UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

☒

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

 

For the quarterly period ended March 31, 2022

 

☐

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

 

For the transition period from __________ to __________.

 

Commission File Number: 000-54277

 

XERIANT, INC.

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

 

Nevada

27-1519178

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

Innovation Centre #1

3998 FAU Boulevard, Suite 309

Boca Raton, Florida

33431

(Address of principal executive offices)

(Zip code)

 

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

 

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

 

Title of each class

 

Trading

symbol

 

Name of exchange

on which registered

N/A

 

N/A

 

N/A

 

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

 

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

 

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

 

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated Filer

☒

Smaller reporting company

☒

Emerging growth company

☐

 

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

 

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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of May 16, 2022, the Registrant had outstanding 365,239,001 shares of common stock.

 

 

 

 

XERIANT, INC.

FORM 10-Q

TABLE OF CONTENTS

 

 

Page

 

Special Note regarding Forward-looking Statements

 

3

 

 

 

PART I – Financial Information

 

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

 

4

 

Item 2.

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

 

5

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

10

 

Item 4.

Controls and Procedures

10

 

PART II – Other Information

Item 1.

Legal Proceedings

 

11

 

Item 1A.

Risk Factors

 

11

 

Item 2.

Unregistered Sales of Equity Securities

 

11

 

Item 3.

Defaults Upon Senior Securities

 

11

 

Item 4.

Mine Safety Disclosures

 

11

 

Item 5.

Other Information

 

11

 

Item 6.

Exhibits

 

12

 

 

Signatures

 

13

 

 

2

Table of Contents

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

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

 

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

 

 

3

Table of Contents

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial statements

 

XERIANT, INC.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

(UNAUDITED)

 

INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Condensed Consolidated Balance Sheets as of March 31, 2022 (Unaudited) and June 30, 2021

 

F-1

 

 

 

Condensed Consolidated Statements of Operations for the three and nine months ended March 31, 2022 and 2021 (Unaudited)

 

F-2

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholder’s Equity for the three and nine months ended March 31, 2022 and 2021 (Unaudited)

 

F-3

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2022 and 2021 (Unaudited)

 

 

F-5

 

 

 

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

F-6

 

 

4

Table of Contents

  

XERIANT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

As of March 31, 2022

 

 

As of June 30,

2021

 

Assets

 

(Unaudited)

 

 

 

Current assets

 

 

 

 

 

 

Cash

 

$1,693,495

 

 

$962,540

 

Deposits

 

 

12,546

 

 

 

12,546

 

Prepaids

 

 

1,790

 

 

 

1,234

 

Total current assets

 

 

1,707,831

 

 

 

976,320

 

Property & equipment, net

 

 

19,658

 

 

 

 

 

Operating lease right-of-use asset

 

 

138,963

 

 

 

169,209

 

Total assets

 

$1,866,452

 

 

$1,145,529

 

 

 

 

 

 

 

 

 

 

Liabilities & stockholders' deficit

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$33,962

 

 

$73,224

 

Accrued liabilities, related party

 

 

30,000

 

 

 

25,000

 

Convertible notes payable, net of discount

 

 

2,319,738

 

 

 

158,196

 

Lease liability, current

 

 

34,785

 

 

 

42,643

 

Total current liabilities

 

 

2,418,485

 

 

 

299,063

 

 

 

 

 

 

 

 

 

 

Lease liability, long-term

 

 

117,585

 

 

 

141,160

 

Total liabilities

 

 

2,536,070

 

 

 

440,223

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' deficit

 

 

 

 

 

 

 

 

Series A Preferred stock, $0.00001 par value; 100,000,000 authorized; 3,500,000 designated; 781,132 and 793,279 shares issued and outstanding at March 31, 2022 and June 30, 2021, respectively

 

 

8

 

 

 

8

 

Series B Preferred stock, $0.00001 par value; 100,000,000 authorized; 1,000,000 designated; 1,000,000 issued and outstanding at March 31, 2022 and June 30, 2021, respectively

 

 

10

 

 

 

10

 

Common stock, $0.00001 par value; 5,000,000,000 shares authorized; 363,778,386 and 292,815,960 shares issued and outstanding at March 31, 2022 and June 30, 2021, respectively

 

 

3,633

 

 

 

2,925

 

Common stock to be issued

 

 

97,900

 

 

 

51,090

 

Additional paid in capital

 

 

15,494,788

 

 

 

4,138,194

 

Accumulated deficit

 

 

(12,826,977)

 

 

(3,270,235)

Total Xeriant stockholder's deficit

 

 

2,769,362

 

 

 

921,992

 

Non-controlling interest

 

 

(3,438,980)

 

 

(216,686)

Total stockholders' deficit

 

 

(669,618)

 

 

705,306

 

Total liabilities and stockholders' deficit

 

$1,866,452

 

 

$1,145,529

 

 

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

          

 
F-1

Table of Contents

 

XERIANT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

 

For the three months ended

 

 

For the nine months ended

 

 

 

March 31, 2022

 

 

March 31, 2021

 

 

March 31, 2022

 

 

March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing expense

 

$25,771

 

 

$-

 

 

$670,989

 

 

$1,000,000

 

General and administrative expenses

 

 

799,521

 

 

 

141,897

 

 

 

3,120,772

 

 

 

242,445

 

Professional fees

 

 

102,646

 

 

 

32,160

 

 

 

234,671

 

 

 

67,397

 

Related party consulting fees

 

 

135,500

 

 

 

54,500

 

 

 

348,925

 

 

 

132,500

 

Research and development expense

 

 

7,587

 

 

 

-

 

 

 

5,207,806

 

 

 

-

 

Total operating expenses

 

 

1,071,025

 

 

 

228,557

 

 

 

9,583,163

 

 

 

1,442,342

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

 

(1,071,025)

 

 

(228,557)

 

 

(9,583,163)

 

 

(1,442,342)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of debt discount

 

 

(1,598,683)

 

 

(103,225)

 

 

(3,012,642)

 

 

(215,635)

Amortization of debt discount, related party

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(5,000)

Financing fees

 

 

-

 

 

 

-

 

 

 

(43,750)

 

 

-

 

Interest expense

 

 

(134,927)

 

 

(2,661)

 

 

(138,941)

 

 

(4,857)

Interest expense, related party

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(76)

Gain on forgiveness of accounts payable

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Loss on settlement of debt

 

 

(3)

 

 

-

 

 

 

(536)

 

 

(186,954)

Total other (expense)

 

 

(1,733,613)

 

 

(105,886)

 

 

(3,195,869)

 

 

(412,522)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-controlling interest

 

 

(7,425)

 

 

-

 

 

 

(3,222,294)

 

 

-

 

Common stockholders

 

 

(2,797,213)

 

 

-

 

 

 

(9,556,738)

 

 

-

 

Net loss

 

$(2,804,638)

 

$(334,443)

 

$(12,779,032)

 

$(1,854,864)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share - basic and diluted

 

$(0.01)

 

$(0.00)

 

$(0.04)

 

$(0.01)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding - basic and diluted

 

 

362,872,609

 

 

 

234,451,953

 

 

 

339,759,839

 

 

 

176,685,459

 

 

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

 

 
F-2

Table of Contents

 

XERIANT, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT

FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2022

(UNAUDITED)

 

 

 

 Series A Preferred Stock  

 

 

 

 Series B Preferred Stock 

 

 

 Common Stock  

 

 

 Additional Paid in

 

 

 

 Common stock

 

 

 Accumulated 

 

 

 Non-Controlling

 

 

 

 

 

 

Shares

 

 

 Amount

 

 

Shares

 

 

 Amount

 

 

Shares

 

 

 Amount

 

 

  Capital

 

 

 to be issued 

 

 

 Deficit

 

 

  Interest

 

 

 Total

 

Balance June 30, 2021

 

 

788,270

 

 

 

8

 

 

 

1,000,000

 

 

 

10

 

 

 

292,815,960

 

 

 

2,925

 

 

 

4,138,194

 

 

 

51,090

 

 

 

(3,270,235)

 

 

(216,686)

 

 

705,306

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock committed in prior period

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

400,000

 

 

 

4

 

 

 

47,996

 

 

 

(48,000)

 

 

-

 

 

 

-

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sale of common stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7,500,000

 

 

 

75

 

 

 

499,925

 

 

 

1,168,500

 

 

 

-

 

 

 

-

 

 

 

1,668,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued as equity kicker

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

250,000

 

 

 

3

 

 

 

43,750

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

43,753

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of warrants

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,185,000

 

 

 

41

 

 

 

125,509

 

 

 

3,000

 

 

 

-

 

 

 

-

 

 

 

128,550

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of Series A Preferred to Common Stock

 

 

(4,000)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,000,000

 

 

 

40

 

 

 

(40)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of convertible notes and accrued interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

10,598,544

 

 

 

106

 

 

 

176,054

 

 

 

(3,090)

 

 

-

 

 

 

-

 

 

 

173,070

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock issued for services

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,825,000

 

 

 

27

 

 

 

449,173

 

 

 

91,900

 

 

 

-

 

 

 

-

 

 

 

541,100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock option compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,060,324

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,060,324

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of beneficial conversion feature associated with convertible debt

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

250,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

250,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,270,099)

 

 

(1,177,816)

 

 

(4,447,915)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance September 30, 2021

 

 

784,270

 

 

$8

 

 

 

1,000,000

 

 

$10

 

 

 

322,574,504

 

 

$3,221

 

 

$6,790,885

 

 

$1,263,400

 

 

$(6,540,334)

 

$(1,394,502)

 

$122,688

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock committed in prior period

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

23,266,666

 

 

 

233

 

 

 

1,162,267

 

 

 

(1,162,500)

 

 

-

 

 

 

-

 

 

 

0.33

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sale of common stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

8,200,000

 

 

 

82

 

 

 

409,918

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

410,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of warrants

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

123,600

 

 

 

1

 

 

 

2,999

 

 

 

(3,000)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of Series A Preferred to Common Stock

 

 

(3,138)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,138,000

 

 

 

31

 

 

 

(31)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of convertible notes and accrued interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

250,000

 

 

 

-

 

 

 

-

 

 

 

250,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock issued for services

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

900,000

 

 

 

9

 

 

 

116,095

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

116,104

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock option compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

827,221

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

827,221

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of warrants associated with convertible debt

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,777,081

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,777,081

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of beneficial conversion feature associated with convertible debt

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,365,419

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,365,419

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,489,430)

 

 

(2,037,053)

 

 

(5,526,483)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance December 31, 2021

 

 

781,132

 

 

$8

 

 

 

1,000,000

 

 

$10

 

 

 

358,202,770

 

 

$3,577

 

 

$14,451,855

 

 

$347,900

 

 

$(10,029,764)

 

$(3,431,555)

 

$1,342,031

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock committed in prior period

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,229,680

 

 

 

42

 

 

 

253,707

 

 

 

(250,000)

 

 

-

 

 

 

-

 

 

 

3,749

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of Series A Preferred to Common Stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inducement of conversion - interest expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

845,936

 

 

 

8

 

 

 

134,918

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

134,927

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock option compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

0

 

 

 

-

 

 

 

574,563

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

574,563

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock issued for services

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

500,000

 

 

 

5

 

 

 

79,745

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

79,750

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,797,213)

 

 

(7,425)

 

 

(2,804,638)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance March 31, 2022

 

 

781,132

 

 

$8

 

 

 

1,000,000

 

 

$10

 

 

 

363,778,386

 

 

 

3,633

 

 

$15,494,788

 

 

0

97,900

 

 

$(12,826,977)

 

$(3,438,980)

 

$(669,618)

   

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

 

 
F-3

Table of Contents

 

XERIANT, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT

FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2022

(UNAUDITED

 

 

 

 Preferred Stock

 

 

  Common Stock

 

 

 Additional

Paid in 

 

 

 Common stock

 

 

 Accumulated 

 

 

 

 

 

 

Shares

 

 

 Amount

 

 

Shares

 

 

 Amount

 

 

Capital

 

 

 to be issued

 

 

 Deficit

 

 

 Total

 

Balance June 30, 2020

 

 

3,113,637

 

 

$31

 

 

 

69,584,149

 

 

$696

 

 

$379,971

 

 

$372,397

 

 

$(784,319)

 

$(31,224)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares reclassed from common stock to be issued

 

 

-

 

 

 

-

 

 

 

112,847,466

 

 

 

1,127

 

 

 

371,270

 

 

 

(372,397)

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of convertible notes and accrued interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

51,145

 

 

 

-

 

 

 

51,145

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of Series A Preferred to Common Stock

 

 

(39,358)

 

 

-

 

 

 

39,358,000

 

 

 

393

 

 

 

(393)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of warrants with convertible notes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

36,407

 

 

 

-

 

 

 

-

 

 

 

36,407

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of beneficial conversion feature associated with convertible debt

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

42,893

 

 

 

-

 

 

 

-

 

 

 

42,893

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock issued for services

 

 

-

 

 

 

-

 

 

 

4,090,909

 

 

 

40

 

 

 

200,414

 

 

 

-

 

 

 

-

 

 

 

200,454

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

(327,072)

 

 

(327,072)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance September 30, 2020

 

 

3,074,279

 

 

 

31

 

 

 

225,880,524

 

 

 

2,256

 

 

 

1,030,562

 

 

 

51,145

 

 

 

(1,111,391)

 

 

(27,397)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sale of common stock

 

 

-

 

 

 

-

 

 

 

3,400,000

 

 

 

34

 

 

 

50,966

 

 

 

-

 

 

 

-

 

 

 

51,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of convertible notes and accrued interest

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

78,714

 

 

 

-

 

 

 

78,714

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of warrants with convertible notes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

6,388

 

 

 

-

 

 

 

-

 

 

 

6,388

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of beneficial conversion feature associated with convertible debt

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

6,612

 

 

 

-

 

 

 

-

 

 

 

6,612

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock issued for services

 

 

-

 

 

 

-

 

 

 

20,300,000

 

 

 

203

 

 

 

1,012,997

 

 

 

-

 

 

 

-

 

 

 

1,013,200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of warrants for services

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

13,909

 

 

 

-

 

 

 

-

 

 

 

13,909

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,193,349)

 

 

(1,193,349)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance December 31, 2020

 

 

3,074,279

 

 

$31

 

 

 

249,580,524

 

 

$2,493

 

 

$2,121,434

 

 

$129,859

 

 

$(2,304,740)

 

$(50,923)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sale of common stock

 

 

-

 

 

 

-

 

 

 

9,991,667

 

 

 

100

 

 

 

1,198,900

 

 

 

298,000

 

 

 

-

 

 

 

1,497,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares reclassed from common stock to be issued

 

 

-

 

 

 

-

 

 

 

19,595,442

 

 

 

195

 

 

 

129,660

 

 

 

(129,859)

 

 

-

 

 

 

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of convertible notes and accrued interest

 

 

-

 

 

 

-

 

 

 

4,557,943

 

 

 

46

 

 

 

23,810

 

 

 

-

 

 

 

-

 

 

 

23,856

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of warrants with convertible notes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

75,097

 

 

 

-

 

 

 

-

 

 

 

75,097

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of beneficial conversion feature associated with convertible debt

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

122,453

 

 

 

-

 

 

 

-

 

 

 

122,453

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock issued for services

 

 

-

 

 

 

-

 

 

 

150,000

 

 

 

2

 

 

 

62,048

 

 

 

-

 

 

 

-

 

 

 

62,050

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of warrants for services

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

24,422

 

 

 

-

 

 

 

-

 

 

 

24,422

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(344,596)

 

 

(344,596)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance March 31, 2021

 

 

3,074,279

 

 

$31

 

 

 

283,875,576

 

 

$2,836

 

 

$3,757,824

 

 

$298,000

 

 

$(2,649,336)

 

$1,409,355

 

 

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

 

 
F-4

Table of Contents

 

XERIANT, INC. 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 

(Unaudited) 

 

 

 

For the Nine months ended

 

 

 

March 31,

2022

 

 

March 31,

2021

 

 

 

 

 

 

 

 

Cash Flows from Operating Activities

 

 

 

 

 

 

Net Loss

 

$(12,779,032)

 

$(1,854,864)
Adjustments to reconcile net loss to net

 

 

 

 

 

 

 

 

cash used by operating activities:

 

 

 

 

 

 

 

 

Depreciation and Amortization

 

 

332

 

 

 

-

 

Stock compensation expense

 

 

2,462,108

 

 

 

1,113,583

 

Stock issued for services

 

 

736,954

 

 

 

-

 

Financing fees

 

 

178,676

 

 

 

-

 

Loss on settlement of debt

 

 

-

 

 

 

186,954

 

Amortization of Debt Discount

 

 

3,012,642

 

 

 

215,635

 

Amortization of Debt Discount, Related Party

 

 

-

 

 

 

5,000

 

