NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1
–
NATURE OF BUSINESS
ITEM
1. BUSINESS OVERVIEW
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, PHI has been actively pursuing
the establishment of a Luxembourg Bank Fund known as “Reserved Alternative Investment Fund” (“RAIF”) together
with a number of initial sub-funds for investment in agriculture, energy, real estate and other selective
projects. No assurances can be made that the Company will be successful in achieving its plans.
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 formation of a Luxembourg Bank Fund known as “Reserved Alternative Investment Fund” (“RAIF”)
and a number of initial sub-funds thereunder for investment in agriculture, energy, real estate and other
selective projects, 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.
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., Abundant Farms, Inc., American Pacific Resources, Inc., and PHI Group Regional Center, LLC as well as its discontinued operations
Providential Securities, Inc., PHI Energy Corporation, PHI Gold Corp, Providential Vietnam Ltd. and Philand Ranch Limited (including
its 100% owned subsidiary Philand Corporation and Philand Vietnam Ltd), Omni Resources, Inc., and Cornerstone Biomass Corp., collectively
referred to as the “Company.” All significant inter-company transactions have been eliminated in consolidation.
USE
OF ESTIMATES
The
preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. 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.
Each
investment in marketable securities typically represents less than twenty percent (20%) of the outstanding common stock and stock
equivalents of the investee, and each security is quoted on a national exchange or on the OTC Markets. As such, each investment
is accounted for in accordance with the provisions of ASC 320 (previously 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 June 30, 2018 and 2017 the marketable securities have been recorded
at $1,100,483 and $502,696, respectively based upon the fair value of the marketable securities at that time.
ACCOUNTS
RECEIVABLE
Management
reviews the composition of accounts receivable and analyzes historical bad debts. As of June 30, 2018, the Company had $432,000
in accounts receivable.
IMPAIRMENT
OF LONG-LIVED ASSETS
Effective
January 1, 2002, the Company adopted ASC 350 (Previously SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived
Assets”), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes
SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,” and
the accounting and reporting provisions of APB Opinion No. 30, “Reporting the Results of Operations for a Disposal of a
Segment of a Business.” The Company periodically evaluates the carrying value of long-lived assets to be held and used in
accordance with ASC 350. ASC 350 requires impairment losses to be recorded on long-lived assets used in operations when indicators
of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’
carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market
value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair
market values are reduced for the cost of disposal.
PROPERTY
AND EQUIPMENT
Property
and equipment are stated at cost. Maintenance and repair costs are charged to expense as incurred; costs of major additions and
betterments are capitalized. When property and equipment are sold or otherwise disposed of, the cost and related accumulated depreciation
are eliminated from the accounts and any resulting gain or loss is reflected in income. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets, ranging from three to ten years.
DEPRECIATION
AND AMORTIZATION
The
cost of property and equipment is depreciated over the estimated useful lives of the related assets. Depreciation and amortization
of fixed assets are computed on a straight-line basis.
NET
EARNINGS (LOSS) PER SHARE
The
Company adopted the provisions of ASC 260 (previously SFAS 128). ASC 260 eliminates the presentation of primary and fully diluted
earnings per share (“EPS”) and requires presentation of basic and diluted EPS. Basic EPS is computed by dividing income
(loss) available to common stockholders 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.
The
net earnings (loss) per share is computed as follows:
|
|
2018
|
|
|
2017
|
|
Basic
and diluted net loss per share:
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
(2,026,320
|
)
|
|
$
|
(1,560,718
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
Basic
weighted average number of common shares outstanding
|
|
|
72,797,797
|
|
|
|
15,553,354
|
|
Basic
net income (loss) per share
|
|
$
|
(0.03
|
)
|
|
$
|
(0.10
|
)
|
Diluted
weighted average number of common shares outstanding
|
|
|
72,797,797
|
|
|
|
15,553,354
|
|
Diluted
net income (loss) per share
|
|
$
|
(0.03
|
)
|
|
$
|
(0.10
|
)
|
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.
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. ASC 820
permits the Company to defer the recognition and measurement of the nonfinancial assets and nonfinancial liabilities until January
1, 2010. At June 30, 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.
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.
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.
ADVERTISING
The
Company expenses advertising costs as incurred. Advertising costs for the years ended June 30, 2018 and 2017 were $36,221 and
$31,413, respectively. The increase in advertising expenses in the current year is primarily due to an increase of $4,808 in investor
relations expenses during the fiscal year ended June 30, 2018, as compared to the previous fiscal year.
COMPREHENSIVE
INCOME (LOSS)
ASC
220-10-45 (previously SFAS 130, Reporting Comprehensive Income) establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is defined to include all changes in equity, except those
resulting from investments by owners and distributions to owners. Among other disclosures, SFAS No. 130 requires that all items
that are required to be recognized under current accounting standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial statements. As of June 30, 2018 and 2017, respectively,
accumulated other comprehensive incomes of $751,962 and $153,474 are presented on the accompanying consolidated balance sheets.
INCOME
TAXES
The
Company accounts for income taxes in accordance with ASC 740 (previously SFAS No. 109, “Accounting for Income Taxes”).
Deferred taxes are provided on the liability method whereby deferred tax assets are recognized for deductible temporary differences,
and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between
the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when,
in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
REPORTING
OF SEGMENTS
ASC
280 (previously Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information),
which supersedes Statement of Financial Accounting Standards No. 14, Financial Reporting for Segments of a Business Enterprise,
establishes standards for the way that public enterprises report information about operating segments in annual financial statements
and requires reporting of selected information about operating segments in interim financial statements regarding products and
services, geographic areas and major customers. ASC 280 defines operating segments as components of an enterprise about which
separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how
to allocate resources and in assessing performance. The Company operated in two segments that generated revenues during the year
ended June 30, 2018 and one segment in the year ended June 30, 2017.
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 rollforward 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 sharebased 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.
T
h
e
Co
mp
a
n
y
h
as
e
i
t
h
e
r
eva
l
ua
t
e
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o
r
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s c
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e
n
t
l
y
eva
luat
i
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th
e
im
p
licat
io
n
s
,
i
f
a
n
y,
o
f
eac
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o
f
these
p
ro
n
o
unc
e
m
e
n
t
s
a
nd
th
e
p
oss
ibl
e
impac
t th
ey
m
ay
h
ave
o
n
t
h
e
Co
m
pa
n
y
’
s
f
i
n
a
n
c
i
al
s
t
a
t
e
m
e
nt
s
.
In m
os
t
ca
ses,
m
a
n
age
m
e
nt
h
as
d
e
t
e
rmin
e
d
t
h
a
t
t
h
e
i
mpl
e
m
e
nt
a
ti
o
n
of these pronouncements
wo
uld
n
ot
h
ave
a
m
a
t
er
i
al
imp
ac
t
o
n
t
h
e
financi
a
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s
t
a
te
m
e
nt
s
t
a
k
e
n
as
a
w
h
o
l
e.
NOTE
3
– LOANS RECEIVABLE
Loans
receivable consist of the following at June 30, 2018 and 2017:
Loans
Receivable
|
|
June
30, 2018
|
|
|
June
30, 2017
|
|
Loan
to American Laser Healthcare, Inc.
|
|
$
|
1,605
|
|
|
$
|
-
|
|
Total
|
|
$
|
1,605
|
|
|
$
|
-
|
|
NOTE
4
– OTHER ASSETS
The
Other Assets comprise of the following as of June 30, 2018 and 2017:
|
|
2018
|
|
|
2017
|
|
Investments
|
|
$
|
25,005,000
|
|
|
$
|
-
|
|
Contract
Assets
|
|
$
|
697,841
|
|
|
$
|
-
|
|
Total
Other Assets
|
|
$
|
27,424,139
|
|
|
$
|
-
|
|
Investments
consist of a $5,000 investment in AQuarius Power, Inc., a renewable energy technology company, and a 51% ownership in twenty-one
mining claims over an area of approximately 400 acres in Granite Mining District, Grant County, Oregon, U.S.A., acquired by American
Pacific Resources, Inc., a subsidiary of the Company, in exchange for a total purchase price of twenty-five million U.S. Dollars
($US 25,000,000) paid in a combination of cash, convertible demand promissory note and PHI Group, Inc.’s Class A Series
II Convertible Cumulative Redeemable Preferred Stock. Contract assets consist of a balance of $697,841 from an agreement dated
March 27, 2018 with a client for the total amount of $2,000,000, of which $1,212,159 was received and recognized as revenue during
the fiscal year ended June 30, 2018.
