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 |
x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 20152022
☐ |
|
For the transition period from __________ to __________.
Commission File Number: 000-54277
|
(Exact name of registrant as specified in its charter). |
Nevada | 27-1519178 | ||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Identification No.) | ||
Innovation Centre #1 3998 FAU Boulevard, Suite 309 Boca Raton, Florida | 33431 | ||
(Address of principal executive offices) | (Zip code) |
1221 2nd Street #300
Santa Monica CA 90401
(Address of principal executive offices and zip code)
(855) 245-1613
(Registrant’s telephone number, including area code)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 o ☒ No x☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x ☒ No o☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.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 |
| |
| ☐ |
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 o ☐ No x☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of December 31, 2016,November 18, 2022, the Registrant had outstanding 58,823,116376,933,144 shares of common stock.
BANJO & MATILDA,XERIANT, INC.
FORM 10-Q
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Condensed Consolidated Financial | 4 | ||||||||
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 5 |
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| 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
BANJO & MATILDA,XERIANT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 20152022
(UNAUDITED)
INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of September 30, 2022 (Unaudited) and June 30, 2022 | F-1 |
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| F-2 | |||||
F-3 | ||||||
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Notes to Unaudited Condensed Consolidated Financial Statements |
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| 4 |
| Table of Contents |
XERIANT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
BANJO & MATILDA INC. AND SUBSIDIARIES September 30, June 30, 2015 2015 (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents Trade receivables, net Inventory, net Deposit on purchases Other assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Intangible assets, net Deferred financing costs, net Other receivable Property, plant and equipment, net TOTAL NON-CURRENT ASSETS TOTAL ASSETS LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES Trade and other payables Deposit payable Trade financing Accrued interest Loans payable Loan from related parties Convertible loan from related party (net of discount) TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Loans payable (net of related discount) Convertible loan from related party (net of discount) (net of current portion) TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES STOCKHOLDERS' DEFICIT Preferred stock, $0.00001 par value, 100,000,000 shares authorized and 1,000,000 shares issued and outstanding, respectively Common stock, $0.00001 par value, 100,000,000 shares authorized and 58,823,116 and 58,323,116 shares issued and outstanding, respectively Additional paid in capital Other accumulated comprehensive gain Accumulated deficit TOTAL STOCKHOLDERS' DEFICIT TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 27,083 $ 362,668 525,493 180,289 76,718 174,792 259,289 357,804 70,983 5,550 959,566 1,081,103 43,326 45,011 43,182 47,107 - 66,952 12,759 12,139 99,266 171,208 $ 1,058,833 $ 1,252,311 $ 675,536 $ 633,394 1,159 1,159 780,313 779,653 90,038 69,824 221,806 229,288 176,986 217,855 163,059 - 2,108,896 1,931,172 400,973 563,357 212,670 - 613,643 563,357 2,722,539 2,494,529 10 10 588 583 1,591,051 1,759,187 100,007 100,007 (3,355,363 ) (3,102,005 ) (1,663,707 ) (1,242,219 ) $ 1,058,833 $ 1,252,311
|
| As of |
|
| As of |
| ||
| September 30, 2022 |
|
| June 30, 2022 |
| |||
Assets |
| (Unaudited) |
|
|
|
| ||
Current assets |
|
|
|
|
|
| ||
Cash |
| $ | 498,039 |
|
| $ | 1,065,945 |
|
Deposits |
|
| 12,546 |
|
|
| 12,546 |
|
Investment in JV - Ebenberg LLC |
|
| 107,007 |
|
|
| 57,678 |
|
Prepaids |
|
| 8,231 |
|
|
| 756 |
|
Total current assets |
|
| 625,823 |
|
|
| 1,136,925 |
|
Property & equipment, net |
|
| 6,641 |
|
|
| 4,409 |
|
Operating lease right-of-use asset |
|
| 117,437 |
|
|
| 128,342 |
|
Total assets |
| $ | 749,901 |
|
| $ | 1,269,676 |
|
|
|
|
|
|
|
|
|
|
Liabilities & stockholders’ deficit |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
| $ | 69,697 |
|
| $ | 56,836 |
|
Accrued liabilities, related party |
|
| 32,000 |
|
|
| 22,000 |
|
Shares to be issued |
|
| 75,200 |
|
|
| 75,200 |
|
Convertible notes payable, net of discount |
|
| 5,950,000 |
|
|
| 3,936,185 |
|
Lease liability, current |
|
| 50,647 |
|
|
| 48,963 |
|
Total current liabilities |
|
| 6,177,544 |
|
|
| 4,139,184 |
|
|
|
|
|
|
|
|
|
|
Lease liability, long-term |
|
| 79,020 |
|
|
| 92,197 |
|
Total liabilities |
|
| 6,256,564 |
|
|
| 4,231,381 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 9) |
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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Stockholders’ deficit |
|
|
|
|
|
|
|
|
Series A Preferred stock, $0.00001 par value; 100,000,000 authorized; 3,500,000 designated; 780,132 and 781,132 shares issued and outstanding at September 30, 2022 and June 30, 2022, 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 September 30, 2022 and June 30, 2022, respectively |
|
| 10 |
|
|
| 10 |
|
Common stock, $0.00001 par value; 5,000,000,000 shares authorized; 365,696,144 and 365,239,001 shares issued and outstanding at September 30, 2022 and June 30, 2022, respectively |
|
| 3,657 |
|
|
| 3,652 |
|
Common stock to be issued |
|
| 51,950 |
|
|
| 51,950 |
|
Additional paid in capital |
|
| 18,624,349 |
|
|
| 16,351,791 |
|
Accumulated deficit |
|
| (21,381,601 | ) |
|
| (16,571,505 | ) |
Total stockholder’s deficit |
|
| (2,701,627 | ) |
|
| (164,094 | ) |
Non-controlling interest |
|
| (2,805,036 | ) |
|
| (2,797,611 | ) |
Total stockholders’ deficit |
|
| (5,506,663 | ) |
|
| (2,961,705 | ) |
Total liabilities and stockholders’ deficit |
| $ | 749,901 |
|
| $ | 1,269,676 |
|
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)
BANJO & MATILDA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 2015 AND 2014 (UNAUDITED) September 30, 2015 September 30, 2014 Revenue Cost of sales Gross profit Payroll and employee related expenses Operating expense Marketing expense Samples & design expense Occupancy expenses Depreciation and amortization expense Finance Charges Corporate and public company expense Loss from operations Other Income (Expense) Other income Amortization of debt discount Interest expense Total Other Expense Loss before income tax Provision for income taxes Net loss Other comprehensive income Foreign currency translation Comprehensive loss Net loss per share Basic Diluted Weighted average number of shares outstanding: Basic Diluted $ 880,304 $ 746,763 571,807 411,733 308,497 335,030 261,965 172,404 62,720 54,548 68,420 105,792 36,603 - 13,365 13,239 2,265 3,269 15,381 40,751 32,387 36,539 493,106 426,542 (184,610 ) (91,512 ) 12,678 - (18,094 ) - (63,332 ) (46,179 ) (68,748 ) (46,179 ) (253,358 ) (137,691 ) - - (253,358 ) (137,691 ) - (5,424 ) $ (253,358 ) $ (143,115 ) $ (0.00 ) $ (0.00 ) $ (0.00 ) $ (0.00 ) 58,619,819 27,924,631 58,619,819 27,924,631
|
| For the three months ended |
| |||||
|
| September 30, 2022 |
|
| September 30, 2021 |
| ||
Operating expenses: |
|
|
|
|
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| ||
General and administrative expenses |
| $ | 545,569 |
|
| $ | 1,201,002 |
|
Professional fees |
|
| 90,060 |
|
|
| 29,541 |
|
Related party consulting fees |
|
| 94,000 |
|
|
| 82,500 |
|
Research and development expense |
|
| - |
|
|
| 2,340,575 |
|
Sales and marketing expense |
|
| 6,356 |
|
|
| 598,595 |
|
Total operating expenses |
|
| 735,985 |
|
|
| 4,252,213 |
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
| (735,985 | ) |
|
| (4,252,213 | ) |
|
|
|
|
|
|
|
|
|
Other expenses: |
|
|
|
|
|
|
|
|
Amortization of debt discount |
|
| (461,842 | ) |
|
| (149,028 | ) |
Financing fees |
|
| - |
|
|
| (43,750 | ) |
Interest expense |
|
| - |
|
|
| (2,389 | ) |
Loss from Ebenberg JV |
|
| (49,328 | ) |
|
| - |
|
Loss on extinguishment of debt |
|
| (3,570,366 | ) |
|
| (535 | ) |
Total other (expense) |
|
| (4,081,536 | ) |
|
| (195,702 | ) |
|
|
|
|
|
|
|
|
|
Net loss |
|
| (4,817,521 | ) |
|
| (4,447,915 | ) |
|
|
|
|
|
|
|
|
|
Less net loss attributable to noncontrolling interest |
|
| (7,425 | ) |
|
| (1,177,816 | ) |
|
|
|
|
|
|
|
|
|
Net income attributable to common stockholders |
| $ | (4,810,096 | ) |
| $ | (3,270,099 | ) |
|
|
|
|
|
|
|
|
|
Net loss per common share - basic and diluted |
| $ | (0.01 | ) |
| $ | (0.01 | ) |
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding - basic and diluted |
|
| 361,552,863 |
|
|
| 225,497,197 |
|
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 MONTHS ENDED SEPTEMBER 30, 2022
(UNAUDITED)
BANJO & MATILDA, INC. AND SUBSIDIARIES FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 2015 AND 2014 (UNAUDITED) 2015 2014 Net loss Adjustments to reconcile net loss to net cash used in operating activities: Depreciation Amortization Effect of exchange rate changes on cash and cash equivalents Debt discount amortization Amortization of deferred finance fee (Increase) / decrease in assets: Trade receivables Inventory Deposit on Purchases Other assets Other receivable Increase in current liabilities: Trade payables and other liabilities Accrued interest Deposits payable Net cash used in operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of stock Net (payments) proceeds from related party loan Net loan (payments) proceeds Net trade financing Net cash provided by (used in) financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period SUPPLEMENTAL DISCLOSURES: Cash paid during the year for: Income tax payments Interest payments SUPPLEMENTAL DISCLOSURES FOR NON CASH: FINANCING AND INVESTING ACTIVITIES Debt converted to equity $ (253,358 ) $ (137,691 ) 580 692 1,686 2,577 - (1,191 ) 18,094 - 3,926 - (345,204 ) (67,684 ) 98,074 (259,528 ) 98,515 - (65,433 ) 3,071 66,952 (7,565 ) 69,268 56,078 20,211 7,543 - 30,413 (286,690 ) (373,285 ) (1,200 ) (2,873 ) - 32,770 121,512 (54,843 ) (169,867 ) 3,764 660 372,529 (47,695 ) 354,220 (335,585 ) (21,938 ) $ 362,668 $ 33,367 $ 27,083 $ 11,429 $ - $ - $ 40,192 $ 46,769 $ 27,123 $ -
|
| Series A |
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| Series B |
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| Additional |
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| Common |
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|
|
| Non- |
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| ||||||||||||||||||||||
|
| Preferred Stock |
|
| Preferred Stock |
|
| Common Stock |
|
| Paid in |
|
| stock to |
|
| Accumulated |
|
| Controlling |
|
|
|
| ||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| be issued |
|
| Deficit |
|
| Interest |
|
| Total |
| |||||||||||
Balance June 30, 2022 |
|
| 781,132 |
|
| $ | 8 |
|
|
| 1,000,000 |
|
| $ | 10 |
|
|
| 365,239,001 |
|
| $ | 3,652 |
|
|
| 16,351,791 |
|
| $ | 51,950 |
|
| $ | (16,571,505 | ) |
| $ | (2,797,611 | ) |
| $ | (2,961,705 | ) |
|
|
|
|
|
|
|
|
|
|
|
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|
Stock issued for services |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 457,143 |
|
|
| 5 |
|
|
| 47,995 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 48,000 |
