Xeriant (XERI) 10-K2020 FY Annual report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☒     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2020

or

☐     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number 000-54277

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

Securities registered under Section 12(b) of the Act:

Securities registered under Section 12(g) of the Act:

Common Stock, $0.00001 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐     No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐     No ☒

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

Indicate by check mark whether the registrant has submitted electronically 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 ☒     No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes ☒     No ☐ 

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

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

The aggregate market value of the voting common equity held by non-affiliates of the registrant was approximately $1,152,295 as of the last business day of the registrant’s most recently completed second fiscal quarter, based upon the closing sale price on the OTC:BB reported for such date. Shares of common stock held by each officer and director, and by each person who owns 10% or more of the outstanding common stock, have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of September 30, 2020, the registrant had outstanding 69,584,149 shares of common stock.

Documents Incorporated by Reference: None.

TABLE OF CONTENTS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K (this “Report”) contains “forward-looking statements” within the meaning of the Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Any statements about our expectations, beliefs, plans, predictions, forecasts, objectives, assumptions, or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “intends,” and similar words or phrases. Accordingly, these statements are only predictions and involve estimates, known and unknown risks, assumptions, and uncertainties that could cause actual results to differ materially from those expressed in them. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of several factors more fully described in Item 1A of this Report under the caption “Risk Factors” and elsewhere in this Report, including the exhibits hereto.

All forward-looking statements are necessarily only estimates of future results, and actual results may differ materially from expectations. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates, or expectations contemplated by us will be achieved. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, and financial needs. You are cautioned not to place undue reliance on such statements which should be read in conjunction with the other cautionary statements that are included elsewhere in this Report. Any forward-looking statement speaks only as of the date on which it is made and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws.

Use of Certain Defined Terms

Except where the context otherwise requires and for the purposes of this Report only:

PART I.

Item 1. Business

Xeriant, Inc. (“Xeriant,” formerly known as “Banjo & Matilda, Inc.,” “Banjo,” “BANJ”) is a holding and operating company focused on acquiring, developing and commercializing technologies with applications in aerospace, including innovative aircraft concepts. The Company is located at the Research Park at Florida Atlantic University in Boca Raton, Florida.

Corporate History

The Company was originally incorporated in Nevada on December 18, 2009 under the name Eastern World Group, Inc. The name changed to Banjo & Matilda, Inc. on September 24, 2013. Effective June 22, 2020 the Company changed its name from Banjo & Matilda, Inc. to Xeriant, Inc.

On November 14, 2013, Eastern World Group, Inc. entered into a share exchange agreement (the “Exchange Agreement”) with Banjo & Matilda Pty Ltd, (“Banjo & Matilda”) and the shareholders of Banjo & Matilda (“B&M Shareholders”). Pursuant to the Exchange Agreement, 100% of the issued and outstanding capital stock of Banjo & Matilda was acquired, making it a wholly-owned subsidiary. In consideration for the purchase of 100% of the issued and outstanding capital stock of Xeriant, Inc. (f/k/a Banjo & Matilda) under the Exchange Agreement, the Company issued B&M Shareholders an aggregate of 24,338,872 restricted shares of common stock of the Company.

On July 1, 2015, the operations of Banjo & Matilda Pty Ltd were transferred to Banjo & Matilda (Australia) Pty Ltd., a wholly owned subsidiary of Xeriant, Inc. (f/k/a Banjo & Matilda).

Following the worldwide downturn of the retail clothing business model, in June of 2017, Xeriant (f/k/a Banjo) began to seek out additional businesses to acquire as subsidiaries to expand and refocus its operations to generate more revenue and profit. In June of 2017, Xeriant (f/k/a Banjo) began to seek out companies to acquire as additional subsidiaries to expand its business lines and generate more revenue and profit.

On September 20, 2017, Xeriant (f/k/a Banjo) entered into a Memorandum of Understanding for the acquisition of Spectrum King, LLC as a wholly-owned subsidiary, a pioneer of full spectrum LED grow lights, specialized in designing, manufacturing and selling high-end LED grow lights for indoor/greenhouse applications with both the Agriculture and Horticulture industries.

On March 19, 2018, Banjo entered into a Share Exchange Agreement with Spectrum King, LLC, however this transaction failed to close.

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

On June 28, 2019, Xeriant (f/k/a Banjo) spun out two wholly-owned subsidiaries: Banjo & Matilda (USA), Inc. and Banjo & Matilda Australia Pty LTD.

On September 30, 2019, the acquisition of AAT closed and AAT became a wholly-owned subsidiary of Xeriant, Inc. (f/k/a Banjo & Matilda, Inc.). On June 22, 2020, the name was changed from Banjo & Matilda, Inc. to Xeriant, Inc. The Company will be referred to as “Xeriant, Inc.” and or “Xeriant” throughout the document.

OUR BUSINESS SUMMARY

Introduction

Throughout history, aerospace has been at the leading edge of many important technological, design and engineering breakthroughs. The ability to evolve and innovate has been a critical factor in the industry’s tremendous growth and led to a more prosperous and interconnected global economy. Aerospace continues to adapt to ongoing challenges and opportunities with technology-based solutions in the areas of design, safety, efficiency, maintenance and environmental impact. These advancements are producing next generation aircraft with more specialized features to serve niche markets and improve service in response to changing consumer demands, further demonstrating the industry’s commitment to expanding its traditional boundaries.

Company Strategy

Xeriant is a holding and operating company focused on acquiring, developing and commercializing revolutionary, eco-friendly technologies with applications in aerospace. These include innovative aircraft concepts targeting emerging opportunities within the aviation industry. The Company plans to take an active and disruptive role in the “third wave of aeronautics,” which includes the electrification of aerial transport and the development and integration of specialized aircraft with greatly reduced logistical footprints — allowing them to safely take-off and land significantly closer to (and even on top of) buildings. This will facilitate point-to-point on-demand and scheduled short-haul flights in congested urban environments, called urban air mobility (UAM).

Advancements in structural design, propulsion systems, materials, sensors, artificial intelligence (AI), batteries and high-speed connectivity have dramatically enhanced energy efficiency, acoustics, emissions, safety and autonomy, making feasible a broad range of electrically-powered VTOL (vertical takeoff and landing) capable aircraft, and transitioning aviation into a new era. Many of Xeriant’s “nextologies” will make personal air travel (for 1-4 passengers) far more affordable — providing safe, practical alternatives to traditional means of travel in a post-pandemic world.

Xeriant intends to acquire strategic interests in the most promising of these technological breakthroughs and next-generation aircraft configurations, leveraging the collective expertise of its growing international network of industry partnerships to accelerate the development of economically viable products that address specific market demands. The Company will identify prospective synergies between complementary and related technologies under its umbrella and promote constructive interaction and collaboration.

The Company is an OTC Markets publicly traded company trading under the stock symbol, XERI. As a holding company, Xeriant is positioned to own a portfolio of assets in a number of entities at various stages of maturity, including well-established revenue-generating enterprises. At this time, the Company is in active negotiations with several parties and performing due diligence.

The holding and operating company structure has several advantages and will enable the Company to grow rapidly, acquiring its assets primarily through acquisitions, joint ventures, strategic investments and licensing arrangements. As a publicly-traded holding company, Xeriant offers its subsidiaries such benefits as providing shareholder liquidity, improved access to capital, higher valuations and lower risk through the shared ownership of a diversified portfolio, while at the same time allowing these entities to maintain independence in their distinct operations to focus on their fields of expertise. Cost savings and efficiencies may be realized from sharing non-operational functions such as finance, legal, tax, marketing, human resources, purchasing power, as well as investor and public relations. In addition, leveraging the breadth of resources in a holding company structure provides increased access to financial markets with more favorable terms, allowing for the ability to invest in large-scale projects. Xeriant is selecting investments and acquisitions based on the potential impact of a company’s technology, the strength of its patents and other IP, the quality of its management team, and a demonstrated commitment to its vision with a clear path to profitability.

Industry Overview

The aerospace industry is proving that it can expand its traditional boundaries and meet today’s challenges with exciting new aircraft designs and business models. VTOL aircraft, which comprise a diverse array of small UAVs (unmanned aerial vehicles or drones) and larger airframes for passenger and cargo transport, are a vibrant aviation niche market, attracting substantial investment and spurring technological innovation in virtually every aspect of aircraft development. The quintessence of contemporary aeronautical science and engineering, these mostly electric aircraft (eVTOL) are leading the green transformation in air travel. Given the current state of battery technology, however, larger eVTOL aircraft designs must be optimized for efficiency, which includes reducing engine energy consumption and structural weight where possible, often through utilizing advanced composite materials, additive manufacturing (3D printing) processes for some components, and the miniaturization of electronics. Duration, speed and payload capacity of eVTOL aircraft are dependent on the energy density and weight of batteries. The use of electric aircraft is also being considered for regional routes, flights generally under 500 miles between smaller regional airports. Hybrid electric and fuel cell systems may bridge the transition from petroleum-based fuels to fully electric power from batteries.

