PART
I - FINANCIAL INFORMATION
Item
1- Consolidated Financial Statements – Unaudited
PHI
GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
(UNAUDITED)
|
|
March 31, 2016
|
|
|
June 30, 2015
|
|
|
|
|
|
|
(Audited)
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|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
11,139
|
|
|
$
|
10,654
|
|
Marketable securities
|
|
|
375,850
|
|
|
|
350,556
|
|
Loans receivable
|
|
|
12,123
|
|
|
|
9,841
|
|
Total
current assets
|
|
$
|
399,111
|
|
|
$
|
371,051
|
|
Fixed assets
|
|
|
|
|
|
|
|
|
Land
|
|
|
82,733
|
|
|
|
-
|
|
Total fixed assets
|
|
$
|
82,733
|
|
|
$
|
-
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Other
assets
|
|
|
144,505
|
|
|
|
77,729
|
|
Prepaid
Expense
|
|
|
11,000
|
|
|
|
-
|
|
Total
other assets
|
|
|
155,505
|
|
|
|
77,729
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
637,349
|
|
|
$
|
448,780
|
|
|
|
|
|
|
|
|
|
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LIABILITIES AND STOCKHOLDERS’ DEFICIT
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|
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Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
131,671
|
|
|
$
|
131,454
|
|
Accrued expenses
|
|
|
4,585,446
|
|
|
|
4,253,280
|
|
Short-term notes payable
|
|
|
677,660
|
|
|
|
1,342,618
|
|
Due to officers
|
|
|
833,758
|
|
|
|
1,879,458
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|
Due to preferred stockholders
|
|
|
215,000
|
|
|
|
215,000
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|
Advances from customers
|
|
|
558,219
|
|
|
|
563,219
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|
Client deposits
|
|
|
49,821
|
|
|
|
-
|
|
Liabilities from discontinued operations
|
|
|
1,045,232
|
|
|
|
1,045,232
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
$
|
8,096,807
|
|
|
$
|
9,430,260
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|
|
|
|
|
|
|
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Stockholders’ deficit:
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|
|
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Preferred
stock, $.001 par value, 100,000,000 shares authorized; none issued and outstanding
|
|
|
-
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|
|
-
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|
Common stock, $.001 par value; 300,000,000 shares authorized; 14,549,001
issued and 8,875,674 outstanding on 03/31/2016, and 9,584,675 issued and 3,911,348 outstanding on 6/30/2015, respectively,
adjusted for 1 for 1,500 reverse split effective March 15, 2012.
|
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|
242,400
|
|
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237,447
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|
|
|
|
|
|
|
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Treasury stock, $.001 par value, 66,989 and 3,289 shares as of 3/31/2016 and 6/30/2015.
|
|
|
(3,854
|
)
|
|
|
(3,801
|
)
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Paid-in capital
|
|
|
30,175,340
|
|
|
|
28,365,269
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|
Acc. other comprehensive gain (loss)
|
|
|
23,068
|
|
|
|
99,341
|
|
Accumulated deficit
|
|
|
(37,896,413
|
)
|
|
|
(37,679,736
|
)
|
Total
stockholders’ deficit
|
|
$
|
(7,459,458
|
)
|
|
$
|
(8,981,480
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ deficit
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|
$
|
637,349
|
|
|
$
|
448,780
|
|
The
accompanying notes form an integral part of these unaudited consolidated financial statements
PHI
GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
UNAUDITED
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|
For the Three Months Ended
March 31,
|
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|
For the Nine Months Ended
March 31,
|
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2016
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2015
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2016
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|
2015
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Net revenues
|
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|
|
|
|
|
|
|
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Revenues
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$
|
97,350
|
|
|
$
|
16,000
|
|
|
$
|
332,050
|
|
|
$
|
31,096
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|
|
|
|
|
|
|
|
|
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|
|
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|
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Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Salaries and wages
|
|
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52,500
|
|
|
|
52,500
|
|
|
|
157,500
|
|
|
|
157,500
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|
Professional services, including non-cash compensation
|
|
|
59,501
|
|
|
|
40,250
|
|
|
|
120,311
|
|
|
|
72,988
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|
General and administrative
|
|
|
29,951
|
|
|
|
32,999
|
|
|
|
83,237
|
|
|
|
78,031
|
|
Total operating expenses
|
|
$
|
141,951
|
|
|
$
|
125,749
|
|
|
$
|
361,048
|
|
|
$
|
308,519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Gain (loss) from operations
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|
$
|
(44,601
|
)
|
|
$
|
(109,749
|
)
|
|
$
|
(28,998
|
)
|
|
$
|
(277,423
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Other income and (expenses)
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|
|
|
|
|
|
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|
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Interest expense
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|
|
(70,520
|
)
|
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|
(81,377
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)
|
|
|
(230,025
|
)
|
|
|
(242,517
|
)
|
Net gain (loss) on sale of marketable securities
|
|
|
(61,827
|
)
|
|
|
(39,286
|
)
|
|
|
131,370
|
|
|
|
(47,813
|
)
|
Gain (loss) on settlement of debts
|
|
|
-
|
|
|
|
(26,125
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)
|
|
|
-
|
|
|
|
(25,845
|
)
|
Other income (expense)
|
|
|
0
|
|
|
|
-
|
|
|
|
(1,915
|
)
|
|
|
(152
|
)
|
Net other income (expenses)
|
|
|
(132,346
|
)
|
|
|
(146,788
|
)
|
|
|
(100,571
|
)
|
|
|
(316,328
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(176,948
|
)
|
|
$
|
(256,537
|
)
|
|
$
|
(129,569
|
)
|
|
$
|
(593,750
|
)
|
Other comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acc. Other comprehensive loss
|
|
$
|
23,068
|
|
|
$
|
(599,472
|
)
|
|
$
|
23,068
|
|
|
$
|
(599,472
|
)
|
Comprehensive income (loss)
|
|
|
(153,880
|
)
|
|
|
(856,009
|
)
|
|
|
(106,501
|
)
|
|
|
(1,193,222
|
)
|
Net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.04
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.09
|
)
|
Diluted
|
|
$
|
(0.04
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
0.09
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
4,011,661
|
|
|
|
6,875,395
|
|
|
|
4,011,661
|
|
|
|
6,875,395
|
|
Diluted
|
|
|
4,011,661
|
|
|
|
6,875,395
|
|
|
|
4,011,661
|
|
|
|
6,875,395
|
|
The
accompanying notes form an integral part of these unaudited consolidated financial statements
PHI
GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
UNAUDITED
|
|
For the Nine Months Ended
March 31,
|
|
|
|
2016
|
|
|
2015
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net income (loss) from operations
|
|
$
|
(129,568
|
)
|
|
$
|
(593,750
|
)
|
Adjustments to reconcile net income to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
(Increase) decrease in other assets and prepaid expenses
|
|
|
(38,575
|
)
|
|
|
(40,324
|
)
|
Increase (decrease) in accounts payable and accrued
expenses
|
|
|
(1,333,823
|
)
|
|
|
353,765
|
|
Net cash provided by (used in)
operating activities
|
|
|
(1,501,967
|
)
|
|
|
(280,309
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Land purchase
|
|
|
(82,733
|
)
|
|
|
-
|
|
Deposit for acquisition Investment in subsidiary and/or deposit for acquisition
|
|
|
(66,776
|
)
|
|
|
(10,774
|
)
|
Net cash provided by (used in)
investing activities
|
|
|
(149,509
|
)
|
|
|
(10,774
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds/changes from Common Stock
|
|
|
1,815,025
|
|
|
|
79,252
|
|
Change in Accumulated Other Comprehensive Loss
|
|
|
(76,273
|
)
|
|
|
189,900
|
|
Adjustment in Accumulated Deficit
|
|
|
(87,108
|
)
|
|
|
-
|
|
Change in Treasury Stock
|
|
|
(52
|
)
|
|
|
-
|
|
Net cash provided by (used in)
financing activities
|
|
|
1,651,591
|
|
|
|
269,152
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
114
|
|
|
|
(21,931
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
11,024
|
|
|
|
30,623
|
|
Cash and cash equivalents, end of period
|
|
$
|
11,139
|
|
|
$
|
8,692
|
|
The
accompanying notes form an integral part of these unaudited consolidated financial statements
PHI
GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE
1
–
NATURE OF BUSINESS
Established
in June 1982, PHI Group, Inc. (the “Company” or “PHI”) is a Nevada corporation primarily engaged in conventional
energy and renewables (
www.phiglobal.com
). The Company has signed an agreement to acquire a 50.90% equity interest in Pacific
Petro Commercial Joint Stock Company (aka Pacific Petro Trading Corporation), a Vietnamese company engaged in liquefied petroleum
gas (
www.pacificpetro.com.vn
). The Company has also approved a plan to spin off its mining, mineral and other natural resource
activities into American Pacific Resources, Inc., a Wyoming corporation and wholly owned subsidiary of PHI.
The
Company, originally incorporated under the name of JR Consulting, Inc., was initially engaged in mergers and acquisitions and
had an operating subsidiary, Diva Entertainment, Inc., which operated two modeling agencies, one in New York and one in California.
Following the business combination with Providential Securities, Inc., a California-based brokerage firm, in late 1999 the Company
changed its name to Providential Securities, Inc. (Nevada) in January 2000. The Company then changed its name to Providential
Holdings, Inc. in February 2000. In October 2000, Providential Securities withdrew its securities brokerage membership and ceased
its financial services business. Subsequently, in April 2009, the Company changed its name to PHI Group, Inc. From October 2000
to October 2011, the Company was engaged in mergers and acquisitions advisory and consulting services, real estate and hospitality
development, mining, oil and gas, telecommunications, technology, healthcare, private equity, and investment in special situations.
In October 2011, the Company discontinued the operations of Providential Vietnam Ltd., Philand Ranch Limited, a United Kingdom
corporation (together with its subsidiaries Philand Ranch - Singapore, Philand Corporation and Philand Vietnam Ltd.), PHI Gold
Corporation (formerly PHI Mining Corporation), and PHI Energy Corporation, and have since mainly focused on energy business and
natural resources, including investing in and/or developing energy assets, independent power plant projects, renewable energy,
industrial minerals, and international trade. PHI Capital Holdings, Inc., a wholly owned subsidiary of the Company, provided corporate
and project finance services, including merger and acquisition (M&A) advisory and consulting services and arranging capital
for companies in a variety of industries.
