XERI 10-K & 10-Q changes, risk factors and insider trading
Xeriant, Inc. · OTC · Aircraft · CIK 1481504 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “The high capital requirements of building materials manufacturing may require us to seek large-scale financing, including potential green bond financing or similar structured debt instruments, that may not be available on terms acceptable to us or at all.”
New heading “Our business is substantially concentrated in the building materials industry, and adverse conditions in that industry could materially harm our results of operations.”
New heading “Widespread acceptance of NexBoard™ as a replacement for conventional building materials may be slow, uncertain, and more costly than anticipated due to established procurement relationships and resistance to change.”
New heading “The manufacture of NexBoard™ at commercial scale requires substantial capital investment that we may be unable to raise on acceptable terms or at all.”
New heading “Our reliance on contract manufacturing introduces risks of quality control, production capacity, delivery reliability, and confidentiality that are outside of our direct control.”
New heading “We face pricing pressure from established, well-capitalized competitors in the construction materials market who benefit from economies of scale, entrenched distribution networks, and lower per-unit production costs.”
New heading “Our products may be subject to building code approval processes, certification requirements, and regulatory compliance obligations that could delay or restrict commercialization.”
New heading “Our operations and products may be subject to environmental, health, and safety regulations that could increase our costs or restrict our operations.”
New heading “Unauthorized disclosure or reverse engineering of our proprietary fire-retardant formulation could materially compromise our competitive position, even if patent protection is in place.”
New heading “Third parties may challenge the validity or enforceability of U.S. Patent No. 12,679,047, and an adverse outcome could materially harm our competitive position and commercial prospects.”
New heading “If competitors develop products that design around our patents or independently achieve comparable performance characteristics, our competitive advantages may be diminished.”
Removed heading “There is no assurance that we or our affiliates will be able to accomplish the design and engineering needed to demonstrate that the technologies that are undertaken will perform or operate as planned.”
Removed heading “The development timeline for the development of certain technologies could expand.”
Removed heading “Some technologies are still being developed and specific market applications have not been finalized.”
Removed heading “We will face significant industry competition.”
Removed heading “We are dependent on developing competitively priced, superior-performance, and industry-certified DUREVER™ and NEXBOARD™ products.”
Removed heading “Misappropriation of our intellectual property and proprietary rights could impair our competitive position.”
Removed heading “We rely on patents and patent applications and various regulatory exclusivities to protect some of our product candidates, and our ability to compete may be limited or eliminated if we are not able to protect our products.”
Removed heading “If we infringe the rights of others, we could be prevented from selling products or forced to pay damages.”
Removed heading “Our intellectual property may not be sufficient to protect our products from competition, which may negatively affect our business as well as limit our partnership or acquisition appeal.”
Removed heading “We may incur substantial costs enforcing our patents, defending against third-party patents, invalidating third-party patents or licensing third-party intellectual property, as a result of litigation or other proceedings relating to patent and other intellectual property rights.”
Removed heading “If we are unable to protect our intellectual property rights, our competitors may develop and market products with similar features that may reduce demand for our potential products.”
Largest changes
“On October 19, 2023, the Company filed a complaint in the United States Southern District of New York (Case no.1:23-cv-09200) against Auctus Fund LLC, to invalidate allegedly illegally designed contractual agreements, including contesting the enforceability of the related note and amendments, and to set aside improper and unlawful securities transactions effectuated in violation of Section 15(a)(1) of the Exchange Act (15 U.S.C. § 78o(a)(1)) by the Defendant, alleging breaches of fiduciary duty and related claims. On February 9, 2024, the case was dismissed. …”see in full comparison
“The laws of some jurisdictions do not protect intellectual property rights to the same extent as the laws or rules and regulations in the United States and Europe, and many companies have encountered significant difficulties in protecting and defending such rights in such jurisdictions. …”see in full comparison
“We may incur substantial costs enforcing our patents, defending against third-party patents, invalidating third-party patents or licensing third-party intellectual property, as a result of litigation or other proceedings relating to patent and other intellectual property rights.”see in full comparison
“The construction industry is characterized by deeply entrenched purchasing habits, long-standing supplier relationships, established specification standards, and significant institutional resistance to the adoption of new materials, even when those materials offer demonstrably superior performance characteristics. …”see in full comparison
“Our intellectual property may not be sufficient to protect our products from competition, which may negatively affect our business as well as limit our partnership or acquisition appeal.”see in full comparison
“Our operations and products may be subject to environmental, health, and safety regulations that could increase our costs or restrict our operations.”see in full comparison
Full comparison: every changed paragraph (67)
The high capital requirements of building materials manufacturing may require us to seek large-scale financing, including potential green bond financing or similar structured debt instruments, that may not be available on terms acceptable to us or at all.
Our long-term manufacturing strategy contemplates the potential use of large-scale financing structures, including green bond financing or similar instruments, to fund dedicated NexBoard manufacturing facilities and equipment. Green bond financing is subject to certification requirements, use-of-proceeds restrictions, and ongoing reporting obligations that could restrict our operational flexibility. If market conditions change, interest rates rise materially, investor appetite for green bond instruments declines, or our financial condition or project economics do not meet underwriting standards, we may be unable to complete such financing on acceptable terms or at all. The failure to secure large-scale manufacturing financing when needed could prevent us from scaling production to meet commercial demand, resulting in the loss of customer orders, damage to our market reputation, and material harm to our business and financial condition.
We will need to meet or otherwise resolve the obligations required by the Auctus Fund LLC Senior Secured Note and the Amendment to the Note.
The Company has a Senior Secured Promissory Note with Auctus Fund LLC (“Auctus”), which became due and payable on March 15, 2023.2023, Atafter thistwo time,Amendments. thereEffective isOctober no29, assurance2025, thatXeriant entered into a Settlement Agreement with Auctus to restructure the CompanyAuctus willNote work out a favorable resolution of its obligationsand related toXeriant thisobligations. note.The IfSettlement AuctusAgreement electsterms towere enforceextended thethrough Note,October we31, may lose all or substantially all of our assets.2026. If Auctus elects to convert the note into shares of our Common Stock, our shareholders could experience substantial dilution.
On October 19, 2023, the Company filed a complaint in the United States Southern District of New York (Case no.1:23-cv-09200) against Auctus Fund LLC, to invalidate allegedly illegally designed contractual agreements, including contesting the enforceability of the related note and amendments, and to set aside improper and unlawful securities transactions effectuated in violation of Section 15(a)(1) of the Exchange Act (15 U.S.C. § 78o(a)(1)) by the Defendant, alleging breaches of fiduciary duty and related claims. On February 9, 2024, the case was dismissed. The Company filed a Notice of Civil Appeal on March 13, 2024, primarily based on public welfare because of the pending litigation between the SEC and Auctus Fund Management, LLC, which complaint was filed on June 1, 2023. On June 19, 2024, the Company filed an appeal in the United States Court of Appeals for the Second Circuit (Case no. 24-682-cv). On June 25, 2025, the appellate court affirmed the lower court’s decision. The Company’s counsel is in the process of filing an appeal to the United States Supreme Court to challenge this decision, which went against precedent decisions in other districts. In addition to the pending legal matters, the Company is currently in discussions with Auctus in an attempt to come up with a settlement. The Company’s ongoing lawsuit against XTI Aircraft Company has a connection to the Auctus matter in that the Company’s obligations to Auctus were, according to the Company’s complaint, to be assumed by XTI as provided in a Letter Agreement. The foregoing descriptions of the legal actions do not purport to be complete and are subject in their entirety by the full text of the court filings.
Our recurring operating losses raise substantial doubt about our ability to continue as a going concern. This condition is expected to continue for the foreseeable future until we can produce sufficient revenues to cover our costs as we seek to raise funding and invest in our operations as well as our sales and marketing efforts. Given this financial situation, no assurancesassurance can be given that we will be able to raise capital in the future on acceptable terms, or at all. As a result, our independent registered public accounting firm included an explanatory paragraph in its report in our consolidated financial statements for the most recent fiscal years with respect to this uncertainty. The perception of our ability to continue as a going concern may make it more difficult for us to obtain financing for the continuation of our operations and could result in the loss of confidence of investors, partners and employees.