NOTE
5
–
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. 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 nationally
quoted on the National Association of Securities Dealers OTC Bulletin Board (“OTCBB”) or the OTC Markets. As such,
each investment is accounted for in accordance with the provisions of SFAS No. 115.
Marketable
securities owned by the Company and classified as available for sale as of June 30, 2018 consisted of 33,805,106 shares of Myson
Group, Inc. (formerly Vanguard Mining Corporation) and 292,050,000 shares of Sports Pouch Beverage Company, both public companies
traded on the a public company traded on the OTC Markets (Trading symbols MYSN and SPBV, respectively). The fair value of the
marketable securities recorded as of June 30, 2018 was $1,100,483.
Securities
available for sale
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
June
30, 2018
|
|
|
-
|
|
|
$
|
253,538
|
|
|
$
|
846,945
|
|
|
$
|
1,100,483
|
|
June
30, 2017
|
|
$
|
-
|
|
|
$
|
210,646
|
|
|
$
|
292,050
|
|
|
$
|
502,696
|
|
During
the fiscal year ended June 30, 2018, there was no transfer of securities from level 3 to level 2.
NOTE
6
– PROPERTY AND EQUIPMENT
During
the fiscal year ended June 30, 2017, the Company sold ten acres of land, Parcel Identification Numbers 09705010180 & 190,
in Suwannee County, Florida. As of June 30, 2018 the Company did not have any property or equipment, except 51% ownership in twenty-one
mining claims over an area of approximately 400 acres in Granite Mining District, Grant County, Oregon, U.S.A. owned by American
Pacific Resources, Inc., a subsidiary of the Company’s.
NOTE
7
– DISCONTINUED OPERATIONS
As
of June 30, 2012, the Company recognized 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 June 30, 2018, the Company had a balance of $1,255,037 as Long-term Liabilities from Discontinued Operations,
consisting of $954,337 from Philand Ranch Ltd., $215,000 from preferred stock of Providential Holdings, Inc., a former subsidiary
of the Company, and $85,700 in contingency liabilities.
NOTE
8
– CURRENT LIABILITIES
Current
liabilities of the Company consist of the followings as of June 30, 2018 and 2017:
|
|
June
30, 2018
|
|
|
June
30, 2017
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
116,063
|
|
|
$
|
159,875
|
|
Accrued
expenses
|
|
$
|
392,205
|
|
|
$
|
384,929
|
|
Short-term
notes payable
|
|
$
|
1,336,552
|
|
|
$
|
873,008
|
|
Due
to officers
|
|
$
|
233,577
|
|
|
$
|
592,141
|
|
Other
current payable
|
|
$
|
92,781
|
|
|
|
-
|
|
Contract
liabilities
|
|
$
|
697,841
|
|
|
|
-
|
|
Client
deposit
|
|
$
|
-
|
|
|
$
|
780
|
|
Derivative
liabilities
|
|
$
|
738,814
|
|
|
$
|
545,756
|
|
CURRENT
ACCRUED EXPENSES
Current
accrued expenses consist of $238,165 in accrued salaries and payroll tax liabilities, $149,359 in accrued interest from short-term
notes, and $4,681 in dividends payable from Class A Series II Preferred Stock.
Contract
liabilities consist of a balance of $697,841 as a result of an agreement dated March 27, 2018 with a client for the total amount
of $2,000,000, of which $1,212,159 was recognized as revenue and thus reducing the original contract liabilities by that same
amount during the fiscal year ended June 30, 2018.
NOTE
9
– LONG-TERM LIABILITIES
As
of June 30, 2018 and 2017, Long-term liabilities consist of:
|
|
June
30, 2018
|
|
|
June
30, 2017
|
|
Accrued
Expenses:
|
|
$
|
1,063,481
|
|
|
$
|
1,462,836
|
|
Accrued
Interest:
|
|
$
|
2,005,815
|
|
|
$
|
2,715,963
|
|
Advances
from Customers:
|
|
$
|
288,219
|
|
|
$
|
288,219
|
|
Demand
Promissory Note:
|
|
$
|
24,048,500
|
|
|
|
-
|
|
Liabilities
from Discontinued Operations:
|
|
$
|
1,040,037
|
|
|
$
|
1,040,037
|
|
Preferred
Stock Liabilities from Discontinued Operations:
|
|
$
|
215,000
|
|
|
$
|
215,000
|
|
LONG-TERM
ACCRUED EXPENSES
Long-term
accrued expenses consist of accrued salaries and payroll taxes of $698,653; accrued legal fees of $172,091; consulting fees of
$165,850; and other accrued expenses of $26,888.
ACCRUED
INTEREST EXPENSES
Long-term
accrued interest expenses consist of accrued interest from notes payable in the amount of $2,005,815.
ADVANCES
FROM CUSTOMERS
The
Company recorded $288,219 as Advances from Customers to reserve for consulting fees previously received from a client while the
Company was not able to complete the consulting services due to the client’s inability to provide GAAP-compliant audited
financial statements in order to file a registration statement with the Securities and Exchange Commission.
DEMAND
PROMISSORY NOTE
The
Company issued a Demand Promissory Note in the amount of $24,310,400 to Rush Gold Royalty, Inc., a Wyoming corporation, in connection
with the acquisition of 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 by American Pacific Resources, Inc., a subsidiary of the Company. As of June 30, 2018, the
balance of the convertible demand promissory note was $24,048,500.
LIABILTIES
FROM DISCONTINUED OPERATIONS
As
of June 30, 2012, the Company recognized 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 June 30, 2018, the Company carried balance of $ 1,040,037 as Long-term Liabilities for these discontinued
operations.
PREFERRED
STOCK LIABILITIES FROM DISCONTINUED OPERATIONS
As
of June 30, 2017, the Company re-classified $215,000 as 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 recorded the amount of $215,000 as Long-term Liability.
NOTE
10
- DUE TO OFFICERS AND DIRECTORS
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 June 30, 2018 and 2017, the balances were $233,577 and $592,141, respectively.
Officers/Directors
|
|
June
30, 2018
|
|
|
June
30, 2017
|
|
Henry
Fahman
|
|
|
157,727
|
|
|
|
511,291
|
|
Tam
Bui
|
|
|
63,350
|
|
|
|
63,350
|
|
Frank
Hawkins
|
|
|
-
|
|
|
|
5,000
|
|
Lawrence
Olson
|
|
|
12,500
|
|
|
|
12,500
|
|
Total
|
|
$
|
233,577
|
|
|
$
|
592,141
|
|
NOTE
11
– LOANS AND PROMISSORY NOTES
SHORT
TERM NOTES PAYABLE:
In
the course of its business, the Company has obtained short-term loans from individuals and institutional investors and from time
to time raised money by issuing restricted common stock of the Company under the auspices of Rule 144. As of June 30, 2018, the
Company had $803,310 in short-term notes payable with $2,133,947 accrued and unpaid interest. These notes bear interest rates
ranging from 0% to 36% per annum.
CONVERTIBLE
PROMISSORY NOTES:
During
the fiscal year ended June 30, 2018, the Company issued the following convertible promissory notes to various private investment
funds:
On
July 20, 2017, the Company issued a new convertible promissory note to Power Up Lending Group for $28,000, with an interest rate
of 8% and convertible to Common Stock of the Company at 42% discount. On January 18, 2018, the Company paid a total of $43,610.96
to Power Up Lending Group, which amount included the principal, prepayment premium and accrued interest. This note was paid off
in full as of January 18, 2018.
On
August 3, 2017, the Company issued a new convertible promissory note to JSJ Investments, Inc. for $78,750, with an interest rate
of 10% and convertible to Common Stock of the Company at 45% discount. On January 30, 2018, the Company paid a total of $117,984.76
to JSJ Investments, Inc., which amount included the principal amount of $78,750, prepayment premium of $35,437.50 and accrued
and unpaid interest of $3,797.26. This note was paid off in full as of January 30, 2018.
On
August 15, 2017, the Company issued a new convertible promissory note to Power Up Lending Group for $33,000, with an interest
rate of 10% and convertible to Common Stock of the Company at 42% discount. On February 5, 2018, the Company paid a total of $51,300.99
to Power Up Lending Group, which amount included the principal, prepayment premium and accrued interest. This note was paid off
in full as of February 5, 2018.