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
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|
|
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|
|
|
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|
|
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|
|
|
Conversion of Series A Preferred to Common Stock |
|
| (1,000 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,000,000 |
|
|
| 10 |
|
|
| (10 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Fair value of warrants associated with convertible debt |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,918,393 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,918,393 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment for rounding |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 5 |
|
|
| (5 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock option compensation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 306,170 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 306,170 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (4,810,096 | ) |
|
| (7,425 | ) |
|
| (4,817,521 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance September 30, 2022 |
|
| 780,132 |
|
| $ | 8 |
|
|
| 1,000,000 |
|
| $ | 10 |
|
|
| 365,696,144 |
|
| $ | 3,657 |
|
|
| 18,624,349 |
|
| $ | 51,950 |
|
| $ | (21,381,601 | ) |
| $ | (2,805,036 | ) |
| $ | (5,506,663 | ) |
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’ EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021
(UNAUDITED)
|
| Series A |
|
| Series B |
|
|
|
| Additional |
|
| Common |
|
|
|
| Non- |
|
|
| |||||||||||||||||||||||
|
| Preferred Stock |
|
| Preferred Stock |
|
| Common Stock |
|
| Paid in |
|
| stock to |
|
| Accumulated |
|
| Controlling |
|
|
| |||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| 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 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 | ) |
|
| (1,117,816 | ) |
|
| (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 |
|
BANJO & MATILDA, INC. AND SUBSIDIARIES
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 three months ended |
| |||||
|
| September 30, 2022 |
|
| September 30, 2021 |
| ||
Cash Flows from Operating Activities |
|
|
|
|
|
| ||
Net Loss |
| $ | (4,817,521 | ) |
| $ | (4,447,915 | ) |
Adjustments to reconcile net loss to net |
|
|
|
|
|
|
|
|
cash used by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 335 |
|
|
| - |
|
Stock option expense |
|
| 306,170 |
|
|
| 1,060,324 |
|
Stock issued for services |
|
| 48,000 |
|
|
| 494,700 |
|
Loss on extinguishment of debt |
|
| 3,470,366 |
|
|
| 535 |
|
Loss from joint venture investment |
|
| (49,328 | ) |
|
| - |
|
Amortization of debt discount |
|
| 461,842 |
|
|
| 149,028 |
|
Operating lease right of use asset |
|
| 10,905 |
|
|
| 245 |
|
Changes in operating assets & liabilities: |
|
|
|
|
|
|
|
|
Lease liabilities |
|
| (11,493 | ) |
|
| - |
|
Deposits and prepaids |
|
| (7,476 | ) |
|
| (34,850 | ) |
Accounts payable and accrued liabilities |
|
| 12,861 |
|
|
| 50,191 |
|
Accrued liability, related party |
|
| 10,000 |
|
|
| - |
|
Net cash used by operating activities |
|
| (565,339 | ) |
|
| (2,727,742 | ) |
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
| (2,567 | ) |
|
| - |
|
Net cash used in investing activities |
|
| (2,567 | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
Sale of common stock |
|
| - |
|
|
| 1,668,500 |
|
Cash from exercise of warrants |
|
| - |
|
|
| 128,549 |
|
Proceeds from convertible notes payable |
|
| - |
|
|
| 250,000 |
|
Net cash provided by financing activities |
|
| - |
|
|
| 2,047,049 |
|
|
|
|
|
|
|
|
|
|
Decrease in Cash |
|
| (567,906 | ) |
|
| (680,693 | ) |
|
|
|
|
|
|
|
|
|
Cash at beginning of period |
|
| 1,065,945 |
|
|
| 962,540 |
|
|
|
|
|
|
|
|
|
|
Cash at end of period |
| $ | 498,039 |
|
| $ | 281,847 |
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information |
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ | - |
|
| $ | - |
|
Cash paid for income taxes |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
Conversion of convertible notes payable and accrued interest |
| $ | - |
|
| $ | 187,246 |
|
Warrants issued with convertible notes payable |
| $ | - |
|
| $ | 117,893 |
|
Beneficial conversion feature arising from convertible notes payable |
| $ | - |
|
| $ | 171,597 |
|
Warrants issued with convertible notes payable extinguishment |
| $ | 1,918,393 |
|
| $ | - |
|
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
(UNAUDITED)
NoteNOTE 1 – BASIS- ORGANIZATION AND NATURE OF PRESENTATION AND ORGANIZATIONBUSINESS
All currencies represented inCompany Overview
Xeriant, Inc. (“Xeriant” or the notes“Company”) is dedicated to the condensed consolidated financial statements areacquisition, development and commercialization of transformative technologies, including eco-friendly specialty materials which can be successfully deployed and integrated across multiple industry sectors, and disruptive innovations related to the emerging aviation market called Advanced Air Mobility, which include next-generation aircraft. We seek to partner with and acquire strategic interests in United States Dollars (USD) unless specified as AUD (Australian Dollars).visionary companies that accelerate this mission.
Banjo and Matilda, Inc.The Company was incorporated in Nevada on December 18, 2009 under the name Eastern World Group, Inc. On September 24, 2013, its name was changed to Banjo & Matilda, Inc.2009.
On November 14, 2013, Banjo & Matilda, Inc.,April 16, 2019, the Company entered into a Share Exchange Agreement (the "Exchange Agreement") with Banjo & Matilda, Pty Ltd.American Aviation Technologies, LLC (“AAT”), a corporation formed underan aircraft design and development company focused on the laws of Australia (the "Company") and the shareholdersemerging segment of the Company. Pursuant toaviation industry of autonomous and semi-autonomous vertical take-off and landing (VTOL) unmanned aerial vehicles (UAVs).
On September 30, 2019, the Exchange Agreement, at the closingacquisition of AAT closed, and AAT became a subsidiary of the transaction contemplated thereunder (the "Transaction"),Company.
On June 22, 2020, the name of the Company became a wholly-owned subsidiary of Banjo & Matilda,was changed to Xeriant, Inc.
Banjo & Matilda Pty Ltd. was incorporated under the laws of Australia on May 27, 2009 and manufactures and sells cashmere fashion. Headquartered at Bondi Beach, the Aussie lifestyle of sun, sand and surf resonates innately with this label and its philosophy of low maintenance, style and comfort.
Banjo & Matilda USA, Inc. was incorporated in the State of Delaware on October 14, 2013Nevada and subsequently approved by FINRA effective July 30, 2020 for the name and symbol change (XERI).
On May 31, 2021, the Company entered into a Joint Venture Agreement with XTI Aircraft Company, to form a new company, called Eco-Aero, LLC, for purpose of completing the preliminary design of XTI’s TriFan 600, a 5-passenger plus pilot, hybrid electric, vertical takeoff and landing (eVTOL) fixed wing aircraft.
Effective April 2, 2022 (the “Effective Date”) and Amended November 7, 2022, 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 100%50% by Banjo & Matilda, Inc.each of the Company and Movychem.
Advanced Materials
A primary focus of our Company is the acquisition and commercial exploitation of eco-friendly, advanced materials and chemicals which have applications across a broad range of industries and the potential to generate significant near-term revenue. The ultra-soft cashmere staples, pairing simplicityCompany’s commercialization strategy encompasses licensing arrangements and joint ventures with cool sophistication has rapidly gained loyal customers worldwide positioningmajor industry players, which would allow for more rapid access to the labelmarket with reduced capital requirements and financial risk. In addition to providing the production and distribution infrastructure, these established partnering companies can streamline testing and certification and add brand recognition value. The advanced materials and chemicals may be sold as standalone products, enhancements to existing products, or used in the development of proprietary products under a new trademarked brand owned by the Company. The Company is exploring manufacturing and branding opportunities for specific products derived from advanced materials and chemicals acquired or developed, which would involve setting up production facilities, equipment, systems and supply chain. Our plan to source and acquire strategic interests in visionary companies developing, integrating, and commercializing critical breakthrough technologies is underway with our first successful advanced materials transaction executed in the second quarter of 2022.
| F-6 |
| Table of Contents |
Effective April 2, 2022, we entered into a Joint Venture Agreement with Movychem s.r.o, a Slovakian chemicalcompany, setting forth the terms for a joint venture (referred to herein as the 'go-to'Movychem JV) to develop applications and commercialize a series of productswhich incorporate an internationally patented flame-retardant technology developed by Movychem under the trade name Retacell®. The Movychem JV, owned 50% by Xeriant and 50% by Movychem, subject to certain funding conditions, has been granted the exclusive worldwide rights to the intellectual property related to Retacell® and will be responsible for contemporary cashmere products.developing applications and commercializing products derived from Retacell®. Engineered over two decades, Retacell® is a versatile, biodegradable, non-toxic, high-performance thermal and fire protection chemical agent that is custom formulated for each application, based on the specific properties of the base material and the fire protection requirements. Retacell® can be applied as a coating, treatment, or infused during manufacturing into a variety of materials, including recycled plastics and wood-based fiber. In addition to becoming heat and fire resistant, the resulting Retacell®-enhanced materials are also water resistant.
Under accounting principles generally acceptedOn June 8, 2022, we announced the successful development of a multi-purpose, high-strength fire- and water-resistant composite panel made from a formulation of Retacell® and a cardboard fiber-reinforced polymeric resin, which can be sourced from recycled materials. The panel is fabricated through a compression molding process and may be produced or cut in varying thicknesses and sizes, including standard 48” x 96” sheets. Depending on the application, the panel can have different colors, textures or decorative finishes. Potential interior and exterior construction applications include walls, ceilings, flooring, framing, siding, roofing, and decking.
Xeriant, pursuant to the Services Agreement with the Movychem JV, is planning to buildout manufacturing facilities in the United States and Eastern Europe to meet the share exchange is considereddemand for Retacell® and Retacell®-infused products. The manufacturing facilities will be owned and operated by Xeriant, and will wholesale product to becustomers licensed by the Movychem JV. We have identified potential sites, received bids for specialized manufacturing equipment, developed timetables related to the action plan, and hired a capital transaction in substance, rather than a business combination. Thatmanaging director with decades of experience to oversee the projects.