Our business is substantially concentrated in the building materials industry, and adverse conditions in that industry could materially harm our results of operations.
A substantial portion of our anticipated revenues and commercial activities is dependent on the construction and building materials industry, and specifically on the market for interior and exterior wall panels, and finishing compounds for residential, commercial, and institutional construction applications. Accordingly, our business is subject to risks specific to that industry, including cyclical downturns in residential and commercial construction activity driven by rising interest rates, declining housing starts, reduced consumer spending, tightening credit conditions, and adverse real estate market conditions. Construction activity is historically one of the most interest-rate-sensitive sectors of the economy, and periods of elevated borrowing costs can suppress new construction starts for sustained periods. In addition, our anticipated customer base, including homebuilders, commercial contractors, institutional facility managers, and building material distributors, is itself subject to economic pressures that could delay or reduce purchasing decisions. Our heavy concentration in a single industry means that we do not have diversified revenue streams that could offset a downturn in building materials demand. If construction activity declines materially, or if our target customer segments reduce capital expenditures or defer purchasing decisions, our revenues, cash flow, and results of operations could be materially and adversely affected.
Widespread acceptance of NexBoard™ as a replacement for conventional building materials may be slow, uncertain, and more costly than anticipated due to established procurement relationships and resistance to change.
The construction industry is characterized by deeply entrenched purchasing habits, long-standing supplier relationships, established specification standards, and significant institutional resistance to the adoption of new materials, even when those materials offer demonstrably superior performance characteristics. Builders, contractors, architects, and building owners often default to familiar materials, including drywall, plywood, and OSB, not because those materials are optimal but because they are familiar, widely distributed, and supported by established installation practices, workforce training, and supply chain infrastructure. Gaining acceptance of NexBoard as a substitute for these conventional materials will require extensive education of architects, specifiers, contractors, and building inspectors; investment in training programs for installation crews; inclusion in building codes and specification guides that currently reference only conventional materials; and a sustained period of demonstrated field performance to build market confidence. We may encounter resistance from established industry participants, including drywall manufacturers, distribution networks, and trade organizations, who may have economic interests in maintaining the status quo. Even if NexBoard's technical performance advantages are widely recognized, the transition from awareness to specification to procurement to widespread adoption may take significantly longer and require significantly more marketing and business development investment than we currently anticipate. If we are unable to achieve broad industry acceptance within a commercially reasonable timeframe, our ability to generate revenues and reach profitability could be materially and adversely affected.
The manufacture of NexBoard™ at commercial scale requires substantial capital investment that we may be unable to raise on acceptable terms or at all.
The transition from contract manufacturing to dedicated, internally operated manufacturing facilities capable of producing NexBoard at commercial scale requires substantial capital investment in specialized equipment, which may include injection molding tooling and equipment, sheet extrusion equipment, coating systems equipment, and associated production infrastructure. A fully operational, dedicated manufacturing facility capable of meeting anticipated market demand would require capital outlays that significantly exceed our current resources and near-term financing plans. The specialized nature of the equipment required means that off-the-shelf solutions are not available and lead times for custom equipment procurement are extended. If we are unable to raise the capital necessary to fund manufacturing infrastructure on terms that are economically viable, or if equipment procurement, installation, and commissioning encounters delays, cost overruns, or technical challenges, our ability to fulfill commercial orders, meet customer commitments, and scale revenues could be severely impaired. Additionally, the construction of or transition to owned manufacturing facilities will introduce fixed cost structures, lease or mortgage obligations, and employee headcount that could increase our operating losses in the near term before manufacturing scale and revenue growth provide adequate cost coverage.
Our reliance on contract manufacturing introduces risks of quality control, production capacity, delivery reliability, and confidentiality that are outside of our direct control.
We depend on contract manufacturing partners for the production of NexBoard This reliance introduces risks that we cannot fully control or mitigate, including the risk that our contract manufacturers may not maintain the quality standards required to produce NexBoard to our specifications, experience capacity constraints that limit our ability to fulfill customer orders, fail to meet delivery timelines that could damage our customer relationships, or, in the case of the termination of a manufacturing relationship, leave us without production capacity for an extended period while we identify and qualify alternative manufacturers. Contract manufacturing relationships are also subject to the risk that the manufacturer could, intentionally or inadvertently, disclose, replicate, or reverse-engineer our proprietary Durazite™ formulation or manufacturing processes, which could compromise our competitive position even if those processes are protected by our U.S. Patent No. 12,679,047. While we believe our patent provides meaningful protection, the risk of trade secret misappropriation in a contract manufacturing environment is inherently difficult to eliminate entirely.
We face pricing pressure from established, well-capitalized competitors in the construction materials market who benefit from economies of scale, entrenched distribution networks, and lower per-unit production costs.
Our primary competitors in the construction panel market, manufacturers of gypsum drywall, plywood, OSB, and MDF, include some of the largest building materials companies in the world. These companies benefit from fully depreciated manufacturing facilities, decades of production optimization, established nationwide distribution infrastructure, existing relationships with major homebuilders and commercial contractors, and per-unit production costs that reflect the advantages of very high-volume manufacturing. NexBoard, as a new entrant with a novel material composition and manufacturing process, is unlikely to achieve comparable per-unit costs in the near to medium term, and we may face pricing pressure from incumbent products whose manufacturers are willing to reduce margins to defend their market position. If we are unable to price NexBoard competitively relative to conventional alternatives while still maintaining margins sufficient to support our operations, or if established competitors respond to NexBoard's market entry with aggressive pricing strategies, our commercial prospects and financial condition could be materially and adversely affected.
Our products may be subject to building code approval processes, certification requirements, and regulatory compliance obligations that could delay or restrict commercialization.
The construction materials industry is subject to extensive building codes, fire safety regulations, environmental regulations, and product certification requirements at the federal, state, and local levels, including the International Building Code, NFPA standards, EPA and CARB VOC emission standards, and LEED certification requirements. NexBoard has obtained a number of important independent laboratory certifications, including ASTM E84 Class A fire rating and NFPA 286 passage, but there is no assurance that NexBoard will be accepted in all jurisdictions without additional testing, local code approval processes, or product listing by recognized testing laboratories such as UL or ICC-ES. Building inspectors and local authorities having jurisdiction may be unfamiliar with composite polymer panels and may require additional documentation, testing, or approvals before allowing NexBoard to be installed in buildings subject to their oversight. Any delays in obtaining required local approvals, or any failure to obtain or maintain necessary certifications, could restrict our ability to market and sell NexBoard in affected markets and could materially harm our revenues and competitive position.
Our operations and products may be subject to environmental, health, and safety regulations that could increase our costs or restrict our operations.
The manufacture of NexBoard incorporates recycled thermoplastics, fire-retardant chemicals, and nanotechnology-enhanced materials that may be subject to environmental, health, and safety regulations at the federal, state, and local levels, including regulations administered by the Environmental Protection Agency, the Occupational Safety and Health Administration, and state environmental agencies. Changes in applicable environmental regulations, including regulations relating to chemical manufacturing, volatile organic compounds, nanomaterial handling and disclosure, and end-of-life product disposal, could require us to modify our manufacturing processes, reformulate our products, or incur additional compliance costs. Although we believe our products are designed to meet or exceed current environmental standards, we cannot predict the nature or timing of future regulatory changes that could affect our products or operations.
There is no assurance that we or our affiliates will be able to accomplish the design and engineering needed to demonstrate that the technologies that are undertaken will perform or operate as planned.
Because of unanticipated technological hurdles or the inability to assemble a qualified team to address these challenges, we may not be able to meet the technology development and performance objectives that are needed to be competitive in the various targeted markets.
The development timeline for the development of certain technologies could expand.
Due to unexpected challenges, the length of time to develop certain technologies may become expanded, causing cost overruns and potentially demanding the infusion of large amounts of capital and other financing, which may not be available. Because of the long timeline, there is also uncertainty regarding the uniqueness or advantages of the technologies at the time they are introduced into the market.