On
August 24, 2017, the Company issued a new convertible promissory note to LG Capital for $78,750, with an interest rate of 8% and
convertible to Common Stock of the Company at 50% discount. On February 20, 2018, the Company paid a total of $122,655.82 to LG
Capital, which amount included the principal, prepayment premium and accrued interest. This note was paid off in full as of February
20, 2018.
On
October 18, 2017, the Company issued a new convertible promissory note to Power Up Lending Group for $53,000, with an interest
rate of 8% and convertible to Common Stock of the Company at 42% discount to the average of the two lowest trading prices or closing
bids during the ten trading days immediately prior to the date of conversion. The maturity date of this note is 7/20/2018. On
April 17, 2018, the Company made a payment in the amount of $25,000.00, consisting of $16,666.67 of principal and $8,333.33 of
prepayment premium, to Power Up Lending Group. The principal balance due remaining under this Note after this payment was $36,333.33.
On April 19, 2018, the Company issued 1,169,591 shares of free-trading Common Stock of PHI Group, Inc. to Power Up Lending Group
for the conversion of $20,000.00 of the principal amount of the Note. The principal amount of the Note remaining after this conversion
was $16,333.33. On April 23, 2018, the Company issued 1,127,820 shares of free-trading Common Stock of PHI Group, Inc. to Power
Up Lending Group for the conversion of $15,000.00 of the principal amount of the Note. The principal amount of the Note remaining
after this conversion was $1,333.33. On April 24, 2018, the Company issued 295,156 shares of free-trading Common Stock of PHI
Group, Inc. to Power Up Lending for the conversion of $1,333,33 of the principal amount of the Note together with $2,120 of accrued
and unpaid interest thereto, totaling $3,453.33. The principal amount of the Note remaining after this conversion was $0.00.
On
October 26, 2017, the Company issued a new convertible promissory note to Crown Bridge Partners, LLC for $35,000, with an interest
rate of 5% and convertible to Common Stock of the Company at 50% discount to the average of the two lowest trading prices or closing
bids during the twenty trading days immediately prior to the date of conversion. The maturity date of this note is 10/26/2018.
In connection with this note, the Company issued 87,500 warrants to Crown Bridge Partners, LLC for the purchase of Common Stock
of the Company at the exercise price of $0.40 per share. The exercise period commences on the issuance date and ends on the one-year
anniversary thereof. On May 29, 2018, the Company issued 3,159,521 shares of free-trading Common Stock of PHI Group, Inc. to Crown
Bridge Partners for the conversion of the principal, $992.47 of accrued interest and $500.00 of fees under the Note, totaling
$36,492.47. The principal balance due remaining under this Note after this conversion was $0.00.
On
November 24, 2017, the Company issued a new convertible promissory note to Einstein Investments LLC for $115,500, with an interest
rate of 10% and convertible to Common Stock of the Company at 50% discount to the average of the two lowest trading prices or
closing bids during the ten trading days immediately prior to the date of conversion. The maturity date of this note is 10/26/2018.
On June 04, 2018, the Company issued 3,149,607 shares of free-trading Common Stock of PHI Group, Inc. to Einstein Investments,
LLC for the conversion of $44,050.96 principal amount together with $5,949.04 accrued interest under the Note, totaling $50,000.
The principal balance due remaining under this Note after this conversion was $71,449.04.
On
January 18, 2018, the Company issued a new convertible promissory note to JSJ Investments, Inc. for $78,750, with an interest
rate of 10% and convertible to Common Stock of the Company at 45% discount to the average of the three lowest trading prices or
closing bids during the twenty trading days immediately prior to the date of conversion. The maturity date of this note is 01/18/2019.
On
January 18, 2018, the Company issued a new convertible promissory note to Power Up Lending Group for $33,000, with an interest
rate of 8% and convertible to Common Stock of the Company at 42% discount to the average of the two lowest trading prices or closing
bids during the ten trading days immediately prior to the date of conversion. The maturity date of this note is 10/10/2018.
On
January 26, 2018, the Company issued a new convertible promissory note to Power Up Lending Group for $33,000, with an interest
rate of 8% and convertible to Common Stock of the Company at 42% discount to the average of the two lowest trading prices or closing
bids during the ten trading days immediately prior to the date of conversion. The maturity date of this note is 11/15/2018.
On
January 31, 2018, the Company issued a new convertible promissory note to JSJ Investments, Inc. for $78,750, with an interest
rate of 10% and convertible to Common Stock of the Company at 45% discount to the average of the three lowest trading prices or
closing bids during the twenty trading days immediately prior to the date of conversion. The maturity date of this note is 01/18/2019.
On
January 31, 2018, the Company issued a new convertible promissory note to Crown Bridge Partners, LLC for $50,000, with an interest
rate of 5% and convertible to Common Stock of the Company at 50% discount to the average of the two lowest trading prices or closing
bids during the twenty trading days immediately prior to the date of conversion. The maturity date of this note is 01/31/2019.
On
February 01, 2018, the Company issued a new convertible promissory note to Adar Bays for $60,000, with an interest rate of 6%
and convertible to Common Stock of the Company at 50% discount to the average of the two lowest trading prices during the twenty
five trading days immediately prior to the date of conversion. The maturity date of this note is 02/01/2019.
On
February 02, 2018, the Company issued a new convertible promissory note to Auctus Fund LLC for $75,000, with an interest rate
of 12% and convertible to Common Stock of the Company at 50% discount to the average of the two lowest trading prices during the
twenty five trading days immediately prior to the date of conversion. The maturity date of this note is 11/02/2018.
On
February 22, 2018, the Company issued a new convertible promissory note to Power Up Lending Group for $33,000, with an interest
rate of 8% and convertible to Common Stock of the Company at 42% discount to the average of the two lowest trading prices or closing
bids during the ten trading days immediately prior to the date of conversion. The maturity date of this note is 11/30/2018.
On
March 21, 2018, the Company issued a new convertible promissory note to JSJ Investments, Inc. for $78,750, with an interest rate
of 10% and convertible to Common Stock of the Company at 45% discount to the average of the three lowest trading prices or closing
bids during the twenty trading days immediately prior to the date of conversion. The maturity date of this note is 03/21/2019.
On
April 2, 2018, the Company issued a new convertible promissory note to Crown Bridge Partners, LLC for $55,000, with an interest
rate of 10% and convertible to Common Stock of the Company at 50% discount to the average of the two lowest trading prices or
closing bids during the twenty trading days immediately prior to the date of conversion. The maturity date of this note is 04/02/2019.
On
April 10, 2018, the Company issued a new convertible promissory note to Power Up Lending Group for $33,000, with an interest rate
of 8% and convertible to Common Stock of the Company at 42% discount to the average of the two lowest trading prices or closing
bids during the ten trading days immediately prior to the date of conversion. The maturity date of this note is 01/30/2019.
On
June 12, 2018, the Company issued a new convertible promissory note to Crown Bridge Partners, LLC for $55,000, with an interest
rate of 10% and convertible to Common Stock of the Company at 50% discount to the average of the two lowest trading prices or
closing bids during the twenty trading days immediately prior to the date of conversion. The maturity date of this note is 06/12/2019.
On
June 25, 2018, the Company issued a new convertible promissory note to JSJ Investments, Inc. for $100,000, with an interest rate
of 10% and convertible to Common Stock of the Company at 45% discount to the average of the three lowest trading prices or closing
bids during the twenty trading days immediately prior to the date of conversion. The maturity date of this note is 06/25/2019.
As
of June 30, 2018, the principal balance of the outstanding convertible notes was $834,699, with a total discount of $301,457,
accrued interest of $21,227 and total derivative liabilities of $738,814. The Company relies on professional third-party valuation
to record the value of derivative liabilities, discounts, and changes 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 to repay these notes in cash as much
as practical.
NOTE
12
– LITIGATION
LEGAL
PROCEEDING SETTLED AND UNPAID AS OF JUNE 30, 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 June
30, 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 June 30, 2018.
NOTE
13
– PAYROLL TAX 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 balance of $118,399 of payroll tax, penalties and interest claimed by these agencies. The Company
has not resolved the remaining balances with the Internal Revenue Service and the State of California Employment Department as
of June 30, 2018.
NOTE
14
– BASIC AND DILUTED NET 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 year ended June 30, 2018 were the same since the inclusion of Common stock equivalents is anti-dilutive.