Multirotor UAVs have proven to be a viable, low-cost alternative in many applications previously dominated by the helicopter, including surveying, inspections, aerial photography and videography. In the future, larger eVTOL aircraft such as air taxis are poised to become a replacement for light helicopters for inter and intracity passenger travel and cargo delivery and possibly even for military transport. Among the advantages are clean emissions, better acoustics, less complex flight controls, autonomous capability, increased safety on the ground, superior maneuverability and reduced expenses related to maintenance, repair and operations. Because of the explosive growth of VTOL aircraft development over the past few years and their likely ubiquity in the future, new regulations are being formulated to allow their safe integration into civil airspace. As with UAVs, the flights of all new aircraft in civil airspace must also be regulated and safely integrated through some type of low-altitude traffic management system. Stakeholders shaping this integration process include aircraft manufacturers, ride-sharing companies, governmental regulatory agencies and civil transportation authorities, all of whom are working toward establishing standards and overcoming the multitude of issues involved with its implementation. Key technologies impacting the development and implementation of autonomous guidance, navigation and flight control systems, deemed the next technological revolution in air transportation, are high speed (5G) data transmission and AI.

All of the game-changing trends and technical challenges cited above represent significant areas of opportunity for Xeriant, which is well-situated to play a leadership role in this critical transitional period in the evolution of aviation, and specifically the rapidly growing eVTOL aircraft industry. Below are some compelling statistics and forecasts in support of the development and future growth of electrically powered aircraft:

The Research Park at Florida Atlantic University

In August 2019, Xeriant was approved by the Florida Atlantic Research and Development Authority to become a member and tenant of the Research Park at Florida Atlantic University (FAU) in Boca Raton, Florida, which is part of the university and adjacent to the Boca Raton Airport. FAU is one of the top engineering schools in the state, and part of the National Science Foundation’s Industry/University Cooperative Research Center Program called the Center for Advanced Knowledge Enablement (CAKE). The 70-acre Research Park, home to many technology companies and research-based organizations, is the site of Xeriant’s main office. FAU recently opened a center for Artificial Intelligence and Connected Assured Autonomy through their College of Engineering and Computer Science, which is applicable to advanced aircraft systems. The Company is engaging with FAU’s academic team, both faculty and students, to assist in screening and validating various technologies and to work together in a series of joint research initiatives. The relationship with FAU gives Xeriant tremendous credibility, since few companies are selected for membership in its research park, and may provide access to grant programs and financing opportunities. Universities continue to be an indispensable source for novel discoveries in science and technology, with an impressive history of innovations that changed the world. Research parks have become the intermediaries between these academic institutions and industry, a hybrid of two diverse cultures that fosters a dynamic innovation ecosystem of technology transfer, economic development and the generation of skilled labor. Faculty members often play a direct role in furthering the commercialization of technologies by starting their own companies.

Halo Aircraft

One VTOL concept currently in development by Xeriant is called Halo, a unique aerial platform that uses a powered lift ducted fan system to seamlessly transition from vertical to forward flight with superior operational flexibility.

Halo’s patented design features a pivoting ring-wing, dual shrouded contra-rotating impellers, a central axle-mounted payload compartment with a globular shape, designed for high visibility hemispherical viewing. The original patent application filed by the inventor goes back approximately ten years, preceding many other drone or UAV patent filings and claims. Because the Halo patent allowances include multiple rotors, and alternative propulsion and control systems, there is significant room for design flexibility. As a scalable platform, the aircraft’s size and capabilities can be expanded depending on the mission requirements, from a small frame UAV to possibly a heavy lift UAV or even a passenger transport aircraft. Halo, when fully developed, is expected to compete favorably with other VTOL aircraft in terms of speed, acoustics, payload, maneuverability, reliability, efficiency, duration and safety.

The Halo platform will be introduced as a small to medium size high-performance UAV, which is primarily intended for commercial applications such as surveillance or imagery. The strategy for initially introducing a UAV version of Halo includes low regulatory and certification hurdles, reduced development costs, and a relatively short timeline to market. The Halo aircraft was presented at the Space Florida Venture Forum in November 2019, where Xeriant was chosen to be a finalist out of approximately 70 companies.

Intellectual Property

Xeriant owns an eVTOL concept called Halo. All intellectual property rights to the Halo aircraft, both domestically and internationally, including patents and applications for patents, were acquired on October 2, 2018. A Halo aircraft utility patent was filed on September 28, 2018, which is a continuation of U.S. Patent Application Serial No. 12/157,180, filed June 5, 2008, which claims the benefit of and priority to U.S. Patent Application Serial No. 60/941,965, filed June 5, 2007, with both prior applications fully incorporated in their entireties and for all purposes. The Company received a Notice of Allowance from the U.S. Patent and Trademark Office dated June 10, 2019 on the major claims in the patent application, which indicates the agency’s intent to issue a patent. Xeriant received an additional Notice of Allowance dated June 22, 2020 covering additional Halo claims. The Company plans to file a design patent application with the U.S. Patent and Trademark Office for legal protection to cover the unique and distinct appearance or configuration of Halo, as well as file for trademarks to register the Xeriant brand name and intended use, logo design, and some expressions including tag lines.

Market Opportunity

Xeriant has identified multiple emerging areas of technology with exceptional market opportunity, which will be the basis for potential acquisitions, strategic partnerships or licensing arrangements. A number of early-stage technology companies, as well as established companies that have been confined to a limited geographical area, have developed breakthrough, high-market-potential technologies that are past the concept/seed capital stage. Some are already generating revenue while others have a clear path to sales or monetization. Many are acquisition targets or have the potential for a combination or roll-up. In some cases, their technology originated and was developed out of an academic environment. Most of these companies have dynamic management teams that would prefer to focus on their areas of expertise rather than deal with investors, raise capital or dedicate time to non-operational demands. As a strategic and financial partner, Xeriant could provide these companies with access to capital, liquidity through an exchange of equity for shares in a public company, new markets and synergistic contacts, and a state university relationship for research and grants, while maintaining their operational independence. Xeriant understands that the entrepreneurial spirit, passion and vision are critical to success, and can provide a complementary extension of the affiliate company’s management team, including strategic guidance and introductions, increased access to financial markets, and investor liquidity.

Target companies have disruptive technologies with applications in aerospace or innovative aircraft concepts with improved functional capabilities, efficiency, performance, sustainability and safety. The categories of technology include a broad range of disciplines impacting areas such as structural design, aerodynamics, propulsion systems, advanced materials, autonomy, artificial intelligence (AI), sensors, communications and navigation. These prospective target companies also should have significant upside potential, unique I/P, roll up or combination potential, are an acquisition target, have a quality team in place to execute their business plan, and need funding for execution or growth, etc.

An emerging segment of the aviation industry attracting significant investment is the development of autonomous and semi-autonomous vertical take-off and landing (VTOL) unmanned aerial vehicles (UAVs). The quintessence of contemporary aeronautical science and engineering, these mostly electric or hybrid-electric aircraft include small remotely controlled UAVs as well as larger passenger and cargo UAVs, which are targeting short-haul, on-demand transport of passengers and freight, called urban aerial mobility (UAM). The feasibility of these more lightweight and efficient aircraft designs is made possible through advances in composite materials, additive manufacturing (3D printing), miniaturization of electronics, computer processing speed, battery power and electromagnetic propulsion. The UAV has become a viable, low cost alternative in many VTOL applications previously dominated by the helicopter, including aerial photography and videography. Because of UAVs’ explosive growth over the past few years and their anticipated ubiquity in the future, new regulations are being formulated to allow their safe integration into low altitude civil airspace. Stakeholders shaping this integration process include aircraft manufacturers, ridesharing companies, governmental regulatory agencies and civil transportation authorities, all of whom are working toward establishing standards and overcoming the variety of issues involved with its implementation. Key technologies impacting the development and implementation of this VTOL aircraft segment for fully autonomous applications include high speed (5G) data transmission and artificial intelligence. Also drawing interest is the development of VTOL and hover capable rotorcraft that can accomplish many of the civilian and military transport functions of a helicopter, but are faster, quieter, less complex to operate and safer on the ground. Helicopters have been around for over 80 years and have been improved significantly with advanced flight control systems but remain extremely complicated to fly and have performance limitations based on their fundamental flight principles. Due to a condition called retreating blade stall, also known as dissymmetry of lift, helicopters have a maximum forward speed of about 250 miles per hour. Additionally, helicopters produce high noise levels, due primarily to rotor blade vortex interaction and vibration, and have high operating costs. Most of the modernization activity in vertical lift aircraft design over the past few decades has been directed toward modification of existing platforms.