Some technologies are still being developed and specific market applications have not been finalized.
Because some of the anticipated technologies will be in an early stage of development, there is no certainty as to which market applications will be prioritized and targeted as well as the associated timelines and costs involved when we reach that point of determination after a technology has been proven. There is no assurance that the required selling price of our technologies will be competitive.
We will face significant industry competition.
Most of the targeted technologies will face significant competition from industry leaders or from well-funded entrants in the marketplace. We could face significant competition from companies who have developed or are developing alternative technologies that could render acquired technologies less competitive than planned. Many existing potential competitors are well-established, have or may have longer-standing relationships with customers and potential business partners, have or may have greater name recognition, and have or may have access to substantially greater financial, technical and marketing resources.
We are dependent on developing competitively priced, superior-performance, and industry-certified DUREVER™ and NEXBOARD™ products.
A significant part of our projected operations is expected to come from the sale of DUREVER™ products and NEXBOARD™ composite wallboards that are primarily made from recycled materials that use our proprietary eco-friendly industrial flame retardants and nanomaterials. We are in the process of obtaining certification of NEXBOARD for the construction industry and other applications, however, there is no assurance that the required certifications will be obtained.
Unauthorized disclosure or reverse engineering of our proprietary fire-retardant formulation could materially compromise our competitive position, even if patent protection is in place.
Our competitive advantage is substantially dependent on our proprietary fire-retardant formulation, which is incorporated into both NexBoard™ and NexPatch™. While we hold U.S. Patent No. 12,679,047 covering our specialized manufacturing process, novel composition, and layering architecture, the value of that patent protection is limited by our ability to detect and pursue infringement, and by the scope of the patent claims relative to alternative formulations that competitors might develop. Patent protection does not prevent competitors from independently developing alternative materials that achieve similar performance characteristics through different chemical approaches, nor does it prevent the misappropriation of trade secrets and know-how that is not captured within the patent claims. If our proprietary formulation were reverse engineered, disclosed by a former employee, consultant, or contract manufacturer, or independently replicated by a well-resourced competitor, our competitive differentiation could be substantially reduced and our investment in research and development could be significantly devalued. We may not detect such misappropriation until significant commercial harm has already occurred, and the cost and uncertainty of litigation to enforce our rights could be prohibitive.
Third parties may challenge the validity or enforceability of U.S. Patent No. 12,679,047, and an adverse outcome could materially harm our competitive position and commercial prospects.
We hold U.S. Patent No. 12,679,047, which we believe provides meaningful protection for key aspects of NexBoard's manufacturing process and composition. However, this patent may be challenged through post-grant proceedings at the U.S. Patent and Trademark Office, including inter partes review and post-grant review, or through invalidity claims raised as defenses in litigation. The outcome of patent validity proceedings is inherently uncertain, and a determination that our patent is invalid, unenforceable, or narrower in scope than we believe could significantly weaken our ability to prevent competitors from manufacturing and selling products that compete directly with NexBoard. In addition, because our patent was issued in connection with a novel and proprietary process, and because the prior art landscape in polymer composites and fire-retardant chemistry is complex, there is a risk that prior art exists of which we are unaware that could be cited against our patent in a validity challenge. Any such challenge, regardless of its ultimate outcome, could require us to expend significant financial and management resources in defense, and could create uncertainty regarding our intellectual property position that negatively affects investor confidence, partnership discussions, and commercial relationships.
If competitors develop products that design around our patents or independently achieve comparable performance characteristics, our competitive advantages may be diminished.
Our existing patent covers specific aspects of NexBoard's manufacturing process, composition, and layering architecture. It may be possible for competitors, particularly well-resourced building materials manufacturers or chemical companies, to develop composite panel products that achieve performance characteristics similar to NexBoard through alternative polymer matrices, different fire-retardant chemistries, or modified manufacturing processes that do not infringe our patent claims. The construction materials market has a history of rapid product innovation, and if a large, established manufacturer were to develop a competing product with comparable or superior performance, that competitor's existing manufacturing scale, distribution infrastructure, and customer relationships would represent significant competitive advantages over us. We cannot assure that our patent protection will be sufficient to prevent such competitive development or to maintain our current performance-based differentiation over the long term. We will also rely on trade secrets, know-how and technology, which are not protected by patents, to maintain our competitive position. We will seek to protect this information by entering into confidentiality agreements with parties that have access to it, such as strategic partners, collaborators, employees, contractors and consultants. Any of these parties may breach these agreements and disclose our confidential information or our competitors might learn of the information in some other way. If any trade secret, know-how or other technology not protected by a patent were disclosed to, or independently developed by, a competitor, our business, financial condition and results of operations could be materially adversely affected.
Misappropriation of our intellectual property and proprietary rights could impair our competitive position.
Our success will depend to some extent upon our proprietary patented technology. The legal protections available to us can afford only limited protection, and these means of protecting our intellectual property may be inadequate. We rely, and will continue to rely, on patents, trademarks, trade secrets and copyright laws, confidentiality agreements, employment agreements, work for hire agreements, and technical measures to protect its intellectual property. We cannot ensure that the steps taken by it will prevent misappropriation of its technology or that the agreements entered into for that purpose will be enforceable. Effective trademark, service mark, copyright and trade secret protection may not be available in every jurisdiction in which our products and services are made available online. Our intellectual property may be subject to even greater risk in foreign jurisdictions, as the laws of many countries do not protect intellectual property to the same extent as the laws of the United States. As part of its confidentiality procedures, we generally will enter into agreements with our employees and consultants and limit access to our trade secrets and technology. We cannot assure or assume, however, that former employees will not seek to start or enhance other competing products or services to our detriment, our business, results of operations and financial condition. Nevertheless, management believes that the technical and creative skills of its personnel, continued development of its proprietary systems and technology, as well as brand name recognition and development are more essential in establishing and maintaining a competitive market position.
Despite efforts to protect our proprietary rights, unauthorized persons may attempt to copy aspects of our products or services or to obtain and use information that we regard as proprietary. Policing unauthorized use of our proprietary rights is difficult and requires constant attention. We may be required to spend significant resources to monitor and police our intellectual property rights. We may not be able to detect infringement and may lose our competitive position in the market before we are able to ascertain any such infringement. In addition, competitors may design around our proprietary technology or develop competing technologies.
Intellectual property litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement by us. Other companies, including competitors, may obtain patents or other proprietary rights that would prevent, limit or interfere with our ability to make, use or sell its products and services. Any such litigation by or against us, whether the claims are valid or not, could result in our incurring substantial costs and diversion of resources, including the attention of senior management. If we are unsuccessful in such legal proceedings, we could be subjected to significant damages; be required to license technology that is critical to our operations, if a license is available at a cost which we can pay; or be required to develop replacement technologies at substantial cost to us in money and time. Any of these results could materially and adversely affect our business, results of operations and financial condition.
We rely on patents and patent applications and various regulatory exclusivities to protect some of our product candidates, and our ability to compete may be limited or eliminated if we are not able to protect our products.
The patent positions of companies such as ours are uncertain and involve complex legal and factual questions. We may incur significant expenses in protecting our intellectual property and defending or assessing claims with respect to intellectual property owned by others. Any patent or other infringement litigation by or against us could cause us to incur significant expenses and divert the attention of our management.
Others may file patent applications or obtain patents on similar technologies that compete with our products or those of our joint ventures. We cannot predict how broad the claims in any such patents or applications will be and whether they will be allowed. Once claims have been issued, we cannot predict how they will be construed or enforced. We and/or our joint ventures may infringe upon intellectual property rights of others without being aware of it. If another party claims we are infringing their technology, we could have to defend an expensive and time-consuming lawsuit, pay a large sum if we are found to be infringing, or be prohibited from selling or licensing our products unless we obtain a license or redesign our products, which may not be possible.
If we infringe the rights of others, we could be prevented from selling products or forced to pay damages.