Aerospace
Another area of interest for our Company is the share exchangeemerging aviation market called Advanced Air Mobility (AAM), the transition to more efficient, eco-friendly, automated and convenient flight operations enabled by the convergence of technological advancements in design and engineering, composite materials, propulsion systems, battery energy density and manufacturing processes. Next-generation aircraft being developed for this market offer low-cost, on-demand flight for passengers and cargo, utilizing lower altitude airspace and bypassing the traditional hub and spoke airport network with vertical takeoff and landing (VTOL) capabilities. Many of these lightweight aircraft are electrically powered through either hybrid or pure battery systems, which allows for quieter, low emission flights over urban areas, however with limited speed and range. The adoption and integration of niche aerial services through AAM is equivalentexpected to provide benefits throughout the issuanceeconomy. We plan to partner with and acquire strategic interests in visionary companies that accelerate our mission of stock by Banjo & Matilda Pty Ltd.commercializing critical breakthrough AAM technologies which enhance performance, increase safety, and enable and support more efficient, autonomous, and sustainable flight operations, including electric and hybrid-electric passenger and cargo transport aircraft capable of vertical takeoff and landing. Our plan to source and acquire strategic interests in leading aerospace companies developing breakthrough VTOL aircraft began in the second quarter of 2021.
Effective May 27, 2021, we entered into a Joint Venture Agreement with XTI Aircraft Company (“XTI”), a privately owned OEM based in Englewood, Colorado for the net monetary assetspurpose of completing the preliminary design of XTI’s TriFan 600, a 5-passenger plus pilot, hybrid electric vertical takeoff and landing (eVTOL) fixed-wing aircraft.
Through our joint venture with XTI, (referred to hereinafter as the “XTI JV”), we were involved in the successful completion of the Banjo & Matilda, Inc. accompanied by a recapitalization,preliminary design of their TriFan 600 eVTOL aircraft. The TriFan 600 is being designed to become the fastest, longest-range VTOL aircraft in the world and the first commercial fixed-wing VTOL airplane, with current pre-orders exceeding $3 billion in gross revenues upon delivery of those aircraft.
| F-7 |
| Table of Contents |
While the purpose of the XTI JV has been achieved, XTI and Xeriant continue to see value in the XTI JV for future collaboration in Advanced Ari Mobility. Should XTI and Xeriant determine it is accounted for as a change in capital structure. Accordingly,their best interest to terminate the accounting for the share exchangeXTI JV, then it will be identical to that resulting from a reverse acquisition, except no goodwill willdissolved. Should the XTI JV be recorded. Under share reverse takeover accounting, the post reverse acquisition comparative historical financial statementsdissolved, as of the legal acquirer, Banjo & Matilda, Inc. are thoseOctober 18, 2022, Xeriant would receive 5.5% equity ownership of the legal acquiree, Banjo & Matilda Pty Ltd., which is considered to be the accounting acquirer. Share and per share amounts stated have been retroactively adjusted to reflect the merger.XTI.
Management believes that our holding and operating company structure has several advantages and will enable us to grow rapidly, acquiring assets primarily through acquisitions, joint ventures, strategic investments, and licensing arrangements. As a resultpublicly traded company, we offer our subsidiaries such benefits as improved access to capital, higher valuations and lower risk through the shared ownership of the exchange agreement, the reorganization was treateda diversified portfolio, while allowing these entities to maintain independence in their distinct operations to focus on their fields of expertise. Cost savings and efficiencies may be realized from sharing non-operational functions such as an acquisition by the accounting acquiree that is being accounted forfinance, legal, tax, sales & marketing, human resources, purchasing power, as a recapitalizationwell as investor and as a reverse merger by the legal acquirer for accounting purposes. Pursuant to the recapitalization, all capital stock shares and amounts and per share data have been retroactively restated. Accordingly, the financial statements include the following:public relations.
|
| |
|
|
NoteNOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanyingconsolidated financial statements, werewhich include the accounts of the Company, American Aviation Technologies, LLC, and Eco-Aero, LLC, its subsidiaries, are prepared in conformity with generally accepted accounting principles in the United States of America ("(U.S. GAAP). All significant intercompany balances and transactions have been eliminated. The consolidated financial statements, which include the accounts of the Company and its wholly owned subsidiaries, and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The Financial Statements have been prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and presented in US GAAP").dollars. The fiscal year end is June 30.
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 September 30, 2022 and June 30, 2022, the Company had $498,039 and $1,065,945 in cash and $5,551,721 and $3,002,259 in negative working capital, respectively. For the three months ended September 30, 2022 and 2021, the Company had a net loss of $4,817,521 and $4,447,915, respectively. Continued losses may adversely affect the liquidity of the Company in the future. Therefore, the factors noted above raise substantial doubt about our ability to continue as a going concern. The recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheets is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to raise additional capital, obtain financing and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s existence is dependent upon management’s ability to develop profitable operations and resolve its liquidity problems.
| F-8 |
| Table of Contents |
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Principles of Consolidation
The consolidated financial statements include the accounts of Banjo & Matilda, Inc. ("Banjo" or "the Company") and its wholly owned subsidiaries Banjo & Matilda Pty Ltd. and Banjo & Matilda USA,Xeriant, Inc., collectively referred to as the Company.American Aviation Technologies, LLC, and Eco-Aero, LLC. All materialsignificant intercompany accounts,balances and transactions and profits were eliminated in consolidation.have been eliminated.
Exchange Gain (Loss)
During the three-month period ended September 30, 2015, the transactions of the Company were denominated in US Dollars. Some transactions were denominated in AUD and British pounds for the sales made outside US and for rent paid for the Australian store. Such transactions were converted to US$ on the date of transaction and the exchange gains or losses were recorded in the statement of operations. During the three-month period ended September 30, 2014, the transactions of the Company were denominated in foreign currency and were recorded in Australian dollar (AUD) at the rates of exchange in effect when the transactions occurred. Exchange gains and losses are recognized for the different foreign exchange rates applied when the foreign currency assets and liabilities are settled.
Foreign Currency Translation and Comprehensive Income (Loss)
During the three-month period ended September 30, 2015, the transactions of the Company were denominated in US Dollars. All the transactions which were denominated in other currencies were converted to US$ on the date of settlement and the exchange gains and losses were recorded in the statement of operations. No change was recorded in the comprehensive income (loss). During the three-month period ended September 30, 2014, the accounts of the Company were maintained, and its financial statements were expressed, in AUD. Such financial statements were translated into USD with the AUD as the functional currency. All assets and liabilities were translated at the exchange rate at the balance sheet date, stockholder's equity is translated at the historical rates and income statement items are translated at the average exchange rate for the period. Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of transaction. Any differences between the initially recorded amount and the settlement amount are recorded as a gain or loss on foreign currency transaction in the statements of operations. The resulting translation adjustments are reported under other comprehensive income as a component of shareholders' equity. There were no significant fluctuations in the exchange rate for the conversion of AUD to USD after the balance sheet date.
Use of Estimates
The preparation of financial statements in conformity with US GAAPaccounting principles generally accepted in the United States of America requires management to make certain 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 thosethese estimates. Significant estimates include collectability of accounts receivable, accounts payable, sales returns and recoverability of long-term assets.
Reportable SegmentFair Value Measurements and Fair Value of Financial Instruments
The Company has one reportable segment. The Company's activities are interrelated and each activity is dependent upon and supportive of the other. Accordingly, all significant operating decisions are based on analysis of financial products provided as a single global business.
Revenue Recognition
Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is probable. Revenue generally is recognized net of allowances for returns and any taxes collected from customers and subsequently remitted to governmental authorities.
Cost of Sales
Cost of sales consists primarily of inventory costs, as well as warehousing costs (including the cost of warehouse labor), shipping, importation duties and charges, third party royalties, and product sampling.
Operating Overhead Expense
Operating overhead expense consists primarily of payroll and benefit related costs, rent, depreciation and amortization, professional services, and meetings and travel.
Income Taxes
The Company utilizes FASB Accounting Standards Codification (ASC) Topic 740, Income Taxes, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that were included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax 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.
The Company follows FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, (codified in FASB ASC Topic 740). When tax returns are filed, it is likely that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest associated with unrecognized tax benefits is classified as interest expense and penalties are classified in selling, general and administrative expenses in the statements of income.
At September 30, 2015 and 2014, the Company had not taken any significant uncertain tax positions on its tax returns for periods ended September 30, 2015 and prior years or in computing its tax provision for 2015. Management has considered its tax positions and believes that all of the positions taken by the Company in its Federal and State tax returns are more likely than not to be sustained upon examination. The Company is subject to examination by U.S. Federal and State tax authorities from the period ended June 30, 2012 to the present, generally for three years after they are filed.
The Company has been behind in filing its payroll tax returns and sales tax returns. The Company has recorded $1,580 as penalties for the late payment of taxes in the accompanying financials.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk are cash, accounts receivable and other receivables arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy financial institutions. The Company has a diversified customer base across many markets, predominantly Australia, United States of America, United Kingdom, Europe and the Middle East. The Company controls credit risk related to accounts receivable through credit approvals, credit limits and monitoring procedures. The Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk, establishes an allowance, if required, for uncollectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance is limited. In addition, Receivables that are factored through the Company's Receivable finance facility are guaranteed by the finance company that further mitigates Credit Risk.
Risks and Uncertainties
The Company is subject to risks from, among other things, competition associated with the industry in general, other risks associated with financing, liquidity requirements, rapidly changing customer requirements, limited operating history, foreign currency exchange rates and the volatility of public markets.
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. The Company's management and legal counsel assess such contingent liabilities, and such assessment inherently involves judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company's 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.
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 the Company's financial statements. If the assessment indicates that a potential 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 to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.
Cash and Equivalents
Cash and equivalents include cash in hand and cash in demand deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less. At September 30, 2015 and June 30, 2015, the Company had $27,083 and $362,668 in cash in Australia and in the United States. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in bank accounts.
Allowance for Doubtful Accounts
The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. The allowances for doubtful accounts as of September 30, 2015 and June 30, 2015 are $147,870 and $140,870 respectively.
Inventory
Inventories are valued at the lower of cost (determined on a weighted average basis) or market. Management compares the cost of inventories with the market value and allowance is made to write down inventories to market value, if lower. As of September 30, 2015 and June 30, 2015, the Company had outstanding balances of Finished Goods Inventory of $76,718 and $174,792 respectively.
Property, Plant & Equipment
Property and equipment is stated at cost and depreciated using the straight-line method over the shorter of the estimated useful life of the asset or the lease term. The estimated useful lives of our property and equipment are generally as follows: computer software developed or acquired for internal use, three to 10 years; computer equipment, two to three years; buildings and improvements, five to 15 years; leasehold improvements, two to 10 years; and furniture and equipment, one to five years.
As of September 30, 2015 and June 30, 2015, Plant and Equipment consisted of the following:
September 30, 2015 June 30, 2015 Property, plant & equipment Accumulated depreciation $ 30,244 $ 29,044 $ (17,485 ) $ (16,905 ) $ 12,759 $ 12,139
Depreciation was $580 and $692 for the three-month periods ended September 30, 2015 and 2014, respectively.
Fair Value of Financial Instruments
For certain of the Company's financial instruments, including cash and equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities.adopted ASC Topic 820, "FairFair Value Measurements and Disclosures," requires disclosureMeasurements. ASC Topic 820 clarifies the definition of the fair value, of financial instruments held by the Company. ASC Topic 825, "Financial Instruments," definesprescribes methods for measuring fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements forhierarchy to classify the inputs used in measuring fair value measures. The carrying amounts reported in the balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:
Level 1 inputs to the valuation methodology1: Inputs are unadjusted quoted prices in active markets for identical assets or liabilities in active markets.available at the measurement date.
Level 2 inputs to the valuation methodology include2: 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, forand 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 either directly or indirectly, for substantiallybased on the full termbest 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 financial instrument.short-term nature of these instruments.
