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.

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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, 2024 and 2023. 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, is dedicated to the discovery, development and commercialization of advanced materials and technology related to next generation air and spacecraft, which can be successfully integrated and commercialized for deployment across multiple industrial sectors. The Company seeks to partner with and acquire strategic interests in visionary companies that accelerate this mission. Xeriant’s advanced materials line will be marketed under the DUREVERTM brand, and includes NEXBOARDTM, an eco-friendly, patent-pending composite building panel made from plastic and cellulose waste and a proprietary flame retardant, primarily designed to be a replacement for traditional building materials such as drywall, plywood, OSB, MDF, MgO board and other materials used in construction.

Joint Venture with XTI Aircraft

On May 31, 2021, the Company entered into a Joint Venture Agreement (the “Agreement”) with XTI Aircraft Company (“XTI”), a Delaware corporation, to form a joint venture with XTI (the “XTI JV”), named Eco-Aero, LLC, with the purpose of completing the preliminary design review (“PDR”) of XTI’s TriFan 600, a 5-passenger plus pilot, hybrid electric, eVTOL fixed wing aircraft. Under the Agreement, Xeriant would contribute capital, technology, and strategic business relationships, and XTI contributed intellectual property licensing rights and know-how. XTI and the Company each owned 50 percent of the XTI JV and would be managed by a management committee consisting of five members, three appointed by Xeriant and two by XTI. The Company invested approximately $5.5 million into the joint venture after borrowing the funds from Auctus Fund LLC (“Auctus”) through a Senior Secured Promissory Note, through an introduction from Maxim Group, LLC, the Company’s investment banker at the time. The borrowed funds from Auctus were intended to be a bridge loan that would be resolved through an IPO (Initial Public Offering) and uplist to Nasdaq in a merger with XTI, which did not occur because XTI refused to move forward with the merger. The PDR was completed during the first quarter of 2022 according to XTI.

On May 17, 2022, after failed merger negotiations, the Company entered into a confidential Letter Agreement with XTI whereby Xeriant would receive compensation for introducing Inpixon, a Nasdaq-listed company, to XTI for a combination or any other transaction. Should a combination or any other transaction occur, the compensation due to Xeriant would include a six percent (6%) fully diluted interest in XTI upon dissolution of its Joint Venture with Xeriant, and XTI would assume Xeriant’s obligations under its Senior Secured Note with Auctus.

The material terms of the May 17, 2022 Letter Agreement with XTI are briefly delineated as follows:

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.

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

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

On February 29, 2024, the Company filed a Second Amended Complaint against XTI, along with other unnamed defendants, on February 29, 2024, and on March 13, 2024, XTI filed a partial Motion to Dismiss.

On March 12, 2024, XTI merged with Inpixon, a Nasdaq-listed company.

On April 10, 2024, the Company filed a Memorandum of Law in Opposition to XTI’s Motion to Dismiss the Company’s Second Amended Complaint and is waiting for the court to rule on the matter.

The foregoing descriptions of the legal actions do not purport to be complete and are subject in their entirety by the full text of the court filings.

Joint Venture with Movychem

Effective April 2, 2022, the Company entered into a Joint Venture with Movychem s.r.o., a Slovakian limited liability company (“Movychem”), called Ebenberg, LLC, setting forth the terms for the establishment of a joint venture to develop and exploit certain Movychem intellectual property that would be exploited by the joint venture. The JV was organized as a Florida limited liability company and was owned 50% by each of the Company and Movychem. Essentially, the Company would contribute certain funding for its capital contribution and Movychem would provide an exclusive license and assignment of its intellectual property.

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 were 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 certain know-how and intellectual property, 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.

After funding the JV during the remainder of 2022, the Company notified Movychem that in its determination it had not performed its obligations under the Joint Venture Agreement and discontinued payments until there was a resolution, which was followed by Movychem formally requested dissolution of the JV, which the parties agreed to and was effective June 30, 2023.

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

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Stock Sales

During the year ended June 30, 2024, the Company received $0 by selling shares of common stock.

Convertible Notes Issued

During the year ended June 30, 2024, the Company received $2,030,000 from the issuance of convertible debt.

