UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: SEPTEMBER 30, 2019

or

 

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ___________________________ to ______________________________________

 

Commission File Number: 2-78335-NY

 

 

PHI GROUP, INC.

(Exact name of registrant as specified in its charter)

 

Wyoming   90-0114535

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

identification Number)

 

2323 Main Street Irvine,   CA 92614
(Address of principal executive offices)   (Zip Code)

 

702-475-5430

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

 

Yes [  ] No [X]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 

Yes [  ] No [X]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

  Large accelerated filer [  ] Accelerated filer [  ]
         
  Non-accelerated filer [  ] Smaller reporting company [X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes [  ] No [X]

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of April 09, 2021, there were 23,995,238,069 shares of the registrant’s $0.001 par value Common Stock issued and outstanding.

 

 

 

 
 

 

PHI GROUP, INC.

 

INDEX TO FORM 10-Q

 

PART I - FINANCIAL INFORMATION  
   
Item 1- Consolidated Financial Statements – Unaudited 3
   
Consolidated Balance Sheets as of September 30, 2019 and June 30, 2019 3
 

Consolidated Statements of Operations for the three months ended September 30, 2019 and 2018

4
   

Consolidated Statements of Cash Flows for the three months ended September 30, 2019 and 2018

5
   
Notes to Consolidated Financial Statements 6
 
Item 2 -Management’s Discussion and Analysis of Financial Condition and Results of Operations 25
   
Item 3- Quantitative and Qualitative Disclosures about Market Risk 32
   
Item 4- Controls and Procedures 32
   
PART II - OTHER INFORMATION  
   
Item 1- Legal Proceedings 34
   
Item 1A- Risk Factors 34
   
Item 2- Unregistered Sales of Equity Securities and Use of Proceeds 37
   
Item 3- Defaults Upon Senior Securities 37
   
Item 4- Submission of Matters to a Vote of Security Holders 37
   
Item 5- Other Information 37
   
Item 6- Exhibits 38
   
SIGNATURES 39
   
Exhibit 21.1  
   
CERTIFICATIONS  

 

2
 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1- CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

 

PHI GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 

    September 30,     June 30,  
    2019     2019  
          (Audited)  
ASSETS                
Current Assets                
Cash and cash equivalents     75,952       71,768  
Marketable securities     158,695       213,485  
Other current assets     863,842       793,842  
Total current assets   $ 1,098,489     $ 1,079,095  
Other assets:                
Investments     5,000       5,000  
Total other assets     5,000       5,000  
Total Assets   $ 1,103,489     $ 1,084,095  
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT                
                 
Current Liabilities                
Accounts payable     212,985       189,152  
Sub-fund obligations     1,266,634       1,266,634  
Accrued expenses     2,511,823       2,389,111  
Short-term notes payable (net)     334,700       331,700  
Convertible Promissory Notes (net)     286,840       273,903  
Due to officers     992,052       890,897  
Advances from customers     430,500       438,000  
Derivative liabilities     281,320       1,307,421  
Total current liabilities   $ 6,316,854     $ 7,086,819  
                 
Total Liabilities   $ 6,316,854     $ 7,086,819  
                 
Stockholders’ deficit:                
Preferred Stock, $0.001 par value; 100,000,000 shares authorized.
10,000,000 shares Class A Series II issued and outstanding as of 9/30/2019 and 6/30/2019, respectively. Par value:
    10,000       10,000  
120,000 shares Class B Series I issued and outstanding as of 09/30/19 and 06/30/2019. Par value:     120       120  
Common stock, $0.001 par value; 30.5 billion shares authorized; 13,196,408,755 shares issued and outstanding as of 09/30/2019; 10,009,756,808 shares issued and outstanding as of 6/30/2019, respectively.                
Par value:     13,196,410       10,009,757  
APIC - Common Stock     23,873,791       26,745,616  
Common Stock to be cancelled     (35,500 )     (35,500 )
Treasury stock: 484,767 shares as of 9/30/19 and 6/30/19, respectively - cost method.     (44,170 )     (44,170 )
Acc. Other comprehensive gain (loss)     (54,790 )     -  
Accumulated deficit     (42,159,225 )     (42,688,547 )
Total stockholders’ deficit     (5,213,365 )     (6,002,724 )
Total liabilities and stockholders’ deficit   $ 1,103,489     $ 1,084,095  

 

The accompanying notes form an integral part of these audited consolidated financial statements

 

3
 

 

PHI GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

UNAUDITED

 

    SEPTEMBER 30,  
    2019     2018  
Net revenues                
Consulting, advisory and management services     8,531       -  
Total revenues             -  
Operating expenses:                
Salaries and wages     97,500       59,666  
Professional services, including non-cash compensation     13,700       150,564  
General and administrative     39,982       70,267  
Total operating expenses   $ 151,182     $ 280,497  
                 
Income (loss) from operations   $ (142,651 )   $ (280,497 )
                 
Other income and expenses                
                 
Interest expense     (208,129 )     (630,908 )
Other income (expense)     (2,652 )     (6,278 )
                 
Net other income (expenses)   $ (210,781 )   $ (637,186 )
                 
Net income (loss)   $ (353,432 )   $ (917,683 )
Other comprehensive income (loss)                
Accumulated other comprehensive gain (loss)     (54,790 )     751,962  
Comprehensive income (loss)   $ (408,222 )   $ (165,721 )
                 
Net loss per share:                
Basic   $ (0.00 )   $ (0.01 )
Diluted   $ (0.00 )   $ (0.01 )
                 
Weighted average number of shares outstanding:                
Basic     12,720,242,401       154,222,652  
Diluted     12,720,242,401       154,222,652  

 

The accompanying notes form an integral part of these audited consolidated financial statements

 

4
 

 

PHI GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(UNAUDITED)

 

    2019     2018  
Cash flows from operating activities:                
Net income (loss) from operations   $ (353,432 )   $ (917,682 )
Adjustments to reconcile net income to net cash used in operating activities:                
Changes in current assets:                
Marketable securities     54,790       -  
(Increase) decrease in assets and prepaid expenses     (70,000 )     (1,261,312 )
Changes in current liabilities:                
Acoounts payable     23,832       -  
Accrued expenses     97,500       -  
Notes payable and derivative liabilities     (129,256 )     -  
Advances from customers     (7,500 )     -  
Increase (decrease) in accounts payable and accrued expenses     25,212       734,903  
Net cash provided by (used in) operating activities   $ (358,854 )   $ (1,444,091 )
                 
Cash flows from investing activities:                
Net cash provided by (used in) investing activities   $ -     $ -  
                 
Cash flows from financing activities:                
Common Stock     314,828       544,472  
Preferred Stock     -       1,311,434  
Loans and notes     103,000       -  
Accum. other comprehensive income (loss)     (54,790 )     (416,851 )
      -       (4,981 )
Net cash provided by (used in) financing activities   $ 363,038     $ 1,434,075  
                 
Net increase (decrease) in cash and cash equivalents     4,184       (10,016 )
Cash and cash equivalents, beginning of period     71,768       13,937  
Cash and cash equivalents, end of period   $ 75,952     $ 3,921  

 

The accompanying notes form an integral part of these audited consolidated financial statements

 

5
 

 

PHI GROUP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1NATURE OF BUSINESS

 

INTRODUCTION

 

PHI Group, Inc. (the “Company” or “PHI”) (www.phiglobal.com) is primarily engaged in the operations of PHILUX Global Funds, SCA, SICAV-RAIF, a “Reserved Alternative Investment Fund” (“RAIF”) under the laws of Luxembourg, and the development of the Asia Diamond Exchange in Vietnam. Besides, the Company provides corporate finance services, including merger and acquisition advisory and consulting services for client companies through our wholly owned subsidiary PHILUX Capital Advisors, Inc. (formerly PHI Capital Holdings, Inc.) (www.philuxcap.com) and invests in selective industries as well as special situations that may potentially create significant long-term value for shareholders. PHILUX Global Funds plans to include a number of sub-funds for investment in the proposed Asia Diamond Exchange in Vietnam (ADE), real estate, infrastructure, agriculture, renewable energy, and healthcare.

 

BACKGROUND

 

Originally incorporated on June 8, 1982 as JR Consulting, Inc., a Nevada corporation, the Company applied for a Certificate of Domestication and filed Articles of Domestication to become a Wyoming corporation on September 20, 2017. In the beginning, the Company was foremost engaged in mergers and acquisitions and had an operating subsidiary, Diva Entertainment, Inc., which operated two modeling agencies, one in New York and one in California. In January 2000, the Company changed its name to Providential Securities, Inc., a Nevada corporation, following a business combination with Providential Securities, Inc., a California-based financial services company. 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 Philand Ranch Limited, a United Kingdom corporation previously listed on the Frankfurt Stock Exchange (together with its subsidiaries Philand Ranch - Singapore, Philand Corporation - US, and Philand Vietnam Ltd. - Vietnam), Providential Vietnam Ltd., 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.

 

The Company is currently focused on operating PHILUX Global Funds, SCA, SICAV-RAIF by setting up a number of sub-funds for investment in real estate, renewable energy, infrastructure, agriculture and healthcare as well as developing and establishing the Asia Diamond Exchange in Vietnam. In addition, PHILUX Capital Advisors, Inc. (formerly Capital Holdings, Inc.), a wholly owned subsidiary of the Company, continues to provide corporate and project finance services, including merger and acquisition (M&A) advisory and consulting services for other client companies. No assurances can be made that the Company will be successful in achieving its plans.

 

BUSINESS STRATEGY

 

PHI’s strategy is to:

 

1. Identify, build, acquire, commit and deploy valuable resources with distinctive competitive advantages;

 

2. Identify, evaluate, acquire, participate and compete in attractive businesses that have large, growing market potential;

 

3. Build an attractive investment that includes points of exit for investors through capital appreciation or spin-offs of business units.

 

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 (1) American Pacific Resources, Inc., a Wyoming corporation (100%), (2) PHILUX Capital Advisors, Inc., a Wyoming corporation (100%), and (3) PHI Luxembourg Development S.A., a Luxembourg corporation (100%), collectively referred to as the “Company.” All significant inter-company transactions have been eliminated in consolidation.

 

6
 

 

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. These statements should be read in conjunction with the audited financial statements for the year ended June 30, 2019. In the opinion of management, all adjustments consisting of normal reoccurring accruals have been made to the financial statements. The results of operation for the three months ended September 30, 2019 are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2019.