If our products, methods, processes, and other technologies are found to infringe the rights of other parties, we could be required to pay damages or may be required to cease using the technology or to license rights from the prevailing party. Any prevailing party may be unwilling to offer us a license on commercially acceptable terms.
Our success will depend in part on our ability to operate without infringing the proprietary rights of third parties. We cannot guarantee that our products or product candidates, or manufacture or use of our products or product candidates, will not infringe third-party patents. Furthermore, a third party may claim that we are using inventions covered by the third party’s patent rights and may go to court to stop us from engaging in our normal operations and activities, including making or selling our product candidates or products. These lawsuits are costly and could affect our results of operations and divert the attention of managerial and scientific personnel. Some of these third parties may be better capitalized and have more resources than us. There is a risk that a court wouldcould decide that we are infringing the third party’s patents and would order us to stopcease the activities covered by the patents. In that event, we may not have a viable way to get around the patent and may need to halt commercialization of the relevant product candidate(s) or product(s). In addition, there is a risk that a court will order us to pay the other party damages for having violated the other party’s patents. In addition, we may be obligated to indemnify our licensors and collaborators against certain intellectual property infringement claims brought by third parties, which could require us to expend additional resources. The aerospace and technology industries have produced a proliferation of patents, and it is not always clear to industry participants, including us, which patents cover various types of products or methods. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform.
Our intellectual property may not be sufficient to protect our products from competition, which may negatively affect our business as well as limit our partnership or acquisition appeal.
We may be subject to competition despite the existence of intellectual property we license, or we or our joint ventures own. We can give no assurance that our intellectual property will be sufficient to prevent third parties from designing around the patents we own or license and developing and commercializing competitive products. The existence of competitive products that avoid our intellectual property could materially adversely affect our operating results and financial condition. Furthermore, limitations, or perceived limitations, in our intellectual property may limit the interest of third parties to partner, collaborate or otherwise transact with us if third parties perceive a higher than acceptable risk to commercialization of our products or future products.
Our approach involves filing patent applications covering new methods of use and/or new formulations of previously known, studied and/or marketed devices. Although the protection afforded by patents issued from our patent applications may be significant, when looking at our patents’ ability to block competition, the protection offered by our patents may be, to some extent, more limited than the protection provided by patents claiming the composition of matter previously unknown. If a competitor were able to successfully design around any method of use and formulation patents we may have in the future, our business and competitive advantage could be significantly affected.
We may elect to sue a third party, or otherwise make a claim, alleging infringement or other violation of patents, trademarks, trade dress, copyrights, trade secrets, domain names or other intellectual property rights that we either own or license. If we do not prevail in enforcing our intellectual property rights in this type of litigation, we may be subject to:
A third party may also challenge the validity, enforceability or scope of the intellectual property rights that we license or own; and the result of these challenges may narrow the claim scope of or invalidate patents that are integral to our product candidates in the future. There can be no assurance that we will be able to successfully defend patents we own or licensed in an action against third parties due to the unpredictability of litigation and the high costs associated with intellectual property litigation, amongst other factors.
The laws of some jurisdictions do not protect intellectual property rights to the same extent as the laws or rules and regulations in the United States and Europe, and many companies have encountered significant difficulties in protecting and defending such rights in such jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in other jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated, rendered unenforceable or interpreted narrowly and our patent applications at risk of not issuing, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license. Furthermore, while we intend to protect our intellectual property rights in our expected significant markets, we cannot ensure that we will be able to initiate or maintain similar efforts in all jurisdictions in which we may wish to market our products or product candidates. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate, which may have an adverse effect on our ability to successfully commercialize our product candidates in all of our expected significant foreign markets. If we or our licensors encounter difficulties in protecting, or are otherwise precluded from effectively protecting, the intellectual property rights important for our business in such jurisdictions, the value of these rights may be diminished, and we may face additional competition from others in those jurisdictions.
Changes to patent law, for example the Leahy-Smith America Invests Act, AIA or Leahy-Smith Act, of 2011 and the Patent Reform Act of 2009 and other future article of legislation in the U.S., may substantially change the regulations and procedures surrounding patent applications, issuance of patents, prosecution of patents, challenges to patent validity, and patent enforcement. We can give no assurances that our patents and those of our licensor(s) can be defended or will protect us against future intellectual property challenges, particularly as they pertain to changes in patent law and future patent law interpretations.
In addition, enforcing and maintaining our intellectual property protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by the U.S. Patent and Trademark Office and courts, and foreign government patent agencies and courts, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
We may incur substantial costs enforcing our patents, defending against third-party patents, invalidating third-party patents or licensing third-party intellectual property, as a result of litigation or other proceedings relating to patent and other intellectual property rights.
We may be unaware of or unfamiliar with prior art and/or interpretations of prior art that could potentially impact the validity or scope of our patents, pending patent applications, or patent applications that we will file. We may have elected, or elect now or in the future, not to maintain or pursue intellectual property rights that, at some point in time, may be considered relevant to or enforceable against a competitor.
We take efforts and enter into agreements with employees, consultants, collaborators, and advisors to confirm ownership and chain of title in intellectual property rights. However, an inventorship or ownership dispute could arise that may permit one or more third parties to practice or enforce our intellectual property rights, including possible efforts to enforce rights against us.
We may not have rights under some patents or patent applications that may cover technologies that we use in our research, product candidates and particular uses thereof that we seek to develop and commercialize, as well as synthesis of our product candidates. Third parties may own or control these patents and patent applications in the United States and elsewhere. These third parties could bring claims against us or our collaborators that would cause us to incur substantial expenses and, if successful against us, could cause us to pay substantial damages. Further, if a patent infringement suit were brought against us or our collaborators, we or they could be forced to stop or delay research, development, manufacturing or sales of the product or product candidate that is the subject of the suit. We or our collaborators therefore may choose to seek, or be required to seek, a license from the third-party and would most likely be required to pay license fees or royalties or both. These licenses may not be available on acceptable terms, or at all. Even if we or our collaborators were able to obtain a license, the rights may be nonexclusive, which would give our competitors access to the same intellectual property. Ultimately, we could be prevented from commercializing a product or product candidate or forced to cease some aspect of our business operations, as a result of patent infringement claims, which could harm our business.
There has been substantial litigation and other legal proceedings regarding patent and other intellectual property rights in the broad technology industry. Although we are not currently a party to any patent litigation or any other adversarial proceeding, including any interference or derivation proceeding declared or instituted before the United States Patent and Trademark Office, regarding intellectual property rights with respect to our products, product candidates and technology, it is possible that we may become so in the future. We are not currently aware of any actual or potential third-party infringement claim involving our product candidates. The cost to us of any patent litigation or other proceeding, even if resolved in our favor, could be substantial. The outcome of patent litigation is subject to uncertainties that cannot be adequately quantified in advance, including the demeanor and credibility of witnesses and the identity of the adverse party, especially in the aerospace and technology related patent cases that may turn on the testimony of experts as to technical facts upon which experts may reasonably disagree. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their substantially greater financial resources. If a patent or other proceeding is resolved against us, we may be enjoined from researching, developing, manufacturing or commercializing our products or product candidates without a license from the other party and we may be held liable for significant damages. We may not be able to obtain any required license on commercially acceptable terms or at all.
Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could harm our ability to compete in the marketplace. Patent litigation and other proceedings may also absorb significant management time.