Litigation

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

On December 6, 2023, the Company initiated legal proceedings against XTI Aircraft Company in the Federal District Court for the Southern District of New York (Case no. 1:23-cv-10656-JPO), along with other unnamed defendants, seeking to enforce the terms of the Letter Agreement, and alleging fraudulent acts, breach of contract and misappropriation of intellectual property. The foregoing description of the legal action does not purport to be complete and is subject in its entirety by the full text of the complaint, a copy of which was filed in an 8-K on December 12, 2023, Exhibit 99.1. On February 29, 2024, the Company filed a Second Amended Complaint against XTI, along with other unnamed defendants, on February 29, 2024, and on March 13, 2024, XTI filed a partial Motion to Dismiss. On April 10, 2024, the Company filed a Memorandum of Law in Opposition to XTI’s Motion to Dismiss the Company’s Second Amended Complaint and is waiting for the court to rule on the matter.

There is no pending litigation against the Company and to our knowledge no litigation is contemplated or threatened. To our knowledge, none of our directors, officers, 5% shareholders or affiliates are party to any legal proceedings that would have a material adverse effect on our business, financial condition, or operating results.

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Fiscal Year 2024 Results of Operations Compared with Fiscal Year 2023

For the years ended

Operating expenses:

Other expenses:

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Consulting and advisory fees

Total consulting and advisory expenses were $731,128 and $1,147,398 for the years ended June 30, 2024 and 2023, respectively. In the prior period, there were increased expenses due to stock issuances for services.

Related Party Consulting Fees

Total related party consulting fees were $388,000 and $353,000 for the years ended June 30, 2024 and 2023, respectively. The related party consulting fees for the year ended June 30, 2024, consisted of (i) $207,500 to Ancient Investments, LLC, a company owned by Keith Duffy, CEO and Scott Duffy, Executive Director of Operations, (ii) $67,000 for AMP Web Services, LLC, a company owned by Pablo Lavigna, CIO, (iii) $78,500 to Edward DeFeudis, Director, and (iv) $35,000 for Keystone Business Development Partners, LLC, a company owned by Brian Carey, CFO. The related party consulting fees for the year ended June 30, 2023, consisted of (i) $170,000 to Ancient Investments, LLC, (ii) $56,000 for AMP Web Services, LLC, (iii) $102,000 to Edward DeFeudis, and (iv) $25,000 for Keystone Business Development Partners, LLC.

General and administrative expenses

Total general and administrative expenses were $282,249 and $280,216 for the years ended June 30, 2024 and 2023, respectively. The increase was primarily related to increased travel expenses.

Professional Fees

Total professional fees were $308,109 and $271,021 for the years ended June 30, 2024 and 2023, respectively. The current period increased amount was due primarily to increased audit fees.

Research and Development Expenses

Total research and development expenses were $196,422 and $0 for the years ended June 30, 2024, and 2023, respectively. The research and development expenses in the fiscal year ended June 30, 2024, were in connection with our NEXBOARDTM development operations through BlueGreen Composites, LLC, a consolidated disregarded entity of the Company.

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 $1,197,197 for the year ended June 30, 2024, compared to $5,045,004 for the year ended June 30, 2023. The decrease 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 $3,103,101 for the year ended June 30, 2024, compared to $7,096,639 for the year ended June 30, 2023. The decrease was primarily related to loss on extinguishment of debt of $4,259,987 for the year ended June 30, 2023. The difference was partially offset by an increase in interest expense of $1,183,885 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, 2024 and 2023, the Company had $653,117 and $61,625 in cash, respectfully, and $8,661,248 and $6,684,867 in negative working capital, respectively. On June 30, 2024, 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, 2024 and 2023, the Company had a net loss of $3,103,101 and $7,096,639, 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. The Company has been funded primarily through the issuance of convertible debt.

During the fiscal year ended June 30, 2024, our operating activities used $1,430,345 of net cash used compared to using $1,174,190 of net cash used in our operating activities during the fiscal year ended June 30, 2023. This difference primarily related to an increase in stock-based compensation and an increase in the change in accounts payable. During the fiscal year ended June 30, 2024, our investing activities used $8,163 of net cash compared to using $200,130 of net cash used in our investing activities during the fiscal year ended June 30, 2023. The primary reason for the difference is the $197,563 in the prior period related to Investment in Movychem JV. During the fiscal year ended June 30, 2024, our financing activities added $2,030,000 of net cash compared to adding $370,000 of net cash in our financing activities during the fiscal year ended June 30, 2023. This difference related to a substantial increase in the issuance of convertible notes in the current fiscal year. The Company continues to raise capital through the issuance of convertible notes and has received commitments from key investors that additional funds are available upon request. The Company maintains a fiscal policy to limit the issuance of convertible notes to our current and projected funding needs. The Company is confident that funding through this process will be adequate to cover required operating and development expenditures until cash flow from operations is sufficient.