The UAV industry has experienced remarkable growth worldwide over the past decade, and most dramatically over the past five years, across the military, civilian governmental and commercial sectors. Industry forecasters view the booming UAV market as early-stage with significant potential, and as a result, expect the strong performance to extend well into the foreseeable future. A November 2018 market study by Teal Group Corporation, a leading U.S. aerospace and defense market analysis firm, predicts that UAVs will be the most dynamic growth sector of the global aerospace industry, more than tripling over the next decade. Critical factors driving the market’s continuing fast-paced surge include worldwide military adoption of UAVs, increased use of UAVs in commercial and civil government applications, ongoing high capital investments in UAV technologies, consolidation of UAV businesses through acquisitions and synergistic partnerships, and the changing regulatory environment for UAVs’ operation in manned airspace. The commercial sector is forecast to register the fastest compound annual growth rate (CAGR), outpacing both the military and civilian sectors; however, military spending will continue to be dominant, representing over 70 percent of all UAV industry revenue.

The U.S. is the world’s leader in the deployment and development of military UAVs, with some of the most sought-after systems in the world. A decade of extensive operational work with UAVs has given the U.S. military tremendous experience with the architecture, design, and employment of UAV technology. Based on an assessment by Global Market Insights, the larger, higher value systems procured by the U.S. will drive the relative strength of the U.S. military market in the coming years. Military UAV manufacturing in the U.S. is led by General Atomics and Northrop Grumman with over 50 percent of the market. Spurred by new venture capital funding, UAV startups are continuing to enter the market while existing companies are consolidating, introducing new products and components, and shifting toward software and end-to end-solutions for niche markets to maintain market relevance. As UAVs become more widely deployed and accepted, regulatory agencies will need to begin identifying and tracking them as with other aircraft, ultimately bringing them into the air traffic networks. While there are 195 countries in the world, each at a different stage of UAV implementation, the UAV industry will likely be dominated by the largest economies, led by the U.S., China, Japan, Germany and the U.K. India will become the fastest growing commercial market for UAVs, having legalized their use in December 2018. According to a 2016 report by Goldman Sachs, the total market for UAV technologies over the five-year period from 2016-2020 is projected at $100 billion. Approximately 70% of this figure, or $70 billion, would be linked to military activities, while the commercial business, which represents the fastest growth sector, is projected to reach $13 billion over this period. Leading the growth in the commercial sector are the construction and agriculture industries, which require UAVs for mapping, inspections, surveying and maintenance.

UAVs were originally developed by the military to provide aerial surveillance without risk to personnel and evolved into highly capable aircraft for deployment in a variety of missions, including combat, replacing more expensive aircraft. The foundational technologies pioneered and implemented in military UAV programs, as well as smartphone technology and other advancements within the past decade, have enabled UAVs to become powerful tools and a cost effective, reliable and safer option in an expanding list of business applications across almost every industry. Among the areas experiencing dramatic improvements in recent years are electric propulsion, batteries, navigation systems, computer processing, camera systems, stabilization equipment, imaging sensors and analytics software. Many companies, realizing the value of UAVs, are incorporating them into their business processes, through purchasing complete hardware and software packages or through third party service providers. The growing commercial use of UAVs has led to the FAA and other agencies to begin formulating standards and regulations which will enable these aircraft to be identified by air traffic control and integrated into the National Airspace System. The benefits of UAV technology for commercial use will only be optimized, however, when both technological capabilities and regulations allow for fully autonomous operation beyond visual line of sight. Smart UAVs are the next big revolution in UAV technology, particularly with the arrival of 5G’s high-speed transmission across mobile networks. High-speed, secure wireless network connectivity, such as 5G, is required to safely expand UAV operations and unlock the true potential of UAVs in commercial applications. Latency, or transmission delay, is one of the technical issues which has limited fully autonomous deployment but can be almost completely overcome through 5G.

An application whose implementation will be dependent upon the development of autonomous enabling technologies is the use of UAVs in delivery services, or logistics. This application field is receiving significant attention and investment worldwide, and progress is being made on several fronts. According to analysts at Research and Markets, the market for delivery UAV services is projected to reach $29.06 billion by 2027. UAVs have the potential to change last-mile delivery economics for smaller and lighter packages as they could replace many deliveries currently made by traditional delivery vehicles. Since UAVs are not constrained by road infrastructure and congestion, they can theoretically deliver packages faster than a car/truck from a close-by storage location. UAVs can fly over difficult terrain, water or rural areas with poor infrastructure in many cases, or take a much shorter route. Improving the speed of package delivery with lower cost of operation and environmentally friendly technology using unmanned aerial transport systems is currently an area of intense interest among major e-commerce and mass market retailers like Amazon and Walmart, tech giants like IBM and Google, and logistics companies like DHL and UPS. Even some fast food restaurant chains like Domino’s are looking at the potential for food delivery using UAVs. Leading aircraft manufacturers, including Boeing, Airbus and Bell, have become involved with designing these unmanned vehicles and systems for package and cargo transport and delivery, with several prototypes in the process of field testing. Over the past few years, thousands of patents and applications for patents relating to UAV package delivery systems have been granted or filed. Halo plans to design a delivery system architecture to meet the challenges of this emerging field of application.

In addition to participating in the small UAV market, the Company will also begin to look at developing larger, scaled-up aircraft, both manned or unmanned, and other potential applications in aviation. The prospective VTOL applications include short-haul on-demand or scheduled passenger or cargo transport, called urban aerial mobility (UAM). Urban aerial transport vehicles are designed for efficient, low-altitude, inter- and intra-city flights through electrically powered VTOL aircraft (eVTOL). UAM is receiving the attention of major aircraft manufacturers like Airbus, Bell and Boeing, and transportation services companies like Uber, with several prototypes already built. While the technology to develop, produce and fly these aircraft on a manned or semi-autonomous basis is available today, and a number of companies are well along in the process, the actual implementation will likely take many years due to lagging regulatory and infrastructure reforms. Most of the major issues related to regulations, airspace integration and infrastructure that will impact the rollout and penetration of these UAM systems are being addressed and seem to be moving in the right direction. Fully autonomous versions are dependent on real time data transmission, such as 5G technology, and would be even further out. Given the expected lag in federal regulations, integration policies and infrastructure, the Company believes that it has the opportunity to become one of the early players in the urban aerial mobility (UAM) market, which may include air taxi service, personal air travel, air ambulance and cargo transportation. Anticipating the materialization of this new market, well-established aircraft manufacturers and entrepreneurial entries, are in the process of designing and developing short and medium range VTOL-capable aerial vehicles for civilian on-demand and scheduled point-to-point urban transport. These companies want to be part of this emerging aviation segment that is considered to represent the next frontier in commercial aviation. According to a 2018 study by Booz Allen Hamilton, over $1 billion in investment has already been directed to these companies. The convergence of several key trends has enabled the viability of lightweight VTOL aircraft as an option in urban transit, if only on a limited or niche basis. An optimistic scenario by Goldman Sachs projected the demand for air taxis worldwide amounting to $70 billion annually by 2035, requiring an overall production capacity of 50,000 new aircraft a year. John Langford, President and founder of Boeing’s Aurora Flight Sciences, believes an operational air taxi system could make its debut in the mid-2020’s.

Another VTOL market that may be targeted is the more powerful long-range, heavy lift manned commercial or military transport aircraft, which is dominated by the helicopter. New aircraft designed for this market would be built for payload capacity, higher altitude and endurance, are likely to be powered by engines used for conventional manned aircraft with similar performance requirements. There have been very few successful aircraft designs in this general category, particularly designs that have matched the capabilities of heavy lift helicopters, however the U.S. military’s adoption of the V-22 Osprey and V-280 Valor, as well as the AW609’s anticipated entry in civilian transport service, have renewed the interest in powered lift aircraft configurations. According to research firms ReportBuyer and GlobalData, the global helicopter market, which includes both military and commercial aircraft, was valued at $31.5 billion in 2017 and is projected to increase to $40.4 billion by 2027. The U.S. military’s Future Vertical Life (FVL) initiative, established in 2009, was a plan to replace the aging fleet of helicopters with a new family of next-generation rotorcraft.

Development Strategy

Xeriant plans to acquire and develop innovative technologies, including specialized aircraft concepts, with a clear plan toward commercialization. The Company’s relationship with Florida Atlantic University can provide a collaborative research arm for those technologies that require additional validation and the backing of a respected research institution for credibility. The university can provide access to various grants through the SBIR (Small Business Innovation Research), STTR (Small Business Technology Transfer, NSF (National Science Foundation) and other programs, and if warranted, introductions into a number of government agencies, such as DOD (Department of Defense) and DARPA (Defense Advanced Research Projects Agency). Xeriant can also set up strategic alliances with companies that provide complementary technologies or access to new markets. Many of the companies that have developed these technologies or aircraft concepts are constantly seeking capital and in need of investor liquidity, which Xeriant can provide, allowing them to accelerate their development timelines.

