NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1
–
NATURE OF BUSINESS
ITEM
1. BUSINESS OVERVIEW
PHI
Group, Inc. (the “Company” or “PHI”) is engaged in mergers and acquisitions as a principal (
www.phiglobal.com
).
The Company has adopted plans to acquire established operating businesses in selective industries and invest in various ventures
that may potentially create significant long-term value for our shareholders. In addition, we also provide corporate finance services,
including merger and acquisition advisory and consulting services for client companies through our wholly owned subsidiary PHI
Capital Holdings, Inc. (
www.phicapitalholdings.com
). No assurances can be made that the Company will be successful in achieving
its plans.
Originally
incorporated on June 8, 1982 as JR Consulting, Inc., a Nevada corporation, the Company applied for a Certificate of Domestication
and filed Articles of Domestication to become a Wyoming corporation on September 20, 2017. In the beginning, the Company was foremost
engaged in mergers and acquisitions and had an operating subsidiary, Diva Entertainment, Inc., which operated two modeling agencies,
one in New York and one in California. Following the business combination with Providential Securities, Inc., a California-based
financial services company, the Company changed its name to Providential Securities, Inc., a Nevada corporation, in January 2000.
The Company then changed its name to Providential Holdings, Inc. in February 2000. In October 2000, Providential Securities withdrew
its securities brokerage membership and ceased its financial services business. Subsequently, in April 2009, the Company changed
its name to PHI Group, Inc. From October 2000 to October 2011, the Company and its subsidiaries were engaged in mergers and acquisitions
advisory and consulting services, real estate and hospitality development, mining, oil and gas, telecommunications, technology,
healthcare, private equity, and special situations. In October 2011, the Company discontinued the operations of Providential Vietnam
Ltd., Philand Ranch Limited, a United Kingdom corporation (together with its subsidiaries Philand Ranch - Singapore, Philand Corporation
- US, and Philand Vietnam Ltd. - Vietnam), PHI Gold Corporation (formerly PHI Mining Corporation, a Nevada corporation), and PHI
Energy Corporation (a Nevada corporation), and mainly focused on acquisition and development opportunities in energy and natural
resource businesses. At the present, the Company is engaged in mergers and acquisitions as a principal and investments in natural
resources, energy, agriculture, healthcare, pharmaceuticals, biotechnology and special situations. In addition, PHI Capital Holdings,
Inc., a wholly owned subsidiary of PHI, continues to provide corporate and project finance services, including merger and acquisition
(M&A) advisory and consulting services for other companies in a variety of industries.
NOTE
2
– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES
OF CONSOLIDATION
The
consolidated financial statements include the accounts of PHI Group, Inc., its wholly owned subsidiaries PHI Capital Holdings,
Inc., Abundant Farms, Inc., American Pacific Resources, Inc., and PHI Group Regional Center, LLC as well as its discontinued operations
Providential Securities, Inc., PHI Energy Corporation, PHI Gold Corp, Providential Vietnam Ltd. and Philand Ranch Limited (including
its 100% owned subsidiary Philand Corporation and Philand Vietnam Ltd), Omni Resources, Inc., and Cornerstone Biomass Corp., collectively
referred to as the “Company.” All significant inter-company transactions have been eliminated in consolidation.
USE
OF ESTIMATES
The
preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates.
CASH
AND CASH EQUIVALENTS
The
Company considers all liquid investments with a maturity of three months or less from the date of purchase that are readily convertible
into cash to be cash equivalents.
MARKETABLE
SECURITIES
The
Company’s securities are classified as available-for-sale and, as such, are carried at fair value. Securities classified
as available-for-sale may be sold in response to changes in interest rates, liquidity needs, and for other purposes.
Each
investment in marketable securities typically represents less than twenty percent (20%) of the outstanding common stock and stock
equivalents of the investee, and each security is quoted on a national exchange or on the OTC Markets. As such, each investment
is accounted for in accordance with the provisions of ASC 320 (previously SFAS No. 115).