 

USE OF ESTIMATES

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

 

Cash and Cash Equivalents

 

The Company considers all liquid investments with a maturity of three months or less from the date of purchase that are readily convertible into cash to be cash equivalents.

 

MARKETABLE SECURITIES

 

The Company’s securities are classified as available-for-sale and, as such, are carried at fair value. Securities classified as available-for-sale may be sold in response to changes in interest rates, liquidity needs, and for other purposes.

 

Typically, each investment in marketable securities represents less than twenty percent (20%) of the outstanding common stock and stock equivalents of the investee, and each security is quoted on either the OTC Markets or other public exchanges. As such, each investment is accounted for in accordance with the provisions of SFAS No. 115.

 

Unrealized holding gains and losses for available-for-sale securities are excluded from earnings and reported as a separate component of stockholder’s equity. Realized gains and losses for securities classified as available-for-sale are reported in earnings based upon the adjusted cost of the specific security sold. On September 30, 2019, the marketable securities were recorded at $158,695, based upon the fair value of the marketable securities at that time.

 

FAIR VALUE OF FINANCIAL INSTRUMENTS

 

Fair Value - Definition and Hierarchy

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are categorized based on whether or not the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

 

A fair value hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs are to be used when available.

 

Valuation techniques that are consistent with the market or income approach are used to measure fair value. The fair value hierarchy is categorized into three levels based on the inputs as follows:

 

Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access.

 

Level 2 - Valuations based on inputs other than quoted prices included in Level 1 that are observable, either directly or indirectly.

 

Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

 

7
 

 

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.

 

8
 

 

As of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying values as presented on the balance sheet. This is primarily attributed to the short maturities of these instruments.

 

Effective July 1, 2008, the Company adopted ASC 820 (previously SFAS 157), Fair Value Measurements and adopted this Statement for the assets and liabilities shown in the table below. ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, establishes a fair value hierarchy based on the inputs used to measure fair value, and expands disclosures about the use of fair value measurements. The adoption of ASC 820 did not have a material impact on our fair value measurements. At September 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.

 

Available-for-sale securities

 

The Company uses various approaches to measure fair value of available-for-sale securities, while applying the three-level valuation hierarchy for disclosures, specified in ASC 820. Our Level 1 securities were measured using the quoted prices in active markets for identical assets and liabilities.

 

The company’s policy regarding the transfers in and/or out of Level 3 depends on the trading activity of the security, the volatility of the security, and other observable units which clearly represents the fair value of the security. If a level 3 security can be measured using a more fairly represented fair value, we will transfer these securities either into Level 1 or Level 2, depending on the type of inputs.

 

ACCOUNTS RECEIVABLE

 

Management reviews the composition of accounts receivable and analyzes historical bad debts. As of September 30, 2019, the Company did not have any accounts receivable.

 

PROPERTIES AND EQUIPMENT

 

Property and equipment are carried at cost less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful life of the assets from three to five years. Expenditures for maintenance and repairs are charged to expense as incurred.

 

REVENUE RECOGNITION STANDARDS

 

ASC 606-10 provides the following overview of how revenue is recognized from an entity’s contracts with customers: An entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

 

Step 1: Identify the contract(s) with a customer.

 

Step 2: Identify the performance obligations in the contract.

 

Step 3: Determine the transaction price – The transaction price is the amount of consideration in a contract to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer.

 

Step 4: Allocate the transaction price to the performance obligations in the contract – Any entity typically allocates the transaction price to each performance obligation on the basis of the relative standalone selling prices of each distinct good or service promised in the contract.

 

9
 

 

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation – An entity recognizes revenue when (or as) it satisfies a performance obligation by transferring a promised good or service to a customer (which is when the customer obtains control of that good or service).

 

The amount of revenue recognized is the amount allocated to the satisfied performance obligation. A performance obligation may be satisfied at a point in time (typically for promises to transfer goods to a customer) or over time (typically for promises to transfer service to a customer). For performance obligations satisfied over time, an entity recognizes revenue over time by selecting an appropriate method for measuring the entity’s progress toward complete satisfaction of that performance obligation. (Paragraphs 606-10 25-23 through 25-30).

 

In addition, ASC 606-10 contains guidance on the disclosures related to revenue, and notes the following:

 

It also includes a cohesive set of disclosure requirements that would result in an entity providing users of financial statements with comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from the entity’s contracts with customers. Specifically, Section 606-10-50 requires an entity to provide information about:

 

- Revenue recognized from contracts with customers, including disaggregation of revenue into appropriate categories.

 

- Contract balances, including the opening and closing balances of receivables, contract assets, and contract liabilities.

 

- Performance obligations, including when the entity typically satisfies its performance obligations and the transaction prices is that is allocated to the remaining performance obligations in a contract.

 

- Significant judgments, and changes in judgments, made in applying the requirements to those contracts.

 

Additionally, Section 340-40-50 requires an entity to provide quantitative and/or qualitative information about assets recognized from the costs to obtain or fulfill a contract with a customer.

 

The Company’s revenue recognition policies are in compliance with ASC 606-10. The Company recognizes consulting and advisory fee revenues in accordance with the above-mentioned guidelines and expenses are recognized in the period in which the corresponding liability is incurred.

 

STOCK-BASED COMPENSATION

 

Effective July 1, 2006, the Company adopted ASC 718-10-25 (previously SFAS 123R) and accordingly has adopted the modified prospective application method. Under this method, ASC 718-10-25 is applied to new awards and to awards modified, repurchased, or cancelled after the effective date. Additionally, compensation cost for the portion of awards that are outstanding as of the date of adoption for which the requisite service has not been rendered (such as unvested options) is recognized over a period of time as the remaining requisite services are rendered.

 

RISKS AND UNCERTAINTIES

 

In the normal course of business, the Company is subject to certain risks and uncertainties. The Company provides its service and receives marketable securities upon execution of transactions. Consequently, the value of the securities received from customers can be affected by economic fluctuations and each customer’s business growth. The actual realized value of these securities could be significantly different than recorded value.

 

RECENT ACCOUNTING PRONOUNCEMENTS

 

Update No. 2018-13 – August 2018

 

Fair Value Measurement (Topic 820): Changes to the Disclosure Requirements for Fair Value Measurement

 

10
 

 

Modifications: The following disclosure requirements were modified in Topic 820:

 

1. In lieu of a roll-forward for Level 3 fair value measurements, a nonpublic entity is required to disclose transfers into and out of Level 3 of the fair value hierarchy and purchases and issues of Level 3 assets and liabilities.

 

2. For investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date when restrictions from redemption might lapse only if the investee has communicated the timing to the entity or announced the timing publicly.

 

3. The amendments clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date.

 

Additions: The following disclosure requirements were added to Topic 820; however, the disclosures are not required for nonpublic entities:

 

1. The changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period.

 

2. The range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. For certain unobservable inputs, an entity may disclose other quantitative information (such as the median or arithmetic average) in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements.

 

The amendments in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

 

Update No. 2018-07 – June 2018

 

Compensation – Stock Compensation (Topic 718)

 

Improvements to Nonemployee Share-Based Payment Accounting

 

Main Provisions: The amendments in this Update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers.

 

The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year.

 

Update No. 2017-13 - September 2017

 

Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606)

 

FASB Accounting Standards Updates No. 2014-09, Revenue from Contracts with Customers (Topic 606), issued in May 2014 and codified in ASC Topic 606, Revenue from Contracts with Customers, and No. 2016-02.

 

The transition provisions in ASC Topic 606 require that a public business entity and certain other specified entities adopt ASC Topic 606 for annual reporting 3 periods beginning after December 15, 2017, including interim reporting periods within that reporting period. FN2 All other entities are required to adopt ASC Topic 606 for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019.

 

11
 

 

Update No. 2016-10 - April 2016

 

Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing

 

The core principle of the guidance in Topic 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps:

 

1. Identify the contract(s) with a customer.

2. Identify the performance obligations in the contract.

3. Determine the transaction price.

4. Allocate the transaction price to the performance obligations in the contract.

5. Recognize revenue when (or as) the entity satisfies a performance obligation.

 

The amendments in this Update do not change the core principle of the guidance in Topic 606. Rather, the amendments in this Update clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas.

 

The Company has either evaluated or is currently evaluating the implications, if any, of each of these pronouncements and the possible impact they may have on the Company’s financial statements. In most cases, management has determined that the implementation of these pronouncements would not have a material impact on the financial statements taken as a whole.

 

NOTE 3 – MARKETABLE EQUITY SECURITIES AVAILABLE FOR SALE

 

The Company’s marketable securities are classified as available-for-sale and, as such, are carried at fair value. All of the securities are comprised of shares of common stock of the investee. Securities classified as available-for-sale may be sold in response to changes in interest rates, liquidity needs, and for other purposes. These marketable securities are quoted on the OTC Markets or other public exchanges and are accounted for in accordance with the provisions of SFAS No. 115.

 

Marketable securities held by the Company and classified as available for sale as of September 30, 2019 consisted of 905,000 shares of Myson Group, Inc. (formerly Vanguard Mining Corporation) 292,050,000 shares of Sports Pouch Beverage Co., both of which are publicly-traded companies quoted on the OTC Markets (Trading symbols “MYSN” and “SPBV,” respectively). The fair value of the shares recorded as of September 30, 2019 was $158,695.

 

Securities available for sale   Level 1   Level 2     Level 3     Total  
September 30, 2019   None   $ 12,670     $ 146,025     $ 158,695  
June 30, 2019   None   $ 9,050     $ 204,435     $ 213,485  

 

NOTE 4 – PROPERTIES AND EQUIPMENT

 

The Company did not have any properties or equipment as of September 30, 2019.

 

NOTE 5 – OTHER CURRENT ASSETS

 

As of September 30, 2019, Other Current Assets comprise of $862,237 in escrow deposit with DLP Law Firm as part of the fees for setting up PHILUX Global Funds and $1,605 loan to American Laser Healthcare, Inc.

 

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NOTE 6 – CURRENT LIABILITIES

 

Current Liabilities of the Company consist of the followings as of September 30, 2019 and June 30, 2019.

