complex legal positioning.

Pablo Lavigna, Chief Information Officer

Pablo Lavigna has over twenty years of experience in the Information Technology and Software Engineering field. He developed extensive experience as Director of Information Technology operations at a private firm. Mr. Lavigna has developed and implemented network security procedures and developed software for multiple industries. He holds several Microsoft and CompTIA certifications including Microsoft Certified System Engineer (MCSE), Microsoft Certified System Administrator (MCSA), and Microsoft Certified Professional (MCP), and CompTIA Security+. Mr. Lavigna attended Florida International University where he earned his degree in Information Technology and Business with Magna Cum Laude Honors.

Brian Carey, Chief Financial Officer

Brian Carey is an entrepreneur and business development specialist who built and ran a successful accounting, tax and business management firm for over 30 years. He started a financial management/insurance and investment firm in 1984, then expanded it to add accounting, tax preparation and business planning and management services in 1986 called Carey Associates Accounting and Tax Services. More recently, Mr. Carey was the owner and manager of BCGR Tax and Financial Services. This company also provides business start-up and development services to a limited number of client/partner companies. He holds a Bachelor of Accounting Degree from Penn State University.

Table of Contents

Director Independence

We are not currently a “listed company” under SEC rules and are therefore not required to have a Board comprised of a majority of independent directors or separate committees comprised of independent directors.

Director Independence; Standing Committees

The Company’s common stock is traded on OTCQB under the symbol “XERI.” The OTCQB trading platform does not maintain any standards regarding the “independence” of the directors for our Board of Directors, and we are not otherwise subject to the requirements of any national securities exchange or an inter- dealer quotation system with respect to the need to have a majority of our directors be independent.

The Company’s Board presently has no functioning standing committees.

Board Leadership Structure and Role in Risk Oversight

Although we have not adopted a formal policy on whether the Chairman and Chief Executive Officer should be separate or combined, we have traditionally determined that it is in the best interests of the Company and its shareholders to combine these roles due to the small size and early stage of the Company.

Family Relationships

Keith Duffy, Chairman and CEO, and Scott Duffy, Executive Director, are brothers.

Board Committees

Audit Committee

We do not have a separately designated audit committee of the board. Audit committee functions are performed by our board of directors. None of our directors are deemed independent. Two directors also hold positions as our officers. Our Board of Directors is responsible for: (1) selection and oversight of our independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; (3) establishing procedures for the confidential, anonymous submission by our employees of concerns regarding accounting and auditing matters; (4) engaging outside advisors; and, (5) funding for the outside auditory and any outside advisors’ engagement by the audit committee.

Nominees

There have been no material changes to the procedures by which security holders may recommend nominees to the Registrant's board.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires our directors, executive officers and beneficial owners of more than 10% of our common stock to file with the SEC reports of their holdings of, and transactions in, our common stock. Based solely upon our review of copies of such reports and written representations from reporting persons that were provided to us, we believe that our officers, directors and 10% stockholders complied with these reporting requirements with respect to our fiscal year ended June 30, 2023.

Code of Ethics

The Registrant has adopted a corporate code of ethics. The Registrant believes its code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code.

Table of Contents

Item 11. Executive Compensation.

For the years ended June 30, 2023, all officers and directors were compensated as independent contractors based upon respective consulting agreements as noted in Table below.

The following table shows information regarding the compensation earned for the years ended June 30, 2023 and 2022 by our named executive officers:

EXECUTIVE COMPENSATION TABLE

Table of Contents

Director Compensation

The following table shows information regarding the compensation earned during the years ended June 30, 2023, and 2022 by the members of our board of directors.

DIRECTOR COMPENSATION TABLE

Keith Duffy 2023 - - - - - - - -

Director 2022 - - - - - - - -

Scott Duffy 2023 - - - - - - - -

Director 2022 - - - - - - - -

Executive Compensation Policies as They Relate to Risk Management

Management have considered whether our compensation policies might encourage inappropriate risk taking by the Company's executive officers and other employees. The Compensation Committee has determined that the current compensation structure aligns the interests of the executive officers with those of the Company without providing rewards for excessive risk taking by awarding a mix of fixed and performance based or discretionary bonuses with the performance- based compensation focused on profits as opposed to revenue growth.