Changes in operating assets & liabilities

 

 

 

 

 

 

 

 

Operating lease right of use asset

 

 

30,246

 

 

 

93

 

Lease liabilities

 

 

(31,433)

 

 

-

 

Deposits and prepaids

 

 

(556)

 

 

(62,458)
Accounts payable and accrued liabilities

 

 

(35,513)

 

 

25,880

 

Accrued liability, related party

 

 

5,000

 

 

 

-

 

Accrued expenses

 

 

5,520

 

 

 

-

 

Net cash used by operating activities

 

 

(6,415,055)

 

 

(370,177)

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(19,990)

 

 

-

 

Net cash used in financing activities

 

 

(19,990)

 

 

-

 

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

Sale of common stock

 

 

2,078,500

 

 

 

1,548,000

 

Cash from exercise of warrants

 

 

128,550

 

 

 

0

 

Proceeds from convertible notes payable

 

 

4,958,950

 

 

 

289,850

 

Net cash provided by financing activities

 

 

7,166,000

 

 

 

1,837,850

 

 

 

 

 

 

 

 

 

 

Increase in Cash

 

 

730,955

 

 

 

1,467,673

 

 

 

 

 

 

 

 

 

 

Cash at beginning of period

 

 

962,540

 

 

 

38,893

 

 

 

 

 

 

 

 

 

 

Cash at end of period

 

$1,693,495

 

 

$1,506,566

 

 

 

 

 

 

 

 

 

 

Supplemental Cash Flow Information

 

 

 

 

 

 

 

 

Cash paid for interest

 

$0

 

 

$0

 

Cash paid for income taxes

 

$0

 

 

$0

 

 

 

 

 

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Conversion of convertible notes payable and accrued interest

 

$440,995

 

 

$130,410

 

Warrants issued with convertible notes payable

 

$2,894,974

 

 

$117,892

 

Beneficial conversion feature arising from convertible notes payable

 

$2,787,376

 

 

$171,958

 

 

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

 

 
F-5

Table of Contents

  

XERIANT, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2022 AND 2021

 

NOTE 1 - ORGANIZATION AND NATURE OF BUSINESS

 

Xeriant, Inc. (“Xeriant” or the “Company”) is an aerospace company dedicated to the emerging aviation market called Advanced Air Mobility (AAM), the transition to eco-friendly, on demand flight, making air transportation more accessible and a greater part of our daily lives. Xeriant is focused on the acquisition, development, and proliferation of next generation hybrid-electric and fully electric aircraft with vertical takeoff and landing (eVTOL) capabilities, performance enhancing aerospace technologies and advanced materials, as well as critical support infrastructure. Xeriant is located at the Research Park at Florida Atlantic University in Boca Raton, Florida adjacent to the Boca Raton Airport, and trades on OTC Markets under the stock symbol, XERI. The Company was incorporated in Nevada on December 18, 2009.

 

On April 16, 2019, the Company and the members of American Aviation Technologies, LLC (“AAT”) entered into a Share Exchange Agreement (“Agreement”). The agreement, which became effective on September 30, 2019, was pursuant to which the Company acquired 100% of the issued and outstanding membership units in exchange for the issuance of shares of the Company’s Series A Preferred Stock constituting 86.39% of the total voting power of the Company’s capital stock to be outstanding upon closing, after giving effect to the consummation of concurrent debt settlement and other capital stock issuances but before the issuance of shares of capital stock for investor relations purposes. As a result of the Exchange Agreement, AAT became a wholly owned subsidiary of the Company.

 

On June 22, 2020, the name of the Company was changed to Xeriant, Inc. in the State of Nevada and subsequently approved by FINRA effective July 30, 2020 for the name and symbol change (XERI).

 

On May 27, 2021, the Company entered into a Joint Venture Agreement with XTI Aircraft Company, to form a new company, called Eco-Aero, LLC, for purpose of completing the preliminary design of XTI’s TriFan 600, a 5-passenger plus pilot, hybrid electric, vertical takeoff and landing (eVTOL) fixed wing aircraft.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

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

 

Principles of Consolidation

 

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

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant assumptions and estimates relate to the valuation of beneficial conversion features and warrants associated with convertible debt. Actual results could differ from these estimates.

 

 
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Fair Value Measurements and Fair Value of Financial Instruments

 

The Company adopted ASC Topic 820, Fair Value Measurements. ASC Topic 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

 

Level 1: Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

 

Level 2: Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

 

Level 3: Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

 

The estimated fair value of certain financial instruments, including all current liabilities are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

 

Deferred Taxes

 

The Company follows Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”) for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability during each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods.

 

Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse and are considered immaterial. As of March 31, 2022 and June 30, 2021 there are no deferred tax assets.

 

Going concern

 

The Company’s financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. At March 31, 2022 and June 30, 2021, the Company had $1,693,495 and $962,540 in cash and $(710,654) and $677,257 in working capital, respectively. For the nine months ended March 31, 2022 and 2021, the Company had a net loss of $12,779,032 and $1,854,864, respectively. Continued losses may adversely affect the liquidity of the Company in the future. Therefore, the factors noted above raise substantial doubt about our ability to continue as a going concern. The recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheets is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to raise additional capital, obtain financing and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s existence is dependent upon management’s ability to develop profitable operations and resolve its liquidity problems.

  

Cash and Cash Equivalents

 

For purposes of the Statements of Cash Flows, the Company considers highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company has no cash equivalents.

 

Accounts Receivable and Allowance for Doubtful Accounts

 

The Company monitors outstanding receivables based on factors surrounding the credit risk of specific customers, historical trends, and other information. The allowance for doubtful accounts is estimated based on an assessment of the Company’s ability to collect on customer accounts receivable. There is judgment involved with estimating the allowance for doubtful accounts and if the financial condition of the Company’s customers were to deteriorate, resulting in their inability to make the required payments, the Company may be required to record additional allowances or charges against revenues. The Company writes-off accounts receivable against the allowance when it determines a balance is uncollectible and no longer actively pursues its collection. The allowance for doubtful accounts is created by forming a credit balance which is deducted from the total receivables balance in the balance sheet. As of March 31, 2022 and June 30, 2021 there are no accounts receivable.

 

 
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Convertible Debentures

 

If the conversion features of conventional convertible debt provide for a rate of conversion that is below market value at issuance, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount pursuant to ASC Topic 470-20 “Debt with Conversion and Other Options.” In those circumstances, the convertible debt is recorded net of the discount related to the BCF, and the Company amortizes the discount to interest expense, over the life of the debt.

 

Fair Value of Financial Instruments

 

Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments. The carrying value of cash, accounts payable and accrued liabilities as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only available information pertinent to fair value has been disclosed.

 

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

 

Research and Development Expenses

 

Expenditures for research and development are expensed as incurred. The Company incurred research and development expenses of $7,587 and $0 for the three months ended March 31, 2022 and 2021, respectively. The Company incurred research and development expenses of $5,207,806 and $0 for the nine months ended March 31, 2022 and 2021, respectively.

 

Advertising, Marketing and Public Relations

 

The Company expenses advertising and marketing costs as they are incurred. The Company recorded advertising expenses in the amount of $3,690 and $0 for the three months ended March 31, 2022 and 2021, respectively. The Company recorded advertising expenses in the amount of $168,403 and $0 for the nine months ended March 31, 2022 and 2021, respectively. These expenses are included within sales in marketing expenses in the statements of operations.

 

Offering Costs

 

Costs incurred in connection with raising capital by the issuance of common stock are recorded as contra equity and deducted from the capital raised. There were no offering costs for the three and nine months ended March 31, 2022 and 2021, respectively.

 

 
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Income Taxes

 

The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to unrecognized tax benefits as a component of general and administrative expenses. Our consolidated federal tax return and any state tax returns are not currently under examination.

 

The Company has adopted FASB ASC 740-10, Accounting for Income Taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually from differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

 

Recent Accounting Pronouncements

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, issued as a new Topic, ASC Topic 606. The new revenue recognition standard supersedes all existing revenue recognition guidance. Under this ASU, an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2015-14, issued in August 2015, deferred the effective date of ASU 2014-09 to the first quarter of 2018, with early adoption permitted in the first quarter of 2017.

 

In February 2016, FASB issued ASC 842 that requires lessees to recognize lease assets and corresponding lease liabilities on the balance sheet for all leases with terms of more than 12 months. The update, which supersedes existing lease guidance, will continue to classify leases as either finance or operating, with the classification determining the pattern of expense recognition in the income statement.

 

The ASU will be effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted, and is applicable on a modified retrospective basis with various optional practical expedients. The Company has assessed the impact of this standard. The Company entered into a new lease agreement commencing on November 1, 2019 and implemented this guidance on November 1, 2019.

 

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

 

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the consolidated financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

NOTE 3 - JOINT VENTURE

 

On May 31, 2021, the Company entered into a Joint Venture Agreement (the “Agreement”) with XTI Aircraft Company (“XTI”), a Delaware corporation, to form a new company, called Eco-Aero, LLC (the “JV”), a Delaware limited liability company, with the purpose of completing the preliminary design of XTI’s TriFan 600, a 5-passenger plus pilot, hybrid electric, vertical takeoff, and landing (eVTOL) fixed wing aircraft. Under the Agreement, Xeriant is contributing capital, technology, and strategic business relationships, and XTI is contributing intellectual property licensing rights and know-how. XTI and the Company each own 50 percent of the JV. The JV is managed by a management committee consisting of five members, three appointed by the Company and two by XTI. The Agreement was effective on June 4, 2021, with an initial deposit of $1 million into the JV. Xeriant’s financial commitment is $10 million, contributed over a period of less than one year, as required by the aircraft development timeline and budget.

 

The Company analyzed the transaction under ASC 810 Consolidation, to determine if the joint venture classifies as a Variable Interest Entity (“VIE”). The Joint Venture qualifies as a VIE based on the fact the JV does not have sufficient equity to operate without financial support from Xeriant. According to ASC 810-25-38, a reporting entity shall consolidate a VIE when that reporting entity has a variable interest (or combination of variable interests) that provides the reporting entity with a controlling financial interest on the basis of the provisions in paragraphs 810-10-25-38A through 25-38J. The reporting entity that consolidates a VIE is called the primary beneficiary of that VIE. According to the JV operating agreement, the ownership interests are 50/50. However, the agreement provides for a Management Committee of five members. Three of the five members are from Xeriant. Additionally, Xeriant has the right to invest $10,000,000 into the JV. As such, Xeriant has substantial capital at risk. Based on these two factors, the conclusion is that Xeriant is the primary beneficiary of the VIE. Accordingly, Xeriant has consolidated the VIE.

 

NOTE 4 - CONCENTRATION OF CREDIT RISKS

 

The Company maintains accounts with financial institutions. All cash in checking accounts is non-interest bearing and is fully insured by the Federal Deposit Insurance Corporation (FDIC). At times, cash balances may exceed the maximum coverage provided by the FDIC on insured depositor accounts. The Company believes it mitigates its risk by depositing its cash and cash equivalents with major financial institutions. On March 31, 2022, the Company had $1,443,495 in excess of FDIC insurance.

 

 
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NOTE 5 - OPERATING LEASE RIGHT-OF-USE ASSET AND OPERATING LEASE LIABILITY

 

The Company leases 2,911 square feet of office space located in the Research Park at Florida Atlantic University, Innovation Centre 1, 3998 FAU Boulevard, Suite 309, Boca Raton, Florida. The Company entered into a lease agreement commencing on November 1, 2019 through January 1, 2025 in which the first three months of rent were abated. Due to the COVID-19 pandemic, the Company decided to have all employees work from home and intends to build out the office space by the end of 2021 to allow employees to work from the office in January of 2022. The following table illustrates the base rent amounts over the term of the lease:

 

 

 

Base

 

Rent Periods

 

Rent

 

February 1, 2020 to October 1, 2020

 

$4,367

 

November 1, 2020 to October 1, 2021

 

$4,498

 

November 1, 2021 to October 1, 2022

 

$4,633

 

November 1, 2021 to October 1, 2022

 

$4,771

 

November 1, 2023 to October 1, 2024

 

$4,915

 

November 1, 2024 to January 1, 2025

 

$5,063

 

 

Operating lease right-of-use asset and liability are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value is our incremental borrowing rate, estimated to be 10%, as the interest rate implicit in most of our leases is not readily determinable. Operating lease expense is recognized on a straight-line basis over the lease term. Since the common area maintenance expenses are expenses that do not depend on an index or rate, they are excluded from the measurement of the lease liability and recognized in other general and administrative expenses on the statements of operations. At inception the Company paid prepaid rent in the amount of $4,659, which was netted against the operating lease right-of-use asset balance until it was applied in February 2020.

 

Right-of-use asset is summarized below:

 

 

 

March 31,

 

 

 

2022

 

Office lease

 

$220,448

 

Less: accumulated amortization

 

 

(81,485 )

Right-of-use asset, net

 

$138,963

 

 

Operating lease liability is summarized below:

 

 

 

March 31,

2022

 

Office lease

 

$152,370

 

Less: current portion

 

 

(34,785 )

Long term portion

 

 

117,585

 

 

Maturity of the lease liability is as follows:

 

Fiscal year ending June 30, 2022

 

$14,804

 

Fiscal year ending June 30, 2023

 

 

60,392

 

Fiscal year ending June 30, 2024

 

 

62,201

 

Fiscal year ending June 30, 2025

 

 

37,112

 

 

 

 

174,508

 

Present value discount

 

 

(22,138 )

Lease liability

 

$152,370

 

 

 
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NOTE 6 - CONVERTIBLE NOTES PAYABLE

 

The carrying value of convertible notes payable, net of discount, as of March 31, 2022 and June 30, 2021 was $2,319,738 and $158,196, respectively, as summarized below:

 

The following table illustrates the carrying values for the convertible notes payable as of March 31, 2022 and June 30, 2021:

 

 

 

March 31,

 

 

June 30,

 

Convertible Notes Payable

 

2022

 

 

2021

 

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

 

$-

 

 

$25,000

 

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

 

 

-

 

 

 

142,550

 

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

 

 

-

 

 

 

-

 

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

 

 

-

 

 

 

-

 

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

 

 

6,050,000

 

 

 

-

 

Total face value

 

 

6,050,000

 

 

 

167,550

 

Less unamortized discount

 

 

(3,730,262)

 

 

(9,354 )

Carrying value

 

$2,319,738

 

 

$158,196

 

 

Between September 27, 2019 and August 10, 2021, the Company issued convertible notes payable with an aggregate face value of $892,300, of which $342,950 were issued by our subsidiary AAT. The notes have a coupon rate of 6% and maturity dates between three and six months. The agreements provided the holder has the option to convert the principal balance and any accrued interest to common stock of the Company. In the event the holder does not elect to convert the note prior to maturity, the note will automatically convert to common stock. Of the $892,300, $342,950 is convertible at $.0033 per share, $87,000 is convertible at $0.025 per share, $180,550 is convertible at $.03 per share, $31,800 is convertible at $0.003 per share, and the remaining $250,000 is convertible at $.06 per share. All these convertible notes payable have been converted as of March 31, 2021 and $167,550 principal balance remaining as of June 30, 2021.

 

The Company evaluated these notes under ASC 815 Derivatives and Hedging (“ASC 815”). ASC 815 generally requires the analysis embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. None of the embedded terms required bifurcation and liability classification. However, the Company was required to determine if the debt contained a beneficial conversion feature (“BCF”), which is based on the intrinsic value on the date of issuance.

 

In connection with the notes, the Company issued warrants indexed to an aggregate 8,848,333 shares of common stock. The warrants have a term of two years and an exercise price of $.025. The Company evaluated the warrants under ASC 815 Derivatives and Hedging (“ASC 815”) and determined that they did not require liability classification. The warrants were recorded in additional paid-in capital under their aggregate relative fair value of $156,225.

 

Auctus Fund, LLC

 

On October 27, 2021, the Company issued a convertible note payable with Auctus Fund, LLC (the “Auctus Note”) with the principal sum of $6,050,000, which amount is the $5,142,500 actual amount of the purchase price, hereof plus an original issue discount in the amount of $907,500 and to pay interest on the unpaid principal amount hereof at the rate of zero percent per annum from the issue date until the note becomes due and payable, and $433,550 for professional fees in completing the transactions. The note has a maturity date of twelve months. The agreement provides the holder has the option to convert the principal balance and any accrued interest to common stock of the Company at a conversion price of lesser of (i) $0.1187 or (ii) 75% of the offering price per share divided by the number of shares of common stock. The Auctus Note is secured by the grant of a first priority security interest in the assets of the Company.

 

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

 

The Company was required to determine if the debt contained a beneficial conversion feature (“BCF”), which is based on the intrinsic value on the date of issuance. The Company recorded $2,365,419 conversion feature in additional paid-in capital. The BCF resulted in a debt discount and are amortized over the life of the note.