Level 3The inputs to the valuation methodology are unobservableof stock options and significantwarrants were under level 3 fair value measurements.
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.
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 fair value measurement.BCF, and the Company amortizes the discount to interest expense, over the life of the debt. During the year ended June 30, 2022, the Company recorded a BCF in the amount of $2,615,419.
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| Table of Contents |
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock-based Compensation
The Company analyzes all financial instruments with featuresmeasures the cost of both liabilities andemployee services received in exchange for equity under ASC 480, "Distinguishing Liabilities from Equity," and ASC 815.incentive awards based on the grant date fair value of the award. The Company uses the Black-Scholes valuation model to calculate the fair value of stock options granted to employees or consultants. Stock-based compensation expense is recognized over the period during which the employee is required to provide services in exchange for the award, which is usually the vesting period.
AsResearch and Development Expenses
Expenditures for research and development are expensed as incurred. The Company incurred research and development expenses of $0 and $2,340,575 for the three months ended September 30, 20152022 and June2021, respectively.
Advertising and Marketing Expenses
The Company expenses advertising and marketing costs as they are incurred. The Company recorded advertising expenses in the amount of $15,442 and $168,087 for the three months ended September 30, 2015,2022 and 2021, respectively.
Income Taxes
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is more likely than not of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company didrecords 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 identify anycurrently under examination.
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 areit 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 presented onrealized. Future changes in such valuation allowance are included in the balance sheet at fair value.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.
EarningsBasic Income (Loss) Per Share (EPS)
Basic EPSUnder the provisions of ASC 260, “Earnings per Share,” basic loss per common share is computed by dividing incomenet loss available to common shareholders by the weighted average number of shares of common sharesstock outstanding for the period.periods presented. Diluted EPS is computed similar to basic net incomeloss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if allreflects the potential common shares, warrants and stock options had been issued anddilution that could occur if the additional common shares were dilutive. Diluted EPS is based on the assumption that all dilutive convertible shares and stock options were convertedsecurities or exercised. Dilution is computed by applying the treasury stock method for the outstanding options and the if-converted method for the outstanding convertible preferred shares. Under the treasury stock method, options and warrants are assumedother contracts to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchaseissue common stock at the average market price during the period. Under the if-converted method, convertible outstanding instruments are assumed to bewere exercised or converted into common stock ator resulted in the beginningissuance of common stock that would then share in the income of the period (or at the time of issuance, if later).Company, subject to anti-dilution limitations.
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| Table of Contents |
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The following table sets forbelow presents the computation of basic and diluted earnings per share for the three month periodsmonths ended September 30, 20152022 and 2014:2021:
|
| For the three months ended September 30, 2022 |
|
| For the three months ended September 30, 2021 |
| ||
Numerator: |
|
|
|
|
|
| ||
Net loss |
| $ | (4,810,096 | ) |
| $ | (3,270,099 | ) |
Denominator: |
|
|
|
|
|
|
|
|
Weighted average common shares outstanding—basic |
|
| 361,552,863 |
|
|
| 225,497,197 |
|
Dilutive common stock equivalents |
|
| - |
|
|
| - |
|
Weighted average common shares outstanding—diluted |
|
| 361,552,863 |
|
|
| 225,497,197 |
|
Net loss per share: |
|
|
|
|
|
|
|
|
Basic |
| $ | (0.01 | ) |
| $ | (0.02 | ) |
Diluted |
| $ | (0.01 | ) |
| $ | (0.02 | ) |
September 30, 2015 September 30, 2014 Basic and diluted Net (loss) income Weighted average number of shares in computing basic and diluted net (loss) income Basic Diluted Net (loss) income per share basic and diluted Basic $ (253,358 ) $ (137,691 ) 58,619,819 27,924,631 58,619,819 27,924,631 $ (0.00 ) $ (0.00 )
NOTE 3 – JOINT VENTURE
Intangible AssetsJV with XTI Aircraft
On May 31, 2021, the Company entered into a Joint Venture Agreement (the “Agreement”) with XTI Aircraft Company (“XTI”), a Delaware corporation, to form a 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 for up to $10 million, contributed as required by the aircraft development timeline and budget.
The Company records identifiable intangible assets at fair valueanalyzed 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 datefact 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 acquisition and evaluatesvariable interests) that provides the useful lifereporting entity with a controlling financial interest on the basis of each asset.the provisions in paragraphs 810-10-25-38A through 25-38J. The reporting entity that consolidates a VIE is called the primary beneficiary of that VIE. According to the JV operating agreement, the ownership interests are 50/50. However, the agreement provides for a Management Committee of five members. Three of the five members are from Xeriant. Additionally, Xeriant has an obligation to invest $10,000,000 into the JV. As such, Xeriant has substantial capital at risk. Based on these two factors, the conclusion is that Xeriant is the primary beneficiary of the VIE. Accordingly, Xeriant has consolidated the VIE.
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JV with Movychem
Finite-lived intangible assets primarily consist of software development capitalized. Finite-lived intangible assets are amortized on a straight-line basis and are tested for recoverability if events or changes in circumstances indicate that their carrying amounts may not be recoverable. These intangibles have useful lives ranging from 1 to 10 years. No events or changes in circumstances indicate that impairment existed as of September 30, 2015.
Going Concern
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate the continuation of the Company as a going concern. The Company reported accumulated deficit of $3,355,363 as of September 30, 2015. The Company also incurred net losses of $253,358 and $137,691 for the three-month periods ended September 30, 2015 and 2014, respectively and had negative working capital for the three-month periods ended September 30, 2015 and 2014. To date, these losses and deficiencies have been financed principally through the loans from related parties and from third parties.
In view of the matters described, there is substantial doubt as to the Company's ability to continue as a going concern without a significant infusion of capital. We anticipate that we will have to raise additional capital to fund operations over the next 12 months. To the extent that we are required to raise additional funds to acquire properties, and to cover costs of operations, we intend to do so through additional offerings of debt or equity securities. There are no commitments or arrangements for other offerings in place, no guaranties that any such financings would be forthcoming, or as to the terms of any such financings. Any future financing will involve substantial dilution to existing investors.
Subsequent to the period ended September 30, 2015,On April 2, 2022 the Company entered into an equity line funding agreementa Joint Venture Agreement with Spider Investments, LLC to sell up to $1,500,000 of our common stock, subject to certainMovychem s.r.o., a Slovakian limited liability company setting forth the terms and conditions some of which are out of our control, includingfor the (i) filing and obtaining effectivenessestablishment of a registration statement registeringjoint venture (the “Joint Venture”) to develop applications and commercialize a series of flame-retardant products in the issuanceform of our shares of common stockpolymer gels, powders, liquids and pellets derived from technology developed by Movychem under the Actname 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.
For its capital contribution to be issuedthe 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 (Amended to February 15, 2023, as per Amended Agreement). 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 equity linePatent Agreement, Movychem will transfer all of its rights, title and (ii)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 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 volumeindividuals 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 other trading conditionsthe assignment to Movychem of our common stock. 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.
The Company plansanalyzed the transaction under ASC 810 Consolidation, to filedetermine if the registration statementjoint venture classifies as a Variable Interest Entity (“VIE”). The Joint Venture qualifies as a VIE based on the fact the JV does not have sufficient equity to operate without financial support from both parties. According to ASC 810-25-38, a reporting entity shall consolidate a VIE when that reporting entity has a variable interest (or combination of variable interests) that provides the reporting entity with a controlling financial interest on the basis of the provisions in paragraphs 810-10-25-38A through 25-38J. The reporting entity that consolidates a VIE is called the primary beneficiary of that VIE. According to the JV operating agreement, the ownership interests are 50/50 and the agreement provides for a Management Committee of five members. Two of the five members are from Xeriant and Movychem, respectively and one is appointed by mutual agreement of the parties. Movychem is transferring to obtain effectiveness thereof as soon as practicable. the Joint Venture all of its interest to the know-how and intellectual property relating to Retacell exclusive of all patents, and the Company is contributing cash. As such, both parties do not have substantial capital at risk. Based on these two factors, the conclusion is that no one is the primary beneficiary of the VIE. Accordingly, Xeriant has not consolidated the VIE.
As of September 30, 2022 and June 30, 2022, the Company contributed $214,014 and $115,356 to the joint venture, respectively.
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NOTE 4 – CONCENTRATION OF CREDIT RISKS
Recently Issued Accounting PronouncementsThe 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 September 30, 2022 and June 30, 2022, the Company had $243,598 and $811,429 in excess of FDIC insurance, respectively.
In August 2014, the FASB issued Accounting Standards Update No. 2014-15, PresentationNOTE 5 – OPERATING LEASE RIGHT-OF-USE ASSET AND OPERATING LEASE LIABILITY
The Company leases 2,911 square feet of Financial Statements – Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (ASU 2014-15). The guidance in ASU 2014-15 sets forth management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern as well as required disclosures. ASU 2014-15 indicates that, when preparing financial statements for interim and annual financial statements, management should evaluate whether conditions or events,office space located in the aggregate, raise substantial doubt aboutResearch 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 entity’s abilityfirst three months of rent were abated. Due to continue as a going concern for one yearthe 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 2022 to allow employees to work from the dateoffice in January of 2023. The following table illustrates the financial statementsbase rent amounts over the term of the lease:
Base Rent Periods
November 1, 2019 to October 31, 2020 |
| $ | 4,367 |
|
November 1, 2020 to October 31, 2021 |
| $ | 4,498 |
|
November 1, 2021 to October 31, 2022 |
| $ | 4,633 |
|
November 1, 2022 to October 31, 2023 |
| $ | 4,772 |
|
November 1, 2023 to October 31, 2024 |
| $ | 4,915 |
|
November 1, 2024 to January 31, 2025 |
| $ | 5,063 |
|
Operating lease right-of-use asset and liability are issued or are availablerecognized 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 issued. This evaluation should include consideration10%, as the interest rate implicit in most of conditions and events that are either known or are reasonably knowable at the date the financial statements are issued or are available to be issued, as well as whether it is probable that management’s plans to address the substantial doubt will be implemented and, if so, whether it is probable that the plans will alleviate the substantial doubt. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods and annual periods thereafter. Early application is permitted. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.
In November 2015, the Financial Accounting Standards Board (FASB) issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes” (ASU 2015-17), which changes how deferred taxes are classified on the balance sheet and is effective for financial statements issued for annual periods beginning after December 15, 2016, with early adoption permitted. ASU 2015-17 requires all deferred tax assets and liabilities to be classified as non-current. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.
In January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” (ASU 2016-01), which requires equity investments that are not accounted for under the equity method of accounting to be measured at fair value with changes recognized in net income and updates certain presentation and disclosure requirements. ASU 2016-01 is effective beginning after December 15, 2017. The adoption of this guidanceour leases is not expected to have a material impact on the Company’s results of operations, financial position or disclosures.
In February 2016, the FASB issued ASU No. 2016-02, “Leases,” which requires lessees to recognize right-of-use assets and lease liabilities, for all leases, with the exception of short-term leases, at the commencement date of each lease. This ASU requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whetherreadily determinable. Operating lease expense is recognized based on an effective interest method or on a straight-line basis over the termlease 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. This ASU is effective for annual periods beginning after December 15, 2018lease liability and interim periods within those annual periods. Early adoption is permitted. The amendments of this update should be applied using a modified retrospective approach, which requires lesseesrecognized in other general and lessors to recognize and measure leases at the beginning of the earliest period presented. The adoption of this guidance is not expected to have a material impactadministrative expenses on the Company’s resultsstatements of operations, financial position or disclosures.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.
