Risk Factors Dashboard

Once a year, publicly traded companies issue a comprehensive report of their business, called a 10-K. A component mandated in the 10-K is the ‘Risk Factors’ section, where companies disclose any major potential risks that they may face. This dashboard highlights all major changes and additions in new 10K reports, allowing investors to quickly identify new potential risks and opportunities.

Risk Factors - XERI

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-Changes in blue
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Item 1A. Risk Factors

An investment in our common stock involves a high degree of risk. Before making an investment decision, you should give careful consideration to the following risk factors, including our financial statements and related notes, before deciding whether to invest in shares of our common stock. The occurrence of any of the adverse developments described in the following risk factors could materially and adversely harm our business, financial condition, results of operations or prospects. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.

RISKS RELATING TO OUR FINANCIAL POSITION AND CAPITAL NEEDS

We are in our development stage and have a limited operating history.

We are a development-stage enterprise with a limited operating history with no sales, and operating losses since its inception. We will need to continue building our organization and team to competently evaluate and secure business opportunities for the development of sophisticated technologies. As an early-stage business we will likely encounter unforeseen costs, expenses, competition and other problems to which such businesses are often subject. Our likelihood of success will depend on the problems, uncertainties, unexpected costs, difficulties, complications and delays frequently encountered in developing and expanding a new business and the competitive environment in which we plan to operate. If we fail to successfully address these risks, our business, financial condition and results of operations would be materially harmed.

We anticipate operating losses to continue into the foreseeable future and substantial additional capital may be required that may not be available on acceptable terms.

Currently, there is no revenue being generated and we have significant operating losses that are expected to continue into the foreseeable future. There is no assurance that we will be able to raise the capital that will be required to sustain operations and execute our business plan, which involves raising capital for acquisitions as well as developing and commercializing technologies. We are especially focused on the green construction materials business, namely DUREVER™ building products, which includes a line of composite products primarily made from recycled thermoplastics, reinforcement materials and fire-retardant chemicals for use in walls, ceilings, flooring, framing, siding, roofing, molding and decking. We are especially focused on the green construction materials business, namely Durever™ building products, which includes a line of composite products primarily made from recycled thermoplastics, reinforcement materials and fire-retardant chemicals for use in walls, ceilings, flooring, framing, siding, roofing, molding and decking. The production of green building materials requires establishing manufacturing operations in the United States, whether through contract manufacturing or setting up our own facilities. The production of green building materials requires establishing manufacturing operations in the United States. Should we be unable to raise sufficient capital required to set up manufacturing facilities to produce NEXBOARDTM products, we would lose the ability to deliver NEXBOARD to interested buyers and incur continued operating losses.

We expect capital outlays and operating expenditures to increase as we expand our product offerings and marketing activities. Our business or operations may change in a manner that would consume available funds more rapidly than anticipated, and substantial additional funding may be required to maintain operations, fund expansion, develop new or enhanced products or services, acquire complementary products, businesses or technologies or otherwise respond to competitive pressures and opportunities. 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.

We will need to meet or otherwise resolve the obligations required by the Auctus Fund LLC Senior Secured Note and the Amendment to the Note.

The Company has Senior Secured Promissory Note with Auctus Fund LLC (“Auctus”), which became due and payable on March 15, 2023. On June 1, 2023, the SEC filed a complaint against Auctus claiming that the company was operating as an unlicensed broker-dealer and the loans could result in cancellation.

At this time, there is no assurance that the SEC will be successful in its effort, or the Company will work out a favorable extension of this note. One of the related obligations of the Company is to uplist to a major exchange. If we do not perform under the Note, and Auctus elects to enforce the Note, we may lose all or substantially all of our assets. If Auctus elects to convert the note into shares of our Common Stock, our shareholders could experience substantial dilution.

In an effort to resolve the Auctus obligation, on May 17, 2022, the Company entered into a Letter Agreement with XTI Aircraft Company (“XTI”) whereby Xeriant would receive compensation for introducing Inpixon, a Nasdaq-listed company, to XTI for a combination or any other transaction. Should a combination or any other transaction occur, the compensation due to Xeriant would include XTI assuming Xeriant’s obligations under its Senior Secured Note with Auctus and Xeriant would receive a six percent (6%) fully diluted interest in XTI upon dissolution of its Joint Venture with Xeriant. Should a combination or any other transaction occur, the compensation due to Xeriant would include a six percent (6%) fully diluted interest in XTI upon dissolution of its Joint Venture with Xeriant, and XTI would assume Xeriant’s obligations under its Senior Secured Note with Auctus Fund, LLC. On July 25, 2023, Inpixon filed an 8-K announcing that they had signed an Agreement of Plan and Merger with XTI. On October 6, 2023, Inpixon filed an S4/A for the business combination with XTI. On March 12, 2024, XTI merged with Inpixon, the Nasdaq-listed company introduced to XTI by Xeriant, arranged through Xeriant’s investment banker at that time, Maxim Group, LLC.