PRINCIPLES
OF CONSOLIDATION
The
consolidated financial statements include the accounts of PHI Group, Inc., its wholly-owned subsidiary PHI Capital Holdings, its
majority-owned subsidiary Cornerstone Biomass Corporation, and the discontinued operations Providential Securities, Inc., PHI
Gold Corporation (formerly PHI Mining Group), Providential Vietnam Ltd., and Philand Ranch Limited, collectively referred to as
the “Company.” All significant inter-company transactions have been eliminated in consolidation.
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
The
accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles
generally accepted in the United States of America for complete financial statements. These statements should be read in conjunction
with the audited financial statements for the year ended June 30, 2015. In the opinion of management, all adjustments consisting
of normal reoccurring accruals have been made to the financial statements. The results of operation for the three and nine months
ended March 31, 2016 are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2016.
USE
OF ESTIMATES
The
preparation of financial statements in conformity with generally accepted accounting principles 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 periods. Actual
results could differ from those estimates.
Cash
and Cash Equivalents
The
Company considers all liquid investments with a maturity of three months or less from the date of purchase that are readily convertible
into cash to be cash equivalents.
MARKETABLE
SECURITIES
The
Company’s securities are classified as available-for-sale and, as such, are carried at fair value. Securities classified
as available-for-sale may be sold in response to changes in interest rates, liquidity needs, and for other purposes.
Typically, each investment in marketable securities
represents less than twenty percent (20%) of the outstanding common stock and stock equivalents of the investee, and each security
is quoted on either the “Pink Sheets” or the OTC Bulletin Board. As such, each investment is accounted for in accordance
with the provisions of SFAS No. 115.
Unrealized
holding gains and losses for available-for-sale securities are excluded from earnings and reported as a separate component of
stockholder’s equity. Realized gains and losses for securities classified as available-for-sale are reported in earnings
based upon the adjusted cost of the specific security sold. On March 31, 2016, the marketable securities have been recorded at
$375,850 based upon the fair value of the marketable securities. (Note 3)
FAIR
VALUE OF FINANCIAL INSTRUMENTS
Fair
Value - Definition and Hierarchy
Fair
value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Assets and liabilities measured at fair value are categorized based on whether
or not the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial
assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair
value measurement.
A
fair value hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the
use of unobservable inputs by requiring that the most observable inputs are to be used when available.
Valuation
techniques that are consistent with the market or income approach are used to measure fair value. The fair value hierarchy is
categorized into three levels based on the inputs as follows:
Level
1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the
ability to access.
Level
2 - Valuations based on inputs other than quoted prices included in Level 1 that are observable, either directly or indirectly.
Level
3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
Fair
value is a market-based measure, based on assumptions of prices and inputs considered from the perspective of a market participant
that are current as of the measurement date, rather than an entity-specific measure. Therefore, even when market assumptions are
not readily available, the Company’s own assumptions are set to reflect those that market participants would use in pricing
the asset or liability at the measurement date. The availability of valuation techniques and observable inputs can vary from investment
to investment and are affected by a wide variety of factors, including; type of investment, whether the investment is new and
not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the transaction.
To
the extent that valuation is based upon models or inputs that are less observable or unobservable in the market, the determination
of fair value requires more judgment. Because of the inherent uncertainty of valuation, those estimated values may be materially
higher or lower than the values that would have been used had a ready market for the investments existed. Accordingly, the degree
of judgment exercised by the Fund in determining fair value is greatest for investments categorized in Level 3. In certain cases,
the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in
the fair value hierarchy in which the fair value measurement falls in its entirety is determined based upon the lowest level input
that is significant to the fair value measurement.
Fair
Value - Valuation Techniques and Inputs
The
Company holds and may invest in public securities traded on public exchanges or over-the-counter (OTC), private securities, real
estate, convertible securities, interest bearing securities and other types of securities and has adopted specific techniques
for their respective valuations.
Equity
Securities in Public Companies
Unrestricted
The
Company values investments in securities that are freely tradable and listed on major securities exchanges at their last reported
sales price as of the valuation date. To the extent these securities are actively traded and valuation adjustments are not applied,
they are categorized in Level 1 of the fair value hierarchy.
Securities
traded on inactive markets or valued by reference to similar instruments are generally categorized in Level 2 or 3 of the fair
value hierarchy.
Restricted
Securities
traded on public exchanges or over-the-counter (OTC) where there are formal restrictions that limit (i.e. Rule 144 holding periods
and underwriter’s lock-ups) their sale shall be valued at the closing price on the date of valuation less applicable discounts.
The Company may apply a discount to securities with Rule 144 restrictions. Additional discounts may be assessed if the Company
believes there are other mitigating factors, which warrant the additional discounting. When determining potential additional discounts,
factors that will be taken into consideration include, but are not limited to; securities’ trading characteristics, volume,
length and overall impact of the restriction as well as other macro-economic factors. Valuations should be discounted appropriately
until the securities may be freely traded.
If
it has been determined that the exchange or OTC listed price does not accurately reflect fair market value, the Company may elect
to treat the security as a private company and apply an alternative valuation method.
Investments
in restricted securities of public companies may be included in Level 2 of the fair value hierarchy. However, to the extent that
significant inputs used to determine liquidity discounts are not observable, investments in restricted securities in public companies
may be categorized in Level 3 of the fair value hierarchy.
The
Company’s financial instruments primarily consist of cash and cash equivalents, accounts receivable, marketable securities,
and accounts payable.
As
of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying
values as presented on the balance sheet. This is primarily attributed to the short maturities of these instruments.
PROPERTIES
AND EQUIPMENT
Property
and equipment are carried at cost less accumulated depreciation. Depreciation is provided using the straight-line method over
the estimated useful life of the assets from three to five years. Expenditures for maintenance and repairs are charged to expense
as incurred.
REVENUE
RECOGNITION
The
Company’s revenue recognition policies are in compliance with ASC 13 (previously Staff accounting bulletin (SAB) 104). The
Company recognizes consulting and advisory fee revenues when the transaction is completed and the service fees are earned. Expenses
are recognized in the period in which the corresponding liability is incurred. Payments received before all of the relevant criteria
for revenue recognition are recorded as unearned revenue.
RISKS
AND UNCERTAINTIES
In
the normal course of business, the Company is subject to certain risks and uncertainties. The Company provides its service and
receives marketable securities upon execution of transactions. Consequently, the value of the securities received from customers
can be affected by economic fluctuations and each customer’s business growth. The actual realized value of these securities
could be significantly different than recorded value.
RECENT
ACCOUNTING PRONOUNCEMENTS
Update
No. 2013-11—Income Taxes (Topic 740):
Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward,
a Similar Tax Loss, or a Tax Credit Carryforward Exists
(a consensus of the FASB Emerging Issues Task Force) [Download]
|
|
July
2013
|
|
Effective
for fiscal years, and interim periods within those years, beginning after December 15, 2013. For nonpublic entities, the amendments
are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. Early adoption
is permitted.
|
|
|
|
|
|
Update
No. 2013-09—
Fair Value Measurement (Topic 820): Deferral of the Effective Date of Certain Disclosures for Nonpublic
Employee Benefit Plans in Update No. 2011-04
[Download]
|
|
July
2013
|
|
The
deferral in this amendment is effective upon issuance for financial statements that have not been issued.
|
|
|
|
|
|
Update
No. 2013-07—
Presentation of Financial Statements (Topic 205): Liquidation Basis of Accounting
[Download]
|
|
April
2013
|
|
Effective
for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013. Early
adoption is permitted.
|
|
|
|
|
|
Update
No. 2013-04—
Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which
the Total Amount of the Obligation Is Fixed at the Reporting Date
(a consensus of the FASB Emerging Issues Task Force)
[Download]
|
|
February
2013
|
|
Effective
for fiscal years, and interim periods within those years, beginning after December 15, 2013. For nonpublic entities, the amendments
are effective for fiscal years ending after December 15, 2014, and interim periods and annual periods thereafter.
|
|
|
|
|
|
Update
2013-02—
Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive
Income
[Download]
|
|
February
2013
|
|
For
public entities, the amendments are effective prospectively for reporting periods beginning after December 15, 2012. For nonpublic
entities, the amendments are effective prospectively for reporting periods beginning after December 15, 2013. Early adoption
is permitted.
|
|
|
|
|
|
Update
2013-01—
Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities
[Download]
|
|
January
2013
|
|
An
entity is required to apply the amendments for fiscal years beginning on or after January 1, 2013, and interim periods within
those annual periods. An entity should provide the required disclosures retrospectively for all comparative periods presented.
The effective date is the same as the effective date of Update 2011-11.
|
The
Company has either evaluated or is currently evaluating the implications, if any, of each of these pronouncements and the possible
impact they may have on the Company’s financial statements. In most cases, management has determined that the pronouncement
has either limited or no application to the Company and, in all cases, implementation would not have a material impact on the
financial statements taken as a whole.
NOTE
2
– LOANS RECEIVABLE
Loans
receivable consist of the following at March 31, 2016 and June 30, 2015:
|
|
March 31, 2016
|
|
|
June 30, 2015
|
|
Loan to Catalyst Group
|
|
|
5,140
|
|
|
|
5,140
|
|
Loan to Provimex, Inc.
|
|
|
2,000
|
|
|
|
2,000
|
|
Loan to Catthai Corp.
|
|
|
2,700
|
|
|
|
2,700
|
|
Loan to Myson Group, Inc.
|
|
|
2,282
|
|
|
|
-
|
|
TOTAL
|
|
$
|
12,123
|
|
|
$
|
9,841
|
|
NOTE
3
–
MARKETABLE EQUITY SECURITIES AVAILABLE FOR SALE
The
Company’s marketable securities are classified as available-for-sale and, as such, are carried at fair value. All of the
securities are comprised of shares of common stock of the investee. Securities classified as available-for-sale may be sold in
response to changes in interest rates, liquidity needs, and for other purposes. These marketable securities are quoted on the
OTC markets and are accounted for in accordance with the provisions of SFAS No. 115.
Marketable
securities classified as available for sale as of March 31, 2016 consisted of 34,612,106 shares of Myson Group, Inc. (formerly
Vanguard Mining Corporation), a public company quoted on the OTC Markets (Trading symbol “MYSN”) and 292,050,000 shares
of Sports Pouch Beverage Co., a public company quoted on the OTC Markets (Trading symbol “SPBV”). The fair value of
the shares recorded as of March 31, 2016 was $375,850.