NOTE
15
–
STOCKHOLDER’S EQUITY
As
of June 30, 2018, the total number of authorized capital stock of the Company was 2,000,000,000 shares with a par value of $0.001
per share, consisting of 1,900,000,000 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 June 30, 2018 was 487,767 shares valued at $44,170 based on cost basis.
Common
Stock
During
the fiscal year ended June 30, 2018, the Company has issued the following amounts of its Common Stock:
On
July 05, 2017, the Company issued 740,741 shares of free-trading Common Stock of PHI Group, Inc. to Power Up Lending Group Ltd.,
holder of a Convertible Promissory Note dated 12/15/2016 of the Company, for the conversion of $10,000.00 of the principal amount
of the Note, at the conversion price of $0.0135 per share. The principal amount of the Note after this conversion was $14,500.00.
On
July 11, 2017, the Company issued 800,000 shares of free-trading Common Stock of PHI Group, Inc. to Auctus Fund LLC, holder of
a Convertible Promissory Note dated 8/16/2016 of the Company, for the conversion of $5,152.00, consisting of $3,485.17 principal
amount of the Note and $1,666.83 of accrued and unpaid interest thereto, at the conversion price of $0.00644 per share. The principal
amount of the Note after this conversion was $32,613.12. Subsequently, on July 24, 2017, the Company paid a total of $49,530.72
to Auctus Fund LLC, consisting of $32,613.12 principal amount and the balance in pre-payment premium and accrued and unpaid interest
in connection with the Convertible Promissory Note dated 8/16/16. This note was paid in full and the principal balance due remaining
and accrued and unpaid interest remaining after this payment was $0.00.
On
July 17, 2017, the Company issued 880,000 shares of free-trading Common Stock of PHI Group, Inc. to Power Up Lending Group Ltd.,
holder of a Convertible Promissory Note dated 12/15/2016 of the Company, for the conversion of $7,920.00 of the principal amount
of the Note, at the conversion price of $0.009 per share. The principal amount of the Note after this conversion was $6,580.
On
July 21, 2017, the Company issued 1,019,872 shares of free-trading Common Stock of PHI Group, Inc. to Power Up Lending Group Ltd.,
holder of a Convertible Promissory Note dated 12/15/2016 of the Company, for the conversion of $7,955.00, consisting of $6,580
principal amount of the Note and $1,375.00 of accrued and unpaid interest thereto, at the conversion price of $0.0078 per share.
The principal balance due remaining and accrued and unpaid interest remaining after this conversion was $0.00.
On
July 25, 2017, Henry Fahman, Chairman and Chief Executive Officer of the Company, converted $300,000 of indebtedness owed by the
Company into 20,000,000 shares of restricted common stock of PHI Group, Inc. at the conversion price of $0.015 per share. The
conversion into restricted common stock of the Company was effectuated pursuant to the resolutions of the Company’s Board
of Directors dated March 12, 2012, June 06, 2012, and November 2, 2012 which remain in full force and effect, allowing creditors
of the Company to convert any or all of their outstanding indebtedness and accrued and unpaid interest thereof into shares of
common stock of PHI Group, Inc. by relying on the exemption from the registration requirements of the United States Securities
Act of 1933, as amended (the “Act”).
On
July 25, 2017, the Company issued a total of 1,533,333 shares of restricted Common Stock of PHI Group, Inc. pursuant to Rule 144
to two non-US shareholders in connection with private stock purchase agreements dated July 19, 2017 and July 20, 2017, respectively,
between these shareholders and the Company, for a total of $23,000.00, at the purchase price of $0.015 per share.
On
October 17, 2017, the Company issued 434,783 shares of free–trading Common Stock of PHI Group, Inc. to Power Up Lending
Group Ltd., holder of a Convertible Promissory Note dated April 12, 2017 of the Company, for the conversion of $12,000.00 of the
principal amount of the Note.
On
October 19, 2017, the Company issued 371,057 shares of free–trading Common Stock of PHI Group, Inc. to JSJ Investments,
Inc., holder of a Convertible Promissory Note dated February 2, 2017 of the Company, for the conversion of $10,000.00 of the principal
balance of the Note.
On
October 23, 2017, the Company issued 622,407 shares of free–trading Common Stock of PHI Group, Inc. to Power Up Lending
Group Ltd., holder of a Convertible Promissory Note dated April 12, 2017 of the Company, for the conversion of $15,000.00 principal
balance of the Note.
On
October 24, 2017, the Company issued 250,000 shares of free–trading Common Stock of PHI Group, Inc. to EMA Financial LLC.,
holder of a Convertible Promissory Note dated April 04, 2017 of the Company, for the conversion of $3,587.50 of the principal
amount of the Note, less $750.00 of applicable fees under the Note.
On
October 31, 2017, the Company issued 419,212 shares of free–trading Common Stock of PHI Group, Inc. to Power Up Lending
Group Ltd., holder of a Convertible Promissory Note dated April 12, 2017 of the Company, for the conversion of $6,500.00 of the
remaining principal amount of the Note together with $2,010.00 of accrued and unpaid interest thereto, totaling $8,510.00.
On
November 7, 2017, the Company issued 600,000 shares of free–trading Common Stock of PHI Group, Inc. to EMA Financial LLC,
holder of a Convertible Promissory Note dated April 04, 2017 of the Company, for the conversion of $3,750.00 of the principal
balance of the Note, less $1,350.00 of applicable fees under the Note.
On
November 8, 2017, the Company issued 2,154,700 shares of free–trading Common Stock of PHI Group, Inc. to Auctus Fund, LLC,
holder of a Convertible Promissory Note dated March 3, 2017 of the Company, for the conversion of $17,852.43 of the principal
balance of the Note together with $3,356.17 of accrued and unpaid interest thereto and $500.00 applicable fee, totaling $21,708.60.
On
November 16, 2017, the Company issued 80,000 shares of restricted Common Stock of PHI Group, Inc. to Andreas Held, a current shareholder
of the Company, for $1,920 in cash under the auspices of Rule 144 pursuant to a Private Stock Purchase Agreement dated November
14, 2017.
On
November 21, 2017, the Company issued 1,000,000 shares of free–trading Common Stock of PHI Group, Inc. to EMA Financial
LLC, holder of a Convertible Promissory Note dated April 04, 2017 of the Company, for the conversion of $5,950.00 of the principal
balance of the Note, less $1,050.00 of applicable fees under the Note.
On
December 01, 2017, the Company issued 2,346,000 shares of free–trading Common Stock of PHI Group, Inc. to Auctus Fund, LLC,
holder of a Convertible Promissory Note dated March 3, 2017 of the Company, for the conversion of $15,062.55 of the principal
balance of the Note together with $202.57 of accrued and unpaid interest thereto and $500.00 applicable fee, totaling $15,765.12.
On
December 05, 2017, the Company issued 1,385,677 shares of free–trading Common Stock of PHI Group, Inc. to JSJ Investments,
Inc., holder of a Convertible Promissory Note dated February 2, 2017 of the Company, for the conversion of $11,000.00 of the principal
balance of the Note together with $1,651.23 of accrued and unpaid interest thereto, totaling $12,651.23.
On
December 12, 2017, the Company issued 2,000,000 shares of free–trading Common Stock of PHI Group, Inc. to EMA Financial
LLC, holder of a Convertible Promissory Note dated April 04, 2017 of the Company, for the conversion of $7,140.00 of the principal
balance of the Note, less $1,050.00 of applicable fees under the Note.
On
December 13, 2017, the Company issued 2,250,821 shares of free–trading Common Stock of PHI Group, Inc. to JSJ Investments,
Inc., holder of the $40,000 Convertible Promissory Note dated April 5, 2017 of the Company, for the conversion of $12,420.75 of
the principal balance of the Note.
On
December 14, 2017, the Company issued 2,744,300 shares of free–trading Common Stock of PHI Group, Inc. to Auctus Fund, LLC,
holder of a Convertible Promissory Note dated March 3, 2017 of the Company, for the conversion of $10,339.52 of the principal
balance of the Note together with $137.68 of accrued and unpaid interest thereto and $500.00 applicable fee, totaling $10,977.20.
On
December 14, 2017, the Company issued 1,724,138 shares of restricted Common Stock of PHI Group, Inc. to Steve Truong for $20,000
in cash under the auspices of Rule 144 pursuant to a Private Stock Purchase Agreement dated December 14, 2017.