In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting.” The guidance simplifies accounting for share-based payments, most notably by requiring all excess tax benefits and tax deficiencies to be recorded as income tax benefits or expense in the income statement and by allowing entities to recognize forfeitures of awards when they occur. This new guidanceRight-of-use asset is effective for annual reporting periods beginning after December 15, 2016 and may be adopted prospectively or retroactively. The Company is currently evaluating the impact the adoption of this standard would have on its financial condition, results of operations and cash flows.summarized below:
In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” (“ASU 2016-12”), which amends the guidance in the new revenue standard on collectability, noncash consideration, presentation of sales tax, and transition. The amendments are intended to address implementation issues and provide additional practical expedients to reduce the cost and complexity of applying the new revenue standard. The new guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods, which will be our interim period beginning January 1, 2018. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods with that reporting period. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements.
|
| September 30, 2022 |
| |
Office lease |
| $ | 220,448 |
|
Less: accumulated amortization |
|
| (103,011 | ) |
Right -of- use asset, net |
| $ | 117,437 |
|
| F-13 |
| Table of Contents |
Operating lease liability is summarized below:
In August 2016, the FASB issued ASU 2016-15, regarding ASC Topic 230 “Statement of Cash Flows.” This update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted. The Company does not expect the adoption of this standard to have a significant effect on its consolidated financial statements.
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| September 30, 2022 |
| |
Office lease |
| $ | 129,667 |
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Less: current portion |
|
| (50,647 | ) |
Long term portion |
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| 79,020 |
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|
|
|
|
|
Maturity of the lease liability is as follows: |
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|
|
|
Fiscal year ending June 30, 2023 |
|
| 45,589 |
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Fiscal year ending June 30, 2024 |
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| 62,201 |
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Fiscal year ending June 30, 2025 |
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| 37,112 |
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|
|
| 144,901 |
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Present value discount |
|
| (15,235 | ) |
Lease liability |
| $ | 129,667 |
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There were no other new accounting pronouncements during the three-month period ended September 30, 2015 that we believe would have a material impact on our financial position or results of operations.
Reclassification
Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations or cash flow.
Note 3NOTE 6 – TRADE RECEIVABLES
Trade receivables consist principally of accounts receivable from sales to small to medium sized businesses, principally in Australia, Europe and the United States. Trade receivables are recorded at the invoiced amount and net of allowances for doubtful accounts. The allowance for doubtful accounts represents management's estimate of the amount of probable credit losses in existing accounts receivable, as determined from a review of past due balances and other specific account data. The assessment includes actually incurred historical data as well as current economic conditions. Account balances are written off against the allowance when management determines the receivable is uncollectible.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off by reducing the carrying amount directly. A provision for impairment of trade receivables is raised when there is objective evidence that the consolidated entity or parent entity will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization and default or delinquency in payments (more than 60 days overdue) are considered indicators that the trade receivable may be impaired. The amount of the impairment allowance is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial.
Trade receivables that are past their normal payment terms are overdue and once 60 days past due are considered delinquent. Minimum payment terms vary by product. The maximum payment term for all products is 90 days. All trade receivables that are overdue are individually assessed for impairment.CONVERTIBLE NOTES PAYABLE
The allowances for doubtful accountscarrying value of convertible notes payable, net of discount, as of September 30, 20152022 and June 30, 2015 are $147,8702022 was $5,590,000 and $140,870$3,936,185, respectively.
Note 4 – INTANGIBLE ASSETS
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| September 30, |
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| June 30, |
| ||
Convertible Notes Payable |
| 2022 |
|
| 2022 |
| ||
Convertible notes payable issued October 27, 2021 (0% interest) – Auctus Fund LLC |
| $ | 5,950,000 |
|
| $ | 6,050,000 |
|
Total face value |
|
| 5,950,000 |
|
|
| 6,050,000 |
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Less unamortized discount |
|
| - |
|
|
| (2,113,815 | ) |
Carrying value |
| $ | 5,950,000 |
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| $ | 3,936,185 |
|
Intangible assets consistBetween 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 followingCompany. 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 September 30, 2015 and June 30, 2015:
September 30, 2015 June 30, 2015 Website Accumulated amortization $ 60,781 $ 60,781 $ (17,456 ) $ (15,770 ) $ 43,325 $ 45,011
The intangible assets are amortized over 1 to 10 years. Amortization expense was $1,686 and $2,577 forDecember 31, 2021. During the three-month periodsthree months ended September 30, 2015 and 2014 respectively.
Note 5 – TRADE AND OTHER PAYABLES
As of September 30, 2015 and June 30, 2015, trade and other payable are comprised of the following:
September 30, 2015 June 30, 2015 Trade payable Officer compensation Payroll payable Payroll taxes Employee benefits Other liabilities $ 443,875 $ 463,107 $ 7,698 $ - $ 13,863 $ 91,018 $ 107,893 $ - $ 82,671 $ 82,671 $ 19,536 $ (3,402 ) $ 675,536 $ 633,394
Note 6 – TRADE FINANCING
The Company has a trade financing agreement with a financial institution in Australia at an interest rate of 20.95% per annum. The amount is to be paid through application of its EMDG grant and up to 25% of the Company's store sales in Australia. All of the amounts referenced are in Australian dollars. As of September 30, 2015 and June 30, 2015,2021, the Company had outstanding balancesrecorded amortization of USD $112,814 and $112,436, respectively.
On August 14, 2014, the Company entered into a trade finance agreement with an entity in the United States with a total maximum facility of $1,500,000 based on $1,000,000 towards sales invoiced and $500,000 towards purchase order financing. As of September 30, 2015 and June 30, 2015, the Company had an outstanding balance of $667,498 and $646,078, respectively.
On November 20, 2014, the Company entered into a new retail trade finance agreement with an entity in Australia for AUD $75,000 with 100 equal payments of AUD $871.80 daily. As of September 30, 2015 and June 30, 2015, the Company had outstanding balances of USD $0 and USD $21,139 (AUD $27,500), respectively.
Note 7 – LOANS
In December 2013, the Company entered into a short-term loan arrangementdebt discount related to these notes in the amount of $100,000$149,028 and interest expense of $2,389.
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Auctus Fund, LLC Senior Secured Note
On October 27, 2021, the Company issued a convertible note payable with an individual. TermsAuctus Fund, LLC (the “Auctus Note”) with the principal sum of $6,050,000, which amount is the $5,142,500 actual amount of the note requirepurchase price, hereof plus an original issue discount in the amount of $907,500 and to pay interest payment of $5,000 on the repayment date, 30 days after the note date. If not repaid at that time, interest will accrueunpaid principal amount hereof at the rate of $166zero percent per dayannum from the issue date until the note is repaid. The outstanding balance as of September 30, 2015 and as of June 30, 2015 was $100,000 and $100,000 respectively. During the three-month periods ended September 30, 2015 and 2014, the Company recorded an interest of $15,106 and $7,386, respectively, on the note.
In May 2014 and July 2014, the Company entered into two convertible loan agreements in the amount of $72,800 each. Interest accrued at the rate of 8% per annum. Loan and accrued interest were due in February 2015 and April 2015. The loans may be converted into common stock of the Company at any time by the election of the lender at a predetermined conversion price. During the quarter ended March 31, 2015, $72,800 was converted into 2,402,141 shares and $20,000 was converted into 943,396 shares. The remaining loan balance plus accrued interest was repaid during the quarter ended March 31, 2015. The outstanding balance as of September 30, 2015 and as of June 30, 2015 was $0.
From May 2014 to September 2015, the Company entered into several convertible loan agreements with a lender aggregating in the amount of $121,500. The notes bear interest at 6% per annum and arebecomes due and payable, six months fromand $433,550 for professional fees in completing the date of each note. The loans may be converted into common stock at any time by the election of the lender after a period of six months at a predetermined conversion price. The outstanding balance as of September 30, 2015 and as of June 30, 2015 was $121,500 and $121,500 respectively. The Company accrued interest of $1,823 and $0 during the three-month periods ended September 30, 2015 and 2014, respectively.
In December 2014, the Company entered into a loan agreement in the amount of $10,000 AUD with an individual in Australia. The note was repaid in full in July 2015.
In June 2015, the Company entered into a secured promissory note in the amount of $500,000 with a Delaware statutory trust. The note bears interest at the rate of 18% per annum and is due or before July 1, 2017.transactions. The note has various covenants attached including one in which all credit card receipts are to be swept into an account which will fund payments on the note that are not in excess of the minimum quarterly payments required. As a condition of the note, an affiliate of the lender was granted a warrant to purchase 6,000,000 shares of the common stock of Banjo & Matilda, Inc. at a price of $.08 in whole or in part. The outstanding balance as of September 30, 2015 was $500,000. The Company determined that the fair value of the warrants using the Black – Scholes model with the variable listed below:
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In connection with the issuance of the above notes, the Company recorded a note discount of $115,274. The Company amortized $14,235 and $0, of the note discount during the three-month periods ended September 30, 2015 and 2014, respectively. The Company recorded an interest of $22,099 and $0, on the note during the three-month periods ended September 30, 2015 and 2014, respectively
Subsequent to the period, on February 5, 2016, the Company signed an amendment to the secured promissory note extending the maturity date by one yearof twelve months. The agreement provides the holder has the option to July 17, 2018.
Related Party Payable
The Company had several note agreements with a shareholder aggregating to AUD $370,000 plus interest. The notes had interest rates varying from 6% to 15% per annum. In March 2015,convert the outstandingprincipal balance and any accrued interest was refinanced by an AUD526,272 convertible note. The Convertible Note bears interest at the rate of 18% per annum and is due on or before April 30, 2017. The interest portion of the note shall be paid weekly starting in April 2015. Principle payments of $9,929 AUD weekly are to commence in April 2016. All or any portion of the principal amount of the Convertible Note and all accrued interest is convertible at the option of the holder into common stock of the Company at a conversion price of five cents ($0.05)lesser of (i) $0.1187 or (ii) 75% of the offering price per share subject to various standard provisions. The outstanding balance, netdivided by the number of related discount, as of September 30, 2015 and June 30, 2015 was USD $375,733 and $217,855, respectively. The Company determined the fair value of the convertible note of $80,909 using the intrinsic value method. The Company recorded an amortization of the debt discount of $3,858 and $0, during the three-month period ended September 30, 2015 and 2014, respectively. During the three-month periods ended September 30, 2015 and 2014, the Company recorded an interest of $17,178 and $0, respectively, on the note.
The Company has liabilities payable in the amount of $176,986 and $217,855 to shareholders and officers of the Company as of September 30, 2015 and June 30, 2015, respectively. The note bears interest at the rate of 3% per annum and was due on or before June 30, 2014. The outstanding balance, including accrued interest, may be converted into common shares of Banjo & Matilda, Inc. atcommon stock. The Auctus Note is secured by the grant of a pre-determined rate. The Company has granted the Lenders afirst priority security interest in the intellectual property of the Borrower.