Management's Discussion & Analysis (MD&A)
New heading “Net income (loss)”
Removed heading “Funding Strategy”
Largest changes
“Effective October 29, 2025, Xeriant terminated its previously disclosed litigation proceedings with Auctus Fund, LLC and entered into a Settlement Agreement with Auctus to restructure the Auctus Note and related obligations. A summary of the terms of the Settlement Agreement is discussed in the Liquidity and Capital Resources section below. …”see in full comparison
“Effective October 29, 2025, Xeriant entered into a Settlement Agreement with Auctus to restructure the Auctus Note and related Xeriant obligations. The Settlement Agreement provides that the Company pay Auctus $3,500,000 as follows: (A) $1,000,000 on or before 75 days from October 29, 2025; (B) $1,000,000 on or before 105 days from October 29, 2025;(C) $1,000,000 on or before 135 days from October 29, 2025; and (D) $500,000 on or before 165 days from October 29, 2025. …”see in full comparison
“On December 6, 2023, the Company initiated legal proceedings against XTI Aircraft Company in the Federal District Court for the Southern District of New York (Case no. 1:23-cv-10656-JPO), along with other unnamed defendants, seeking to enforce the terms of the Letter Agreement, alleging fraudulent acts, deceptive maneuvers and intentional breaches, and seeking a range of remedies. These include the recovery of losses, expenses, attorneys’ fees, punitive damages and a compensatory damage award exceeding $500 million. …”see in full comparison
“On July 2, 2025, the Company was served with a complaint from Midland Compounding for breach of contract in the payment of an invoice in the amount of $57,600 related to a purchase order for consulting services related to improving the Company’s intumescent fire-retardant layer for NexBoard. On August 20, 2025, the Company filed an Answer and Affirmative Defenses, essentially stating that Midland Compounding had not performed the services it was contracted to provide. …”see in full comparison
Total other expenses consist of amortization of debt discount related to convertible notes, interest expense related to convertible notes, loan extension fee, loss on extinguishment of debt, and gain on extinguishment ofsee in full comparisondebt and change in fair value of the convertible bridge loans.debt. Total otherexpensesincomewerewas $1,466,383 for the year ended June 30, 2026, compared to other expense of $281,407 for the year ended June 30, 2025,compared to $1,197,193 for the year ended June 30, 2024,adecreasechange of$915,786.$1,747,790. Theprimaryreason for thedecreaseotherwasincome in thepriorcurrentperiod,period was the Company recordeddefaultainterestgain on extinguishment of debt in the amount of$1,070,729$2,810,278, of which $2,743,546 was related to the settlement with Auctus. This was offset somewhat by a loss on debt extinguishment in the amount of $1,061,176 related to shares issued to Auctusnote.for the extension of an agreement.
“Except as set forth above, there is no pending litigation against the Company and to our knowledge no litigation is contemplated or threatened. To our knowledge, none of our directors, officers, 5% shareholders or affiliates are party to any legal proceedings that would have a material adverse effect on our business, financial condition, or operating results”see in full comparison
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The following discussion of our financial condition and results of operations should be read in conjunction with the audited and unaudited consolidated financial statements and the notes to those statements included elsewhere in this Report. This discussion contains forward-looking statements that involve risks and uncertainties. You should specifically consider the various risk factors identified in this Report that could cause actual results to differ materially from those anticipated in these forward-looking statements.
Xeriant, Inc. (the “Company) is dedicated to the discovery, developmentdevelopment, and commercialization of disruptivetransformative technologiestechnologies, inwith a focus on advanced materials and aerospace whichthat can be successfully integrated and commercialized for deploymentdeployed across multiple industrial sectors. We seek to partner with and acquire strategic interests in visionary companies that accelerate this mission. The Company’sXeriant’s advanced materials line is marketed under the DUREVER™ brand,brand and includes NEXBOARDNexBoard™, ana eco-friendly,high-performance patent-pendingeco-friendly composite construction panel made from recycled plastic and fiber waste, and NexPatch™, its companion fire-resistant joint compound. Both products use the Company’s proprietary fire-retardant technology, called Durazite™. NexBoard™ has shown exceptional resistance to fire, water, mold, insects, cracking, abrasion, compression and puncture, and was designed to become a universal panel to replace products such as drywall, plywood, OSB, MDF, MgO board, cement board and other materials used in construction. Durazite also has potential uses in many industries looking to improve the performance of their products. The Company seeks strategic partners in the building materials industry and other industries for immediate access to their distribution networks and markets.
Effective May 31, 2021, the CompanyXeriant entered into a Joint Venture with XTI Aircraft Company (“XTI”), named Eco-Aero, LLC, with the purpose of completing the preliminary design review (“PDR”) of XTI’s eVTOL fixed wing aircraft. XTI and the Company each own 50 percent of the XTI JV, and it is managed by a management committee consisting of five members, three appointed by the CompanyXeriant and two by XTI. The Company invested approximately $5.5 million into the joint venture after borrowing the funds from Auctus Fund LLC (“Auctus”) through a Senior Secured Promissory Note, through an introduction from Maxim Group, LLC, the Company’s investment banker at the time. The borrowed funds from Auctus were intended to be a bridge loan that would be resolved through an IPO (Initial Public Offering) and uplist to Nasdaq in a merger with XTI, which did not occur because XTI refused to move forward with the merger. The PDR was completed during the first quarter of 2022 according to XTI, which was the purpose of the joint venture.
On May 17, 2022, the CompanyXeriant signed a Letter Agreement with XTI related to the introduction of XTI to Inpixon, a Nasdaq-listed company. Under this Letter Agreement, if there was a combination or other transaction between XTI and Inpixon, Xeriant would receive compensation of 6 percent of XTI fully diluted pre-merger shares, and XTI would assume the obligations of the Company’sXeriant’s Senior Secured Note with Auctus Fund, LLC. On May 31, 2023, the joint venture was terminated according to an Acceleration Event, which was twenty-four (24) months from the start of the joint venture. On June 5, 2023, after suspecting that the obligations under the Letter Agreement were possibly being evaded, the Company transmitted a formal demand letter to XTI requesting compliance with the provisions outlined in the Letter Agreement, and in accordance with section 8 of the JV Agreement with XTI. On July 25, 2023, Inpixon filed an 8-K, announcing their intention to merge with XTI having executed an Agreement of Plan and Merger with XTI. The filing also showed that XTI had engaged in a transaction with Inpixon on March 10, 2023, receiving $300,000 in funding, which was a compensation triggering event. Inpixon subsequently filed an S-4/A registration statement on October 6, 2023. On December 6, 2023, the Company initiated legal proceedings against XTI. See Litigation Section at Note 9 below for a summary of the related legal proceedings.
During the year ended June 30, 2025,2026, the Company receiveddid $0not bysell selling shares ofany common stock.
Effective October 29, 2025, Xeriant terminated its previously disclosed litigation proceedings with Auctus Fund, LLC and entered into a Settlement Agreement with Auctus to restructure the Auctus Note and related obligations. A summary of the terms of the Settlement Agreement is discussed in the Liquidity and Capital Resources section below. Xeriant is currently working on securing funding to fulfill its obligations under the Settlement Agreement and has ongoing discussions with Auctus regarding extending the cash payments based on the Company’s timelines in executing its business plan, particularly certification testing of NEXBOARD. The Company’s ongoing lawsuit against XTI Aircraft Company has a connection to the Auctus matter in that the Company’s obligations to Auctus were, according to Xeriant’s complaint, to be assumed by XTI as provided in a Letter Agreement. Separately, Auctus Fund, LLC sued XTI related to the Letter Agreement.