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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, 2024 and 2023 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.

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Item 8. Financial Statements and Supplementary Data

XERIANT, INC.

CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024 and 2023

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID # 6920) F-1

Consolidated Balance Sheets as of June 30, 2024 and 2023 F-6

Notes to Consolidated Financial Statements F-10

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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 sheet of Xeriant, Inc. (the Company) as of June 30, 2024, and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for the year ended June 30, 2024, 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, 2024, and the results of its operations and its cash flows for the year ended June 30 2024, 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 audit. 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit 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 audit, 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 audit 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 audit 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 audit provides 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.

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Convertible Debentures

As described in Note 2 to the Company’s consolidated financial statements, the Company adheres to ASU 2020-06 which simplifies an issuer’s accounting for convertible instruments and its application of the derivatives scope exception for contracts in its own equity. 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 warrant features 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:

- 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.

We have served as the Company’s auditor since 2024.

Tampa, Florida

October 8, 2024

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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 sheet of Xeriant, Inc. (the Company) as of June 30, 2023, and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for the year 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 the results of its operations and its cash flows for the year 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 audit. 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit 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 audit, 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 audit 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 audit provides 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.

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Derivatives

As described in Note 2 to the Company’s consolidated financial statements, 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 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.

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.

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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

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XERIANT, INC.

CONSOLIDATED BALANCE SHEETS

As of As of

Assets

Current assets

Note receivable 8,163 -

Operating lease right-of-use asset, net 32,253 82,911

Liabilities and stockholders' deficit

Current liabilities

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

Convertible bridge loans, at fair value - 247,254

Lease liability, long-term - 36,197

Commitments and contingencies (Note 11)

Stockholders' deficit

Total liabilities and stockholders' deficit $ 713,005 $ 167,118

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

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XERIANT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the years ended

Operating expenses:

Research and development expense 196,422 -

Other expenses:

Change in fair value of convertible bridge loans (2,448 ) (57,368 )

Loss on impairment of investment - (156,460 )

Loss from Ebenberg JV - (98,781 )

Gain on extinguishment of debt 28,627 -

Less net loss attributable to noncontrolling interest (32,647 ) (29,683 )

Net loss attributable to common stockholders $ (3,070,454 ) $ (7,066,956 )

Net loss per common share - basic and diluted $ (0.01 ) $ (0.02 )

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

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XERIANT, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

Shares Amount Shares Amount Shares Amount Capital issued Deficit Interest Total

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

Warrants associated with convertible debt - - - - - - 66,660 - - - 66,660

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

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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:

Depreciation and amortization 1,512 1,469

Change in fair value of convertible bridge loans 2,448 57,368

Gain on extinguishment of debt (28,627 ) -

Loss from Ebenberg JV - 98,781

Loss on impairment of investment - 156,460

Changes in operating assets and liabilities:

Accrued liability, related party - (2,000 )

Cash Flows from Investing Activities

Cash issued for notes receivable (139,947 ) -

Cash repayments for notes receivable 131,784 -

Investment in JV Movychem - (197,563 )

Purchase of property and equipment - (2,567 )

Net cash from financing activities (8,163 ) (200,130 )

Cash Flows from Financing Activities

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 $ 669,182 $ -

Warrants issued with convertible notes payable $ 66,660 $ 2,688,128

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

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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 will be marketed under the DUREVERTM brand, and includes NEXBOARDTM, an eco-friendly, patent-pending composite building panel made from plastic and cellulose waste and a proprietary flame retardant, primarily designed to be a replacement for traditional building materials such as drywall, plywood, OSB, MDF, MgO board and other materials used in construction.

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 had two joint ventures, one in the area of aerospace that was effective May 31, 2021, and terminated on May 31, 2023, 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 development and commercialization of eco-friendly advanced materials which have applications across a broad range of industries and the potential to generate significant near-term revenue. The Company’s strategy encompasses licensing arrangements, joint ventures, or combinations which could allow for more rapid access to the market with reduced capital requirements and financial risk. Some partner companies may provide production and distribution infrastructure, which could streamline testing and certification as well as add brand recognition. Once the Company establishes sufficient production capabilities, the advanced materials may be sold as standalone products, enhancements to existing products, or used in the development of proprietary products under new trademarked brands owned by the Company. The Company is exploring manufacturing and branding opportunities for specific products derived from advanced materials acquired or developed, which would involve setting up production facilities, equipment, systems and supply chains.