2016 2017 Year ending September 30, Loan 1 Loan 2 Loan 3 Loan 4 Loan 5 Total $ 100,000 $ 121,806 $ - $ 175,558 $ 176,986 $ 574,349 $ - $ - $ 500,000 $ 228,987 $ - $ 728,987 $ 100,000 $ 121,806 $ 500,000 $ 404,545 $ 176,986 $ 1,303,337
Note 8 – COMMITMENTS
The Company leases commercial space in Sydney, Australia that serves as its flagship as well as a retail store. We lease approximately 2,500 square feet of space pursuant to a three-year lease agreement which expired in October 2014. After expiration, the lease converted to a month-to-month basis. The annual rent for the premises is AUD $57,200.
The Company also leases space on an as needed basis in Santa Monica, California that serves as its corporate headquarters.
For the three-month periods ended September 30, 2015 and 2014 the aggregate rental expense was $13,365 and $13,239, respectively.
Note 9 – INCOME TAXES
Based on the available information and other factors, management believes it is more likely than not that the net deferred tax assets at, September 30, 2015 and June 30, 2015 will not be fully realizable. Accordingly, management has recorded a full valuation allowance against its net deferred tax assets at, September 30, 2015 and June 30, 2015. At June 30, 2016 and 2015, the Company had federal net operating loss carry-forwards of approximately $3,290,000 and $2,555,000, respectively, expiring beginning in 2032.
Deferred tax assets consist of the following components:
September 30, June 30, 2015 2015 Net loss carryforward $ 980,000 $ 767,000 Valuation allowance $ (980,000 ) $ (767,000 ) Total deferred tax assets $ - $ -
Note 10 – STOCKHOLDERS' EQUITY
Common Stock
On July 24, 2014, the Company agreed to issue 55,200 shares of the Company stock for $13,800 or $0.25 per share to an individual investor.
On October 28, 2014, the Company agreed to issue 5,833,333 shares of the Company stock to the original shareholders of Banjo & Matilda Pty Ltd related to the merger and reorganization based on the original agreement.
On October 28, 2014, the Company agreed to issue 92,593 shares of common stock to an individual for compensation from Banjo Australia. The shares were valued at $15,339 or approximately $0.17 per share.
On November 3, 2014, the Company issued 25,000 shares of common stock to an individual in exchange for interest expense. The shares were valued at $5,000 or $.25 per share.
During the quarter ended March 31, 2015, the Company agreed to convert $92,800 of convertible debt for 3,345,537 shares of common stock at prices from $0.02 to $0.0901 per share to a corporate investor.
During the quarter ended March 31, 2015, the Company agreed to issue 400,000 shares of the Company stock for $60,000 or $0.15 per share to a company for consulting services. The terms of the service agreement is from January 1, 2015 to June 1, 2015. As of June 30, 2015, the Company recognized consulting expense of $60,000.
During the first and second quarter of 2015, the Company agreed to issue 21,039,970 shares of the Company stock for $450,799 or approximately $0.02 per share to five investors.
During the fiscal year ended June 30, 2015, the Company voided 475,000 shares of the Company stock for the value of $95,000. The shares were originally considered converted from debt when they were in fact not converted. The debt is still outstanding.
During the three-month period ended September 30, 2015, the Company issued 500,000 shares of the Company’s common stock for settlement of an outstanding vendor balance amounting to USD $27,123.
Note 11 – RELATED PARTY TRANSACTIONS
During the three-month period ended September 30, 2015, the Company paid $4,759 as compensation to the mother of the CEO. During the three-month period ended September 30, 2015, the Company accrued interest of $6,982 on a loan owed to the CEO of the Company.
Note 12 – SUBSEQUENT EVENTS
Subsequent toIn connection with the period, on November 2, 2016,notes, the Company entered intoissued warrants indexed to an aggregate 50,968,828 shares of common stock. The warrants have a merchant agreementterm 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 a capital funding group for $47,250. Pursuant toASC 815-10 based upon the agreement,allocation of the Company cannot obtain future financing by selling receivables without consent from the lender. The Merchant holds a security interest in all accounts anddebt proceeds.
Subsequent to the period, on November 3, 2016, the Company entered into a payments rights purchase and sale agreement for $72,500.
Subsequent to the period, on February 5, 2016, The Company signed an amendment to the secured promissory note of $500,000, extending the maturity date by one year to July 17, 2018. The amendment changed the terms of the credit card receipts used to fund payments required by the note. The amendment also cancelled the warrants to purchase 6,000,000 shares at a price of $0.08. New warrants were granted to purchase 6,000,000 shares at $0.05 per share and to purchase 2,000,000 shares at $0.02 per share. The Company determinedestimated 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 Black – Scholes modelexpected life of the warrants, the risk-free interest rate and recorded the additionalfair value of $87,553 for the modifiedcommon stock underlying the warrants. The variables usedCompany 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 Black –Scholes model are as listed below:expected remaining life of the warrants. The expected remaining life of the warrants is assumed to be equivalent to their remaining contractual term.
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Subsequent to the period, on October 27, 2015, the Company entered into convertible loan agreements in the amount of $42,000 with a lender with whom they have several other loans. The notes bear interest at 6% per annum and are due and payable in six months. The loans may be converted into common stock at any time by the election of the lender after a period of six months at a predetermined conversion price.
Subsequent to the period, on November 29, 2016, the Company entered into a consignment agreement. It is a platform for funding advance inventory production. This facility allowed the Company to fund manufacturing with a consignment facility which pegs repayment to the sales of inventory.
Subsequent to the period ended September 30, 2015,Effective July 26, 2022, the Company entered into an equity line funding agreementAmendment to Senior Secured Promissory Note (the “Amendment”) with SpiderAuctus Fund, LLC (“Auctus”) pursuant to which the parties agreed to amend the Company’s Senior Secured Convertible Promissory Note in the principal amount of $6,050,000 dated October 27, 2021 (the “Note”) issued to Auctus. The Amendment (i) extended the maturity date of the Note to November 1, 2022 and (ii) extended the dates for the completion of the acquisition of XTI Aircraft and the uplist of the Company’s common stock to a national securities exchange to November 1, 2022. In consideration of the Amendment, the Company agreed to (i) grant to Auctus a new Warrant to purchase 25,000,000 shares of Common Stock dated July 26, 2022 (the “Warrant”) at an exercise price of $0.09 per share; (ii) make a prepayment of the Note in the amount of $100,000; and (iii) cause a director of the Company to cancel his 10b-5(1) Plan. The Company tested the modification under ASC 470-50-40 to determine if the modification resulted in an extinguishment. It was determined the present value of the cash flows under the terms of the new debt instrument was at least 10 percent different from the present value of the remaining cash flows under the terms of the original instrument. As a result, the modification resulted in a loss on an extinguishment in the amount of $3,570,366. The loss on extinguishment was determined as follows:
Reacquisition Price: | ||||||||
Modified convertible debt instrument | 5,950,000.00 | |||||||
Fair value of warrants | 1,918,393 | |||||||
Cash payment | 100,000 | |||||||
Carrying Value of Original Instrument | ||||||||
Original convertible debt instrument | 6,050,000 | |||||||
Debt discount - warrant | (707,585 | ) | ||||||
Original issue discount | (341,692 | ) | ||||||
Debt discount - BCF | (602,696 | ) | ||||||
Carrying value of original debt | 4,398,027 | |||||||
Loss on extinguishment | 3,570,366 | |||||||
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For the three months ended September 30, 2022, the Company recorded $461,482 in amortization of debt discount related to the Auctus note. As of September 30, 2022 and June 30, 2022, the carrying value of the Auctus note was $5,950,000 and $3,936,185, respectively.
NOTE 7– RELATED PARTY TRANSACTIONS
Consulting fees
During the three months ended September 30, 2022 and 2021, the Company recorded $55,000 and $33,000 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 September 30, 2022, and June 30, 2022, $15,000 and $22,000 was recorded in accrued liabilities.
For the three months ended September 30, 2022 and 2021, the Company recorded $20,000 and $24,000 respectively, in consulting fees to sellEdward DeFeudis, a Director of the Company. As of September 30, 2022, and June 30, 2022, $10,000 and $0 was recorded in accrued liabilities.
During the three months ended September 30, 2022 and 2021, the Company recorded $14,000 and $18,000 respectively, in consulting fees to AMP Web Services, a Company owned by the Company’s CTO, Pablo Lavigna. As of September 30, 2022 and June 30, 2022, $7,000 and $7,000 was recorded in accrued liabilities.
During the three months ended September 30, 2022 and 2021, the Company recorded $5,000 and $7,500 respectively, in consulting fees to Keystone Business Development Partners, a Company owned by the Company’s CFO, Brian Carey.
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 up to $1,500,000 of our common stock, subject to certain terms and conditions some of which are out of our control, including$10,000,000 into the (i) filing and obtaining effectiveness of a registration statement registering the issuance of our shares of common stock under the Act to be issued pursuant to the equity line and (ii) certain volume and other trading conditions of our common stock. The Company plans to file the registration statement and to obtain effectiveness thereof as soon as practicable. joint venture.
Financial Advisory Agreements
On August 10, 2021, the Company entered into an Advisory Agreement with an outside firm to assist the Company with fundraising activities. In connection with the agreement, the Company has the following commitments:
· | 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 |
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| Table of Contents |
During the year ended June 30, 2022, the Company issued all 1,500,000 shares under the agreement.
On August 19, 2021, the Company entered into an Advisory Agreement with an outside firm to assist the Company with fundraising activities. In connection with the agreement, the Company has the following commitments:
· | 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 year ended June 30, 2022, the Company issued the initial 2,225,000 shares.
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.
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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.
On January 20, 2022, the Company agreed to issue 250,000 common shares, and $5,000 paid on a monthly basis, for a period of three months, and an option to purchase 2,250,000 common shares at $0.12 per share, vesting immediately.
On March 28, 2022, the Company agreed to issue 150,000 common shares vested monthly over one year, and $2,500 per meeting paid in cash, and additional bonus of $25,000 paid in common shares issued at the end of each year of service.
NOTE 9 – EQUITY
Common Stock
As of September 30, 2022 and June 30, 2022, the Company had 5,000,000,000 shares of common stock authorized with a par value of $0.00001. There were 365,696,144 and 364,239,001 shares issued and outstanding as of September 30, 2022 and June 30, 2022, respectively.
Fiscal Year 2022 Issuances
During the year ended June 30, 2022 in connection with one of the subscription agreements, the Company issued 250,000 shares as an equity kicker valued at $43,753, which has been expensed as a financing costs.
During the year ended June 30, 2022, the Company issued 4,308,600 shares of common stock as a result of warrant exercises in the aggregate proceeds of $128,550.
During the year ended June 30, 2022, the Company issued 4,685,615 shares of common stock for services, valued at $761,954.
During the year ended June 30, 2022, the Company sold 39,366,666 shares of common stock for aggregate proceeds of $2,078,500.
During the year ended June 30, 2022, the Company issued 7,138,000 shares of common stock in exchange for the conversion of 7,138 shares of Series A Preferred Stock.
During the year ended June 30, 2022, the Company issued 10,598,544 shares of common stock for the conversion of $167,550 in principal and $4,985 in accrued interest. This resulted in a loss on extinguishment of debt in the amount of $535.
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NOTE 9 – EQUITY (CONTINUED)
During the year ended June 30, 2022, the Company issued 4,229,680 shares of common stock for the conversion of $250,000 principal balance of convertible notes payable and $3,749 accrued interest.