Securities Available for Sale
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
March 31, 2016
|
|
|
-
|
|
|
$
|
30,302
|
|
|
$
|
345,548
|
|
|
$
|
375,850
|
|
June 30, 2015
|
|
$
|
16,828
|
|
|
$
|
301,562
|
|
|
$
|
32,166
|
|
|
$
|
350,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss)
|
|
|
|
Balance
|
|
|
Realized
|
|
|
Unrealized
|
|
|
Net
|
|
|
Balance
|
|
|
for Investments
|
|
|
|
06/30/15
|
|
|
Gain or
|
|
|
Gain or
|
|
|
Purchases
|
|
|
03/31/16
|
|
|
still held at
|
|
Assets
|
|
(Net)
|
|
|
(Loss)
|
|
|
(Loss)
|
|
|
(Sales)
|
|
|
(Net)
|
|
|
03/31/16
|
|
Marketable Securities
|
|
$
|
350,556
|
|
|
$
|
131,370
|
|
|
$
|
23,068
|
|
|
$
|
292,050
|
|
|
$
|
375,850
|
|
|
$
|
(76,273
|
)
|
Total
|
|
$
|
350,556
|
|
|
$
|
131,370
|
|
|
$
|
23,068
|
|
|
$
|
292,050
|
|
|
$
|
375,850
|
|
|
$
|
(76,273
|
)
|
The
change in unrealized appreciation (depreciation) related to the Level 2 investments still held at March 31, 2016 is ($76,273).
Level 1 and Level 2 securities sold during the quarter ended March 31, 2016 were sold at net realized loss of $61,827.
NOTE
4
– PROPERTIES AND EQUIPMENT
As
of March 31, 2016, the Company owned and held title to ten acres of land, Parcel Identification Number 09705010180 & 190,
in Suwannee County, Florida at historical cost of $82,733. The Company did not have any equipment as of March 31, 2016.
NOTE
5
– OTHER ASSETS
The
Other Assets comprise of the following as of March 31, 2016 and June 30, 2015:
|
|
March
31, 2016
|
|
|
June
30, 2015
|
|
|
|
|
|
|
|
|
Loans Receivable
|
|
$
|
66,955
|
|
|
$
|
66,955
|
|
Investment in subsidiary
|
|
$
|
2,550
|
|
|
$
|
2,550
|
|
Deposit for purchases
|
|
$
|
75,000
|
|
|
$
|
8,224
|
|
Total Other Assets
|
|
$
|
144,505
|
|
|
$
|
77,729
|
|
During
the year ended June 30, 2011, the Company signed a consulting agreement to assist Agent155 Media Corp., a Delaware corporation,
with respect to its corporate restructuring and business combination with Freshwater Technologies, Inc., a Nevada corporation.
As part of the restructuring requirements, the Company made payment to Manning Elliot LLP in the amount of $24,476 on behalf of
Freshwater Technologies, Inc. and other loan amounts to Agent155 Media Corp. As of June 30, 2014, Christopher Martinez, the President
of Agent155 Media Corp., assumed the balance of $66,955 from Agent155 Media Corp. as his personal obligations to the Company.
As
of March 31, 2016, the total amounts owed by Christopher Martinez, deposits for acquisition and the investment in a subsidiary
were collectively reported as Other Assets totaling $144,505.
NOTE
6
– DISCONTINUED OPERATIONS
As
of June 30, 2012, discontinued the businesses of PHI Gold Corp. (formerly PHI Mining Corporation), Providential Vietnam Ltd.,
PHI Energy Corp., and Philand Ranch Ltd., a United Kingdom corporation, together with its wholly-owned subsidiaries Philand Corporation
(USA), Philand Ranch Ltd. (Singapore) and Philand Vietnam Ltd. for practical business and accounting purposes. As of March 31,
2016, the Company had a balance of $1,045,232 as Liabilities from Discontinued Operations.
NOTE
7
– ACCOUNTS PAYABLE AND ACCRUED EXPENSES
The
accounts payable and accrued expenses at March 31, 2016 and June 30, 2015 consist of the following:
|
|
March 31, 2016
|
|
|
June 30, 2015
|
|
Accounts payable
|
|
|
131,671
|
|
|
|
131,454
|
|
Accrued salaries and payroll taxes
|
|
|
1,030,404
|
|
|
|
849,279
|
|
Accrued interest
|
|
|
3,182,194
|
|
|
|
3,031,152
|
|
Accrued legal expenses
|
|
|
172,091
|
|
|
|
172,091
|
|
Accrued consulting fees
|
|
|
173,870
|
|
|
|
173,870
|
|
Other accrued expenses
|
|
|
26,888
|
|
|
|
26,888
|
|
Total
|
|
$
|
4,717,117
|
|
|
$
|
4,384,734
|
|
NOTE
8
– DUE TO OFFICER
Due
to officer, represents advances made by officers of the Company and its subsidiaries, which are non-interest bearing, unsecured
and due on demand. As of March 31, 2016 and June 30, 2015, the balances were $833,758 and $1,879,458, respectively.
Officers/Directors
|
|
March 31, 2016
|
|
|
June 30, 2015
|
|
Henry Fahman
|
|
|
808,758
|
|
|
|
1,577,958
|
|
Tam Bui
|
|
|
0
|
|
|
|
276,500
|
|
Frank Hawkins
|
|
|
12,500
|
|
|
|
12,500
|
|
Lawrence Olson
|
|
|
12,500
|
|
|
|
12,500
|
|
Total
|
|
$
|
833,758
|
|
|
$
|
1,879,458
|
|
NOTE
9
– LOANS AND PROMISSORY NOTES
SHORT
TERM NOTES PAYABLE:
As
of March 31, 2016 and June 30, 2015, the Company had short-term notes payable amounting to $677,660 and $1,342,618 with accrued
interest of $3,182,194 and $3,031,152, respectively. These notes bear interest rates ranging from 0% to 36% per annum.
Some
of the notes payable are secured by assets of the Company as summarized below:
Note Balance:
|
|
|
Secured by:
|
|
|
|
|
$
|
115,000
|
|
|
400,000 Catalyst Resource Group, Inc. shares
|
|
|
|
|
500,000 Catthai Corporation shares
|
|
|
|
|
|
$
|
550,000
|
|
|
500,000 Catthai Corporation shares
|
|
|
|
|
|
$
|
150,000
|
|
|
1,500,000 PHI Gold Corp shares
|
|
|
|
|
|
$
|
100,000
|
|
|
1,500,000 PHI Gold Corp shares
|
CONVERTIBLE
PROMISSORY NOTE:
On
February 29, 2016, the Company issued a convertible promissory note in the amount of $56,750 to Auctus Fund, LLC, a Delaware limited
liability company. This convertible note is due and payable on November 29, 2016 with interest of 10% per annum. This note is
convertible at the election of Auctus Fund, LLC from time to time after the issuance date. In the event of default, the amount
of principal and interest not paid when due bear interest at the rate of 24% per annum and the note becomes immediately due and
payable. Should an event of default occur, the Company is liable to pay 150% of the then outstanding principal and interest. The
note agreement contains covenants requiring Auctus Fund’s written consent for certain activities not in existence or not
committed to by the Company on the issuance date of the note, as follows: dividend distributions in cash or shares, stock repurchases,
borrowings, sale of assets, certain advances and loans in excess of $100,000, and certain guarantees with respect to preservation
of existence of the Company and non-circumvention. Outstanding note principal and interest accrued thereon can be converted in
whole, or in part, at any time by Auctus after the issuance date into an equivalent of the Company’s common stock determined
by 55% of the average of the two lowest closing trading prices of the Company’s common stock during the twenty (20) trading
days prior to the date the conversion notice is sent by Auctus. The Company may prepay the amounts outstanding to Auctus Fund
at any time up to the 180
th
day following the issue date of this note by making a payment to the note holder of an
amount in cash equal to 125% to 150%, multiplied by the sum of: (w) the then outstanding principal amount of this Note
plus
(x) accrued and unpaid interest on the unpaid principal amount of this Note
plus
(y) Default Interest, depending on
the time of prepayment.
DUE
TO PREFERRED STOCKHOLDERS OF FORMER SUBSIDIARY:
The
Company classified $215,000 of preferred stock as a current liability payable to holders of preferred stock in Providential Securities,
Inc., a previously discontinued subsidiary of the Company, due to deficiency in compliance of the preferred share subscription
agreement in the year 2000. The Company has made an offer for these preferred stock holders to receive shares of common stock
in the Company in exchange for the preferred shares but so far only a small number of the preferred shareholders have accepted
the offer.
The
interest expenses payable to holders of the referenced preferred stock of $406,805 and $387,455 have been included in Accrued
Interest Expenses on the balance sheets as of March 31, 2016 and June 30, 2015, respectively.
ADVANCES
FROM CUSTOMERS
As
of September 30, 2012, the Company reclassified the previously recorded Unearned Revenues as Advances from Customers because the
Company has not been able to complete the consulting services for the related clients due to their inability to provide GAAP-compliant
audited financial statements in order to file a registration statement with the Securities and Exchange Commission. As of March
31, 2016, the Company recorded $558,219 as Advances from Customers.
NOTE
10
– LITIGATION
LEGAL
PROCEEDING SETTLED AND UNPAID AS OF MARCH 31, 2016:
QUANG
VAN CAO AND NHAN THI NGUYEN CAO VS. PROVIDENTIAL SECURITIES, INC. ET AL.
This
case was originally submitted to Orange County Superior Court, CA on June 25, 1997, Case No. 781121, and subsequently moved to
NASD Dispute resolution for arbitration. On or about August 24, 2000, the Company’s legal counsel negotiated with the Claimant’s
counsel and unilaterally reached a settlement that had not been approved by the Company. While the Company was in the process
of re-negotiating the terms of said settlement, the Claimants filed a request for arbitration hearing before the National Association
of Securities Dealers on October 4, 2000, Case No. 99-03160. Thereafter, the Claimants filed a complaint with the Orange County
Superior Court, CA on October 31, 2000, Case No. 00CC13067 for alleged breach of contract for damages in the sum of $75,000 plus
pre-judgment interest, costs incurred in connection with the complaint, and other relief. Without admitting or denying any allegations,
the Company reached a settlement agreement with the Claimants whereby the Company would pay the Claimants a total of $62,500 plus
$4,500 in administrative costs. As the date of this report, the Company has paid $2,500 and is subject to an entry of judgment
for $79,000. In May 2011, the Claimants filed an application for and renewal of judgment for a total of $140,490.78. As of March
31, 2016 the Company accrued $172,091 for potential liabilities in connection with this case in the accompanying consolidated
financial statements.
WILLIAM
DAVIDSON VS. DOAN ET AL.