 

    Sep 30, 2019     Jun 30, 2019  
Accounts payable     212,985       189,152  
Subfund obligations     1,266,634       1,266,634  
Accrued expenses     2,511,823       2,389,111  
Short-term notes payable (net)     334,700       331,700  
Convertible Promissory Notes (net)     286,840       273,903  
Due to officers     992,052       890,897  
Advances from customers     430,500       438,000  
Derivative liabilities     281,320       1,307,421  
Total current liabilities   $ 6,316,854     $ 7,086,819  

 

ACCRUED EXPENSES: Accrued expenses as of September 30, 2019 consist of $1,335,151 in accrued salaries and $1,176,672 in accrued interest from short-term notes.

 

NOTES PAYABLE (NET): As of September 30, 2019, Notes Payable consist of $334,700 in short-term notes payable and $286,840 in convertible promissory notes.

 

ADVANCES FROM CUSTOMERS:

 

The Company recorded $430,500 as Advances from Customers for $288,219 of consulting fees previously received from a client and the balance in accrued interest. 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.

 

SUB-FUND OBILGATIONS: During the fiscal year ended June 30, 2019, the Company received $800,000 from European Plastic Joint Stock Company towards the expenses and capitalization for setting up the energy sub-fund and $466,634 from Saigon Pho Palace Joint Stock Company towards the expenses and capitalization for setting up the real estate sub-fund respectively under the master PHILUX Global Funds. The Company has recorded these amounts as liabilities until these sub-funds are set up and activated, at which time the sub-fund participants will receive 49% of the general partners’ portion of ownership in the relevant sub-funds for a total contribution of $2,000,000 each.

 

NOTE 7 – DUE TO OFFICERS

 

Due to officer, represents loans and advances made by officers and directors of the Company and its subsidiaries, unsecured and due on demand. As of September 30, 2019 and June 30, 2019, the balances were $992,052 and $890,897, respectively.

 

Officers/Directors   September 30, 2019     June 30, 2019  
Henry Fahman                          328,702     $ 227,547  
Tam Bui     663,350     $ 663,350  
Total   $ 992,052     $ 890,897  

 

NOTE 8 – LOANS AND PROMISSORY NOTES

 

A. SHORT TERM NOTES PAYABLE:

 

In the course of its business, the Company has obtained short-term loans from individuals and institutional investors.

 

During the quarter ended September 30, 2019, the Company received a $3,000 loan bearing 8% interest per annum from a shareholder .

 

As of September 30, 2019, the Company had $334,700 in short-term notes payable with $1,176,672 accrued and unpaid interest. These notes bear interest rates ranging from 0% to 36% per annum.

 

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B. CONVERTIBLE PROMISSORY NOTES OUTSTANDING AS OF SEPTEMBER 30, 2019

 

As of September 30, 2019, the Company had a net balance of $286,840 in convertible promissory notes. The derivative liabilities associated with these notes are $281,320 as of September 30, 2019.

 

The Company relies on the results a professional, independent valuation firm to record the value of derivative liabilities, discounts, and change in fair value of derivatives in connection with these convertible notes and warrants, if any, that are related to the convertible notes.

 

NOTE 9 – 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 September 30, 2019. As of April 05, 2021, the total balance as most recently notified by the Internal Revenue Service is estimated to be $4,704.

 

NOTE 10 – BASIC AND DILUTED NET PROFIT (LOSS) PER SHARE

 

Net loss per share is calculated in accordance with SFAS No. 128, “Earnings per Share”. Under the provision of SFAS No. 128, basic net loss per share is computed by dividing the net loss for the period by the weighted-average number of common shares outstanding for the period. Diluted EPS is based on the weighted-average number of shares of common stock outstanding for the period and common stock equivalents outstanding at the end of the period. Basic and diluted weighted average numbers of shares for the period ended September 30, 2019 were the same since the inclusion of Common stock equivalents is anti-dilutive.

 

NOTE 11STOCKHOLDER’S EQUITY

 

As of September 30, 2019, the total number of authorized capital stock of the Company was shares with a par value of $0.001 per share, consisting of 30,500,000,000 shares of voting Common Stock with a par value of $0.001 per share and 500,000,000 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 September 30, 2019 was 484,767 post-split shares valued at $44,170 according to cost method.

 

COMMON STOCK

 

During the quarter ended September 30, 2019, the Company issued the following amounts of its Common Stock for cash and conversion of notes:

 

DATE   NAME   AMOUNT OF SHARES     CONSIDERATIONS
7/19/19   ANDREAS HELD     20,000,000     Cash
7/25/19   JSJ INVESTMENTS, INC.     491,458,083     Note conversion
8/16/19   JSJ INVESTMENTS, INC.     212,148,000     Note conversion
8/22/19    JSJ INVESTMENTS, INC.     525,934,781     Note conversion
8/29/19   CROWN BRIDGE PARTNERS LLC     525,000,000     Note conversion
9/4/19   AUCTUS FUND, LLC     224,451,600     Note conversion
9/5/19   ADAR ALEF LLC     599,230,769     Note conversion
9/6/19   JSJ INVESTMENTS, INC.     588,428,714     Note conversion

 

As of September 30, 2019, there were 13,196,408,755 shares of the Company’s common stock issued and outstanding.

 

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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 of September 30, 2019 the designations of the Company’s Preferred Stock were as follows:

 

CLASS A PREFERRED STOCK

 

I. DESIGNATIONS, AMOUNTS AND DIVIDENDS

 

1. Class A Series I Cumulative Convertible Redeemable Preferred Stock

 

A. Designation: Twenty million (20,000,000) shares of the authorized 500,000,000 shares of Preferred Stock, with a par value of $0.001 per share, are designated as 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. Twenty-five million (25,000,000) shares of the authorized 500,000,000 shares of Preferred Stock, with a par value of $0.001 per share, are designated 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. Fifty million (50,000,000) shares of the authorized 500,000,000 shares of Preferred Stock, with a par value of $0.001 per share, are designated as 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.

 

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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.

 

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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.

 

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CLASS B PREFERRED STOCK

 

Class B Series I Preferred Stock

 

A. Designation: Two hundred thousand shares of the authorized 500,000,000 shares of Preferred Stock, with a par value of $0.001 per share, are designated as Class B Series I Preferred Stock.

 

B. Number of Shares: The number of shares of Class B Series I Preferred Stock authorized will be two hundred 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 September 30, 2019, the following amounts of Preferred Stock were issued and outstanding:

 

Class A Series II Preferred Stock: 10,000,000 shares.

Class B Series I Preferred Stock: 120,000 shares.

 

AMENDMENTS TO ARTICLES OF INCORPORATION:

 

On October 29, 2018, a Certificate of Amendment to Articles of Incorporation of PHI Group, Inc. was filed with the Nevada Secretary of State to amend Article V of the Articles of Incorporation to change the authorized capital stock of the Corporation to 3,000,000,000 shares with a par value of $0.001 per share, consisting of 2,800,000,000 shares of voting Common Stock with a par value of $0.001 per share and 200,000,000 shares of Preferred Stock with a par value of $0.001 per share. The rights and terms associated with the shares of Preferred Stock will be determined by the Board of Directors of the Corporation.

 

On November 08, 2018, a Certificate of Amendment to Articles of Incorporation of PHI Group, Inc. was filed with the Nevada Secretary of State to amend Article V of the Articles of Incorporation to change the authorized capital stock of the Corporation to 4,000,000,000 shares with a par value of $0.001 per share, consisting of 3,800,000,000 shares of voting Common Stock with a par value of $0.001 per share and 200,000,000 shares of Preferred Stock with a par value of $0.001 per share. The rights and terms associated with the shares of Preferred Stock will be determined by the Board of Directors of the Corporation.

 

On November 27, 2018, a Certificate of Amendment to Articles of Incorporation of PHI Group, Inc. was filed with the Nevada Secretary of State to amend Article V of the Articles of Incorporation to change the authorized capital stock of the Corporation to 5,000,000,000 shares with a par value of $0.001 per share, consisting of 4,800,000,000 shares of voting Common Stock with a par value of $0.001 per share and 200,000,000 shares of Preferred Stock with a par value of $0.001 per share. The rights and terms associated with the shares of Preferred Stock will be determined by the Board of Directors of the Corporation.

 

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On January 03, 2019, a Certificate of Amendment to Articles of Incorporation of PHI Group, Inc. was filed with the Nevada Secretary of State to amend Article V of the Articles of Incorporation to change the authorized capital stock of the Corporation to 7,000,000,000 shares with a par value of $0.001 per share, consisting of 6,900,000,000 shares of voting Common Stock with a par value of $0.001 per share and 100,000,000 shares of Preferred Stock with a par value of $0.001 per share. The rights and terms associated with the shares of Preferred Stock will be determined by the Board of Directors of the Corporation.

 

On February 19, 2019, a Certificate of Amendment to Articles of Incorporation of PHI Group, Inc. was filed with the Nevada Secretary of State to amend Article V of the Articles of Incorporation to change the authorized capital stock of the Corporation to ten billion shares with a par value of $0.001 per share, consisting of 9.8 billion shares of voting Common Stock with a par value of $0.001 per share and 200,000,000 shares of Preferred Stock with a par value of $0.001 per share. The rights and terms associated with the shares of Preferred Stock will be determined by the Board of Directors of the Corporation.

 

On February 27, 2019, a Certificate of Amendment to Articles of Incorporation of PHI Group, Inc. was filed with the Nevada Secretary of State to amend Article V of the Articles of Incorporation to change the authorized capital stock of the Corporation to fifteen billion shares with a par value of $0.001 per share, consisting of 14.8 billion shares of voting Common Stock with a par value of $0.001 per share and 200,000,000 shares of Preferred Stock with a par value of $0.001 per share. The rights and terms associated with the shares of Preferred Stock will be determined by the Board of Directors of the Corporation.

 

On March 29, 2019, a Certificate of Amendment to Articles of Incorporation of PHI Group, Inc. was filed with the Nevada Secretary of State to amend Article V of the Articles of Incorporation to change the authorized capital stock of the Corporation to thirty-one billion shares with a par value of $0.001 per share, consisting of 30.5 billion shares of voting Common Stock with a par value of $0.001 per share and 500,000,000 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.

 

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.”

 

On June 25, 2020, the Company filed Articles of Amendment with the Wyoming Secretary of State to amend the authorized capital of the Company as follows:

 

Total authorized capital: Forty billion shares of Common Stock with a par value of $0.001 per share and five hundred million 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.

 

The Company continued to operate as a Nevada corporation until June 30, 2020.

 

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NOTE 12STOCK-BASED COMPENSATION PLAN

 

On February March 18, 2015, the Company adopted an Employee Benefit Plan to set aside 1,000,000 shares of common stock for eligible employees and independent contractors of the Company and its subsidiaries. As of March 31, 2018 the Company has not issued any stock in lieu of cash under this plan.