 

For the nine months ended March 31, 2022, the Company recorded $3,730,262 amortization of debt discount related to the Auctus Note.

 

The Company is in communication with Auctus Fund, LLC and is actively working on strategies to extinguish, extend or restructure the Senior Secured Promissory Note. No assurance can be made as to the results of such actions.

 

For the nine months ended March 31, 2022 and 2021, the Company recorded $3,012,642 and $215,635 in amortization of debt discount related to the notes. For the nine months ended March 31, 2022 and 2021, the Company recorded $4,014 and $2,196 in interest expense related to the notes, respectively.

 

 
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NOTE 7 - RELATED PARTY TRANSACTIONS

 

Convertible notes

 

On August 25, 2020, the Company issued a convertible note payable with a face value of $5,000 with a coupon rate of 6% to Keystone Business Development Partners, a Company owned by the Company’s CFO, Brian Carey. The note has a maturity date of three months. The agreement provides the holder has the option to convert the principal balance and any accrued interest to common stock of the Company at a conversion price of $0.025 per share. In the event the holder does not elect to convert the note prior to maturity, the note will automatically convert to common stock at a price of $0.025 per share.

 

The Company evaluated the agreement under ASC 815 Derivatives and Hedging (“ASC 815”). ASC 815 generally requires the analysis embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. None of the embedded terms required bifurcation and liability classification.

 

In connection with the note, the Company issued warrants indexed to an aggregate 200,000 shares of common stock. The warrants have a term of two years and an exercise price of $0.025. The Company evaluated the warrants under ASC 815 Derivatives and Hedging (“ASC 815”) and determined that they did not require liability classification. The warrants were recorded in additional paid-in capital under their relative fair value of $2,461.

 

The Company was required to determine if the debt contained a beneficial conversion feature (“BCF”), which is based on the intrinsic value on the date of issuance. After the allocation of $2,461 to the warrants, the remaining $2,539 in proceeds resulted in a beneficial conversion feature recorded in additional paid-in capital. Both the BCF and warrants resulted in a debt discount and are amortized over the life of the note.

 

For the nine months ended March 31, 2022 and 2021, the Company recorded $0 and $5,000 in amortization of debt discount related to the note. For the nine months ended March 31, 2022 and 2021, the Company recorded $0 and $76 in interest expense related to the note, respectively.

 

On November 25, 2020, Keystone Business Development Partners converted $5,000 in principal and $76 in accrued interest into 203,024 shares of common stock.

 

 
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Consulting fees

 

During the nine months ended March 31, 2022 and March 31, 2021, the Company recorded $134,000 and $66,000 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 March 31, 2022 and June 30, 2021, $15,000 and $0 was recorded in accrued liabilities related to Ancient Investments, LLC, respectively.

 

During the nine months ended March 31, 2022 and March 31, 2021, the Company recorded $92,000 and $0 respectively, in consulting fees to Edward DeFeudis, a Director of the Company. As of March 31, 2022 and June 30, 2021, $10,000 and $0 was recorded in accrued liabilities related to Edward DeFeudis, respectively.

 

During the nine months ended March 31, 2022 and March 31, 2021, the Company recorded $65,000 and $32,500 respectively, in consulting fees to AMP Web Services, a Company owned by the Company’s CIO, Pablo Lavigna. As of March 31, 2022 and June 30, 2021, $7,000 and $0 was recorded in accrued liabilities related to AMP Web Services, respectively.

 

During the nine months ended March 31, 2022 and March 31, 2021, the Company recorded $22,500 and $22,500 respectively, in consulting fees to Keystone Business Development Partners, a Company owned by the Company’s CFO, Brian Carey. As of March 31, 2022 and June 30, 2021, $0 and $25,000 was recorded in accrued liabilities related to Keystone Business Development Partners, respectively.

 

NOTE 8 - COMMITMENTS AND CONTINGENCIES

 

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

 

Joint Venture

 

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

 

Financial Advisory Agreements

 

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

 

 

·

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

 

 

 

 

·

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

 

 

 

 

·

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

 

During the nine months ended March 31, 2022, the Company issued the initial 500,000 shares, second tranche of 500,000 shares, and the remaining 500,000 shares.

 

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

 

 

·

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

 

 

 

 

·

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

 

 

 

 

·

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

 

During the nine months ended March 31, 2022, the Company issued the initial 2,225,000 shares.

 

 
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Litigation

 

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

 

Board of Advisors Agreements

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 
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NOTE 9 - EQUITY

 

Common Stock

 

As of March 31, 2022 and June 30, 2021, the Company had 5,000,000,000 shares of common stock authorized with a par value of $0.00001. There were 363,778,386 and 292,815,960 shares issued and outstanding as of March 31, 2022 and June 30, 2021, respectively.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

During the three months ended March 31, 2022, the Company issued 500,000 shares of common stock for services, valued at $79,750.

 

During the three months ended March 31, 2022, the Company issued 4,229,680 shares of common stock for the conversion of $250,000 principal balance of convertible notes payable and $3,749 accrued interest that has not been issued in the quarter ended December 31, 2021.

 

During the three months ended March 31, 2022, the Company issued 845,936 shares of common stock in exchange for the inducement to the convertible notes holders to convert at fair value of $134,927.

 

Common Stock to be Issued

 

During the three months ended September 30, 2021, the Company sold 200,000 shares of common stock for aggregate proceeds of $6,000, or $0.03 per share. As of March 31, 2022, these shares are categorized in common stock to be issued.

 

During the three months ended September 30, 2021, the Company agreed to pay a consultant 250,000 shares in exchange to $45,500 in services. As of March 31, 2022, these shares are categorized in common stock to be issued.

 

During the three months ended September 30, 2021, the Company agreed to issue advisory board members 250,000 shares in exchange for $46,400 in services. 200,000 shares vest on a quarterly basis over one year and 50,000 shares vest completely after a year. As of March 31, 2022, these shares are categorized in common stock to be issued.

 

 
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Series A Preferred Stock

 

There are 100,000,000 shares authorized as preferred stock, of which 3,500,000 are designated as Series A Preferred Stock having a par value of $0.00001 per share. The Series A preferred stock has the following rights:

 

 

·

Voting: The preferred shares shall be entitled to 1,000 votes to every one share of common stock.

 

 

 

 

·

Dividends: The Series A Preferred Stockholders are treated the same as the Common Stock holders except at the dividend on each share of Series A Convertible Preferred Stock is equal to the amount of the dividend declared and paid on each share of Common Stock multiplied by the Conversion Rate.

 

 

 

 

·

Conversion: Each share of Series A Preferred Stock is convertible, at the option of the holder thereof, at any time into shares of Common Stock on a 1:1,000 basis.

 

 

 

 

·

The shares of Series A Preferred Stock are redeemable at the option of the Corporation at any time after September 30, 2022 upon not less than 30 days written notice to the holders. It is not mandatorily redeemable.

 

As of As of March 31, 2022 and June 30, 2021, the Company has 780,132 and 788,270 shares of Series A Preferred Stock issued and outstanding, respectively.

 

On February 15, 2021, in accordance with Florida Law and conversations with counsel, the Board of Directors of the Company rescinded 990,000 Series A Preferred Shares, which represented all preferred shares issued to one of the shareholders in the Share Exchange between American Aviation Technologies, LLC and Xeriant, Inc. entered into on April 19, 2019, due to breach of contract.

 

During March of 2021, the remaining former members of American Aviation Technologies, LLC agreed to allow the Company to rescind an aggregate of 1,250,001 of their 1,760,000 Series A Preferred Shares issued pursuant to the Share Exchange between American Aviation Technologies, LLC and Xeriant, Inc., as a result of said breach. As a result of the cancellation, the Company reduced the investment in AAT by the value of these preferred shares.

 

During the nine months ended March 31, 2022, the Company issued 4,138,000 shares of common stock in exchange for the conversion of 4,138 shares of Series A Preferred Stock.

 

Series B Preferred Stock

 

On March 25, 2021, the Certificate of Designation for the Series B Preferred was recorded by the State of Nevada. There are 100,000,000 shares authorized as preferred stock, of which 1,000,000 are designated as Series B Preferred Stock having a par value of $0.00001 per share. The Series B preferred stock is not convertible, does not have any voting rights and no liquidation preference.

 

 
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Stock Options

 

In connection with certain advisory board compensation agreements, the Company issued an aggregate 19,000,000 options at an exercise price of $0.12 per share in July and August 2021. These options vest quarterly over twenty-four months and have a term of three years. The grant date fair value was $3,543,787. The Company recorded compensation expense in the amount of $2,462,108 for these options for the nine months ended March 31, 2022. As of March 31, 2022, there was $1,125,008 of total unrecognized compensation cost related to non vested portion of options granted. 

 

As of March 31, 2022, there are 19,000,000 options outstanding, of which 4,750,000 are exercisable. The weighted average remaining term is 2.31 years.

 

Options

 

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

 

 

 

Number of Options 

 

 

Weighted-

Average Exercise Price

 

 

Weighted-

Average Contractual Term

(in years)

 

 

Aggregate Intrinsic Value

 

Outstanding at June 30, 2021

 

 

-

 

 

$-

 

 

 

 

 

 

 

Granted

 

 

19,000,000

 

 

 

0.12

 

 

 

 

 

 

 

Exercised

 

 

-

 

 

 

-

 

 

 

 

 

 

 

Canceled

 

 

-

 

 

 

-

 

 

 

 

 

 

 

Outstanding at March 31, 2022

 

 

19,000,000

 

 

$0.12

 

 

 

2.3

 

 

$-

 

Vested and expected to vest at March 31, 2022

 

 

4,750,000

 

 

$0.12

 

 

 

2.3

 

 

$-

 

Exercisable at March 31, 2022

 

 

4,750,000

 

 

$0.12

 

 

 

2.3

 

 

$-

 

 

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

 

Quoted market price on valuation date

 

$0.169 - $0.23

 

Exercise prices

 

$0.12

 

Range of expected term

 

1.55 Years – 2.49 Years

 

Range of market volatility:

 

 

 

 

Range of equivalent volatility

 

215.12% - 275.73

% 

Range of interest rates

 

0.20% - 0.47

% 

 

Warrants

 

As of March 31, 2022 and June 30, 2021, the Company had 55,512,161 and 8,848,333 warrants outstanding, respectively. The warrants were issued in connection with the Convertible Notes (See Note 6). The warrants have a term of two to five years and an exercise price range from $0.1187 to $0.025. The Company evaluated the warrants under ASC 815 Derivatives and Hedging (“ASC 815”) and determined that they did not require liability classification. The warrants were recorded in additional paid-in capital under their aggregate relative fair value of $2,933,305. During the nine months ended March 31, 2022, holders of warrants exercised warrants for 4,308,600 shares of common stock for aggregate proceeds of $128,550. As of March 31, 2022, the weighted average remaining useful life of the warrants was 0.83.

 

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

  

 

 

Number of Options (in thousands)

 

 

Weighted-

Average Exercise Price

 

 

Weighted-

Average Contractual Term

(in years)

 

 

Aggregate Intrinsic Value

 

Outstanding at June 30, 2021

 

 

8,848,333

 

 

$0.03

 

 

 

0.94

 

 

 

-

 

Granted

 

 

50,968,828

 

 

 

0.1187

 

 

 

4.6

 

 

 

-

 

Exercised

 

 

(4,305,000)

 

 

-

 

 

 

 

 

 

 

 

 

Canceled

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

Outstanding at March 31, 2022

 

 

55,512,161

 

 

$0.111

 

 

 

4.3

 

 

$-

 

Vested and expected to vest at March 31, 2022

 

 

55,512,161

 

 

$0.111

 

 

 

4.3

 

 

$-

 

Exercisable at March 31, 2022

 

 

55,512,161

 

 

$0.111

 

 

 

4.3

 

 

$-

 

 

NOTE 10 - NON-CONTROLLING INTEREST

 

AAT membership unit adjustment

 

On May 12, 2021, on further advice of counsel and in good faith, the Company returned 3,600,000 membership units of American Aviation Technologies, LLC to a former shareholder, which was his consideration provided in the Share Exchange between American Aviation Technologies, LLC and Xeriant, Inc. As a result, this former shareholder was restored to his original shareholding position in American Aviation Technologies, LLC.

 

AAT Subsidiary

 

On May 12, 2021, the Company’s position in American Aviation Technologies, LLC was reduced to 64%, and therefore the subsidiary is now classified as majority owned.

 

 
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NOTE 11 - SUBSEQUENT EVENTS

 

Joint Venture 

 

Effective April 2, 2022 (the “Effective Date”), the Company entered into a Joint Venture Agreement (the “Joint Venture Agreement”) with Movychem s.r.o., a Slovakian limited liability company (“Movychem”) setting forth the terms for the establishment of a joint venture (the “Joint Venture”) to develop applications and commercialize a series of flame retardant products in the form of polymer gels, powders, liquids and pellets derived from technology developed by Movychem under the name Retacell™. The Joint Venture is organized as a Florida limited liability company under the name Ebenberg, LLC and is owned 50% by each of the Company and Movychem.

 

The management and control of the Joint Venture is exclusively vested in a management committee (the “Management Committee”) which consists of five members two of whom are appointed by the Company, two of whom are appointed by Movychem and one of whom (the “Independent Member”) is appointed by mutual agreement of the parties. The Independent Member serves for a period of six months for the first two terms with each of the subsequent terms to be for a period of 12 months.

 

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

 

Concurrently with the execution of the Joint Venture Agreement, the Joint Venture has entered into a Services Agreement (the “Services Agreement”) with the Company pursuant to which the Company will provide to the Joint Venture technical services related to the exploitation of the Retacell intellectual property and corporate, marketing. business development, communications and administrative services as requested by the Joint Venture in exchange for 40% of all royalty payments received by the Joint Venture for the licensing of Retacell products.

 

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

 

The Joint Venture Agreement grants to Movychem the right to dissolve the Joint Venture in the event that the Company fails to make any of its capital contributions in which case the Joint Venture will be required to grant back to Movychem all joint venture intellectual property and the assignment to Movychem of any outstanding licenses. Additionally, the Services Agreement will be amended to provide that the 40% of royalties to be paid by to the Company will be limited to licensees who were first introduced to the Joint Venture or Movychem, as the case may be.

 

Board of Directors

 

On May 12, 2022, Michael Harper and Lisa Ruth completed their one-year term serving as directors of the Company and have resigned from the board. Their resignations were anticipated and not as a result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

 

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

 

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

 

Forward-Looking Statements

 

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

 

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

 

This section of the report should be read together with Footnotes of the Company audited financials for the year ended June 30, 2021. The unaudited statements of operations for the six months ended March 31, 2022 and 2021 are compared in the sections below.

 

Brief Corporate History

 

Xeriant is an aerospace technology and advanced materials holding and operating company focused on Advanced Air Mobility (“AAM”) and the transition to green aerospace. The Company plans to source and acquire complementary and strategic interests in visionary companies developing, integrating, and commercializing critical breakthrough technologies which enhance performance, increase safety, and enable and support more efficient, autonomous, and sustainable flight operations, including electrically powered passenger and cargo transport aircraft capable of vertical takeoff and landing. The Company is located at the Research Park at Florida Atlantic University in Boca Raton, Florida.

 

The Company was originally incorporated in Nevada on December 18, 2009 under the name Eastern World Solutions, Inc. The name changed to Banjo & Matilda, Inc. on September 24, 2013. On June 22, 2020, the Company changed its name from Banjo & Matilda, Inc. to Xeriant, Inc. in the State of Nevada and subsequently approved by FINRA effective July 30, 2020 for the name and symbol change (XERI).

 

On April 16, 2019, the Company entered into a Share Exchange Agreement with American Aviation Technologies, LLC (“AAT”), an aircraft design and development company focused on the emerging segment of the aviation industry of autonomous and semi-autonomous vertical take-off and landing (VTOL) and unmanned aerial vehicles (UAVs).

 

On June 28, 2019, the Company spun out two wholly owned subsidiaries: Banjo & Matilda (USA), Inc. and Banjo & Matilda Australia Pty LTD.

 

On September 30, 2019, the acquisition of AAT closed, and AAT became a wholly owned subsidiary of the Company.

 

On June 22, 2020, the name was changed from Banjo & Matilda, Inc. to Xeriant, Inc.

 

On May 31, 2021, the Company entered into a Joint Venture Agreement (the “Agreement”) with XTI Aircraft Company (“XTI”) to form a new company, called Eco-Aero, LLC (the “JV”), with the purpose of completing the preliminary design of XTI’s TriFan 600, a 5-passenger plus pilot, hybrid electric, vertical takeoff, and landing (eVTOL) fixed wing aircraft. Under the Agreement, Xeriant is contributing capital, technology, and strategic business relationships, and XTI is contributing intellectual property licensing rights and know-how. XTI and the Company each own 50 percent of the JV.