Effective April 2, 2022, the Company entered into a Joint Venture Agreement with Movychem s.r.o., a Slovakian company, to exploit Movychem’s intellectual property related to advanced materials. The joint venture was owned 50% by Xeriant and 50% by Movychem, and was terminated effective June 30, 2023.

Throughout the second half of 2023, Xeriant began developing its own advanced materials, including proprietary flame-retardant technology for polymers contained in recycled materials. The Company also began testing a number of production processes to manufacture its eco-friendly, patent pending, composite construction panel called NEXBOARDTM that can be competitive in the market and produced at industrial scale. Xeriant intends to initially manufacture these wallboards through a contract manufacturer to meet current existing demand indicated by several homebuilders and developers. NEXBOARD will be available in varying thicknesses and sizes, including standard 48” x 96” sheets.

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On August 12, 2022, the Company filed a trademark application with the U.S. Patent and Trademark Office for “NEXBOARD,” with respect to 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. Xeriant has also filed a trademark application for “DUREVERTM.”

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. On April 1, 2024, the Company filed a non-provisional U.S. patent application claiming priority to the filing date of the 2023 related provisional patent application described herein. Subject to available capital, the Company is planning to build manufacturing facilities in the United States for the production of NEXBOARDTM in order to meet market demand, or alternatively license the technology and process. The Company has identified companies for near-term contract manufacturing, has potential locations identified for a pilot plant and larger manufacturing facilities, received bids for specialized manufacturing equipment, developed timetables related to the action plan, and selected a managing director with decades of experience who would like to oversee the startup of production, expansion and operations.

Aerospace

The Company seeks to develop or acquire and commercialize disruptive, high-growth-potential technologies in aerospace, including next-generation air and spacecraft, that have potential applications in other industries. The areas of focus that are reshaping the future of aerospace include advanced materials, advanced air mobility, unmanned aerial systems, AI, hypersonics, communications, cybersecurity, satellites, and renewable energy technology. The Company’s initial concentration was on 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. Hydrogen powered aircraft have already been prototyped and are expected to become more prevalent over the next decade. The development of solid-state hydrogen technology may address the safety, large-area storage requirement limitations for gaseous-state hydrogen. The Company plans to partner with and acquire strategic interests in visionary companies that accelerate our mission of commercializing critical breakthrough aerospace technologies which enhance sustainability, performance, and safety.

Effective May 31, 2021, the Company entered into a 50/50 Joint Venture Agreement with XTI Aircraft Company (“XTI”), for 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 (VTOL) fixed-wing aircraft. The aircraft’s unique design elements along with the $1 billion in pre-orders and reservations, enticed Xeriant to invest $5.5 million to complete the PDR, which was accomplished in the first quarter of 2022 according to XTI. The TriFan 600 was purported to become the fastest, longest-range VTOL aircraft in the world and the first commercial fixed-wing VTOL airplane. According to recent public disclosures by XTI, pre-orders and reservations of the TriFan 600 total approximately $7 billion.

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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, which was a compensation triggering event. Inpixon subsequently filed an S-4/A registration statement on October 6, 2023.

On December 6, 2023, the Company initiated legal proceedings against XTI in the Federal District Court for the Southern District of New York (Case no. 1:23-cv-10656-JPO), along with other unnamed defendants, seeking to enforce the terms of the Letter Agreement, and alleging fraudulent acts, breach of contract and misappropriation of intellectual property. The foregoing description of the legal action does not purport to be complete and is subject in its entirety by the full text of the complaint, a copy of which was filed in an 8-K on December 12, 2023, Exhibit 99.1. Litigation is still pending.

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 partner companies 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 ("AAT"), Eco-Aero, LLC, and BlueGreen Composites, 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 $26,708,915 as of June 30, 2024. During the year ended June 30, 2024, the Company’s net loss was $3,103,101 and at June 30, 2024, the Company had a working capital deficit of $8,661,248. 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 three months from October 8, 2024. 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.

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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.

Reclassification

Certain amounts included in prior year financial statements have been reclassified to conform to the current year presentation. These reclassifications did not have a material impact on the Company’s previously reported financial statements.

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

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, 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.

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.

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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, 2024, there was no impairment. 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.

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, 2024 and 2023, the Company recognized $0 and $702,116, 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.

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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 consolidated statements of operations.

Finance leases are recorded as a finance lease liability and property 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 $196,422 and $0 for the years ended June 30, 2024 and 2023, 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 $4,854 and $23,348 for the years ended June 30, 2024, and 2023, respectively, and are included within general and administrative expenses on the consolidated statements of operations.