On
December 19, 2017, the Company issued 2,500,000 shares of free–trading Common Stock of PHI Group, Inc. to EMA Financial
LLC, holder of a Convertible Promissory Note dated April 04, 2017 of the Company, for the conversion of $8,750.00 of the principal
balance of the Note, less $1,050.00 of applicable fees under the Note.
On
December 20, 2017, the Company issued 2,913,837 shares of free–trading Common Stock of PHI Group, Inc. to JSJ Investments,
Inc., holder of the $40,000 Convertible Promissory Note dated April 5, 2017 of the Company, for the conversion of $16,079.47 of
the principal balance of the Note.
On
December 29, 2017, the Company issued 2,300,000 shares of free–trading Common Stock of PHI Group, Inc. to Crown Bridge Partners,
LLC., holder of the $35,000.00 Convertible Promissory Note dated June 9, 2017 of the Company, for the conversion of $7,550.00
of the principal and $500.00 of fees under the Note totaling $8,050.00.
On
December 29, 2017, the Company issued 2,500,000 shares of free–trading Common Stock of PHI Group, Inc. to EMA Financial
LLC, holder of a Convertible Promissory Note dated April 04, 2017 of the Company, for the conversion of $8,750.00 of the principal
balance of the Note, less $1,050.00 of applicable fees under the Note.
On
January 08, 2018, the Company issued 1,835,795 shares of free-trading Common Stock of PHI Group, Inc. to Auctus Fund, LLC, holder
of a Convertible Promissory Note dated March 03, 2017 of the Company, for the conversion of $6,745.50 of the principal balance
of the Note, $97.68 of accrued and unpaid interest and $500.00 conversion fee under the Note totaling $7,343.18. The principal
balance due remaining under this Note after this conversion was $0.00.
On
January 09, 2018, the Company issued 2,601,957 shares of free-trading Common Stock of PHI Group, Inc. to JSJ Investments, Inc.,
holder of a Convertible Promissory Note dated April 05, 2017 of the Company, for the conversion of $11,499.78 of the principal
balance and accrued and unpaid interest of $2,858.64 totaling $14,358.42. The principal balance due remaining under this Note
after this conversion was $0.00.
On
January 11, 2018, the Company issued 2,900,000 shares of free-trading Common Stock of PHI Group, Inc. to Crown Bridge Partners,
LLC., holder of the $35,000.00 Convertible Promissory Note dated June 9, 2017 of the Company, for the conversion of $9,650.00
of the principal and $500.00 of fees under the Note totaling $10,150.00. The principal balance due remaining under this Note after
this conversion was $17,800.00.
On
January 25, 2018, the Company issued 2,500,000 shares of free-trading Common Stock of PHI Group, Inc. to EMA Financial LLC, holder
of a Convertible Promissory Note dated April 4, 2017 of the Company, for the conversion of $9,625.00 of the principal balance
of the Note, less $1,050 of conversion fees under the Note. The principal balance due remaining under this Note after this conversion
is $9,977.50
On
January 29, 2018, the Company issued 3,812,188 shares of free-trading Common Stock of PHI Group, Inc. to EMA Financial LLC, holder
of a Convertible Promissory Note dated April 4, 2017 of the Company, for the conversion of $9,975.50 of the principal balance
of the Note, $3,649.43 of accrued and unpaid interest, and $1,050 for legal and transfer agent fees for conversion, totaling $14,467.93.
This Note was paid off in full as of January 29, 2018; the principal balance due remaining under this Note after this conversion
is $0.00.
On
January 29, 2018, the Company issued 2,500,000 shares of free-trading Common Stock of PHI Group, Inc. to Crown Bridge Partners,
LLC., holder of the $35,000.00 Convertible Promissory Note dated June 9, 2017 of the Company, for the conversion of $9,562.50
of the principal and $500.00 of fees under the Note, totaling $10,062.50. The principal balance due remaining under this Note
after this conversion was $8,237.50.
On
January 30, 2018, the Company issued 100,000 shares of PHI Group, Inc.’s restricted common stock to Andreas Held, a long-term
shareholder of PHI Group, Inc.’s, for $981.00 in cash.
On
January 30, 2018, the Company issued 100,000 shares of PHI Group, Inc.’s restricted common stock to Cuong Tran, an independent
consultant, for technical consulting service.
On
February 8, 2018, the Company issued 2,509,693 shares of free-trading Common Stock of PHI Group, Inc. to Crown Bridge Partners,
LLC., holder of the $35,000.00 Convertible Promissory Note dated June 9, 2017 of the Company, for the conversion of $8,237.50
of principal, $1,012.66 of accrued interest, and $500.00 of fees under the Note, totaling $9,750.16. The principal balance due
remaining under this Note after this conversion was $0.00.
On
February 8, 2018, Henry Fahman, the Company’s Chief Executive Officer and Chief Financial Officer, converted $150,000.00
of the accrued and unpaid salary for the fiscal year ended June 30, 2011 into 4,746,084 shares of Restricted Common Stock of PHI
Group, Inc. at the effective price of $0.031605 per share, pursuant to the Company’s corporate resolutions dated November
2, 2012, which still remain in full force and effect.
On
February 8, 2018, Tina Phan, the Company’s Corporate Secretary and Treasurer, converted $60,000.00 of the accrued and unpaid
salary for the fiscal year ended June 30, 2011 into 1,898,434 shares of Restricted Common Stock of PHI Group, Inc. at the effective
price of $0.031605 per share, pursuant to the Company’s corporate resolutions dated November 2, 2012, which still remain
in full force and effect.
On
February 28, 2018, the Company issued 4,744,007 shares of free-trading Common Stock of PHI Group, Inc. to Crown Bridge Partners,
LLC., holder of the Common Stock Purchase Warrant dated as of June 9, 2017 in connection with the $35,000.00 Convertible Promissory
Note of June 9, 2017 by the Company, for the cashless exercise of $17,300.00 value of warrants. The total warrant value remaining
after this exercise was $17,700.00.
On
April 13, 2018, the Company issued 4,653,954 shares of free-trading Common Stock of PHI Group, Inc. to Crown Bridge Partners,
LLC., holder of the Common Stock Purchase Warrant dated June 9, 2017 in connection with the $35,000.00 Convertible Promissory
Note of June 9, 2017 by the Company, for the cashless exercise of $17,700.00 value of warrants. The total warrant value remaining
after this exercise was $0.00.
On
April 19, 2018, the Company issued 1,169,591 shares of free-trading Common Stock of PHI Group, Inc. to Power Up Lending Group
Ltd., holder of a Convertible Promissory Note dated as of 10/18/2017 by the Company, for the conversion of $20,000.00 of the principal
amount of the Note, at the conversion price of $0.0171 per share. The principal amount of the Note remaining after this conversion
was $16,333.33.
On
April 23, 2018, the Company issued 1,127,820 shares of free-trading Common Stock of PHI Group, Inc. to Power Up Lending Group
Ltd., holder of a Convertible Promissory Note dated as of 10/18/2017 by the Company, for the conversion of $15,000.00 of the principal
amount of the Note, at the conversion price of $0.0133 per share. The principal amount of the Note remaining after this conversion
was $1,333.33.
On
April 24, 2018, the Company issued 295,156 shares of free-trading Common Stock of PHI Group, Inc. to Power Up Lending Group Ltd.,
holder of a Convertible Promissory Note dated as of 10/18/2017 by the Company, for the conversion of $1,333,33 of the principal
amount of the Note together with $2,120 of accrued and unpaid interest thereto, totaling $3,453.33, at the conversion price of
$0.0117 per share. The principal amount of the Note remaining after this conversion was $0.00.
On
April 27, 2018, Tina Phan, the Company’s Corporate Secretary and Treasurer, converted $120,000.00 of the accrued and unpaid
salaries for the fiscal years ended June 30, 2012 and June 30, 2013 into 4,629,630 shares of Restricted Common Stock of PHI Group,
Inc. at the effective price of $0.02592 per share, pursuant to the Company’s corporate resolutions dated November 2, 2012,
which still remain in full force and effect.
On
April 27, 2018, Henry Fahman, the Company’s Chief Executive Officer and Chief Financial Officer, converted $300,000.00 of
the accrued and unpaid salaries for the fiscal years ended June 30, 2012 and June 30, 2013 into 11,574,074 shares of Restricted
Common Stock of PHI Group, Inc. at the effective price of $0.02592 per share, pursuant to the Company’s corporate resolutions
dated November 2, 2012, which still remain in full force and effect.
