Item
1- Consolidated Financial Statements – Unaudited
PHI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
|
|
December
31, 2018
|
|
|
June
30, 2018
|
|
|
|
|
|
|
(Audited)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
3,782
|
|
|
$
|
13,937
|
|
Marketable
securities
|
|
|
518,266
|
|
|
|
1,100,483
|
|
Accounts
receivable
|
|
|
632,000
|
|
|
|
432,000
|
|
Other
current assets
|
|
|
1,018,934
|
|
|
|
174,877
|
|
Total
current assets
|
|
$
|
2,172,982
|
|
|
$
|
1,721,298
|
|
Other
assets:
|
|
|
|
|
|
|
|
|
Investments
|
|
|
26,316,419
|
|
|
|
25,005,000
|
|
Contract
Assets
|
|
|
2,497,841
|
|
|
|
697,841
|
|
Total
other assets
|
|
$
|
28,814,260
|
|
|
|
25,702,841
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
30,987,242
|
|
|
$
|
27,424,139
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
114,538
|
|
|
$
|
116,063
|
|
Accrued
expenses
|
|
|
464,337
|
|
|
|
392,205
|
|
Short-term
notes payable - Net
|
|
|
1,552,033
|
|
|
|
1,336,552
|
|
Due
to officers and directors
|
|
|
448,017
|
|
|
|
233,577
|
|
Contract
Liabilities
|
|
|
2,497,841
|
|
|
|
697,841
|
|
Derivative
liabilities - Net
|
|
|
1,102,699
|
|
|
|
738,814
|
|
Other
current payable
|
|
|
92,781
|
|
|
|
92,781
|
|
Total
current liabilities
|
|
$
|
6,272,247
|
|
|
$
|
3,607,834
|
|
Long-term
Liabilities
|
|
|
|
|
|
|
|
|
Demand
promissory note
|
|
|
24,048,500
|
|
|
$
|
24,048,500
|
|
Accrued
expenses
|
|
|
1,174,565
|
|
|
|
1,063,481
|
|
Accrued
interest
|
|
|
2,067,349
|
|
|
|
2,005,815
|
|
Advances
from Customers
|
|
|
288,219
|
|
|
|
288,219
|
|
Liabilities
from Discontinued Operations
|
|
|
1,255,037
|
|
|
|
1,255,037
|
|
Total
Long-term Liabilities
|
|
$
|
28,833,670
|
|
|
$
|
28,661,052
|
|
Total
Liabilities
|
|
$
|
35,105,916
|
|
|
$
|
32,268,886
|
|
Stockholders’
deficit:
|
|
|
|
|
|
|
|
|
Preferred
Stock, $0.001 par value; 100,000,000 shares authorized:
|
|
|
|
|
|
|
|
|
Class
A Series II Preferred; 10,000,000 shares issued and outstanding as of 12/31/2018. Par Value
|
|
|
10,000
|
|
|
|
10,000
|
|
Class
A Series II Preferred; 10,000,000 shares issued and outstanding as of 12/31/18 - APIC
|
|
|
304,100
|
|
|
|
304,100
|
|
Class
A Series III Preferred; 50,000,000 shares issued and outstanding as of 12/31/2018; Par Value
|
|
|
50,000
|
|
|
|
-
|
|
Class
A Series III Preferred; 50,000,000 shares issued and outstanding as of 12/31/2018; APIC
|
|
|
1,261,419
|
|
|
|
-
|
|
Class
B Series I Preferred; 15,000 shares issued and outstanding as of 12/31/2018; Par Value
|
|
|
15
|
|
|
|
-
|
|
Total
Preferred Stock
|
|
|
1,625,534
|
|
|
|
314,100
|
|
Common
Stock, $0.001 par value; 6,900,000,000 shares authorized:
|
|
|
|
|
|
|
|
|
447,379,900
shares issued and outstanding on 12/31/2018, and 135,893,815 shares issued and outstanding on 6/30/2018, respectively; Par
value
|
|
|
705,058
|
|
|
|
382,920
|
|
APIC
- Common Stock
|
|
|
34,884,083
|
|
|
|
33,887,240
|
|
Common
Stock to be cancelled - 100,000 shares previously issued to Level Logic, Inc.
|
|
|
(33,000
|
)
|
|
|
(33,000
|
)
|
Common
Stock to be issued
|
|
|
2,600
|
|
|
|
-
|
|
Total
Common Stock
|
|
|
35,558,741
|
|
|
|
34,237,160
|
|
Treasury
stock: 484,767 and 321,569 shares as of 12/31/18 and 6/30/18, respectively - cost method.
|
|
|
(44,170
|
)
|
|
|
(44,170
|
)
|
Common
Stock to be issued - American Pacific Resources, Inc. subsidiary
|
|
|
447,500
|
|
|
|
447,500
|
|
Acc.
other comprehensive gain (loss)
|
|
|
169,744
|
|
|
|
751,962
|
|
Accumulated
deficit
|
|
|
(41,876,024
|
)
|
|
|
(40,551,299
|
)
|
Total
stockholders’ deficit
|
|
$
|
(4,118,674
|
)
|
|
$
|
(4,844,747
|
)
|
Total
liabilities and stockholders’ deficit
|
|
$
|
30,987,242
|
|
|
$
|
27,424,139
|
|
The accompanying notes form an integral part of these unaudited consolidated financial statements
PHI
GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
UNAUDITED
|
|
For the Three Months Ended December 31
|
|
|
For the Six Months Ended December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Net revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
200,000
|
|
|
$
|
432,000
|
|
|
$
|
200,000
|
|
|
$
|
460,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and wages
|
|
|
52,500
|
|
|
|
52,500
|
|
|
|
105,000
|
|
|
|
104,500
|
|
Professional services, including non-cash compensation
|
|
|
69,699
|
|
|
|
35,172
|
|
|
|
220,263
|
|
|
|
73,503
|
|
General and administrative
|
|
|
56,752
|
|
|
|
47,500
|
|
|
|
134,185
|
|
|
|
91,463
|
|
Total operating expenses
|
|
$
|
178,951
|
|
|
$
|
135,172
|
|
|
$
|
459,448
|
|
|
$
|
269,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) from operations
|
|
$
|
21,049
|
|
|
$
|
296,828
|
|
|
$
|
(259,448
|
)
|
|
$
|
191,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income and (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (expense)
|
|
|
(395,551
|
)
|
|
|
(295,045
|
)
|
|
|
(1,026,458
|
)
|
|
|
(512,617
|
)
|
Loss on equity investment
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Gain (loss) on settlement of debts
|
|
|
-
|
|
|
|
(9,310
|
)
|
|
|
-
|
|
|
|
(187,320
|
)
|
Dividends - Class A Series II & Series III Preferred Stock
|
|
|
(32,510
|
)
|
|
|
(390,137
|
)
|
|
|
(38,792
|
)
|
|
|
(390,137
|
)
|
Other income (expense)
|
|
|
(30
|
)
|
|
|
(37,570
|
)
|
|
|
(27
|
)
|
|
|
(487,748
|
)
|
Net other income (expenses)
|
|
|
(428,091
|
)
|
|
|
(732,062
|
)
|
|
|
(1,065,277
|
)
|
|
|
(1,577,822
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(407,043
|
)
|
|
$
|
(435,234
|
)
|
|
$
|
(1,324,725
|
)
|
|
$
|
(1,386,787
|
)
|
Other comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acc. Other comprehensive gain (loss)
|
|
$
|
169,744
|
|
|
$
|
95,651
|
|
|
$
|
169,744
|
|
|
$
|
95,651
|
|
Comprehensive income (loss)
|
|
|
(237,298
|
)
|
|
|
(339,583
|
)
|
|
|
(1,154,981
|
)
|
|
|
(1,291,136
|
)
|
Net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.02
|
)
|
Diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
331,277,496
|
|
|
|
55,754,516
|
|
|
|
331,277,496
|
|
|
|
55,754,516
|
|
Diluted
|
|
|
331,277,496
|
|
|
|
55,754,516
|
|
|
|
331,277,496
|
|
|
|
55,754,516
|
|
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 Six Months Ended December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net income (loss) from operations
|
|
$
|
(1,324,725
|
)
|
|
$
|
(996,650
|
)
|
Adjustments to reconcile net income to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
(Increase) decrease in other assets and prepaid expenses
|
|
|
(2,261,839
|
)
|
|
|
(330,376
|
)
|
Increase (decrease) in accounts payable and accrued expenses
|
|
|
2,664,413
|
|
|
|
551,192
|
|
Net cash provided by (used in) operating activities
|
|
|
(922,151
|
)
|
|
|
(775,834
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Investments in Vinafilms JSC.
|
|
|
(1,311,419
|
)
|
|
|
(25,005,000
|
)
|
Net cash provided by (used in) investing activities
|
|
|
(1,311,419
|
)
|
|
|
(25,005,000
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Common Stock and APIC
|
|
|
1,318,981
|
|
|
|
955,102
|
|
Common Stock to be issued
|
|
|
2,600
|
|
|
|
-
|
|
Preferred Stock and APIC
|
|
|
1,311,434
|
|
|
|
20,000,000
|
|
Acc. Other Comprehensive Income (Loss)
|
|
|
(582,217
|
)
|
|
|
(57,823
|
)
|
Changes in Treasury Stock
|
|
|
-
|
|
|
|
(3,262
|
)
|
Demand Promissory Note
|
|
|
-
|
|
|
|
4,939,500
|
|
Decrease in minority interest Other Adjustment
|
|
|
172,617
|
|
|
|
(6,020
|
)
|
Net cash provided by (used in) financing activities
|
|
|
2,223,415
|
|
|
|
25,827,497
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
(10,154
|
)
|
|
|
46,664
|
|
Cash and cash equivalents, beginning of period
|
|
|
13,937
|
|
|
|
38,369
|
|
Cash and cash equivalents, end of period
|
|
$
|
3,782
|
|
|
$
|
85,032
|
|
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
INTRODUCTION
PHI
Group, Inc. (the “Company” or “PHI”) is engaged in mergers and acquisitions as a principal (
www.phiglobal.com
).
The Company has adopted plans to acquire established operating businesses in selective industries and invest in various ventures
that may potentially create significant long-term value for our shareholders. In addition, the Company provides corporate finance
services, including merger and acquisition advisory and consulting services for client companies through our wholly owned subsidiary
PHI Capital Holdings, Inc. (
www.phicapitalholdings.com
). Furthermore, the Company has been working to establish a Luxembourg
Bank Fund in accordance with the “Reserved Alternative Investment Fund” (“RAIF”), known as PHILUX GLOBAL
FUNDS, together with a number of sub-funds for agricultural, energy and real estate projects as well as other investments.
BACKGROUND
Originally
incorporated on June 8, 1982 as JR Consulting, Inc., a Nevada corporation, the Company applied for a Certificate of Domestication
and filed Articles of Domestication to become a Wyoming corporation on September 20, 2017. In the beginning, the Company was foremost
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
financial services company, the Company changed its name to Providential Securities, Inc., a Nevada corporation, 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 and its subsidiaries were engaged in mergers and acquisitions
advisory and consulting services, real estate and hospitality development, mining, oil and gas, telecommunications, technology,
healthcare, private equity, and 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
- US, and Philand Vietnam Ltd. - Vietnam), PHI Gold Corporation (formerly PHI Mining Corporation, a Nevada corporation), and PHI
Energy Corporation (a Nevada corporation), and mainly focused on acquisition and development opportunities in energy and natural
resource businesses. At the present, the Company is engaged in mergers and acquisitions as a principal and investments in natural
resources, energy, agriculture, consumer goods, technology and special situations. In addition, PHI Capital Holdings, Inc., a
wholly owned subsidiary of PHI, continues to provide corporate and project finance services, including merger and acquisition
(M&A) advisory and consulting services for other companies in a variety of industries. Furthermore, PHI is in the process
of completing the establishment of PHILUX Global Funds, a Luxembourg Bank Fund in accordance with the “Reserved Alternative
Investment Fund” (“RAIF”), and a number of initial sub-funds thereunder for agricultural, energy, real estate
projects and other investments, in accordance with the Luxembourg Law of July 23, 2016 relative to reserved alternative investment
funds, Law of August 23, 2016 relative to commercial companies, and Modified Law of July 12, 2013 relative to alternative investment
fund managers. The Company has also been working with special international partners and the Chu Lai Open Economic Zone Authority
to potentially develop and establish an Asia Diamond Exchange in the Free-Trade Zone of Quang Nam Province, Vietnam. No assurances
can be made that the Company will be successful in achieving its plans.
NOTE
2
– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES
OF CONSOLIDATION
The
consolidated financial statements include the accounts of PHI Group, Inc., its wholly owned subsidiaries PHI Capital Holdings,
Inc., American Pacific Resources, Inc., American Pacific Plastics, Inc., PHI EZ Water Tech, Inc., and its previously discontinued
operations, 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, 2018. 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 six months
ended December 31, 2018 are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2019.
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 OTC Markets or other public exchanges. 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 December 31, 2018, the marketable securities were recorded at $518,266,
based upon the fair value of the marketable securities at that time.
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 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,
short-term notes payable, convertible notes, derivative liability 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.
Effective
July 1, 2008, the Company adopted ASC 820 (previously SFAS 157),
Fair Value Measurements
and adopted this Statement for
the assets and liabilities shown in the table below. ASC 820 clarifies the definition of fair value, prescribes methods for measuring
fair value, establishes a fair value hierarchy based on the inputs used to measure fair value, and expands disclosures about the
use of fair value measurements. The adoption of ASC 820 did not have a material impact on our fair value measurements. At December
31, 2018, the Company did not have any nonfinancial assets or nonfinancial liabilities that are recognized or disclosed at fair
value. ASC 820 requires that financial assets and liabilities that are reported at fair value be categorized as one of the types
of investments based upon the methodology mentioned in Level 1, Level 2 and Level 3 above for determining fair value.
Assets
measured at fair value on a recurring basis are summarized below. The Company also has convertible notes and derivative liabilities
as disclosed in this report that are measured at fair value on a regular basis until paid off or exercised.