On December 6, 2023, the Company initiated legal proceedings against XTI Aircraft Company in the Federal District Court for the Southern District of New York (Case no. 1:23-cv-10656-JPO), along with other unnamed defendants, seeking to enforce the terms of the Letter Agreement, alleging fraudulent acts, deceptive maneuvers and intentional breaches, and seeking a range of remedies. These include the recovery of losses, expenses, attorneys’ fees, punitive damages and a compensatory damage award exceeding $500 million. The legal action aims to address the alleged misconduct comprehensively and to protect the Company’s interests in the face of XTI’s actions. The foregoing description of the legal action does not purport to be complete and is subject in its entirety by the full text of the complaint, a copy of which was filed in an 8-K on December 12, 2023, Exhibit 99.1. On February 29, 2025, the Company filed a Second Amended Complaint alleging seven counts including intentional fraud, fraudulent concealment, breach of contract, unjust enrichment, unfair competition, quantum meruit, and misappropriation of confidential information. XTI filed a Motion to Dismiss on March 13, 2025, seeking to dismiss all the Company’s claims except for breach of contract. The Company filed a Memorandum of Law in Opposition to XTI’s Motion to Dismiss on April 10, 2025, and on January 14, 2025, the Court agreed with the Company’s position that its claims were validly alleged and denied all of XTI’s arguments in their entirety. On February 18, 2025, XTI filed its answer to the Company’s Second Amended Complaint adding two counter claims, including breach of fiduciary duty and breach of contract. The Company responded on March 18, 2025, moving to dismiss both counterclaims and on April 1, 2025, XTI filed a Second Amended Answer and Counterclaims to the Second Amended Complaint. On April 28, 2025, the Company filed a Motion to Dismiss XTI’s Second Amended Answer and Counterclaims. On May 12, 2025, XTI filed a Memorandum of Law in Opposition to Xeriant’s Motion to Dismiss XTI’s Second Amended Counterclaim. On May 20, 2025, Xeriant filed a Memorandum of Law in Support of its Motion to Dismiss XTI’s Second Amended Answer with Counterclaims. On September 23, 2025, Xeriant’s Motion to dismiss XTI’s Second Amended Answer with Counterclaim was denied by the Court. The parties are presently involved in the discovery process. The foregoing descriptions of the legal actions do not purport to be complete and are subject in their entirety by the full text of the court filings.
On July 2, 2025, the Company was served with a complaint from Midland Compounding for breach of contract in the payment of an invoice in the amount of $57,600 related to a purchase order for consulting services related to improving the Company’s intumescent fire-retardant layer for NexBoard. On August 20, 2025, the Company filed an Answer and Affirmative Defenses, essentially stating that Midland Compounding had not performed the services it was contracted to provide. On August 6, 2026, the Company settled the lawsuit with Midland Compounding by agreeing to make three $10,000 payments by September 30, 2026, and in return getting back equipment and chemicals previously provided by Xeriant.
Except as set forth above, there is no pending litigation against the Company and to our knowledge no litigation is contemplated or threatened. To our knowledge, none of our directors, officers, 5% shareholders or affiliates are party to any legal proceedings that would have a material adverse effect on our business, financial condition, or operating results
Total consulting and advisory expenses were $327,991$293,525 and $731,128$327,991 for the years ended June 30, 20252026 and 2024,2025, respectively, a decrease of $403,137.$34,466. The primary reason for the decrease was thereprimarily were increased expenses duerelated to stockan issuancesdecrease forin advisoryconsulting board and legal servicesfees in the amount of $374,906$80,466 relating to less reliance on consultants offset by an increase in advisory board fees in the prioramount period.of $46,000.
Total related party consulting fees were $438,000$296,000 and $388,000$438,000 for the years ended June 30, 20252026 and 2024,2025, respectively, ana increasedecrease of $50,000. In addition to the consulting agreement amounts, the Company will pay additional consulting fees to related parties when the Company has increased available funds.$142,000. In the current period, the Company had increasedreduced funds to pay consulting fees.fees and the related parties agreed to accept reduced amounts of compensation for the same amount of services rendered. Additionally, in the prior period, the Company paid consulting fees to a former director.
Total general and administrative expenses were $309,107$185,285 and $282,249$309,107 for the years ended June 30, 20252026 and 2024,2025, respectively, a decrease of $123,822. The primary reasons for the decrease was (i) a decrease in rent expense of $45,923 due to the Company entering into a new agreement in February 2025 for substantially less and (ii) $128,281 less in advertising and marketing expenses in the current period. This was slightly offset by an increase ofin $26,858.travel Theexpenses primary reason forin the increaseamount wasof increased expenses related to our subsidiary BlueGreen Composites, LLC. Expenses for BlueGreen Composites, LLC, relate to testing and business development costs for the Company’s advanced materials operations.$51,143.
Total professional fees were $221,119$183,509 and $308,109$221,119 for the years ended June 30, 20252026 and 2024,2025, respectively, a decrease of $86,990.$37,610. The primary reason for the decrease was higherreduced auditinglegal fees relatingof to change in audit firms and excess fees charged by prior firm and higher legal costs in the prior period.$46,565.
Total research and development expenses were $69,274$99,905 and $196,422$69,274 for the years ended June 30, 2025,2026, and 2024,2025, respectively, aan decreaseincrease of $127,148.$30,631. The primary reason for the decreaseincrease was increased research and development expenses related to testing and initial product development schedule in the priorcurrent period.
Total other expenses consist of amortization of debt discount related to convertible notes, interest expense related to convertible notes, loan extension fee, loss on extinguishment of debt, and gain on extinguishment of debt and change in fair value of the convertible bridge loans.debt. Total other expensesincome werewas $1,466,383 for the year ended June 30, 2026, compared to other expense of $281,407 for the year ended June 30, 2025, compared to $1,197,193 for the year ended June 30, 2024, a decreasechange of $915,786.$1,747,790. The primary reason for the decreaseother wasincome in the priorcurrent period,period was the Company recorded defaulta interestgain on extinguishment of debt in the amount of $1,070,729$2,810,278, of which $2,743,546 was related to the settlement with Auctus. This was offset somewhat by a loss on debt extinguishment in the amount of $1,061,176 related to shares issued to Auctus note.for the extension of an agreement.
Net income (loss)
Total net income was $392,278 for the year ended June 30, 2026, compared to a net loss wasof $1,646,898 for the year ended June 30, 2025, compared to $3,103,101 for the year ended June 30, 2024, a decreasechange of $1,456,203.$2,039,176. The decreased net loss was primarily related to less operating expenses in the current year offset by more interest expense in the prior year.year and the Company recording a gain on extinguishment of debt in the amount of $2,818,025, of which $2,743,546 was related to the settlement with Auctus.
The Company’s consolidated financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. On June 30, 20252026 and 2024,2025, the Company had $44,850$87,594 and $653,117$44,850 in cash, respectively, and $8,712,005$4,897,313 and $8,661,248$8,708,900 in negative working capital, respectively. On June 30, 2025, the principal balance of the Auctus Senior Secured Promissory Note was $5,900,000. The Note matured on March 15, 2023, and the company has been in discussions with Auctus to resolve the liability. For the years ended June 30, 20252026 and 2024,2025, the Company had net income of $392,278 and a net loss of $1,646,898 and $3,103,101,$1,646,898, respectively. The net income for the year ended June 30, 2026, was generated by a gain on extinguishment of debt in the amount of $2,810,278 of which $2,743,546 was related to the Auctus Settlement. Continued losses may adversely affect the liquidity of the Company in the future. Therefore, the factors noted above raise substantial doubt about our ability to continue as a going concern. The recoverability of a major portion of the recorded asset amounts shown in the accompanying unaudited consolidated balance sheets is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to raise additional capital, obtain financing and to succeed in its future operations. The unaudited consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. To implement its business plan, the Company must raise sufficient funds in the form of equity, debt, or a combination thereof. Until the Company develops profitable operations, it is dependent upon management continually raising funds.
During the year ended June 30, 2025,2026, the Company’s operating activities used $1,288,505$791,756 of net cash used compared to using $1,430,345$1,288,505 of net cash used in operating activities during the year ended June 30, 2024.2025. This difference primarily related to anthe decreasedchange in net income (loss) in the prior periodamount of $1,558,375$2,039,176 offsetalong bywith aan decreasedaggregate changeincrease of $1,471,066 in depreciation and amortization, amortization of debt discount, loss on extinguishment of debt, prepaids and deposits, accounts payable and accrued liabilitiesliabilities, accrued liability-related party, shares to be issued, taxes payable and lease liabilities, offset by an aggregate decrease of $3,013,493 in thestock priorissued periodfor inservices, thegain amounton extinguishment of $1,335,117.debt, and amortization of right of use asset. During the year ended June 30, 2025,2026, the Company’s investing activities used cash of $1,762$3,000 compared to using$1,762 cash of $8,163 duringin the yearprior ended June 30, 2024.period. In the current yearperiod, the Company purchasedacquired property and equipment$3,000 in theequipment. amountThe ofcash $1,762.provided by financing activities in both periods was from proceeds from convertible notes payable. During the year ended June 30, 2025,2026, the Company’s financing activities wereprovided $682,000cash of $837,500 compared to $2,030,000$682,000 ofin netthe prior period. The cash addedprovided inby financing activities duringin theboth yearperiods endedwas Junefrom 30, 2024. This difference related to the fact the Company raised more moneyproceeds from convertible notes during the year ended June 30, 2024 than June 30, 2025.payable.