Xeriant’s Halo platform, which will be introduced as a small, high-performance UAV, would primarily be used for consumer and commercial applications and operate under Part 107 of FAA regulations. The strategy for initially manufacturing a mini-UAV version of Halo includes low regulatory and certification hurdles, reduced development costs, a relatively short timeline to market, and proof of concept validation, which will assist in the development of future scaled up models. The Halo UAV could be used for military purposes will likely be developed in coordination with the Department of Defense (DOD), with mission-specific transport, offensive or defensive capabilities and integrated within the military’s existing air support structure. The niche opportunities for Halo may include ISR operations, communications relay or even tactical weapons delivery. According to its FY 2019 budget request, the DOD is looking specifically for UAVs that can improve the situational awareness of small units and that are able to perform complex missions in urban environments such as reconnoitering a building.

Xeriant will follow commonly accepted aircraft development processes and methods in the design and engineering of any specialized aircraft, including Halo. After outlining the specific performance objectives and depending on the particular aircraft’s stage of development, the Company’s multidisciplinary engineering team and consultants will concentrate on further developing the conceptual design, concentrating on fundamental aerodynamics and the main structural and mechanical components of the aircraft. Using a project management approach, the goal is to complete the conceptual design through a digital mock-up within six months, and a more detailed design and functioning prototype by the end of the following 12 months. Computer-generated 3D modeling and simulations will be used to configure a basic functioning aircraft that will lift, hover, and transition to forward flight, as well as help determine if modifications will be needed to the airframe or movable surfaces to promote stability and maneuverability. In the next phase of design, the team (internal and external) will focus on developing the supporting systems, including propulsion, navigational and control systems, payloads, and optimization of all elements of the aircraft. The analysis involved in this level of the development process will include CFD (computational fluid dynamics), MBD (multibody dynamics) and FEA (finite element analysis) to determine the aircraft’s performance under various conditions. A series of UAV prototypes will be fabricated, revised and field tested over several months to demonstrate proof of concept. After the preliminary design phase is completed, and with a working model, the Company can seek strategic alliances, joint ventures or licensing agreements for certification, manufacturing and distribution of particular aircraft for the various respective applications.

CONSIDERATIONS RELATED TO OUR BUSINESS

Item 1A. Risk Factors

The Company is in its development stage and has limited operating history.

The Company has limited operating history. The Company will need to continue building its organization and team to competently evaluate and develop sophisticated aerospace and other technologies, including new aircraft. Since the new members of the team will not have worked together, there will likely be personnel changes as the Company proceeds, which may cause disruptions in workflow. The Company is also in the process of building out its location, which will require proper implementation of security protocols, IT infrastructure, a project management system, policies and procedures, in addition to meeting the demanding reporting requirements as a new public company. These challenges will place additional demands on management’s time which may create temporary delays in executing the Company’s business plan or in the development process.

The Company anticipates significant operating losses into the future and additional capital may be required.

Since the Company is still in the process of acquiring and developing technologies, including a new type of aircraft, there is no revenue and there will be significant operating losses into the foreseeable future. There is no assurance that the Company will be able to raise the capital that will be required to sustain operations and execute its business plan, which involves raising capital for acquisitions. Furthermore, any equity or debt financings, if available at all, may be on terms which are not favorable to the Company (and therefore its shareholders) and, in the case of a new equity offering by the Company, existing shareholders will be diluted unless they purchase their proportionate share of the equity offering. If adequate capital is not available on economically viable terms and conditions, the Company’s business, operating results and financial condition may be materially adversely affected.

There is no assurance that the Company or its affiliates will be able to accomplish the design and engineering needed to demonstrate that the technologies, including the Halo aircraft, will perform or operate as planned.

Because of unanticipated technological hurdles or the inability to assemble a qualified team to address these challenges, the Company may not be able to meet the technology performance objectives that are needed to be competitive in the various targeted markets.

The development timeline for certain technologies, including the Halo aircraft, could expand.

Due to unexpected challenges, the length of time to develop certain technologies, including a new aircraft, 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, such as the Halo aircraft platform, 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, such as the Halo aircraft, there is no certainty as to which market applications will be prioritized and targeted as well as the associated timelines and costs involved when the Company reaches that point of determination after a technology has been proven. There is no assurance that the required selling price of our aircraft or its various models will be competitive.

The Company will face significant industry competition.

Most of the targeted technologies will face significant competition from industry leaders who control most of the aerospace industry. The Halo aircraft will compete with hundreds of domestic and international aircraft companies, many well-capitalized, including some who are among the largest aerospace companies in the world, developing VTOL aircraft. The Company could face significant competition from companies who have developed or are developing alternative technologies that could render any acquired technologies, including the Halo aircraft, 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.

The Company is dependent on key personnel.

The success of the Company depends on its ability to identify, hire, train and retain highly qualified, specialized and experienced management and technical personnel. In addition, as the Company enters new areas of aerospace technology, it will need to hire additional highly skilled personnel. Competition for personnel with the required knowledge, skill and experience may be significant, and the Company may not be able to attract, assimilate or retain such personnel. The inability to attract and retain the necessary managerial and technical personnel could have a material adverse effect on the business, results of operations and financial condition of the Company.

Operations could be adversely affected by interruptions from suppliers of components that are beyond the Company’s control.

Whenever possible, the Company intends to use tested and certified systems, components and parts developed and manufactured by third-party suppliers. The Company’s technology development could be adversely affected by interruptions in the supply of these components. If any of these third parties experience difficulties, it may have a direct negative impact on our development process.

Success of the Company is dependent upon it keeping pace with the advances in technology.

The Company is positioned as a technology company. Some of its initiatives will be dependent on the technology of other companies. Systems and components may be impacted by rapid changes in technology, including the emergence of new industry standards and practices that could require the Company to make modifications to its platform. The performance of the Company will depend, in part, on its ability to continue to enhance its existing technology or develop new technology that addresses the increasingly sophisticated and varied needs of the market, license leading technologies and respond to technological advances and emerging industry standards and practices on a timely and cost effective basis. The development of the Company’s proprietary technology entails significant technical as well as business risks. The Company may be unsuccessful in using new technologies effectively or adapting its systems or other proprietary technology to the requirements of emerging industry standards. If the Company is unable to adapt to these changes and demands, the results of operations and financial condition could be materially and adversely affected.

The Company could face liability or disruption from security breaches.

The Company’s technology and development process involves the storage of critical, secure and proprietary information. The Company’s computer infrastructure is potentially vulnerable to both physical and electronic invasions, such as cyberattacks and security breaches. The Company will be required to expend significant capital and other resources to defend against and lessen or correct the adverse effects of these invasions. Any such invasion could result in significant damage to the Company. A person who is able to circumvent the security measures employed by the Company could capture proprietary information; alter or destroy the information of the Company; or cause interruptions of the operations of the Company.

Misappropriation of the intellectual property and proprietary rights of the Company could impair the competitive position of the Company.

The success of the Company will depend to some extent upon is proprietary patented technology. The legal protections available to the Company can afford only limited protection, and these means of protecting the intellectual property of the Company may be inadequate. The Company relies and will continue to rely on patent, trademark, trade secret and copyright laws, confidentiality agreements, employment agreements, work for hire agreements, and technical measures to protect its intellectual property. The Company cannot assure 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 the Company’s products and services are made available online. The intellectual property of the Company 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, the Company generally will enter into agreements with its employees and consultants and limit access to its trade secrets and technology. The Company cannot assure or assume, however, that former employees will not seek to start or enhance other competing products or services to the detriment of the Company, its 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 its proprietary rights, unauthorized persons may attempt to copy aspects of its products or services or to obtain and use information that the Company regards as proprietary. Policing unauthorized use of its proprietary rights is difficult and requires constant attention. The Company may be required to spend significant resources to monitor and police its intellectual property rights. The Company may not be able to detect infringement and may lose its competitive position in the market before it is able to ascertain any such infringement. In addition, competitors may design around the Company’s proprietary technology or develop competing technologies.

Intellectual property litigation may be necessary in the future to enforce the intellectual property rights of the Company, to protect its trade secrets, to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement by the Company. Other companies, including competitors, may obtain patents or other proprietary rights that would prevent, limit or interfere with the ability of the Company to make, use or sell its products and services. Any such litigation by or against the Company, whether the claims are valid or not, could result in the Company incurring substantial costs and diversion of resources, including the attention of senior management. If the Company is unsuccessful in such legal proceedings, the Company could be subjected to significant damages; be required to license technology that is critical to the operations of the Company, if a license is available at a cost which the Company can pay; or be required to develop replacement technologies at substantial cost to the Company in money and time. Any of these results could materially and adversely affect the business, results of operations and financial condition of the Company.

The Company has broad discretion in the use of the offering proceeds.

The Company has broad discretion with respect to the specific application of the net proceeds of this offering. Currently, the Company intends to apply the net proceeds of this offering toward technology acquisitions and development, including aircraft, as well as working capital for operations. There can be no assurance that determinations ultimately made by the Company relating to the specific allocation of the net proceeds will permit the Company to achieve its business objectives.

Many of the regulations involving the planned applications of UAV and VTOL aircraft are still being established.