On
or about February 01, 2010, the company was notified of a suit that was filed with the Superior Court of the State of California
for the County of Los Angeles on November 24, 2009 by William Davidson, an individual against Martin Doan, Henry Fahman, Benjamin
Tran, HRCiti Corporation, and Providential Capital, Inc. (collectively referred to as “Defendants” - Case No. BC 426831).
Plaintiff demanded an amount of not less than $140,000.00 from Defendants for promissory notes outstanding between Plaintiff and
the company.
On
July 09, 2012 William Davidson and PHI Capital Holdings, Inc. (formerly Providential Capital, Inc.), a subsidiary of the Company,
reached a settlement agreement with respect to whereby PHI Capital agreed to pay William Davidson a total of $200,000 over a period
of nineteen months beginning September 1, 2012. Since November 30, 2012, William Davidson has converted portions of the total
amount into common stock of PHI Group, Inc. in lieu of cash payment. The Company has accrued the required liabilities associated
with the balance of these notes in the accompanying consolidated financial statements as of March 31, 2016.
NOTE
11
– PAYROLL LIABILITIES
The
payroll liabilities are accrued and recorded as accrued expenses in the consolidated balance sheet. During the fiscal year ended
June 30, 2014, the Company paid $41,974.22 to the Internal Revenue Service and $ 19,289.94 to the State of California Employment
Development Department towards the total balance of $118,399 of payroll tax, penalties and interest claimed by these agencies.
The Company is currently working with the Internal Revenue Service and the State of California Employment Department to resolve
the remaining balance.
NOTE
12
– BASIC AND DILUTED NET PROFIT (LOSS) PER SHARE
Net
loss per share is calculated in accordance with SFAS No. 128, “Earnings per Share”. Under the provision of SFAS No.
128, basic net loss per share is computed by dividing the net loss for the period by the weighted-average number of common shares
outstanding for the period. Diluted EPS is based on the weighted-average number of shares of common stock outstanding for the
period and common stock equivalents outstanding at the end of the period. Basic and diluted weighted average numbers of shares
for the period ended March 31, 2016 were the same since the inclusion of Common stock equivalents is anti-dilutive.
NOTE
13
–
STOCKHOLDER’S EQUITY
The
total number of authorized capital stock of the Company is 400,000,000 shares with a par value of $0.001 per share, consisting
of 300,000,000 shares of voting Common Stock with a par value of $0.001 per share and 100,000,000 shares of Preferred Stock with
a par value of $0.001 per share. The rights and terms associated with the Preferred Stock will be determined by the Board of Directors
of the Company.
On
March 15, 2012, the Company effectuated a 1 for 1,500 reverse split of the Company’s Common Stock.
Treasury
Stock:
The
balance of treasury stock as of March 31, 2016 was 66,989 post-split shares, valued at $3,854.
Common
Stock:
During
the quarter ended March 31, 2016, the Company issued the following amounts of its Common Stock:
On
February 2, 2016, the Company issued 121,212 shares of PHI Group, Inc.’s restricted Common Stock to an investor under the
auspices of Rule 144 for $40,000 in cash, at the price of $0.33 per share.
On
February 2, 2016, the Company issued 98,084 shares of PHI Group, Inc.’s free-trading Common Stock to a creditor for conversion
of a $32,000 loan principal at the price of $0.3263 per share.
On
February 4, 2016, the Company issued 100,000 shares of PHI Group, Inc.’s restricted Common Stock to an independent consultant
for marketing and investor relation services.
On
March 28, 2016, Henry Fahman, Chairman and Chief Executive Officer of the Company, converted $1,000,000 of debts into 2,688,172
shares of restricted common stock of the Company at the conversion price of $0.372 per share.
On
March 28, 2016, Tam Bui, an independent director and Chairman of the Audit Committee the Company, converted $276,500 of principal
loan amounts and $76,850 of accrued and unpaid interest amounts, totaling $353,350, into 949,866 shares of restricted common stock
of the Company at the conversion price of $0.372 per share.
On
March 28, 2016, Natalie Bui, the spouse of Tam Bui, converted $384,090.50 of principal loan amounts into 1,032,502 shares of restricted
common stock of the Company at the conversion price of $0.372 per share.
As
of March 31, 2016, there were 14,549,001 post-split shares of the Company’s $0.001 par value Common Stock issued, including
5,673,327 shares reserved for a special dividend distribution.
Preferred
Stock:
There is no preferred stock issued and outstanding.
Class
A Preferred Stock:
On April 2, 2015, the Company designated
the first fifty million (50,000,000) shares of the Company’s
previously authorized 100,000,000 shares of Preferred Stock, with a par value of $0.001 per share, as Class A Cumulative Convertible
Redeemable Class A Preferred Stock (the “
Class A Preferred Stock
”) with the following rights and terms:
1)
Dividends: Each holder of Class A Preferred Stock is entitled to receive twelve percent (12%) non-compounding cumulative dividends
per annum, payable semi-annually.
2)
Conversion: Each share of the Class A Preferred Stock shall be convertible into the Company’s Common Stock any time after
one year from the date of issuance at a Variable Conversion Price (as defined herein) of the Common Stock. The “Variable
Conversion Price” shall mean 75% multiplied by the Market Price (as defined herein) (representing a discount rate of 25%).
“Market Price” means the average Trading Price for the Company’s Common Stock during the ten (10) trading-day
period ending one trading day prior to the date the Conversion Notice is sent by the Holder of the Class A Preferred Stock to
the Company via facsimile or email (the “Conversion Date”). “Trading Price” means, for any security as
of any date, the closing price on the OTC Markets, OTCQB, NASDAQ Stock Markets, NYSE or applicable trading market as reported
by a reliable reporting service (“Reporting Service”) mutually acceptable to the Company and Holder of the Class A
Preferred Stock.
3)
Redemption Rights: The Company, after a period of two years from the date of issuance, may at any time or from time to time redeem
the Class A Preferred Stock, in whole or in part, at the option of the Company’s Board of Directors, at a price equal to
one hundred twenty percent (120%) of the original purchase price of the Class A Preferred Stock or of a unit consisting of any
shares of Class A Preferred Stock and any warrants attached thereto, plus, in each case, accumulated and unpaid dividends to the
date fixed for redemption.
NOTE
14
–
STOCK-BASED COMPENSATION PLAN
On
March 18, 2015, the Company adopted an Employee Benefit Plan to set aside 1,000,000 shares of common stock for eligible employees
and independent contractors of the Company and its subsidiaries. As of March 31, 2016 the Company has not issued any stock in
lieu of cash under this plan.
NOTE
15
–
RELATED PARTY TRANSACTIONS
The
Company accrued $52,500 in salaries for Henry Fahman (President of the Company) and Tina Phan (Secretary and Treasurer of the
Company) during the quarters ended March 31, 2016 and March 31, 2015.
NOTE
16
–
CONTRACTS AND COMMITMENTS
BUSINESS
AND FINANCIAL CONSULTING AGREEMENT WITH THINH HUNG INVESTMENT CO.
Effective
May 21, 2010 the Company signed an agreement with Thinh Hung Investment Co., Ltd., a Vietnam-based company, to assist Thinh Hung
in identifying, locating and, possibly, acquiring various business opportunities for Thinh An Co., Ltd., a subsidiary of Thinh
Hung, including but not limited to a reverse merger, a stock swap, or a business combination between Thinh An and a publicly-traded
company in the U.S. In exchange for the services rendered, the Company would receive compensation in cash from Thinh Hung and
common stock of the combined company. As of September 30, 2011, the Company has completed a stock purchase and investment agreement
between Thinh Anh Co., Ltd. and Vietnam Foods Corporation, a Nevada corporation. However, the combined company has not filed a
registration statement with the Securities and Exchange Commission to become a reporting company. The Company has recognized $26,656
as only revenues from this transaction. The balance of $288,219 was booked as Customer Advances in the liability portion of the
balance sheet.
BUSINESS
COOPERATION AND INVESTMENT AGREEMENT WITH AG MATERIALS, LLC.
On
January 7, 2015, the Company signed a Business Cooperation and Investment Agreement with AG Materials, LLC, an Alabama limited
liability company, (“AGM”) to cooperate with each other to establish and operate a 200,000 MT wood pellet plant in
Live Oak, Suwannee County, Florida. Both parties have incorporated Cornerstone Biomass Corporation, a Florida corporation, as
the entity to manage the joint-venture wood pellet project in Live Oak, Florida. On July 31, 2015, PHI Group, Inc. purchased ten
acres of land, namely Lots 18 & 19 Eagle’s Nest, Live Oak, Florida 32060 from Klausner Holding USA, Inc., a Georgia
corporation, for the purpose of establishing the wood pellet plant.
BUSINESS
COOPERATION AGREEMENT AND MASTER CONTRACT FOR PURCHASE AND SALE OF SAND WITH KIEN HOANG MINERALS JOINT STOCK COMPANY
On
May 8, 2015, the Company signed a Business Cooperation Agreement with Kien Hoang Minerals Joint Stock Company (” KHM JSC”),
a Vietnamese company, to develop and expand international markets for KHM’s mineral products, particularly exports of reclamation
sand and granite to Singapore through Primearth Resources Asia Pte Ltd, another strategic partner of the Company’s. The
Company was granted the first right of refusal by KHM to purchase approximately 102 million cubic meters of sand and 40 million
cubic meters of granite. On June 12, 2015, the Company signed a Master Contract for Purchase and Sale of 60 million cubic meters
of sand recovered from the dredging and clearing of traffic pathways at De Gi estuary and surrounding areas in Binh Dinh Province,
Vietnam over a period of five years for exports to Singapore and other Asian markets. The Company intends to assign and transfer
this transaction to American Pacific Resources, Inc., a new subsidiary of PHI Group, Inc.
CONSULTING
AGREEMENT WITH SPORTS POUCH BEVERAGE COMPANY
On
June 3, 2015, PHI Capital Holdings, Inc., a wholly owned subsidiary of the Company, signed a Consulting Engagement Agreement with
Sports Pouch Beverage Company (“SPBV”), a Nevada corporation, to provide consulting services and assist SPBV with
respect to business development, mergers and acquisitions, corporate governance, and corporate finance. PHI Capital Holdings,
Inc. is entitled to receive up to forty percent of common stock in SPBV as compensation for the services rendered. The duration
of this agreement is one year. As of March 31, 2016 PHI Capital Holdings, Inc. has received 389,400,000 shares of SPBV stock and
recorded a total of 292,050,000 shares as earned revenues from this transaction.
