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.
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.
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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
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
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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.
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.
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Fiscal Year 2020 Results of Operations Compared with Fiscal Year 2019
For the Year (August 6,
Ended June 2018) through
30, 2020 June 30, 2019 $ %
General and administrative
expenses $ 94,013$ 11,682$ 82,331 705 %
Professional fees 137,250 64,311 72,939 113 %
Related party consulting fees 125,100 - 125,100 100 %
Research and development
expense 6,376 8,384 (2,008 ) -24 %
Total operating expenses 362,739 84,377 278,362 330 %
Loss from operations (362,739 ) (84,377 ) (278,362 ) 330 %
Other income (expense):
Amortization of debt discount (324,034 ) - (324,034 ) 100 %
Amortization of debt discount,
related parties (27,242 ) - (27,242 ) 100 %
Interest expense (9,722 ) - (9,722 ) 100 %
Interest expense, related
parties (3,983 ) (378 ) (3,605 ) 954 %
Gain on forgiveness of accounts
payable 28,156 - 28,156 100 %
Total other income (expense) (336,825 ) (378 ) (336,447 ) 89007 %
Net loss $ (699,564 )$ (84,755 )$ (614,809 ) 725 %
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
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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
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
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
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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.
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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.
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 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:
(i) persuasive evidence of an arrangement exists,
(ii) the services have been rendered and all required milestones achieved,
(iii) the sales price is fixed or determinable, and
(iv) Collectability is reasonably assured.
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.
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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,
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.
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.
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.
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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.
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