On
May 29, 2018, the Company issued 3,159,521 shares of free-trading Common Stock of PHI Group, Inc. to Crown Bridge Partners, LLC.,
holder of the $35,000.00 Convertible Promissory Note dated October 26, 2017 of the Company, for the conversion of the principal,
$992.47 of accrued interest and $500.00 of fees under the Note, totaling $36,492.47. The principal balance due remaining under
this Note after this conversion was $0.00.
On
June 04, 2018, the Company issued 3,149,607 shares of free-trading Common Stock of PHI Group, Inc. to Einstein Investments, LLC,
holder of the $115,000 Convertible Promissory Note dated November 24, 2017 of the Company, for the conversion of $44,050.96 principal
amount together with $5,949.04 accrued interest under the Note, totaling $50,000. The principal balance due remaining under this
Note after this conversion was $71,449.04.
On
June 21, 2018, the Company issued 6,048,786 shares of free-trading Common Stock of PHI Group, Inc. to Crown Bridge Partners, LLC.,
holder of the Common Stock Purchase Warrant dated as of October 26, 2017 in connection with the $35,000.00 Convertible Promissory
Note of October 26, 2017 by the Company, for the cashless exercise of $22,285.00 value of warrants. The total warrant value remaining
after this exercise was $12,715.00.
On
June 26, 2018, the Company issued 157,604 shares of free-trading Common Stock of PHI Group, Inc. to Buu Chung, holder of the convertible
promissory note dated 4/14/2005 of the Company, for the conversion of $3,000 principal amount. The principal balance due remaining
under this Note after this conversion was $0.00.
As
of June 30, 2018, there were 135,893,815 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.
|
Amount of CS
=
|
OIP + AUD
|
|
|
|
or alternatively of a subsidiary of PHI Group, Inc.’s.
|
|
|
|
|
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 June 30, 2018, there were 10,000,000 shares of Class A Series II Preferred Stock issued and outstanding.
Domestication
in the State of Wyoming
On
September 20, 2017, the Company applied for a Certificate of Domestication and filed Articles of Domestication with the office
of the Secretary of State of Wyoming to re-domicile the Company’s jurisdiction to the State of Wyoming.
On
September 20, 2017, the Company filed Articles of Amendment with the Wyoming Secretary of State to amend the authorized capital
of the Company as follows:
“The
total number of shares into which the authorized capital stock of the corporation is divided is one billion shares, consisting
of: nine hundred million shares of voting Common Stock with a par value of $0.001 per share; fifty million shares of non-voting
Class A Series I Preferred Stock with a par value of $5.00 per share; twenty-five million shares of non-voting Class A Series
II Preferred Stock with a par value of $5.00 per share; twenty million shares of non-voting Class A Series III Preferred Stock
with a par value of $5.00 per share and five million shares of voting Class A Series IV Preferred Stock with a par value of $5.00
per share. The relative rights, preferences, limitations and restrictions associated with the afore-mentioned shares of Class
A Preferred Stock will be determined by the Board of Directors of the corporation.” As of the date of this report, the Company
continues to operate as a Nevada corporation.
NOTE
16
–
STOCK-BASED COMPENSATION PLANS
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 June 30, 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
17
–
GAIN (LOSS) ON SETTLEMENT OF DEBTS
For
the fiscal year ended June 30, 2018, there was a loss in the amount of $92,780 on settlement of debts and a loss in the amount
of $94,539 from conversions of debts into common stock of the Company.
NOTE
18
–
OTHER INCOME (EXPENSE)
Net
Other Income (Expense) for the fiscal year ended June 30, 2018 consists of the following:
OTHER INCOME (EXPENSES)
|
|
FY ended
June 30, 2018
|
|
Interest expense
|
|
|
(1,352,736
|
)
|
Loss on loan/note conversions
|
|
|
(94,539
|
)
|
Loss on debt settlement
|
|
|
(92,781
|
)
|
Prepayment premium
|
|
|
(164,272
|
)
|
Write-offs
|
|
|
(77,500
|
)
|
Loss on issuance of stock
|
|
|
(9,310
|
)
|
Accrual for Preferred Stock Dividends
|
|
|
(4,681
|
)
|
Net miscellaneous other income/expense
|
|
|
(194
|
)
|
NET OTHER INCOME (EXPENSES)
|
|
$
|
(1,796,013
|
)
|
NOTE
19
–
RELATED PARTY TRANSACTIONS
The
Company accrued $210,000 in salaries for the President and Secretary of the Company during the year ended June 30, 2018.
During
the year ended June 30, 2018, the Company received $25,000 for consulting service from American Laser Healthcare, Inc., for which
the president of the Company also serves as an interim Chief Executive Officer.
NOTE
20
–
INCOME TAXES
No
provision was made for income tax since the Company has significant net operating loss carry forward. Through June 30, 2018, the
Company incurred net operating losses for tax purposes of approximately $40,551,299. The net operating loss carry forward may
be used to reduce taxable income through the year 2033. Net operating loss for carry forwards for the State of California is generally
available to reduce taxable income through the year 2023. The availability of the Company’s net operating loss carry-forward
is subject to limitation if there is a 50% or more positive change in the ownership of the Company’s stock.
“Under
section 6501(a) of the Internal Revenue Code (Tax Code) and section 301.6501(a)-1(a) of the Income Tax Regulations (Tax Regulations),
the IRS is required to assess tax within 3 years after the tax return was filed with the IRS.”
NOTE
21
–
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 intends to access the
Equity Line Facility only when the Company’s stock prices reach levels that its management deems appropriate.
SETTLEMENT
AGREEMENT WITH THINH HUNG INVESTMENT CO.
On
August 3, 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 that is reclassified as Customer Advances in the Long-term Liability portion
of the attached balance sheet and accrued interest as agreed by the two parties.
According
to the Settlement Agreement, the Compapny will transfer or cause to be transferred at least 480,000 shares of Common Stock of
PHI Group, Inc. to an authorized represenatative of Thinh Hung. In the event Thinh Hung is unable to realize at least $381,000
from the sale of PHI Stock, PHI Group will either transfer additional Common Stock of PHI Group, Inc. or other marketable securities
to the authorized reprenesattive designated Thinh Hung or pay cash directly to Thinh Hung until the total amount of $381,000 is
reached. PHI Group, Inc. agreed to use its best efforst to pay off any outstanding balance by October 31, 2017. After the receipt
of at least 480,000 shares of PHI Group Stock by the authorized representative of Thinh Hung, Thinh Hung shall deliver and transfer
all the Vietnam Foods Corporation Stock to PHI Group, Inc. or its authorized representative. As of the day of this report, the
Company has not been able to transfer 480,000 shares of its Common Stock to Thinh Hung’s authorized representative.
MEMORANDUM
OF UNDERSTANDING WITH AQUARIUS POWER, INC.
On
August 9, 2017, the Company signed a Memorandum of Understanding (“MOU”) with Aquarius Power, Inc. (“AQP”),
a Texas company, to provide renewable energy technology to Vietnam. PHI has also made an investment to become a strategic shareholder
of AQP.
PHI
and AQP will form a joint venture company which will have the exclusive right to sublicense, sell, build, own and/or operate the
AQP energy systems in Vietnam on an exclusive basis.
PHI
will be responsible for: Obtaining all necessary approvals to build, own and operate AQuarius Energy System; Securing a binding
and acceptable power purchase agreement (PPA) from the governmental authority; Providing the land for the Aquarius Energy System;
Providing the construction and civil engineering know-how to build the energy pools; Providing management, engineering and operational
manpower to build and operate the AQuarius Engineering System; and Providing the interconnection of the AQuarius Energy System
to the national grid.
AQP’s
responsibilities include: Support PHI in obtaining the Power Purchase Agreement; Conduct a site survey and provide blueprints
for a tailor made Energy System; Provide technical support for the construction and operation of the Energy System (Includes training
for construction, installation and operations); Build, Ship, the AQuarius Energy System(s); and Install and commission the AQuarius
Energy System as required.
AQuarius
Wave Energy System is a land-based wave energy system that uses a combination of gravity and “buoyancy” found within
the interaction between air and water to produce power that can be used to generate electricity and / or produce potable water.