 

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 (the “JV”) to develop applications and commercialize a series of flame retardant products in the form of polymer gels, powders, liquids and pellets derived from technology developed by Movychem under the name Retacell™. The JV is organized as a Florida limited liability and is owned 50% by each of the Company and Movychem. The transaction is further described herein under Subsequent Events.

   

 
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We have incurred recurring losses to date. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.

 

We expect we will require additional capital to meet our long-term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.

 

Results of Operations

 

Three months ended March 31, 2022 compared to the three months ended March 31, 2021

 

 

 

For the three months ended

 

 

 

 

 

 

March 31,

2022

 

 

March 31,

2021

 

 

$ 

 

 

  %

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing expense

 

$25,771

 

 

$0

 

 

$25,771

 

 

 

100%

General and administrative expenses

 

 

799,521

 

 

 

141,897

 

 

 

657,624

 

 

 

463.45%

Professional fees

 

 

102,646

 

 

 

32,160

 

 

 

70,486

 

 

 

219.17%

Related party consulting fees

 

 

135,500

 

 

 

54,500

 

 

 

81,000

 

 

 

148.62%

Research and development expense

 

 

7,587

 

 

 

-

 

 

 

7,587

 

 

 

100%

Total operating expenses

 

 

1,071,025

 

 

 

228,557

 

 

 

842,468

 

 

 

368.60%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(1,071,025 )

 

 

(228,557 )

 

 

842,468

 

 

 

369.00%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of debt discount

 

 

(1,598,683 )

 

 

(103,225 )

 

 

1,495,458

 

 

 

1,448.74%

Amortization of debt discount, related party

 

 

-

 

 

 

-

 

 

 

-

 

 

-

% 

Interest expense

 

 

(134,927 )

 

 

(2,661 )

 

 

132,266

 

 

 

4970.54%

Interest expense, related parties

 

 

-

 

 

 

-

 

 

 

-

 

 

-

% 

Gain on forgiveness of accounts payable

 

 

-

 

 

 

-

 

 

 

-

 

 

-

%

Loss on settlement of debt

 

 

(3 )

 

 

-

 

 

 

(3 )

 

 

100%

Total other income (expense)

 

 

(1,733,613 )

 

 

(105,886 )

 

 

(1,627,727)

 

 

1537.24%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$(2,804,638 )

 

 

(334,433 )

 

 

(2,470,195 )

 

 

738.60%

 

Sales and Marketing Expense

 

Sales and marketing expense was $25,771 for the three months ended March 31, 2022 compared to $0 for the three months ended March 31, 2021 for investor relations to create market awareness of the Company.

 

General and Administrative Expenses

 

Total general and administrative expenses were $799,521 for the three months ended March 31, 2022 compared to $141,897 for the three months ended March 31, 2021. The increase of $657,624 primarily relates to options granted valued at $574,563 for advisory board services.

 

Professional Fees

 

Total professional fees were $102,646 for the three months ended March 31, 2022 compared to $32,160 for the three months ended March 31, 2022. The increase of $70,486 primary relates to legal fees paid.

 

 
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Related Party Consulting Fees

 

Total related party consulting fees were $135,500 for the three months ended March 31, 2022 compared to $54,500 for the three months ended March 31, 2022. The increase of $81,000 was primarily related to additional related party consulting expenses coupled with an increase in the pay of existing related party.

 

Research and Development Expenses

 

Total research and development expenses were $7,587 for the three months ended March 31, 2022 compared to $0 for the three months ended March 31, 2021. The research and development costs were related to the development of an aircraft through our Eco-Aero joint venture.

 

Other Expenses

 

Total other income (expenses) was ($1,733,613) for the three months ended March 31, 2022 compared to ($105,886) for the three months ended March 31, 2021. Total other expenses consist of interest expense on debt, amortization of debt and loss on settlement of debt. The increase of $1,627,727 was primarily related the Company recording amortization of debt discount during the three months ended March 31, 2022 in the amount of $1,598,683.

 

Net loss

 

Total net loss was $2,804,638 for the three months ended March 31, 2022 compared to $2,804,638 for the three months ended March 31, 2021. The increase of $2,470,195 was primarily due to the reasons above.

 

Nine months ended March 31, 2022 compared to the nine months ended March 31, 2021

 

 

 

For the nine months ended

 

 

 

 

 

 

March 31,

2022

 

 

March 31,

2021

 

 

 $  

 

 

%

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing expense

 

$670,989

 

 

$1,000,000

 

 

$(329,011)

 

 

32.9%

General and administrative expenses

 

 

3,120,772

 

 

 

242,445

 

 

 

2,878,327

 

 

 

2,028.50%

Professional fees

 

 

234,671

 

 

 

67,397

 

 

 

167,274

 

 

 

520.1%

Related party consulting fees

 

 

348,925

 

 

 

132,500

 

 

 

216,425

 

 

 

397.1%

Research and development expense

 

 

5,207,806

 

 

 

-

 

 

 

5,207,806

 

 

 

100%

Total operating expenses

 

 

9,583,163

 

 

 

1,442,342

 

 

 

8,140,821

 

 

 

3,561.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(9,583,163 )

 

 

(1,442,342 )

 

 

8,140,821

 

 

 

3,561.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of debt discount

 

 

(3,012,642 )

 

 

(215,635 )

 

 

2,797,007

 

 

 

2,709.6%

Amortization of debt discount, related party

 

 

-

 

 

 

(5,000 )

 

 

5,000

 

 

 

100%

Financing fees

 

 

(43,750 )

 

 

-

 

 

 

(43,750 )

 

 

100%

Interest expense

 

 

(138,941 )

 

 

(4,857 )

 

 

(134,084 )

 

 

5,038.9%

Interest expense, related parties

 

 

-

 

 

 

(76 )

 

 

76

 

 

 

100%

Loss on settlement of debt

 

 

(536 )

 

 

(186,954 )

 

 

186,418

 

 

 

100%

Total other income (expense)

 

 

(3,195,869 )

 

 

(412,522 )

 

 

2,783,347

 

 

 

2,628.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$(12,779,032 )

 

 

(1,854,864 )

 

 

10,924,168

 

 

 

3,266.4%

     

 
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Sales and Marketing Expense

 

Sales and marketing expense was $670,989 for the nine months ended March 31, 2022 compared to $1,000,000 for the nine months ended March 31, 2021.

 

General and Administrative Expenses

 

Total general and administrative expenses were $3,120,772 for the nine months ended March 31, 2022 compared to $242,445 for the nine months ended March 31, 2021. The increase of $2,878,327 primarily relates to options granted valued at $1,993,524 for advisory board services and $736,954 from stock issued for services.

 

Professional Fees

 

Total professional fees were $234,671 for the nine months ended March 31, 2022 compared to $67,397 for the nine months ended March 31, 2021. The increase of $167,274 primary relates to legal fees paid.

   

Related Party Consulting Fees

 

Total related party consulting fees were $348,925 for the nine months ended March 31, 2022 compared to $132,500 for the nine months ended March 31, 2021. The increase of $216,425 was primarily related to additional related party expenses coupled with an increase in the pay of existing related party.

 

Research and Development Expenses

 

Total research and development expenses were $5,207,806 for the nine months ended March 31, 2022 compared to $0 for the nine months ended March 31, 2021. The research and development costs were related to the development of an aircraft through our Eco-Aero joint venture.

 

Other Expenses

 

Total other income (expenses) was ($3,195,869) for the nine months ended March 31, 2022 compared to ($412,522) for the nine months ended March 31, 2021. Total other expenses consist of interest expense on debt, amortization of debt and loss on settlement of debt. The increase of $2,783,347 was primarily related the Company recording amortization of debt discount during the nine months ended March 31, 2022 in the amount of $3,012,642.

 

Net loss

 

Total net loss was $12,779,032 for the nine months ended March 31, 2022 compared to $1,854,864 for nine months ended March 31, 2021. The increase of $10,924,168 was primarily due to the above reasons.

 

Liquidity and Capital Resources

 

Operating Activities

 

Cash used in operations of $6,415,055 during the nine months ended March 31, 2022 was primarily resulted from the increase cash used in operations resulted from increased expenditures on sales and marketing and on R&D. The Company has a net loss of $12,779,032 during the nine months ended March 31, 2021 and offset by non-cash expenses such as stock compensation expense of $2,462,108, stock issued for services of $736,954, and amortization of debt discounts of $3,012,642.

 

Cash used in operations of $162,557 during the nine months ended March 31, 2021 was primarily a result of our $1,520,421 net loss reconciled with our net non-cash expenses relating to amortization of debt discount and our changes in operating assets and liabilities relating to accounts payable and accrued liabilities.

 

Investing Activities

 

Net cash used in investing activities for the nine months ended March 31, 2022 was $19,990, which consisted of purchase of new equipment.

 

Financing Activities

 

Net cash provided by financing activities for the nine months ended March 31, 2022 was $7,166,000, which consisted of proceeds from the sale of common stock of $2,078,500, cash in the amount of $128,550 from the exercise of warrants, and issuance of convertible debt of $4,958,950.

 

Net cash provided by financing activities for the nine months ended March 31, 2021 was $143,300, which consisted of proceeds from the sale of common stock of $51,000 and issuance of convertible debt of $92,300.

 

 
8

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The Company’s financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. At March 31, 2022 and June 30, 2021, the Company had $1,639,495 and $962,540 in cash and $(710,654) and $677,257 in working capital, respectively. For the nine months ended March 31, 2022 and 2021, the Company had a net loss of $12,779,032 and $1,854,864, respectively. Continued losses may adversely affect the liquidity of the Company in the future. Therefore, the factors noted above raise substantial doubt about our ability to continue as a going concern. The recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheets is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to raise additional capital, obtain financing and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company has granted a first priority security interest in its asset to Auctus Fund, LLC to secure a convertible note in the principal amount of $6,050,000 which is due on October 27, 2022. The Company’s existence is dependent upon management’s ability to develop profitable operations and resolve its liquidity problems.

 

Commitments for Capital Expenditures

 

To date, our operations have been funded primarily through private investors. 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 companies with revenue and develop breakthrough technologies or business interests in those companies that have developed these technologies. We are in the process of issuing an offering document to obtain the funding for certain acquisitions that are in the discussion stages. There is no assurance that the Company will be able to obtain such funding and/or working capital. To the extent that funding is not available, the Company will be required to scale back or discontinue its business plan. Even if the Company is able to obtain financing, it may contain undue restrictions of the Company’s operations, or there may be substantial dilution for our shareholders in the case of equity financing or convertible debt financing.

 

Off Balance Sheet Items

 

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

 

Quantitative and Qualitative Disclosures about Market Risk

 

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

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant assumptions and estimates relate to the valuation of beneficial conversion features and warrants associated with convertible debt. Actual results could differ from these estimates.

 

 
9

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Contingencies

 

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

 

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

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

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

 

Item 4. Controls and Procedures.

 

Disclosure Controls and Procedures

 

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

 

At December 31, 2021, an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)-15(e) of the Exchange Act) was carried out under the supervision and with the participation of Keith Duffy our Chief Executive Officer and Brian Carey our Chief Financial Officer. Based on his evaluation of our disclosure controls and procedures, he concluded that at March 31, 2022, our disclosure controls and procedures are not effective due to material weaknesses in our internal controls over financial reporting discussed directly below.

 

Changes in Internal Control Over Financial Reporting

 

There has been no change in the Company’s internal control over financial reporting, as defined in Rules 13a-15(f) of the Exchange Act, during the Company’s most recent fiscal quarter ended March 31, 2022, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 
10

Table of Contents

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

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

 

 Item 1A. Risk Factors

 

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

 

Item 2. Unregistered Sales of Equity Securities

 

None.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

None.

 

Item 5. Other Information

 

None.

 

 
11

Table of Contents

 

Item 6. Exhibits

 

The following exhibits are filed herewith

 

Exhibit

Number

 

Document

 

10.1

 

Joint Venture Agreement dated as of April 2, 2022 between Xeriant Inc. and Movychem S.R.O.

 

 

 

10.2

 

Patent and Exclusive License Agreement between Movychem S.R.O. and

 

 

 

10.3

 

Services Agreement dated as of April 2, 2022 between Xertiant, Inc.

 

 

 

31.1

 

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

 

 

 

31.2

 

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

 

32.1

 

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

 

 

 

32.2

 

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

 

101.INS

 

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

 

 

 

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document

 

 

 

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

101.DEF

 

Inline XBRL Taxonomy Extension Definition Document

 

 

 

101.LAB

 

Inline XBRL Taxonomy Extension Label Linkbase Document

 

 

 

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

104

 

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

 

 
12

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SIGNATURES

 

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

 

 

XERIANT, INC.

 

 

 

Date: May 16, 2022

By:

/s/ Keith Duffy

 

Keith Duffy

Chief Executive Officer

(Principal Executive)

 

Date: May 16, 2022

By:

/s/ Brian Carey

 

Brian Carey

Chief Financial Officer

 

 
13

 

EXHIBIT 10.1

 

JOINT VENTURE AGREEMENT

 

XERIANT, INC.

 

MOVYCHEM, s.r.o.

 

April __, 2022

 

 
1

 

 

JOINT VENTURE AGREEMENT

 

This Joint Venture Agreement (this “Agreement“), effective as of April __, 2022 (the “Effective Date“) is between Xeriant, Inc., a Nevada corporation (“Xeriant“) with its principal executive office at Innovation Center #1, 3998 FAU boulevard, Suite 309, Boca Raton, Florida 33431, registered in the office of the State of Nevada Secretary of State, Entity Number E0649622009-0; and Movychem, s.r.o, a Slovakian limited liability company (“Movychem“) with its registered office at Svabska 1433/2, 951 31 Mocenok, the Slovak Republic, Identification No. 46515224 registered in the Commercial Register maintained by the No. 28814/T District Court Trnava; and will constitute the initial operating agreement of the Company under the Florida Revised Limited Liability Act (the “Florida Act“). Xeriant and Movychem shall be hereinafter referred to collectively as the “Parties“ and individually as a “Party.“ This Agreement is entered into with reference to the following facts:

 

 

A.

The Parties wish to set forth herein the terms for the establishment of a joint venture (the “Joint Venture“ or the “Company“) to be used as a vehicle to distribute earnings, hold patents and issue licenses. As used herein, the Company and the Joint Venture shall have the same meaning and shall be used interchangeably.

 

 

 

 

B.

As soon as practicable the Parties shall file the Articles of Organization in accordance with the Florida Act.

 

 

 

 

C.

Xeriant is an aerospace company dedicated to the emerging aviation market called Advanced Air Mobility, the transition to eco-friendly on-demand flight. Xeriant is focused on the development and deployment of next-generation electrically powered aircraft capable of vertical takeoff and landing, breakthrough technologies and advanced materials which can be successfully integrated and commercialized, and the critical infrastructure components needed to support operations. Xeriant is a publicly traded company (OTCQB: XERI).

 

 

 

 

D.

Movychem develops and manufactures advanced materials and chemicals and has created a series of flame retardants (Retacell) in the form of polymer gels, powders, liquids and pellets as presently existing and as hereinafter developed pursuant to this Agreement, (the “Products“).

 

 

 

 

E.

As set forth herein, Movychem will contribute to Joint Venture all right, title and interest in and to its know-how and intellectual property exclusive of all patents related thereto (collectively, the “Movychem Intellectual Property“) now existing or hereinafter developed pursuant to this Agreement related to the Products.

 

 
2

 

 

Now, therefore, with reference to the foregoing facts, the Parties agree as follows:

 

1. Definitions and Interpretation.

 

1.1 Definitions. Capitalized terms used herein and not otherwise defined shall have the meanings set forth below:

 

“Affiliate“ means, with respect to any Person, any other Person who, directly or indirectly (including through one or more intermediaries), controls, is controlled by, or is under common control with, such Person. For purposes of this definition, “control,“ when used with respect to any specified Person, shall mean the power, direct or indirect, to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities or partnership or other ownership interests, by contract or otherwise; and the terms “controlling“ and “controlled“ shall have correlative meanings.

 

“Agreement“ means this Joint Venture Agreement, as executed and as it may be amended, modified, supplemented or restated from time to time, as provided herein.

 

“Applicable Law“ means all applicable provisions of (a) constitutions, treaties, statutes, laws (including the common law), rules, regulations, decrees, ordinances, codes, proclamations, declarations or orders of any Governmental Authority; (b) any consents or approvals of any Governmental Authority; and (c) any orders, decisions, advisory or interpretative opinions, injunctions, judgments, awards, decrees of, or agreements with, any Governmental Authority.

 

“Approval“ means, with respect to the Approval of the Members, the unanimous Vote of the Members.

 

“Assignee“ means a Transferee of Units who does not become a Member.

 

“Business Day“ means a day other than a Saturday, Sunday or other day on which commercial banks in the City of Boca Raton, Florida are authorized or required to close.