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.

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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

All other recent accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”), did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

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NOTE 3 – JOINT VENTURE

Joint Venture with XTI Aircraft

Effective May 31, 2021, Xeriant entered into a Joint Venture Agreement (the “Agreement”) with XTI Aircraft Company (“XTI”), a Delaware corporation, to form a joint venture with XTI (the “XTI JV”), named Eco-Aero, LLC, with the purpose of completing the preliminary design review (“PDR”) of XTI’s TriFan 600, a 5-passenger plus pilot, hybrid electric, eVTOL fixed wing aircraft. Under the Agreement, Xeriant contributed capital, technology, and strategic business relationships, and XTI contributed intellectual property licensing rights and know-how. XTI and the Company each own 50 percent of the XTI JV, and it is managed by a management committee consisting of five members, three appointed by Xeriant and two by XTI. The Company invested approximately $5.5 million into the joint venture after borrowing the funds from Auctus Fund LLC (“Auctus”) through a Senior Secured Promissory Note, through an introduction from Maxim Group, LLC, the Company’s investment banker at the time. The borrowed funds from Auctus were intended to be a bridge loan that would be resolved through an IPO (Initial Public Offering) and uplist to Nasdaq in a merger with XTI, which did not occur because XTI refused to move forward with the merger. The PDR was completed during the first quarter of 2022 according to XTI, which was the purpose of the joint venture. On May 31, 2023, the joint venture was terminated according to an Acceleration Event, which was 24 months from the start of the joint venture.

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

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.

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 filed an S-4 registration statement on August 14, 2023, and subsequently filed an S-4/A amended registration statement on October 6, 2023.

On December 6, 2023, the Company initiated legal proceedings against XTI in the Federal District Court for the Southern District of New York (Case no. 1:23-cv-10656-JPO), along with other unnamed defendants, alleging fraudulent acts, breach of contract and misappropriation of intellectual property. In the complaint, the Company contends that XTI, utilizing false promises, induced substantial investments from the Company, in terms of millions of dollars together with valuable intellectual property, for the development of the TriFan 600 vertical takeoff and landing (VTOL) aircraft.

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The Company believes that the completed designs of the TriFan 600, a product of the Company’s significant investment, were integral to XTI’s merger with Inpixon. Despite the Company’s pivotal role in facilitating this merger, as memorialized in a formal agreement, XTI has publicly disclaimed any obligation to compensate the Company. In response to XTI’s alleged fraudulent conduct, deceptive maneuvers and intentional breaches, the Company is seeking a range of remedies. These include the recovery of losses, expenses, attorneys’ fees, punitive damages and a compensatory damage award exceeding $500 million. The legal action aims to address the alleged misconduct comprehensively and to protect the Company’s interests in the face of XTI’s actions. The foregoing description of the legal action does not purport to be complete and is subject in its entirety by the full text of the Complaint, a copy of which was filed in an 8-K on December 12, 2023, Exhibit 99.1. Litigation is still pending.

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 were 50/50. However, the agreement provides for a Management Committee of five members. Three of the five members are from Xeriant. Additionally, Xeriant invested approximately $5.5 million in 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 condensed consolidated balance sheets. Xeriant provides cash to the VIE to fund its operations. The carrying amounts of the consolidated VIE's assets and liabilities associated with the VIE subsidiary were as follows:

Assets

Cash $ - $ -

Total Assets $ - $ -

Liabilities

Joint Venture with Movychem

Effective April 2, 2022, the Company entered into a joint venture (“JV”) with Movychem s.r.o., a Slovakian limited liability company (“Movychem”), called Ebenberg, LLC, setting forth the terms for the establishment of a joint venture to develop and exploit certain Movychem intellectual property that would be exploited by the joint venture. The JV was organized as a Florida limited liability company and was owned 50% by each of the Company and Movychem. Essentially, the Company would contribute certain funding for its capital contribution and Movychem would provide an exclusive license and assignment of its intellectual property.

The Company analyzed the transaction under ASC 810, Consolidation, to determine if the joint venture classifies as a 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 were 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 certain know-how and intellectual property, 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.

After funding the JV during the remainder of 2022, the Company notified Movychem that in its determination it had not performed its obligations under the Joint Venture Agreement and discontinued payments until there was a resolution, which was followed by Movychem formally requested dissolution of the JV, which the parties agreed to and was effective June 30, 2023.