 

On September 23, 2016, the Company issued incentive stock options and nonqualified stock options to certain key employee(s) (Henry Fahman – CEO/CFO) and directors (Tam Bui, Henry Fahman, and Frank Hawkins constitute the Board of Directors) as deferred compensation. The options allow the holders to acquire the Company’s Common Stock at the fair exercise price of the Company’s Common Stock on the grant date of each option at $0.24 per share, based on the 10-days’ volume-weighted average price prior to the grant date. The number of options is equal to a total of 6,520,000. The options terminate seven years from the date of grant and become vested and exercisable after one year from the grant date. The following assumptions were used in the Monte Carlo analysis by Doty Scott Enterprises, Inc., an independent valuation firm, to determine the fair value of the stock options:

 

Risk-free interest rate     1.18 %
Expected life     7 years  
Expected volatility     239.3 %
Vesting is based on a one-year cliff from grant date.        

 

Annual attrition rates were used in the valuation since ongoing employment was condition for vesting the options.

 

The fair value of the Company’s Stock Options as of issuance valuation date is as follows:

 

Holder   Issue Date   Maturity
Date
  Stock Options     Exercise Price   Fair Value at
Issuance
 
                         
Tam Bui   9/23/2016   9/23/2023     875,000     Fixed price: $0.24   $ 219,464  
Frank Hawkins   9/23/2016   9/23/2023     875,000     Fixed price: $0.24   $ 219,464  
Henry Fahman   9/23/2016   9/23/2023     4,770,000     Fixed price: $0.24   $ 1,187,984  

 

NOTE 13RELATED PARTY TRANSACTIONS

 

The Company accrued $52,500 in salaries for the President and the Secretary & Treasurer of the Company during the quarters ended September 30, 2019 and September 30, 2018.

 

During the quarter ended September 20, 2019, the Company received $100,000 from Henry Fahman, Chairman and Chief Executive Officer of the Company, as a short-term loan to be paid on demand without interest.

 

NOTE 14CONTRACTS AND COMMITMENTS

 

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.

 

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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. The master Luxembourg RAIF fund named “PHILUX Global Funds SCA, SICAV – RAIF” was registered and activated with the Luxembourg Commission de Surveillance du Secteur Financier (CSSF) on June 11, 2020, Registration No. B244952.

 

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. Though this transaction was technically closed on September 28, 2018, the Company did not recognize the operations of Vinafilms JSC in its consolidated financial statements as of September 30, 2019 and will not do so until a GAAP audit of Vinafilms JSC financial statements are conducted and completed by a PCAOB-registered auditing firm.

 

NOTE 15GOING CONCERN UNCERTAINTY

 

As shown in the accompanying consolidated financial statements, the Company has accumulated deficit of $42,159,225 as of September 30, 2019 and total stockholders’ deficit of $5,213,365. For the quarter ended September 30, 2019, the Company incurred a net loss of $353,432 as compared to a net loss in the amount of $917,683 during the same period ended September 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, 2021 and beyond.

 

NOTE 16 – SUBSEQUENT EVENT

 

These financial statements were approved by management and available for issuance on or about April 9, 2021. Subsequent events have been evaluated through this date.

 

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1. ISSUANCE OF COMMON STOCK.

 

The Company has issued the following amounts of Common Stock since the end of the quarter ended September 30, 2019:

 

SHARES ISSUED FROM OCTOBER 01, 2019 THROUGH APRIL 09, 2021

 

DATE   NAME   AMOUNT OF SHARES     CONSIDERATIONS
5/14/20   ANDREAS HELD     16,000,000     Cash
6/10/20   ANDREAS HELD     20,000,000     Cash
8/7/20   ONE44 CAPITAL LLC     239,611,455     Note conversion
12/2/20   ADAR ALEF LLC     318,050,962     Note conversion
12/3/20   ONE44 CAPITAL LLC     154,538,182     Note conversion
12/15/20   ONE44 CAPITAL LLC     163,666,182     Note conversion
12/22/20   JSJ INVESTMENTS, INC.     100,000,000     Note conversion
12/24/20   ONE44 CAPITAL LLC     155,732,187     Note conversion
12/30/20   JSJ INVESTMENTS, INC.     100,000,000     Note conversion
1/4/21   ONE44 CAPITAL LLC     170,025,603     Note conversion
1/8/21   JSJ INVESTMENTS, INC.     100,000,000     Note conversion
1/8/21   EMA FINANCIAL LLC     200,000,000     Note conversion
1/12/21   ONE44 CAPITAL LLC     200,308,909     Note conversion
1/15/21   JSJ INVESTMENTS, INC.     100,000,000     Note conversion
1/21/21   EMA FINANCIAL LLC     250,000,000     Note conversion
1/22/21   ONE44 CAPITAL LLC     323,442,182     Note conversion
1/25/21   JSJ INVESTMENTS, INC.     100,000,000     Note conversion
1/26/21   JSJ INVESTMENTS, INC.     200,000,000     Note conversion
2/3/21   ONE44 CAPITAL LLC     246,027,364     Note conversion
2/9/21   JSJ INVESTMENTS, INC.     571,064,466     Note conversion
2/9/21   CROWN BRIDGE PARTNERS LLC     216,393,200     Note conversion
2/9/21   CROWN BRIDGE PARTNERS LLC     238,365,100     Note conversion
2/22/21   EMA FINANCIAL LLC     200,000,000     Note conversion
2/23/21   EMA FINANCIAL LLC     650,000,000     Note conversion
2/24/21   JSJ INVESTMENTS, INC.     135,896,680     Note conversion
2/26/21   EMA FINANCIAL LLC     850,000,000     Note conversion
3/04/21   EMA FINANCIAL LLC     800,000,000     Note conversion
3/11/21   EMA FINANCIAL LLC     900,000,000     Note conversion
3/17/21   EMA FINANCIAL LLC     624,233,000     Note conversion
3/19/21   JSJ INVESTMENTS, INC.     3,417,442     Note conversion
3/22/21   LG CAPITAL FUNDING, LLC.     952,056,400     Note conversion
3/31/21   EMA FINANCIAL LLC     750,000,000     Note conversion
4/07/21   EMA FINANCIAL LLC     750,000,000     Note conversion

 

2. ESTABLISHMENT AND ACTIVATION OF PHILUX GLOBAL FUNDS SCA, SICAV-RAIF

 

On June 11, 2020, the Company received the approval from the Luxembourg Commission de Surveillance du Secteur Financier (CSSF) and successfully established and activated PHILUX GLOBAL FUNDS SCA, SICAV-RAIF (the “Fund”), Registration No. B244952, a Luxembourg bank fund organized as a Reserved Alternative Investment Fund in accordance with the Luxembourg Law of July 23, 2016 relative to reserved alternative investment funds, Law of August 23, 2016 relative to commercial companies, and Modified Law of July 12, 2013 relative to alternative investment fund managers.

 

The following entities have been engaged to support the Fund’s operations: a) Custodian Bank: Hauck & Aufhauser Privatbankiers AG, b) Administrative Registrar & Transfer Agent: Hauck & Aufhauser Alternative Investment Services S.A., c) Fund Manager: Hauck & Aufhauser Fund Services S.A., d) Fund Attorneys: DLP Law Firm SARL and VCI Legal, e) Investment Advisor: PHILUX Capital Advisors, Inc., f) Fund Auditors: E&Y Luxembourg and E&Y Vietnam, g) Fund Tax Advisor: ATOZ Tax Management, Luxembourg, h) Fund Independent Asset Valuator: Cushman & Wakefield, Vietnam.

 

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The Fund is an umbrella fund containing one or more sub-fund compartments intended to invest in real estate, renewable energy, agriculture, healthcare and especially the Asia Diamond Exchange and the International Financial Center in Vietnam.

 

3. DEVELOPMENT OF THE ASIA DIAMOND EXCHANGE IN VIETNAM

 

Along with the establishment of PHILUX Global Funds, since March 2018 the Company has worked closely with the Authority of Chu Lai Open Economic Zone and the Provincial Government of Quang Nam, Vietnam to develop the Asia Diamond Exchange. Quang Nam Provincial Government has agreed to allocate more than 200 hectares in the sanctioned Free-Trade Zone near Chu Lai Airport, Nui Thanh District, Quang Nam Province in Central Vietnam for us to set up a multi-commodities center which would include the Asia Diamond Exchange. Recently, another opportunity has arisen with the start of construction of the new international airport in Long Thanh District, Dong Nai Province near Ho Chi Minh City in Southern Vietnam. In December 2020, the Vietnamese central government designated 1,200 hectares of land in Bau Can village, Long Thanh District, Dong Nai Province as a new industrial zone. We are in the process of applying for 600 hectares close to the Long Thanh International Airport to develop Long Thanh Multi-Commodities Logistics Center (LMLC) which would house the proposed International Financial Center, an Urban Area and other hi-tech industrial operations.

 

4. AGREEMENTS

 

A. CONSULTING SERVICE AGREEMENT WITH GLINK APPS JSC

 

On December 23, 2019, PHI Capital Holdings, Inc., a subsidiary of the Company, (name changed to PHILUX Capital Advisors, Inc. effective June 03, 2020) signed a Consulting Service Agreement to provide consulting service to Glink Apps JSC, a Wyoming corporation, and assist the latter to become a publicly traded company in the U.S. According to the agreement, Glink Apps JSC will pay PHI Capital Holdings, Inc. $88,500 in cash and five million (5,000,000) shares of its common stock for the consulting service to be rendered.

 

B. BUSINESS COOPERATION AGREEMENT WITH NATURAL WELL TECHNICAL LTD.

 

On April 27, 2020, the Company signed a Business Cooperation Agreement with Natural Well Technical Ltd. (“NWTL”), a company organized and existing under the laws of Republic of China and engaged in research and development of innovative biotechnologies that may have significant applications for healthcare, beauty supply, agriculture and industry.

 

NWTL and the Company agree to jointly cooperate in the research and development activities of pertinent technologies that have been initiated and continue to be carried out by NWTL and applying them to produce commercial products and services in the fields of healthcare, beauty supply, agriculture and industry, as the case may be, as well as any other business activities deemed mutually beneficial.