The USDOT, FAA (Federal Aviation Administration) and other agencies at the federal, state and local levels are beginning to address some of the numerous certification, regulatory and legal challenges associated with unmanned aerial systems (UAS) and urban air mobility. A comprehensive set of standards and enforcement procedures for these new transport systems will need to be developed. Urban mobility aircraft and their operators must undergo rigorous testing and certification, which may require new or modified airworthiness certification standards. These aircraft will also need to comply with existing regulations or be the subject of new regulations to cover their activities. Current regulations govern operating BVLOS (beyond visual line of sight), passenger transport, operating over people and public streets, privacy, transporting commercial cargo across state lines and instrument-based flight. The integration of UAS and UAM into the National Airspace System and air traffic management is a critical factor, requiring a remote identification process for these aircraft. The FAA’s Unmanned Aircraft System Integration Pilot Program (IPP) will provide certification necessary to operate UAVs for certain applications. It is uncertain how new or changed laws and regulations will affect the introduction of the Halo aerial platform into the marketplace. The time and costs involved in obtaining these certifications and regulatory compliance may adversely impact the development process.

There are demanding regulatory requirements involved in producing, testing and certifying an aircraft.

Once the aircraft has gone through the detailed design phase, prototype manufacturing and flight testing, certification by the FAA will be required. The process to obtain such certification is expensive and time consuming and has inherent engineering risks. These include testing for structural strength and fatigue resistance under various conditions, flight tests to assess stability and handling, performance under various extremes controllability, and failure safety. Delays in FAA certification will likely result in the Company incurring increased costs in attempting to correct any issues, and the Company will not be permitted to deliver any aircraft until it has obtained the necessary certification.

There is no assurance that there will be a liquid public market for our stock.

Although we expect our common stock to be eligible for quotation on the OTCQB in the near future, there may not be an active trading market in such stock. In addition, there can be no assurance that a regular and established market will be developed and maintained. There can also be no assurance as to the level of liquidity of any market for our common stock or the prices at which our stockholders may be able to sell their shares.

We do not intend to pay cash dividends on our common stock in the foreseeable future.

We currently anticipate that we will retain all future earnings, if any, to finance the growth and development of our business and do not anticipate paying cash dividends on our common stock in the foreseeable future. Any payment of cash dividends will depend upon our financial condition, capital requirements, earnings and other factors deemed relevant by our board of directors.

Our stock may be subject to certain risks associated with low-priced stocks.

Our common stock is expected to continue to trade on the over-the-counter (OTC) market. The Company is a development-stage company with no present revenues, so the trading price of our common stock may remain below $5.00. So long as our common stock trades below $5.00 per share, the stock will be treated as a “penny stock.” Broker-dealers who sell penny stocks to their established customers must deliver a disclosure schedule explaining the penny stock market and the risks associated with investing in penny stocks prior to any transaction. Additional restrictions apply to broker-dealers who sell penny stocks to persons other than established customers and accredited investors (generally defined as an investor with a net worth in excess of $1,000,000 or annual income exceeding $200,000 individually or $300,000 together with a spouse). For these types of transactions, the broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to the sale. The broker-dealer also must disclose the commissions payable to the broker-dealer, current bid and offer quotations for the penny stock and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market. Such information must be provided by the broker-dealer to the customer orally or in writing before or with the written confirmation of trade sent to the customer. Monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Broker-dealers may be discouraged from dealing with our common stock if they have to bear these additional burdens, which could severely limit the market liquidity of the common stock and the ability of our stockholders to sell their shares.

Our stock price is likely to be volatile.

The market price for our common stock will be influenced by many factors and will be subject to significant fluctuations in response to variations in our operating results and other factors such as investor perceptions of the prospects for the aerospace industry, especially as it relates to VTOL (Vertical Take-Off and Landing) aircraft, UAS (Unmanned Aerial Systems), economic conditions, the financial markets, the regulatory environment, and/or changes in management.

There will be a substantial number of shares eligible for future sale because of the reverse merger with American Aviation Technologies, LLC.

The Company issued 3,113,637 shares of our Series A Preferred Stock in the Exchange. Each preferred share is convertible into 1,000 common shares. Once converted, all of these common shares will constitute “restricted shares” within the meaning of Rule 144 under the Securities Act of 1933. All of these shares are eligible for resale under Rule 144 based on the six-month anniversary of the closing of the merger, subject to the Company being fully reported and following Rule 144 requirements. The sale, or availability for sale, for the foregoing shares could adversely affect the market price of our common stock or impair our ability to raise capital through future sales of our common stock.

MANAGEMENT

Officers and Directors

Our directors will serve until their successor is elected and qualified. Our officers are elected by the board of directors to a term of one year and serves until their successor is duly elected and qualified, or until they are removed from office. Our board of directors has no nominating, auditing or compensation committees.

The name and position of our officers and directors are set forth below:

Keith Duffy, Chairman of the Board and CEO

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

Scott Duffy, Executive Director, Corporate Operations

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

Pablo Lavigna, Chief Technology Officer

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

Brian Carey, Chief Financial Officer

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

Edward C. DeFeudis, Director

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

Item 2. Properties

The Company’s headquarters is located at Innovation Centre #1, 3998 FAU Blvd., Suite 309 Boca Raton, FL 33431.

Item 3. Legal Proceedings

We are not a party to any pending litigation and to our knowledge, no such 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.

Item 4. Mine Safety Disclosures.

Not Applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Our common stock is quoted on the OTC Pink quotation under the symbol “XERI.”

Shares of our common stock have historically been thinly traded, and currently there is no active trading market for our common stock. As a result, our stock price as quoted by the OTC Pink may not reflect an actual or perceived value. The following table sets forth the approximate high and low bid prices for our common stock for the last two fiscal years and interim periods. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. 

Our Transfer Agent

Olde Monmouth Stock Transfer Company, with offices at 200 Memorial Parkway, Atlantic Highlands, New Jersey 07716, is the transfer agent for our shares of common stock. The transfer agent is responsible for all record-keeping and administrative functions in connection with our shares of common stock.

Holders

As of September 30, 2020, there are approximately 151 holders of record of our common stock.

Dividends

We have not declared any cash dividends, nor do we intend to do so in the foreseeable future.

Penny Stock Regulations

The SEC has adopted regulations which generally define so-called “penny stocks” to be an equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. The Registrant’s common stock is a “penny stock” and is subject to Rule 15g-9 under the Exchange Act, or the Penny Stock Rule. This rule imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers and “accredited investors” (generally, individuals with a net worth in excess of $1,000,000 or annual incomes exceeding $200,000, or $300,000 together with their spouses). For transactions covered by Rule 15g-9, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to sale. As a result, this rule may affect the ability of broker-dealers to sell our securities and may affect the ability of purchasers to sell any of our securities in the secondary market, thus possibly making it more difficult for us to raise additional capital.

For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in penny stock, of a disclosure schedule required by the SEC relating to the penny stock market. Disclosure is also required to be made about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stock.

There can be no assurance that the Registrant’s common stock will qualify for exemption from the Penny Stock Rule. Even if the Registrant’s common stock were exempt from the Penny Stock Rule, the Registrant would remain subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of penny stock, if the SEC finds that such a restriction would be in the public interest.

Rule 144

The Registrant was considered a shell company. As a result, the Registrant is subject to the provisions of Rule 144(i) which limit reliance on Rule 144 by shareholders owning stock in a shell company (or a former shell company). Under current interpretations, unregistered shares issued after the Registrant first became a shell company cannot be resold under Rule 144 until the following conditions were met:

Consequently, until the Company becomes current in its Exchange Act filings, holders of the Registrant’s common stock cannot rely on Rule 144 to sell restricted shares of common stock, and may do so then only if we have then filed all required Exchange Act reports during the preceding 12 months.

Securities Authorized for Issuance under Equity Compensation Plans

The Registrant does not have any equity compensation plans and accordingly there are no shares authorized for issuance under an equity compensation plan.

There was no stock issued in fiscal year ended 2019 or fiscal year ended 2020.

The sales and issuances of the securities described above were made pursuant to the exemptions from registration contained in to Section 4(a)(2) of the Securities Act, Regulation D under the Securities Act and Regulation S under the Securities Act. Each purchaser represented that such purchaser’s intention to acquire the shares for investment only and not with a view toward distribution. We requested our stock transfer agent to affix appropriate legends to the stock certificate issued to each purchaser and the transfer agent affixed the appropriate legends. Each purchaser was given adequate access to sufficient information about us to make an informed investment decision. Except as described in this prospectus, none of the securities were sold through an underwriter and accordingly, there were no underwriting discounts or commissions involved.

Item 6. Selected Financial Data.

Not applicable because we are a smaller reporting company.

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

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

Financial Results

The following discussion of the results of operations constitutes management’s review of the factors that affected the financial and operating performance for the fiscal years ended June 30, 2020 and 2019. This discussion should be read in conjunction with the financial statements and notes thereto contained elsewhere in this report. The Company has a June 30 fiscal year end.