As of June 30, 2023, the Company contributed $312,919 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.

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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, 2024 and 2023, the Company had $403,117 and $0 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. 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 general and administrative expenses on the consolidated statements of operations. During the years ended June 30, 2024 and 2023, the Company recorded $52,632 and $53,327 in rent expense, respectively in general and administrative expenses on the consolidated statements of operations.

Right-of-use asset is summarized below:

Operating lease liability is summarized below:

Long term portion $ - $ 36,197

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Maturity of lease liabilities are as follows:

Total future minimum lease payments 37,112

Less: Present value discount (915 )

NOTE 6 – CONVERTIBLE NOTES PAYABLE, IN DEFAULT

The carrying value of convertible notes payable as of June 30, 2024 and 2023, was as follows.

Convertible Notes Payable, in default 2024 2023

Auctus Fund LLC Senior Secured Note

Through Maxim Group, LLC, Xeriant was introduced to Auctus Fund LLC (“Auctus”) for the purpose of providing bridge loan funding to satisfy the requirements of a pending merger with XTI Aircraft under a letter of intent signed in September 2021. On October 27, 2021, the Company was issued a convertible note payable with Auctus 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. The exercise price can be adjusted downward to match the price of Company’s most recent issuance of common shares.

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. On October 6, 2023, the Company received a conversion notice to issue 20,011,500 shares of the Company’s common stock to Auctus which shares were subsequently issued by the Company’s stock transfer agent and the value of the relating shares applied to interest on the Note. The Company is contesting the legality of this conversion and issuance which is a subject of the Company’s legal proceedings against Auctus.

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 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 for the year ended June 30, 2023.

On October 19, 2023, Xeriant filed a complaint in the United States Southern District of New York against Auctus Fund LLC, to invalidate allegedly illegally designed contractual agreements, including contesting the enforceability of the related note and amendments, and to set aside improper and unlawful securities transactions effectuated in violation of Section 15(a)(1) of the Exchange Act (15 U.S.C. § 78o(a)(1)) by the Defendant, alleging breaches of fiduciary duty and related claims. On February 9, 2024, the case was dismissed. The Company filed a Notice of Civil Appeal on March 13, 2024, primarily based on public welfare because of the pending litigation between the SEC and Auctus Fund Management, LLC, which complaint was filed on June 1, 2023.

As of June 30, 2024, a total of $50,000 remains outstanding, and is recorded within accounts payable and accrued liabilities on the consolidated balance sheets. During the year ended June 30, 2024, the Company recorded $1,070,729 in default interest related to the note. On October 6, 2023, Auctus converted $200,115 in interest into 20,011,500 shares of common stock and on April 5, 2024, Auctus converted $227,067 in interest into 22,706,700 shares of common stock. As of June 30, 2024, the balance of accrued interest of this note was $643,546.

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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 has 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.

In October 2023, the holders of the convertible bridge loans agreed to modify the conversion price to a fixed $0.01 per share. As a result, the loans are no longer required to be recorded pursuant to ASC 480-10-30-7. The Company tested the modification 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 $20,298 for the year ended June 30, 2024. The loss on extinguishment in the amount of $20,298 resulted in the loans being marked up from their aggregate fair value of $249,702 to their face value of $270,000 and reclassified within the consolidated balance sheets under convertible notes payable.

NOTE 8 – CONVERTIBLE NOTES PAYABLE

The carrying value of convertible notes payable, net of discount at June 30, 2024 and 2023 was as follows:

Less unamortized discount (47,471 ) -

Between July 17, 2023 and June 26, 2024, the Company issued convertible bridge loans with an aggregate face value of $2,030,000. 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. In connection with the Notes, holders of $150,000 in principal were issued 15,000,000 warrants during the fiscal year ended June 30, 2024. These warrants have an exercise price of $0.01 per share and have a three-year expiration date. During the years ended June 30, 2024 and 2023, the Company recorded $90,068 and $483 in interest expense related to these notes, respectively.

As mentioned in Note 7, the Company marked up convertible bridge loans from their aggregate fair value of $249,702 to their face value of $270,000 and reclassified within the consolidated balance sheets under convertible notes payable. During the years ended June 30, 2024 and 2023, the Company recorded $23,089 and $0 in interest expense related to these notes, respectively.

During the year ended June 30, 2024, $220,000 in principal and $22,000 in accrued interest was converted into 23,200,000 shares of common stock.

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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 issued during the year ended June 30, 2024, were valued using Black-Scholes Merton (“BSM”) and were determined to have a value of $66,660.