 

“Capital Contribution“ means, for any Member, the total amount of cash and cash equivalents and the Book Value of any other property contributed to the Company by such Member, in each case net of any liabilities assumed by the Company from such Member in connection with such contribution and net of any liabilities to which assets contributed by such Member in respect thereof are subject.

 

“Cash Available for Distribution“ means all cash of the Company excluding (a) amounts necessary for the payment of the liabilities of the Company including the Xeriant Services Fee and the Movychem Patent Purchase Price payments, (b) such additional amounts as the Management Committee determines to be necessary or desirable as a reserve for the operation of the business and future or contingent liabilities of the Joint Venture and (c) amounts to be utilized for research and development (the “R & D Retention“).

 

“Distribution“ means a transfer of money or other property to a Member or Assignee on account of a Unit.

 

“Electronic Transmission“ means any form of communication not directly involving the physical transmission of paper that creates a record that may be retained, retrieved and reviewed by a recipient thereof and that may be directly reproduced in paper form by such a recipient through an automated process.

 

 
3

 

 

“Fiscal Year“ means the calendar year, unless the Company is required to have a taxable year other than the calendar year, in which case Fiscal Year shall be the period that conforms to its taxable year.

 

“Governmental Authority“ means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the force of law), or any arbitrator, court or tribunal of competent jurisdiction.

 

“IRC“ means the U.S. Internal Revenue Code of 1986, as amended.

 

“Joinder Agreement“ means a joinder agreement in form and substance acceptable to the Company by which the Member agrees to be bound by the provisions of this Agreement.

 

Joint Venture Intellectual Property means the Movychem Intellectual Property, the Joint Venture Patents and all other intellectual property developed or granted to the Joint Venture.

 

“Joint Venture Patents“ means all patents and any patent applications licensed to or purchased by the Joint Venture pursuant this Agreement.

 

“Manager“ means any member of the Management Committee.

 

“Member“ means an owner of Units who is not an Assignee.

 

“Membership Interest“ means an interest in the Company owned by a Member to any and all benefits to which such Member may be entitled as provided in this Agreement or the Florida Act.

 

“Movychem Patents“ means all patents and patent applications owned by Movychem prior to the transfer of ownership to the Joint Venure.

 

“Movychem Patent Purchase Price“ means (a) $2,000,000 payable when Xeriant makes its capital contribution pursuant to Section 3.3(b); (b) $600,000 payable at the rate of $25,000 per month commencing the next month following the execution of the Xeriant Services Agreement and (c) 40% of all royalty payments received by the Joint Venture for the licensing of the Joint Venture Patents.

 

“Party“ means a party to this Agreement and “Parties“ means two or more parties to this Agreement.

 

“Patent Agreement“ means the agreement between the Joint Venture and Movychem pursuant to which the Joint Venture shall license and, after payment in full of the $2,000,000 portion of the Xeriant capital contribution pursuant to Section 3.3(b) , acquire the Movychem Patents from Movychem as referenced in Section 5.9.

 

 
4

 

 

“Percentage Interest“ means, for any Member, a ratio, expressed as percentage, equal to the number of Units held by such Member over the aggregate number of Units held by all the Members.

 

“Permitted Transfer“ has the meaning set forth in Section 7.6.

 

“Permitted Transferee“ means the Transferee of Units in a Permitted Transfer.

 

“Person“ means an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association or other entity.

 

“Related Party Agreement“ means any agreement between the Company, on one hand, and any Member, Manager or Officer of the Company (or any Affiliate thereof), on the other hand, as such agreement may be amended.

 

“Representative“ means, with respect to any Person, any and all directors, officers, employees, consultants, financial advisors, counsel, accountants and other agents of such Person.

 

“Securities Act“ means the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations thereunder, which shall be in effect at the time.

 

“Services Agreement“ means the Services Agreement between Xeriant and the Joint Venture pursuant to which Xeriant is to perform the services specified therein for a fee equal to 40% of the royalties received by the Joint Venture for the licensing of its intellectual property as referenced in Section 5.10.

 

“Subsidiary“ means, with respect to any Person, any other Person of which a majority of the outstanding shares or other equity interests having the power to vote for directors or comparable managers are owned, directly or indirectly, by the first Person.

 

 “Transfer“ means to, directly or indirectly, sell, transfer, assign, pledge, encumber, hypothecate or similarly dispose of, either voluntarily or involuntarily, by operation of law or otherwise, or to enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, assignment, pledge, encumbrance, hypothecation or similar disposition of, any Units owned by a Person or any interest (including a beneficial interest) in any Units owned by a Person. “Transfer“ when used as a noun shall have a correlative meaning. “Transferor“ and “Transferee“ mean a Person who makes or receives a Transfer, respectively.

 

“Unit“ means an equity interest in the Company as defined in Section 3.1(a).

 

“Xeriant Services Fee“ means the fees payable to Xeriant pursuant to the Services Agreement.

 

 
5

 

 

1.2 Interpretation. For purposes of this Agreement: (a) the words “include,“ “includes“ and “including“ shall be deemed to be followed by the words “without limitation“; (b) the word “or“ is not exclusive; and (c) the words “herein,“ “hereof,“ “hereby,“ “hereto“ and “hereunder“ refer to this Agreement as a whole. The definitions given for any defined terms in this Agreement shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. Unless the context otherwise requires, references herein: (x) to Sections, and Exhibits mean the Sections of, and Exhibits attached to, this Agreement; (y) to an agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof; and (z) to a statute means such statute as amended from time to time and includes any successor legislation thereto and any regulations promulgated thereunder. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the Party drafting an instrument or causing any instrument to be drafted. Any Exhibits referred to herein shall be construed with, and as an integral part of, this Agreement to the same extent as if they were set forth verbatim herein.

 

2. Organization.

 

2.1 Formation.

 

(a) The Company will be formed as provided in the Recitals.

 

(b) This Agreement shall constitute the initial “operating agreement“ (as that term is used in the Florida Act) of the Company. The rights, powers, duties, obligations and liabilities of the Members shall be determined pursuant to the Florida Act and this Agreement. To the extent that the rights, powers, duties, obligations and liabilities of any Member are different by reason of any provision of this Agreement than they would be under the Florida Act in the absence of such provision, this Agreement shall, to the extent permitted by the Florida Act, control.

 

2.2 Name. The name of the Company shall be such name or names as may be designated by the Management Committee; provided, that the name shall always contain the words “Limited Liability Company“ or the abbreviation “L.L.C.“ or the designation “LLC.“ The Management Committee shall give notice to the Members of any change to the name of the Company. The initial name of the Company shall be Ebenberg, LLC.

 

2.3 Principal Office. The principal office of the Company is located at the offices of Xeriant, or such other place as may from time to time be determined by the Management Committee. The Management Committee shall give notice of any such change to each of the Members.

 

2.4 Registered Office; Registered Agent.

 

(a) The registered office of the Company shall be the office of the initial registered agent named in the Articles of Organization or such other office (which need not be a place of business of the Company) as the Management Committee may designate from time to time in the manner provided by the Florida Act and Applicable Law.

 

(b) The registered agent for service of process on the Company in the State of Florida shall be the initial registered agent named in the Articles of Organization or such other Person or Persons as the Management Committee may designate from time to time in the manner provided by the Florida Act and Applicable Law.

 

 
6

 

 

2.5 Purpose; Powers.

 

(a) The purpose of the Joint Venture will be to exploit the Movychem Intellectual Property and the Purchased Patents.

 

(b) The Company shall have all the powers necessary or convenient to carry out the purposes for which it is formed, including the powers granted by the Florida Act.

 

2.6 Term. The term of the Company commenced on the date the Articles of Organization was filed in accordance with the Florida Act and shall continue until the Company is dissolved in accordance with the provisions of this Agreement.

 

2.7 No State-Law Partnership. Except to the extent provided in the next sentence, the Parties intend that the Company not be a partnership (including a limited partnership), and that no Member be a partner or joint venturer of any other Member by virtue of this Agreement, for any purposes other than as set forth in the last sentence of this Section 2.7, and neither this Agreement nor any other document entered into by the Company or any Member relating to the subject matter hereof shall be construed to suggest otherwise. The Members intend that, (i) as of the Effective Date, the Company shall be treated as a partnership for U.S. federal and, if applicable, state or local income tax purposes, and (ii) each Member and the Company shall file all tax returns and shall otherwise take all tax and financial reporting positions in a manner consistent with clauses (i) and (ii) of this sentence.

 

3. Units; Capital Contributions; Capital Accounts.

 

3.1 Units. The Company’s equity interests shall be represented by “Units.“ As of the date of this Agreement, the Company shall have one class of Units. The initial Units of the Company shall be 50 Units to Movychem and 50 Units to Xeriant.

 

3.2 Additional Classes of Units. Subject to any other approval requirements set forth in this Agreement, the Management Committee may from time to time and at any time authorize the creation one or more additional classes or series of Units and shall have the right fix the relative privileges, preferences, duties, liabilities, obligations, and rights of any such new class of series of Units, including the preference over any other Units, and any contributions required in connection therewith, and may amend this Agreement to reflect such new class or series of Units and its relative privileges, preference, duties, liabilities, obligations, and rights. The Management Committee shall not have the power to amend adversely the rights, preferences or privileges of any outstanding class of Units without the Approval of Members holding that class of Units; provided that the issuance a new class of Units with rights, preferences or privileges that are on parity with or senior to a class of Units shall not be deemed a change in the rights, preferences or privileges of that class of Units.

 

 
7

 

 

3.3 Capital Contributions.

 

(a) In consideration for the initial issuance of Units to Movychem, Movychem shall transfer all right, title and interest in and to the Movychem Intellectual Property pursuant to transfer documents in form and substance approved by the Management Committee.

 

(b) In consideration for the initial issuance of Units to Xeriant, Xeriant shall contribute the amount of $2,600,000 payable as follows: (i) $600,000 payable at the rate of $25,000 per month over a 24 month period commencing the first day of the month immediately following the establishment of the Joint Venture and its related bank account, and (ii) $2,000,000 within five Business Days of the closing of a financing in which Xeriant receives net proceeds of at least $3,000,000 but in no event later than six months from the Effective Date.

 

3.4 Issuance of Additional Units. The Management Committee may in its sole discretion authorize the Company to issue and sell Units on the terms and conditions, including purchase price, as the Management Committee shall believe appropriate.

 

4. Members; Assignees.

 

4.1 No Personal Liability. Except as otherwise provided in the Florida Act, by Applicable Law or expressly in this Agreement, no Member will be obligated personally for any debt, obligation or liability of the Company or other Members, whether arising in contract, tort or otherwise, solely by reason of being a Member.

 

4.2 No Withdrawal. So long as a Member continues to hold any Units, such Member shall not have the ability to withdraw or resign as a Member prior to the dissolution and winding up of the Company and any such withdrawal or resignation or attempted withdrawal or resignation by a Member prior to the dissolution or winding up of the Company shall be null and void. As soon as any Person who is a Member ceases to hold any Units, such Person shall no longer be a Member. A Member shall not cease to be a Member as a result of the bankruptcy of such Member.

 

4.3 Meetings of Members.

 

(a) Meetings of the Members may be called only by the Management Committee or with the Approval of the Members.

 

(b) Written notice stating the place, date and time of the meeting and describing the purposes for which the meeting is called shall be delivered not fewer than two days and not more than 30 days before the date of the meeting to each Member or Member of the applicable class, by or at the direction of the Management Committee or the Member(s) calling the meeting, as the case may be. Meetings of Members may be held at the Company’s principal office or at such other place as the Management Committee or the Member(s) calling the meeting may designate in the notice for such meeting.

 

(c) Any Member shall be permitted to participate in a meeting of the Members by means of conference telephone or video or other communications equipment by means of which all Persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting.

 

 
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(d) On any matter that is to be voted on by Members or class of Members, a Member may vote in person or by proxy, and such proxy may be granted in writing, by means of Electronic Transmission or as otherwise permitted by Applicable Law. Every proxy shall be revocable in the discretion of the Member executing it unless otherwise provided in such proxy; provided, that such right to revocation shall not invalidate or otherwise affect actions taken under such proxy prior to such revocation.

 

(e) The business to be conducted at such meeting need not be limited to the purpose described in the notice and can include business to be conducted by Members or class of Members; provided, that the appropriate Members shall have been notified of the meeting in accordance with Section 4.3(b). Attendance of a Member at any meeting shall constitute a waiver of notice of such meeting, except where a Member attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

 

4.4 Quorum; Action by Members. A quorum of any meeting of the Members shall require the presence of the Members holding a majority of the Units held by Members. No action at any meeting may be taken by the Members or class(es) of Members unless the appropriate quorum is present. Unless this Agreement expressly provides for a different approval threshold, Members shall act by unanimous vote of the Members.

 

4.5 Action without a Meeting. Notwithstanding the provisions of Section 4.3, any matter that is to be Approved by Members may be taken without a meeting, without prior notice and without a vote if consented to, in writing or by Electronic Transmission, by Members holding not less than a majority of the outstanding Units held by Members (or such lesser or greater percentage to approve such matter as may be specified in this Agreement). A record shall be maintained by the Management Committee of each such action taken by written consent of the Members.

 

4.6 Power of Members. The Members shall have the power to exercise any and all rights or powers granted to Members pursuant to the express terms of this Agreement and the Florida Act. Except as otherwise specifically provided by this Agreement or required by the Florida Act, no Member, in its capacity as a Member, shall have the power to act for or on behalf of, or to bind, the Company.

 

4.7 No Interest in Company Property. No real or personal property of the Company shall be deemed to be owned by any Member individually, but shall be owned by, and title shall be vested solely in, the Company. Without limiting the foregoing, each Member hereby irrevocably waives during the term of the Company any right that such Member may have to maintain any action for partition with respect to the property of the Company.

 

4.8 Other Activities; Business Opportunities. Nothing contained in this Agreement shall prevent any Member or any of its Affiliates from engaging in any other activities or businesses, regardless of whether those activities or businesses are similar to or competitive with the Business. None of the Members nor any of their Affiliates shall be obligated to account to the Company or to the other Member for any profits or income earned or derived from other such activities or businesses. None of the Members nor any of their Affiliates shall be obligated to inform the Company or the other Member of any business opportunity of any type or description.

 

 
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5. Management

 

5.1 Management Committee.

 

The management and control of the Joint Venture shall be exclusively vested in a Management Committee (the “Management Committee“). Without limiting the generality of the foregoing, the responsibilities and obligations of the Management Committee shall include the following:

 

(a) Establishing and modifying the business plan of the Joint Venture;

 

(b) Enter into, make, and perform contracts in furtherance of the purposes of the Joint Venture;

 

(c) Open and maintain bank accounts;

 

(d) Purchase, lease, or otherwise acquire personal property; and

 

(e) Retain services of third parties in connection with the business of the Joint Venture.

 

5.2 Composition of Management Committee. The Management Committee shall consist of five members, two of whom shall be appointed by Xeriant, two of whom shall be appointed by Movychem and one of whom shall be appointed by mutual agreement of the Members (the “Independent Member“). The Independent Member shall serve for a period of six months for the first two terms, with all subsequent terms to be for a period of 12 months. An appointee of a Party may be removed or replaced only at the discretion of such Party. The members of the Management Committee shall not receive any compensation in connection with their acting in the capacity as a member of the Management Committee.

 

5.3 Actions of the Management Committee. All actions of the Management Committee shall require a majority vote of the Management Committee, except that the following actions shall require the unanimous approval of all members of the Management Committee:

 

(a) Any agreement with a Party or any Affiliate of a Party;

 

(b) The entering into of License Agreements, Sub-License Agreements, or Services Agreements, and the entering into of any other agreement pertaining to the exploitation or development of the Joint Venture Intellectual Property;

 

(c) Approving any transfer of securities held by either Party other than to Affiliates;

 

(d) Any sale of the Company;

 

 
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(e) Admitting new members to the Joint Venture;

 

(f) Increasing or decreasing the size of the Management Committee;

 

(g) Dissolving and liquidating the Joint Venture;

 

(h) Except as expressly provided herein, issuing any securities including additional Units or adopting any new class of securities; and

 

(i) The payment of the R &D Retention Amount

 

5.4 Appointment of Personnel From time to time, the Management Committee may employ individuals (who may also be employees of a Party) or consultants to provide services to the Joint Venture on terms and conditions established by the Management Committee (including receipt of compensation).

 

5.5 Management Committee Meetings.

 

(a) Meetings. Meetings of the Management Committee for any purpose or purposes may be called at any time by any Manager.

 

(b) Notice of Meetings. Unless the Managers waive notice of, or consent to, a meeting, a notice stating the date, hour and place of any meeting of the Management Committee shall be given at least 48 hours and not more than 10 days prior to the meeting. Notice of any meeting of the Management Committee need not state the purpose of such meeting. Notice of meetings of the Management Committee shall be given to each Manager by at least one of the following methods:

 

(i) Oral notice, effective when communicated;

 

(ii) Facsimile or electronic mail, effective when sent to the facsimile number or electronic mail address maintained in the corporate records.