AGREEMENT
WITH PRIMEFORTH RENEWABLE ENERGY LTD.
On
June 24, 2015, PHI Capital Holdings, Inc., a wholly owned subsidiary of the Company, signed a Consulting Engagement Agreement
with Primeforth Renewable Energy Ltd. (“Primeforth”), a Singaporean company, to provide consulting services with respect
to corporate development, corporate finance and debt financing for Primeforth Renewable Energy. PHI Capital Holdings is entitled
to a one-time non-refundable professional fee of $20,000 and 4% cash success fee for any financing arranged for Primeforth. The
term of this agreement is two years. Primeforth is engaged in developing alternative energy using patented microalgae technologies.
AGREEMENT
FOR DEFRAYAL OF EXPENSES AND STOCK COMPENSATION WITH ASIA GREEN CORPORATION
On
July 17, 2015, the Company signed an agreement to provide $75,000 to Asia Green Corporation (AGMC”), a Nevada corporation,
for AGMC to pay certain required expenses and resume its status as fully reporting company with the Securities and Exchange Commission.
In exchange for the fund, AGMC agrees to allocate 500,000 shares of its Common Stock upon the consummation of a business combination
between itself and a Vietnamese company engaged in agriculture and reforestation.
BUSINESS
COOPERATION AND INVESTMENT AGREEMENT WITH CAVICO LAO MINING CO. LTD.
On
August 7, 2015, the Company signed a Business Cooperation and Investment Agreement with Cavico Lao Mining Co., Ltd. (“CLM”)
to provide the initial required capital to be raised from the Company’s 506(c) private placement for CLM’s interim
operations and a budget to conduct an independent JORC report for the nickel portion of the CLM’s a 80-hectare multi-mineral
mine in the Khoam Bang mountainous area at Ban Bo, Bulikhamsay, Laos People’s Democratic Republic. In addition, the Company
shall establish a subsidiary to be the holding company for the CLM’s assets to be spun off as a separate publicly traded
company (“PubCo”) on the NASDAQ Stock Markets, subject to certain conditions and requirements. CLM management believes
the estimated value of the nickel portion in the afore-mentioned multi-mineral mine is approximately $1.5 billion - $4 billion,
subject to further independent validation. The Company intends to assign and transfer this transaction to American Pacific Resources,
Inc., a new subsidiary of PHI Group, Inc.
MASTER
AGREEMENT FOR BUSINESS COOPERATION WITH DREDGE MASTERS AND CIVIL WORKS
On
August 19, 2015, the Company signed an agreement with Dredge Masters and Civil Works, Inc., a Filipino corporation, to cooperate
with each other in order to optimize the dredging, transshipment, loading, shipping and unloading of saline sand on large scales
to serve the needs of land reclamation in Singaporean and other Asian countries. The term of this agreement is one year. The Company
intends to assign and transfer this transaction to American Pacific Resources, Inc., a new subsidiary of PHI Group, Inc.
STOCK
PURCHASE AND INVESTMENT AGREEMENT WITH VINABENNY ENERGY JOINT STOCK COMPANY
On
September 1, 2015, the Company signed an agreement to acquire a 50.10% equity ownership in VinaBenny Energy Joint Stock Company
(“VinaBenny”, a Vietnamese company, for $10,700,000 and to arrange capital for VinaBenny to complete a 84,000 MT Liquefied
Petroleum Gas (LPG) terminal in Can Giuoc District, Long An Province, Vietnam. This agreement expired on December 31, 2015.
AGREEMENT
WITH REDICSACO JOINT STOCK COMPANY
On
September 11, 2015, the Company signed a Principle Business and Investment Agreement with Redicsaco JSC, a Vietnamese company,
to cooperate with each other with respect to the dredging, transshipment, loading, sale and export of saline reclamation sand
from the Ham Luong River waterway, Ben Tre Province, Vietnam to Singapore, Brunei and other Asian markets. The initial authorized
volume of sand from this location is 25 million cubic meters and the total reserve is more than 390 million cubic meters. The
Company intends to assign and transfer this transaction to American Pacific Resources, Inc., a new subsidiary of PHI Group, Inc.
AGREEMENT
WITH HATICO INVESTMENT DEVELOPMENT JOINT STOCK COMPANY
On
September 11, 2015, the Company signed a Principle Business Cooperation Agreement with HATICO Investment Development Joint Stock
Company, a Vietnamese company, to cooperate with each other in order to dredge, sell and export saline reclamation sand from Ha
Tien, Kien Giang Province, Vietnam and to develop a deep-water seaport terminal at this location. It is estimated that the volume
of sand from this location is approximately one billion cubic meters. Both parties have agreed in principle for the Company to
acquire 50.90% of HATICO or own the same percentage in a joint venture company to be set up. The Company intends to assign and
transfer this transaction to American Pacific Resources, Inc., a new subsidiary of PHI Group, Inc.
BUSINESS
COOPERATION AND INVESTMENT AGREEMENT WITH HUNG THINH MINERALS INVESTMENT CO., LTD
On
October 26, 2015 the Company signed a Principle Business Cooperation and Investment Agreement with Hung Thinh Minerals Investment
Co., Ltd. “(HTMI”), a Vietnamese company that owns a titanium mine and a slag processing plant in Binh Thuan Province,
Vietnam to cooperate with HTMI to increase its capacity to produce 150,000 MT of titanium slag per year, to develop HTMI into
a major refiner of titanium-related products, including titanium pigments, ingots, sponge, and alloys, and to list HTMI on an
international stock exchange to raise capital for its growth and expansion program. PHI Group, Inc. will acquire 49% of HTMI,
plus 2% proxy voting right in HTMI, as a prerequisite to cooperate with HTMI in this development program. The closing of this
transaction is subject to satisfactory due diligence review of HTMI, the signing of a definitive agreement, and HTMI’s compliance
with the U.S. Generally Accepted Accounting Principles (GAAP). As of the day of this report, HTMI has not completed the due diligence
request required by the Company. The Company intends to assign and transfer this transaction to American Pacific Resources, Inc.,
a new subsidiary of PHI Group, Inc., or otherwise terminate this agreement if it is not able to conduct an audit of HTMI in accordance
with GAAP.
BUSINESS
COOPERATION AND INVESTMENT AGREEMENT WITH SPARTAN MINING AND DEVELOPMENT CORPORATION
On
October 30, 2015, the Company signed a Principle Business Cooperation and Investment Agreement with Spartan Mining and Development
Corporation (“SMDC”), a Philippine company, to form a joint venture between SMDC and PHI Group, Inc. to dredge, extract,
process, sell and export lahar sand from the Sto. Tomas, Maloma and Bucao Rivers in the Province of Zamales, the Philippines.
The total volume of the lahar sand to be dredged from these rivers is estimated at 1.4 billion
metric tonnes. The sand was created by the Mount Pinatubo volcanic eruption in June 1991.
On
November 24, 2015 both parties signed a Joint Venture Agreement to form a joint venture corporation, to be preferably styled “PHI-Spartan
Resources, Inc.,” in order to implement the provisions of the Principle Business Cooperation and Agreement.
The
Company intends to assign and transfer this transaction to American Pacific Resources, Inc., a new subsidiary of PHI Group, Inc.
SALE
AND PURCHASE AGREEMENTS OF MARINE SAND FOR EXPORT TO SINGAPORE
On
December 16, 2015, the Company signed Sale and Purchase Agreements with two Vietnamese companies to export marine sand recovered
from dredging projects in Central Vietnam to Singapore for reclamation purposes. The Vietnamese companies are in the process of
obtaining the remaining licenses and permits to operate the dredging projects.
The
Company intends to assign and transfer this transaction to American Pacific Resources, Inc., a new subsidiary of PHI Group, Inc.
INVESTMENT
IN ANTIMONY MINE IN LAO PEOPLE’S DEMORACTIC REPUBLIC
On
January 19 and 20, 2016, the Company signed a Business Cooperation Agreement and an Investment Agreement with Khamchaleun Investment
Sole Co., Ltd., a Laotian company, to acquire a 35% equity interest in Hung Kham Lao Investment Co., Ltd and co-invest in a 92km
2
antimony mine in Chalet Village, Boualapha District, Khammuane Province, People’s Democratic Republic. The antimony
mining company has been granted a quota to extract, process and sell 350,000 metric tons of antimony from this mine. The Company
intends to assign and transfer this transaction to American Pacific Resources, Inc., a new subsidiary of PHI Group, Inc.
ACQUISITION
OF MAJORITY INTEREST IN A LIQUEFIED PETROLEUM GAS COMPANY IN VIETNAM
On
January 23, 2016, PHI Group, Inc. (the “Company”) entered into an agreement to purchase 50.90% of equity ownership
(the “Exchange Ownership”) in Pacific Petro Commercial Joint Stock Company (aka Pacific Petro Trading Corporation),
a Vietnamese company, hereinafter referred to as “Pacific Petro,” in exchange for a combination of cash and Common
Stock and/or Preferred Stock of the Company. The fair value for the Exchange Ownership will be determined by the majority shareholders
of Pacific Petro (the “Majority Shareholders”) and the Company after the completion of a business valuation of Pacific
Petro by Grant Thornton Vietnam Ltd. and the financial audits of Pacific Petro by a PCAOB-registered auditing firm.
Originally
established as Binh Duong Gas LLC in 1998, Pacific Petro changed its name to Pacific Petro Commercial Joint Stock Company (aka
Pacific Petro Trading Corporation) in May 2010. This company’s headquarters is located at 99 Ich Thanh Street, Truong Thanh
Ward, District 9, Ho Chi Minh City, Vietnam. Website:
http://www.pacificpetro.com.vn/
Pacific
Petro is the third largest private liquefied petroleum gas (LPG) company in Southern Vietnam, engaged in sales of liquefied petroleum
gas (LPG), manufacturing of gas canisters and cylinders, filling of LPG, repair and maintenance of gas tanks, and wholesale of
solid fuels, liquid, gas and related petroleum products.
This
company owns a gas canister-manufacturing factory on a 215,200 square-foot lot in Ben Cat District, Binh Duong Province and a
gas filling plant on a 65,600 square-foot lot in District 9, Ho Chi Minh City, Vietnam. It has also acquired a 93,600 square-foot
lot Go Dau Industrial Park, Dong Nai Province to build a proprietary LPG storage area and has been granted 83 acres in Phu Huu
Village, Nhon Trach District, Dong Nai Province to build an integrated port for imports of energy-related commodities and products.