Available-for-sale
securities
The
Company uses various approaches to measure fair value of available-for-sale securities, while applying the three-level valuation
hierarchy for disclosures, specified in ASC 820. Our Level 1 securities were measured using the quoted prices in active markets
for identical assets and liabilities.
The
company’s policy regarding the transfers in and/or out of Level 3 depends on the trading activity of the security, the volatility
of the security, and other observable units which clearly represents the fair value of the security. If a level 3 security can
be measured using a more fairly represented fair value, we will transfer these securities either into Level 1 or Level 2, depending
on the type of inputs.
ACCOUNTS
RECEIVABLE
Management
reviews the composition of accounts receivable and analyzes historical bad debts. As of December 31, 2018, the Company had accounts
receivable in the amount of $632,000.
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 STANDARDS
ASC
606-10 provides the following overview of how revenue is recognized from an entity’s contracts with customers: An entity
recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those goods or services.
Step
1: Identify the contract(s) with a customer.
Step
2: Identify the performance obligations in the contract.
Step
3: Determine the transaction price – The transaction price is the amount of consideration in a contract to which an entity
expects to be entitled in exchange for transferring promised goods or services to a customer.
Step
4: Allocate the transaction price to the performance obligations in the contract – Any entity typically allocates the transaction
price to each performance obligation on the basis of the relative standalone selling prices of each distinct good or service promised
in the contract.
Step
5: Recognize revenue when (or as) the entity satisfies a performance obligation – An entity recognizes revenue when (or
as) it satisfies a performance obligation by transferring a promised good or service to a customer (which is when the customer
obtains control of that good or service).
The
amount of revenue recognized is the amount allocated to the satisfied performance obligation. A performance obligation may be
satisfied at a point in time (typically for promises to transfer goods to a customer) or over time (typically for promises to
transfer service to a customer). For performance obligations satisfied over time, an entity recognizes revenue over time by selecting
an appropriate method for measuring the entity’s progress toward complete satisfaction of that performance obligation. (Paragraphs
606-10 25-23 through 25-30).
In
addition, ASC 606-10 contains guidance on the disclosures related to revenue, and notes the following:
It
also includes a cohesive set of disclosure requirements that would result in an entity providing users of financial statements
with comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from the entity’s
contracts with customers. Specifically, Section 606-10-50 requires an entity to provide information about:
-
Revenue recognized from contracts with customers, including disaggregation of revenue into appropriate categories.
-
Contract balances, including the opening and closing balances of receivables, contract assets, and contract liabilities.
-
Performance obligations, including when the entity typically satisfies its performance obligations and the transaction prices
is that is allocated to the remaining performance obligations in a contract.
-
Significant judgments, and changes in judgments, made in applying the requirements to those contracts.
Additionally,
Section 340-40-50 requires an entity to provide quantitative and/or qualitative information about assets recognized from the costs
to obtain or fulfill a contract with a customer.
The
Company’s revenue recognition policies are in compliance with ASC 606-10. The Company recognizes consulting and advisory
fee revenues in accordance with the above-mentioned guidelines and expenses are recognized in the period in which the corresponding
liability is incurred.
STOCK-BASED
COMPENSATION
Effective
July 1, 2006, the Company adopted ASC 718-10-25 (previously SFAS 123R) and accordingly has adopted the modified prospective application
method. Under this method, ASC 718-10-25 is applied to new awards and to awards modified, repurchased, or cancelled after the
effective date. Additionally, compensation cost for the portion of awards that are outstanding as of the date of adoption for
which the requisite service has not been rendered (such as unvested options) is recognized over a period of time as the remaining
requisite services are rendered.
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. 2018-13 – August 2018
Fair
Value Measurement (Topic 820): Changes to the Disclosure Requirements for Fair Value Measurement
Modifications:
The following disclosure requirements were modified in Topic 820:
1.
In lieu of a roll-forward for Level 3 fair value measurements, a nonpublic entity is required to disclose transfers into and out
of Level 3 of the fair value hierarchy and purchases and issues of Level 3 assets and liabilities.
2.
For investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation
of an investee’s assets and the date when restrictions from redemption might lapse only if the investee has communicated
the timing to the entity or announced the timing publicly.
3.
The amendments clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement
as of the reporting date.
Additions:
The following disclosure requirements were added to Topic 820; however, the disclosures are not required for nonpublic entities:
1.
The changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value
measurements held at the end of the reporting period.
2.
The range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. For certain
unobservable inputs, an entity may disclose other quantitative information (such as the median or arithmetic average) in lieu
of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method
to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements.
The
amendments in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning
after December 15, 2019.
Update
No. 2018-07 – June 2018
Compensation
– Stock Compensation (Topic 718)
Improvements
to Nonemployee Share-Based Payment Accounting
Main
Provisions: The amendments in this Update expand the scope of Topic 718 to include share-based payment transactions for acquiring
goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific
guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based
payment awards vest and the pattern of cost recognition over that period). The amendments specify that Topic 718 applies to all
share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own
operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments
used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to
customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers.
The
amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2018, including
interim periods within that fiscal year.
Update
No. 2017-13 - September 2017
Revenue
Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606)
FASB
Accounting Standards Updates No. 2014-09, Revenue from Contracts with Customers (Topic 606), issued in May 2014 and codified in
ASC Topic 606, Revenue from Contracts with Customers, and No. 2016-02.
The
transition provisions in ASC Topic 606 require that a public business entity and certain other specified entities adopt ASC Topic
606 for annual reporting 3 periods beginning after December 15, 2017, including interim reporting periods within that reporting
period. FN2 All other entities are required to adopt ASC Topic 606 for annual reporting periods beginning after December 15, 2018,
and interim reporting periods within annual reporting periods beginning after December 15, 2019.
Update
No. 2016-10 - April 2016
Revenue
from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing
The
core principle of the guidance in Topic 606 is that an entity should recognize revenue to depict the transfer of promised goods
or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for
those goods or services. To achieve that core principle, an entity should apply the following steps:
1.
Identify the contract(s) with a customer.
2.
Identify the performance obligations in the contract.
3.
Determine the transaction price.
4.
Allocate the transaction price to the performance obligations in the contract.
5.
Recognize revenue when (or as) the entity satisfies a performance obligation.
The
amendments in this Update do not change the core principle of the guidance in Topic 606. Rather, the amendments in this Update
clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance,
while retaining the related principles for those areas.
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 implementation
of these pronouncements would not have a material impact on the financial statements taken as a whole.
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 or other public exchanges and are accounted for in accordance with the provisions of SFAS No. 115.
Marketable
securities held by the Company and classified as available for sale as of December 30, 2018 consisted of 32,900,106 shares of
Myson Group, Inc., 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 December 31, 2018 was $518,266.
Securities available for sale
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
December 31, 2018
|
|
|
None
|
|
|
$
|
138,601
|
|
|
$
|
379,665
|
|
|
$
|
518,266
|
|
June 30, 2018
|
|
|
None
|
|
|
$
|
253,538
|
|
|
$
|
846,945
|
|
|
$
|
1,100,483
|
|
NOTE
4
– PROPERTIES AND EQUIPMENT
The
Company did not have any properties or equipment as of December 31, 2018.
NOTE
5
– OTHER ASSETS
Other
Assets comprise of the following: (1) As of December 31, 2018: $5,000 investment in Aquarius Power, Inc., $25,000,000 investment
in 51% of twenty-one mining claims over an area of approximately 400 acres situated five miles Northeast of the town of Granite,
Grant County, Oregon, U.S.A., near Granite Creek, within a precious metals belt 30-40 miles wide (N-S) and 100 miles long (E-W);
coincident with the core of the Blue Mountains, along the Snake River; 3,060,000 shares of Common Stock of Vinafilms Joint Stock
Company equivalent to 51% of this company, valued at $1,311,419; and Contract Assets of $2,497,841 totaling $28,814,260; (2) As
of June 30, 2018: $5,000 investment in Aquarius Power, Inc., $25,000,000 investment in 51% of twenty-one mining claims over an
area of approximately 400 acres situated five miles Northeast of the town of Granite, Grant County, Oregon, U.S.A., near Granite
Creek, within a precious metals belt 30-40 miles wide (N-S) and 100 miles long (E-W); coincident with the core of the Blue Mountains,
along the Snake River; and Contract Assets of $697,841 totaling $25,702,841.
|
|
12/31/2018
|
|
|
6/30/2018
|
|
Investments
|
|
$
|
26,316,419
|
|
|
$
|
25,005,000
|
|
Contract Assets
|
|
$
|
2,497,841
|
|
|
$
|
697,841
|
|
Total Other Assets
|
|
$
|
28,814,260
|
|
|
$
|
25,702,841
|
|
NOTE
6
– DISCONTINUED OPERATIONS
In
June 2012, the Company decided to recognize 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. as discontinued operations for practical business and
accounting purposes. As of December 31, 2018, the Company had a balance of $1,255,037 as Long-term Liabilities from Discontinued
Operations.
NOTE
7
– CURRENT LIABILITIES
Current
liabilities of the Company consisted of the followings as of December 31, 2018 and June 30, 2018:
|
|
December 31, 2018
|
|
|
June 30, 2018
|
|
Accounts Payable
|
|
|
114,538
|
|
|
|
116,063
|
|
Accrued Expenses
|
|
|
464,337
|
|
|
|
392,205
|
|
Short-term Notes Payable - Net
|
|
|
1,552,033
|
|
|
|
1,336,552
|
|
Due to Officers
|
|
|
448,017
|
|
|
|
233,577
|
|
Derivative Liabilities – Net
|
|
|
1,102,699
|
|
|
|
783,814
|
|
Contract Liabilities
|
|
|
2,497,841
|
|
|
|
697,841
|
|
Other Current Payable
|
|
|
92,781
|
|
|
|
92,781
|
|
Total Current Liabilities:
|
|
$
|
6,272,247
|
|
|
$
|
3,607,834
|
|
NOTE
8
– LONG-TERM LIABILITIES
Long-term
liabilities of the Company consisted of the followings as of December 31, 2018 and June 30, 2018:
|
|
December
31, 2018
|
|
|
June 30, 2018
|
|
Demand promissory note – American Pacific Resources, Inc.
|
|
|
24,048,500
|
|
|
|
24,048,500
|
|
Accrued Expenses
|
|
|
1,174,565
|
|
|
|
1,063,481
|
|
Accrued Interest
|
|
|
2,067,349
|
|
|
|
2,005,815
|
|
Advances from Customers
|
|
|
288,219
|
|
|
|
288,219
|
|
Liabilities from Discontinued Operations (including Preferred Stock Liabilities)
|
|
|
1,255,037
|
|
|
|
1,255,037
|
|
Total Long-term Liabilities:
|
|
$
|
28,883,670
|
|
|
$
|
28,661,052
|
|
DUE
TO PREFERRED STOCKHOLDERS OF DISCONTINUED SUBSIDIARY
As
of December 31, 2018, the Company recognized $215,000 Long-term Liabilities payable to holders of preferred stock of Providential
Securities, Inc., a previous subsidiary of the Company that was discontinued in the year 2000. In the early 2000’s, the
Company had made an offer for these preferred stockholders to receive shares of common stock in the Company in exchange for the
preferred shares in the discontinued subsidiary but only a small number of the preferred shareholders responded and accepted the
offer. In more recent years, the Company has also attempted to contact these preferred shareholders from time to time but have
not received further response from them. The Company has continued to accrue imputed interest expenses at 12% per annum on the
balance of $215,000 on a quarterly basis.
ADVANCES
FROM CUSTOMERS
As
of September 30, 2012, the Company reclassified the previously recorded Unearned Revenues as Advances from Customers because the
Company was not able to complete the consulting services for the related client due to its 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, 2018, the Company recorded $288,219 of Advances from Customers as a Long-term Liability.
In
September 2017, the Company signed a Settlement Agreement and agreed to pay Thinh Hung Investment Co. a total amount of $381,000
which includes the outstanding balance of $288,219 mentioned above and $92,781 in accrued interest that is recorded as Other Current
Liability in the balance sheets of the Company as of December 31, 2018.
NOTE
9
– DUE TO OFFICERS
Due
to officer, represents loans and advances made by officers and directors of the Company and its subsidiaries, unsecured and due
on demand. As of December 31, 2018 and June 30, 2018, the balances were $448,017 and $233,577, respectively.
Officers/Directors
|
|
December 31, 2018
|
|
|
June 30, 2018
|
|
Henry Fahman
|
|
|
147,167
|
|
|
$
|
157,727
|
|
Tam Bui
|
|
|
288,350
|
|
|
$
|
63,350
|
|
Lawrence Olson
|
|
|
12,500
|
|
|
|
12,500
|
|
Total
|
|
$
|
448,017
|
|
|
$
|
233,577
|
|
NOTE
10
– LOANS AND PROMISSORY NOTES
A.
SHORT TERM NOTES PAYABLE:
In
the course of its business, the Company has obtained short-term loans from individuals and institutional investors.
During
the quarter ended December 31, 2018, the Company received a $300,000 short-term loan from Robert Bui. This loan is due and payable
on demand and carries an interest of $30,000 per month until paid.
As
of December 31, 2018, the Company had $977,310 in short-term notes payable with $2,211,056 accrued and unpaid interest. These
notes bear interest rates ranging from 0% to 36% per annum.
B.
CONVERTIBLE PROMISSORY NOTES:
1.
ISSUANCE OF NEW CONVERTIBLE PROMISSORY NOTES
During
the quarter ended December 31, 2018, the Company issued the following convertible promissory notes:
On
October 17, 2018, the Company issued a convertible promissory note in the amount of $65,000 to One44 Capital LLC. The Note has
a coupon rate of 10%, matures on October 17, 2019 and is convertible (after 180 days) to Common Stock of the Company at a conversion
price equals to 55% multiplied by the average of the two lowest trading prices during the previous twenty trading days ending
on the latest complete trading day prior to the conversion date. The note may be prepaid at 145% of outstanding principal and
interest up to 180 days.