 

In particular, NWTL and the Company will initially focus on the following activities:

 

a. Developing and implementing a comprehensive plan to increase the production, marketing and sale of the “Super Green” High Energy Drop Drink and “Mistyrious” Fine Mist Spray products on a large scale worldwide;

 

b. Developing and implementing a plan to increase the production, marketing and sale of “Super Cassava” and “Uni-Wash” Engine Booster products as well as other products related to the fields of agriculture and energy that have been studied and developed by NWTL;

 

c. Continuing to conduct research and accumulate clinical data for NWTL’s biotechnologies in order to obtain U.S. FDA’s approval of cancer treatments and other healthcare products. In addition, both parties also develop, produce and market beauty supply products.

 

d. Designing a financial plan and providing the required funding for NWTL to execute its business plan.

 

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C. INVESTMENT ADVISORY AGREEMENT AMONG PHILUX CAPITAL ADVISORS, INC., HAUCK & AUFHAUSER FUND SERVICES S.A. AND PHILUX GLOBAL FUNDS SCA, SICAV-RAIF

 

On June 11, 2020, PHILUX CAPITAL ADVISORS, INC. (the “Investment Advisor”) signed an Investment Advisory Agreement among Hauck & Aufhauser Fund Services S.A.(the “AIFM”) and PHILUX Global Funds SCA, SICAV-RAIF an umbrella-fund composed of one or more sub-funds (the “Fund”) to serve as the Investment Advisor for PHILUX Global Funds. According to the Agreement, the Investment Advisor will cooperate in the definition of the investment strategy and its implementation in an advisory capacity, develop proposals for specific investment policy of the Fund, advise and support the AIFM in the selection of the investments and to make investment recommendations, carry out due diligence process, present suitable investments selected in consideration of the investment policy and investment restrictions of the Fund, provide support in the conclusion of purchase and sale transactions, observe and analyze relevant markets and potential investments, provide advice and support to the AIFM and give recommendations in the event of a sale of investments, support investors of the Fund in onboarding management, granting information on Fund-relevant issues, as well as channeling and answering all investor questions, support the AIFM in its performance of risk control and with the completion of subscription agreements. The Investment Advisor shall receive from the General Partner of the Fund a remuneration as stated in the fees annex to the Investment Advisory Agreement.

 

D. AGREEMENT WITH TECCO GROUP FOR PARTICIPATION IN PHILUX INFRASTRUCTURE FUND COMPARTMENT OF PHILUX GLOBAL FUNDS

 

On August 10, 2020, Tecco Group, a Vietnamese company, signed an agreement with PHI Luxembourg Development SA, a subsidiary of the Company, to participate in the proposed infrastructure fund compartment of PHILUX Global Funds SCA, SICAV-RAIF. According to the agreement, Tecco Group will contribute $2,000,000 for 49% ownership of the general partners’ portion of said infrastructure fund compartment. As of April 05, 2021, Tecco Group has paid four billion Vietnam Dong (VND) towards the total agreed amount.

 

E. AGREEMENT WITH PHAT VAN HUNG CO. LTD. FOR PARTICIPATION IN PHILUX REAL ESTATE FUND COMPARTMENT OF PHILUX GLOBAL FUNDS

 

On November 09, 2020, Phat Van Hung Co. Ltd. signed an agreement with PHI Luxembourg Development SA, a subsidiary of the Company, to participate in the real estate fund compartment of PHILUX Global Funds SCA, SICAV-RAIF. According to the agreement, Phat Van Hung Co. Ltd. will contribute $2,000,000 for 49% ownership of the general partners’ portion of said real estate fund compartment. As of April 05, 2021, Phat Van Hung has not made any payment towards the agreed amount.

 

F. AGREEMENT WITH XUAN QUYNH LLC FOR PARTICIPATION IN PHILUX INFRASTRUCTURE FUND COMPARTMENT OF PHILUX GLOBAL FUNDS

 

On November 20, 2020, Xuan Quynh LLC, a Vietnamese company, signed an agreement with PHI Luxembourg Development SA, a subsidiary of the Company, to participate in the proposed infrastructure fund compartment of PHILUX Global Funds SCA, SICAV-RAIF. According to the agreement, Xuan Quynh LLC will contribute $2,000,000 for 49% ownership of the general partners’ portion said infrastructure fund compartment. As of April 05, 2021, Xuan Quynh LLC has not made any payment towards the agreed amount.

 

G. INVESTMENT AGREEMENTS AND MEMORANDUM OF UNDERSTANDING

 

From August 24, 2020 to November 11, 2020, the Company through its Luxembourg bank fund mother holding company PHI Luxembourg Development SA and PHILUX Global Funds SCA, SICAV-RAIF has signed investment agreements and memorandum of understanding with three non-US entities for total investments of more than one billion U.S. dollars. However, as of the date of this report, the Company has not received any money from these investment agreements and there is no guarantee that any money will be received from these agreements and memorandum of understanding in the future.

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Except for the audited historical information contained herein, this report specifies forward-looking statements of management of the Company within the meaning of Section 27a of the Securities Act of 1933 and Section 21e of the Securities Exchange Act of 1934 (“forward-looking statements”) including, without limitation, forward-looking statements regarding the Company’s expectations, beliefs, intentions and future strategies. Forward-looking statements are statements that estimate the happening of future events and are not based on historical facts. Forward- looking statements may be identified by the use of forward-looking terminology, such as “could”, “may”, “will”, “expect”, “shall”, “estimate”, “anticipate”, “probable”, “possible”, “should”, “continue”, “intend” or similar terms, variations of those terms or the negative of those terms. The forward-looking statements specified in this report have been compiled by management of the Company on the basis of assumptions made by management and considered by management to be reasonable. Future operating results of the Company, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements. The assumptions used for purposes of the forward-looking statements specified in this report represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. In addition, those forward-looking statements have been compiled as of the date of this report and should be evaluated with consideration of any changes occurring after the date of this report. No assurance can be given that any of the assumptions relating to the forward-looking statements specified in this report are accurate and the Company assumes no obligation to update any such forward-looking statements.

 

INTRODUCTION

 

PHI Group, Inc. (the “Company” or “PHI”) (www.phiglobal.com) is primarily engaged in the operations of PHILUX Global Funds, SCA, SICAV-RAIF, a “Reserved Alternative Investment Fund” (“RAIF”) under the laws of Luxembourg, and the development of the Asia Diamond Exchange in Vietnam. Besides, the Company provides corporate finance services, including merger and acquisition advisory and consulting services for client companies through our wholly owned subsidiary PHILUX Capital Advisors, Inc. (formerly PHI Capital Holdings, Inc.) (www.philuxcap.com) and invests in selective industries as well as special situations that may potentially create significant long-term value for shareholders. PHILUX Global Funds plans to include a number of sub-funds for investment in the proposed Asia Diamond Exchange in Vietnam (ADE), real estate, infrastructure, agriculture, renewable energy, and healthcare.

 

BACKGROUND

 

Originally incorporated on June 8, 1982 as JR Consulting, Inc., a Nevada corporation, the Company applied for a Certificate of Domestication and filed Articles of Domestication to become a Wyoming corporation on September 20, 2017. In the beginning, the Company was foremost engaged in mergers and acquisitions and had an operating subsidiary, Diva Entertainment, Inc., which operated two modeling agencies, one in New York and one in California. In January 2000, the Company changed its name to Providential Securities, Inc., a Nevada corporation, following a business combination with Providential Securities, Inc., a California-based financial services company. 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 Philand Ranch Limited, a United Kingdom corporation previously listed on the Frankfurt Stock Exchange (together with its subsidiaries Philand Ranch - Singapore, Philand Corporation - US, and Philand Vietnam Ltd. - Vietnam), Providential Vietnam Ltd., 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.

 

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The Company is currently focused on operating PHILUX Global Funds, SCA, SICAV-RAIF by setting up a number of sub-funds for investment in real estate, renewable energy, infrastructure, agriculture and healthcare as well as developing and establishing the Asia Diamond Exchange in Vietnam. In addition, PHILUX Capital Advisors, Inc. (formerly Capital Holdings, Inc.), a wholly owned subsidiary of the Company, continues to provide corporate and project finance services, including merger and acquisition (M&A) advisory and consulting services for other client companies. No assurances can be made that the Company will be successful in achieving its plans.

 

BUSINESS STRATEGY

 

PHI’s strategy is to:

 

1. Identify, build, acquire, commit and deploy valuable resources with distinctive competitive advantages;

 

2. Identify, evaluate, acquire, participate and compete in attractive businesses that have large, growing market potential;

 

3. Build an attractive investment that includes points of exit for investors through capital appreciation or spin-offs of business units.

 

SUBSIDIARIES:

 

As of September 30, 2019, the Company owned the following subsidiaries: (1) PHILUX Capital Advisors, Inc., a Wyoming corporation (100% owned), (2) PHI Luxembourg Development S.A., a Luxembourg corporation (100% owned), (3) PHILUX Global Funds SCA, SICAV-RAIF, a Luxembourg bank fund, (4) PHI Vietnam Investment and Development Company Ltd., a Vietnamese limited liability company (100% owned), (5) American Pacific Plastics, Inc., a Wyoming corporation (100% owned), (6) American Pacific Resources, Inc., a Wyoming corporation (100% owned), (7) Phivitae Corporation, a Wyoming corporation – name changed to “Phivitae Healthcare, Inc.” on March 17, 2020 (100% owned).

 

PHILUX CAPITAL ADVISORS, INC. (formerly PHI Capital Holdings, Inc.)

 

PHILUX CAPITAL ADVISORS, INC., a wholly owned subsidiary of the Company, was originally incorporated under the name of “Providential Capital, Inc.” in 2004 as a Nevada corporation and to provide merger and acquisition (M&A) advisory services, consulting services, project financing, and capital market services to clients in North America and Asia. In May 2010, Providential Capital, Inc. changed its name to PHI Capital Holdings, Inc. It was re-domiciled as a Wyoming corporation on September 20, 2017 and changed its name to “PHILUX Capital Advisors, Inc.” on June 03, 2020. This subsidiary has successfully managed merger plans for several privately held and publicly traded companies and continues to focus on serving the Pacific Rim markets in the foreseeable future. This subsidiary currently serves as the investment advisor to “PHILUX Global Funds SCA, SICAV-RAIF,” a Luxembourg Reserved Alternative Investment Fund established by PHI Luxembourg Development S.A.

 

PHI LUXEMBOURG DEVELOPMENT S.A.