Effective October 29, 2025, Xeriant entered into a Settlement Agreement with Auctus to restructure the Auctus Note and related Xeriant obligations. The Settlement Agreement provides that the Company pay Auctus $3,500,000 as follows: (A) $1,000,000 on or before 75 days from October 29, 2025; (B) $1,000,000 on or before 105 days from October 29, 2025;(C) $1,000,000 on or before 135 days from October 29, 2025; and (D) $500,000 on or before 165 days from October 29, 2025. In addition, within ten (10) business days of receipt by the Company of any money or any other consideration pertaining to the legal action brought by the Company against XTI Aircraft Company, the Company will transfer litigation proceeds to Auctus on a preferred basis and share on a percentage basis thereafter net of legal fees not to exceed $250,000. The Settlement Agreement was subsequently extended through July 31, 2026, and again extended through October 31, 2026. There is no assurance that the Company will raise the funds necessary to meet these obligations of the Settlement Agreement or that there will be proceeds from the litigation against XTI Aircraft. The foregoing terms from the Settlement Agreement relate to liquidity and are only a portion of those found in the Settlement Agreement. This paragraph is qualified in its entirety by the terms and conditions set forth in Form 8-K filed with the SEC on November 12, 2025.
Funding Strategy
To date, our operations have been funded primarily through private investors. Some of these investors have verbally committed additional funding for the Company, as needed. We have had a number of discussions with broker-dealers regarding the funding required to execute the Company’s business plan, which is to acquire and develop breakthrough technologies or business interests in those companies that have developed these technologies. We plan on issuing an offering document to obtain funding for certain acquisitions that are in the discussion stages.
What changed in the latest 10-Q
Risk Factors
Our business is subject to numerous risks and uncertainties including but not limited to those discussed in “Risk Factors” in our Annual Report on Form 10-K.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
Largest changes
see in full comparisonSixNineMonthsmonths EndedDecemberMarch 31,2025,2026, Results of Operations Compared withSixNineMonthsmonths EndedDecemberMarch 31,20242025
During thesee in full comparisonsixnine months endedDecemberMarch 31,2025,2026, the Company’s operating activities used$383,317$607,290 of net cash used compared to using$750,922$1,116,530 of net cash used in operating activities during thesixnine months endedDecemberMarch 31,2024.2025. This differenceprimarilyrelated toan increasedthe change in net income (loss) in the amount of $2,828,845 along with an aggregate increase of $452,426 in depreciation and amortization, amortization of debt discount, accounts payable and accruedliabilitiesliabilities,inaccruedtheliability,amountrelatedofparty,$329,871taxes payable and lease liabilities, offset byaandecreasedaggregatechangedecrease of $2,772,031 in stock issued forservicesservices, gain on extinguishment of debt, amortization of right of use asset, prepaids and deposits, and shares to be issued. During the nine months ended March 31, 2026, the Company’s investing activities used cash of $3,000 compared to $0 in theamountpriorofperiod.$189,506.In the current period, the Company acquired $3,000 in equipment. The cash provided by financing activities in both periods was from proceeds from convertible notes payable. During thesixnine months endedDecemberMarch 31,2025,2026, the Company’s financing activities provided cash of$415,000$590,000 compared to$352,000$517,000 in the prior period. The cash provided by financing activities in both periods was from proceeds from convertible notes payable.
Total consulting and advisory expenses weresee in full comparison$105,950$276,450 and$125,120$266,720 for thesixnine months endedDecemberMarch 31,20252026 and2024,2025, respectively,aandecreaseincrease of$19,170.$9,730. Thedecreaseincrease was primarily related tonon-recurringanconsulting fees during the quarter ended December 31, 2024. Additionally, there was a small decreaseincrease in advisory board fees in the amount of $84,621 relating to timing of board member anniversarydates.dates offset by a decrease in consulting fees in amount of $68,729 due to non-recurring consulting fees in the third quarter of 2025 in the amount of $56,600.
Total related party consulting fees weresee in full comparison$163,000$235,000 and$251,000$364,500 for thesixnine months endedDecemberMarch 31,20252026 and2024,2025, respectively, a decrease of$88,000.$129,500. Inaddition totheconsultingcurrentagreement amounts,period, the Companywillhad reduced funds to payadditionalconsulting feestoand the related partieswhenagreed to accept reduced amounts of compensation for theCompanysamehasamountincreasedofavailableservicesfunds.rendered.InAdditionally, in the prior period, the Companyhadpaidincreasedconsultingfundsfees topayaconsultingformerfees.director.
Total general and administrative expenses weresee in full comparison$28,381$58,733 and$145,621$102,087 for the three months endedDecemberMarch 31,20252026 and2024,2025, respectively, a decrease of$117,240.$43,354. The primary reasons for the decrease was (i) a decrease in rent expense of$20,051$3,639 due to the Company entering into a new agreement in February 2025 for substantially lessrent, $3,208 less in corporate and listing expenses in the current period,and (iii)$51,176$67,598 less in advertising and marketing expenses in the currentperiod.period offset slightly by an increase in corporate and listing fees in the amount of $11,331 and travel expense in the amount of $16,157.
Total related party consulting fees weresee in full comparison$89,000$72,000 and$128,000$113,500 for the three months endedDecemberMarch 31,20252026 and2024,2025, respectively, a decrease of$39,000. In addition to the consulting agreement amounts, the Company will pay additional consulting fees to related parties when the Company has increased available funds.$41,500. In thepriorcurrent period, the Company hadincreasedreduced funds to pay consultingfees.fees and the related parties agreed to accept reduced amounts.
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This section of the report should be read together with Footnotes of the Company’s audited consolidated financials for the year ended June 30, 2025. The unaudited condensed consolidated statements of operations for the sixthree and nine months ended DecemberMarch 31, 20252026 and 20242025 are compared in the sections below.
During the sixnine months ended DecemberMarch 31, 2025,2026, the Company received $415,000$590,000 from issuance of convertible debt. The convertible notes issued during the sixnine months ended DecemberMarch 31, 2025,2026, contain a provision that prevents the Company from prepaying any principal or interest on the notes.
On July 2, 2025, the Company was served with a complaint from Midland Compounding for breach of contract in the payment of an invoice in the amount of $57,600 related to a purchase order for consulting services related to improving the Company’s intumescent fire-retardant layer for NEXBOARD. On August 20, 2025, the Company filed an Answer and Affirmative Defenses, essentially stating that Midland Compounding had not performed the services it was contracted to provide. The Company’s counsel has been involved in settlement discussions, which have not been successful to date.
SixNine Monthsmonths Ended DecemberMarch 31, 2025,2026, Results of Operations Compared with SixNine Monthsmonths Ended DecemberMarch 31, 20242025
Total consulting and advisory expenses were $105,950$276,450 and $125,120$266,720 for the sixnine months ended DecemberMarch 31, 20252026 and 2024,2025, respectively, aan decreaseincrease of $19,170.$9,730. The decreaseincrease was primarily related to non-recurringan consulting fees during the quarter ended December 31, 2024. Additionally, there was a small decreaseincrease in advisory board fees in the amount of $84,621 relating to timing of board member anniversary dates.dates offset by a decrease in consulting fees in amount of $68,729 due to non-recurring consulting fees in the third quarter of 2025 in the amount of $56,600.
Total related party consulting fees were $163,000$235,000 and $251,000$364,500 for the sixnine months ended DecemberMarch 31, 20252026 and 2024,2025, respectively, a decrease of $88,000.$129,500. In addition to the consultingcurrent agreement amounts,period, the Company willhad reduced funds to pay additional consulting fees toand the related parties whenagreed to accept reduced amounts of compensation for the Companysame hasamount increasedof availableservices funds.rendered. InAdditionally, in the prior period, the Company hadpaid increasedconsulting fundsfees to paya consultingformer fees.director.