On
October 25, 2018, the Company issued a convertible promissory note in the amount of $42,000 to Adar Alef LLC. The Note has a coupon
rate of 6%, matures on October 25, 2019 and is convertible (after 180 days) to Common Stock of the Company at a conversion price
equals to 52% multiplied by the average of the two lowest trading prices during the previous twenty trading days ending on the
latest complete trading day prior to the conversion date. The note may be prepaid at 150% of outstanding principal and interest
up to 180 days.
2.
CONVERSIONS OF CONVERTIBLE PROMISSORY NOTES AND EXERCISE OF WARRANTS
During
the quarter ended December 31, 2018, some holders of the Company’s convertible promissory notes converted certain amounts
of principal and accrued interest and exercised purchase of warrants in connection with certain convertible promissory note(s)
totaling 273,894,330 shares of Common Stock of the Company. (
Note 14 – Common Stock
).
3.
CONVERTIBLE PROMISSORY NOTES OUTSTANDING AS OF DECEMBER 31, 2018
As
of December 31, 2018, the Company had a net balance of $574,723 in convertible promissory notes, which included $1,080,899 in
face value and $506,176 in note discounts. The derivative liabilities associated with these notes are $1,102,699 as of December
31, 2018.
The
Company relies on the results a professional, independent valuation firm to record the value of derivative liabilities, discounts,
and change in fair value of derivatives in connection with these convertible notes and warrants, if any, that are related to the
convertible notes. The Company intends and prefers to repay the outstanding notes in cash as much as practical.
NOTE
11
– LITIGATION
LEGAL
PROCEEDING SETTLED AND UNPAID AS OF DECEMBER 31, 2018:
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 December
31, 2018 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 $90,000 as the required liability
associated with the balance of these notes in the accompanying consolidated financial statements as of December 31, 2018.
NOTE
12
– 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 purported balance of $118,399 of payroll tax, penalties and interest. The Company is currently
negotiating with the pertinent agencies to settle this matter as soon as possible.
NOTE
13
– 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 December 31, 2018 were the same since the inclusion of Common stock equivalents is anti-dilutive.
NOTE
14
–
STOCKHOLDER’S EQUITY
In
accordance with the Articles of Incorporation and Amendments to the Articles of Incorporation filed with the Nevada Secretary
of State, the total number of authorized capital stock of the Company is 7,000,000,000 shares with a par value of $0.001 per share,
consisting of 6,900,000,000 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.
Treasury
Stock:
The
balance of treasury stock as of December 31, 2018 was 484,767 post-split shares valued at $44,170 according to cost method.
Common
Stock:
During
the quarter ended December 31, 2018, the Company issued the following amounts of its Common Stock:
On
October 16, 2018, the Company issued 8,603,239 shares of free–trading Common Stock of PHI Group, Inc. to Adar Bays LLC,
holder of a Convertible Promissory Note dated February 13, 2018 of the Company, for the conversion of $34,000.00 of the principal
amount of the Note. The principal balance due remaining under this Note after this conversion was $21,000.00.
On
October 17, 2018, the Company issued 2,500,000 shares of free–trading Common Stock of PHI Group, Inc. to Auctus Fund, LLC,
holder of a Convertible Promissory Note dated February 02, 2018 of the Company, for the conversion of $6,375.88 of the principal
amount of the Note, together with $624.12 of accrued and unpaid interest and $500.00 of conversion fees, totaling $7,500.00. The
principal balance due remaining under this Note after this conversion was $63,934.28.
On
October 18, 2018, the Company issued 4,500,000shares of free–trading Common Stock of PHI Group, Inc. to Crown Bridge Partners
LLC, holder of a Convertible Promissory Note dated January 31, 2018 of the Company, for the conversion of $11,627.50 of the principal
amount of the Note, together with $500.00 of conversion fees, totaling $12,127.50. The principal balance due remaining under this
Note after this conversion was $38,372.50.
On
October 22, 2018, the Company issued 8,782,805 shares of free–trading Common Stock of PHI Group, Inc. to Einstein Investments,
LLC, holder of a Convertible Promissory Note dated November 24, 2017 of the Company, for the conversion of $32,624.39 of the principal
amount of the Note, together with $250.27 of accrued and unpaid interest and $500.00 of conversion fees, totaling $33,374.66 .
The principal balance due remaining under this Note after this conversion was $0.00.
On
October 25, 2018, the Company issued 9,044,851 shares of free-trading Common Stock of PHI Group, Inc. to JSJ Investments, Inc.,
holder of a Convertible Promissory Note dated January 31, 2018 of the Company, for the conversion of $37,310.01 of the principal
amount of the Note. The principal balance due remaining under this Note after this conversion was $41,439.99.
On
October 26, 2018, the Company issued 6,097,561shares of free–trading Common Stock of PHI Group, Inc. to Power Up Lending
Group Ltd., holder of a Convertible Promissory Note dated April 10, 2018 of the Company, for the conversion of $25,000.00 of the
principal amount of the Note. The principal balance due remaining under this Note after this conversion was $8,000.00.
On
October 29, 2018, the Company issued 2,518,919 shares of free–trading Common Stock of PHI Group, Inc. to Power Up Lending
Group Ltd., holder of a Convertible Promissory Note dated April 10, 2018 of the Company, for the conversion of $8,000.00 of the
principal amount of the Note together with $1,320.00 accrued interest under the Note, totaling $9,320.00. This note was paid in
full with this issuance of conversion shares.
On
October 29, 2018, the Company issued 6,700,000 shares of free-trading Common Stock of PHI Group, Inc. to Crown Bridge Partners
LLC, holder of the Convertible Promissory Note dated January 31, 2018 of the Company, for the conversion of $11,459.50 principal
amount and $500.00 of conversion fees, totaling $11,959.50. The principal balance due remaining under this Note after this conversion
was $26,913.00.
On
October 30, 2018, the Company issued 3,700,000 shares of free–trading Common Stock of PHI Group, Inc. to JSJ Investments,
Inc., holder of a Convertible Promissory Note dated January 18, 2018 of the Company, for the conversion of $38,750.00 of the principal
amount of the Note together with $4,193.15 accrued interest. The principal balance due remaining under this Note after this conversion
was $00.00.
On
November 02, 2018, the Company issued 10,746,606 shares of free–trading Common Stock of PHI Group, Inc. to Adar Bays LLC,
holder of a Convertible Promissory Note dated February 13, 2018 of the Company, for the conversion of $19,000.00 of the principal
amount of the Note. The principal balance due remaining under this Note after this conversion was $2,000.00.
On
November 02, 2018, the Company issued 11,270,000 shares of free–trading Common Stock of PHI Group, Inc. to Crown Bridge
Partners LLC, holder of a Convertible Promissory Note dated February 22, 2018 of the Company, for the conversion of $18,000.00
of the principal amount of the Note together with $1,320.00 accrued interest under the Note, totaling $19,320.00. This note was
paid in full with this issuance of conversion shares.
On
November 06, 2018, the Company issued 2,464,270 shares of free-trading Common Stock of PHI Group, Inc. to Adar Bays LLC, holder
of a Convertible Promissory Note dated February 13, 2018 of the Company, for the conversion of $2,000.00 of the principal balance
of the Note. The principal balance due remaining under this Note after this conversion was $0.00.
On
November 07, 2018, the Company issued 11,070,714 shares of restricted common stock of the Company to JSJ Investments, Inc., holder
of a Convertible Promissory Note dated January 31, 2018 of the Company, for the conversion of $20,093.35 of the principal balance
of the Note. The principal balance due remaining under this Note after this conversion was $21,346.64.
On
November 13, 2018, the Company issued 7,000,000 shares of free-trading Common Stock of PHI Group, Inc. to Auctus Fund, LLC, holder
of a Convertible Promissory Note dated February 02, 2018 of the Company, for the conversion of $6,888.30 of the principal amount
of the Note together with $451.70 of accrued and unpaid interest and $500.00 of conversion fees, totaling $7,840.00. The principal
balance due remaining under this Note after this conversion was $50,292.25.
On
November 14, 2018, the Company issued 10,540,000 shares of free-trading Common Stock of PHI Group, Inc. to Crown Bridge Partners,
LLC, holder of a Promissory Note dated January 31, 2018 of the Company, for the conversion of $10,198.10 of principal amount of
the Note and $500.00 of conversion fees, totaling $10,698.10. The principal balance due remaining under this Note after this conversion
was $3,409.15.
On
November 26, 2018, the Company issued 13,672,202 shares of free-trading Common Stock of PHI Group, Inc. to JSJ Investments, Inc.,
holder of a Convertible Promissory Note dated January 31, 2018 of the Company, for the conversion of $13,535.48 of the principal
balance of the Note. The principal balance due remaining under this Note after this conversion was $7,811.16.
On
November 27, 2018, the Company issued 10,000,000 shares of free-trading Common Stock of PHI Group, Inc. to Auctus Fund, LLC, holder
of a Convertible Promissory Note dated February 02, 2018 of the Company, for the conversion of $6,237.02 of the principal balance
of the Note, together with $462.98 of accrued and unpaid interest and $500.00 conversion fee under the Note totaling $7,200.00.
The principal balance due remaining under this Note after this conversion was $44,055.23.
On
November 29, 2018, the Company issued 9,093,444 shares of free-trading Common Stock of PHI Group, Inc. to Crown Bridge Partners
LLC, holder of a Convertible Promissory Note dated February 02, 2018 of the Company, for the conversion of $3,409.15 of the principal
balance of the Note, together with $1,819.72 of accrued and unpaid interest and $500.00 conversion fee under the Note totaling
$5,728.87. The principal balance due remaining under this Note after this conversion was $0.00.
On
December 04, 2018, the Company issued 15,000,000 shares of free-trading Common Stock of PHI Group, Inc. to Auctus Fund, LLC, holder
of a Convertible Promissory Note dated February 02, 2018 of the Company, for the conversion of $8,268.24 of the principal balance
of the Note, together with $231.76 of accrued and unpaid interest and $500.00 conversion fee under the Note totaling $9,000.00.
The principal balance due remaining under this Note after this conversion was $35,786.99.
On
December 06, 2018, the Company issued 15,558,000 shares of free-trading Common Stock of PHI Group, Inc. to Crown Bridge Partners,
LLC, holder of a Convertible Promissory Note dated April 02, 2018 of the Company, for the conversion of $7,667.95 of the principal
balance of the Note and $500.00 conversion fee under the Note totaling $8,167.95. The principal balance due remaining under this
Note after this conversion was $47,332.05.
On
December 11, 2018, the Company issued 15,277,718 shares of free-trading Common Stock of PHI Group, Inc. to JSJ Investments, Inc.,
holder of a Convertible Promissory Note dated February 02, 2018 of the Company, for the conversion of $7,811.16 of the principal
balance of the Note, together with $4,792.96 of accrued and unpaid interest, totaling $12,604.12. The principal balance due remaining
under this Note after this conversion was $0.00.
On
December 12, 2018, the Company issued 17,000,000 shares of free-trading Common Stock of PHI Group, Inc. to Crown Bridge Partners
LLC, holder of a Convertible Promissory Note dated April 02, 2018 of the Company, for the conversion of $8,127.50 of the principal
balance of the Note and $500.00 conversion fee under the Note totaling $8,627.50. The principal balance due remaining under this
Note after this conversion was $39,204.55.
On
December 13, 2018, the Company issued 16,000,000 shares of free-trading Common Stock of PHI Group, Inc. to Auctus Fund, LLC, holder
of a Convertible Promissory Note dated February 02, 2018 of the Company, for the conversion of $8,935.29 of the principal balance
of the Note, together with $164.71 of accrued and unpaid interest and $500.00 conversion fee under the Note totaling $9,600.00.
The principal balance due remaining under this Note after this conversion was $26,851.70
On
December 21, 2018, the Company issued 16,000,000 shares of free-trading Common Stock of PHI Group, Inc. to Auctus Fund, LLC, holder
of a Convertible Promissory Note dated February 02, 2018 of the Company, for the conversion of $7,003.40 of the principal balance
of the Note, together with $176.60 of accrued and unpaid interest and $500.00 conversion fee under the Note totaling $7,680.00.
The principal balance due remaining under this Note after this conversion was $19,848.30.
On
December 24, 2018, the Company issued 19,492,000 shares of free-trading Common Stock of PHI Group, Inc. to Crown Bridge Partners
LLC, holder of a Convertible Promissory Note dated April 02, 2018 of the Company, for the conversion of $8,027.75 of the principal
balance of the Note and $500.00 conversion fee under the Note totaling $8,527.75. The principal balance due remaining under this
Note after this conversion was $31,176.80.
On
December 31, 2018, the Company issued 21,262,000 shares of free-trading Common Stock of PHI Group, Inc. to Crown Bridge Partners
LLC, holder of a Convertible Promissory Note dated February 02, 2018 of the Company, for the conversion of $7,685.87 of the principal
balance of the Note and $500.00 conversion fee under the Note totaling $8,185.87. The principal balance due remaining under this
Note after this conversion was $23,490.93.
As
of December 31, 2018, there were 447,379,900 shares of the Company’s common stock issued and outstanding, excluding 5,673,327
shares of common stock that have been set aside for a special dividend distribution.
As
of February 17, 2019, there were 1,208,383,378 shares of the Company’s common stock issued and outstanding, excluding 5,673,327
shares of common stock that have been set aside for a special dividend distribution.
Preferred
Stock:
The
Company has filed Certificates of Designation and Amendments to Certificate of Designation with the Nevada Secretary of State
to designate the Company’s authorized Preferred Stock as follows:
Class
A Preferred Stock
I.
DESIGNATIONS, AMOUNTS AND DIVIDENDS
1.
Class A Series I Cumulative Convertible Redeemable Preferred Stock
A.
Designation: The designation of the first twenty million (20,000,000) shares of the previously authorized 100,000,000 shares of
Preferred Stock, with a par value of $0.001 per share, shall be Class A Series I Cumulative Convertible Redeemable Preferred Stock.
B.
Number of Shares: The number of shares of Class A Series I Preferred Stock authorized shall be twenty million (20,000,000) shares.
C.
Dividends: Each holder of Class A Series I Preferred Stock is entitled to receive ten percent (10%) non-compounding cumulative
dividends per annum, payable semi-annually.