Unrealized
holding gains and losses for available-for-sale securities are excluded from earnings and reported as a separate component of
stockholder’s equity. Realized gains and losses for securities classified as available-for-sale are reported in earnings
based upon the adjusted cost of the specific security sold. On June 30, 2017 and 2016 the marketable securities have been recorded
at $502,696 and $481,120, respectively based upon the fair value of the marketable securities at that time.
ACCOUNTS
RECEIVABLE
Management
reviews the composition of accounts receivable and analyzes historical bad debts. As of June 30, 2017, the Company had no accounts
receivable.
IMPAIRMENT
OF LONG-LIVED ASSETS
Effective
January 1, 2002, the Company adopted ASC 350 (Previously SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived
Assets”), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes
SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,” and
the accounting and reporting provisions of APB Opinion No. 30, “Reporting the Results of Operations for a Disposal of a
Segment of a Business.” The Company periodically evaluates the carrying value of long-lived assets to be held and used in
accordance with ASC 350. ASC 350 requires impairment losses to be recorded on long-lived assets used in operations when indicators
of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’
carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market
value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair
market values are reduced for the cost of disposal.
PROPERTY
AND EQUIPMENT
Property
and equipment are stated at cost. Maintenance and repair costs are charged to expense as incurred; costs of major additions and
betterments are capitalized. When property and equipment are sold or otherwise disposed of, the cost and related accumulated depreciation
are eliminated from the accounts and any resulting gain or loss is reflected in income. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets, ranging from three to ten years.
DEPRECIATION
AND AMORTIZATION
The
cost of property and equipment is depreciated over the estimated useful lives of the related assets. Depreciation and amortization
of fixed assets are computed on a straight-line basis.
NET
EARNINGS (LOSS) PER SHARE
The
Company adopted the provisions of ASC 260 (previously SFAS 128). ASC 260 eliminates the presentation of primary and fully diluted
earnings per share (“EPS”) and requires presentation of basic and diluted EPS. Basic EPS is computed by dividing income
(loss) available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS
is based on the weighted-average number of shares of common stock outstanding for the period and common stock equivalents outstanding
at the end of the period.
The
net earnings (loss) per share is computed as follows:
|
|
2017
|
|
|
2016
|
|
Basic and diluted net loss per share:
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
(1,560,718
|
)
|
|
$
|
(7,998
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
Basic weighted average number of common
shares outstanding
|
|
|
15,553,354
|
|
|
|
5,324,120
|
|
Basic net income
(loss) per share
|
|
$
|
(0.10
|
)
|
|
$
|
(0.00
|
)
|
Diluted weighted average number of common shares outstanding
|
|
|
15,553,354
|
|
|
|
5,324,120
|
|
Diluted net income
(loss) per share
|
|
$
|
(0.10
|
)
|
|
$
|
(0.00
|
)
|
STOCK-BASED
COMPENSATION
Effective
July 1, 2006, the Company adopted ASC 718-10-25 (previously SFAS 123R) and accordingly has adopted the modified prospective application
method. Under this method, ASC 718-10-25 is applied to new awards and to awards modified, repurchased, or cancelled after the
effective date. Additionally, compensation cost for the portion of awards that are outstanding as of the date of adoption for
which the requisite service has not been rendered (such as unvested options) is recognized over a period of time as the remaining
requisite services are rendered.
FAIR
VALUE OF FINANCIAL INSTRUMENTS
Fair
Value - Definition and Hierarchy
Fair
value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Assets and liabilities measured at fair value are categorized based on whether
or not the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial
assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair
value measurement.
A
fair value hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the
use of unobservable inputs by requiring that the most observable inputs are to be used when available.
Valuation
techniques that are consistent with the market or income approach are used to measure fair value. The fair value hierarchy is
categorized into three levels based on the inputs as follows:
Level
1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the
ability to access.
Level
2 - Valuations based on inputs other than quoted prices included in Level 1 that are observable, either directly or indirectly.
Level
3
- Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
Fair
value is a market-based measure, based on assumptions of prices and inputs considered from the perspective of a market participant
that are current as of the measurement date, rather than an entity-specific measure. Therefore, even when market assumptions are
not readily available, the Company’s own assumptions are set to reflect those that market participants would use in pricing
the asset or liability at the measurement date. The availability of valuation techniques and observable inputs can vary from investment
to investment and are affected by a wide variety of factors, including; type of investment, whether the investment is new and
not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the transaction.
