NOTE 6 – CONVERTIBLE NOTES PAYABLE, IN DEFAULT

The carrying value of convertible notes payable in default as of June 30, 2026, and 2025, is as follows.

Auctus Fund LLC Senior Secured Note

Through Maxim Group, LLC, the Company was introduced to Auctus Fund LLC (“Auctus”) for the purpose of providing bridge loan funding to satisfy the requirements of a pending merger with XTI Aircraft under a letter of intent signed in September 2021. On October 27, 2021, the Company issued a convertible note payable with Auctus with the principal of $6,050,000, consisting of $5,142,500, which was the actual amount funded, plus an original issue discount in the amount of $907,500 for interest on the unpaid principal amount at the rate of zero percent per annum from the issue date until the note becomes due and payable. The closing costs were $433,550, which included $308,550 in fees paid to Maxim and professional fees for completing the transaction. The Note had an initial due date of October 27, 2022. The Auctus Note provides the holder has the option to convert the principal balance to common stock of the Company at a conversion price of the lesser of (i) $0.1187 or (ii) 75% of the offering price per share divided by the number of shares of common stock. The Auctus Note is secured by the grant of a first priority security interest in the assets of the Company. In connection with the Auctus Note, the Company issued warrants indexed to an aggregate of 50,968,828 shares of common stock. The warrants have a term of five years and an exercise price of $0.1187. The exercise price can be adjusted downward to match the price of the Company’s most recent issuances of common shares.

Effective August 1, 2022, the Company entered into an Amendment to the Senior Secured Promissory Note (the “First Amendment”) with Auctus pursuant to which the parties agreed to amend the Auctus Note. The Amendment (i) extended the maturity date of the Auctus Note to November 1, 2022, and (ii) extended the dates for the completion of the acquisition of XTI Aircraft and the uplist of the Company’s common stock to a national securities exchange to November 1, 2022. In consideration of the Amendment, the Company agreed to (i) grant to Auctus a new Warrant to purchase 25,000,000 shares of common stock dated July 26, 2022 (the “Warrant”) at an exercise price of $0.09 per share and 5-year term; (ii) make a prepayment of the Note in the amount of $100,000; and (iii) cause a director of the Company to cancel his 10b-5(1) Plan.

Effective December 27, 2022, the Company entered into a Second Amendment to the Senior Secured Promissory Note (the “Second Amendment”) with Auctus pursuant to which the parties agreed to further amend the Auctus Note. The Second Amendment (i) extended the maturity date of the Note, the obligation to uplist to a national securities exchange and acquisition of XTI Aircraft Company to March 15, 2023, and (ii) extended the date to file an S-1 registration statement to uplist the Company’s common stock to a national securities exchange to January 15, 2023. In consideration of the Amendment, the Company agreed to (i) grant to Auctus a new Warrant to purchase 25,000,000 shares of Common Stock dated December 27, 2022 (the “New Warrant”) at an exercise price of $0.09 per share and 5-year term, and (ii) make two pre-payment installments of $50,000 on January 15, 2023, and February 15, 2023. On October 6, 2023, the Company received a conversion notice to issue 20,011,500 shares of the Company’s common stock to Auctus which shares were subsequently issued by the Company’s stock transfer agent and the value of the relating shares applied to interest on the Note.

The Company tested the first modification (“First Amendment”) under ASC 470-50-40 to determine if the modification resulted in an extinguishment. It was determined the present value of the cash flows under the terms of the new debt instrument was at least 10 percent different from the present value of the remaining cash flows under the terms of the original instrument. As a result, the modification resulted in a loss on an extinguishment in the amount of $3,570,366 for the year ended June 30, 2023. The Company tested the second modification (“Second Amendment”) under ASC 470-50-40 to determine if the modification resulted in an extinguishment. It was determined the present value of the cash flows under the terms of the new debt instrument was at least 10 percent different from the present value of the remaining cash flows under the terms of the original instrument. As a result, the modification resulted in a loss on an extinguishment in the amount of $689,621 for the year ended June 30, 2023.

As of June 30, 2024, a total of $50,000 remained outstanding, and was recorded within accounts payable and accrued liabilities on the consolidated balance sheets. As of June 30, 2025, the $50,000 accrued liability was consolidated into the balance of the convertible note payable. During the year ended June 30, 2024, the Company recorded $1,070,729 in default interest related to the note. On October 6, 2023, Auctus converted $200,115 in interest into 20,011,500 shares of common stock and on April 5, 2024, Auctus converted $227,067 in interest into 22,706,700 shares of common stock. As of June 30, 2026, and 2025, the balance of accrued interest of this note was $0 and $643,546, respectively, which is recorded in the accounts payable and accrued liabilities section of the consolidated balance sheets. 