2
.
Class A Series II Cumulative Convertible Redeemable Preferred Stock
A.
Designation. The designation of the next twenty-five million (25,000,000) shares of the previously authorized 100,000,000 shares
of Preferred Stock, with a par value of $0.001 per share, shall be Class A Series II Cumulative Convertible Redeemable Preferred
Stock (the “
Class A Series II Preferred Stock
”).
B.
Number of Shares. The number of shares of Class A Series II Preferred Stock authorized shall be twenty-five million (25,000,000)
shares.
C.
Dividends: Each holder of Class A Series II Preferred Stock is entitled to receive eight percent (8%) cumulative dividends per
annum, payable semi-annually.
3.
Class A Series III Cumulative Convertible Redeemable Preferred Stock
A.
Designation. The designation of the next fifty million (50,000,000) shares of the previously authorized 100,000,000 shares of
Preferred Stock, with a par value of $0.001 per share, shall be Class A Series III Cumulative Convertible Redeemable Preferred
Stock (the “
Class A Series III Preferred Stock
“).
B.
Number of Shares. The number of shares of Class A Series III Preferred Stock authorized shall be fifty million (50,000,000) shares.
C.
Dividends: Each holder of Class A Series III Preferred Stock is entitled to receive eight percent (8%) cumulative dividends per
annum, payable semi-annually.
II.
CONVERSION
1.
Conversion of Series I and/or Series II Class A Preferred Stock into Common Stock of PHI Group, Inc.
Each
share of the Class A Preferred Stock, either Series I or Series II shall be convertible into the Company’s Common Stock
any time after two years 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, 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.
2.
Conversion of Series I and/or Series II Class A Preferred Stock into Common Stock of a subsidiary of PHI Group, Inc.’s.
Alternatively,
each share of the Class A Preferred Stock, either Series I or Series II, may be convertible into Common Stock of a subsidiary
of PHI Group, Inc.’s, to be determined by the Company’s Board of Directors, any time after such subsidiary has become
a fully-reporting publicly traded company for at least three months, at a Variable Conversion Price (as defined herein). The Variable
Conversion Price to be used in connection with the conversion into Common Stock of a subsidiary of PHI Group, Inc.’s shall
mean 50% multiplied by the Market Price (as defined herein), representing a discount rate of 50%, of that Common Stock. “Market
Price” means the average Trading Price for the Common Stock of said subsidiary of PHI Group, Inc.’s 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 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, said subsidiary and Holder
of the Class A Preferred Stock.”
3.
Conversion of Class A Series III Preferred Stock of PHI Group, Inc. into Common Stock of American Pacific Plastics, Inc., a subsidiary
of PHI Group, Inc.’s.
The
entire Class A Series III Preferred Stock of PHI Group, Inc. (i.e. fifty million (50,000,000) shares) may be convertible into
eighty percent (80%) American Pacific Plastics, Inc.’s Common Stock which will have been issued and outstanding immediately
after such conversion or exchange on a pro rata basis.
4.
Conversion Shares.
The
amount of shares of Common Stock of PHI Group, Inc., or alternatively, of a subsidiary of PHI Group, Inc.’s, to be received
by Holder at the time of conversion of Class A Series I or Series II Preferred Stock of PHI Group, Inc. will be based on the following
formula:
|
|
Where
CS
: Common Shares of PHI Group, Inc., or alternatively, of a subsidiary of PHI Group, Inc.’s.
|
OIP + AUD
|
|
|
|
Amount
of CS
= ---------------------
|
|
|
|
VCP
|
|
OIP
:
|
Original
Issue Price of Class A Series I or Series II Preferred Stock of PHI Group, Inc.
|
|
|
AUD
:
|
Accrued
and Unpaid Dividends.
|
|
|
VCP
:
|
Variable
Conversion Price of PHI Common Stock or of a subsidiary of PHI Group, Inc.’s as defined above.
|
III.
REDEMPTION RIGHTS
The
Corporation, 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, either Series I, Series II or Series III, 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.
IV.
LIQUIDATION
Upon
the occurrence of a Liquidation Event (as defined below), the holders of Class A Preferred Stock are entitled to receive net assets
on a pro rata basis. As used herein, “
Liquidation Event
” means (i) the liquidation, dissolution or winding-up,
whether voluntary or involuntary, of the Corporation, (ii) the purchase or redemption by the Corporation of shares of any class
of stock or the merger or consolidation of the Corporation with or into any other corporation or corporations, unless (a) the
holders of the Class A Preferred Stock receive securities of the surviving corporation having substantially similar rights as
the Class A Preferred Stock and the stockholders of the Corporation immediately prior to such transaction are holders of at least
a majority of the voting securities of the successor corporation immediately thereafter (the “
Permitted Merger
”),
unless the holders of the shares of Class A Preferred Stock elect otherwise or (b) the sale, license or lease of all or substantially
all, or any material part of, the Corporation’s assets, unless the holders of Class A Preferred Stock elect otherwise.
V.
RANK
All
shares of the Class A Preferred Stock shall rank (i) senior to the Corporation’s Common Stock and any other class or series
of capital stock of the Corporation hereafter created, (ii)
pari passu
with any class or series of capital stock of the
Corporation hereafter created and specifically ranking, by its terms, on par with the Class A Preferred Stock and (iii) junior
to any class or series of capital stock of the Corporation hereafter created specifically ranking, by its terms, senior to the
Class A Preferred Stock, in each case as to distribution of assets upon liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary.
VI.
VOTING RIGHTS
1.
Class A Series I, II and III Preferred Stock of PHI Group, Inc. shall have no voting rights.
VII.
PROTECTION PROVISIONS
So
long as any shares of Class A Preferred Stock are outstanding, the Corporation shall not, without first obtaining the majority
written consent of the holders of Class A Preferred Stock, alter or change the rights, preferences or privileges of the Class
A Preferred Stock so as to affect adversely the holders of Class A Preferred Stock.
VIII.
MISCELLANEOUS
A.
Status of Redeemed Stock
: In case any shares of Class A Preferred Stock shall be redeemed or otherwise repurchased or reacquired,
the shares so redeemed, repurchased, or reacquired shall resume the status of authorized but unissued shares of preferred stock,
and shall no longer be designated as Class A Preferred Stock.
B
.
Lost or Stolen Certificates
: Upon receipt by the Corporation of (i) evidence of the loss, theft, destruction or mutilation
of any Preferred Stock Certificate(s) and (ii) in the case of loss, theft or destruction, indemnity (with a bond or other security)
reasonably satisfactory to the Corporation, or in the case of mutilation, the Preferred Stock Certificate(s) (surrendered for
cancellation), the Corporation shall execute and deliver new Preferred Stock Certificates. However, the Corporation shall not
be obligated to reissue such lost, stolen, destroyed or mutilated Preferred Stock Certificates if the holder of Class A Preferred
Stock contemporaneously requests the Corporation to convert such holder’s Class A Preferred Stock into Common Stock.
C
.
Waiver
: Notwithstanding any provision in this Certificate of Designation to the contrary, any provision contained herein
and any right of the holders of Class A Preferred granted hereunder may be waived as to all shares of Class A Preferred Stock
(and the holders thereof) upon the majority written consent of the holders of the Class A Preferred Stock.
D
.
Notices
: Any notices required or permitted to be given under the terms hereof shall be sent by certified or registered
mail (return receipt requested) or delivered personally, by nationally recognized overnight carrier or by confirmed facsimile
transmission, and shall be effective five (5) days after being placed in the mail, if mailed, or upon receipt or refusal of receipt,
if delivered personally or by nationally recognized overnight carrier or confirmed facsimile transmission, in each case addressed
to a party as set forth below, or such other address and telephone and fax number as may be designated in writing hereafter in
the same manner as set forth in this Section.
If
to the Corporation:
PHI
GROUP, INC.
5348
Vegas Drive, # 237
Las
Vegas, NV 89108
Telephone:
702-475-5430
Facsimile:
702-472-8556
If
to the holders of Class Preferred Stock, to the address to be listed in the Corporation’s books and Records.
Class
B Preferred Stock
Class
B Series I Preferred Stock
A.
Designation: The designation of the next twenty-five thousand shares of the previously authorized 100,000,000 shares of Preferred
Stock, with a par value of $0.001 per share, shall be Class B Series I Preferred Stock.
B.
Number of Shares: The number of shares of Class B Series I Preferred Stock authorized will be twenty-five thousand shares.
C.
Dividend: None
D.
Voting rights: Except as provided by law, the shares of Class B Series I Preferred Stock shall have the same right to vote or
act on all matters on which the holders of Common Stock have the right to vote or act and the holders of the shares of Class B
Series I shall be entitled to notice of any stockholders’ meeting or action as to such matters on the same basis as the
holders of Common Stock, and the holders of Common Stock and shares of Class B Series I shall vote together or act together thereon
as if a single class on all such matters; provided, in such voting or action each one share of Class B Series I shall be entitled
to one hundred thousand votes.
As
of December 31, 2018, the following amounts of Preferred Stock were issued and outstanding:
Class
A Series II Preferred Stock: 10,000,000 shares.
Class
A Series III Preferred Stock: 50,000,000 shares.
Class
B Series I Preferred Stock: 15,000 shares.
Amendments
to Articles of Incorporation:
On
October 29, 2018, a Certificate of Amendment to Articles of Incorporation of PHI Group, Inc. was filed with the Nevada Secretary
of State to amend Article V of the Articles of Incorporation to change the authorized capital stock of the Corporation to 3,000,000,000
shares with a par value of $0.001 per share, consisting of 2,800,000,000 shares of voting Common Stock with a par value of $0.001
per share and 200,000,000 shares of Preferred Stock with a par value of $0.001 per share. The rights and terms associated with
the shares of Preferred Stock will be determined by the Board of Directors of the Corporation.
On
November 11, 2018, a Certificate of Amendment to Articles of Incorporation of PHI Group, Inc. was filed with the Nevada Secretary
of State to amend Article V of the Articles of Incorporation to change the authorized capital stock of the Corporation to 4,000,000,000
shares with a par value of $0.001 per share, consisting of 3,800,000,000 shares of voting Common Stock with a par value of $0.001
per share and 200,000,000 shares of Preferred Stock with a par value of $0.001 per share. The rights and terms associated with
the shares of Preferred Stock will be determined by the Board of Directors of the Corporation.
On
November 27, 2018, a Certificate of Amendment to Articles of Incorporation of PHI Group, Inc. was filed with the Nevada Secretary
of State to amend Article V of the Articles of Incorporation to change the authorized capital stock of the Corporation to 5,000,000,000
shares with a par value of $0.001 per share, consisting of 4,800,000,000 shares of voting Common Stock with a par value of $0.001
per share and 200,000,000 shares of Preferred Stock with a par value of $0.001 per share. The rights and terms associated with
the shares of Preferred Stock will be determined by the Board of Directors of the Corporation.
On
January 03, 2019, a Certificate of Amendment to Articles of Incorporation of PHI Group, Inc. was filed with the Nevada Secretary
of State to amend Article V of the Articles of Incorporation to change the authorized capital stock of the Corporation to 7,000,000,000
shares with a par value of $0.001 per share, consisting of 6,900,000,000 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 shares of Preferred Stock will be determined by the Board of Directors of the Corporation.
NOTE
15
–
STOCK-BASED COMPENSATION PLAN
On
February 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, 2018 the Company has not issued any
stock in lieu of cash under this plan.
On
September 23, 2016, the Company issued incentive stock options and nonqualified stock options to certain key employee(s) (Henry
Fahman – CEO/CFO) and directors (Tam Bui, Henry Fahman, and Frank Hawkins constitute the Board of Directors) as deferred
compensation. The options allow the holders to acquire the Company’s Common Stock at the fair exercise price of the Company’s
Common Stock on the grant date of each option at $0.24 per share, based on the 10-days’ volume-weighted average price prior
to the grant date. The number of options is equal to a total of 6,520,000. The options terminate seven years from the date of
grant and become vested and exercisable after one year from the grant date. The following assumptions were used in the Monte Carlo
analysis by Doty Scott Enterprises, Inc., an independent valuation firm, to determine the fair value of the stock options:
Risk-free interest rate
|
|
|
1.18
|
%
|
Expected life
|
|
|
7 years
|
|
Expected volatility
|
|
|
239.3
|
%
|
Vesting
is based on a one-year cliff from grant date.
Annual
attrition rates were used in the valuation since ongoing employment was condition for vesting the options.
The
fair value of the Company’s Stock Options as of issuance valuation date is as follows:
Holder
|
|
Issue Date
|
|
Maturity Date
|
|
Stock Options
|
|
|
Exercise Price
|
|
|
Fair Value at
Issuance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tam Bui
|
|
9/23/2016
|
|
9/23/2023
|
|
|
875,000
|
|
|
|
Fixed price: $0.24
|
|
|
$
|
219,464
|
|
Frank Hawkins
|
|
9/23/2016
|
|
9/23/2023
|
|
|
875,000
|
|
|
|
Fixed price: $0.24
|
|
|
$
|
219,464
|
|
Henry Fahman
|
|
9/23/2016
|
|
9/23/2023
|
|
|
4,770,000
|
|
|
|
Fixed price: $0.24
|
|
|
$
|
1,187,984
|
|
NOTE
16
–
RELATED PARTY TRANSACTIONS
The
Company accrued $52,500 in salaries for the President and the Secretary & Treasurer of the Company during the quarters ended
December 31, 2018 and December 31, 2017.
During
the quarter ended December 31, 2018, the Company received $200,000 from Tam Bui, a director of the Company, as a short-term loan
to be paid on demand.
NOTE
17
–
CONTRACTS AND COMMITMENTS
EQUITY
LINE FACILITY - INVESTMENT AGREEMENT WITH AZURE CAPITAL, INC.
On
March 6, 2017, PHI Group, Inc., a Nevada corporation (the “Company”) and Azure Capital, a Massachusetts Corporation
(the “Investor”) entered into an Investment Agreement (the “Investment Agreement”) and a Registration
Rights Agreement (the “Registration Rights Agreement”), each dated March 6, 2017 between the Company and the Investor.