On June 1, 2023, the U.S. Securities and Exchange Commission (“SEC”) filed a complaint in the U.S, District Court in Massachusetts (Case no. 1:23-cv-11233) against Auctus Fund Management, LLC, and its principals, Louis Posner and Alfred Sollami, predicated on their alleged failure to duly register as securities dealers in compliance with SEC regulations.

The SEC complaint charges Auctus Management, Mr. Sollami, and Mr. Posner with breaches of Sections 15(a)(1) and 20(b) of the Securities Exchange Act of 1934. Pursuant to these charges, the SEC is actively seeking the imposition of permanent injunctions, disgorgement of any unauthorized proceeds coupled with the associated prejudgment interest, civil pecuniary sanctions, proscriptions related to penny stock dealings, and other forms of just and equitable relief. Additionally, the SEC complaint incorporates Auctus Fund as a relief defendant and thereby endeavors to secure disgorgement from Auctus Fund, of ill-gotten gains from the activities of Auctus Management, Mr. Sollami, and Mr. Posner.

Given that Auctus issued a Senior Secured Promissory Note to Xeriant on October 27, 2021, we believe the SEC's order to surrender and cancel any securities obtained by Auctus in connection with its convertible notes business between 2012 and 2021 (including convertible notes, warrants, and shares), may result in the extinguishment of the Xeriant Senior Secured Promissory Note although no assurance can be given that such result will occur.

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

The Company’s counsel believes that the Auctus obligation will be resolved in either the pending SEC or appellate cases, although there is no certainty of an outcome favorable to the Company.

Not obtaining sufficient financing will jeopardize our operations and the ability to execute our business plan.

We need to raise additional debt and/or equity financing to fund future operations and to provide working capital. However, there is no assurance that such financing will be consummated or obtained in sufficient amounts necessary to meet our needs. If cash resources are insufficient to satisfy our on-going cash requirements, the Company will be required to scale back or discontinue its product development programs or obtain funds if available (although there can be no certainties) through strategic alliances that may require us to relinquish rights to its technology, substantially reduce or discontinue its operations entirely. No assurance can be given that any future financing will be available or, if available, that it will be in terms that are satisfactory to us. Even if we are able to obtain financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing. As a result, we can provide no assurance as to whether or if we will ever be profitable. If we are not able to achieve and maintain profitability, the value of our company and our common stock could decline significantly.

Our recurring operating losses have raised substantial doubt regarding our ability to continue as a going concern.

Our recurring operating losses raise substantial doubt about our ability to continue as a going concern. This condition is expected to continue for the foreseeable future until we can produce sufficient revenues to cover our costs as we seek to raise funding and invest in our operations as well as our sales and marketing efforts. Given this financial situation, no assurances can be given that we will be able to raise capital in the future on acceptable terms, or at all. As a result, our independent registered public accounting firm included an explanatory paragraph in its report in our consolidated financial statements for the most recent fiscal years with respect to this uncertainty. The perception of our ability to continue as a going concern may make it more difficult for us to obtain financing for the continuation of our operations and could result in the loss of confidence of investors, partners and employees.

RISKS RELATING TO OUR BUSINESS OPERATIONS

There is no assurance that we or our affiliates will be able to accomplish the design and engineering needed to demonstrate that the technologies that are undertaken will perform or operate as planned.

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

The development timeline for the development of certain technologies could expand.

Due to unexpected challenges, the length of time to develop certain technologies may become expanded, causing cost overruns and potentially demanding the infusion of large amounts of capital and other financing, which may not be available. Because of the long timeline, there is also uncertainty regarding the uniqueness or advantages of the technologies at the time they are introduced into the market.

Some technologies are still being developed and specific market applications have not been finalized.

Because some of the anticipated technologies will be in an early stage of development, there is no certainty as to which market applications will be prioritized and targeted as well as the associated timelines and costs involved when we reach that point of determination after a technology has been proven. There is no assurance that the required selling price of our technologies will be competitive.

We will face significant industry competition.

Most of the targeted technologies will face significant competition from industry leaders or from well-funded entrants in the marketplace. We could face significant competition from companies who have developed or are developing alternative technologies that could render acquired technologies less competitive than planned. Many existing potential competitors are well-established, have or may have longer-standing relationships with customers and potential business partners, have or may have greater name recognition, and have or may have access to substantially greater financial, technical and marketing resources.

If we are unable to effectively manage our growth, our ability to implement our business strategy and our operating results will likely be materially adversely affected.

Implementation of our business plan will place a significant strain on our management who must develop administrative, operating and financial infrastructures. To manage our business and planned growth effectively, we must successfully develop, implement, maintain and enhance our financial and accounti