Total general and administrative expenses were $53,293$112,026 and $202,066$304,153 for the sixnine months ended DecemberMarch 31, 20252026 and 2024,2025, respectively, a decrease of $148,773.$192,127. The primary reasons for the decrease was (i) a decrease in rent expense of $38,066$27,655 due to the Company entering into a new agreement in February 2025 for substantially less rent, $10,352 less in corporate and listing expenses in the current period, and (iii) $51,418$119,016 less in advertising and marketing expenses in the current period.
Total professional fees were $142,625$162,443 and $89,616$161,123 for the sixnine months ended DecemberMarch 31, 20252026 and 2024,2025, respectively, an increase of $53,009.$1,320. The primary reason for the increase was higher audit fees in the amount of $7,477 in the current period offset by lower legal costs in the amount of $6,157 in the current period.
Total research and development expenses were $70,269$99,905 and $26,576$56,800 for the sixnine months ended DecemberMarch 31, 2025,2026, and 2024,2025, respectively, an increase of $53,966.$43,105. The primary reason for the increase was increased research and development expenses related to testing and initial product development schedule in the current period.
Total other expenses consist of amortization of debt discount related to convertible notes, interest expense related to convertible notes and gain on extinguishment of debt. Total other income (expenses) was $2,572,273$2,479,368 for the sixnine months ended DecemberMarch 31, 2025,2026, compared to ($95,113$166,463) for the sixnine months ended DecemberMarch 31, 2024,2026, an increase of $2,667,386.$2,645,831. The reason for the income in the current period was the Company recorded a gain on extinguishment of debt in the amount of $2,743,546 related to the settlement with Auctus.
Total net income was $1,928,479$1,509,086 for the sixnine months ended DecemberMarch 31, 2025,2026, compared to a net loss of ($789,491$1,319,759) for the sixnine months ended DecemberMarch 31, 2024,2025, an increase of $2,717,970.$2,828,845. The reason for the net income in the current period was the Company recorded a gain on extinguishment of debt in the amount of $2,743,546 related to the settlement with Auctus.
Three Months Ended DecemberMarch 31, 2025,2026, Results of Operations Compared with Three Months Ended DecemberMarch 31, 20242025
Total consulting and advisory expenses were $38,750$170,500 and $36,137$141,600 for the three months ended DecemberMarch 31, 20252026 and 2024,2025, respectively, an increase of $2,613.$28,900. The increase was insignificant.primarily related to an increase in advisory board fees in the amount of $28,900 relating to timing of board member anniversary dates.
Total related party consulting fees were $89,000$72,000 and $128,000$113,500 for the three months ended DecemberMarch 31, 20252026 and 2024,2025, respectively, a decrease of $39,000. In addition to the consulting agreement amounts, the Company will pay additional consulting fees to related parties when the Company has increased available funds.$41,500. In the priorcurrent period, the Company had increasedreduced funds to pay consulting fees.fees and the related parties agreed to accept reduced amounts.
Total general and administrative expenses were $28,381$58,733 and $145,621$102,087 for the three months ended DecemberMarch 31, 20252026 and 2024,2025, respectively, a decrease of $117,240.$43,354. The primary reasons for the decrease was (i) a decrease in rent expense of $20,051$3,639 due to the Company entering into a new agreement in February 2025 for substantially less rent, $3,208 less in corporate and listing expenses in the current period, and (iii) $51,176$67,598 less in advertising and marketing expenses in the current period.period offset slightly by an increase in corporate and listing fees in the amount of $11,331 and travel expense in the amount of $16,157.
Total professional fees were $58,628$19,818 and $25,810$71,507 for the three months ended DecemberMarch 31, 20252026 and 2024,2025, respectively, ana increasedecrease of $32,818.$51,689. The primary reason for the increasedecrease was higherlower legal costs in the current period.
Total research and development expenses were $16,303$29,636 and $15$30,224 for the three months ended DecemberMarch 31, 2025,2026, and 2024,2025, respectively, ana increasedecrease of $16,288.$588 The primary reason for the increasewhich was increased research and development expenses related to testing and initial product development schedule in the current period.insignificant.
Total other expenses consist of amortization of debt discount related to convertible notes and interest expense related to convertible notes. Total other expenses was $82,459$92,905 for the three months ended DecemberMarch 31, 2025,2026, compared to $81,686$71,350 for the three months ended DecemberMarch 31, 2024,2025, an increase of $773,$21,555. whichThe isincrease insignificant.was primarily due to an increase in debt discount in the amount of $42,122 slightly offset by a decrease in interest expense in the amount of $20,567.
Total net loss was $297,593$419,393 for the three months ended DecemberMarch 31, 2025,2026, compared to a net loss of $417,269$530,268 for the three months ended DecemberMarch 31, 2024,2025, an decreaseincrease of $119,676.$110,875. The primary reason for the decrease was a decrease in general and administrativeoperating expenses.
The Company’s unaudited condensed consolidated financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. On DecemberMarch 31, 2025,2026, and June 30, 2025, the Company had $76,533$24,560 and $44,850 in cash, respectively, and $5,645,060$5,804,759 and $8,708,900 in negative working capital, respectively. For the sixnine months ended DecemberMarch 31, 2025,2026, the Company had a net income of $1,928,479$1,509,086 and for the sixnine months ended DecemberMarch 31, 20242025 the Company had a net loss of $789,491.$1,319,759. For the three months ended DecemberMarch 31, 20252026 and 2024,2025, the Company had a net loss of $297,593$419,393 and $417,269,$530,268, respectively. Continued losses may adversely affect the liquidity of the Company in the future. Therefore, the factors noted above raise substantial doubt about our ability to continue as a going concern. The recoverability of a major portion of the recorded asset amounts shown in the accompanying unaudited condensed consolidated balance sheets is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to raise additional capital, obtain financing and to succeed in its future operations. The unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. To implement its business plan, the Company must raise sufficient funds in the form of equity, debt, or a combination thereof. Until the Company develops profitable operations, it is dependent upon management continually raising funds.
During the sixnine months ended DecemberMarch 31, 2025,2026, the Company’s operating activities used $383,317$607,290 of net cash used compared to using $750,922$1,116,530 of net cash used in operating activities during the sixnine months ended DecemberMarch 31, 2024.2025. This difference primarily related to an increasedthe change in net income (loss) in the amount of $2,828,845 along with an aggregate increase of $452,426 in depreciation and amortization, amortization of debt discount, accounts payable and accrued liabilitiesliabilities, inaccrued theliability, amountrelated ofparty, $329,871taxes payable and lease liabilities, offset by aan decreasedaggregate changedecrease of $2,772,031 in stock issued for servicesservices, gain on extinguishment of debt, amortization of right of use asset, prepaids and deposits, and shares to be issued. During the nine months ended March 31, 2026, the Company’s investing activities used cash of $3,000 compared to $0 in the amountprior ofperiod. $189,506.In the current period, the Company acquired $3,000 in equipment. The cash provided by financing activities in both periods was from proceeds from convertible notes payable. During the sixnine months ended DecemberMarch 31, 2025,2026, the Company’s financing activities provided cash of $415,000$590,000 compared to $352,000$517,000 in the prior period. The cash provided by financing activities in both periods was from proceeds from convertible notes payable.
Our discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and judgments which affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities (see Note 2, Summary of Significant Accounting Policies, contained in the notes to the Company’s unaudited condensed consolidated financial statements for the sixnine months ended DecemberMarch 31, 20252026 and 20242025 contained in this filing). On an ongoing basis, we evaluate our estimates. The Company bases our estimates on historical experience and on various other assumptions which we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities which are not readily apparent from other sources. Actual results may differ from these estimates based upon different assumptions or conditions; however, we believe that our estimates are reasonable.
XERI insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
No Form 4 stock transactions in this period.
Well-known investors holding XERI (13F)
None of the 59 investors we track reported a position in their latest 13F.