8-K: Xeriant Settles Debt with Auctus Fund, Issues 30M Shares

Xeriant, Inc. has entered into a settlement agreement with Auctus Fund, LLC to resolve a Senior Secured Promissory Note, involving a significant share issuance and cash payments.

Summary

• Xeriant, Inc. (XERI) and Auctus Fund, LLC (Auctus) entered into a Settlement Agreement on November 5, 2025, retroactive to October 29, 2025, to resolve a Senior Secured Promissory Note dated October 27, 2021.
• Xeriant will issue 30,000,000 unrestricted shares of its common stock to Auctus based on a February 24, 2025 Notice of Conversion.
• Xeriant will pay Auctus $3,500,000 in four installments: $1,000,000 by January 12, 2026, $1,000,000 by February 11, 2026, $1,000,000 by March 12, 2026, and $500,000 by April 11, 2026.
• Xeriant will transfer the first $2,000,000 in net proceeds (after up to $250,000 in legal fees) from its legal action against XTI Aircraft Company (the 'XERI XTI Action') to Auctus; any additional proceeds will be split 50/50.
• Upon timely completion of all payments and share issuance, Auctus will return two warrants to Xeriant, each for 25,000,000 shares of common stock (totaling 50,000,000 shares) dated July 26, 2022, and December 27, 2022.
• Auctus will suspend further exercise of its conversion rights under the Note as long as Xeriant meets its obligations under the Settlement Agreement.
• Xeriant has issued a full and unconditional release to Auctus for all claims related to the Note and associated agreements, and covenants not to sue Auctus on these matters.
• Auctus covenants not to sue Xeriant on the Note, provided no event of default occurs under the Settlement Agreement.
• Auctus will retain its original warrant to purchase 50,968,828 shares of Xeriant common stock, issued on October 27, 2021.
• The parties also entered into a Leak-Out Agreement regarding Auctus's sale of common stock received from conversions or exercises.

Sentiment

Score: 3

Explanation: The sentiment is negative due to Xeriant being in default, the significant dilution from issuing 30 million shares, the substantial cash payments required, and the diversion of litigation proceeds. While the settlement resolves a default, the terms are costly for Xeriant and its shareholders.

Positives

• The settlement resolves Xeriant's default under the Senior Secured Promissory Note, potentially avoiding further legal action from Auctus regarding the Note.
• Auctus will return warrants for 50,000,000 shares of Xeriant common stock if Xeriant fulfills its payment and share issuance obligations, reducing potential future dilution from those specific warrants.
• Auctus agrees to suspend further conversion rights under the Note, providing Xeriant with temporary relief from additional dilution from the Note itself, contingent on timely payments.

Negatives

• Xeriant is required to issue 30,000,000 unrestricted shares of common stock to Auctus, leading to immediate dilution for existing shareholders.
• Xeriant must make cash payments totaling $3,500,000 to Auctus over approximately five months, which will impact the company's cash reserves.
• Xeriant must transfer the first $2,000,000 (net of up to $250,000 in legal fees) of any proceeds from its litigation against XTI Aircraft Company to Auctus, reducing potential recovery for Xeriant.
• Xeriant has granted a full and unconditional release of claims against Auctus related to the Note and associated agreements, foregoing any potential future claims.
• Auctus retains its original warrant to purchase 50,968,828 shares of Xeriant common stock, representing a significant potential for future dilution.

Risks

• Failure by Xeriant to timely issue the 30,000,000 shares or make the $3,500,000 in payments will constitute an Event of Default, allowing Auctus to exercise all rights and remedies under the Note and the SPA.
• Any default by Xeriant under the Settlement Agreement will immediately cease Auctus's suspension of conversion rights, allowing Auctus to exercise further conversion rights under the Note at its discretion.
• The issuance of 30,000,000 unrestricted shares and the retention of a warrant for 50,968,828 shares by Auctus pose significant risks of dilution for existing shareholders.
• The requirement to pay $3,500,000 in cash and a substantial portion of litigation proceeds could strain Xeriant's financial liquidity.

Future Outlook

The settlement provides a structured path for Xeriant to resolve its default under the Senior Secured Promissory Note, contingent on timely payments and share issuance. It aims to mitigate immediate legal risks from Auctus regarding the Note and temporarily suspends Auctus's conversion rights. However, it introduces significant dilution and cash outflow obligations for Xeriant.

Industry Context

This filing primarily addresses a specific debt settlement and legal dispute resolution for Xeriant, Inc. rather than broader industry trends. The underlying debt was used to fund a joint venture in electric aircraft development, which is a growing sector, but the settlement itself does not provide new insights into that industry.

Legal Proceedings

• Xeriant commenced a civil action against XTI Aircraft Company in the United States District Court for the Southern District of New York, Case No. 1:23-cv-10656-JPO (the 'XERI XTI Action'), asserting claims related to a joint venture, a letter agreement, and the Note.
• Xeriant commenced a civil action against Auctus in the United States District Court for the Southern District of New York, Case No. 1:23-cv-09200-LAK (the 'XERI AUCTUS Action'), which was dismissed by the District Court and affirmed by the Court of Appeals for the Second Circuit.
• Auctus commenced a civil action against XTI Aircraft Company in Colorado state court (the 'AUCTUS XTI Action') arising from the Letter Agreement.

Stakeholder Impact

• Shareholders: Will experience significant dilution due to the issuance of 30,000,000 unrestricted shares and the continued existence of a large warrant held by Auctus. The cash payments will also reduce company assets.
• Creditors (Auctus Fund, LLC): Benefits from the immediate issuance of shares, guaranteed cash payments, and a preferred claim on litigation proceeds, while retaining a significant warrant.
• Management: Faces the challenge of managing cash flow to meet payment obligations and navigating the ongoing litigation with XTI Aircraft Company.
• XTI Aircraft Company: The settlement explicitly states that XTI is not relieved of its obligations to Xeriant or Auctus, indicating continued legal pressure.

Next Steps

• Xeriant must issue 30,000,000 unrestricted shares to Auctus within three business days of the agreement's execution.
• Xeriant must make four scheduled cash payments to Auctus totaling $3,500,000 by January 12, 2026, February 11, 2026, March 12, 2026, and April 11, 2026.
• Xeriant must transfer the first $2,000,000 (net of legal fees) of any litigation proceeds from the XERI XTI Action to Auctus within ten business days of receipt.
• Auctus will return two warrants for 50,000,000 shares to Xeriant within ten business days of receiving the final $500,000 payment, provided all other conditions are met.

Key Dates

Recommendation

The filing reveals Xeriant is in default on a significant debt, leading to a highly unfavorable settlement. The issuance of 30,000,000 unrestricted shares represents substantial immediate dilution, and the commitment to $3,500,000 in cash payments will strain liquidity. Furthermore, a large portion of potential litigation recovery is diverted to Auctus, and Auctus retains a warrant for over 50 million additional shares, posing a long-term dilution risk. These terms indicate severe financial distress and a significant transfer of value from existing shareholders to the creditor, making the stock a strong sell.

Keywords

Xeriant, Auctus Fund, Settlement Agreement, Promissory Note, Share Issuance, Dilution, Warrants, Litigation Proceeds, Debt Settlement, SEC Filing, 8-K