To
the extent that valuation is based upon models or inputs that are less observable or unobservable in the market, the determination
of fair value requires more judgment. Because of the inherent uncertainty of valuation, those estimated values may be materially
higher or lower than the values that would have been used had a ready market for the investments existed. Accordingly, the degree
of judgment exercised by the Fund in determining fair value is greatest for investments categorized in Level 3. In certain cases,
the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in
the fair value hierarchy in which the fair value measurement falls in its entirety is determined based upon the lowest level input
that is significant to the fair value measurement.
Fair
Value - Valuation Techniques and Inputs
The
Company holds and may invest public securities traded on public exchanges or over-the-counter (OTC), private securities, real
estate, convertible securities, interest bearing securities and other types of securities and has adopted specific techniques
for their respective valuations.
Equity
Securities in Public Companies
Unrestricted
The
Company values investments in securities that are freely tradable and listed on major securities exchanges at their last reported
sales price as of the valuation date. To the extent these securities are actively traded and valuation adjustments are not applied,
they are categorized in Level 1 of the fair value hierarchy.
Securities
traded on inactive markets or valued by reference to similar instruments are generally categorized in Level 2 or 3 of the fair
value hierarchy.
Restricted
Securities
traded on public exchanges or over-the-counter (OTC) where there are formal restrictions that limit (i.e. Rule 144 holding periods
and underwriter’s lock-ups) their sale shall be valued at the closing price on the date of valuation less applicable discounts.
The Company may apply a discount to securities with Rule 144 restrictions. Additional discounts may be assessed if the Company
believes there are other mitigating factors which warrant the additional discounting. When determining potential additional discounts,
factors that will be taken into consideration include, but are not limited to; securities’ trading characteristics, volume,
length and overall impact of the restriction as well as other macro-economic factors. Valuations should be discounted appropriately
until the securities may be freely traded.
If
it has been determined that the exchange or OTC listed price does not accurately reflect fair market value, the Company may elect
to treat the security as a private company and apply an alternative valuation method.
Investments
in restricted securities of public companies may be included in Level 2 of the fair value hierarchy. However, to the extent that
significant inputs used to determine liquidity discounts are not observable, investments in restricted securities in public companies
may be categorized in Level 3 of the fair value hierarchy.
The
Company's financial instruments primarily consist of cash and cash equivalents, accounts receivable, marketable securities, short-term
notes payable, convertible notes, derivative liabilities and accounts payable.
As
of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying
values as presented on the balance sheet. This is primarily attributed to the short maturities of these instruments.
Effective
July 1, 2008, the Company adopted ASC 820 (previously SFAS 157),
Fair Value Measurements
and adopted this Statement for
the assets and liabilities shown in the table below. ASC 820 clarifies the definition of fair value, prescribes methods for measuring
fair value, establishes a fair value hierarchy based on the inputs used to measure fair value, and expands disclosures about the
use of fair value measurements. The adoption of ASC 820 did not have a material impact on our fair value measurements. ASC 820
permits the Company to defer the recognition and measurement of the nonfinancial assets and nonfinancial liabilities until January
1, 2010. At June 30, 2017, 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 converted into common stock of
the Company.
Available-for-sale
securities
Securities available
for sale
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
June 30, 2017
|
|
$
|
-
|
|
|
$
|
210,646
|
|
|
$
|
292,050
|
|
|
$
|
502,696
|
|
June 30, 2016
|
|
$
|
-
|
|
|
$
|
60,054
|
|
|
$
|
323,717
|
|
|
$
|
383,770
|
|
The
Company uses various approaches to measure fair value of available-for-sale securities, while applying the three-level valuation
hierarchy for disclosures, specified in ASC 820. Our Level 1 securities were measured using the quoted prices in active markets
for identical assets and liabilities.
The
company’s policy regarding the transfers in and/or out of Level 3 depends on the trading activity of the security, the volatility
of the security, and other observable units which clearly represents the fair value of the security. If a level 3 security can
be measured using a more fairly represented fair value, we will transfer these securities either into Level 1 or Level 2, depending
on the type of inputs.