During the year ended June 30, 2022, the Company issued 845,936 shares of common stock in exchange for the inducement to the convertible notes holders to convert at fair value of $134,927.
Three Months Ended September 30, 2022
On July 11,2022, the Company issued 1,000,000 shares of common stock in exchange for the conversion of 1,000 shares of Series A Preferred Stock.
On July 13, 2022, the Company issued 457,143 shares to a consultant for services valued at $48,000.
Common Stock to be Issued
During the year ended June 30, 2022, the Company sold 200,000 shares of common stock for aggregate proceeds of $6,000, or $0.03 per share. As of June 30, 2022, these shares are categorized in common stock to be issued.
During the year ended June 30, 2022, the Company agreed to pay a consultant 250,000 shares in exchange to $45,950 in services. As of June 30, 2022, these shares are categorized in common stock to be issued.
Series A Preferred Stock
There are 100,000,000 shares authorized as preferred stock, of which 3,500,000 are designated as Series A Preferred Stock having a par value of $0.00001 per share. The Series A preferred stock has the following rights:
· | Voting: The preferred shares shall be entitled to 100 votes to every one share of common stock. | |
· | Dividends: The Series A Preferred Stockholders are treated the same as the Common Stock holders except at the dividend on each share of Series A Convertible Preferred Stock is equal to the amount of the dividend declared and paid on each share of Common Stock multiplied by the Conversion Rate. | |
· | Conversion: Each share of Series A Preferred Stock is convertible, at the option of the holder thereof, at any time into shares of Common Stock on a 1:1,000 basis. | |
· | The shares of Series A Preferred Stock are redeemable at the option of the Corporation at any time after September 30, 2022 upon not less than 30 days written notice to the holders. It is not mandatorily redeemable. |
As of September 30, 2022, and June 30, 2022, the Company has 780,132 and 781,132 of 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.
| F-19 |
| Table of Contents |
On March 27, 2021, Spider Investments, LLC returned 41,000 Series A Preferred Shares to the treasury of the Company.
On July 11,2022, the Company issued 1,000,000 shares of common stock in exchange for the conversion of 1,000 shares of Series A Preferred Stock.
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.
During the year ended June 30, 2021, the Company issued 1,000,000 shares of Series B Preferred Stock to the Company’s CEO as part of his employment agreement.
Stock Options
In connection with certain advisory board compensation agreements, the Company issued an aggregate 21,250,000 options at an exercise price of $0.12 per share for the year ended June 30, 2022. These options vest quarterly over twenty-four months and have a term of three years. The grant date fair value was $3,964,207. The Company recorded compensation expense in the amount of $306,170 and $1,060,324 for these options for the three months ended September 30, 2022 and 2021, respectively. As of September 30, 2022, there was $395,946 of total unrecognized compensation cost related to non-vested portion of options granted.
As of September 30, 2022, there are 21,250,000 options outstanding, of which 10,343,750 are exercisable. The weighted average remaining term is 1.86 years.
Significant inputs and results arising from the Black-Scholes process are as follows for the options:
Quoted market price on valuation date | $0.169 - $0.23 | |||
Exercise prices | $0.12 | |||
Range of expected term | 1.55 Years – 2.49 Years | |||
Range of market volatility: | ||||
Range of equivalent volatility | 215.12% - 275.73 | % | ||
Range of interest rates | 0.20% - 0.47 | % |
Warrants
As of September 30, 2022 and June 30, 2022, the Company had 55,512,161 warrants outstanding. 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 $2,777,081. During the year ended June 30, 2022, holders of warrants exercised warrants for 4,305,000 shares of common stock for aggregate proceeds of $128,550. As of September 30, 2022 and June 30, 2022, the weighted average remaining useful life of the warrants was 4.0.
| F-20 |
| Table of Contents |
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.
NOTE 11 – SUBSEQUENT EVENTS
Amendment to Joint Venture Agreement with Movychem
On November 7, 2022, Xeriant and Movychem executed an Amendment to the Joint Venture Agreement dated April 2, 2022. The Amendment: (1) affirms all the provisions of the existing Joint Venture Agreement; (2) extends the due date for the $2,000,000 Capital Contribution payment to February 15, 2023, (3) requires Xeriant to pay approximately $113,000 for related to patent filings, which will be credited against the $2,000,000 Capital Contribution; and (4) requires Movychem to timely provide materials and information to Xeriant.
Auctus Fund, LLC Senior Secured Promissory Note
The Company is in active negotiations with Auctus Fund, LLC, to extend the maturity date of the Senior Secured Promissory Note, which became due and payable on November 1, 2022. At this time, there is no assurance that Company will be successful in these efforts.
Conversion of Series A Preferred
Effective on October 24, 2022, Karolus Maximus Kapital Inc. converted 10,237 Series A Preferred shares into 10,237,000 common shares.
| F-21 |
| Table of Contents |
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our Company’s financial condition and results of operations should be read in conjunction with ourthe audited and unaudited financial statements and the related notes to those statements included elsewhere in this report and with the financial statements and notes thereto included in the Company’s most recent Annual Report on Form 10-K.Report. This discussion contains forward-looking statements that involve risks and uncertainties. ActualYou should specifically consider the various risk factors identified in this Report that could cause actual results and the timing of selected events couldto differ materially from those anticipated in these forward-looking statements.
Results of OperationsForward-Looking Statements
The following discussionThis 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 constitutes management’s viewwill 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 factors that affecteddate hereof. We are under no duty to update any of the financial and operating performanceforward-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, 2022. The unaudited statements of operations for the three months ended September 30, 20152022 and 2014. This discussion should2021 are compared in the sections below.
Executive Summary
Xeriant, Inc. is dedicated to the acquisition, development and commercialization of transformative technologies, including eco-friendly specialty materials which can be readsuccessfully deployed and integrated across multiple industry sectors, and disruptive innovations related to the emerging aviation market called Advanced Air Mobility, which include next-generation aircraft. We seek to partner with and acquire strategic interests in conjunctionvisionary companies that accelerate this mission. The Company is located at the Research Park at Florida Atlantic University in Boca Raton, Florida.
JV with XTI Aircraft
On May 31, 2021, the Company entered into a Joint Venture Agreement (the “Agreement”) with XTI Aircraft Company (“XTI”), a Delaware corporation, to form a 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 statementscommitment is up to $10 million, contributed as needed based on the aircraft development timeline and notes thereto contained elsewhere in this report. The Company has a June 30 fiscal year end.budget.
During the three-month period ended September 30, 2015, the transactions of the Company were denominated in US Dollars. All the transactions which were denominated in other currencies were converted to US$ on the date of settlement and the exchange gains and losses were recorded in the statement of operations. No change was recorded in the comprehensive income (loss). During the three-month period ended September 30, 2014, the accounts of the Company were maintained, and its financial statements were expressed, in AUD. Such financial statements were translated into USD with the AUD as the functional currency. All assets and liabilities were translated at the exchange rate at the balance sheet date, stockholder's equity is translated at the historical rates and income statement items are translated at the average exchange rate for the period. Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of transaction. Any differences between the initially recorded amount and the settlement amount are recorded as a gain or loss on foreign currency transaction in the statements of operations. The resulting translation adjustments are reported under other comprehensive income as a component of shareholders' equity. There were no significant fluctuations in the exchange rate for the conversion of AUD to USD after the balance sheet date.
Management is pleased with the growth in the Banjo & Matilda brand presence and position in the market. While the Company marginally increased overall sales mostly from increased wholesale sales, the overall profitability declined as a result of expanding personnel and resources to create the platform for growing the Company’s wholesale operations in the United States and reduced gross margins from its wholesale sales channel.
After a strategic review of the Company’s operating performance and long term strategy in June 2015, management decided to exit from the Company’s wholesale sales channel and business in favor of pursuing a higher value and longer term growth, direct to consumer digital vertical brand business model. In September 2015, the Company began to exit from its wholesale sales channel in-line with this strategy. As a digital vertical brand (DVB), the Company can generate higher gross margins by selling directly to consumers online by not having to accommodate the retailer wholesale mark-up. This additional gross margin from eliminating lower margin wholesale sales allows the Company to improve its overall operating margins and have greater flexibility and control over its retail pricing for its products, improving the customer value proposition and brand adoption. The Company can also build a more sustainable and higher growth revenue stream, and at the same time reduce operating overheads by eliminating fixed and variable expenses associated with operating a wholesale business model, among other significant benefits associated with a digitally centric business model. In addition, DVB’s are generally considered superior in value to traditional wholesale focused brands. Typical recent private investment valuations of DVB’s have been transacted at a valuation of 3-4 x annual sales versus less than 1 x annual sales for traditional brands (1). By pursuing a DVB strategy, the Company’s sales will temporarily reduce during the remainder of 2016 and 2017 due to the elimination of low-margin wholesale sales. While there will be been a short-term reduction in sales, the Company believes the superior DVB business model will generate and sustain greater value for shareholders moving forward.
We reported revenue of $880,304 during the September 2015 quarter, an increase of 16% compared to the same quarter during the prior fiscal year mainly because of an increase in wholesale sales. Gross profit decreased 8% compared to the same period in the prior year, from $335,030 to $308,497 as a result of reduced gross margins associated with wholesale sales. SG&A consisting of payroll, selling, marketing and design, e-commerce, retail overhead expenses, administrative (including public Company costs) and occupancy increased 24% to $477,25 in the September 30, 2015 quarter compared from $385,791 in the September 30, 2014 quarter mostly due to the increase in overheads associated with expanding the wholesale sales channel and business. Financing costs decreased to $15,381 in the September 30, 2015 quarter from $40,751 during the September 30, 2014 quarter.
The Company recorded an EBITDA loss of $182,345 for the September 2015 quarter, compared to $88,243 for the same period the prior year. The Net loss was $253,358 for the quarter ended September 30, 2015 compared with $137,691 for the quarter ended September 30, 2014.
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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 up to $10,000,000 into the JV. As such, Xeriant has substantial capital at risk. Based on these two factors, the conclusion is that Xeriant is the primary beneficiary of the VIE. Accordingly, Xeriant has consolidated the VIE.
LIQUIDITY AND CAPITAL RESOURCESRecent Developments
JV with Movychem
On April 2, 2022 (Amended November 7, 2022), the Company entered into a Joint Venture Agreement with Movychem s.r.o., a Slovakian limited liability company 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.
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 February 15, 2023. 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.
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The Company analyzed the transaction under ASC 810 Consolidation, to determine if the joint venture classifies as a Variable Interest Entity (“VIE”). The Joint Venture qualifies as a VIE based on the fact the JV does not have sufficient equity to operate without financial support from both parties. According to ASC 810-25-38, a reporting entity shall consolidate a VIE when that reporting entity has a variable interest (or combination of variable interests) that provides the reporting entity with a controlling financial interest on the basis of the provisions in paragraphs 810-10-25-38A through 25-38J. The reporting entity that consolidates a VIE is called the primary beneficiary of that VIE. According to the JV operating agreement, the ownership interests are 50/50 and the agreement provides for a Management Committee of five members. Two of the five members are from Xeriant and Movychem, respectively and one is appointed by mutual agreement of the parties. Movychem is transferring to the Joint Venture all of its interest to the know-how and intellectual property relating to Retacell exclusive of all patents, and the Company is contributing cash. As such, both parties do not have substantial capital at risk. Based on these two factors, the conclusion is that no one is the primary beneficiary of the VIE. Accordingly, Xeriant has not consolidated the VIE.