Pursuant
to the Investment Agreement, the Investor committed to purchase, subject to certain restrictions and conditions, up to $10,000,000
worth of the Company’s common stock, over a period of 36 months from the effectiveness of the registration statement registering
the resale of shares purchased by the Investor pursuant to the Investment Agreement. The Company agreed to initially reserve 20,000,000
shares of its Common Stock for issuance to the Investor pursuant to the Investment Agreement. In the event the Company cannot
register a sufficient number of shares of its Common Stock for issuance pursuant to the Investment Agreement, the Company will
use its best efforts to authorize and reserve for issuance the number of shares required for the Company to perform its obligations
in connection with the Investment Agreement as soon as reasonable practical.
The
Company may in its discretion draw on the facility from time to time, as and when the Company determines appropriate in accordance
with the terms and conditions of the Investment Agreement. The maximum number of shares that the Company is entitled to put to
the Investor in any one draw down notice shall not exceed shares with a purchase price of $250,000 or 200% of the average daily
volume (U.S. market only) of the Company’s Common Stock for the three (3) Trading Days prior to the applicable put notice
date multiplied by the average of the three (3) daily closing prices immediately preceding the put date, calculated in accordance
with the Investment Agreement. The Company may deliver a notice for a subsequent put from time to time, after the pricing period
for the prior put has been completed.
The
purchase price shall be set at ninety-four percent (94%) of the lowest daily volume weighted average price (VWAP) of the Company’s
common stock during the five (5) consecutive trading days immediately following the put notice date. On each put notice submitted
to the Investor by the Company, the Company shall specify a suspension price for that put. In the event the price of Company’s
Common Stock falls below the suspension price, the put shall be temporarily suspended. The put shall resume at such time the price
of the Company’s Common Stock is above the suspension price, provided the dates for the pricing period for that particular
put are still valid. In the event the pricing period has been complete, any shares above the suspension price due to the Investor
shall be sold to the Investor by the Company at the suspension price under the terms of the Investment Agreement. The suspension
price for a put may not be changed by the Company once submitted to the Investor.
There
are put restrictions applied on days between the draw down notice date and the closing date with respect to that particular put.
During such time, the Company shall not be entitled to deliver another draw down notice. In addition, the Investor will not be
obligated to purchase shares if the Investor’s total number of shares beneficially held at that time would exceed 4.99%
of the number of shares of the Company’s common stock as determined in accordance with Rule 13d-1(j) of the Securities Exchange
Act of 1934, as amended. In addition, the Company is not permitted to draw on the facility unless there is an effective registration
statement to cover the resale of the shares.
The
Investment Agreement also contains customary representations and warranties of each of the parties. The assertions embodied in
those representations and warranties were made for purposes of the Investment Agreement and are subject to qualifications and
limitations agreed to by the parties in connection with negotiating the terms of the Investment Agreement. The Investment Agreement
further provides that the Company and the Investor are each entitled to customary indemnification from the other for, among other
things, any losses or liabilities they may suffer as a result of any breach by the other party of any provisions of the Investment
Agreement or Registration Rights Agreement (as defined below). Investor should read the Investment Agreement together with the
other information concerning the Company that the Company publicly files in reports and statements with the Securities and Exchange
Commission (the “SEC”).
Pursuant
to the terms of the Registration Rights Agreement, the Company is obligated to file one or more registrations statements with
the SEC within twenty-one (21) days after the date of the Registration Rights Agreement to register the resale by the Investor
of the shares of common stock issued or issuable under the Investment Agreement. In addition, the Company is obligated to use
all commercially reasonable efforts to have the registration statement declared effective by the SEC within 90 days after the
registration statement is filed.
This
Investment Agreement was amended on August 3, 2017 to allow for the reservation of 65,445,000 shares of the Company’s Common
Stock for issuance to the Investor pursuant to the corrected Investment Agreement.
The
Company has filed a S-1 Registration Statement with the Securities and Exchange Commission to include 7,936,600 shares of its
Common Stock for issuance in connection with the first tranche of the Equity Line Facility. The S-1 Registration Statement, as
amended, was declared effective by the Securities and Exchange Commission on January 11, 2018. The Company has not accessed the
Equity Line Facility and intends to do so only when the Company’s stock prices reach levels that its management deems appropriate.
BUSINESS
CONSULANCY AND STRUCTURING AGENCY AGREEMENT TO SET UP INSTITUTIONAL BANK FUNDS IN LUXEMBOURG
On
November 30, 2017, the Company signed an agreement with a structuring agent and legal experts to set up a bank fund in Luxembourg
in order to provide financing for the Company’s and its clients’ projects.
The
Reserved Alternative Investment Fund (RAIF) can be established under the form of common funds (“FCP”), investment
companies with variable capital (“SICAV”) or under the form that does not have to have the legal form of a SICAV or
an FCP. There will be no restriction in terms of eligible assets. RAIFs are free to introduce any kind of assets and financial
instruments in their investment policy. According to the Luxembourg Law of July 12, 2013, RAIFs must entrust their assets to a
Luxembourg custodian bank for safekeeping and must appoint an approved statutory auditor.
One
of the distinctive advantages of RAIF is that it may have various sub-funds, each corresponding to a distinct part of the assets
and liabilities of the RAIF. As such, sub-funds can be established under a RAIF umbrella to target different investment opportunities
in a variety of industries as desired.
On
February 21, 2018, the Company signed an amendment to the Business Consultancy and Structuring Agency Agreement to be solely responsible
for all the costs of Euros 3,500,000 associated with establishing the RAIF. On October 4, 2018, a Payment Agreement was signed
by the structuring agent and the Company calling for an additional Euros 1,500,000 to be paid to the structuring agent by November
15, 2018. As of the date of this report, the Company has not fully met its contractual obligations with the Structuring Agency,
but expects to resolve this matter as soon as possible.
On
December 03, 2018, the Company successfully established PHI Luxembourg Development S.A. as the mother holding company in Luxembourg
for PHILUX Global Funds and a number of sub-funds under the same umbrella. PHI Luxembourg Development S.A. is in the process of
activating four initial sub-funds for investments in green energy, sustainable agriculture, real estate and a diamond exchange
in Asia.
AGREEMENT
BETWEEN AMERICAN PACIFIC RESOURCES, INC. AND GILDEXSHOP
On
February 28, 2018, American Pacific Resources, Inc. (“APRI”), a subsidiary of the Company, signed a Business Cooperation
with GildexShop Pte Ltd. (“GLDX”), a company to be established in Singapore. According to the agreement, APRI and
GLDX will primarily cooperate with each other to accomplish the following objectives:
1.
Capitalization of APRI: GLDX will issue and circulate a certain amount of cryptocurrency tokens using blockchain technology in
order to raise capital for APRI to implement its business plan.
2.Using
APRI’s assets as guarantee for GLDX ICO’s: APRI agrees to guarantee the value of the GLDX ICO tokens pursuant to the
following terms and conditions:
a.
In the event the trading prices of GLDX ICO tokens fall below their original purchase prices anytime after GLDX tokens are listed
on a reputable cryptocurrency exchange, APRI agrees to guarantee the value of all such GLDX ICO tokens that are purchased by investors
by allowing the token holders to exchange the original purchase prices of such ICO tokens for gold from APRI at 50% discount to
the Market Price (as defined herein) of gold at the time of exchange. Market Price shall mean the 10-day average closing spot
price of gold on the London Metal Exchange (LME) immediately prior to the date of the request for exchange by the ICO token holders.
b.
Holders of GLDX ICO tokens may select one of the following options for the receipt of the APRI gold guarantee:
(i).
Receipt of physical gold bar(s) from APRI or its affiliate(s).
(ii).
Receipt of Ethereum or alternatively acceptable crytocurrencies equivalent to the value of the original ICO purchase prices.
(iii)
Receipt of cash through wire transfer to token-holder’s bank account after sale of the guarantee gold position(s).
3.
GLDX shall be responsible for providing the required capital for APRI to set up the processing facilities to recover gold and
other precious metals from its Gold Assets. The amounts of capital to be provided to APRI by GLDX will be done in tranches and
based on a schedule of funding and use of proceeds to be determined and agreed upon by both APRI and GLDX.
4.
APRI covenants and warrants that it shall sell refined gold and other products of precious metals from its Gold Assets to GLDX
at 50% discount to Market Price as defined above until GLDX has recovered at least twice the amount(s) of its capital investment
in APRI or the end of the five-year term of this Agreement, whichever occurs later.
5.
Compliance with Various Jurisdictions and the Requirements of the U.S. Securities and Exchange Commission: GLDX shall strictly
comply with the requirements of the appropriate jurisdictions with respect to the offerings of its GLDX ICO tokens and shall not
offer any of such tokens to U.S. investors unless and until it has met all the requirements of the U.S. Securities and Exchange
Commission in connection with the offering and sale of the tokens.
As
of the date of this report, APRI has not received any capital contribution from GLDX.
AGREEMENT
WITH PHUONG HOANG INVESTMENT AND DEVELOPMENT LLC TO GROW SACHA INCHI IN THUA THIEN HUE PROVINCE, VIETNAM
In
March 2018, the Company signed a Business Cooperation Agreement with Phuong Hoang Investment and Development LLC, a company registered
in Ha Tinh Province, Vietnam, to grow a total of 2,000 hectares (approximately 4,940 acres) of sacha inchi in the province of
Thua Thien Hue for export to the U.S. and European markets.
Originally
from the Amazon rainforest and the high Andes Mountains of Peru, sacha inchi has been part of the Inca diet for 3,000 years. The
sacha inchi plant, plukenetia volubilis, a rainforest vine, with star-shaped seed pods, is currently cultivated primarily in parts
of Southeast Asia and South America. Sacha inchi has been recognized for a number of health benefits such as complete protein,
weight loss, heart health, bone health, and skin and hair health.
According
to the agreement, the Company will be responsible for providing the required capital for this project and will own 75% equity
interest in the joint venture company.
AGREEMENT
WITH CLIENT-PARTNER FOR PARTICIPATION IN LUXEMBOURG RESERVED ALTERNATIVE INVESTMENT FUND
On
March 27, 2018, Thanh Vu, an individual, (“TV”) signed an agreement with the Company to participate in a Luxembourg
Reserved Alternative Investment Fund (“RAIF”). According to the agreement, TV will pay the Company $2,000,000 in fees
to participate in the RAIF, of which $500,000 is due upon the signing and $1,500,000 to be paid fifteen days after the signing
of the agreement. The Company recorded $2,000,000 as Contract Assets, of which $1,212,159 was recognized as revenue during the
fiscal year ended June 30, 2018, thus leaving $697,841 as the remaining Contract Assets, offset by $697,841 as Contract Liabilities
as of December 31, 2018. TV shall be entitled to all the benefits in connection with the RAIF, including but not limited to voting
rights, profit sharing, cash and securities dividends, as well as other benefits related to ownership in the fund.
JOINT
BUSINESS COOPERATION AGREEMENT WITH INDONESIAN AND GERMAN COMPANIES
On
April 5, 2018, the Company signed a Joint Business Cooperation Agreement with PT Mega Kencana Persada, an Indonesian company with
principal address at No 2, Jln Kepodang Raya K9, Jakarta Selatan 15412, Indonesia, (hereinafter referred to as “MKP”),
and Smartway GmbH, a company organized and existing under the laws of Federal Republic of Germany, with principal address at Liszstr.
17, D-53115, Bonn, Germany (hereinafter referred to as “SMW” to primarily cooperate with one other to develop certain
joint business opportunities, particularly research and development in the Indonesian maritime commuter segment, including application
of SMW’s logistical technology for optimized inter-provincial ferry operations and digital online payment system for maritime
passengers. Moreover, the parties may from time to time cooperate with each other and jointly engage in other business activities
that deem mutually desirable and beneficial to all parties.
The
Parties agree that:
a)
MKP shall be responsible for conducting all research and development, field survey, data collection and capturing business opportunities
and securing local government licensing requirements.
b)
SMW shall provide or cause to be provided system technologies to support market segments submitted by MKP with respect to the
Indonesian maritime transportation, land transportation, and online payment for Indonesian overseas travel.
c)
PHI shall provide assistance with respect to financing, capitalization, investor and public relations, business development, going
public, corporate governance, growth and expansion strategy and other pertinent corporate activities that deem beneficial to the
scope of business cooperation mentioned herein.
d)
MKP, PHI and SMW agree to form a Singaporean company as the holding company (“HoldCo”) for the contemplated business
activities mentioned herein.
e)
The roles, responsibilities and benefits of each party in connection with the scope of business mentioned herein will be determined
by HoldCo.
BUSINESS
COOPERATION AGREEMENT WITH FINTECH GREEN INVESTMENT JSC
On
May 21, 2018, the Company signed a Business Cooperation Agreement with Fintech Green Investment JSC to cooperate with other with
respect to the following areas:
a)
PHI will discuss and negotiate with FGI to consider an acquisition of a majority equity interest in FGI and/or exchange of ownership
between TNB and PHI by way of stock swap to form a strategic alliance between the two companies;
b)
PHI will invest or cause to be invested in FGI and assist FGI to access funding sources to implement FGI’s business plan;
c)
PHI will assist FGI to become a publicly traded company in the United States Stock Market and other international exchanges as
deems appropriate to enable FGI to access international capital markets to further its development and growth;
d)
PHI will cooperate with FGI to set up additional cryptocurrency mining facilities in selective geographical areas and assist FGI
to promote and advertise its business on a global basis;
e)
PHI and FGI may jointly develop, manufacture and market other products and/or engage in other business activities that may be
of mutual interest to both parties.
BUSINESS
COOPERATION AGREEMENT WITH REGENT BLOCKHAIN GROUP, LTD.
On
July 22, 2018, the Company signed a Business Cooperation Agreement
with
Regent Blockchain Group, Ltd. (“RBG”), a Filipino company, to form a joint venture company to develop and operate
an offshore financial center and blockchain businesses, including but not limited to Apps, ICO’s and cryptocurrency exchanges.
The joint venture company will be located in the Cagayan Economic Zone, Lai-lo Municipality, Cagayan, Philippines
http://ceza.gov.ph/
.