 

PHI Luxembourg DEVELOPMENT S.A., a wholly-owned subsidiary of the Company, was incorporated in the Grand Duchy of Luxembourg on December 03, 2018 to serve as the mother holding company for PHILUX Global Funds, a Luxembourg bank fund known as “Reserved Alternative Investment Fund”.

 

PHILUX GOBAL FUNDS SCA, SICAV-RAIF

 

PHILUX Global Funds SCA, SICAV-RAIF, a Luxembourg Bank Fund organized as a Reserved Alternative Investment Fund 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, was activated on June 11, 2020, Registration No. B244952. The Company intends to organize a number of sub-funds under the umbrella of PHILUX Global Funds for investment in real estate, infrastructure, agriculture, renewable energy, healthcare, the proposed Asia Diamond Exchange and International Financial Center to be established in Vietnam.

 

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PHI VIETNAM INVESTMENT AND DEVELOPMENT COMPANY LIMITED

 

PHI VIETNAM INVESTMENT AND DEVELOPMENT COMPANY LIMITED

 

Established as a Vietnam-based company in May 2018, PHI Vietnam Investment and Development Company Limited (“PHI VN”) is a wholly-owned subsidiary of the Company to engage in consulting services in Vietnam. PHI VN will serve as a special consultant to PHILUX Capital Advisors, Inc. to assist PHILUX Global Funds with respect to investments in Vietnam.

 

AMERICAN PACIFIC RESOURCES, INC.

 

American Pacific Resources, Inc. (“APR”) is a Wyoming corporation established in April 2016 to serve as a holding company for various natural resource projects. On September 2, 2017, APR entered into an Agreement of Purchase and Sale with Rush Gold Royalty, Inc. (“RGR”), a Wyoming corporation, to acquire a 51% ownership in twenty-one mining claims over an area of approximately 400 acres in Granite Mining District, Grant County, Oregon, U.S.A., in exchange for a total purchase price of twenty-five million U.S. Dollars ($US 25,000,000) to be paid in a combination of cash, convertible demand promissory note and PHI Group, Inc.’s Class A Series II Convertible Cumulative Redeemable Preferred Stock (“Preferred Stock”). This transaction was closed effective October 3, 2017. Following the first amendment dated April 19, 2018 and the second amendment dated September 29, 2018 retroactively effective April 20, 2018, to the afore-mentioned Agreement of Purchase and Sale, PHI Group, Inc. paid ten million shares of its Class A Series II Convertible Cumulative Redeemable Preferred Stock, a convertible demand promissory note and cash totaling $25,000,000 to Rush Gold Royalty, Inc. For the fiscal year ended June 30, 2019, the Company only recorded $462,000 paid for this transaction as expenses for research and development in connection with the Granite Mining Claims project. The value of these mining claims is expected to be adjusted later after a new valuation of these mining assets is conducted by an independent third-party valuator.

 

SPECIAL STOCK DIVIDEND FROM AMERICAN PACIFIC RESOURCES, INC. SUBSIDIARY

 

On April 23, 2018, the Company’s Board of Directors passed a resolution to declare a twenty percent (20%) special stock dividend from its holdings of Common Stock in American Pacific Resources, Inc., a subsidiary of the Company, to shareholders of Common Stock of the Company as follows: (a) Declaration date: April 23, 2018; (b) Record date: May 31, 2018; (c) Payment date: October 31, 2018; (d) Dividend ratio: All eligible shareholders of Common Stock of the Company as of the Record date shall be entitled to receive two (2) shares of Common Stock of American Pacific Resources, Inc. for every ten (10) shares of Common Stock of PHI Group, Inc. held by such shareholders as of the referenced Record date. The payment date was rescheduled for March 29, 2019.

 

Most recently, on December 28, 2020, the Board of Directors of PHI Group, Inc., adopted a resolution to further extend the Record Date to June 30, 2021 and state the provisions for the afore-mentioned stock dividend as follows: (a) Eligible shareholders: In order to be eligible for the above-mentioned special stock dividend, the minimum amount of Common Stock of PHI Group, Inc. each shareholder must hold as of June 30, 2021 (the New Record Date) is twenty (20) shares; (b) Dividend ratio: All eligible shareholders of Common Stock of the Company as of the new Record Date will be entitled to receive one (1) share of Common Stock of American Pacific Resources, Inc. for every twenty (20) shares of Common Stock of PHI Group, Inc. held by such shareholders as of the new Record date; and (c) Payment Date: the Payment Date for the distribution of the special stock dividend to be ten (10) business days after a registration statement for said special stock dividend shares is declared effective by the Securities and Exchange Commission.

 

AMERICAN PACIFIC PLASTICS, INC.

 

American Pacific Plastics, Inc. (“APP”) is a Wyoming corporation established in July 2018 to serve as a holding company for the acquisition of Vinafilms JSC (Công ty Cổ phần Màng Bao Bì Tân Vinh Nam Phát - “VNF”), a Vietnamese joint stock company engaged in the manufacturing and sale of plastic thin films.

 

On August 06, 2018, the Company signed a Business Cooperation Agreement with 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 U.S. Securities and Exchange Commission for APP which will hold 51% equity ownership in VNF, to become a fully-reporting public company in the U.S. Stock Market.

 

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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. Though this transaction was technically closed on September 28, 2018, the Company did not recognize the operations of Vinafilms JSC in its consolidated financial statements as of September 30, 2019 and will only so when a GAAP audit of Vinafilms JSC financial statements is conducted and completed by a PCAOB-registered auditing firm. The Company intends to distribute special share dividend from APP to the Company’s shareholders in conjunction with the filing of the S-1 Registration Statement with the U.S. Securities and Exchange Commission in the future.

 

PHIVITAE CORPORATION (NKA “PHIVITAE HEALTHCARE, INC.”)

 

PHIVITAE CORPORATION, a Wyoming corporation, is a wholly-owned subsidiary of PHI Group established on July 07, 2017 with the intention to acquire a pharmaceutical and medical equipment distribution company in Romania and to manage distribution of medical equipment and pharmaceutical products to emerging markets. This subsidiary changed its name to PHIVITAE HEALTHCARE, INC. on March 17, 2020. On April 27, 2020, PHI Group, Inc. signed a business cooperation agreement with Natural Well Technical Ltd. (“NWTL”), Taiwanese company, to jointly cooperate in the research and development activities of pertinent technologies that have been initiated and continue to be carried out by NWTL and applying them to produce commercial products and services in the fields of healthcare, beauty supply, agriculture and industry, as the case may be, as well as any other business activities deemed mutually beneficial.

 

In particular, NWTL and PHI Group will initially focus on the following activities:

 

1. Developing and implementing a comprehensive plan to increase the production, marketing and sale of the “Super Green” High Energy Drop Drink and “Mistyrious” Fine Mist Spray products on a large scale worldwide;

 

2. Developing and implementing a plan to increase the production, marketing and sale of “Super Cassava” and “Uni-Wash” Engine Booster products as well as other products related to the fields of agriculture and energy that have been studied and developed by NWTL;

 

3. Continuing to conduct research and accumulate clinical data for NWTL’s biotechnologies in order to obtain U.S. FDA’s approval of cancer treatments and other healthcare products. In addition, both parties also develop, produce and market beauty supply products.

 

4. Designing a financial plan and providing the required funding for NWTL to execute its business plan.

Both companies intend to conduct the activities mentioned in 1. and 3. above through PHIVITAE HEALTHCARE, INC. or a subsidiary under it.

 

CRITICAL ACCOUNTING POLICIES

 

The Company’s financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported. These estimates can also affect supplemental information contained in the external disclosures of the Company including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. Valuations based on estimates are reviewed by us for reasonableness and conservatism on a consistent basis throughout the Company. Primary areas where financial information of the Company is subject to the use of estimates, assumptions and the application of judgment include acquisitions, valuation of long-lived and intangible assets, recoverability of deferred tax and the valuation of shares issued for services. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions.

 

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Valuation of Long-Lived and Intangible Assets

 

The recoverability of long-lived assets requires considerable judgment and is evaluated on an annual basis or more frequently if events or circumstances indicate that the assets may be impaired. As it relates to definite life intangible assets, we apply the impairment rules as required by SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and Assets to Be Disposed Of” as amended by SFAS No. 144, which also requires significant judgment and assumptions related to the expected future cash flows attributable to the intangible asset. The impact of modifying any of these assumptions can have a significant impact on the estimate of fair value and, thus, the recoverability of the asset.

 

Income Taxes

 

We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities. We regularly review our deferred tax assets for recoverability and establish a valuation allowance based upon historical losses, projected future taxable income and the expected timing of the reversals of existing temporary differences. As of September 30, 2019, we estimated the allowance on net deferred tax assets to be one hundred percent of the net deferred tax assets.

 

RESULTS OF OPERATIONS

 

The following is a discussion and analysis of our results of operations for the three-month periods ended September 30, 2019 and 2018, our financial condition at September 30, 2019 and factors that we believe could affect our future financial condition and results of operations. Historical results may not be indicative of future performance.

 

This discussion and analysis should be read in conjunction with our consolidated financial statements and the notes thereto included elsewhere in this Form 10-Q. Our consolidated financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States (“GAAP”). All references to dollar amounts in this section are in United States dollars.

 

Three months ended September 30, 2019 compared to the three months ended September 30, 2019

 

Total Revenues:

 

The Company recorded $8,531 in revenues from consulting services for the quarter ended September 30, 2019 as compared to no revenue for the quarter ended September 30, 2018. The Company had been primarily focused on launching the Luxembourg bank fund “PHILUX Global Funds SCA, SICAV-RAIF and developing the Asia Diamond Exchange in Vietnam and did not generate any significant revenue from its consulting and advisory services during the two quarterly periods mentioned herein.

 

Operating Costs and Expenses:

 

Total operating expenses were $151,182 and $280,497 for the three months ended September 30, 2019, and 2018, respectively. The decrease of $119,285 on total operating expenses between the two periods was mainly due to a decrease in professional services of $136,864 and that in general and administrative expenses of $30,285, offset by an increase in salaries and wages of $37,834. The increase in salaries and wages was due to an increase in manpower for the development of the Asia Diamond Exchange.

 

Loss from Operations:

 

Loss from operations for the quarter ended September 30, 2019 was $142,651, as compared to loss from operations of $280,497 for the corresponding period ended September 30, 2018. A decrease of $137,846 in the loss from operations between the two periods was mainly due to the decrease in professional services of $136,864 and that in general and administrative expenses of $30,285, offset by an increase in salaries and wages of $37,834.

