10-K: Xeriant Faces Legal Battles, Funding Needs Amidst Green Tech Push

Xeriant, Inc. reports continued operating losses and significant legal challenges while advancing its eco-friendly NEXBOARD construction panel and aerospace technologies.

Summary

• Xeriant, Inc. is a development-stage company focused on disruptive technologies in advanced materials (DUREVER brand, NEXBOARD construction panels) and aerospace (VTOL/UAVs).
• The company reported a net loss of $1,646,898 for the fiscal year ended June 30, 2025, an improvement from $3,103,101 in 2024.
• Cash on hand significantly decreased to $44,850 as of June 30, 2025, from $653,117 in the prior year.
• Negative working capital increased to $8,712,005 as of June 30, 2025.
• The company's Senior Secured Promissory Note with Auctus Fund LLC, with a principal balance of $5,900,000, remains in default since March 15, 2023, with $643,546 in accrued interest.
• Xeriant is engaged in multiple legal proceedings, including a lawsuit against Auctus Fund LLC (appealed to the United States Supreme Court) and XTI Aircraft Company (seeking over $500 million in damages).
• Development of NEXBOARD, an eco-friendly, patent-pending composite construction panel, is ongoing, with plans for contract manufacturing and certification for the construction industry.
• The company issued $676,000 in convertible debt during the year ended June 30, 2025.

Sentiment

Score: 3

Explanation: The company is in a precarious financial position with recurring losses, minimal cash, and significant debt in default. While there are promising product developments and legal wins in one case, the overall financial health and ongoing legal challenges, particularly the adverse ruling in the Auctus case, present substantial risks and uncertainty. The 'going concern' doubt is a major red flag.

Positives

• Net loss decreased by $1,456,203 from $3,103,101 in 2024 to $1,646,898 in 2025.
• Operating losses decreased by $540,417 from $1,905,908 in 2024 to $1,365,491 in 2025.
• Research and development expenses decreased by $127,148, indicating a potential shift in development phase or cost management.
• The company is actively developing NEXBOARD, an eco-friendly, patent-pending composite construction panel, and has filed a non-provisional U.S. patent application for its flame-retardant technology.
• Management believes incorporating nanotechnology in NEXBOARD will significantly improve its fire resistance and thermal stability.
• Strong interest from homebuilders, developers, and building materials wholesalers/retailers for NEXBOARD.
• The smart nano-construction materials market is projected to grow from $12.5 billion in 2023 to $17.7-$18.7 billion by 2032, providing a significant market opportunity for NEXBOARD.
• The global aerospace materials market is projected to reach $74.29 billion by 2032, indicating growth potential for the company's aerospace segment.
• The court denied all of XTI Aircraft Company's arguments in their motion to dismiss Xeriant's claims, validating Xeriant's legal position in that lawsuit.
• Appointed two Senior Advisors in nanomaterials, expanding the portfolio of advanced materials and products.

Negatives

• The company is a development-stage enterprise with a limited operating history and no sales.
• Recurring operating losses raise substantial doubt about the company's ability to continue as a going concern.
• Cash on hand significantly decreased to $44,850 as of June 30, 2025, from $653,117 as of June 30, 2024.
• Negative working capital increased to $8,712,005 as of June 30, 2025.
• The Senior Secured Promissory Note with Auctus Fund LLC, with a principal balance of $5,900,000, is in default since March 15, 2023.
• The company's lawsuit against Auctus Fund LLC was dismissed by the lower court, and the appellate court affirmed this decision, requiring an appeal to the United States Supreme Court.
• The company is facing a new breach of contract lawsuit from Midland Compounding for $57,600.
• Significant dilution risk for existing shareholders due to potential future equity financings and conversion of preferred stock and convertible notes.
• The company's common stock is a 'penny stock' and thinly traded, which may affect liquidity and ability to raise capital.
• The company is dependent on raising additional debt and/or equity financing to fund future operations and execute its business plan, with no assurance of availability on acceptable terms.
• The company's management team of four people is currently paid as consultants or independent contractors, which could pose risks related to personnel retention and commitment.