RBG and PHI will specifically cooperate with each other with respect to the following areas:
1.
PHI and RBG will form a joint venture company (the “JV”) to be located in the Cagayan Economic Zone, Lai-lo Municipality,
Cagayan, Philippines, for the purposes of developing and operating an offshore financial center and blockchain businesses including
but not limited to Apps, ICO’s and cryptocurrency exchanges.
2.
PHI initially will invest or cause to be invested $4,000,000 for a fifty-one percent ownership and management rights of the JV
and will assist the JV to access funding sources to implement its business plan. This initial investment can be in cash or stock
of PHI, to be determined by both parties prior to the closing of the Definitive Agreement as mentioned in Article II below.
3.
RBG will contribute the required license(s) from the Filipino government, particularly Cagayan Economic Zone Authority, towards
the JV for the operations of the offshore financial center and blockchain businesses.
4.
PHI will, at the appropriate time, spin off the JV company as a new public company in the United States Stock Market and other
international exchanges as deems desirable to enable it to access international capital markets to further its development and
growth. The capital structure of the JV prior to the spinoff will be determined by both parties and further detailed in the Definitive
Agreement.
5.
PHI and RBG may jointly develop, manufacture and market other products and/or engage in other business activities that may be
of mutual interest to both parties.
BUSINESS
COOPERATION AGREEMENT WITH BAO LAM LLC TO GROW SACHA INCHI IN VIETNAM CENTRAL HIGHLANDS
On
July 2, 2018, the Company signed Business Cooperation Agreement Bao Lam LLC, a company registered in Dak Lak Province, Vietnam,
to grow a total of 1,000 hectares (approximately 2,470 areas) of sacha inchi in the province of Dak Lak and Dak Nong Province,
Vietnam for export to the U.S. and European markets.
According
to the agreement, the Company will be responsible for providing the required capital for this project and will own 75% equity
interest in the joint venture company.
ACQUISITION
OF 51% EQUITY INTEREST IN VINAFILMS JOINT STOCK COMPANY
On
August 06, 2018, signed a Business Cooperation Agreement with Vinafilms JSC (Công ty Cổ phần Màng Bao
Bì Tân Vinh Nam Phát), a Vietnamese joint stock company, with principal business address at Lot G9, Road No.
9, Tan Do Industrial Zone, Duc Hoa Ha Village, Duc Hoa District, Long An Province, Vietnam, hereinafter referred to as “VNF”
and its majority shareholder, to exchange fifty-one percent ownership in VNF for Preferred Stock of PHI. According to the Agreement,
PHI will be responsible for filing a S-1 Registration Statement with the Securities and Exchange Commission for American Pacific
Plastics, Inc., a subsidiary of PHI that holds the 51% equity ownership in VNF, to become a fully-reporting public company in
the U.S. Stock Market.
On
September 20, 2018, a Stock Swap Agreement was signed by and between Ms. Do Thi Nghieu, the majority shareholder holding 76% of
ownership in VNF, and PHI to exchange 3,060,000 shares of ordinary stock of VNF owned by Ms. Do Thi Nghieu for 50 million shares
of Class A Series III Cumulative, Convertible, Redeemable Preferred Stock of PHI. This transaction was closed on September 28,
2018. The Company expects to consolidate VNF’s operating results with PHI’s after the completion of financial audits
of VNF according to the U.S. Generally Accepted Accounting Principals by a PCAOB-registered auditing firm.
AGREEMENTS
WITH SAIGON PHO PALACE JSC
On
October 16, 2018, the Company signed a Business Cooperation Agreement with Saigon Pho Palace Joint Stock Company (“SGP”),
a Vietnamese company, and its majority shareholder to acquire a 51% ownership in SGP in exchange for Preferred Stock of PHI Group,
Inc. or a promissory note that may be convertible into shares of a subsidiary of the Company. On October 22, 2018, a Stock Swap
Agreement was signed among the Company, SGP and Le Minh Quy, its majority shareholder and Chairman, to exchange 15,300,000 shares
of Common Stock of SGP held by him for shares of Preferred Stock or a Convertible Promissory Note of the Company. The amount of
Preferred Stock or the value of the Convertible Promissory Note will be determined and agreed upon by the parties following the
results of a valuation of SGP by an independent business valuation firm. On November 5, 2018, the Company formed a special purpose
vehicle “American Saigon Palace Group,” a Wyoming corporation, as the holding company for the 51% ownership in SGP.
The Company expects to be able to report consolidated operating results from SGP after the
closing of the Stock Swap Agreement, and, subject to meeting all necessary compliance requirements, intends to
file a registration
statement with the U.S. Securities and Exchange Commission to take ASPG public in the U.S. Stock Market at the appropriate time
in the future. The majority shareholder of SGP will have the option to convert the Preferred Stock or the convertible note of
PHI Group into 80% stock of American Saigon Palace Group when this subsidiary has become a fully reporting publicly traded company
in the U.S. Stock Market. The closing of this transaction is subject to the completion of an independent valuation of SGP by Grant
Thornton Vietnam.
On
October 16, 2018, Saigon Pho Palace also signed an agreement for participation in a sub-fund of the Luxembourg Institutional Bank
Fund with the Company. According to the agreement, SGP will contribute $2,000,000 as a founding partner in a sub-fund and will
have the priority to use capital from this sub-fund for priority investment projects. The Company has recorded $2,000,000 as Contract
Assets, of which $200,000 was recognized as revenue during the quarter ended December 31, 2018, thus leaving $1,800,00 as the
remaining Contract Assets, offset by $1,800,000 as Contract Liabilities as of December 31, 2018.
On
December 01, 2018, PHI Capital Holdings, Inc., a wholly-owned subsidiary of PHI Group, Inc., signed a consulting service agreement
with DIO Group Joint Stock Company to provide consulting services on a non-exclusive basis to take DIO Group public on the U.S.
Nasdaq Stock Market and assist DIO Group in its capitalization plan. DIO Group has agreed to set aside a budget of $4,000,000
and allocate fifteen percent of the new public company’s stock for PHI Capital Holdings, Inc. and its service providers
in connection with this agreement.
NOTE
18
–
GOING CONCERN UNCERTAINTY
As
shown in the accompanying consolidated financial statements, the Company has accumulated deficit of $41,843,513 as of December
31, 2018 and total stockholders’ deficit of $4,086,164. For the quarter ended December 31, 2018, the Company incurred a
net loss of $374,532 as compared to a net loss in the amount of $435,234 during the same period ended December 31, 2017. These
factors as well as the uncertain conditions 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 generate sufficient
cash to meet its operating needs through June 30, 2019 and beyond.
NOTE
19 – SUBSEQUENT EVENT
These
financial statements were approved by management and available for issuance on February 17, 2019. Subsequent events have been
evaluated through this date.
RECEIPT
OF PAYMENT FROM SAIGON PHO PALACE JSC.
On
January 08, 2019, the Company received $200,000 from Saigon Pho Palace JSC for contribution towards the costs of setting up a
sub-fund pursuant the agreement dated October 16, 2018 between Saigon Pho Palace JSC and the Company.
ISSUANCES
OF COMMON STOCK FOR CONVERSIONS OF CONVERTIBLE PROMISSORY NOTES
On
January 08, 2019, the Company issued 20,000,000 shares of free-trading Common Stock of PHI Group, Inc. to Auctus Fund, LLC, holder
of a Convertible Promissory Note dated February 02, 2018 of the Company, for the conversion of $8,117.30 of the principal balance
of the Note, together with $182.70 of accrued and unpaid interest and $500.00 conversion fee under the Note totaling $8,800.00.
The principal balance due remaining under this Note after this conversion was $11,731.00.
On
January 09, 2019, the Company issued 19,140,669 shares of free-trading Common Stock of PHI Group, Inc. to JSJ Investments, Inc.,
holder of a Convertible Promissory Note dated March 21, 2018 of the Company, for the conversion of $13,685.58 of the principal
balance of the Note. The principal balance due remaining under this Note after this conversion was $65,064.42.
On
January 09, 2019, the Company issued 22,324,000 shares of free-trading Common Stock of PHI Group, Inc. to Crown Bridge Partners,
LLC, holder of a Convertible Promissory Note dated April 02, 2018 of the Company, for the conversion of $8,094.74 of the principal
balance of the Note and $500.00 of fees under the Note, totaling $8,594.94. The principal balance due remaining under this Note
after this conversion was $15,396.19.
On
January 11, 2019, the Company issued 22,313,433 shares of free-trading Common Stock of PHI Group, Inc. to Power Up Lending Group
Ltd., holder of a Convertible Promissory Note dated July 10, 2018 of the Company, for the conversion of $14,950.00 of the principal
balance of the Note. The principal balance due remaining under this Note after this conversion was $94,550.00, including provisions
for default penalty.
On
January 14, 2019, the Company issued 22,311,475 shares of free-trading Common Stock of PHI Group, Inc. to Power Up Lending Group
Ltd., holder of a Convertible Promissory Note dated July 10, 2018 of the Company, for the conversion of $13,610.00 of the principal
balance of the Note. The principal balance due remaining under this Note after this conversion was $80,940.00, including provisions
for default penalty.
On
January 15, 2019, the Company issued 22,312,500 shares of free-trading Common Stock of PHI Group, Inc. to Power Up Lending Group
Ltd., holder of a Convertible Promissory Note dated July 10, 2018 of the Company, for the conversion of $14,280.00 of the principal
balance of the Note. The principal balance due remaining under this Note after this conversion was $66,660.00, including provisions
for default penalty.
On
January 15, 2019, the Company issued 22,310,345 shares of free-trading Common Stock of PHI Group, Inc. to Power Up Lending Group
Ltd., holder of a Convertible Promissory Note dated July 10, 2018 of the Company, for the conversion of $12,940.00 of the principal
balance of the Note. The principal balance due remaining under this Note after this conversion was $53,720.00, including provisions
for default penalty.
On
January 15, 2019, the Company issued 23,000,000 shares of free-trading Common Stock of PHI Group, Inc. to Crown Bridge Partners,
LLC, holder of a Convertible Promissory Note dated April 02, 2018 of the Company, for the conversion of $7,550.00 of the principal
balance of the Note and $500.00 of fees under the Note, totaling $8,050.00. The principal balance due remaining under this Note
after this conversion was $7,846.19.
On
January 15, 2019, the Company issued 25,000,000 shares of free-trading Common Stock of PHI Group, Inc. to Auctus Fund, LLC, holder
of a Convertible Promissory Note dated February 02, 2018 of the Company, for the conversion of $9,415.19 of the principal balance
of the Note, together with $84.81 of accrued and unpaid interest and $500.00 conversion fee under the Note totaling $10,000.00.
The principal balance due remaining under this Note after this conversion was $2,315.81.
On
January 17, 2019, the Company issued 22,316,327 shares of free-trading Common Stock of PHI Group, Inc. to Power Up Lending Group
Ltd., holder of a Convertible Promissory Note dated July 10, 2018 of the Company, for the conversion of $10,935.00 of the principal
balance of the Note. The principal balance due remaining under this Note after this conversion was $42,785.00, including provisions
for default penalty.
On
January 22, 2019, the Company issued 22,304,348 shares of free-trading Common Stock of PHI Group, Inc. to Power Up Lending Group
Ltd., holder of a Convertible Promissory Note dated July 10, 2018 of the Company, for the conversion of $10,260.00 of the principal
balance of the Note. The principal balance due remaining under this Note after this conversion was $32,525.00, including provisions
for default penalty.
On
January 23, 2019, the Company issued 33,314,463 shares of free-trading Common Stock of PHI Group, Inc. to Power Up Lending Group
Ltd., holder of a Convertible Promissory Note dated July 10, 2018 of the Company, for the conversion of $13,670.00 of the principal
balance of the Note. The principal balance due remaining under this Note after this conversion was $18,855.00, including provisions
for default penalty.
On
January 24, 2019, the Company issued 31,658,523 shares of free-trading Common Stock of PHI Group, Inc. to JSJ Investments, Inc.,
holder of a Convertible Promissory Note dated March 21, 2018 of the Company, for the conversion of $13,929.75 of the principal
balance of the Note. The principal balance due remaining under this Note after this conversion was $51,134.67.
On
January 24, 2019, the Company issued 33,342,857 shares of free-trading Common Stock of PHI Group, Inc. to Power Up Lending Group
Ltd., holder of a Convertible Promissory Note dated July 10, 2018 of the Company, for the conversion of $11,670.00 of the principal
balance of the Note. The principal balance due remaining under this Note after this conversion was $7,185.00, including provisions
for default penalty.
On
January 28, 2019, the Company issued 33,000,000 shares of free-trading Common Stock of PHI Group, Inc. to Auctus Fund, LLC, holder
of a Convertible Promissory Note dated February 02, 2018 of the Company, for the conversion of $2,315.81 of the principal balance
of the Note, together with $15.20 of accrued and unpaid interest, $3,768.99 penalties and $500.00 conversion fee under the Note
totaling $6,600.00. The principal penalty balance due remaining under this Note after this conversion was $11,231.01
On
January 28, 2019, the Company issued 39,370,000 shares of free-trading Common Stock of PHI Group, Inc. to EMA Financial, LLC,
holder of a Convertible Promissory Note dated July 23, 2018 of the Company, for the conversion of $6,089.75 of the principal balance
of the Note and $32,480.25 additional principal on account of conversion pursuant to Section 1.2(b) of the Note. The principal
balance due remaining under this Note after this conversion was $93,910.25.
On
January 28, 2019, the Company issued 34,844,828 shares of free-trading Common Stock of PHI Group, Inc. to Power Up Lending Group
Ltd., holder of a Convertible Promissory Note dated July 10, 2018 of the Company, for the conversion of $7,185.00 of the principal
balance of the Note together with $2,920.00 of accrued and unpaid interest thereto, totaling $10,105.00. The principal balance
due remaining under this Note after this conversion was $0.00.
On
January 29, 2019, the Company issued 38,663,736 shares of free-trading Common Stock of PHI Group, Inc. to JSJ Investments, Inc.,
holder of a Convertible Promissory Note dated March 21, 2018 of the Company, for the conversion of $10,632.53 of the principal
balance of the Note. The principal balance due remaining under this Note after this conversion was $40,502.14.