 

(c) Waiver of Notice. Any Manager may waive notice of any meeting in writing before, at, or after such meeting. A Manager’s attendance at or participation in a meeting waives any required notice of the meeting unless the Manager at the beginning of the meeting, or promptly upon the Manager’s arrival, objects to holding the meeting, or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting.

 

(d) Telecommunications. Meetings of the Management Committee may be held by means of conference telephone or video or similar communications equipment by which all persons participating may simultaneously hear each other during the meeting. A Manager participating in a meeting by this means is deemed to be present in person at the meeting.

 

(e) Quorum. The majority of the authorized number of Managers shall constitute a quorum for any meeting of the Management Committee. Except as expressly provided herein, at any meeting of the Management Committee at which a quorum is present, the affirmative vote or consent of a majority of such quorum shall be the approval or consent of the Management Committee unless this Agreement requires a greater vote.

 

 
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(f) Management Committee Action Without a Meeting. Any action required or permitted to be taken by the Management Committee at a meeting may be taken without a meeting if (i) the action is authorized by written consent resolution signed by not less than the minimum number of Managers which would be necessary to authorize or take the action at a meeting at which all Managers were present and voted and (ii) the consents are filed with the records of the Company. Action taken by consent is effective when the last Manager signs the consent, unless the consent specifies a different effective date. A signed consent has the effect of a meeting vote and may be so described in any document.

 

5.6 Limitation of Liability. To the maximum extent permitted under the Florida Act, no Person shall have personal liability to the Company or the Members for monetary damages for conduct as a Manager, except as specifically provided in this Agreement or to the extent that the Florida Act, as the same may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment does not adversely affect any right or protection of such person for actions or omissions prior to such amendment), prohibits elimination or limitation of such Person’s liability.

 

5.7 Delegation of Authority. The Management Committee shall have the power to delegate authority to such committees of the Management Committee, officers, employees, agents and representatives of the Company as it may from time to time deem appropriate. Any delegation of authority to take any action must be approved in the same manner as would be required for the Management Committee to approve such action directly.

 

5.8 Reliance by Third Parties. Any Person dealing with the Company, the Managers or any Member may rely (without duty of further inquiry) upon a certificate signed by any Manager as to (a) the identity and authority of a Manager to act on behalf of the Company; (b) any factual matters relevant to the affairs of the Company; (c) the persons who are authorized to execute and deliver any document on behalf of the Company; or (d) any action taken or omitted by the Company or the Managers.

 

5.9 Movychem Patents. Until payment in full of the $2,000,000 portion of the capital contribution of Xeriant pursuant to Section 3.3(b), Movychem will grant to the Joint Venture an exclusive worldwide license to use the Movychem Patents until the earlier to occur of the payment of the $2,000,000 portion of the Xeriant capital contribution or the dissolution of the Joint Venture pursuant to Section 10.1(c). After such portion of the capital contribution is paid (and provided that (a)Xeriant is then current in the monthly payments portion of its capital contribution and (b)the Joint Venture has made to Movychem all such payments), the Movychem Patents will be transferred to the Joint Venture for the Movychem Patent Purchase Price. The foregoing shall be reflected in a Patent Agreement in form and substance satisfactory to the Parties.

 

5.10 Services Agreement. As soon as reasonably practicable after the date hereof, the Joint Venture shall enter into the Services Agreement with Xeriant in form and substance satisfactory to the Parties.

 

 
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6. Distributions; Payment to Members.

 

6.1 Cash Available for Distribution shall be made to the Members when and in such amounts as determined by the Management Committee in its sole discretion. The Cash Available for Distribution shall be distributed in accordance with the Percentage Interest of the Members as of the time of the Distribution.

 

6.2 Tax Withholding; Withholding Advances.

 

(a) Tax Withholding. Each Member agrees to furnish the Company with any representations and forms as shall be required or otherwise reasonably requested by the Company to assist it in determining the extent of, and in fulfilling, any withholding obligations it may have and represents and warrants that the information, forms and certifications furnished by it shall be true, correct and complete in all material respects.

 

(b) Withholding Advances. The Company is hereby authorized at all times to make payments with respect to each Member in amounts required to discharge any obligation of the Company ( based on the advice of legal or tax counsel to the Company, and which shall include, without limitation, any taxes, interest, penalties or additions to tax imposed thereon, ) to withhold or make payments to any U.S. federal, state, local or foreign taxing authority (a “Taxing Authority“) with respect to any Member (or former Member, in the case of an Imputed Underpayment Amount) (such amounts, “Withholding Advances“) and to withhold the same from distributions to such Member.

 

6.3 Equity Payment to Movychem.

 

In consideration for Movychem to transfer the Movychem Intellectual Property to the Joint Venture, provided that Movychem has transferred ownership of the Movychem Patents to the Joint Venture, Xeriant shall issue to Movychem five-year warrants (the “Warrants“) to purchase an aggregate of 170,000,000 shares (the “Warrant Shares“) of its Common Stock at an exercise price of $.01 per share (as adjusted for stock splits, stock dividends, recapitalizations and similar events) with a cashless exercise feature as follows:

 

(a) Within five Business Days from written verification of certification of authorization from the equivalent of the National Fire Protection Association (NFPA) for use and exploitation of the Movychem Technology for any Licensed Product in the European Union, 42,500,000 Warrant Shares as follows: 10,625,000 Warrant Shares to Jiri Vylimec, 10,625,000 Warrant Shares to Roman Magdina, 10,625,000 Warrant Shares to Lubomir Nemecek and 10,625,000 Warrant Shares to Martin Stloukal.

 

(b) Within five Business Days from written verification of certification of UL-94 of Polypropylene with Retacell additive resulting in UL-94-5VA, 42,500,000 Warrant Shares as follows: 10,625,000 Warrant Shares to Jiri Vylimec, 10,625,000 Warrant Shares to Roman Magdina, 10,625,000 Warrant Shares to Lubomir Nemecek, and 10,625,000 Warrant Shares to Martin Stloukal.

 

 
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(c) Within five business days of generating $5,000,000 in gross revenue from the sale of Products licensed by the Joint Venture, 42,500,000 Warrant Shares as follows: 10,625,000 Warrant Shares to Jiri Vylimec, 10,625,000 Warrant Shares to Roman Magdina, 10,625,000 Warrant Shares to Lubomir Nemecek and 10,625,000 Warrant Shares to Martin Stloukal.

 

(d) Within five business days of generating an additional $10,000,000 in gross revenues from the sale of Products licensed by the Joint Venture, 42,500,000 Warrant Shares as follows: 10,625,000 Warrant Shares to Jiri Vylimec, 10,625,000 Warrant Shares to Roman Magdina, 10,625,000 Warrant Shares to Lubomir Nemecek and 10,625,000 Warrant Shares to Martin Stloukal.

 

7. General Restrictions on Transfer.

 

7.1 Each Member agrees not to Transfer any Units except in compliance with the provisions of this Agreement.

 

7.2 Notwithstanding any other provision of this Agreement, each Member agrees not to Transfer any Units:

 

(a) if such Transfer or issuance would violate the registration or qualification provisions of the Securities Act and other applicable state securities, and then if requested by the Company, only upon delivery to the Company of an opinion of counsel in form and substance satisfactory to the Company to the effect that such Transfer may be effected without registration under the Securities Act;

 

(b) if such Transfer would be to a Person that the Management Committee reasonably deems a competitor of the Company;

 

(c) Any Transfer or attempted Transfer of any Unit in violation of this Agreement shall be null and void, no such Transfer shall be recorded on the Company’s books and the purported Transferee in any such Transfer shall not be treated (and the purported Transferor shall continue be treated) as the owner of such Unit for all purposes of this Agreement.

 

7.3 For the avoidance of doubt, any Transfer of a Unit permitted by this Agreement shall be deemed a Transfer of such Unit in its entirety as intended by the parties to such Transfer.

 

7.4 No Member may Transfer all or any portion of its Units without first providing to the Company such information, documentation and forms requested by the Company to determine whether any tax withholding applies to the Transfer and evidence satisfactory to the Company that any such required tax withholding has been done in accordance with Applicable Law

 

7.5 No Member may pledge, hypothecate or grant a security interest in its Units without the prior written consent of the Management Committee.

 

 
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7.6 Permitted Transfers. A Member may Transfer all or any portion of its Units as follows (each, a “Permitted Transfer“) only: to an entity Affiliate of such entity. If the Transferring Member is a Member, the Permitted Transferee shall become a Member automatically without the approval of the Management Committee provided that, if requested by the Management Committee, such Transferee executes a Joinder Agreement.

 

8. Confidentiality.

 

Each party shall maintain confidentiality of all confidential information of the other Party and the Joint Venture, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for information that: (a) is or will be in the public domain (other than through the receiving Party’s unauthorized disclosure) ) (b) is under the obligation to be disclosed pursuant to Applicable Law, rules of any stock exchange or orders of any Governmental Authority; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsel of financial advisors regarding the transactions contemplated hereunder, provided that such parties shall be bound by the confidentiality obligations similar to those set forth in this Section. The obligations hereunder shall survive the termination of this Agreement.

 

9. Reports; Accounting; Tax Matters.

 

9.1 Books and Records. The books and records of the Company shall be kept, and the financial position and the results of its operations recorded, in accordance with the accounting methods followed for U.S. federal income tax purposes. The books and records of the Company shall reflect all the Company transactions and shall be appropriate and adequate for the Company’s business. The Company shall maintain at its principal office:

 

(a) A copy of the Articles of Organization and any and all amendments thereto;

 

(b) Copies of the Company’s U.S. federal, state and local income tax or information returns and reports, if any, for the three most recent taxable years;

 

(c) A copy of this Agreement and any and all amendments thereto together with executed copies of any powers of attorney pursuant to which this Agreement or any amendments thereto have been executed; and

 

(d) Copies of the financial statements of the Company, if any, for the three most recent Fiscal Years.

 

9.2 Delivery to Members and Inspection.

 

(a) Upon the request of any Member, the Company shall promptly deliver to the requesting Member at the expense of the Company a copy of the information required to be maintained by Section 9.1 except for financial statements as of dates or for periods ending more than two years prior to the request.

 

 
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(b) Upon reasonable notice from a Member, the Company shall afford such Member and its representatives access during normal business hours to (a) the Company’s properties, offices, plants and other facilities; and (b) the corporate, financial and similar records, reports and documents of the Company, including, without limitation, all books and records, minutes of proceedings, internal management documents, reports of operations, reports of adverse developments, copies of any management letters and communications with Members or Managers. Each Member and its representatives to examine such documents and make copies thereof.

 

(c) Income Tax Status. It is the intent of this Company and the Members that this Company shall be treated as a partnership for U.S. federal, state and local income tax purposes. Neither the Company nor any Member shall make an election for the Company to be classified as other than a partnership for U.S. income tax purposes.

 

9.3 Tax Returns. At the expense of the Company, the Company shall endeavor to cause the preparation and filing of all tax returns required to be filed by the Company pursuant to the IRC as well as all other required tax returns in each jurisdiction in which the Company owns property or does business. Within 120 days after the end of each Fiscal Year, or as soon as reasonably practicable thereafter, the Partnership Representative will cause to be delivered to each Person who was a Member at any time during such Fiscal Year, IRS Schedule K-1 to Form 1065 and any other tax information reasonable requested by the Member in order to complete their tax returns.

 

9.4 Company Funds. All funds of the Company shall be deposited in its name, or in such name as may be designated by the Management Committee, in such checking, savings or other accounts, or held in its name in the form of such other investments as shall be designated by the Management Committee. The funds of the Company shall not be commingled with the funds of any other Person. All withdrawals of such deposits or liquidations of such investments by the Company shall be made exclusively upon the signature or signatures of such Officer or Officers as the Management Committee may designate.

 

10. Dissolution and Liquidation.

 

10.1 Events of Dissolution. The Company shall be dissolved and its affairs wound up only upon the occurrence of any of the following events:

 

(a) The affirmative vote or written Approval of the Members, or

 

(b) The entry of a decree of judicial dissolution under the Florida Act.

 

(c) In the event that Xeriant fails to make any of the contributions set forth in Section 3.3(b) of this Agreement, or the Company fails to make any payments required to be made by the Company to Movychem hereunder, Movychem shall have the right to issue a written default notice under Section 11.3 of this Agreement. Xeriant or the Company, as the case may be, shall have a period of 30 days from receipt of such notice to cure such default except that in respect of a default under Section 3.3(b)(ii), Xeriant shall have the right to extend the cure period by an additional 30 days upon payment of $100,000 to Movychem. In the event that Xeriant or the Company fails to cure its breach within the time period provided, Movychem shall have a right to cause the dissolution of the Company upon written notice to Xeriant and the Company. In connection with this subparagraph (c), the provisions of Section 10.4 shall apply.

 

 
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10.2 Effectiveness of Dissolution. Dissolution of the Company shall be effective on the day on which the event described in Section 10.1 occurs, but the Company shall not terminate until the winding up of the Company has been completed, the assets of the Company have been Distributed as provided in Section 10.3.

 

10.3 Liquidation. If the Company is dissolved pursuant to Section 10.1, the Company shall be liquidated and its business and affairs wound up in accordance with the Florida Act and the following provisions:

 

(a) Winding-Up Period. Upon a dissolution of the Company pursuant to Section 10.1 hereof, all property, income and other interests of the Company shall be distributed or returned to the Parties as provided herein and the business of the Company shall be fully and finally wound up and terminated within sixty (60) days after the date of the occurrence of the event causing dissolution (“Date of Dissolution“) or such longer period as the Management Committee shall designate in order to preserve the Company’s rights with respect to any of its assets.

 

(b) Liquidating Manager. The Management Committee shall direct and control the winding-up of the affairs of the Company, subject to the terms of this Section 10, and is hereby appointed the true and lawful attorney-in-fact of the Company, and of each Party with full power of substitution and delegation, irrevocable and coupled with an interest, to execute and deliver such documents and instruments as may be necessary to wind up the affairs of the Company and to distribute the property, income and interests of the Company as herein provided.

 

(c) Payments in Dissolution. Upon the dissolution and liquidation of the assets of the Company, the Management Committee shall take the proceeds from such liquidation to the extent they are sufficient, and apply and distribute them in the following order of priority:

 

(i) To the payment of creditors (including any Party to whom the Company may be indebted) in the order of priority as provided by law or this Agreement.

 

(ii) To the establishment of any reserves that the Management Committee may deem advisable for contingent liabilities.

 

(iii) To each Party in proportion and to the extent of their respective positive capital account balances after allocating all net income and net losses of the Company for all periods.

 

(iv) To the Parties in equal amounts.

 

Upon completion of the dissolution and winding up of the Company, the Company shall terminate.

 

 
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10.4 Dissolution Pursuant to Section 10.1(c). Notwithstanding anything herein to the contrary, in the event of a dissolution pursuant to Section 10.1(c): (i) the Company shall transfer back to Movychem all Joint Venture Intellectual Property, (ii) the license agreement to the Joint Venture referred to in Section 5.9 shall terminate, (iii) any outstanding licenses pursuant to which the Company is licensor shall be assigned by the Company to Movychem, (iv) Movychem shall have the right to retain any portion of the Movychem Patent Purchase Price it has thenreceived and (v) the Services Agreement between the Company and Xeriant shall be assigned by the Company to Movychem and such agreement shall be amended to provide that the 40% of royalties to be paid to Xeriant pursuant thereto shall be limited to licensees who were first introduced to the Company or Movychem, as the case may be. Additionally, all unvested Warrants issued pursuant to Section 6.3 shall be extinguished and be of no force and effect.

 

10.5 Survival of Rights, Duties and Obligations. Dissolution, liquidation, winding up or termination of the Company for any reason shall not release any Party from any Loss that at the time of such dissolution, liquidation, winding up or termination already had accrued to any other Party or thereafter may accrue in respect of any act or omission prior to such dissolution, liquidation, winding up or termination except that Section 10.4 shall be the exclusive remedy for any breach referred to in Section 10.1(c).

 

11. Miscellaneous.

 

11.1 Expenses. Except as otherwise expressly provided herein, all costs and expenses, including fees and disbursements of counsel, financial advisors and accountants, incurred in connection with the preparation and execution of this Agreement, or any amendment or waiver hereof, and the transactions contemplated hereby shall be paid by the Party incurring such costs and expenses.

 

11.2 Further Assurances. Each Party hereto agrees to execute and deliver all such other and additional instruments and documents and do all such other acts and things as may be necessary to more fully effectuate this Agreement and carry on the business contemplated herein.