Option Exercises and Fiscal Year-end Option Value Table

None of the named executive officers exercised any stock options during the year ended June 30, 2023, or held any outstanding stock options as of June 30, 2023.

Table of Contents

Incentive Plan

The Registrant does not have any equity compensation plans.

Consulting Agreements

None, although the officers are currently paid as related party consultants of the Company.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The table below sets forth as of June 30, 2023, information with respect to beneficial ownership of the Company’s common stock by:

· Each of the post-Merger directors and executive officers of the Company.

· All of our post-Merger directors and executive officers as a group.

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. Shares of common stock subject to any warrants or options that are presently exercisable or exercisable within 60 days of June 30, 2023, are deemed outstanding for the purpose of computing the percentage ownership of the person holding the warrants or options but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. The numbers reflected in the percentage ownership columns are based on a fully diluted basis of the Company’s common stock outstanding after a conversion of the Series A Preferred Stock into Common Shares. The persons named in the table have sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable.

Name of Beneficial Owner

(3) Cameron Cox is the beneficial owner or Basil Consulting, LLC.

(6) Brian Carey is the Chief Financial Officer of the Company.

Table of Contents

Item 13. Certain Relationships and Related Transactions, and Director Independence

Director Independence

We are not currently a “listed company” under SEC rules and are therefore not required to have a Board comprised of a majority of independent directors or separate committees comprised of independent directors. We currently do not have any independent directors as the term “independent” is defined by the rules of the Nasdaq Stock Market.

Item 14. Principal Accounting Fees and Services.

The following is a summary of the fees billed to us by BF Borgers CPA, PC, and Accell Audit & Compliance, PA, for professional services rendered for the fiscal year ended June 30, 2023 and 2022:

Fiscal Year Ended

Audit Related Fees - -

Tax Fees - -

All Other Fees - -

Audit Fees. Consists of fees billed for professional services rendered for the audit of our consolidated financial statements and review of interim consolidated financial statements included in quarterly reports and services that are normally provided in connection with statutory and regulatory filings or engagements.

Audit Related Fees. Consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit Fees”.

Table of Contents

Tax Fees. Consists of fees billed for professional services for tax compliance, tax advice and tax planning. These services include preparation of federal and state income tax returns.

All Other Fees. Consists of fees for product and services other than the services reported above.

Board of Directors' Pre-Approval Policies

Our Board of Directors' policy is to pre-approve all audit and permissible non-audit services provided by the independent auditors. These services may include audit services, audit related services, tax services, and other services. Pre-approval is generally provided for up to one year, and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent auditors and management are required to periodically report to the Board of Directors regarding the extent of services provided by the independent auditors in accordance with this pre-approval and the fees for the services performed to date. The Board of Directors may also pre-approve particular services on a case-by-case basis.

Our Board of Directors has reviewed and discussed with Accell Audit & Compliance, PA (“Accell”) our audited consolidated financial statements contained in this Annual Report on Form 10-K for the fiscal years ended June 30, 2023 and 2022. The Board of Directors also has discussed with Accell the matters required to be discussed pursuant to SAS No. 61 (Codification of Statements on Auditing Standards, AU Section 380), which includes, among other items, matters related to the conduct of the audit of our consolidated financial statements.

Based on the review and discussions referred to above, the Board of Directors determined that the audited consolidated financial statements be included in our Annual Report on Form 10-K for our fiscal year ended June 30, 2023, for filing with the SEC.

Table of Contents

PART IV

Item 15. Exhibits, Financial Statement Schedules

ExhibitNumber Document

101.SCH Inline XBRL Taxonomy Extension Schema

101.CAL Inline XBRL Taxonomy Extension Calculation

101.DEF Inline XBRL Taxonomy Extension Definition

101.LAB Inline XBRL Taxonomy Extension Label

101.PRE Inline XBRL Taxonomy Extension Presentation

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: October 16, 2023 By: /s/ Keith Duffy

Keith Duffy

Chief Executive Officer (Principal Executive)

Date: October 16, 2023 By: /s/ Brian Carey

Brian Carey

Chief Financial Officer

Date: October 16, 2023 By: /s/ Scott Duffy

Scott Duffy

Executive Director, Corporate Operations

Date: October 16, 2023 By: /s/ Edward DeFeudis

Edward DeFeudis

Director