Executive summary

Xeriant, Inc. (“Xeriant,” formerly known as “Banjo & Matilda, Inc.,” “Banjo,” “BANJ”) is a holding and operating company focused on acquiring, developing and commercializing technologies with applications in aerospace, including innovative aircraft concepts. The Company is located at the Research Park at Florida Atlantic University in Boca Raton, Florida.

The Company was originally incorporated in Nevada on December 18, 2009 under the name Eastern World Group, Inc. The name changed to Banjo & Matilda, Inc. on September 24, 2013. Effective June 22, 2020 the Company changed its name from Banjo & Matilda, Inc. to Xeriant, Inc.

On November 14, 2013, Eastern World Group, Inc. entered into a share exchange agreement (the “Exchange Agreement”) with Banjo & Matilda Pty Ltd, (“Banjo & Matilda”) and the shareholders of Banjo & Matilda (“B&M Shareholders”). Pursuant to the Exchange Agreement, 100% of the issued and outstanding capital stock of Banjo & Matilda was acquired, making it a wholly-owned subsidiary. In consideration for the purchase of 100% of the issued and outstanding capital stock of Xeriant, Inc. (f/k/a Banjo & Matilda) under the Exchange Agreement, the Company issued B&M Shareholders an aggregate of 24,338,872 restricted shares of common stock of the Company.

On July 1, 2015, the operations of Banjo & Matilda Pty Ltd were transferred to Banjo & Matilda (Australia) Pty Ltd., a wholly owned subsidiary of Xeriant, Inc. (f/k/a Banjo & Matilda).

Following the worldwide downturn of the retail clothing business model, in June of 2017, Xeriant (f/k/a Banjo) began to seek out additional businesses to acquire as subsidiaries to expand and refocus its operations to generate more revenue and profit. In June of 2017, Xeriant (f/k/a Banjo) began to seek out companies to acquire as additional subsidiaries to expand its business lines and generate more revenue and profit.

On September 20, 2017, Xeriant (f/k/a Banjo) entered into a Memorandum of Understanding for the acquisition of Spectrum King, LLC as a wholly-owned subsidiary, a pioneer of full spectrum LED grow lights, specialized in designing, manufacturing and selling high-end LED grow lights for indoor/greenhouse applications with both the Agriculture and Horticulture industries.

On March 19, 2018, Banjo entered into a Share Exchange Agreement with Spectrum King, LLC, however this transaction failed to close.

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

On June 28, 2019, Xeriant (f/k/a Banjo) spun out two wholly-owned subsidiaries: Banjo & Matilda (USA), Inc. and Banjo & Matilda Australia Pty LTD.

On September 30, 2019, the acquisition of AAT closed and AAT became a wholly-owned subsidiary of Xeriant, Inc. (f/k/a Banjo & Matilda, Inc.). On June 22, 2020, the name was changed from Banjo & Matilda, Inc. to Xeriant, Inc. The Company will be referred to as “Xeriant, Inc.” and or “Xeriant” throughout the document.

Recent Developments

Spin Out Agreement

Effective June 28, 2019, the Company entered into a Spin Out Agreement with WNPAU Pty Ltd. (“WNPAU”) which is owned by the Company’s former CEO Brendan MacPherson. In connection with the agreement, WNPAU agreed to assume all the assets and liabilities of the Company’s two subsidiaries: Banjo & Matilda (USA), Inc. and Banjo & Matilda Australia Pty LTD exchange for the return of 1,000,000 shares of Preferred Stock held by Brendan MacPherson and $135,000 of accrued compensation owed to Brendan MacPherson.

Exchange Agreement

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

The Exchange Agreement was subject to the satisfaction of certain conditions as set forth in the Exchange Agreement.

AAT is a Florida limited liability company that is an aircraft design and development company dedicated to advancing aeronautical safety and performance through new and innovative concepts.

Fiscal Year 2020 Results of Operations Compared with Fiscal Year 2019

General and administrative expenses

Total general and administrative expenses were $94,013 for the year ended June 30, 2020 compared to $11,682 for the period from inception (August 6, 2018) through June 30, 2019. The increase of 705% was primarily due to an increase in consulting fees for new business development and incurring rent for new office space.

Professional Fees

Total professional fees were $137,250 for the year ended June 30, 2020 compared to $64,311 for the period from inception (August 6, 2018) through June 30, 2019. The increase of 113% was due was due to incurring engineering, legal and accounting fees. The accounting and legal fees were primarily related to fulfilling financial reporting requirements.

Related Party Consulting Fees

Total related party consulting fees were $125,100 for the year ended June 30, 2020 compared to $0 for the period from inception (August 6, 2018) through June 30, 2019. The consulting fees consisted of (i) $73,400 paid to Ancient Investments, LLC, a company owned by Keith Duffy, CEO and Scott Duffy, Executive Director of Operations, (ii) $44,700 paid to AMP Web services, a company owned by Pablo Lavigna, CTO and (iii) $7,000 paid to Keystone Business Development Partners, a company owned by Brian Carey, CFO. The increase of 100% was due to services beginning in the current fiscal year.

Research and Development Expenses

Total research and development expenses were $6,376 for the year ended June 30, 2020 compared to $8,384 for the period from inception (August 6, 2018) through June 30, 2019. The research and development fees were paid to an inventor to work on the Vertical Take-Off and Landing (“VTOL”) Halo Aircraft Technology. The decrease of 24% was due to the fact that most of the contract fees were incurred in the prior period.

Other Income (Expenses)

Total other expenses consist of amortization of debt discount related to convertible notes, interest expense related to convertible notes and gain on forgiveness of accounts payable. Total other income (expenses) were $336,825 for the year ended June 30, 2020 compared to $378 for the period from inception (August 6, 2018) through June 30, 2019. The increase was due to the issuance of new debt.

Net loss

Total net loss was $699,564 for the year ended June 30, 2020 compared to $84,755 for the period from inception (August 6, 2018) through June 30, 2019. The increase of 725% was due to increased professional fees primarily for fulfilling financial reporting requirements, office rent and expenses related to new debt.

Liquidity and Capital Resources

As of June 30, 2020, we had a cash balance of $38,893 and negative working capital of $53,532. Our net loss of $699,564 in the year ended June 30, 2020 was mostly funded by proceeds raised from financings. We will need to raise working capital (or refinance existing short-term debt to long-term debt) to fund 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-efforts private equity and debt financings. We do not have any credit or equity facilities available with financial institutions, stockholders or third-party investors, and will continue to rely on best efforts financings. The failure to raise sufficient capital will likely cause us to cease operations.

During the fiscal year 2020, our operating activities used $349,586 of net cash compared to using $82,171 of net cash flow in our operating activities during fiscal year 2019. This difference primarily resulted from the increase of operations.

Commitments for Capital Expenditures

To date, our operations have been funded primarily through private investors. Some of these investors have verbally committed additional funding for the Company, as needed. We have had a number of discussions with broker-dealers regarding the funding required to execute the Company’s business plan, which is to acquire 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.

Off Balance Sheet Items

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

Critical Accounting Policies

Basis of Presentation

The consolidated financial statements, which include the accounts of the Company and American Aviation Technologies, LLC, its subsidiary, 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 subsidiary, 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 dollars. The fiscal year end is June 30.

Principles of Consolidation

The consolidated financial statements include the accounts of Xeriant, Inc. and American Aviation Technologies, LLC. All significant intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant assumptions and estimates relate to (i) the valuation of beneficial conversion features associated with convertible debt and (ii) our incremental borrowing rate, estimated to be 10%, used to calculate the present value of our lease payments. Actual results could differ from these estimates.

Fair Value Measurements and Fair Value of Financial Instruments

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

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

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

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

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

Deferred Taxes

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

Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse and are considered immaterial. As of June 30, 2020 there are no deferred tax assets.

Cash and Cash Equivalents

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

Accounts Receivable and Allowance for Doubtful Accounts

The Company monitors outstanding receivables based on factors surrounding the credit risk of specific customers, historical trends, and other information. The allowance for doubtful accounts is estimated based on an assessment of the Company’s ability to collect on customer accounts receivable. There is judgment involved with estimating the allowance for doubtful accounts and if the financial condition of the Company’s customers were to deteriorate, resulting in their inability to make the required payments, the Company may be required to record additional allowances or charges against revenues. The Company writes-off accounts receivable against the allowance when it determines a balance is uncollectible and no longer actively pursues its collection. The allowance for doubtful accounts is created by forming a credit balance which is deducted from the total receivables balance in the balance sheet. As of June 30, 2020 and 2019 there are no accounts receivable.

Revenue Recognition

Revenue includes product sales. The Company recognizes revenue from product sales in accordance with Topic 606 “Revenue Recognition in Financial Statements” which considers revenue realized or realizable and earned when all of the following criteria are met:

For the year ended June 30, 2020 and for the period from inception (August 6, 2018) through June 30, 2019, the Company has no revenue.