 

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Other Income and Expenses:

 

The Company had a net other expenses of $210,781for the three months ended September 30, 2019, as compared to net other expenses of $637,186 for the three months ended September 30, 2018. The decrease in other expenses of $426,405 between the two periods was mainly due to a decrease of $422,779 in net interest expenses and a decrease of $3,626 in other expense. Interest expenses were$208,129 and $630,908 for the three months ended September 30, 2019 and 2018, respectively.

 

Net Income (Loss):

 

Net loss for the three months ended September 30, 2019 was $353,432, as compared to net loss of $917,683 for the same period in 2018, which is equivalent to ($0.00) per share for the current period and ($0.01) per share for the corresponding period ended September 30, 2018, based on the weighted average number of basic and diluted shares outstanding at the end of each corresponding period.

 

CASH FLOWS

 

The Company’s cash and cash equivalents balance were $75,952 and $3,921 as of September 30, 2019 and September 30, 2018, respectively.

 

Net cash used in the Company’s operating activities during the quarter ended September 30, 2019 was $358,854, as compared to net cash used in operating activities of $1,444,091 during the corresponding period ended September 30, 2018. This represents a variance of $1,085,237 in net cash used in operating activities between the two periods. The underlying reason for the variance was primarily due to an decrease of $564,250 in loss from operations, an increase in other assets and prepaid expenses in the amount of $1,191,312 and an increase in accounts payable and accrued expenses in the amount of $$709,691 between the two quarters.

 

There was no net cash provided by or used in investing activities during the quarters ended September 30, 2019 and September 30, 2018

 

Cash provided by financing activities was $363,038 for the quarter ended September 30, 2019, as compared to cash provided by financing activities in the amount of $1,434,075 for the quarter ended September 30, 2018. The primary underlying reasons for a decrease of $1,071,037 in cash provided by financing activities between the two quarterly periods were primarily due to a decrease in common stock and paid-in capital in the amount $229,644, a decrease in Preferred Stock of $1,311,434, offset by an increase in loans and notes in the amount of $103,000 and a change in accumulated other comprehensive loss of $362,061 between the two quarters.

 

HISTORICAL FINANCING ARRANGEMENTS

 

SHORT TERM NOTES PAYABLE AND ISSUANCE OF COMMON STOCK

 

In the course of its business, the Company has obtained short-term loans from individuals and institutional investors and from time to time raised money by issuing restricted common stock of the Company under the auspices of Rule 144. These notes bear interest rates ranging from 0% to 36% per annum.

 

CONVERTIBLE PROMISSORY NOTES

 

The Company has also from time to time issued convertible promissory notes to various private investment funds for short-term working capital and special projects. Typically these notes bear interest rates from 5% to 12% per annum, mature within one year, are convertible to common stock of the Company at a discount ranging from 42% to 50%, and may be repaid within 180 days at a prepayment premium ranging from 130% to 150%.

 

COMPANY’S PLAN OF OPERATION FOR THE FOLLOWING 12 MONTHS

 

In the next twelve months the Company’s goals are to create a number of sub-funds under PHILUX Global Funds SCA, SICAV-RAIF for investment in real estate, renewable energy, agriculture, infrastructure, and healthcare, as well as develop the Asia Diamond Exchange in Vietnam. In addition, the Company will continue to carry out its merger and acquisition program by acquiring target companies for roll-up strategy and also invest in special situations. Moreover, we will provide advisory and consulting services to international clients through our wholly owned subsidiary PHILUX Capital Advisors, Inc. (formerly known as PHI Capital Holdings, Inc.)

 

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MATERIAL CASH REQUIREMENTS: We must raise substantial amounts of capital to fulfill our plans for PHILUX Global Funds and for acquisitions. We intend to use equity, debt and project financing to meet our capital needs for acquisitions and investments.

 

Management has taken action and formulated plans to meet the Company’s operating needs through June 30, 2021 and beyond. The working capital cash requirements for the next 12 months are expected to be generated from operations, sale of marketable securities and additional financing. The Company plans to generate revenues from its consulting services, merger and acquisition advisory services, and acquisitions of target companies with cash flows.

 

AVAILABLE FUTURE FINANCING ARRANGEMENTS: The Company may use various sources of funds, including short-term loans, long-term debt, equity capital, and project financing as may be necessary. The Company believes it will be able to secure the required capital to implement its business plan.

 

EQUITY LINE FACILITY

 

On March 6, 2017, PHI Group, Inc., a Nevada corporation (the “Company”) and Azure Capital, a Massachusetts Corporation (the “Investor”) entered into an Investment Agreement (the “Investment Agreement”) and a Registration Rights Agreement (the “Registration Rights Agreement”), each dated March 6, 2017 between the Company and the Investor.

 

Pursuant to the Investment Agreement, the Investor committed to purchase, subject to certain restrictions and conditions, up to $10,000,000 worth of the Company’s common stock, over a period of 36 months from the effectiveness of the registration statement registering the resale of shares purchased by the Investor pursuant to the Investment Agreement. The Company agreed to initially reserve 20,000,000 shares of its Common Stock for issuance to the Investor pursuant to the Investment Agreement. In the event the Company cannot register a sufficient number of shares of its Common Stock for issuance pursuant to the Investment Agreement, the Company will use its best efforts to authorize and reserve for issuance the number of shares required for the Company to perform its obligations in connection with the Investment Agreement as soon as reasonable practical.

 

The Company may in its discretion draw on the facility from time to time, as and when the Company determines appropriate in accordance with the terms and conditions of the Investment Agreement. The maximum number of shares that the Company is entitled to put to the Investor in any one draw down notice shall not exceed shares with a purchase price of $250,000 or 200% of the average daily volume (U.S. market only) of the Company’s Common Stock for the three (3) Trading Days prior to the applicable put notice date multiplied by the average of the three (3) daily closing prices immediately preceding the put date, calculated in accordance with the Investment Agreement. The Company may deliver a notice for a subsequent put from time to time, after the pricing period for the prior put has been completed.

 

The purchase price shall be set at ninety-four percent (94%) of the lowest daily volume weighted average price (VWAP) of the Company’s common stock during the five (5) consecutive trading days immediately following the put notice date. On each put notice submitted to the Investor by the Company, the Company shall specify a suspension price for that put. In the event the price of Company’s Common Stock falls below the suspension price, the put shall be temporarily suspended. The put shall resume at such time the price of the Company’s Common Stock is above the suspension price, provided the dates for the pricing period for that particular put are still valid. In the event the pricing period has been complete, any shares above the suspension price due to the Investor shall be sold to the Investor by the Company at the suspension price under the terms of the Investment Agreement. The suspension price for a put may not be changed by the Company once submitted to the Investor.

 

There are put restrictions applied on days between the draw down notice date and the closing date with respect to that particular put. During such time, the Company shall not be entitled to deliver another draw down notice. In addition, the Investor will not be obligated to purchase shares if the Investor’s total number of shares beneficially held at that time would exceed 4.99% of the number of shares of the Company’s common stock as determined in accordance with Rule 13d-1(j) of the Securities Exchange Act of 1934, as amended. In addition, the Company is not permitted to draw on the facility unless there is an effective registration statement to cover the resale of the shares.

 

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The Investment Agreement also contains customary representations and warranties of each of the parties. The assertions embodied in those representations and warranties were made for purposes of the Investment Agreement and are subject to qualifications and limitations agreed to by the parties in connection with negotiating the terms of the Investment Agreement. The Investment Agreement further provides that the Company and the Investor are each entitled to customary indemnification from the other for, among other things, any losses or liabilities they may suffer as a result of any breach by the other party of any provisions of the Investment Agreement or Registration Rights Agreement (as defined below). Investor should read the Investment Agreement together with the other information concerning the Company that the Company publicly files in reports and statements with the Securities and Exchange Commission (the “SEC”).

 

Pursuant to the terms of the Registration Rights Agreement, the Company is obligated to file one or more registrations statements with the SEC within twenty-one (21) days after the date of the Registration Rights Agreement to register the resale by the Investor of the shares of common stock issued or issuable under the Investment Agreement. In addition, the Company is obligated to use all commercially reasonable efforts to have the registration statement declared effective by the SEC within 90 days after the registration statement is filed.

 

This Investment Agreement was amended on August 3, 2017 to allow for the reservation of 65,445,000 shares of the Company’s Common Stock for issuance to the Investor pursuant to the corrected Investment Agreement.

 

The Company has filed a S-1 Registration Statement with the Securities and Exchange Commission to include 7,936,600 shares of its Common Stock for issuance in connection with the first tranche of the Equity Line Facility. The S-1 Registration Statement, as amended, was declared effective by the Securities and Exchange Commission on January 11, 2018. As of the day of this report, the Company has not accessed the Equity Line Facility for funding.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

The following discussion about PHI Group Inc.’s market risk involves forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements.

 

Currency Fluctuations and Foreign Currency Risk

 

Some of our operations are conducted in other countries whose official currencies are not U.S. dollars. However, the effect of the fluctuations of exchange rates is considered minimal to our business operations.

 

Interest Rate Risk

 

We do not have significant interest rate risk, as most of our debt obligations are primarily short-term in nature to individuals, with fixed interest rates.

 

Valuation of Securities Risk

 

Since a part of our assets is in the form of marketable securities, the value of our assets may fluctuate significantly depending on the market value of the securities we hold.

 

ITEM 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management carried out an evaluation, with the participation of our Chief Executive Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) of the Exchange Act), as of the period covered by this report. Disclosure controls and procedures are defined as controls and other procedures that are designed to ensure that information required to be disclosed by us in reports filed with the SEC under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Based upon their evaluation, our management (including our Chief Executive Officer) concluded that our disclosure controls and procedures were not effective as of September 30, 2018, based on the material weaknesses defined below.

 

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Internal Control over Financial Reporting

 

Management’s Report on Internal Control of Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a set of processes designed by, or under the supervision of, a company’s principal executive and principal financial officers, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:

 

  - pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of our assets,
  - provide reasonable assurance that our transactions are recorded as necessary to permit preparation of our financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors, and
  - provide reasonable assurance regarding prevention or timely detection of authorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. It should be noted that any system of internal control, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Under the supervision and with the participation of management, including its principal executive officer and principal financial officer, the Company’s management assessed the design and operating effectiveness of internal control over financial reporting as of September 30, 2018 based on the framework set forth in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

 

We have identified material weaknesses in our internal control over financial reporting:

 

  (i) inadequate segregation of duties consistent with control objectives;
     
  (ii) ineffective controls over period-end financial disclosure and reporting processes.