Risks

• **Financial Position and Capital Needs**: Limited operating history, no sales, recurring operating losses, and substantial additional capital required that may not be available on acceptable terms.
• **Auctus Fund LLC Senior Secured Note**: Uncertainty regarding resolution of obligations, potential loss of assets if Auctus enforces the note, or substantial dilution if Auctus converts the note into common stock.
• **Financing Availability**: No assurance that future debt/equity financing will be consummated or obtained in sufficient amounts, potentially leading to scaling back or discontinuing product development.
• **Going Concern**: Recurring operating losses raise substantial doubt about the ability to continue as a going concern, impacting financing and investor confidence.
• **Business Operations**: No assurance that technologies will perform as planned, potential for expanded development timelines, cost overruns, and uncertainty regarding market applications.
• **Competition**: Significant competition from industry leaders or well-funded entrants with greater resources and established customer relationships.
• **Growth Management**: Inability to effectively manage growth could materially adversely affect business strategy and operating results, straining management and financial condition.
• **Key Personnel Dependence**: Success depends on identifying, hiring, training, and retaining highly qualified personnel; intense competition for talent.
• **Product Certification and Supply Chain**: No assurance that NEXBOARD will obtain required certifications for the construction industry. Operations could be adversely affected by interruptions from suppliers of components (e.g., chemicals, electronic components).
• **Economic Conditions**: Changes in the general economic climate, recessionary pressures, and public health conditions could detrimentally impact revenue and financial results.
• **Technology Advances**: Success is dependent on keeping pace with rapid technological changes and adapting to new industry standards.
• **Security Breaches**: Vulnerability to cyberattacks and security breaches, potentially leading to significant financial damage and reputational harm.
• **Litigation**: Exposure to litigation (e.g., Auctus, XTI, Midland Compounding) can result in material liability, significant defense costs, diversion of resources, and adverse publicity.
• **Insurance Coverage**: Insurance coverage may be inadequate to cover all claims or liabilities, and no business interruption insurance is maintained.
• **Dependence on Third Parties**: Reliance on independent organizations, advisors, and consultants for services, which may not always be available timely.
• **Intellectual Property**: Misappropriation of IP, limited patent protection, difficulty enforcing rights in foreign jurisdictions, potential for intellectual property litigation, and risk of infringing others' rights.
• **Common Stock Ownership**: Directors and executive officers can exert significant control, potentially differing from other stockholders' interests.
• **Future Stock Sales and Dilution**: Future equity issuances will result in substantial dilution for existing stockholders.
• **Preferred Stock Issuance**: Board can issue Preferred Stock without stockholder approval, potentially affecting voting power or other rights of common stockholders.
• **Active Trading Market**: An active trading market for common stock may not develop or be sustained, making it difficult to sell shares.
• **Penny Stock Regulations**: Common stock is a penny stock, imposing additional sales practice requirements on broker-dealers, potentially affecting liquidity and capital raising.
• **Securities Class Action Litigation**: Risk of class action litigation, leading to substantial costs and diversion of management attention.
• **Anti-Takeover Effects**: Corporate governance provisions and Nevada law may discourage or prevent a change in control.
• **Public Company Obligations**: Significant legal, accounting, and other expenses, and substantial management time devoted to compliance.

Future Outlook

The company anticipates continued operating losses into the foreseeable future and will require substantial additional capital to commence and sustain operations, fund expansion, and commercialize its technologies, particularly for the green construction materials business (NEXBOARD). It plans to initially manufacture NEXBOARD through contract manufacturers to meet expected demand and is exploring building its own manufacturing facilities, which would require significant capital, potentially through green bond issuances. The company also plans to issue an offering document to obtain funding for certain acquisitions.

Management Comments

• "Management believes that incorporating nanotechnology in NEXBOARD will significantly improve its fire resistance and thermal stability based on internal testing."
• "Management believes that the Company can grow expeditiously by acquiring technology and assets primarily through acquisitions, joint ventures, strategic investments, and licensing arrangements."
• "As a publicly traded company, the Company offers partner companies such benefits as improved access to capital, higher valuations and lower risk through the shared ownership of a diversified portfolio, while allowing these entities to maintain independence in their distinct operations to focus on their fields of expertise."
• "The Company believes that entrepreneurial spirit, passion, and vision are critical to success, and that it can provide entrepreneurial teams with strategic guidance to execute their business plan, access to financial markets, and investor liquidity."

Industry Context

The company operates within the rapidly evolving advanced materials and aerospace sectors. In advanced materials, it targets the burgeoning green construction materials market, projected to reach $1.8 trillion by 2030, driven by demand for sustainable building practices and alternatives to traditional materials like gypsum and wood. Its nanotechnology-enhanced composites align with trends for improved safety, durability, and decreased environmental impact. In aerospace, the company focuses on advanced air mobility (AAM), including eVTOLs and UAVs, leveraging advancements in materials, AI, and sustainable propulsion systems. The global aerospace materials market is projected to reach $74.29 billion by 2032, indicating strong industry growth. The company's focus on eco-friendly solutions and high-performance materials positions it within key growth areas of both industries.

Comparison to Industry Standards

• NEXBOARD is positioned as a superior substitute for traditional materials like gypsum drywall, plywood, and OSB, offering lightweight design, exceptional fire resistance, and water, mold, and insect resistance.
• NEXBOARD's nanotechnology, incorporating engineered nanoparticles, enhances strength, durability, and fire-retardant properties without toxic additives, aligning with stringent safety and LEED certification requirements.
• The smart nano-construction materials market, valued at $12.5 billion in 2023, is expected to grow to $17.7-$18.7 billion by 2032 (CAGR 4.5-4.9%), indicating a growing market for products like NEXBOARD.
• The global aerospace materials market, valued at $43.23 billion in 2024, is projected to reach $74.29 billion by 2032, growing at a CAGR of 7%, suggesting the company's aerospace focus is in a high-growth sector.
• The aerospace 3D printing market is expected to grow from $2.1 billion in 2024 to $6.7 billion by 2030 (CAGR 21.5%), highlighting a specific high-growth area within aerospace that the company's advanced materials could support.
• The company aims to address the aerospace industry's contribution to global emissions (approximately 2% of carbon dioxide output) through sustainable propulsion systems and lightweight materials.
• The company's approach to replacing gypsum-based drywall addresses environmental concerns such as hydrogen sulfide gas release in landfills, aligning with green building goals.