Effective October 29, 2025, Xeriant entered into a Settlement Agreement with Auctus to restructure the Auctus Note and related Xeriant obligations. The Settlement Agreement provides, inter alia, the following:

1. The Company will issue to Auctus 30,000,000 unrestricted shares of the Company’s Common Stock (the “Conversion Shares”) pursuant to an existing Notice of Conversion dated February 24, 2025.

2. The Company will pay Auctus $3,500,000 as follows: (A) $1,000,000 on or before 75 days from October 29, 2025; (B) $1,000,000 on or before 105 days from October 29, 2025;(C) $1,000,000 on or before 135 days from October 29, 2025; and (D) $500,000 on or before 165 days from October 29, 2025.

3. Within ten (10) business days of receipt by the Company of any money or any other consideration pertaining to the legal action brought by the Company against XTI Aircraft Company, the Company will transfer litigation proceeds to Auctus on a preferred basis and share on a percentage basis thereafter net of legal fees not to exceed $250,000.

4. Provided that the Company timely makes all payments with respect to the $3,500,000, Auctus will return to Company (a) a Warrant dated July 26, 2022, to purchase 25,000,000 shares of the Company’s Common Stock and (b) a Warrant dated December 27, 2022, to purchase 25,000,000 shares of the Company’s Common Stock.

5. So long as the Company makes all payments as set forth above, Auctus will suspend any further exercise of its conversion rights under the Note.

6. The Company has issued a full and unconditional release to Auctus regarding any claims that the Company has against Auctus with respect to the Note and all agreements relating to the Note.

7. The Company agrees that it will not pursue, file or permit to be pursued. any civil action against Auctus with regard to the released claims.

8. Provided that no event of default has occurred under the Settlement Agreement, Auctus will not pursue, file, or assert any action, suit or legal proceeding against the Company seeking equitable or monetary relief in connection with the Note.

9. Auctus will be entitled to retain its original warrant to purchase 50,968,828 shares of the Company’s Common Stock.

The foregoing summary of the Settlement Agreement does not purport to be complete, and is qualified in its entirety by the terms and conditions set forth in Form 8-K filed with the SEC on November 12, 2025.

The Company and Auctus have also entered into a Leak-Out Agreement regarding the sale by Auctus of common stock received by Auctus pursuant to a conversion or exercise of any security held by Auctus.

As of June 30, 2026 the Company has not made any cash payments in connection with the settlement agreement.

As a result of the agreement, the Company extinguished the $5,900,000 principal amount and $643,546 in accrued interest, in exchange for recording a settlement liability of $3,500,000 along with common stock at $300,000 (30,000,000 shares valued at $0.01 per share). This resulted in the Company recording a gain on extinguishment in the amount of $2,743,546.

On May 18, 2026, the holder agreed to extend the terms of the agreement until July 31, 2026. As consideration for the extension, the Company agreed to issue 46,138,100 shares of common stock valued at $1,061,176. The extension resulted in extinguishment accounting. As a result the Company recorded a loss on extinguishment of debt in the amount of $1,061,176. On September 25, 2026, Auctus agreed to extend the terms of the agreement until October 31, 2026, which included a two-year extension of the warrants previously issued to Auctus.

Convertible notes payable (10% interest), in default

Between January 2023 and June 2025, the Company issued multiple convertible notes payable with a coupon rate of 10% and a maturity date of one year. The Notes are convertible at a fixed price of $0.01 per share. As of June 30, 2026 and 2025, $754,000 and $7,465,000 are in default. There are 26,600,000 warrants outstanding in connection with these convertible notes. These warrants have an exercise price of $0.01 per share and have a three-year expiration date. The convertible notes issued during the year ended June 30, 2026, contain a provision that prevents the Company from prepaying any principal or interest on the notes.

During the years ended June 30, 2026, $1,131,000 in principal and $113,100 in accrued interest was converted into 124,410,000 shares of common stock.

During the years ended June 30, 2026 and 2025, the Company recorded $24,992 and $182,958 in interest expense related to these notes, respectively. As of June 30, 2026, and 2025, the balance of accrued interest related to these loans was $75,400 and $223,232, respectively. Accrued interest is included in the accounts payable and accrued liabilities section of the consolidated balance sheets.