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

Quoted market price on valuation date $0.016 - $0.022

Effective contractual conversion rates $0.01

Contractual term to maturity 3 years

Market volatility:

Risk-adjusted interest rate 4.33% - 4.39%

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, 2024 and 2023:

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

Assets

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

The fair value of the Convertible Bridge Loans has 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

Quoted market price on valuation date $0.027 - $0.05

Effective contractual conversion rates $0.09 - $0.012

Contractual term to maturity 0.4 -1 year

Market volatility:

Risk-adjusted interest rate 4.32% - 5.14%

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The following table summarizes the total carrying value of the Company’s Level 3 instruments held as of June 30, 2024, including cumulative unrealized gains and losses recognized during the years ended June 30, 2024 and 2023:

Year Ended June 30, Year Ended June 30,

Balances at beginning of period $ 247,254 $ -

Issuances:

Convertible Bridge Loans - 189,886

Changes in fair value inputs and assumptions reflected in income 2,448 57,368

Reclassified from fair value to straight debt (249,702 ) -

Balances at end of period $ - $ 247,254

NOTE 10 – RELATED PARTY TRANSACTIONS

Consulting fees

During the years ended June 30, 2024 and 2023, the Company recorded $207,500 and $180,000 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, 2024 and 2023, $5,000 and $10,000 was accrued, respectively.

For the years ended June 30, 2024 and 2023, the Company recorded $78,500 and $92,000 respectively, in consulting fees to Edward DeFeudis, a Director of the Company. As of June 30, 2024 and 2023, $10,000 and $5,000 was accrued.

During the years ended June 30, 2024 and 2023, the Company recorded $67,000 and $56,000 respectively, in consulting fees to AMP Web Services, a Company owned by the Company’s CTO, Pablo Lavigna. As of June 30, 2024 and 2023, $0 was accrued.

During the years ended June 30, 2024 and 2023, the Company recorded $35,000 and $25,000 respectively, in consulting fees to Keystone Business Development Partners, a Company owned by the Company’s CFO, Brian Carey. As of June 30, 2024 and 2023, $5,000 was accrued.

The above amounts and terms are not necessarily what third parties would agree to.

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.

Board of Advisors Agreements

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

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On July 1, 2021, the Company agreed to issue to an advisor 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% finder’s fee.

On July 6, 2021, the Company provided an option to an advisor 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. Advisory agreement is open ended and can be terminated by consent of both parties upon written notice.

On July 28, 2021, the Company agreed to issue to an advisor 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. Advisory agreement is open ended and can be terminated by consent of both parties upon written notice.

On August 9, 2021, the Company agreed to issue to an advisor 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. Advisory agreement is open ended and can be terminated by consent of both parties upon written notice.

On August 20, 2021, the Company agreed to issue to an advisor 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. Advisory agreement is open ended and can be terminated by consent of both parties upon written notice.

On March 1, 2022, the Company agreed to issue to an advisor 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. Advisory agreement is open ended and can be terminated by consent of both parties upon written notice.

On January 20, 2022, the Company agreed to issue to an advisor 150,000 common shares vesting monthly over one year, and $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. Advisory agreement is open ended and can be terminated by consent of both parties upon written notice.

On March 20, 2022, the Company agreed to issue to an advisor 150,000 common shares vesting monthly over one year, and $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. Advisory agreement is open ended and can be terminated by consent of both parties upon written notice.

There were no Advisory Agreements executed during the years ended June 30, 2024.and June 30, 2023

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NOTE 12 – EQUITY

Common Stock

As of June 30, 2024 and 2023, the Company had 5,000,000,000 shares of common stock authorized with a par value of $0.00001. There were 524,853,304 and 389,433,144 shares issued and outstanding as of June 30, 2024 and 2023, respectively.

During the year ended June 30, 2024, the Company issued 51,500,000 shares of common stock in exchange for the conversion of 51,500 shares of Series A Preferred Stock.

During the year ended June 30, 2024, $220,000 in principal and $22,000 in accrued interest was converted into 23,200,000 shares of common stock.

During the year ended June 30, 2024, Auctus converted $427,182 in interest into 42,718,200 shares of common 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, 2024 and 2023, the Company had 705,895 and 757,395 shares of Series A preferred stock issued and outstanding, respectively.

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 $0 and $702,116 for these options for the years ended June 30, 2024 and 2023, respectively. As of June 30, 2024, there was $0 of total unrecognized compensation cost related to non-vested portion of options granted.