PHI
Group has engaged Grant Thornton to conduct an independent business valuation of Pacific Petro in order to determine the fair
value for the transaction.
MEMORANDUM
OF UNDERSTANDING FOR BUSINESS COOPERATION & INVESTMENT
On
March 9, 2016, the Company signed a Memorandum of Understanding for Business Cooperation and Investment with Ses Meas Gas Import
Export, Construction & Development Co., Ltd., (“Ses Meas”) a Cambodian company, to cooperate with each other to
develop liquefied petroleum gas (LPG) and other energy-related businesses in Cambodia, including but not limited to increasing
Ses Meas market share of LPG business in Cambodia, establishing dry port and LPG storage and logistics facilities, engaging in
waste-to-energy business, and potentially establishing and operating an oil refinery in Cambodia in conjunction with an qualified
international investor. Subsequently, the Company signed a Joint Venture Agreement with W.B.J. Import Export Co., Ltd., an affiliate
of Ses Meas, to establish, manage and operate a dry port in Cambodia (NOTE 18: Subsequent Event).
BUSINESS
COOPERATION AGREEMENT WITH PT JAYA SAKTI GLOBALINDO
On
March 17, 2016, the Company signed a Business Cooperation Agreement with PT Jaya Sakti Globalindo (JSG), an Indonesian company,
to utilize hard assets held by JSG and its affiliates as collaterals for project financing. The parties intend to enter into definitive
agreements for the collateral provision in connection with specific projects and the terms and conditions of such provisions.
NOTE
17
–
GOING CONCERN UNCERTAINTY
As
shown in the accompanying consolidated financial statements, the Company has accumulated deficit of $37,896,413 as of March 31,
2016 and net loss from operations of $129,568 for the nine months ended March 31, 2016. The financial condition as well as the
uncertain circumstances that the Company faces in its day-to-day operations with respect to cash flows create an uncertainty as
to the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might
be necessary should the Company be unable to continue as a going concern. Management has taken action to strengthen the Company’s
working capital position and generate sufficient cash to meet its operating needs through June 30, 2016 and beyond. In the next
twelve months, the Company intends to focus on closing the acquisition of a majority interest in Pacific Petro Commercial Joint
Stock Company in Vietnam, acquiring a wood pellet plant in Alabama, U.S.A., implementing the reclamation sand business in Southeast
Asia, and engaging in international trade involving energy products and industrial commodities. The Company will also use its
best efforts to acquire energy-related and natural resource assets and carry out various business cooperation and investment agreements
that have been signed with certain international partners. The Company anticipates generating meaningful revenues through the
acquisition of Pacific Petro Commercial Joint Stock Company, the wood pellet plant in Alabama, the reclamation sand business,
and certain activities in the area of natural resources and international trade. The president and chairman of the Company has
committed to funding the Company’s operations from various sources for the next 12 months. The Company also continues to
seek financing in order to implement its business plan. However, no assurances could be made that management would be successful
in achieving its plan.
NOTE
18
– SUBSEQUENT EVENT
JOINT
VENTURE WITH CAMBODIAN COMPANY TO SET UP A DRY PORT
On
April 30, 2016, the Company signed a Joint Venture Agreement with W.B.J. Import Export Co., Ltd., an affiliate of Ses Meas, to
establish, manage and operate a dry port in Cambodia. According to the Joint Venture Agreement, PHI Group, Inc. will contribute
65% investment capital to the dry port project and hold 65% equity interest in the joint venture company.
ESTABLISHMENT
OF NEW SUBSIDIARY
On
April 05, 2016, the Company formed “American Pacific Resources, Inc.,” a Wyoming corporation as a wholly owned subsidiary
of PHI Group, Inc. to serve as the holding company for the Company’s mining, mineral and other natural resource businesses
apart from energy-related activities.
ISSUANCE
OF PHI GROUP, INC.’S COMMON STOCK FOR CONVERSION OF DEBTS
On
April 08, 2016 a creditor of the Company converted $275,000 of loan balances into 691,824 shares of Common Stock of PHI Group,
Inc., at a price of $0.3975 per share. As of May 20, 2016, the Company has 15,240,825 shares of Common Stock issued and 9,567,498
shares of Common Stock outstanding, respectively.
LETTER
OF INTENT TO PURCHASE A WOOD PELLET PLANT IN DEKALB COUNTY, ALABAMA, U.S.A.
On
April 26, 2016, American Pacific Resources, Inc., a wholly owned subsidiary of the Company, signed a Letter of Intent with Lee
Energy Solutions, LLC, an Alabama limited liability company, to acquire 100% of assets in a 100,000 MT wood pellet plant located
in DeKalb County, Northeast Alabama. The consummation of this transaction is subject to satisfactory due diligence, the signing
of a Definitive Sale and Purchase Agreement and financing for the acquisition.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Except
for the audited historical information contained herein, this report specifies forward-looking statements of management of the
Company within the meaning of Section 27a of the Securities Act of 1933 and Section 21e of the Securities Exchange Act of 1934
(“forward-looking statements”) including, without limitation, forward-looking statements regarding the Company’s
expectations, beliefs, intentions and future strategies. Forward-looking statements are statements that estimate the happening
of future events and are not based on historical facts. Forward- looking statements may be identified by the use of forward-looking
terminology, such as “could”, “may”, “will”, “expect”, “shall”, “estimate”,
“anticipate”, “probable”, “possible”, “should”, “continue”, “intend”
or similar terms, variations of those terms or the negative of those terms. The forward-looking statements specified in this report
have been compiled by management of the Company on the basis of assumptions made by management and considered by management to
be reasonable. Future operating results of the Company, however, are impossible to predict and no representation, guaranty, or
warranty is to be inferred from those forward-looking statements. The assumptions used for purposes of the forward-looking statements
specified in this report represent estimates of future events and are subject to uncertainty as to possible changes in economic,
legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information
and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment.
To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results,
and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. In addition, those forward-looking
statements have been compiled as of the date of this report and should be evaluated with consideration of any changes occurring
after the date of this report. No assurance can be given that any of the assumptions relating to the forward-looking statements
specified in this report are accurate and the Company assumes no obligation to update any such forward-looking statements.
INTRODUCTION
Established
in June 1982, PHI Group, Inc. (the “Company” or “PHI”) is a Nevada corporation primarily engaged in energy
and natural resources (
www.phiglobal.com
). The Company has adopted a long-term plan to acquire energy-related assets and
other natural resources, partner with other companies to develop energy projects in select geographical areas, and provide renewable
energy solutions including bio-mass, wind, solar power and other technologies. The Company also provides corporate finance services,
including merger and acquisition advisory and consulting services, and arranges capital for client companies through its wholly
owned subsidiary PHI Capital Holdings, Inc. (
www.phicapitalholdings.com
). In addition, the Company also participates in
international trade activity.
The
Company, originally incorporated under the name of JR Consulting, Inc., was initially engaged in mergers and acquisitions and
had an operating subsidiary, Diva Entertainment, Inc., which operated two modeling agencies, one in New York and one in California.
Following the business combination with Providential Securities, Inc., a California-based brokerage firm, in late 1999 the Company
changed its name to Providential Securities, Inc. (Nevada) in January 2000. The Company then changed its name to Providential
Holdings, Inc. in February 2000. In October 2000, Providential Securities withdrew its securities brokerage membership and ceased
its financial services business. Subsequently, in April 2009, the Company changed its name to PHI Group, Inc. From October 2000
to October 2011, the Company was engaged in mergers and acquisitions advisory and consulting services, real estate and hospitality
development, mining, oil and gas, telecommunications, technology, healthcare, private equity, and investment in special situations.
Beginning October 2011, the Company discontinued the operations of Providential Vietnam Ltd., Philand Ranch Limited (together
with its subsidiaries Philand Ranch - Singapore, Philand Corporation and Philand Vietnam Ltd.), PHI Gold Corporation (formerly
PHI Mining Corporation), and PHI Energy Corporation, and has been mainly focusing on energy business and natural resources, including
investing in and/or developing energy assets, independent power plant projects, renewable energy, industrial minerals, and international
trade. In addition, PHI Capital Holdings, Inc., the Company’s wholly owned subsidiary, provides corporate and project finance
services, including merger and acquisition (M&A) advisory and consulting services and arranging capital for companies in a
variety of industries. No assurances can be made that the Company will be successful in achieving its plan.
BUSINESS
STRATEGY
PHI
Group Inc.’s strategy is to:
1.
Identify, build, acquire, commit and deploy valuable resources with distinctive competitive advantages;
2.
Design, evaluate, participate and compete in attractive businesses that have large, growing market potential;
3.
Design and implement best-of-breed management systems; and
SUBSIDIARIES:
Since
October 2011 the Company has divested its holdings in other subsidiaries that are not directly related to energy and natural resources
in order to focus on its new scope of business. As of the date of this report, the Company owns one hundred percent of PHI Capital
Holdings, Inc., a Nevada corporation, and 51% of Cornerstone Biomass Corporation, a Florida corporation engaged in biomass energy.
PHI
CAPITAL HOLDINGS, INC.
PHI
Capital Holdings, Inc., a Nevada corporation, was originally incorporated under the name of “Providential Capital, Inc.”
in 2004 as a wholly owned subsidiary of the Company to provide merger and acquisition (M&A) advisory services, consulting
services, project financing, and capital market services to clients in North America and Asia. In May 2010, Providential Capital,
Inc. changed its name to PHI Capital Holdings, Inc. This subsidiary has successfully managed merger plans for several privately
held and publicly traded companies and provided M&A consulting services to clients in the U.S. and abroad.
CORNERSTONE
BIOMASS CORPORATION
Cornerstone
Biomass Corporation, a Florida corporation, was set up in January 2015 by the Company and the principals of AG Materials, LLC,
an Alabama company, to engage in biomass energy. The Company holds 51% and the principals of AG Materials hold 49% of equity ownership
in Cornerstone Biomass Corporation. This subsidiary is currently developing and establishing a 200,000 MT wood pellet plant in
Live Oak, Florida. The Company has purchased a 10-acre parcel of land from Klausner Holding USA Corporation in order to build
the wood pellet plant adjacent to Klausner Lumber Mill. Cornerstone has been guaranteed a stable supply of feedstock from Klausner
Lumber Mill in Live Oak, Florida for its production of wood pellets.