Management Changes

Corporate Governance

Legal Proceedings

• **Auctus Fund LLC Lawsuit**: Filed October 19, 2023, in US Southern District of New York (Case no. 1:23-cv-09200) to invalidate contractual agreements, contest note enforceability, and set aside unlawful securities transactions, alleging breaches of fiduciary duty. Dismissed February 9, 2024. Company filed Notice of Civil Appeal March 13, 2024. US Court of Appeals for the Second Circuit affirmed lower court's decision June 25, 2025. Company's counsel is appealing to the United States Supreme Court. Discussions for settlement are ongoing.
• **XTI Aircraft Company Lawsuit**: Initiated December 6, 2023, in Federal District Court for Southern District of New York (Case no. 1:23-cv-10656-JPO), along with other unnamed defendants, seeking to enforce the terms of a Letter Agreement, alleging fraudulent acts, deceptive maneuvers, and intentional breaches, and seeking a range of remedies including recovery of losses, expenses, attorneys fees, punitive damages, and a compensatory damage award exceeding $500 million. Second Amended Complaint filed February 29, 2024. XTI's Motion to Dismiss denied January 14, 2025. XTI filed counterclaims February 18, 2025, and a Second Amended Answer and Counterclaims April 1, 2025. Company moved to dismiss XTI's counterclaims March 18, 2025, and April 28, 2025.
• **Midland Compounding Lawsuit**: Served July 2, 2025, with a complaint for breach of contract in the payment of an invoice in the amount of $57,600 related to a purchase order for consulting services for NEXBOARD. Company filed Answer and Affirmative Defenses August 20, 2025, essentially stating that Midland Compounding had not performed the services it was contracted to provide.

Related Party Transactions

• $203,000 in consulting fees paid to Ancient Investments, LLC (a company owned by CEO Keith Duffy and Executive Director Scott Duffy) for the year ended June 30, 2025.
• $80,000 in consulting fees paid to Edward DeFeudis (a Director of the company) for the year ended June 30, 2025.
• $95,000 in consulting fees paid to AMP Web Services (a company owned by CIO Pablo Lavigna) for the year ended June 30, 2025.
• $60,000 in consulting fees paid to Keystone Business Development Partners (a company owned by CFO Brian Carey) for the year ended June 30, 2025.

Stakeholder Impact

• **Shareholders**: Face significant dilution risk from future equity issuances and conversion of preferred stock/convertible notes. The stock is a penny stock with limited liquidity. The ongoing legal battles and 'going concern' doubt pose substantial investment risk.
• **Employees/Consultants**: The company's dependence on key personnel and the payment of management as independent contractors highlight potential risks related to retention and commitment.
• **Creditors (Auctus Fund LLC)**: The $5.9 million note is in default, and the company is actively litigating its enforceability, creating uncertainty for this creditor.
• **Customers/Partners (e.g., homebuilders for NEXBOARD)**: Potential delays in product certification or manufacturing capacity could impact the ability to meet demand.
• **Suppliers**: Interruptions in the supply of necessary components could adversely affect product availability, quality, and cost.

Next Steps

• Obtain certification for NEXBOARD for use in the construction industry.
• Build manufacturing facilities in the United States for NEXBOARD production or license the technology and process.
• Raise sufficient funds through equity, debt, or a combination to fund future operations and provide working capital.
• Resolve obligations related to the Auctus Fund LLC Senior Secured Note, potentially through settlement discussions or an appeal to the United States Supreme Court.
• Continue legal proceedings against XTI Aircraft Company, including responding to their counterclaims.
• Defend against the breach of contract complaint from Midland Compounding.
• Issue an offering document to obtain funding for certain acquisitions.
• Continue to identify, hire, train, and retain highly qualified personnel.

Key Dates

Recommendation

The company is in a dire financial state, evidenced by recurring operating losses, a significant decrease in cash to only $44,850, and a substantial negative working capital of over $8.7 million. The 'going concern' warning from auditors is a critical red flag. A $5.9 million senior secured note is in default, and the company has lost its appeal against the lender, now planning a Supreme Court appeal, which is a high-risk, costly endeavor. Furthermore, the company faces another significant lawsuit against XTI Aircraft seeking over $500 million, and a new breach of contract claim. While there are promising product developments like NEXBOARD, the company has no sales, requires substantial capital, and faces immense financial and legal uncertainty. The high dilution risk from future capital raises and existing convertible instruments, combined with its penny stock status and thinly traded nature, makes this a highly speculative and risky investment. The current financial and legal challenges far outweigh any potential future upside in the near to medium term.

Keywords

Advanced Materials, Aerospace, NEXBOARD, DUREVER, Eco-friendly Construction, Nanotechnology, VTOL, UAV, SEC Filing, 10-K, Financial Reporting, Going Concern, Litigation, Convertible Debt, Green Building Materials, Patent-pending, Xeriant