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

Granted -

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%

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Warrants

As of June 30, 2024 and 2023, the Company had 118,968,828 and 104,802,161 warrants outstanding, respectively. The warrants have a term of two to five years and an exercise price range from $0.01 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. The warrants are detailed as follows:

Exercised - -

Exercised - -

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NOTE 13 – 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. The current effective tax rate is 21%.

At June 30, 2024 and 2023, 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. The change in valuation was $651,651 and $1,600,005 for the years ending June 30, 2024 and 2023, respectively.

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, 2024.

NOTE 14 – SUBSEQUENT EVENTS

Stock Issuances

Subsequent to June 30, 2024, the Company issued 26,950,000 additional shares of common stock for conversion of convertible notes with a total face value of $245,000 and accrued interest of $24,500.

Subsequent to June 30, 2024, the Company issued 11,982,182 additional shares of common stock for compensation for services rendered with a total of $225,000.

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

Effective July 8, 2024, Accell Audit and Compliance, P.A. (“Accell”) resigned as the Company’s independent registered accounting firm. Accell advised the Company that it was ceasing to provide PCAOB audit services, and that certain of the audit principals of Accell were now a part of Astra Audit and Advisory, LLP (“Astra”). Accell issued the auditor’s report on the Company’s financial statements for the fiscal years ended June 30, 2023 and 2022. Effective July 17, 2024, the Board of Directors of the Company approved the appointment of Astra as its independent registered public accountant. A Form 8-K was filed by the company as of July 8, 2024.

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, 2024, an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)-15(e) of the Exchange Act) was carried out under the supervision and with the participation of Keith Duffy our Chief Executive Officer and Brian Carey our Chief Financial Officer. Based on his evaluation of our disclosure controls and procedures, he concluded that, at June 30, 2024, 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.

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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, 2024. 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, with the exception of one incident noted below, 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. As noted above, there was an incident in which a necessary adjustment of approximately $145,000 was necessary to correct a calculation error related to the valuation of stock issued for advisory board member services, which is now accurately reflected in the consolidated financial statements. The Company utilizes a public company financial reporting qualified CPA to review its financial reporting on a quarterly and annual basis and has implemented additional procedures to substantially reduce the likelihood of such an error occurring in the future.

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, 2024, that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

Item 9C. Disclosures Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

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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 63 Chairman of the Board and CEO

Scott Duffy 63 Executive Director

Edward C. DeFeudis 51 Director

Pablo Lavigna 53 Chief Information Officer

Brian Carey 62 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. 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.

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Edward C. DeFeudis, Director

Mr. DeFeudis is a venture investor and serial entrepreneur spanning multiple industries. His investments focus on late seed, bridge, and Series A rounds. He 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 started Palm Beach Business Development Group, LLC. This company 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.

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Director Independence

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

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, 2024.

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.

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Item 11. Executive Compensation.

For the year ended June 30, 2024, 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, 2024 and 2023 by our named executive officers:

EXECUTIVE COMPENSATION TABLE

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Director Compensation

The following table shows information regarding the compensation earned during the years ended June 30, 2024, and 2023 by the members of our board of directors.

DIRECTOR COMPENSATION TABLE

Keith Duffy 2024 - - - - - - - -

Director 2023 - - - - - - - -

Scott Duffy 2024 - - - - - - - -

Director 2023 - - - - - - - -

Executive Compensation Policies as They Relate to Risk Management

Management has 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, 2024, or held any outstanding stock options as of June 30, 2024.

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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, 2024, 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, 2024, 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.

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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, 2024 and 2023:

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”.

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

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

Board of Directors' Pre-Approval Policies

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

Our Board of Directors has reviewed and discussed with Astra Audit & Advisory (“Astra”) and 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, 2024 and 2023, respectively. The Board of Directors also has discussed with Astra 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, 2024, for filing with the SEC.

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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

Item 16. Form 10-K Summary

None.

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SIGNATURES

In accordance with the Section 13 and 15(d) of the Securities and Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

XERIANT, INC.

Date: October 8, 2024 By: /s/ Keith Duffy

Keith Duffy

Title: President and Chief Executive Officer (Principal Executive)

Date: October 8, 2024 By: /s/ Brian Carey

Brian Carey

Title: Chief Financial Officer

Date: October 8, 2024 By: /s/ Scott Duffy

Scott Duffy

Title: Executive Director, Corporate Operations

Date: October 8, 2024 By: /s/ Edward DeFeudis

Edward DeFeudis

Title: Director