DISCONTINUED
OPERATIONS:
The
Company has discontinued the operations of Providential Vietnam Ltd., Philand Ranch Limited (together with its subsidiaries Philand
Ranch Ltd-Singapore, Philand Corporation-USA and Philand Vietnam Ltd.), PHI Gold Corporation (formerly PHI Mining Corporation),
and PHI Energy Corporation as of June 30, 2012. (Note 6)
SPIN-OFF
SUBSIDIARIES:
HP.ITA
CORPORATION (FORMERLY PROVIMEX, INC.)
Provimex,
Inc. was originally formed on April 10, 2001 under the name “Providential Imex”, to focus on trade commerce with Vietnam.
This division changed its name to Provimex on July 5, 2001. Provimex began to generate revenues from its import and export activities
in August 2002 through the fiscal year ended June 30, 2005 and incorporated as a Nevada corporation on September 23, 2004. The
Company distributed a 15% stock dividend of Provimex, Inc. to shareholders of record as of September 15, 2004. On June 3, 2011,
Provimex, Inc. signed an agreement to acquire all the issued and outstanding capital stock of Humex Medical Group Corp., a California
corporation, (“Humex”) in exchange solely for a certain amount of shares of Provimex’s common stock, par value
0.001, to engage in stem research and therapy in Southeast Asia. After the merger, shareholders of Humex would own 90% of Provimex
Inc. On June 13, 2012 this transaction was rescinded in its entirety effective retroactively June 3, 2011. On June 19, 2012, Provimex,
Inc. changed its name to HP.ITA Corporation. On July 20, 2012, HP.ITA Corporation (“HPUS”) signed a Corporate Combination
Agreement to acquire all the issued and outstanding stock of HP.ITA Joint Stock Company, a company organized and existing under
the laws of Vietnam, in exchange solely for such amount of authorized but unissued common stock of HPUS that would have been equal
to 95% of all the issued and outstanding shares of HPUS’s common stock immediately following the issuance of such shares.
HPUS intends to complete the required financial audits and file a Form 10 or S-1 registration statement with the Securities and
Exchange Commission to become a separate fully reporting publicly traded company in the U.S. As of the date of this report, HPUS
has not filed a registration statement with the Securities and Exchange Commission.
OMNI
RESOURCES, INC. (F/K/A ASIA GREEN CORPORATION AND TOUCHLINK COMMUNICATIONS, INC.)
Touchlink
Communications was formed on July 7, 2003 as a division of the Company to provide point-of-sale (POS) terminals and prepaid calling
cards to retailers, convenient stores and non-profit organizations across the US. This subsidiary was later incorporated as a
Nevada corporation in February 2004 under the name of Touchlink Communications, Inc. as a wholly owned subsidiary of the Company
to provide long distance services to residential and business customers in the United States. The Company has declared a 15% stock
dividend of Touchlink Communications, Inc. to shareholders of record as of September 15, 2004. On November 03, 2008, this subsidiary
changed its name to Vietnam Media Group, Inc. with the intent to develop a multi-media business in Vietnam and subsequently resumed
the corporate name of Touchlink Communications, Inc. in February 2011. On April 11, 2014 this subsidiary changed its name to Asia
Green Corporation (“AGC”) and entered into a business combination agreement with Asia Green Limited Liability Company,
a Vietnam-based company, to become a holding company for agroforestry and afforestation business in Vietnam and Southeast Asia.
On July 28, 2014 AGC changed its corporate name to Omni Resources, Inc. to pursue a new business venture. The Company anticipates
holding about 10% equity interest in Omni Resources, Inc. following its recapitalization plan.
STOCK
OWNERSHIPS:
As
of March 31, 2016 the Company owned 22,535,714 shares of Catalyst Resource Group, Inc. common stock, or equivalent to 2.56%.
MYSON
GROUP, INC. (FORMERLY VANGUARD MINING CORPORATION AND VIETNAM MINING CORPORATION)
Since
June 2010, the Company has provided consulting and advisory services to Myson Group, Inc. (formerly Vanguard Mining Corporation
and Vietnam Mining Corporation) and has been compensated with Common Stock of Myson Group, Inc. in lieu of cash for services rendered.
As of March 31, 2016, the Company owned 34,642,106 post-split shares of Myson Group, Inc., or equivalent to 4.97%.
CRITICAL
ACCOUNTING POLICIES
The
Company’s financial statements and related public financial information are based on the application of accounting principles
generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective
interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported.
These estimates can also affect supplemental information contained in the external disclosures of the Company including information
regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere
to GAAP and are consistently and conservatively applied. Valuations based on estimates are reviewed by us for reasonableness and
conservatism on a consistent basis throughout the Company. Primary areas where financial information of the Company is subject
to the use of estimates, assumptions and the application of judgment include acquisitions, valuation of long-lived and intangible
assets, recoverability of deferred tax and the valuation of shares issued for services. We base our estimates on historical experience
and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially
from these estimates under different assumptions or conditions.
Valuation
of Long-Lived and Intangible Assets
The
recoverability of long-lived assets requires considerable judgment and is evaluated on an annual basis or more frequently if events
or circumstances indicate that the assets may be impaired. As it relates to definite life intangible assets, we apply the impairment
rules as required by SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and Assets to Be Disposed Of”
as amended by SFAS No. 144, which also requires significant judgment and assumptions related to the expected future cash flows
attributable to the intangible asset. The impact of modifying any of these assumptions can have a significant impact on the estimate
of fair value and, thus, the recoverability of the asset.
Income
Taxes
We
recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the
tax bases of assets and liabilities. We regularly review our deferred tax assets for recoverability and establish a valuation
allowance based upon historical losses, projected future taxable income and the expected timing of the reversals of existing temporary
differences. As of March 31, 2016, we estimated the allowance on net deferred tax assets to be one hundred percent of the net
deferred tax assets.
RESULTS
OF OPERATIONS
The
following is a discussion and analysis of our results of operations for the three-month and nine-month periods ended March 31,
2016 and 2015, our financial condition at December 31, 2015 and factors that we believe could affect our future financial condition
and results of operations. Historical results may not be indicative of future performance.
This
discussion and analysis should be read in conjunction with our consolidated financial statements and the notes thereto included
elsewhere in this Form 10-Q. Our consolidated financial statements are prepared in accordance with Generally Accepted Accounting
Principles in the United States (“GAAP”). All references to dollar amounts in this section are in United States dollars.
Three
months ended March 31, 2016 compared to the three months ended March 31, 2015
Total
Revenues:
The
Company had $97,350 in revenue from consulting services for the quarter ended March 31, 2016 as compared to $16,000 in revenue
for the quarter ended March 31, 2015, an increase of $81,350 between the two periods.
Operating
Costs and Expenses:
Total
operating expenses were $141,951 and $125,749 for the three months ended March 31, 2016, and 2015, respectively.
The
variance of $16,202 in operating expenses between the two periods was due to an increase in professional services of $19,251,
offset by a decrease in general and administrative expenses of $3,049 during the quarter ended March 31, 2016 compared to the
corresponding period in 2015. General and administrative expenses were $29,951 and $32,999 for the three months ended March 31,
2016, and 2015, respectively. The decrease in general and administrative expenses between the two comparable periods was primarily
due to a decrease in filing fees of $2,296, a decrease in transfer agent fees for the Company and our clients of $7,275, a decrease
in travel expense of $3,513, offset by an increase of $9,662 in advertising expenses, respectively.
Other
Income and Expenses:
Net
other expenses were $132,346 for the three months ended March 31, 2016, as compared to $146,788 for the three months ended March
31, 2015. The decrease in other expenses of $14,442 between the two periods was mainly due to a decrease in interest expense of
$10,857, offset by an increase of $22,541 of loss on sale of marketable securities and a decrease in loss on settlement of debts
$26,125.
Interest
expenses were $70,520 and $81,377 for the three months ended March 31, 2016 and 2015, respectively.
Net
Income (Loss):
Net
loss for the three months ended March 31, 2016 was $176,948, as compared to a net loss of $256,537 for the same period in 2015,
which is equivalent to ($0.04) per share for both periods, based on the weighted average number of basic and diluted shares outstanding
at the end of each corresponding period after adjusting for the 1 for 1,500 reverse split effected on March 15, 2012.
The
reduction in net loss of $78,589 between the two comparable periods is primarily due to an increase of $81,350 in revenue, offset
by an increase of $16,202 in total operating expenses, and a decrease in other expense of $14,442.
Nine
months ended March 31, 2016 compared to the nine months ended March 31, 2015
Total
Revenues:
The
Company had $332,050 in revenues for the nine months ended March 31, 2016, as compared to $31,096 of revenues for same nine-month
period ended 2015, an increase of $219,604 between the two periods. The revenue increase was due to additional consulting services
rendered in the current period.
Operating
Costs and Expenses:
Total
operating expenses were $361,048 and $308,519 for the nine months ended March 31, 2016, and 2015, respectively. The increase in
total operating expenses of $52,529 during the current nine-month period is primarily due to an increase in professional services
in the amount of $47,323 and an increase in general and administrative expenses of $5,206, as compared to the nine months ended
March 31, 2015. Salaries and wages of $157,500 were the same for both periods. There was a total of $120,311 in professional services
during the current nine-month period as compared to $72,988 in professional services during the corresponding nine-month period
ended March 31, 2015. General and administrative expenses were $83,237 during the nine months ended March 31, 2016 as compared
to $78,031 during the same corresponding period in 2015. The increase of $5,206 in general and administrative expenses during
the current nine-month period, as compared to the same period ended March 31, 2015, was primarily due to a decrease in expense
of $3,725 related to the collection of the Petrobras bond transaction, an increase of $7,458 in advertising expense, an increase
of $1,900 in donations, an decrease of $505 in filing fees, a decrease of $7,985 in transfer agent fees for the Company and its
clients, an increase of $4,687 in travel expenses, an increase of $360 insurance, and an increase of 343 in dues and subscriptions,
respectively. The increase in total operating expenses between the two periods was due to increased business development activities
during the current period.
Other
Income and Expenses:
Net
other expenses were $100,571 for the nine-month ended March 31, 2016, as compared to net other expenses of $316,328 for the nine-month
ended March 31, 2015. Interest expenses were $230,025 and $242,517 for the nine months ended March 31, 2016, and 2015, respectively.
The decrease in net other expenses of $215,757 between the two periods is primarily due to a gain on sale of marketable securities
in the amount of $131,370 during the nine months ended March 31, 2016, as compared to a loss on sale of marketable securities
in the amount of $47,813 during the same period ended March 31, 2015, no gain or loss on settlement of debts during the current
nine-month period as compared to a loss on settlement of debts in the amount of $25,845 in the previous period, offset by an increase
in miscellaneous expenses of $1,763 between the two periods.