Convertible Debentures

If the conversion features of conventional convertible debt provide for a rate of conversion that is below market value at issuance, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount pursuant to ASC Topic 470-20 “Debt with Conversion and Other Options.” In those circumstances, the convertible debt is recorded net of the discount related to the BCF, and the Company amortizes the discount to interest expense, over the life of the debt. During the year ended June 30, 2020, the Company recorded a BCF in the amount of $379,693.

Fair Value of Financial Instruments

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

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

Research and Development Expenses

Expenditures for research and development are expensed as incurred. The Company incurred research and development expenses of $6,376 for the year ended June 30, 2020 and $8,384 for the period from inception (August 6, 2018) through June 30, 2019.

Advertising, Marketing and Public Relations

The Company expenses advertising and marketing costs as they are incurred. The Company recorded advertising expenses in the amount of $1,211 for the year ended June 30, 2020 and $4,882 for the period from inception (August 6, 2018) through June 30, 2019.

Offering Costs

Costs incurred in connection with raising capital by the issuance of common stock are recorded as contra equity and deducted from the capital raised. There were no offering costs for the year ended June 30, 2020 and $4,882 for the period from inception (August 6, 2018) through June 30, 2019.

Income Taxes

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

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

Recent Accounting Pronouncements

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

In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This update addresses a diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period.

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.

Item 7A. Quantitative And Qualitative Disclosures About Market Risk

As a Smaller Reporting Company, we are not required to furnish information under this Item 7A.

Item 8. Financial Statements and Supplementary Data

XERIANT, INC. AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2020

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

To the shareholders and the board of directors of Xeriant, Inc. f/k/a Banjo & Matilda, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Xeriant, Inc. f/k/a Banjo & Matilda, Inc. (the “Company”) as of June 30, 2020 and 2019, the related statements of operations, stockholders’ equity (deficit), and cash flows for the year ended June 30, 2020 and for the period from inception (August 6, 2018) through June 30, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2020 and 2019, and the results of its operations and its cash flows for the year ended June 30, 2020 and for the period from inception (August 6, 2018) through June 30, 2019, in conformity with accounting principles generally accepted in the United States.

Basis for Opinion

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

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

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

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

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 9 to the consolidated financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ BF Borgers CPA PC

BF Borgers CPA PC

Served as Auditor since 2019

Lakewood, CO

September 30, 2020

XERIANT, INC. AND SUBSIDIARY (FORMERLY BANJO & MATILDA, INC.)

CONSOLIDATED BALANCE SHEETS

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

XERIANT, INC. AND SUBSIDIARY (FORMERLY BANJO & MATILDA, INC.)

CONSOLIDATED STATEMENTS OF OPERATIONS

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

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE YEAR ENDED JUNE 30, 2020

AND FROM INCEPTION (AUGUST 6, 2018) THROUGH JUNE 30, 2019

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

XERIANT, INC. AND SUBSIDIARY(FORMERLY BANJO & MATILDA, INC.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

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

XERIANT, INC. AND SUBSIDIARY (FORMERLY BANJO & MATILDA, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND NATURE OF BUSINESS

Xeriant, Inc. (“Xeriant,” formerly known as “Banjo & Matilda, Inc.,” “Banjo,” “BANJ”) is a holding and operating company focused on acquiring, developing and commercializing technologies with applications in aerospace, including innovative aircraft concepts. The Company is located at the Research Park at Florida Atlantic University in Boca Raton, Florida.

The Company was originally incorporated in Nevada on December 18, 2009 under the name Eastern World Group, Inc. The name changed to Banjo & Matilda, Inc. on September 24, 2013. Effective June 22, 2020 the Company changed its name from Banjo & Matilda, Inc. to Xeriant, Inc.

On November 14, 2013, Eastern World Group, Inc. entered into a share exchange agreement (the “Exchange Agreement”) with Banjo & Matilda Pty Ltd, (“Banjo & Matilda”) and the shareholders of Banjo & Matilda (“B&M Shareholders”). Pursuant to the Exchange Agreement, 100% of the issued and outstanding capital stock of Banjo & Matilda was acquired, making it a wholly-owned subsidiary. In consideration for the purchase of 100% of the issued and outstanding capital stock of Xeriant, Inc. (f/k/a Banjo & Matilda) under the Exchange Agreement, the Company issued B&M Shareholders an aggregate of 24,338,872 restricted shares of common stock of the Company.

On July 1, 2015, the operations of Banjo & Matilda Pty Ltd were transferred to Banjo & Matilda (Australia) Pty Ltd., a wholly owned subsidiary of Xeriant, Inc. (f/k/a Banjo & Matilda).

Following the worldwide downturn of the retail clothing business model, in June of 2017, Xeriant (f/k/a Banjo) began to seek out additional businesses to acquire as subsidiaries to expand and refocus its operations to generate more revenue and profit. In June of 2017, Xeriant (f/k/a Banjo) began to seek out companies to acquire as additional subsidiaries to expand its business lines and generate more revenue and profit.

On September 20, 2017, Xeriant (f/k/a Banjo) entered into a Memorandum of Understanding for the acquisition of Spectrum King, LLC as a wholly-owned subsidiary, a pioneer of full spectrum LED grow lights, specialized in designing, manufacturing and selling high-end LED grow lights for indoor/greenhouse applications with both the Agriculture and Horticulture industries.

On March 19, 2018, Banjo entered into a Share Exchange Agreement with Spectrum King, LLC, however this transaction failed to close.

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

On June 28, 2019, Xeriant (f/k/a Banjo) spun out two wholly-owned subsidiaries: Banjo & Matilda (USA), Inc. and Banjo & Matilda Australia Pty LTD.

On September 30, 2019, the acquisition of AAT closed and AAT became a wholly-owned subsidiary of Xeriant, Inc. (f/k/a Banjo & Matilda, Inc.). On June 22, 2020, the name was changed from Banjo & Matilda, Inc. to Xeriant, Inc. The Company will be referred to as “Xeriant, Inc.” and or “Xeriant” throughout the document.

Xeriant is a holding and operating company focused on acquiring, developing and commercializing revolutionary, eco-friendly technologies with applications in aerospace. These include innovative aircraft concepts targeting emerging opportunities within the aviation industry. The Company plans to take an active and disruptive role in the “third wave of aeronautics,” which includes the electrification of aerial transport and the development and integration of specialized aircraft with greatly reduced logistical footprints — allowing them to safely take-off and land significantly closer to (and even on top of) buildings. This will facilitate point-to-point on-demand and scheduled short-haul flights in congested urban environments, called urban air mobility (UAM).

Advancements in structural design, propulsion systems, materials, sensors, artificial intelligence (AI), batteries and high-speed connectivity have dramatically enhanced energy efficiency, acoustics, emissions, safety and autonomy, making feasible a broad range of electrically-powered VTOL (vertical takeoff and landing) capable aircraft, and transitioning aviation into a new era. Many of Xeriant’s “nextologies” will make personal air travel (for 1-4 passengers) far more affordable — providing safe, practical alternatives to traditional means of travel in a post-pandemic world.

Xeriant intends to acquire strategic interests in the most promising of these technological breakthroughs and next-generation aircraft configurations, leveraging the collective expertise of its growing international network of industry partnerships to accelerate the development of economically viable products that address specific market demands. The Company will identify prospective synergies between complementary and related technologies under its umbrella and promote constructive interaction and collaboration.

The Company is an OTC Markets publicly company trading under the stock symbol, XERI. As a holding company, Xeriant is positioned to own a portfolio of assets in a number of entities at various stages of maturity, including well-established revenue-generating enterprises. At this time, the Company is in active negotiations with several parties and performing due diligence.

The holding and operating company structure has several advantages and will enable the Company to grow rapidly, acquiring its assets primarily through acquisitions, joint ventures, strategic investments and licensing arrangements. As a publicly-traded holding company, Xeriant offers its subsidiaries such benefits as providing shareholder liquidity, improved access to capital, higher valuations and lower risk through the shared ownership of a diversified portfolio, while at the same time allowing these entities to maintain independence in their distinct operations to focus on their fields of expertise. Cost savings and efficiencies may be realized from sharing non-operational functions such as finance, legal, tax, marketing, human resources, purchasing power, as well as investor and public relations. In addition, leveraging the breadth of resources in a holding company structure provides increased access to financial markets with more favorable terms, allowing for the ability to invest in large-scale projects. Xeriant is selecting investments and acquisitions based on the potential impact of a company’s technology, the strength of its patents and other IP, the quality of its management team, and a demonstrated commitment to its vision with a clear path to profitability.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements, which include the accounts of the Company and American Aviation Technologies, LLC, its subsidiary, 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 subsidiary, 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 dollars. The fiscal year end is June 30.

Principles of Consolidation

The consolidated financial statements include the accounts of Xeriant, Inc. and American Aviation Technologies, LLC. All significant intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant assumptions and estimates relate to (i) the valuation of beneficial conversion features associated with convertible debt and (ii) our incremental borrowing rate, estimated to be 10%, used to calculate the present value of our lease payments. Actual results could differ from these estimates.