 

11.3 Notices. All notices, approvals, requests or demands (“Notices“) which any party is required or may desire to give to the other hereunder shall be in writing, unless otherwise specified, and shall be addressed to the address provided for herein. All Notices shall be given in one of the following ways: (i) by delivery to the address set forth in the first paragraph for such Party; (ii) by Federal Express or similar service; or (iii) by transmittal by any electronic means whether now known or hereafter developed, including but not limited to, pdf, telecopier, or laser transmissions, able to be received by the party intended to receive notice. Each Notice shall, except as herein expressly provided, be conclusively deemed to be effective when received. The addresses of the parties shall be those of which the other party actually receives written Notice and until further notice as set forth in the first paragraph of this Agreement.

 

11.4  Captions. The various captions of this Agreement are for reference only and shall not be considered or referred to in resolving questions of interpretation of this Agreement.

 

 
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11.5 Severability. Every provision of this Agreement is severable. If any provision is held to be invalid, illegal or unenforceable under Applicable Law in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction.

 

11.6 Entire Agreement. This Agreement, together with the Articles of Organization and any related Exhibits and Schedules, constitutes the sole and entire agreement of the Parties with respect to the subject matter contained herein and therein, and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter. In the event of any conflict between the provisions of this Agreement and the Term Sheet, the provisions of this Agreement shall prevail.

 

11.7 Successors and Assigns. Subject to the restrictions on Transfers set forth herein, this Agreement shall be binding upon and shall inure to the benefit of the Parties and their respective heirs, executors, administrators, successors and assigns.

 

11.8 No Third-party Beneficiaries. Except as provided in Section 10 which shall be for the benefit of and enforceable by Covered Persons as described therein, this Agreement is for the sole benefit of the Parties (and their respective heirs, executors, administrators, successors and assigns) and nothing herein, express or implied, is intended to or shall confer upon any other Person, including any creditor of the Company, any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

 

11.9 Amendment. This Agreement may be amended only by the Approval of all of the Members.

 

11.10  Waiver. No consent or waiver, express or implied, by any Party to or of any breach or default by any other Party in the performance by the other of its obligations hereunder shall be deemed or construed to be a consent to or waiver of any other breach or default in the performance by such other Parties of the same or any other obligations of such Party hereunder.

 

11.11 Governing Law. All issues and questions concerning the application, construction, validity, interpretation and enforcement of this Agreement shall be governed by and construed in accordance with the internal laws of the State of Florida, without giving effect to any choice or conflict of law provision or rule (whether of the State of Florida or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of Florida.

 

11.12 Equitable Remedies. Each Party acknowledges that a breach or threatened breach by such Party of any of its obligations under this Agreement would give rise to irreparable harm to the other Parties, for which monetary damages would not be an adequate remedy, and hereby agrees that in the event of a breach or a threatened breach by such Party of any such obligations, each of the other Parties shall, in addition to any and all other rights and remedies that may be available to them in respect of such breach, be entitled to equitable relief, including a temporary restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction (without any requirement to post bond).

 

 
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11.13 Attorneys’ Fees. If any Party is a party to any action or proceeding to enforce any of the terms of this Agreement or any action or proceeding in any other way pertaining to this Agreement, the prevailing party in such action or proceeding (as determined by the judge or presiding official therein) shall be entitled to receive from the opposing party or parties the prevailing party’s costs and reasonable accountants’, experts’ and attorneys’ fees incurred in prosecuting, defending or appearing in such action or proceeding.

 

11.14 Remedies Cumulative. Each right, power and remedy provided for herein or now or hereafter existing at law, in equity, by statute or otherwise shall be cumulative and concurrent and shall be in addition to every other right, power or remedy provided for herein or now or hereafter existing at law, in equity, by statute or otherwise, and the exercise or beginning of the exercise or the forbearance of exercise by any party of any one or more of such rights, powers or remedies shall not preclude the simultaneous or later exercise by such party of any or all of such other rights, powers or remedies.

 

11.15 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each Party and delivered to the other Parties, it being understood that the Parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by email delivery of a “pdf“ format data file, such signature shall create a valid and binding obligation of the Party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “pdf“ signature page were an original thereof.

 

 [SIGNATURE PAGE FOLLOWS]

 

 
20

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

 

  Members:

 

 

 

 

Xeriant, Inc.

 

       
By:

 

 

 Keith Duffy, CEO  

 

  Movychem, s.r.o.
       
By:

 

 

 Jiri Vylimec  

 

By:

 

 

 Roman Magdina  
     
  By:    

 

 

Lubomir Nemecek

 

 

 

 

 

 

Equity Payment Recipients (Section 6.3):
     
By:

 

 Jiri Vylimec/Rodne Cislo:  
   
By:    

 

Roman Magdina/Rodne Cislo:

 

 

 

 

By:

 

 

 

Lubomir Nemecek/Rodne Cislo:

 

 

 

 

By:

 

 

 

Martin Stloukal/Rodne Cislo:

 

 

 
21

 

 

  EXHIBIT 10.2

 

PATENT EXCLUSIVE LICENSE AND ASSIGNMENT AGREEMENT

 

This Patent Exclusive License and Assignment Agreement (this “Agreement”) is made as of April ____, 2022 (the “Effective Date”), by and between Xeriant, Inc., a Nevada corporation (“Xeriant”) with its principal executive office at Innovation Center #1, 3998 FAU boulevard, Suite 309, Boca Raton, Florida 33431, registered in the office of the State of Nevada Secretary of State, Entity Number E0649622009-0; and Movychem, s.r.o, a Slovakian limited liability company (“Movychem” or “Assignor”) with its registered office at Svabska 1433/2, 951 31 Mocenok, the Slovak Republic, Identification No. 46515224 registered in the Commercial Register maintained by the No. 28814/T District Court Trnava; (hereinafter referred to collectively as the “Parties” and individually as a “Party”).

 

RECITALS

 

WHEREAS, Movychem has developed and invented and owns or holds several granted patents and pending patent applications pertaining to its Retacell technology, with Retacell technology being defined to mean thermal and/or fire protection chemical agents;

 

WHEREAS, the parties contemporaneously with this agreement are signing a Joint Venture Agreement for establishing and entering into a Joint Venture to initially exclusively license and then to hold the current and future Retacell technology and Retacell technology related worldwide patents, patent applications, copyrights and trade secrets (collectively “Movychem Patents”) currently owned by Movycehm or developed/invented/created after the Effective Date by Movychem and to issue licenses and sublicenses therefore;

 

WHEREAS as part of the Joint Venture, after payment by Xeriant to Assignor in the amount of $2,000,000 under the terms specified in the Joint Venture Agreement, Assignor has agreed that that terms of this Agreement will automatically and immediately cause, without any further action required by Assignor, the irrevocable transfer and assignment by Assignor to the Joint Venture entity Ebenberg, LLC (“Ebenberg” or Assignee”) (a State of Florida, Limited Liability Company) of all of its rights, title and interest, on a worldwide basis in and to the currently existing Movychem Patents which are set forth in Exhibit A (the “Movychem Current Patents”) and to all future creations, inventions, ideas, technology, knowhow, derivatives, materials, products, systems, applications, trade secrets developed, invented and/or created by Movychem in the future concerning, pertaining or related to the Retacell technology such that once the $2,000,000 payment has been paid to Assignor by Xeriant, Joint Venture entity Ebenberg/Assignee will solely own all rights, title and interests in the Movychem Patents and Movychem Current Patents;

 

WHEREAS, Assignor is the sole owner of all rights, title and interest in and to the Movychem Patents and Movychem Current Patents;

 

NOW, THEREFORE, for the good and valuable consideration provided for in the Joint Venture Agreement between the Parties, the receipt and sufficiency of which are hereby acknowledged, and for other good and valuable consideration, which the receipt and sufficiency of which is also hereby acknowledged, the Parties hereby agree as follows:

 

 
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1. EXCLUSIVE WOLRDWIDE LICENSE

 

1.1 Assignor hereby grants to Ebenberg/Assignee an exclusive worldwide license to the Movychem Patents and Movychem Current Patents to make, manufacture, have manufactured, use, offer for sale, import, export, make improvements, distribute and sell all products, services, compositions, technology, methods, covered by any of the Movychem Patents and to practice the same and to issue sublicenses therefore.

 

1.2 As consideration for the exclusive worldwide license granted in Section 1.1, the 40% royalty provided for in Section 3(c) below shall be owed to Movychem for payments received by Ebenberg during the exclusive license period.

 

1.3 Unless the Movychem Patents and Movychem Current Patents are assigned to Ebenberg under the terms of Section 2 of this Agreement or unless the Joint Venture is terminated under the terms of the Joint Venture Agreement, the Exclusive Worldwide License contained in Section 1.1 of this Agreement will be in force from the Effective Date and will remain in effect for the life of the last-to-expire patent or last-to-be-abandoned patent application of the Movychem Patents licensed under this Agreement, whichever is later

 

2. ASSIGNMENT

 

2.1 Automatically effective upon payment of $2,000,000 to Assignor by Xeriant (“Triggering Event”), Assignor hereby unconditionally and irrevocably assigns, conveys, sells, grants and transfers to Assignee all of its rights, title and interest of every kind and character throughout the world in and to (a) the Movychem Patents, including, without limitation the Movychem Current Patents, to the full extent of its ownership or interest therein, including, without limitation, all domestic and foreign patent applications and registrations therefor (and all patents that issue therefrom and all divisions, continuations, continuations-in-part, reexaminations, substitutions, reissues, extensions and renewals of such applications, registrations and patents, and the right to apply for any of the foregoing, and all pending and abandoned patent applications to which any of the Movychem Patents claim priority); (b) all inventions, invention disclosures, trade secrets and discoveries of Assignor currently known and/or described in one or more of the Movychem Patents or later developed, created and/or invented by Movychem concerning, pertaining or related to the Retacell technology; (c) all patents that are related to any of the Movychem Patents through terminal disclaimer, (d) all goodwill associated therewith; (e) all rights to causes of action and remedies related thereto (including, without limitation, the right to sue for past, present or future infringement, misappropriation or violation of rights related to the foregoing and to retain any damages and profits due or accrued); and (f) any and all other rights, title and interests arising out of, in connection with or in relation to the Movychem Patents or inventions, discoveries, trade secrets and invention disclosures resulting from the business and/or business operations of Assignor concerning, pertaining or relating to,the Retacell technology. Immediately upon reaching the Triggering Event, Assignor agrees to execute the confirmatory assignment for the Movychem Patents attached hereto as Exhibit B and agrees to execute future confirmatory assignments with respect to any new inventions, ideas, technology developed, created or invented by Movychem in the future concerning, pertaining or relating to the Retacell technology. Assignor agrees to cooperate with Xeriant with respect to filing the executed confirmatory assignment(s) with the Patent Offices where patent applications involving one or more of the Movychem Patents are patented or where Patents for one or more of the Movychem Patents have been granted and in connection with the filing and recording of future confirmatory assignments. Upon Assignee’s or Xeriant’s request, Assignor will promptly take such other actions, including, without limitation, the prompt execution and delivery of documents in recordable form, as may be reasonably necessary to vest, secure, perfect, protect or enforce the rights and interests of Assignee in and to the Movychem Patents.

 

 
2

 

 

2.2 Appointment. In the event that Assignee is unable, after reasonable notice to Assignor, for any reason whatsoever, to secure Assignor’s signature to any document Assignor is required to execute pursuant to this Section 2 to vest, secure, perfect, protect or enforce the rights and interests of Assignee in and to the Assigned Property and/or Movychem Patents, Assignor hereby irrevocably designates and appoints Assignee and Xeriant and its duly authorized officers and agents as Assignor’s agents and attorneys-in-fact, to act for and on its behalf and instead of Assignor, to execute and file any such documents and to do all other lawfully permitted acts to further the purposes of Section 2 with the same legal force and effect as if executed by Assignor.

 

3. PAYMENT

 

Assignor agrees and acknowledged that it is receiving or has received good and valuable consideration described in the above-noted Joint Venture Agreement, as well as other good and valuable consideration, as full consideration of the exclusive licenses and assignment of rights granted pursuant to Sections 1 and 2. Specifically, as stated in the Joint Venture Agreement between the Parties under the definition of Movychem Patent Purchase Price, as full consideration for the transfers/assignments stated herein by Movychem, Movychem shall receive (a) $2,000,000 from Xeriant, when Xeriant makes its capital contribution pursuant to Section 3.3(b) of the Joint Venture Agreement, (b) $600,000 payable at the rate of $25,000 per month commencing the next month following the execution of the Xeriant License Agreement, and (c) 40% of all royalty payments received by the above-noted Joint Venture for the licensing of the Movychem Patents and payable by the Joint Venture to Assignor.

 

4. REPRESENTATIONS AND WARRANTIES

 

4.1 Authority. Each Party represents and warrants that it has the full power and authority to enter into this Agreement and to perform its obligations hereunder, and that the performance of such obligations will not conflict with or result in a breach of any agreement to which such Party is a party or is otherwise bound.

 

4.2 Title. Assignor represents and warrants that Assignor is the lawful owner of all right, title and interest in and to the Movychem Patents, and has the unrestricted right to grant the rights and licenses granted under Sections 1 and 2 to this Agreement free and clear of any title defects, encumbrances, liens, security interests, mortgages, registrations, licenses, immunities, claims of ownership or coownership to the Retacell technology or to one or more of the Movychem Patents by others including, without limitation, one or more past employees of Movychem, or claims of any nature (including, without limitation, covenants not to sue, government grants, identifications to standard committees, or any other restriction on the rights relating to the Movychem Patents) whether threatened, pending or otherwise held or claimed by anyone (collectively, “Encumbrances”). Assignor represents and warrants that there are no Encumbrances. Assignor has not received notice of (and Assignor is not aware of any facts or circumstances which could reasonably be expected to give rise to) any other actions, suits, investigations, claims or proceedings threatened, pending or in progress relating in any way to the Movychem Patents. Assignor also represents and warrants that all of the active granted patents and pending patent applications, throughout the world, for the Retacell technology owned by Assignor are individually listed in Exhibit A to this Agreement.

 

 
3

 

 

4.3 Validity and Enforceability. Assignor represents and warrants to Xeriant that none of the Movychem Patents or any patent claim in any of the Movychem Patents has never been found invalid or unenforceable for any reason in any administrative, arbitration, judicial or other proceeding. Assignor has provided Xeriant with all information and challenges concerning the title to, and validity, patentability and/or enforceability of, the Movychem Patents, if any.

 

4.4 No Government Funds Used. Assignor represents and warrants to Xeriant that no funding from or facilities of a government, university, college, other educational institution or research center was utilized in the development of the Retacell technology or any component thereof or the intellectual property that is the subject of the Movychem Patents, and the Patents are free from Encumbrances of any U.S. or foreign government, university, college, or other educational institution or research center.

 

4.5 Additional Obligations.

 

4.5.1 Maintenance and Other Fees. Assignor shall (i) forward to Xeriant any and all notices concerning Patent Office Actions, maintenance fees, annuities, and the like that become due on the Movychem Patents immediately upon receipt of such notices by Assignor; (ii) provide, on or before the Effective Date, a list to Xeriant of the dates on which any such fees, annuities and the like will become due and/or for which the window period will open during the two (2) month period following the Effective Date; (iii) provide Xeriant with a list of and contact information for all patent law firms, agents, counsel, attorneys and/or representatives currently or previously used by Assignor or who represented Assignor for one or more of the Movychem Patents or were responsible for handling the last annuity fees payments on behalf of Assignor for the Movychem Patents; and (iv) shall otherwise use its reasonable best efforts to assist Xeriant and Assignee in preventing abandonment, cancellation and/or early expiration of the Movychem Patents. Assignor shall be responsible for all invoices, expenses, and fees pending to outside prosecution counsel or agents existing on the Effective Date. Xeriant shall be responsible for all taxes and fees relating to purchase of the Patents, if any, other than income taxes and withholding taxes imposed on Assignor. Xeriant will timely remit to the appropriate taxing authorities all taxes, levies or other imposts as required by law, including any withholding taxes imposed on this payment to Assignor, and shall provide Assignor with written evidence that such payment was made. Assignor and Xeriant shall cooperate with each other and take all commercially reasonable steps to (i) file certificates and other documentation with taxing authorities and/or (ii) legitimately obtain a reduction or elimination of, or credit for, any taxes, levies or other imposts arising from transactions contemplated by this Agreement.

 

 
4

 

 

4.5.2 Deliverables and Transfer of In-House and Outside Prosecution Files. Assignor shall be responsible for arranging for the timely forwarding of copies of all prosecution-related files from Assignor to Xeriant. On the Effective Date, Assignor shall send to Xeriant:

 

(a) Copies of all letters patent for the Movychem Patents.

 

(b) Copies of all assignment agreements in its possession for the Movychem Patents.

 

(c) Each patent prosecution (docket) file in its possession or any of its patent counsel’s possession for each of the Movychem Patents.