Net
Income (Loss):
Net
loss for the nine months ended March 31, 2016 was $129,568, as compared to net loss of $593,750 for the nine months March 31,
2015, which is equivalent to ($0.03) per share for the current period and ($0.09) per share for the same period in 2015, both
based on the weighted average number of basic and diluted shares outstanding at the end of each corresponding period after adjusting
for the 1 for 1,500 reverse split effected on March 15, 2012.
The
variance in net loss of $464,182 between the two comparable periods is mainly due to an increase in revenue of $300,954, offset
by an increase of $52,529 in total operating expenses, and a decrease of $215,757 in net other expenses during the nine-month
period ended March 31, 2016 compared to the nine-month period ended March 31, 2015.
CASH
FLOWS
The
Company’s cash and cash equivalents balance were $11,139 and $8,692 as of March 31, 2016 and March 31, 2015, respectively.
Net
cash used in the Company’s operating activities during the nine-month period ended March 31, 2016 was $1,501,967, as compared
to net cash used in operating activities of $280,309 during the nine-month period ended March 31, 2015. This represents an increase
of $1,221,658 in net cash used in operating activities between the two periods. The underlying reason for the variance was primarily
due to a net loss from operations of $129,568 during the nine-month period ended March 31, 2016, as compared to a net loss from
operations in the amount of $593,750 during the corresponding nine-month period ended March 31, 2015, an increase in other assets
and prepaid expenses in the amount of $38,575 and an decrease in accounts payable and accrued expenses in the amount of $1,333,823
during the nine-month period ended March 31, 2016, as compared to an increase in other assets and prepaid expenses in the amount
of $40,324 and an increase in accounts payable and accrued expenses of $353,765 during the nine months ended March 31, 2015.
The
Company used $149,509 in investing activities during the current nine-month period ended March 31, 2016 whereas there was $10,774
used in investing activities for the previous nine-month period ended March 31, 2015. The increase in cash used in investing activities
during the current period is due to the purchase of 10 acres of land in Live Oak, Florida and a deposit for purchase of equity
in a company during the current nine-month period.
Cash
provided by financing activities was $1,651,591 for the nine-month period ended March 31, 2016, as compared to cash provided by
financing activities in the amount of $269,152 for the nine-month period ended March 31, 2015. The primary underlying reasons
for the variance of $1,382,439 between the two periods were due to changes in common stock of $1,735,773 as a result of certain
creditors’ conversions of debts into common stock of the Company, a change in Accumulated Other Comprehensive Income (Loss)
of ($266,173), a change in Accumulated Deficit of ($87,108), and a change in Treasury Stock of ($52) between the current nine-month
periods ended March 31, 2016 and the corresponding previous period ended March 31, 2015. The Company repurchased 63,700 shares
of its Common Stock from the open market and cancelled 25,510 restricted shares of its Common Stock during the nine-month ended
March 31, 2106.
HISTORICAL
FINANCING ARRANGEMENTS
SHORT
TERM NOTES PAYABLE AND SALE OF COMMON STOCK:
In
the course of its business, the Company has obtained short-term loans from individuals and institutional investors and from time
to time raised money by issuing restricted common stock of the Company under the auspices of Rule 144. As of March 31, 2016 and
June 30, 2015, the Company had short-term notes payable amounting to $677,660 and $1,342,618 with accrued interest of $3,182,194
and $3,031,152, respectively. These notes bear interest rates ranging from 0% to 36% per annum. Some of the notes payable are
secured by certain assets of the Company.
CONVERTIBLE
PROMISSORY NOTE:
On
February 29, 2016, the Company issued a convertible promissory note in the amount of $56,750 to Auctus Fund, LLC, a Delaware limited
liability company. This convertible note is due and payable on November 29, 2016 with interest of 10% per annum. This note is
convertible at the election of Auctus Fund, LLC from time to time after the issuance date. In the event of default, the amount
of principal and interest not paid when due bear interest at the rate of 24% per annum and the note becomes immediately due and
payable. Should an event of default occur, the Company is liable to pay 150% of the then outstanding principal and interest. The
note agreement contains covenants requiring Auctus Fund’s written consent for certain activities not in existence or not
committed to by the Company on the issuance date of the note, as follows: dividend distributions in cash or shares, stock repurchases,
borrowings, sale of assets, certain advances and loans in excess of $100,000, and certain guarantees with respect to preservation
of existence of the Company and non-circumvention. Outstanding note principal and interest accrued thereon can be converted in
whole, or in part, at any time by Auctus after the issuance date into an equivalent of the Company’s common stock determined
by 55% of the average of the two lowest closing trading prices of the Company’s common stock during the twenty (20) trading
days prior to the date the conversion notice is sent by Auctus. The Company may prepay the amounts outstanding to Auctus Fund
at any time up to the 180
th
day following the issue date of this note by making a payment to the note holder of an
amount in cash equal to 125% to 150%, multiplied by the sum of: (w) the then outstanding principal amount of this Note
plus
(x) accrued and unpaid interest on the unpaid principal amount of this Note
plus
(y) Default Interest, depending on
the time of prepayment.
CONVERTIBLE
PREFERRED STOCK:
In
April 2015, the Company launched a private placement memorandum by offering investment units consisting of Class A cumulative
convertible preferred stock and warrants under the auspices of Regulation 506(c). However, as of the date of this report the Company
has not raised any capital through this program and has withdrawn the private placement offering since February 10, 2016.
FINANCIAL
PLANS
LIQUIDITY
AND CAPITAL RESOURCES: The Company’s operations are currently financed through income from consulting and advisory services,
various loans, sale of marketable securities and issuance of common stock under the auspices of Rule 144. In addition, the Company
also anticipates generating revenues through energy-related and natural resource activities, international trade and joint operations
with other companies. However, no assurances can be made that management will be successful in achieving its plan or that additional
capital will be available on a timely basis or at acceptable terms.
MATERIAL
CASH REQUIREMENTS:
We must raise substantial amounts of capital to fulfill our plan of acquiring energy-related and natural
resource assets as part of our scope of business. We intend to use equity, debt and project financing to meet our capital needs
for acquisitions.
Management
has taken action and formulated plans to strengthen the Company’s working capital position and generate sufficient cash
to meet its operating needs through June 30, 2016 and beyond. The working capital cash requirements for the next 12 months following
the end of the current quarter would be generated from operations, sale of marketable securities and additional financing.
AVAILABLE
FUTURE FINANCING ARRANGEMENTS:
The
Company has engaged a number of investment banking firms and negotiated with private equity firms to arrange financing for potential
acquisitions. The Company believes it will be able to secure the required financing arrangements; however, no assurances could
be made that management would be successful in achieving its plan.
COMPANY’S
PLAN OF OPERATION FOR THE FOLLOWING 12 MONTHS
While
the Company is currently engaged in energy and natural resources, it intends to primarily focus on the following plan of operation
for the next twelve months:
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Complete
the acquisition of a majority interest in Pacific Petro Commercial Joint Stock Company in Vietnam, build liquefied petroleum
gas (LPG) storage facilities in Go Dau Industrial Park, Dong Nai Province, Vietnam, and begin consolidating other businesses
in the fields of LPG natural gas.
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Develop
a dry port in conjunction with W.B.J. Import Export Co., Ltd., a Cambodian company, and engage in LPG business in Cambodia.
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Acquire
a 100,000 MT wood pellet plant in DeKalb County, Northeast Alabama, U.S.A. and develop a wood pellet plant in Southeast Asia.
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Implement
the reclamation and construction sand business among Vietnamese and Filipino partners, Singapore, Brunei and other Asian countries.
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Supply
coal from Indonesia to Asian markets.
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Participate
in other select energy-related and natural resource activities as opportunities arise.
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The
Company intends to spin off its M&A advisory services and mineral resource activities
into separate subsidiaries in conjunction with the closing of the purchase of Pacific
Petro Commercial Joint Stock Company to primarily concentrate on energy business, both
conventional and renewable. However, no guarantee could be made that the Company would
be successful in any of its plans during this time frame. The Company may have to change
its business focus and/or priorities as needed in order to respond to new circumstances
or opportunities.
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ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The
following discussion about PHI Group Inc.’s market risk involves forward-looking statements. Actual results could differ
materially from those projected in the forward-looking statements.
Currency
Fluctuations and Foreign Currency Risk
Some
of our operations are conducted in Vietnam and Indonesia using Vietnamese Dong and Indonesian Rupiahs, which are the official
currencies of these countries. The effect of the fluctuations of exchange rates is considered minimal to our business operations.
Interest
Rate Risk
We
do not have significant interest rate risk, as most of our debt obligations are primarily short-term in nature to individuals,
with fixed interest rates.
Valuation
of Securities Risk
Since
majority of our income is paid with the marketable securities, the value of our assets may fluctuate significantly depending on
the market value of the securities we hold.
ITEM
4.
Controls
and Procedures
Disclosure
Controls and Procedures
As
required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management
carried out an evaluation, with the participation of our Chief Executive Officer/Acting Chief Financial Officer, of the effectiveness
of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) of the Exchange Act), as
of the period covered by this report. Disclosure controls and procedures are defined as controls and other procedures that are
designed to ensure that information required to be disclosed by us in reports filed with the SEC under the Exchange Act is (i)
recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated
and communicated to the Company’s management, including its principal executive officer and principal financial officer,
as appropriate to allow timely decisions regarding required disclosure. Based upon their evaluation, our management (including
our Chief Executive Officer) concluded that our disclosure controls and procedures were not effective as of March 31, 2016, based
on the material weaknesses defined below:
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(i)
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inadequate
segregation of duties consistent with control objectives;
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(ii)
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ineffective
controls over period-end financial disclosure and reporting processes.
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Management’s
Remediation Plan
We
plan to take steps to enhance and improve the design of our internal control over financial reporting. However, during the period
covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To
remediate such weaknesses, we plan to implement the following changes in the future:
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(i)
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appoint
additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and
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(ii)
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adopt
sufficient written policies and procedures for accounting and financial reporting.
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The
remediation efforts set out in (i) are largely dependent upon our company securing additional financing to cover the costs of
implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected
in a material manner. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute
assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities
that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.
Management
believes that despite our material weaknesses set forth above, our consolidated financial statements for the quarter ended March
31, 2016 are fairly stated, in all material respects, in accordance with US GAAP.
Changes
in Internal Control Over Financial Reporting
There
were no changes in our internal control over financial reporting during the quarter ended March 31, 2016 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.