Fair Value Measurements and Fair Value of Financial Instruments

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

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

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

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

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

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Deferred Taxes

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

Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse and are considered immaterial. As of June 30, 2020 there are no deferred tax assets.

Cash and Cash Equivalents

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

Accounts Receivable and Allowance for Doubtful Accounts

The Company monitors outstanding receivables based on factors surrounding the credit risk of specific customers, historical trends, and other information. The allowance for doubtful accounts is estimated based on an assessment of the Company’s ability to collect on customer accounts receivable. There is judgment involved with estimating the allowance for doubtful accounts and if the financial condition of the Company’s customers were to deteriorate, resulting in their inability to make the required payments, the Company may be required to record additional allowances or charges against revenues. The Company writes-off accounts receivable against the allowance when it determines a balance is uncollectible and no longer actively pursues its collection. The allowance for doubtful accounts is created by forming a credit balance which is deducted from the total receivables balance in the balance sheet. As of June 30, 2020 and 2019 there are no accounts receivable.

Revenue Recognition

Revenue includes product sales. The Company recognizes revenue from product sales in accordance with Topic 606 “Revenue Recognition in Financial Statements” which considers revenue realized or realizable and earned when all of the following criteria are met:

For the year ended June 30, 2020 and for the period from inception (August 6, 2018) through June 30, 2019, the Company has no revenue.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Convertible Debentures

If the conversion features of conventional convertible debt provide for a rate of conversion that is below market value at issuance, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount pursuant to ASC Topic 470-20 “Debt with Conversion and Other Options.” In those circumstances, the convertible debt is recorded net of the discount related to the BCF, and the Company amortizes the discount to interest expense, over the life of the debt. During the year ended June 30, 2020, the Company recorded a BCF in the amount of $379,693.

Fair Value of Financial Instruments

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

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

Research and Development Expenses

Expenditures for research and development are expensed as incurred. The Company incurred research and development expenses of $6,376 for the year ended June 30, 2020 and $8,384 for the period from inception (August 6, 2018) through June 30, 2019.

Advertising, Marketing and Public Relations

The Company expenses advertising and marketing costs as they are incurred. There Company recorded advertising expenses in the amount of $1,211 for the year ended June 30, 2020 and $4,882 for the period from inception (August 6, 2018) through June 30, 2019.

Offering Costs

Costs incurred in connection with raising capital by the issuance of common stock are recorded as contra equity and deducted from the capital raised. There were no offering costs for the year ended June 30, 2020 and $4,882 for the period from inception (August 6, 2018) through June 30, 2019.

Income Taxes

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

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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

Recent Accounting Pronouncements

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

In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This update addresses a diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period.

On June 20, 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 is intended to reduce cost and complexity and to improve financial reporting for share-based payments to nonemployees (for example, service providers, external legal counsel, suppliers, etc.). Under the new standard, companies will no longer be required to value non-employee awards differently from employee awards. Meaning that companies will value all equity classified awards at their grant-date under ASC 718 and forgo revaluing the award after this date. The Company adopted ASU 2018-07 on August 6, 2018. The adoption of this standard did not have a material impact on the financial statements.

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

NOTE 3 – OPERATING LEASE RIGHT-OF-USE ASSET AND OPERATING LEASE LIABILITY

The Company leases 2,911 square feet of office space located at Innovation Centre No. 1, 3998 FAU Boulevard, Boca Raton, Florida. The Company entered into a lease agreement commencing on November 1, 2019 through January 1, 2025 in which the first three months of rent are abated. The following table illustrates the base rent amounts over the term of the lease:

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

NOTE 4 – EXCHANGE AGREEMENT

On April 18, 2019, Xeriant, Inc. (f/k/a Banjo & Matilda, Inc.), and American Aviation Technologies, LLC entered into a Share Exchange Agreement (“Agreement”). The agreement, which was effective on September 30, 2019, was pursuant to which Banjo acquired 100% of our issued and outstanding membership units in exchange for the issuance of Banjo shares of its Series A Preferred Stock constituting 86.39% of the total voting power of Banjo capital stock to be outstanding upon closing, after giving effect to the consummation of concurrent debt settlement and other capital stock issuances but before the issuance of shares of capital stock for investor relations purposes. As a result of the Exchange Agreement, the Company became a wholly owned subsidiary of Banjo.

The Exchange Agreement was subject to the satisfaction of certain conditions as set forth in the Exchange Agreement.

Consummation of the Exchange Agreement was effective on September 30, 2019. Pursuant to the Exchange Agreement, the members of AAT received 2,750,000 shares of the Banjo & Matilda, Inc.’s Series A Preferred Stock to the members of AAT in exchange for the 10,000,000 member units.

On September 30, 2019 just prior to the exchange, Banjo issued 170,000 shares of preferred stock as compensation and 193,637 shares of preferred stock in satisfaction of $2,608,224 in liabilities.

NOTE 5 – CONVERTIBLE NOTES PAYABLE

The carrying value of convertible notes payable, net of discount, as of June 30, 2020 was $32,734 as summarized below:

The following table illustrates the carrying values for the convertible notes payable as of June 30, 2020:

Between September 27, 2019 and June 30, 2020, AAT issued convertible notes payable with an aggregate face value of $352,450 with a coupon rate of 6%. The notes have a maturity date of six months. The agreements provided that in the event AAT is merged into Banjo (“Company”), at any time prior to the Maturity Date, the holder has the option to convert the principal balance and any accrued interest to common stock of the Company at a conversion price of $.0033 per share. In the event the holder does not elect to convert the note prior to maturity, the note will automatically convert to common stock at a price of $.0033 per share.

NOTE 5 – CONVERTIBLE NOTES PAYABLE (CONTINUED)

The Company evaluated the agreement under ASC 815 Derivatives and Hedging (“ASC 815”). ASC 815 generally requires the analysis embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. None of the embedded terms required bifurcation and liability classification. However, the Company was required to determine if the debt contained a beneficial conversion feature (“BCF”), which is based on the intrinsic value on the date of issuance. The Company recorded a beneficial conversion feature in the amount of $352,450 related to these notes. Additionally, for the year ended June 30, 2020 the Company recorded $324,034 in amortization of debt discount related to the BCF. For the year ended June 30, 2020 the Company recorded $9,722 in interest expense.

Between March 27, 2020 and June 30, 2020, holders of the convertible notes converted $291,300 in principal and $8,735 in accrued interest into 90,919,827 shares of common stock. Since the shares have not been issued as of June 30, 2020, these amounts were held in common stock to be issued.

NOTE 6 –RELATED PARTY TRANSACTIONS

Convertible Notes Payable, Related Party

The following table illustrates the carrying values for the convertible notes payable, related party as of June 30, 2020 and June 30, 2019:

Between March 4, 2019 and September 23, 2019, AAT issued convertible notes payable with an aggregate face value of $68,000 with a coupon rate of 8% to a related party. The agreements provided that in the event AAT is merged into Banjo (“Company”), at any time prior to the Maturity Date the holder has the option to convert the principal balance and any accrued interest to common stock of the Company at a conversion price of $.0033 per share. In the event the holder does not elect to convert the note prior to maturity, the note will automatically convert to common stock at a price of $.0033 per share.

The Company evaluated the agreement under ASC 815 Derivatives and Hedging (“ASC 815”). ASC 815 generally requires the analysis embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. None of the embedded terms required bifurcation and liability classification. However, the Company was required to determine if the debt contained a beneficial conversion feature (“BCF”), which is based on the intrinsic value on the date of issuance. The Company recorded a beneficial conversion feature in the amount of $27,243 related to these notes. Additionally, for the year ended June 30, 2020 the Company recorded $27,242 in amortization of debt discount related to the BCF. For the year ended June 30, 2020 the Company recorded $3,983 in interest expense.

NOTE 6 –RELATED PARTY TRANSACTIONS (CONTINUED)

Between March 27, 2020 and June 30, 2020, the holder of the convertible notes elected to convert $68,000 in principal and $4,361 in accrued interest into 21,927,636 shares of common stock. Since the shares have not been issued as of June 30, 2020, these amounts were held in common stock to be issued.

Other Related Party Transactions

During the year ended June 30, 2020, the Company paid Ancient Investments, LLC, a Company owned by the Company’s CEO, Keith Duffy and the Company’s Executive Director of Corporate Operations, $73,400 for consulting services.

During the year ended June 30, 2020, the Company paid AMP Web Services, a Company owned by the Company’s CTO, Pablo Lavigna, $35,700 for consulting services. As of June 30, 2020, the Company accrued $9,000 owed for May and June 2020 services.

During the year ended June 30, 2020, the Company paid Keystone Business Development Partners, a Company owned by the Company’s CFO, Brian Carey, $7,000 for consulting services.

NOTE 7 – 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. As of June 30, 2020, the Company is not aware of any contingent liabilities that should be reflected in the financial statements.