On
February 04, 2019, the Company issued 39,373,800 shares of free-trading Common Stock of PHI Group, Inc. to Auctus Fund, LLC, holder
of a Convertible Promissory Note dated February 02, 2018 of the Company, for the conversion of $5,799.81 of penalties and $500.00
conversion fee under the Note totaling $6,299.81. The principal penalty balance due remaining under this Note after this conversion
was $5,431.20.
On
February 04, 2019, the Company issued 45,811,785 shares of free-trading Common Stock of PHI Group, Inc. to JSJ Investments, Inc.,
holder of a Convertible Promissory Note dated March 21, 2018 of the Company, for the conversion of $10,078.59 of the principal
balance of the Note. The principal balance due remaining under this Note after this conversion was $30,423.55.
On
February 04, 2019, the Company issued 45,955,682 shares of free-trading Common Stock of PHI Group, Inc. to One44 Capital, LLC,
holder of a Convertible Promissory Note dated July 23, 2018 of the Company, for the conversion of $9,600.00 of the principal balance
of the Note and $510.25 of accrued and unpaid interest of th Note, totaling $10,110.25. The principal balance due remaining under
this Note after this conversion was $80,400.00.
On
February 07, 2019, the Company issued 53,000,000 shares of free-trading Common Stock of PHI Group, Inc. to EMA Financial, LLC,
holder of a Convertible Promissory Note dated July 23, 2018 of the Company, for the conversion of $6,620.00 of the principal balance
of the Note and $45,580.00 additional principal on account of conversion pursuant to Section 1.2(b) of the Note. The principal
penalty balance due remaining under this Note after this conversion was $68,357.80.
On
February 08, 2019, the Company issued 37,070,000 shares of free-trading Common Stock of PHI Group, Inc. to Auctus Fund, LLC, holder
of a Convertible Promissory Note dated February 02, 2018 of the Company, for the conversion of $5,431.20 of penalties and $500.00
conversion fee under the Note totaling $5,931.20. This note was paid in full after this conversion.
On
February 08, 2019, the Company issued 52,237,707 shares of free-trading Common Stock of PHI Group, Inc. to JSJ Investments, Inc.,
holder of a Convertible Promissory Note dated March 21, 2018 of the Company, for the conversion of $11,492.30 of the principal
balance of the Note. The principal balance due remaining under this Note after this conversion was $18,931.25.
On
February 13, 2019, European Plastic Joint Stock Company, a Vietnamese company, signed an agreement with PHI Group, Inc. to participate
in an energy sub-fund of PHILUX Global Funds, a master Luxembourg bank fund scheduled to be activated in the first calendar quarter
of 2019. According to the agreement, European Plastic Co. will contribute $2,000,000 as a general partner in the energy sub-fund
and hold 49.50% of the general partner shares in this subfund. European Plastic Co. is the developer of two solar energy projects
in Phu Yen Province, Vietnam.
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
PHI
Group, Inc. (the “Company” or “PHI”) is engaged in mergers and acquisitions as a principal (
www.phiglobal.com
).
The Company has adopted plans to acquire established operating businesses in selective industries and invest in various ventures
that may potentially create significant long-term value for our shareholders. In addition, the Company provides corporate finance
services, including merger and acquisition advisory and consulting services for client companies through our wholly owned subsidiary
PHI Capital Holdings, Inc. (
www.phicapitalholdings.com
). Furthermore, the Company has recently established PHI Luxembourg
Development S.A. as the mother holding company for a Luxembourg Bank Fund known as PHILUX Global Funds, to be activated as a “Reserved
Alternative Investment Fund” (“RAIF”) together with a number of sub-funds under the same umbrella for green
energy, sustainable agricultural, and real estate projects as well as other investments.
BACKGROUND
Originally
incorporated on June 8, 1982 as JR Consulting, Inc., a Nevada corporation, the Company applied for a Certificate of Domestication
and filed Articles of Domestication to become a Wyoming corporation on September 20, 2017. In the beginning, the Company was foremost
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
financial services company, the Company changed its name to Providential Securities, Inc., a Nevada corporation, 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 and its subsidiaries were engaged in mergers and acquisitions
advisory and consulting services, real estate and hospitality development, mining, oil and gas, telecommunications, technology,
healthcare, private equity, and 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
- US, and Philand Vietnam Ltd. - Vietnam), PHI Gold Corporation (formerly PHI Mining Corporation, a Nevada corporation), and PHI
Energy Corporation (a Nevada corporation), and mainly focused on acquisition and development opportunities in energy and natural
resource businesses. At the present, the Company is engaged in mergers and acquisitions as a principal and investments in natural
resources, energy, agriculture, consumer goods, technology and special situations. In addition, PHI Capital Holdings, Inc., a
wholly owned subsidiary of PHI, continues to provide corporate and project finance services, including merger and acquisition
(M&A) advisory and consulting services for other companies in a variety of industries. Furthermore, the Company has recently
established PHI Luxembourg Development S.A. as the mother holding company for a Luxembourg Bank Fund known as PHILUX Global Funds,
to be activated as a “Reserved Alternative Investment Fund” (“RAIF”) together with a number of sub-funds
under the same umbrella for green energy, sustainable agricultural, and real estate projects as well as other investments, in
accordance with the Luxembourg Law of July 23, 2016 relative to reserved alternative investment funds, Law of August 23, 2016
relative to commercial companies, and Modified Law of July 12, 2013 relative to alternative investment fund managers. The Company
has also been working with special international partners and the Chu Lai Open Economic Zone Authority to potentially develop
and establish an Asia Diamond Exchange in the Free-Trade Zone of Quang Nam Province, Vietnam. No assurances can be made that the
Company will be successful in achieving its plans.
BUSINESS
STRATEGY
PHI
Group Inc.’s strategy is to:
1.
Identify, build, acquire, commit and deploy valuable resources with distinctive competitive advantages;
2.
Identify, evaluate, acquire, participate and compete in attractive businesses that have large, growing market potential; and
3.
Build an attractive investment that includes points of exit for investors through capital appreciation or spin-offs of business
units.
SUBSIDIARIES:
As
of December 31, 2018, the Company owned the following subsidiaries: Abundant Farms, Inc., a Florida corporation (100%), American
Pacific Resources, Inc., a Wyoming corporation (100%), American Pacific Plastics, Inc., a Wyoming corporation (100%), ComMatrix,
Inc., a Wyoming corporation (100%), Constructii SA Group, Inc., a Delaware corporation (100%), PHI Capital Holdings, Inc., a Nevada
corporation (100%), PHI EZ Water Tech, Inc., a Wyoming corporation (75%), PHI Vietnam Investment and Development Company Ltd.,
a Vietnamese limited liability company (100%), Phivitae Corporation, a Wyoming corporation (100%), and American Saigon Palace
Group, a Wyoming corporation (100%). The following subsidiaries are currently inactive: ComMatrix, Inc., Constructii SA Group,
Inc., PHI EZ Water Tech, Inc., and Phivitae Corporation.
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 continues to focus on serving the Pacific Rim markets in the foreseeable future. This subsidiary
was re-domiciled as a Wyoming corporation on September 20, 2017.
AMERICAN
PACIFIC RESOURCES, INC.
American
Pacific Resources, Inc. (“APR”) is a Wyoming corporation established in April 2016 to serve as a holding company for
various natural resource projects. On September 2, 2017, APR entered into an Agreement of Purchase and Sale with Rush Gold Royalty,
Inc. (“RGR”), a Wyoming corporation, to acquire a 51% ownership in twenty-one mining claims over an area of approximately
400 acres in Granite Mining District, Grant County, Oregon, U.S.A., in exchange for a total purchase price of twenty-five million
U.S. Dollars ($US 25,000,000) to be paid in a combination of cash, convertible demand promissory note and PHI Group, Inc.’s
Class A Series II Convertible Cumulative Redeemable Preferred Stock (“Preferred Stock”). This transaction was closed
effective October 3, 2017. Following the first amendment dated April 19, 2018 and the second amendment dated September 29, 2018
retroactively effective April 20, 2018, to the afore-mentioned Agreement of Purchase and Sale, PHI Group, Inc. paid ten million
shares of its Class A Series II Convertible Cumulative Redeemable Preferred Stock, a convertible demand promissory note and cash
totaling $25,000,000 to Rush Gold Royalty, Inc. As of December 31, 2018, the balance of the convertible demand note was $24,048,500.00.
SPECIAL
STOCK DIVIDEND FROM AMERICAN PACIFIC RESOURCES, INC. SUBSIDIARY
On
April 23, 2018, the Company’s Board of Directors passed a resolution to declare a twenty percent (20%) special stock dividend
from its holdings of Common Stock in American Pacific Resources, Inc., a subsidiary of the Company, to shareholders of Common
Stock of the Company as follows: (a) Declaration date: April 23, 2018; (b) Record date: May 31, 2018; (c) Payment date: October
31, 2018; (d) Dividend ratio: All eligible shareholders of Common Stock of the Company as of the Record date shall be entitled
to receive two (2) shares of Common Stock of American Pacific Resources, Inc. for every ten (10) shares of Common Stock of PHI
Group, Inc. held by such shareholders as of the referenced Record date. The payment date has been rescheduled for March 29, 2019.
On
November 8, 2018, the Company amended the new dividend ratio and the new Record Date as follows: (a) Eligible shareholders: In
order to be eligible for the above-mentioned special stock dividend, the minimum amount of Common Stock of PHI Group, Inc. each
shareholder must hold as of the New Record Date is twenty (20) shares; (b) New Record Date: The new Record Date will March 01,
2019, subject to FINRA’s approval; (c) New dividend ratio: All eligible shareholders of Common Stock of the Company as of
the new Record Date shall be entitled to receive one (1) share of Common Stock of American Pacific Resources, Inc. for every twenty
(20) shares of Common Stock of PHI Group, Inc. held by such shareholders as of the new Record date; and (d) Payment Date: The
Payment Date for the afore-mentioned special stock dividend is March 29, 2019.
ABUNDANT
FARMS, INC.
Abundant
Farms, Inc., a Florida corporation formed on December 19, 2106, is engaged in organic farming activity. It seeks to acquire farmland,
form joint ventures with governments and other farmers, and lease arable land to grow select crops and medicinal plants that potentially
provide superior return on investment. It also plans to produce proprietary organic fertilizer and provides special water treatment
systems by PHI EZ Water Tech, Inc. for its own organic farming program and for sale to farmers worldwide. As of the date of this
report, Abundant Farms has not generated any revenue from operations.
PHI
GROUP REGIONAL CENTER, LLC
PHI
Group Regional Center, LLC was formed on March 23, 2017 with the intention to manage a new EB-5 Regional Center
in
connection with the Company’s organic farming program, Abundant Farms, Inc., and other potential business activities in
the State of Florida. On April 27, 2017,
an I-924 application was filed with the United
States Citizenship and Immigration Service (USCIS) for PHI Group Regional Center, LLC.
Under the EB-5 Program, created
by Congress to stimulate the U.S. economy through job creation and capital investment, foreign entrepreneurs (and their spouses
and unmarried children under 21) are eligible to apply for a Green Card (permanent residence) if they make the necessary investment
in a commercial enterprise in the United States that creates or preserves at least 10 permanent, full-time jobs for qualified
U.S. workers. This subsidiary was dissolved effective September 29, 2018.
PHI
EZ WATER TECH, INC.
PHI
EZ Water Tech, Inc., a Wyoming corporation, is a majority-owned subsidiary of PHI Group that manages, manufactures and markets
a portfolio of innovative water treatment systems and other products developed by Dr. Martin Nguyen for agriculture, healthcare
and human consumption. Website:
www.phiezwater.com.
As of the date of this report, PHI EZ Water Tech, Inc. has not generated
any revenue from operations.
PHIVITAE
CORPORATION
PHIVITAE
CORPORATION, a Wyoming corporation, is a wholly-owned subsidiary of PHI Group set up with the intention to acquire a pharmaceutical
and medical equipment distribution company in Romania and to manage distribution of medical equipment and pharmaceutical products
to emerging markets. This subsidiary is currently inactive.
CONSTRUCTII
SA GROUP, INC.
CONSTRUCTII
SA GROUP, INC., a Delaware corporation, is a wholly-owned subsidiary of PHI Group set up with the intention to acquire a construction
and manufacturing company in Romania. This subsidiary in currently inactive and will be dissolved.
LUXEMBOURG
RESERVED ALTERNATIVE INVESTMENT FUNDS
On
December 03, 2018, the Company formed PHI Luxembourg Development S.A. as the mother holding company for PHILUX Global Funds, a
master Luxembourg bank fund known as “Reserved Alternative Investment Fund” (“RAIF”), to be activated
together with a number of initial sub-funds for investment in agriculture, energy and real estate and other opportunities.
DISCONTINUED
OPERATIONS:
The
Company has discontinued the operations of Providential Vietnam Ltd., Philand Ranch Limited – UK (together with its subsidiaries
Philand Ranch Ltd-Singapore, Philand Corporation-USA and Philand Vietnam Ltd.), PHI Gold Corporation (now known as NS International
Corp.), and PHI Energy Corporation since June 30, 2012.
SPUN-OFF
SUBSIDIARIES:
TANS
GLOBAL, INC. (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 was incorporated as a Nevada corporation on September 23, 2004.
The Company distributed a 15% stock dividend of Provimex, Inc. to PHI Group, Inc.’s 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. 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 merge with HP.ITA Joint
Stock Company (“HPVN”), a Vietnamese company, in order to go public in the United States but the Corporate Combination
Agreement was subsequently rescinded because HPVN was not able to implement its business plan and complete financial audits according
to the U.S. Generally Accepted Accounting Principals (“GAAP”). On September 16, 2016 HP.ITA Corp. changed its name
to Tans Global, Inc. with the intention to merge with an operating company in Vietnam and file a registration statement with the
Securities and Exchange Commission to become a fully reporting public company in the U.S. As of the date of this report, Tans
Global has discontinued the plan to merge with the contemplated operating company in Vietnam.