As of September 30, 2015,2022 and June 30, 2022, the Company contributed $214,014 and $115,356 to the joint venture, respectively.
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.
Three months ended September 30, 2022 compared to the three months ended September 30, 2021
|
| For the three months ended |
|
|
|
| ||||||||||
|
| September 30, |
|
| September 30, |
|
|
|
|
| ||||||
| 2021 |
|
| 2022 | $ | % |
| |||||||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Sales and marketing expense |
| $ | 6,356 |
|
| $ | 598,595 |
|
| $ | (592,239 | ) |
| (99 | %) | |
General and administrative expenses |
|
| 545,569 |
|
|
| 1,201,002 |
|
|
| (655,433 | ) |
| (55 | %) | |
Professional fees |
|
| 90,060 |
|
|
| 29,541 |
|
|
| 60,519 |
|
|
| 205 | % |
Related party consulting fees |
|
| 94,000 |
|
|
| 82,500 |
|
|
| 11,500 |
|
|
| 14 | % |
Research and development expense |
|
| - |
|
|
| 2,340,575 |
|
|
| (2,340,488 | ) |
| (100 | %) | |
Total operating expenses |
|
| 735,985 |
|
|
| 4,252,213 |
|
|
| (3,516,228 | ) |
| (83 | %) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
| (735,985 | ) |
|
| (4,252,213 | ) |
|
| 3,516,228 |
|
| (83 | %) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of debt discount |
|
| (461,842 | ) |
|
| (149,028 | ) |
|
| (312,814 | ) |
|
| 210 | % |
Financing fees |
|
| - |
|
|
| (43,750 | ) |
|
| 43,750 |
|
| (100 | %) | |
Interest expense |
|
| - |
|
|
| (2,389 | ) |
|
| 2,389 |
|
| (100 | %) | |
Loss from Ebenberg JV |
|
| (49,328 | ) |
|
| - |
|
|
| (49,328 | ) |
|
| 100 | % |
Loss on extinguishment of debt |
|
| (3,570,366 | ) |
|
| (535 | ) |
|
| (3,669,831 | ) |
|
| 685950 | % |
Total other income (expense) |
|
| (4,081,536 | ) |
|
| (195,702 | ) |
|
| (3,985,834 | ) |
| 2037 | % | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (4,817,521 | ) |
|
| (4,447,915 | ) |
|
| (469,606 | ) |
|
| 11 | % |
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| Table of Contents |
Sales and marketing expenses
Total sales and marketing expenses were $6,356 and $598,595 for the three months ended September 30, 2022 and 2021, respectively. During the three months ended September 30, 2022 the Company’s sales and marketing expenses were associated with social media marketing campaigns, events and press releases.
General and administrative expenses
Total general and administrative expenses were $545,569 and $1,201,002 for the three months ended September 30, 2022 and 2021, respectively. In the prior period, there were increased expenses due to stock issuances related to consulting fees and advisory board fees.
Professional Fees
Total professional fees were $90,060 and $29,541 for the three months ended September 30, 2022 and 2021, respectively. The increase was primarily due to legal fees.
Related Party Consulting Fees
Total related party consulting fees were $94,000 and $82,500 for the three months ended September 30, 2022 and 2021, respectively. The related party consulting fees for the three months ended consisted of (i) $45,000 to Ancient Investments, LLC, a company owned by Keith Duffy, CEO and Scott Duffy, Executive Director of Operations, (ii) $21,000 for AMP Web Services, LLC, a company owned by Pablo Lavigna, CIO, $23,000 to Edward DeFeudis, Director, and (iii) $5,000 for Keystone Business Development Partners, LLC, a company owned by Brian Carey, CFO. The consulting fees for September 30, 2021 consisted of i) $33,000 to Ancient Investments, LLC, a company owned by Keith Duffy, CEO and Scott Duffy, Executive Director of Operations, (ii) $18,000 for AMP Web Services, LLC, a company owned by Pablo Lavigna, CIO, $24,000 to Edward DeFeudis, Director, and (iii) $7,500 for Keystone Business Development Partners, LLC, a company owned by Brian Carey, CFO.
Research and Development Expenses
Total research and development expenses were $0 and $2,340,575 for the three months ended September 30, 2022 and 2021, respectively. These research and development expenses were in connection with our Eco-Aero, LLC joint venture with XTI Aircraft Company for funding the preliminary design phase in the development of an aircraft, called the TriFan 600. There were no expenses for the joint venture for the three months ended September 30, 2022 Research & Development Expenses relating to Movychem/Ebenberg JV are accounted for through Ebenberg, LLC.
Other Income (Expenses)
Total other expenses consist of amortization of debt discount related to convertible notes, interest expense related to convertible notes, and a loss on settlement of debt. Total other expenses were $4,081,536 for the three months ended September 30, 2022 compared to $195,702 for the year ended September 30, 2021. The increase was primarily due to recording the amortization of debt discount from the Auctus convertible note signed in October 2021 and the loss on extinguishment of debt due to the Auctus Note modification.
Net loss
Total net loss was $4, 817,521 for the three months ended September 30, 2022 compared to $4,447,915 for the three months ended September 30, 2021. The increase was primarily related to the loss on extinguishment in debt.
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Liquidity and Capital Resources
As of September 30, 2022, we had a cash balance of $498,039 and a working deficit of $5,651,721. Our net loss of $4,817,522 in the three months ended September 30, 2022 was mostly funded by proceeds raised from financings. We will need to raise working capital deficit of $1,149,330. We will continue(or refinance existing short-term debt to borrowlong-term debt) to acquire inventory and fund sales. The rates at which we can acquire funds will directly impact our ability to operate profitably and generate positive cash flow. In addition to relying upon debt, we will seek to raise equity to support our efforts to grow. There is no assurance that debt or equity financing will be available to us on acceptable terms, if at all, and, in all events, the sale of equity or instruments convertible into equity will dilute the interests of our current shareholders.operations. Future equity financings may be dilutive to our stockholders. Alternative forms of future financings may include preferences or rights superior to our common stock. Debt financings may involve a pledge of assets and will rank senior to our common stock. We have historically financed our operations through best-effortsbest- efforts private equity and debt financings. We do not have any credit or equity facilities available with financial institutions, stockholders or third partythird-party investors, and will continue to rely on best-effortsbest efforts financings. The failure to raise sufficient capital couldwill likely cause us to cease operations.
Subsequent to the period ended September 30, 2015, the Company entered into an equity line funding agreement with Spider Investments, LLC to sell up to $1,500,000 of our common stock, subject to certain terms and conditions some of which are out of our control, including the (i) filing and obtaining effectiveness of a registration statement registering the issuance of our shares of common stock under the Act to be issued pursuant to the equity line and (ii) certain volume and other trading conditions of our common stock. The Company plans to file the registration statement and to obtain effectiveness thereof as soon as practicable.
During the three months ended September 30, 2015, we2022, our operating activities used $286,690$567,906 of net cash compared to using $2,727,742 of net cash flow in our operating activities to fund our net loss from continuing operations and to finance our trade receivables. The amount of cash used in operations induring the three months ended September 30 2014 was $373,285. During the three months ended September 30, 2015, net cash used2021. This difference primarily a decrease in financing activities was $47,695 compared with net cash providedstock-based compensation and stock issued for services offset by financing activitieshigher amortization of $354,220debt discount.
Funding Strategy
To date, our operations have been funded primarily through private investors. Some of these investors have verbally committed additional funding for the three months ended September 30, 2014.Company, as needed. We have had a number of discussions with broker-dealers regarding the funding required to execute the Company’s business plan, which is to acquire and develop breakthrough technologies or business interests in those companies that have developed these technologies. We are in the process of issuing an offering document to obtain the funding for certain acquisitions that are in the discussion stages. No assurance can be given that funds will be available, or, if available, will be on terms acceptable to The Company.
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).
Item 3. Quantitative and Qualitative Disclosures aboutAbout Market RiskRisk.
Not applicable as the Company isAs a smaller reporting company.company, the Company has elected not to provide the disclosure required by this item.
Item 4. Controls and ProceduresProcedures.
a) Disclosure Controls and Procedures
We maintain “disclosureOur management is responsible for maintaining disclosure controls and procedures” as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in the reports that we filethe Registrant files or submitsubmits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commissionthe SEC’s rules and forms,forms. In addition, the disclosure controls and procedures must ensure that such information is accumulated and communicated to ourthe Registrant’s management, including ourits Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designingfinancial and evaluatingother required disclosures.
At September 30, 2022, an evaluation of the effectiveness of our disclosure controls and procedures management recognized that disclosure controls(as defined in Rules 13(a)-15(e) and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives15(d)-15(e) of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our managementExchange Act) was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
At the end of the period covered by this report we carried out an evaluation, under the supervision and with the participation of Keith Duffy our Chief Executive Officer and Brian Carey our Chief Financial Officer, Brendan Macpherson, of the effectiveness of the design and operationOfficer. Based on his evaluation of our disclosure controls and procedures. This evaluation included an evaluation of our financial controls. Since our Chief Executive Officer also serves as our Chief Financial Officer and we do not have financial and accounting personnel thoroughly familiar with U.S. GAAP and U.S. securities laws and regulations, we have a deficiency in our financial controls. This deficiency in our financial controls and procedures, constitutes a deficiency inhe concluded that at September 30, 2022, our disclosure controls and procedures in that our disclosure controls and procedures wereare not effective due to ensure that information required to be disclosed by usmaterial weaknesses in our periodic reports is recorded, processed, summarized and reported, within the time periods specified for each report and that such information is accumulated and communicated to our management, including our principal executive and principalinternal controls over financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. This deficiency will not be considered remediated until we hire accounting personnel with the requisite knowledge and experience concerning U.S. GAAP and the U.S. securities laws.reporting discussed directly below.
b) Changes in Internal Control overOver Financial Reporting
There havehas been no changeschange in the Company’s internal control over financial reporting, as defined in Rules 13a-15(f) of the Exchange Act, during the quarterly period covered by this reportCompany’s most recent fiscal quarter ended September 30, 2022, that havehas materially affected, or areis reasonably likely to materially affect, the Company’s internal control over financial reporting.
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None.
Our business is subject to numerous risks and uncertainties including but not limited to those discussed in “Risk Factors” in our Annual Report on Form 10-K.
Item 2. Unregistered Sales of Equity Securities
During the three months ended September 30, 2015, we issued a total of 500,000 shares of common stock in settlement of a $27,123 debt obligation.None.
The securities described above were issued in reliance upon the exemptions from registration pursuant to Sections 4(a)(2) and 3(a)(9) of the Securities Act. The shares issued in the private placement were all sold to non-US residents in accordance with Regulation S.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
None.
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The following exhibits are filed herewith:herewith
Exhibit Number |
| Document | ||
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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). |
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101.SCH |
| Inline XBRL Taxonomy Extension Schema Document |
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101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
| Inline XBRL Taxonomy Extension Definition Document |
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101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
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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.
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Date: | By: | /s/ | ||
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Chief Executive Officer (Principal Executive) | |||
Date: November 21, 2022 | By: | /s/ Brian Carey | ||
Brian Carey Chief Financial Officer
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