 

(d) To the extent the same are in the possession, custody, or control of Assignor, copies of those relevant portions of laboratory notebooks and related documents and things as are reasonably related to the conception, reduction to practice, and prosecution of any Movychem Patent or concerning, pertaining or relating to the Retacell technology. To the extent such documents and things currently exist, Assignor further agrees to maintain such records intact consistent with its policy for records retention.

 

4.5.3 Within ten (10) days of the Effective Date, Assignor agrees to notify all patent counsel currently handling or responsible for legal or maintenance matters for one or more of the Movychem Patents and inform such counsel of the exclusive license and future assignment of the Movychem Patents to Assignee and to copy all future correspondence, actions and notices relating to one or more of the Movychem Patents to Xeriant and to any representative designated by Assignee or Xeriant.

 

5. GENERAL

 

5.1 Expenses. Except as otherwise expressly provided herein, all costs and expenses, including fees and disbursements of counsel, financial advisors and accountants, incurred in connection with the preparation and execution of this Agreement, or any amendment or waiver hereof, and the transactions contemplated hereby shall be paid by the Party incurring such costs and expenses.

 

5.2 Further Assurances. Each Party hereto agrees to execute and deliver all such other and additional instruments and documents and do all such other acts and things as may be necessary to more fully effectuate this Agreement and carry on the business contemplated herein.

 

5.3 Notices. All notices, approvals, requests or demands (“Notices”) which any party is required or may desire to give to the other hereunder shall be in writing, unless otherwise specified, and shall be addressed to the address provided for the Parties in the above noted Joint Venture Agreement between the Parties. All Notices shall be given in one of the following ways: (i) by delivery to the address set forth in the first paragraph for such Party; (ii) by Federal Express or similar service; or (iii) by transmittal by any electronic means whether now known or hereafter developed, including but not limited to, pdf, telecopier, or laser transmissions, able to be received by the party intended to receive notice. Each Notice shall, except as herein expressly provided, be conclusively deemed to be effective when received. The addresses of the parties shall be those of which the other party actually receives written Notice and until further notice as set forth in the first paragraph of this Agreement.

 

 
5

 

 

5.4 Captions. The various captions of this Agreement are for reference only and shall not be considered or referred to in resolving questions of interpretation of this Agreement.

 

5.5 Severability. Every provision of this Agreement is severable. If any provision is held to be invalid, illegal or unenforceable under Applicable Law in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction.

 

5.6 Entire Agreement. This Agreement, together with the Joint Venture Agreement between the Parties, constitutes the sole and entire agreement of the Parties with respect to the subject matter contained herein and therein, and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter. In the event of any conflict between the provisions of this Agreement and any prior Term Sheet between the parties, the provisions of this Agreement shall prevail.

 

5.7 Successors and Assigns. Subject to the restrictions on Transfers set forth in the Joint Venture Agreement, this Agreement shall be binding upon and shall inure to the benefit of the Parties and their respective heirs, executors, administrators, successors and assigns.

 

5.8 No Third-party Beneficiaries. This Agreement is for the sole benefit of the Parties and Assignee (and their respective heirs, executors, administrators, successors and assigns) and nothing herein, express or implied, is intended to or shall confer upon any other Person, including any creditor of one or more of the Parties or Assignee, any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

 

5.9 Amendment. This Agreement may be amended only by the Approval of all of the Parties.

 

5.10 Waiver. No consent or waiver, express or implied, by any Party to or of any breach or default by any other Party in the performance by the other of its obligations hereunder shall be deemed or construed to be a consent to or waiver of any other breach or default in the performance by such other Parties of the same or any other obligations of such Party hereunder.

 

5.11 Governing Law. All issues and questions concerning the application, construction, validity, interpretation and enforcement of this Agreement shall be governed by and construed in accordance with the internal laws of the State of Florida, without giving effect to any choice or conflict of law provision or rule (whether of the State of Florida or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of Florida.

 

5.12 Equitable Remedies. Each Party acknowledges that a breach or threatened breach by such Party of any of its obligations under this Agreement would give rise to irreparable harm to the other Parties, for which monetary damages would not be an adequate remedy, and hereby agrees that in the event of a breach or a threatened breach by such Party of any such obligations, each of the other Parties shall, in addition to any and all other rights and remedies that may be available to them in respect of such breach, be entitled to equitable relief, including a temporary restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction (without any requirement to post bond).

 

 
6

 

 

5.13 Attorneys’ Fees. If any Party is a party to any action or proceeding to enforce any of the terms of this Agreement or any action or proceeding in any other way pertaining to this Agreement, the prevailing party in such action or proceeding (as determined by the judge or presiding official therein) shall be entitled to receive from the opposing party or parties the prevailing party’s costs and reasonable accountants’, experts’ and attorneys’ fees incurred in prosecuting, defending or appearing in such action or proceeding.

 

5.14 Remedies Cumulative. Each right, power and remedy provided for herein or now or hereafter existing at law, in equity, by statute or otherwise shall be cumulative and concurrent and shall be in addition to every other right, power or remedy provided for herein or now or hereafter existing at law, in equity, by statute or otherwise, and the exercise or beginning of the exercise or the forbearance of exercise by any party of any one or more of such rights, powers or remedies shall not preclude the simultaneous or later exercise by such party of any or all of such other rights, powers or remedies.

 

5.15 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each Party and delivered to the other Parties, it being understood that the Parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by email delivery of a “pdf” format data file, such signature shall create a valid and binding obligation of the Party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “pdf” signature page were an original thereof.

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

 

[SIGNATURE PAGE FOLLOWS]

 

 
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  Xeriant, Inc
       
By:

 

 

 Keith Duffy, CEO  

 

 

 

 

 

Movychem, s.r.o.

 

 

 

 

 

 

By:

 

 

 

 

Jiri Vylimec, Managing Partner

 

 

 

 

 

 

By:

 

 

 

 

Roman Magdina, Managing Partner

 

 

 

 

 

 

By:

 

 

 

 

 Lubomir Nemecek, Managing Partner

 

 

 
8

 

 

   EXHIBIT 10.3

XERIANT SERVICES AGREEMENT

 

This Services Agreement (the “Agreement”) is dated April 4, 2022 (the “Effective Date”), by and between Xeriant, Inc. (“Xeriant” or the “Service Provider”), a Nevada corporation, located at Innovation Centre 1, 3998 FAU Blvd., Suite 309, Boca Raton, FL 33431, and Ebenberg, LLC (“EJV” or the “Company”), a Florida limited liability company, located at Innovation Centre 1, 3998 FAU Blvd., Suite 309, Boca Raton, FL 33431. The Service Provider and the Company are sometimes referred to herein as a “Party” or collectively, the “Parties.”

 

RECITALS:

 

WHEREAS, the Service Provider is a public company focused on acquiring developing and commercializing disruptive technologies and advanced materials with applications in aerospace, including innovative aircraft concepts;

 

WHEREAS, the Company seeks to enter into License Agreements and Sub-License Agreements, or Services Agreements on behalf and upon approval of EJV to develop and exploit all right, title and interest in and to its know-how, intellectual property and patents (the “Intellectual Property”);

 

WHEREAS, the Service Provider desires to provide the services, and the Company desires to accept the services, as described here below, in support of the Company; and

 

WHEREAS. the Parties intend to set out the terms and conditions according to which the Service Provider will directly or indirectly perform the services for the benefit of the Company.

 

NOW, THEREFORE, in consideration of the foregoing recitals, the Parties hereby agree as follows:

 

1 GENERAL

 

The recitals and the Annexes shall be considered an integral part to this Agreement.

 

2 PROVISION OF SERVICES

 

2.1 Services. The Service Provider shall, subject to Section 2.3, provide, or procure from other sources, the following services, as detailed in Annex A (hereinafter the “Services”), to the Company:

 

 

o

Technical Services related to the exploitation of the Intellectual Property that may assist the Company to accomplish the strategy agreed in Annex A-1 hereto (the “Technical Services”), including information technology Services reasonably necessary to perform the Technical Services.

 

o

The corporate, marketing, business development, communications, and administrative services as requested by the Company from time to time as described in Annex A-2 (the “Corporate Administrative Services”).

 

2.2 Additional Requested Services. If the Company requests services not contemplated by this Agreement, the Service Provider shall provide such services upon terms and conditions mutually agreed to by the Parties, and this Agreement (including the Annexes hereto) shall be modified and/or supplemented to reflect such additional services.

 

 
1

 

 

3 OBLIGATIONS OF THE PARTIES

 

3.1 The Parties shall at all times comply with all applicable laws, regulations, directives and court decisions.

 

3.2 The Service Provider shall provide the Services upon receipt of a written or verbal request by an authorized representative of the Company.

 

3.3 The Company undertakes to supply to the Service Provider all necessary collaboration in order to facilitate the performance of the Services, and, in particular, to promptly communicate all data, news and information necessary or useful to ensure the correct execution of the Services by the Service Provider.

 

3.4 Notwithstanding anything in this Agreement to the contrary, this Agreement and all Services shall be subject to and provided in accordance with the terms of that certain JV Agreement between the Service Provider and Movychem s.r.o., dated April __, 2022 (the “Joint Venture Agreement”).

 

4 LIABILITY AND INDEMNIFICATION

 

4.1 Neither the Service Provider or its subsidiaries, nor any of their respective employees, directors or officers, shall be liable for any loss or damage incurred or suffered by the Company in respect of any action or omission (save for the Service Provider’s gross negligence or fraud), on the part of any person providing Services under this Agreement.

 

4.2 The Company shall indemnify and hold harmless the Service Provider and its subsidiaries, and their respective employees, directors and officers against all claims, liabilities and damages, to the extent such claims, liabilities and damages arise in whole or part as a result of such Company’s act or omission, non-compliance with law or activities occurring prior to the execution of this Agreement.

 

5 FEES AND PAYMENT

 

5.1 The Service Provider shall invoice the Company on a monthly basis a fee equal to 40% of the royalties received by the Joint Venture for the licensing of its Intellectual Property.

 

5.2 The Company shall pay the Service Provider the amount specified in each invoice within five (5) days after receipt.

 

5.3 In consideration of all the above, the Parties agree that the amount of the compensation is the fair reward for the Services to be performed under this Agreement.

 

The Parties hereby mutually acknowledge that such compensation is calculated taking into account the nature of the Services to be provided under this Agreement utilizing existing personnel of the Service Provider, the costs incurred by the Service Provider in connection with providing the Services and also the benefits derived by the Company in connection with the achievement of its corporate goals.  In the event that the Company requests Services requiring the extensive use of the Service Provider’s internal personnel and/or resources (e.g., complex transactions) (“Special Services”), the Parties shall re-assess the adequacy of the fees payable hereunder, and, if necessary, enter into separate supplemental agreements, setting forth the terms and conditions for the provision of such Special Services by the Service Provider.  The Service Provider shall render the Special Services, and the Company shall be responsible for all fees and costs incurred for such Special Services, in each case, in accordance with the terms and conditions of the relevant supplemental service agreement.

 

 
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6 CONFIDENTIALITY

 

Except to the extent required by applicable law, the Service Provider and the Company agree to keep strictly confidential any confidential or proprietary information, news documents and data relating to the scope of this Agreement. In particular, each Party will ensure the protection of all information and data exchanged under the Agreement to prevent unauthorized access or use by third parties.

 

7 DURATION AND TERMINATION

 

7.1 This Agreement shall be in force from the date first above written and shall remain in force until termination of the joint venture in accordance with the Joint Venture Agreement.

 

7.2 This Agreement shall be deemed to be terminated automatically if any Party: (a) makes any voluntary arrangement with its creditors or becomes subject to an administration order or goes into winding –up or bankruptcy or similar procedure or (c) the determination of any governmental authority having competent jurisdiction enjoining or prohibiting the transactions contemplated by this Agreement.

 

7.3 Upon termination of this Agreement for any reason, the terminating Party shall have no further obligation (other than those provided for in clause 4 above) to the non-terminating Party under this Agreement provided that if the Company is the terminating Party, the Company shall remain liable to pay any fees accrued but not paid, prior to such termination.

 

8 MODIFICATIONS

 

It is understood that any amendment or modification to this Agreement shall be valid only if made in writing and signed by the Parties hereto.

 

9 NON-ASSIGNMENT AND SEVERABILITY

 

No Party shall assign any rights arising under this Agreement or transfer the Agreement itself.

 

Should this Agreement become illegal, invalid or unenforceable in one part or be withdrawn or terminated, neither such illegality, invalidity or unenforceability nor such withdrawal or termination shall affect the Agreement, which shall continue in full force and effect for the other provisions hereof.

 

10 INCONSISTENCIES

 

In the event that any provision of this Agreement (including any Annex hereto) is inconsistent with the Joint Venture Agreement, the terms of the Joint Venture Agreement shall prevail.

 

11 GOVERNING LAW AND DISPUTE RESOLUTION

 

This Agreement shall be governed by and construed in accordance with the laws of the State of Florida, without regard to principles of conflicts of laws. Without limitation of a Party’s right to enforce this Agreement in a court of law, the Parties agree that should any legal dispute arise between the Parties in relation to the interpretation and the implementation of this Agreement, their respective top executive management will use their best efforts to reach an amicable settlement resolving such dispute.

 

 
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12 SIGNING

 

This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which taken together shall constitute a single agreement. 

 

13 ANNEXES

 

All Annexes to this Agreement are hereby incorporated herein and made a part of this Agreement as if set forth in full herein. Each capitalized term used in any annex but not otherwise defined has the meaning set forth in this Agreement.

 

IN WITNESS HEREOF, the undersigned have executed this Agreement as of the Effective Date.

 

XERIANT, INC.
     
By:

 

 Keith Duffy  

 

 

 

Its: CEO  

 

 

EBENBERG, LLC
     
By:

 

 

 

Name:

 Scott Duffy  

 

 

 

Title: Partnership Representative  

 

 
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 Annex A-1

 

Technical Services

 

Utilizing the in-house personnel and contractors of the Service Provider, the Service Provider shall provide technical and program management services, including:

 

 

1.

Providing the appropriate technical expertise to develop a global sales strategy to exploit the Intellectual Property.

 

 

 

 

2.

Providing the accompanying certification and testing information as may be required by the Company needed to achieve EJV’s goals to exploit the Intellectual Property.

 

 
5

 

 

Annex A-2

 

Corporate Administrative Services

 

1.

Assist in developing strategies to garner additional funding to build out manufacturing facilities as needed;

 

 

2.

Performing certain public relations efforts as specifically requested by the Company;

 

 

3.

Assist in developing and implementing strategy and business development actions within North America.

 

 

4.

Performing administrative functions such as scheduling and facilitating meetings and events that support the initiatives of the Company.

 

 

5.

Performing program support functions, assisting in identifying new business opportunities, and networking to foster relationships to exploit the Intellectual Property;

 

 

6.

Attending strategic events in order to represent the Company, developing strategies associated with funding and new business opportunities.

 

 

 

 
6

 

EXHIBIT 31.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND

PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO RULE 13a-14(a) UNDER THE EXCHANGE ACT

 

I, Keith Duffy, certify that:

 

1.

I have reviewed this Quarterly Report on Form 10-Q of Xeriant, Inc.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

5.

I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

 

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Dated: May 16, 2022

By:

/s/ Keith Duffy

Keith Duffy

Chief Executive Officer (Principal Executive Officer)

EXHIBIT 31.2

 

CERTIFICATION OF CHIEF FINANCIAL OFFICER AND

PRINCIPAL FINANCIAL OFFICER

PURSUANT TO RULE 13a-14(a) UNDER THE EXCHANGE ACT

 

I, Brian Carey, certify that:

 

1.

I have reviewed this Quarterly Report on Form 10-Q of Xeriant, Inc.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

5.

I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

 

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Dated: May 16, 2022

By:

/s/ Brian Carey

Brian Carey

Chief Financial Officer (Principal Financial Officer)

EXHIBIT 32.1

 

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

 

In connection with the Quarterly Report of Xeriant, Inc., a Nevada corporation (the “Company”), on Form 10-Q for the quarter ended March 31, 2022, as filed with the Securities and Exchange Commission (the “Report”), Keith Duffy, Chief Executive Officer of the Company, does hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. ss. 1350), that:

 

 

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

Date: May 16, 2022

By:

/s/ Keith Duffy

Keith Duffy

Chief Executive Officer (Principal Executive Officer)

EXHIBIT 32.2

 

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

 

In connection with the Quarterly Report of Xeriant, Inc., a Nevada corporation (the “Company”), on Form 10-Q for the quarter ended March 31, 2022, as filed with the Securities and Exchange Commission (the “Report”), Brian Carey, Chief Financial Officer of the Company, does hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. ss. 1350), that:

 

 

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

Date: May 16, 2022

By:

/s/ Brian Carey

Brian Carey

Chief Financial Officer (Principal Financial Officer)