OMNI
RESOURCES, INC. (Formerly 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 4, 2014, this company 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. The Company expects to hold about 10% equity interest
in Omni Resources, Inc. following Omni’s recapitalization. As of the date of this report Omni Resources, Inc. is inactive
and has not implemented any reorganization plan.
SOUTHEAST
ASIA CAPITAL GROUP, INC. (Formerly E-CHECK RECOVERY, INC.)
E-Check
Recovery, Inc. was formed in 2004 as a Nevada corporation to engage in financial services. This company has changed its name to
Southeast Asia Capital Group, Inc. and is being reorganized to engage in real estate development and investment as well as trading
of essential commodities. PHI Group, Inc. and its shareholders expect to hold 15% of equity in Southeast Asia Capital after the
reorganization.
STOCK
OWNERSHIPS:
MYSON
GROUP, INC.
As
of December 31, 2018, PHI Group, Inc. and PHI Capital Holdings, Inc., a wholly owned subsidiary of the Company, together owned
32,900,106 shares of Common Stock of Myson Group, Inc., a Nevada corporation currently traded on the OTC Markets under the symbol
“MYSN.”
SPORTS
POUCH BEVERAGE COMPANY, INC.
As
of December 31, 2018, the Company through PHI Capital Holdings, Inc. owned 292,050,000 shares of Sports Pouch Beverage Company,
Inc., a Nevada corporation traded on the OTC Markets under the symbol “SPBV.”
VINAFILMS
JOINT STOCK COMPANY
As
of December 31, 2018, the Company through American Pacific Plastics, Inc., owned 3,060,000 shares of Common Stock of Vinafilms
JSC, a Vietnamese company, with a par value of VND 10,000 per share and an aggregate value of $1,311,419, representing 51% of
ownership in Vinafilms JSC.
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 December 31, 2018, 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 six-month periods ended December 31,
2018 and 2017, our financial condition at December 31, 2018 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 December 31, 2018 compared to the three months ended December 31, 2017
Total
Revenues:
The
Company reported $200,000 of revenues for the quarter ended December 31, 2018 as compared to $432,000 of revenue for the quarter
ended December 31, 2017. The reason for the decrease in revenues between the two periods was due to sales of goods by one of the
Company’s subsidiaries during the previous corresponding period versus revenue from bank fund fee during the current period.
Operating
Costs and Expenses:
Total
operating expenses were $178,951 and $$135,172 for the three months ended December 31, 2018, and 2017, respectively. The increase
of $43,779 on total operating expenses between the two periods was mainly due to increases in professional services in the amount
of $9,252, rent of new office in Luxembourg in the amount of $22,561, and travel expenses of $4,543.
Income
(Loss) from Operations:
Income
from operations for the quarter ended December 31, 2018 was $21,049, as compared to income from operations of $296,828 for the
previous corresponding period ended December 31, 2011. A variance of $275,779 in the gain from operations between the two periods
was mainly due to the net changes in revenues and total operating expenses between the two quarters.
Other
Income and Expenses:
Net
other expenses were $428,091 for the three months ended December 31, 2018, as compared to net other expenses of $732,062 for the
three months ended December 31, 2017. The decrease in other expenses of $303,971 was mainly due to an increase of $100,506 in
net interest expenses, and decreases of $357,627 in dividends from Preferred Stock, $9,310 in settlement of debt, and a decrease
in discounts on convertible notes of $37,539 between the two periods.
Interest
expenses were $ 395,551 and $295,045 for the three months ended December 31, 2018 and 2017, respectively.
Net
Income (Loss):
Net
loss for the three months ended December 31, 2018 was $407,043, as compared to net loss of $435,234 for the same period in 2017,
which is equivalent to ($0.00) per share for the current period and ($0.01) per share for the corresponding period ended December
31, 2017, based on the weighted average number of basic and diluted shares outstanding at the end of each corresponding period.
Six
months ended December 31, 2018 compared to the six months ended December 31, 2017
Total
Revenues:
The
Company had $200,000 in revenues for the six months ended December 31, 2018, as compared to $460,500 in revenues for the six months
ended December 31, 2017, a decrease of $260,500 between the two periods. The reason for the decrease in revenues between the two
periods was due to sales of goods by one of the Company’s subsidiaries during the previous six-month period versus just
income from bank fund participation during the current six-month period.
Operating
Costs and Expenses:
Total
operating expenses were $ 459,488 and $269,466 for the six months ended December 31, 2018, and 2017, respectively. The increase
of $189,982 in total operating expenses between the two periods was mainly due to increases in professional fees of $146,760 and
general and administrative expenses of $42,722.
Income
(Loss) from Operations:
Loss
from operations for the six-month period ended December 31, 2018 was $259,448 as compared to income from operations of $191,034
for the six months ended December 31, 2017. A variance of $450,482 between the loss from operations in the current period and
the gain from operations of the previous corresponding period was mainly due to the net changes in revenues and total operating
expenses between the two six-month periods.
Other
Income and Expenses:
Net
other expenses were $1,065,277 for the six months ended December 31, 2018, as compared to net other expenses of $1,577,822 for
the six months ended December 31, 2017. The decrease in other expenses of $512,545 was mainly due to a decrease of $187,320 in
loss on settlement of debts, a decrease of $351,345 in dividends from Preferred Stock, and a decrease of $487,721 in other expense,
offset by an increase of $513,841 in net interest expenses between the two six-month periods.
Interest
expenses were $1,026,458 and $512,617 for the six months ended December 31, 2018 and 2017, respectively.
Net
Income (Loss):
Net
loss for the six months ended December 31, 2018 was $1,324,725, as compared to net loss of $1,386,787 for the same period in 2017,
which is equivalent to ($0.00) per share for the current period and ($0.02) per share for the corresponding period ended December
31, 2017, based on the weighted average number of basic and diluted shares outstanding at the end of each corresponding period.
CASH
FLOWS
The
Company’s cash and cash equivalents balance were $3,782 and $85,031 as of December 31, 2018 and December 31, 2017, respectively.
Net
cash used in the Company’s operating activities during the six-month period ended December 31, 2018 was $922,151, as compared
to net cash used in operating activities of $775,834 during the six-month period ended December 31, 2017. This represents a variance
of $146,317 in net cash used in operating activities between the two periods. The underlying reason for the variance was primarily
due to an increase of $1,931,463 from accounts receivable, escrow deposits for the Luxembourg bank fund setup, and accounts receivable,
coupled with a net increase of $2,113,220 in connection with accrued expenses, notes payable, derivative liabilities and other
payables during the current period.
Net
cash used in investing activities during the six-month period ended December 31, 2018 was $1,311,419, as compared to cash provided
by investing activities of $$25,005,000 during the six-month period ended December 31, 2017, respectively. The variance of $23,693,581was
due to investments in AQuarius Power Technology and Oregon gold claims during the previous period.
Cash
provided by financing activities was $2,223,415 for the six-month period ended December 31, 2018, as compared to cash provided
by financing activities in the amount of $25,827,497 for the six-month period ended December 31, 2017. The primary underlying
reasons for a decrease of $23,604,082 in cash provided by financing activities between the two six-month periods were primarily
due to an increase in common stock and paid-in capital in the amount $363,879, a decrease in Preferred Stock in the amount of
$18,688,566, a decrease in Demand Promissory Note of $4,939,500, an increase in Other Comprehensive Loss of $524,395, offset by
changes in Treasury Stock of $3,262 and other adjustment in the amount of $178,637.
HISTORICAL
FINANCING ARRANGEMENTS
SHORT
TERM NOTES PAYABLE AND ISSUANCE 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. These notes bear interest
rates ranging from 0% to 36% per annum.
CONVERTIBLE
PROMISSORY NOTES
The
Company has also from time to time issued convertible promissory notes to various private investment funds for short-term working
capital and special projects. Typically these notes bear interest rates from 5% to 12% per annum, mature within one year, are
convertible to common stock of the Company at a discount ranging from 42% to 50%, and may be repaid within 180 days at a prepayment
premium ranging from 130% to 150%.
COMPANY’S
PLAN OF OPERATION FOR THE FOLLOWING 12 MONTHS
In
the next twelve months the Company intends to focus on completing the establishment and deployment of the contemplated institutional
bank fund in Luxembourg, together with a number of sub-funds, for investing in a certain selective industries such as green energy,
sustainable agriculture and real estate, as well as developing and setting up the Asia Diamond Exchange in Vietnam in conjunction
with other international partners and consultants. In addition, the Company continues to carry out its merger and acquisition
program by acquiring all or controlling interests in certain target companies and also plans to invest in special situations that
may potentially generate significant revenues and profitability for the Company in the short term. We expect to be able to consolidate
the operating results of the acquired targets with those of PHI Group, Inc. Moreover, we will also continue providing advisory
and consulting services to international clients through our wholly owned subsidiary PHI Capital Holdings, Inc.
FINANCIAL
PLANS
MATERIAL
CASH REQUIREMENTS: We must raise substantial amounts of capital to fulfill our plan of acquiring energy-related and natural resource
assets as well as investing in special situations as part of our scope of business. We intend to use equity, debt and project
financing to meet our capital needs for acquisitions and investments.
Management
has taken action and formulated plans to meet the Company’s operating needs through June 30, 2019 and beyond. The working
capital cash requirements for the next 12 months are expected to be generated from operations, sale of marketable securities and
additional financing. The Company plans to generate revenues from its consulting services, merger and acquisition advisory services,
and acquisitions of target companies with cash flows.
AVAILABLE
FUTURE FINANCING ARRANGEMENTS: The Company may use various sources of funds, including short-term loans, long-term debt, equity
capital, and project financing as may be necessary. The Company believes it will be able to secure the required capital to implement
its business plan.
EQUITY
LINE FACILITY
On
March 6, 2017, PHI Group, Inc., a Nevada corporation (the “Company”) and Azure Capital, a Massachusetts Corporation
(the “Investor”) entered into an Investment Agreement (the “Investment Agreement”) and a Registration
Rights Agreement (the “Registration Rights Agreement”), each dated March 6, 2017 between the Company and the Investor.
Pursuant
to the Investment Agreement, the Investor committed to purchase, subject to certain restrictions and conditions, up to $10,000,000
worth of the Company’s common stock, over a period of 36 months from the effectiveness of the registration statement registering
the resale of shares purchased by the Investor pursuant to the Investment Agreement. The Company agreed to initially reserve 20,000,000
shares of its Common Stock for issuance to the Investor pursuant to the Investment Agreement. In the event the Company cannot
register a sufficient number of shares of its Common Stock for issuance pursuant to the Investment Agreement, the Company will
use its best efforts to authorize and reserve for issuance the number of shares required for the Company to perform its obligations
in connection with the Investment Agreement as soon as reasonable practical.
The
Company may in its discretion draw on the facility from time to time, as and when the Company determines appropriate in accordance
with the terms and conditions of the Investment Agreement. The maximum number of shares that the Company is entitled to put to
the Investor in any one draw down notice shall not exceed shares with a purchase price of $250,000 or 200% of the average daily
volume (U.S. market only) of the Company’s Common Stock for the three (3) Trading Days prior to the applicable put notice
date multiplied by the average of the three (3) daily closing prices immediately preceding the put date, calculated in accordance
with the Investment Agreement. The Company may deliver a notice for a subsequent put from time to time, after the pricing period
for the prior put has been completed.
The
purchase price shall be set at ninety-four percent (94%) of the lowest daily volume weighted average price (VWAP) of the Company’s
common stock during the five (5) consecutive trading days immediately following the put notice date. On each put notice submitted
to the Investor by the Company, the Company shall specify a suspension price for that put. In the event the price of Company’s
Common Stock falls below the suspension price, the put shall be temporarily suspended. The put shall resume at such time the price
of the Company’s Common Stock is above the suspension price, provided the dates for the pricing period for that particular
put are still valid. In the event the pricing period has been complete, any shares above the suspension price due to the Investor
shall be sold to the Investor by the Company at the suspension price under the terms of the Investment Agreement. The suspension
price for a put may not be changed by the Company once submitted to the Investor.
There
are put restrictions applied on days between the draw down notice date and the closing date with respect to that particular put.
During such time, the Company shall not be entitled to deliver another draw down notice. In addition, the Investor will not be
obligated to purchase shares if the Investor’s total number of shares beneficially held at that time would exceed 4.99%
of the number of shares of the Company’s common stock as determined in accordance with Rule 13d-1(j) of the Securities Exchange
Act of 1934, as amended. In addition, the Company is not permitted to draw on the facility unless there is an effective registration
statement to cover the resale of the shares.
The
Investment Agreement also contains customary representations and warranties of each of the parties. The assertions embodied in
those representations and warranties were made for purposes of the Investment Agreement and are subject to qualifications and
limitations agreed to by the parties in connection with negotiating the terms of the Investment Agreement. The Investment Agreement
further provides that the Company and the Investor are each entitled to customary indemnification from the other for, among other
things, any losses or liabilities they may suffer as a result of any breach by the other party of any provisions of the Investment
Agreement or Registration Rights Agreement (as defined below). Investor should read the Investment Agreement together with the
other information concerning the Company that the Company publicly files in reports and statements with the Securities and Exchange
Commission (the “SEC”).
Pursuant
to the terms of the Registration Rights Agreement, the Company is obligated to file one or more registrations statements with
the SEC within twenty-one (21) days after the date of the Registration Rights Agreement to register the resale by the Investor
of the shares of common stock issued or issuable under the Investment Agreement. In addition, the Company is obligated to use
all commercially reasonable efforts to have the registration statement declared effective by the SEC within 90 days after the
registration statement is filed.
This
Investment Agreement was amended on August 3, 2017 to allow for the reservation of 65,445,000 shares of the Company’s Common
Stock for issuance to the Investor pursuant to the corrected Investment Agreement.
The
Company has filed a S-1 Registration Statement with the Securities and Exchange Commission to include 7,936,600 shares of its
Common Stock for issuance in connection with the first tranche of the Equity Line Facility. The S-1 Registration Statement, as
amended, was declared effective by the Securities and Exchange Commission on January 11, 2018. As of the day of this report, the
Company has not accessed the Equity Line Facility for funding.