AQuarius is a baseload zero carbon footprint that uses no consumables and can be installed virtually anywhere on the planet that
is cost effective against any fossil fuel alternatives. The system, which can be built turn-key within 6 months of obtaining permits,
has an operating life of over 60 years and is clean, scalable, reliable, and extremely flexible. Its operating cost is comparably
low as hydroelectric systems.
On
October 6, 2017, the Company signed a new Memorandum of Understanding (“MOU”) with AQuarius Power, Inc. to expand
the scope of cooperation and provide the same renewable energy technology to Eastern Europe and the European Region. For Eastern
Europe the Company is in the process of planning to build a pilot unit in Romania using AQP technology. PHI also intends to make
additional investments in AQP. As of the date of this report, the Company has made an investment of $5,000 in AQuarius Power,
Inc. and intends to continue making additional investments via purchase of AQP’s Common Stock.
AGREEMENT
TO ACQUIRE 51% OWNERSHIP IN 400-ACRE MINING CLAIMS IN GRANT COUNTY, OREGON AND CLOSING OF TRANSACTION
On
September 2, 2017, American Pacific Resources, Inc., a Wyoming corporation (“APR”) and wholly owned subsidiary of
the Company, entered into an Agreement of Purchase and Sale with Rush Gold Royalty Inc, 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. This transaction was closed effective October 3, 2017. The Company paid cash and issued 10,000,000 shares of Class A Series
II Preferred Stock, valued at $314,100, and a convertible demand promissory note in the amount of $24,310,400 totaling twenty-five
million dollars to Rush Gold Royalty Inc. in exchange for the mining claims. As of June 30, 2018, the balance of the convertible
demand promissory note was $24,048,500.
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 to March 29, 2019.
TECHNICAL
ASSISTANCE AGREEMENT WITH AUBURN UNIVERSITY
On
September 25, 2017, the Company signed a Technical Assistance Agreement with Auburn University to conduct a research program in
order to determine the market segments related to supply and demand of medicinal and aromatic plants in the world, and then focus
more specifically on major production and consumption markets. The first four topics of the research program focus on the production,
medicinal applications, and market analysis of turmeric, saffron, bitter melon, and some major potential and aromatic plants.
The last topic covers the trends and solutions of switching from conventional farming to organic farming of these crops to meet
the future food and medicinal consumption. The research program began on October 1, 2017 and ended on September 30, 2018.
AGREEMENT
TO DEVELOP A 67,000-ACRE GOLD MINING PROJECT IN LAOS
On
November 4, 2017, American Pacific Resources, Inc. (“APR”) (
https://aprgold.com/
) signed a Business Cooperation
and Investment Agreement with Suda Lattana Co., a Lao company, to develop a 67,000-acre gold mining project in the Province of
Savannakhet, Laos.
According to
the Agreement, APR will be responsible for financing and operating the gold mining project and will share a majority of the project’s
net profits after accounting for the costs of capital and operating expenses. It is estimated that 3,527,000 ounces of gold can
be mined from this concession, subject to further professional study and verification. The Agreement is valid until December 31,
2066. As of the date of this report, APR has not begun this project.
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 extra amount of Euros 1,500,000 to be paid to the structuring agent by
November 15, 2018.
INVESTMENT
AGREEMENT WITH GRIDLINE COMMUNICATIONS, INC.
On
December 15, 2017, PHI Group, Inc. entered into an Investment Agreement with Gridline Communications, Inc. (“Gridline”)
to form a special purpose vehicle (“SPV”) under the name of Matrix Communications, Inc., as the holding company to
acquire all the stock of Gridline Communications and its sister company GridlineX as well as finance and implement Gridline’s
high-speed broadband communications business.
According
to the Investment Agreement, the Matrix Communications will acquire all ownership and rights of the Investee in connection with
high-speed broadband networks and related supporting assets to serve government, commercial and consumer telephony, data and video
needs in the Republic of Equatorial Guinea as the first point of entry into the African Continent. Matrix Communications’
authorized capital will include 600 million shares of Common Stock and 300 million shares of Preferred Stock. PHI Group will be
the sole holder of Common Stock in the SPV initially and will retain fifteen percent equity interest thereof following the capitalization
plan. This transaction has not closed as of the date of this report.
MEMORANDUM
OF UNDERSTANDING TO BUILD INDUSTRIAL PARK, GREENHOUSES, POWER PLANT AND WATER PARK IN TRANSYLVANIA, ROMANIA
On
December 18, 2017, PHI Group, Inc. (the “Company”), entered into a Memorandum of Understanding (“MOU”)
with SC Z.I.O.S. SRL, a Romanian company, to develop an industrial park in Transylvania, Romania.
According
to the MOU, PHI Group will cooperate with the owner of SC Z.I.O.S SRL to develop, build and operate a gas-fired power plant and
greenhouses over the ZIOS land parcel and water park adjacent to it.
The
Company is committed to investing or causing to be invested the required capital to finance the building of a minimum 10-MW gas-fired
power plant (renewable energy with steam processing plant), the building of a minimum 10-hectares of greenhouse and investing
20 million Euros in a water park and health retreat wellness resort taking advantage of the salt lakes adjacent to the ZIOS land
parcel.
Both
parties agree to accept the value of the ZIOS land parcel to be equivalent to seven (7) million Euros and acknowledge that ZIOS
currently has a debt of 1.4 million Euros on its books.
The
owner of SC Z.I.O.S. SRL agrees to contribute 3.5 million Euros from value of the ZIOS land parcel toward the total capitalization
to develop, build and operate the gas-fired power plant, the greenhouse and the water park and will hold a proportionate percentage
of ownership in the entity that owns these projects based on the total capitalization amount during the first two years.
PHI
Group agrees to pay or cause to be paid to owner of SC Z.I.O.S. SRL two (2) million Euros after the all required approvals and
permits are granted by the pertinent Romanian governmental authorities to build the gas-fired power plant, the greenhouse and
the water park. This sum of money and the payment of 1.4 million Euros to the Z.I.O.S. creditor will come from the structured
financing in connection with the capitalization for these projects, unless agreed otherwise by the pertinent parties afterwards.
In addition, the balance of 1.5 million Euros will be paid to the owner of SC Z.I.O.S. SRL over a period of 5 years based on cash
flow milestones from operations.
As
of the date of this report, the Company and SC Z.I.O.S. SRL have not signed a definitive agreement to consummate the transactions
mentioned herein.
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 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 June 30, 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.
NOTE
22
–
GOING CONCERN UNCERTAINTY
As
shown in the accompanying consolidated financial statements, the Company has accumulated deficit of $40,551,299 and total stockholders’
deficit of $4,844,747 as of June 30, 2018. 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 strengthen the Company’s working capital position and generate sufficient
cash to meet its operating needs through June 30, 2019 and beyond.
NOTE
23 – SUBSEQUENT EVENT
These
financial statements were approved by management and available for issuance on October 12, 2018. Subsequent events have been evaluated
through this date.
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.
AMENDMENT
TO ARTICLES OF INCORPORATION OF PHI GROUP, INC.
On
July 25, 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 1,500,000,000
shares with a par value of $0.001 per share, consisting of 1,400,000,000 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.
CERTIFICATE
OF DESIGNATION FOR CLASS B SERIES I PREFERRED STOCK OF PHI GROUP, INC.
On
September 21, 2018, a Certificate of Designation for Nevada Profit Corporations was filed with the Nevada Secretary of State to
designate Class B Series I Preferred Stock of PHI Group, Inc. as follows:
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.
On
September 21, 2018, the Company issued a total of fifteen thousand shares of Class B Series I Preferred Stock at par value to
the current members of the Company’s Board of Directors.
AMENDMENT
TO ARTICLES OF INCORPORATION OF PHI GROUP, INC.
On
September 21, 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 2,000,000,000
shares with a par value of $0.001 per share, consisting of 1,900,000,000 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.
CERTIFICATE
OF AMENDMENT TO CERTIFICATE OF DESIGNATION FOR PREFERRED STOCK OF PHI GROUP, INC.
On
September 24, 2018, Certificate of Amendment to Certificate of Designation for Nevada Profit Corporations was filed with the Nevada
Secretary of State to re-designate Class A Preferred Stock of PHI Group, Inc. as detailed in Note 15 – STOCKHOLDERS’
EQUITY, CLASS A PREFERRED STOCK above.
On
September 28, 2018, the Company issued 50 million shares of Class A Series III Cumulative, Convertible, Redeemable Preferred Stock
to Ms. Do Thi Nghieu in connection with the Closing of the Stock Swap Agreement dated September 20, 2018 between Ms. Do Thi Nghieu
and the Company.