 

If we fail to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in our company.

 

Based on this assessment, management concluded that the Company’s internal control over financial reporting was not effective as of September 30, 2019.

 

Management’s Remediation Plan

 

We plan to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes in the future:

 

(i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and

 

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(ii) adopt sufficient written policies and procedures for accounting and financial reporting.

 

The remediation efforts set out in (i) are largely dependent upon our company securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.

 

Management believes that despite our material weaknesses set forth above, our consolidated financial statements for the quarterly report ended September 30, 2018 are fairly stated, in all material respects, in accordance with US GAAP.

 

Attestation Report of the Registered Accounting Firm

 

This Quarterly Report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to Rule 308(b) of Regulation S-K, which permits the Company to provide only management’s report in this Quarterly Report.

 

Changes in Internal Control over Financial Reporting

 

No changes in the Company’s internal control over financial reporting have come to management’s attention during the fiscal quarter ended September 30, 2018 that have materially affected, or are likely to materially affect, the Company’s internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

The Company is not a party to any material pending legal proceedings and, to the best of its knowledge, no such action by or against Company has been threatened.

 

ITEM 1A. RISK FACTORS

 

Investment in our securities is subject to various risks, including risks and uncertainties inherent in our business. The following sets forth factors related to our business, operations, financial position or future financial performance or cash flows which could cause an investment in our securities to decline and result in a loss.

 

General Risks Related to Our Business

 

Our success depends on our management team and other key personnel, the loss of any of whom could disrupt our business operations.

 

Our future success will depend in substantial part on the continued service of our senior management. The loss of the services of one or more of our key personnel could impede implementation and execution of our business strategy and result in the failure to reach our goals. We do not carry key person life insurance for any of our officers or employees. Our future success will also depend on the continued ability to attract, retain and motivate highly qualified personnel in the diverse areas required for continuing our operations. We cannot assure that we will be able to retain our key personnel or that we will be able to attract, train or retain qualified personnel in the future.

 

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Our strategy in mergers and acquisitions involves a number of risks and we have a limited history of successful acquisitions. Even when an acquisition is completed, we may have to continue our service for integration that may not produce results as positive as management may have projected.

 

The Company is in the process of evaluating various opportunities and negotiating to acquire other companies, assets and technologies. Acquisitions entail numerous risks, including difficulties in the assimilation of acquired operations and products, diversion of management’s attention from other business concerns, amortization of acquired intangible assets and potential loss of key employees of acquired companies. We have limited experience in assimilating acquired organizations into our operations. Although potential synergy may be achieved by acquisitions of related technologies and businesses, no assurance can be given as to the Company’s ability to integrate successfully any operations, personnel, services or products that have been acquired or might be acquired in the future. Failure to successfully assimilate acquired organizations could have a material adverse effect on the Company’s business, financial condition and operating results.

 

Acquisitions involve a number of special risks, including:

 

failure of the acquired business to achieve expected results;
diversion of management’s attention;
failure to retain key personnel of the acquired business;
additional financing, if necessary and available, could increase leverage, dilute equity, or both;
the potential negative effect on our financial statements from the increase in goodwill and other intangibles; and
the high cost and expenses of completing acquisitions and risks associated with unanticipated events or liabilities.

 

These risks could have a material adverse effect on our business, results of operations and financial condition since the values of the securities received for the consulting service at the execution of the acquisition depend on the success of the company involved in acquisition. In addition, our ability to further expand our operations through acquisitions may be dependent on our ability to obtain sufficient working capital, either through cash flows generated through operations or financing activities or both. There can be no assurance that we will be able to obtain any additional financing on terms that are acceptable to us, or at all.

 

As some of our business activities are currently involved with Southeast Asia and Europe, any adverse change to the economy or business environment in these countries could significantly affect our operations, which would lead to lower revenues and reduced profitability.

 

Some of our business activities are currently involved with Southeast Asia and Europe. Because of this presence in specific geographic locations, we are susceptible to fluctuations in our business caused by adverse economic or other conditions in this region, including stock market fluctuation. A stagnant or depressed economy in these countries generally, or in any of the other markets that we serve, could adversely affect our business, results of operations and financial condition.

 

Risks associated with energy business

 

As part of our business involves acquisitions of energy assets as well as production and trading of energy commodities, our profitability will depend on the prices we receive for energy commodities such as coal and wood pellets. These prices are dependent upon factors beyond our control, including: the strength of the global economy; the demand for electricity; the global supply of thermal coal and biomass products; weather patterns and natural disasters; competition within our industry and the availability and price of alternatives, including natural gas; the proximity, capacity and cost of transportation; coal industry capacity; domestic and foreign governmental regulations and taxes, including those establishing air emission standards for coal-fueled power plants or mandating increased use of electricity from renewable energy sources; regulatory, administrative and judicial decisions, including those affecting future mining permits; and technological developments, including those intended to convert coal-to-liquids or gas and those aimed at capturing and storing carbon dioxide.

 

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Risks Related to Our Securities

 

Insiders have substantial control over the company, and they could delay or prevent a change in our corporate control, even if our other stockholders wanted such a change to occur.

 

Though our executive officers and directors as of the date of this report, in the aggregate, hold less than 51% of our outstanding common stock, we have the majority voting rights associated with the Company’s Class B Series I Preferred Stock, which decision may allow the Board of Directors to exercise significant control over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This could delay or prevent an outside party from acquiring or merging with us even if our other stockholders wanted it to occur.

 

The price at which investors purchase our common stock may not be indicative of the prevailing market price.

 

The stock market often experiences significant price fluctuations that are unrelated to the operating performance of the specific companies whose stock is traded. These market fluctuations could adversely affect the trading price of our shares. Investors may be unable to sell their shares of common stock at or above their purchase price, which may result in substantial losses.

 

Since we do not currently meet the requirements for our stock to be quoted on NASDAQ, NYSE MKT LLC or any other senior exchange, the tradability in our securities will be limited under the penny stock regulations.

 

Under the rules of the Securities and Exchange Commission, if the price of our securities on the OTCQB or OTC Markets is below $5.00 per share, our securities are within the definition of a “penny stock.” As a result, it is possible that our securities may be subject to the “penny stock” rules and regulations. Broker-dealers who sell penny stocks to certain types of investors are required to comply with the Commission’s regulations concerning the transfer of penny stock. These regulations require broker-dealers to:

 

*Make a suitability determination prior to selling penny stock to the purchaser;

 

*Receive the purchaser’s written consent to the transaction; and

 

*Provide certain written disclosures to the purchaser.

 

These requirements may restrict the ability of broker/dealers to sell our securities, and may affect the ability to resell our securities.

 

Our compliance with the Sarbanes-Oxley Act and SEC rules concerning internal controls may be time consuming, difficult and costly for us.

 

It may be time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required by the Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal controls and other finance staff in order to develop and implement appropriate internal controls and reporting procedures. If we are unable to comply with the internal controls requirements of the Sarbanes-Oxley Act, we may not be able to obtain the independent accountant certifications that the Sarbanes-Oxley Act requires publicly traded companies to obtain.

 

Our success depends on our management team and other key personnel, the loss of any of whom could disrupt our business operations.

 

Our future success will depend in substantial part on the continued service of our senior management and founder. The loss of the services of one or more of our key personnel could impede implementation and execution of our business strategy and result in the failure to reach our goals. We do not carry key person life insurance for any of our officers or employees. Our future success will also depend on the continued ability to attract, retain and motivate highly qualified personnel in the diverse areas required for continuing our operations. We cannot assure that we will be able to retain our key personnel or that we will be able to attract, train or retain qualified personnel in the future.

 

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Our service strategy in merger and acquisition involves a number of risks and we have a limited history of successful acquisitions. Even when an acquisition is completed, we may have to continue our service for integration that may not produce results as positive as management may have projected.

 

The Company is in the process of evaluating various opportunities and negotiating to acquire other companies and technologies. Acquisitions entail numerous risks, including difficulties in the assimilation of acquired operations and products, diversion of management’s attention from other business concerns, amortization of acquired intangible assets and potential loss of key employees of acquired companies. We have limited experience in assimilating acquired organizations into our operations. Although potential synergy may be achieved by acquisitions of related technologies and businesses, no assurance can be given as to the Company’s ability to integrate successfully any operations, personnel, services or products that have been acquired or might be acquired in the future. Failure to successfully assimilate acquired organizations could have a material adverse effect on the Company’s business, financial condition and operating results.

 

Acquisitions involve a number of special risks, including:

 

  failure of the acquired business to achieve expected results;
     
  diversion of management’s attention;
     
  failure to retain key personnel of the acquired business;
     
  additional financing, if necessary and available, could increase leverage, dilute equity, or both;
     
  the potential negative effect on our financial statements from the increase in goodwill and other intangibles; and
     
  the high cost and expenses of completing acquisitions and risks associated with unanticipated events or liabilities.

 

These risks could have a material adverse effect on our business, results of operations and financial condition since the values of the securities received for the consulting service at the execution of the acquisition depend on the success of the company involved in acquisition. In addition, our ability to further expand our operations through acquisitions may be dependent on our ability to obtain sufficient working capital, either through cash flows generated through operations or financing activities or both. There can be no assurance that we will be able to obtain any additional financing on terms that are acceptable to us, or at all.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None, except as noted elsewhere in this report.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None, except as may be noted elsewhere in this report.

 

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

None

 

ITEM 5. OTHER INFORMATION

 

None, except as may be noted elsewhere in this report.

 

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ITEM 6. EXHIBITS

 

The following exhibits are filed as part of this report:

 

Exhibit No.   Description
     
21.1   Subsidiaries of registrant
     
31.1   Certification by Henry D. Fahman, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
31.2   Certification by Henry D. Fahman, Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
32.1   Certification by Henry D. Fahman, Chief Executive Officer of the Registrant, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
32.2   Certification by Henry D. Fahman, Chief Executive Officer of the Registrant, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  PHI GROUP, INC.
  (Registrant)
     
Date: April 9, 2021 By: /s/ Henry D. Fahman
    Henry D. Fahman
    President and Chief Executive Officer
    (Principal Executive Officer)
     
Date: April 9, 2021 By: /s/ Henry D. Fahman
    Henry D. Fahman
    Acting Chief Financial Officer
    (Principal Financial and Accounting Officer)

 

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