ISSUANCES
OF COMMON STOCK OF THE COMPANY
On
July 19, 2018, the Company issued 1,951,220 shares of free-trading Common Stock of PHI Group, Inc. to Einstein Investments, LLC,
holder of the $115,000 Convertible Promissory Note dated November 24, 2017 of the Company, for the conversion of $18,099.55 principal
amount together with $900.45 accrued interest under the Note and $1,000.00 of conversion fees, totaling $20,000. The principal
balance due remaining under this Note after this conversion was $53,349.49.
On
July 19, 2018, the Company issued 1,200,000 shares of free–trading Common Stock of PHI Group, Inc. to Power Up Lending Group
Ltd., holder of a Convertible Promissory Note dated January 18, 2018 of the Company, for the conversion of $15,000.00 of the principal
amount of the Note. The principal balance due remaining under this Note after this conversion was $18,000.00.
On
July 23, 2018, the Company issued 1,805,607 shares of free–trading Common Stock of PHI Group, Inc. to Power Up Lending Group
Ltd., holder of a Convertible Promissory Note dated January 18, 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
July 26, 2018, the Company issued 4,260,531 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 $40,000.00 of the principal
amount of the Note. The principal balance due remaining under this Note after this conversion was $38,750.00.
On
July 27, 2018, the Company issued 3,356,444 shares of free-trading Common Stock of PHI Group, Inc. to Crown Bridge Partners, LLC.,
holder of the Common Stock Purchase Warrant dated as of October 26, 2017 by the Company, for the cashless exercise of $12,715.00
value of warrants. The total warrant value remaining after this exercise was $0.00.
On
July 30, 2018, the Company issued 2,061,856 shares of free–trading Common Stock of PHI Group, Inc. to Power Up Lending Group
Ltd., holder of a Convertible Promissory Note dated January 26, 2018 of the Company, for the conversion of $20,000.00 of the principal
amount of the Note. The principal balance due remaining under this Note after this conversion was $13,000.00.
On
August 02, 2018, the Company issued 1,491,667 shares of free–trading Common Stock of PHI Group, Inc. to Power Up Lending
Group Ltd., holder of a Convertible Promissory Note dated January 26, 2018 of the Company, for the conversion of $13,000.00 of
the principal amount of the Note together with $1,320.00 accrued interest under the Note, totaling $14,320.00. This note was paid
in full with this issuance of conversion shares.
On
August 06, 2018, the Company issued 2,298,851 shares of free-trading Common Stock of PHI Group, Inc. to Einstein Investments,
LLC, holder of the $115,000 Convertible Promissory Note dated November 24, 2017 of the Company, for the conversion of $14,207.67
principal amount together with $292.33 accrued interest under the Note and $500.00 of conversion fees, totaling $15,000. The principal
balance due remaining under this Note after this conversion was $39,141.82.
On
August 17, 2018, the Company issued 6,971,290 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
August 23, 2018, the Company issued 2,205,882 shares of free–trading Common Stock of PHI Group, Inc. to Power Up Lending
Group Ltd., holder of a Convertible Promissory Note dated February 22, 2018 of the Company, for the conversion of $15,000.00 of
the principal amount of the Note. The principal balance due remaining under this Note after this conversion was $18,000.00.
On
August 27, 2018, the Company issued 3,066,667 shares of free–trading Common Stock of PHI Group, Inc. to Power Up Lending
Group Ltd., 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
August 31, 2018, the Company issued 1,500,000 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 $579.18 of the principal balance
of the Note, together with $4,980.82 of accrued and unpaid interest and $500.00 conversion fee under the Note totaling $6,060.00.
The principal balance due remaining under this Note after this conversion was $74,420.82.
On
August 31, 2018, the Company issued 500,000 shares of restricted common stock of the Company to Redchip Companies LLC and 500,000
shares of restricted common stock of the Company to SRS Consulting Ltd. for consulting services at the price of $0.01 per share.
On
September 06, 2018, the Company issued 1,022,913 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 $5,000.00 of the principal amount
of the Note. The principal balance due remaining under this Note after this conversion was $55,000.00.
On
September 20, 2018, the Company issued 1,734,105 shares of free-trading Common Stock
of PHI Group, Inc. to Einstein Investments, LLC, holder of the $115,000 Convertible Promissory
Note dated November 24, 2017 of the Company, for the conversion of $6,517.43 principal
amount of the Note together with $482.57 accrued interest under the Note and $500.00
of conversion fees, totaling $7,500. The principal balance due remaining under this Note
after this conversion was $32,624.39.
On
September 21, 2018, the Company issued 1,500,000 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 $4,110.66 of the principal balance
of the Note, together with $489.34 of accrued and unpaid interest and $500.00 conversion fee under the Note totaling $5,100.00.
The principal balance due remaining under this Note after this conversion was $70,310.16.
On
September 26, 2018, the Company issued 164,722 shares of restricted common stock of the Company under the auspices of Rule 144
to Andreas Held for $1,334.25 cash payment.
ISSUANCE OF NEW SHORT-TERM PROMISSORY
NOTES
On July 05, 2018, the
Company
received $25,5000 net proceeds from a tranche of $30,000 in connection with a master
convertible promissory note
issued
to
Crown
Bridge Partners, LLC on April 2, 2018
, with an interest rate of 10%
and
convertible
to Common Stock of the Company at 50% discount to the average of the two lowest trading prices or closing bids during the twenty
trading days immediately prior to the date of conversion. The maturity date of this note is 7/05/2019.
On July 10, 2018, the
Company
issued a new convertible promissory note to
Power Up Lending Group
for $73,000,
with an interest rate of 8%, convertible to Common Stock of the Company at 42%
discount
to the average of the two lowest trading prices or closing bids during the ten trading days immediately prior to the date
of conversion
and a prepayment premium of 150%.
The maturity date of this note is
April 30, 2019.
On July 17, 2018, the
Company
issued a new convertible promissory note to
Auctus Fund LLC
for $75,000, with
an interest rate of 12%
and
convertible to Common Stock of the Company at 50% discount
to the average of the two lowest trading prices during the twenty five trading days immediately prior to the date of conversion.
The maturity date of this note is July 17, 2019.
On July 23, 2018, the
Company
issued a new convertible promissory note to
One44 Capital LLC
for $90,000,
with an interest rate of 10%
and
convertible to Common Stock of the Company at 45%
discount to the average of the two lowest trading prices during the twenty trading days immediately prior to the date of conversion.
The maturity date of this note is July 23, 2019.
On August 06, 2018, the
Company
issued a new convertible promissory note to
Power Up Lending Group
for $38,000,
with an interest rate of 8%, convertible to Common Stock of the Company at 42%
discount
to the average of the two lowest trading prices or closing bids during the ten trading days immediately prior to the date
of conversion
and a prepayment premium of 150%.
The maturity date of this note is
May 15, 2019.
On August 30, 2018, the
Company
issued a new convertible promissory note to
Power Up Lending Group
for $73,000,
with an interest rate of 8%, convertible to Common Stock of the Company at 42%
discount
to the average of the two lowest trading prices or closing bids during the ten trading days immediately prior to the date
of conversion
and a prepayment premium of 150%.
The maturity date of this note is
June 15, 2019.
On September 20, 2018, the Company
received $25,000 from Tam Bui, a director of the Company, as a short-term loan to be paid on demand. The interest on the loan
is pegged to the interest rate for cash advance with American Express.
On September 21, 2018, the Company
received $75,000 from Tristina Lam from a note with a face value of $80,000 secured by deed of trust of realty held by the President
of the Company. This note is due and payable on November 21, 2018.
On September 25, 2018, the
Company
issued a new convertible promissory note to
Power Up Lending Group
for $38,000,
with an interest rate of 8%, convertible to Common Stock of the Company at 42%
discount
to the average of the two lowest trading prices or closing bids during the ten trading days immediately prior to the date
of conversion
and a prepayment premium of 150%.
The maturity date of this note is
July 15, 2019.
On September 26,
2018, the
Company
issued a new convertible promissory note to
JSJ
Investments, Inc.
for $144,750, with an interest rate of 10%
and
convertible
to Common Stock of the Company at 50% discount to the average of the two lowest trading prices during twenty trading days immediately
prior to the date of conversion
and a prepayment premium of 150%. The maturity date of this
note is 9/26/2019.