REVENUE
RECOGNITION
The
Company’s revenue recognition policies are in compliance with ASC 13 (previously Staff accounting bulletin (SAB) 104). The
Company recognizes consulting and advisory fee revenues when the transaction is completed and the service fees are earned. Expenses
are recognized in the period in which the corresponding liability is incurred. Payments received before all of the relevant criteria
for revenue recognition are recorded as unearned revenue.
ADVERTISING
The
Company expenses advertising costs as incurred. Advertising costs for the years ended June 30, 2017 and 2016 were $31,413 and
$79,072, respectively. The decrease in advertising expenses in the current year is primarily due to a reduction of $35,500 in
investor relations expenses during the fiscal year ended June 30, 2017, as compared to the previous fiscal year.
COMPREHENSIVE
INCOME (LOSS)
ASC
220-10-45 (previously SFAS 130, Reporting Comprehensive Income) establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is defined to include all changes in equity, except those
resulting from investments by owners and distributions to owners. Among other disclosures, SFAS No. 130 requires that all items
that are required to be recognized under current accounting standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial statements. As of June 30, 2017 and 2016, respectively,
accumulated other comprehensive incomes of $153,474 and $30,263 are presented on the accompanying consolidated balance sheets.
INCOME
TAXES
The
Company accounts for income taxes in accordance with ASC 740 (previously SFAS No. 109, “Accounting for Income Taxes”).
Deferred taxes are provided on the liability method whereby deferred tax assets are recognized for deductible temporary differences,
and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between
the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when,
in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
REPORTING
OF SEGMENTS
ASC
280 (previously Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information),
which supersedes Statement of Financial Accounting Standards No. 14, Financial Reporting for Segments of a Business Enterprise,
establishes standards for the way that public enterprises report information about operating segments in annual financial statements
and requires reporting of selected information about operating segments in interim financial statements regarding products and
services, geographic areas and major customers. ASC 280 defines operating segments as components of an enterprise about which
separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how
to allocate resources and in assessing performance. The Company operated in one segment that generated revenues during the years
ended June 30, 2017 and 2016.
RISKS
AND UNCERTAINTIES
In
the normal course of business, the Company is subject to certain risks and uncertainties. The Company provides its service and
receives marketable securities upon execution of transactions. Consequently, the value of the securities received from customers
can be affected by economic fluctuations and each customer’s business growth. The actual realized value of these securities
could be significantly different than recorded value.
RECENT
ACCOUNTING PRONOUNCEMENTS
Update
No. 2013-11—Income Taxes (Topic 740):
Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward,
a Similar Tax Loss, or a Tax Credit Carryforward Exists
(a consensus of the FASB Emerging Issues Task Force) [Download]
|
|
July
2013
|
|
Effective
for fiscal years, and interim periods within those years, beginning after December 15, 2013. For nonpublic entities, the amendments
are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. Early adoption
is permitted.
|
|
|
|
|
|
Update
No. 2013-09—
Fair Value Measurement (Topic 820): Deferral of the Effective Date of Certain Disclosures for Nonpublic
Employee Benefit Plans in Update No. 2011-04
[Download]
|
|
July
2013
|
|
The
deferral in this amendment is effective upon issuance for financial statements that have not been issued.
|
|
|
|
|
|
Update
No. 2013-07—
Presentation of Financial Statements (Topic 205): Liquidation Basis of Accounting
[Download]
|
|
April
2013
|
|
Effective
for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013. Early
adoption is permitted.
|
|
|
|
|
|
Update
No. 2013-04—
Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which
the Total Amount of the Obligation Is Fixed at the Reporting Date
(a consensus of the FASB Emerging Issues Task Force)
[Download]
|
|
February
2013
|
|
Effective
for fiscal years, and interim periods within those years, beginning after December 15, 2013. For nonpublic entities, the amendments
are effective for fiscal years ending after December 15, 2014, and interim periods and annual periods thereafter.
|
|
|
|
|
|
Update
2013-02—
Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive
Income
[Download]
|
|
February
2013
|
|
For
public entities, the amendments are effective prospectively for reporting periods beginning after December 15, 2012. For nonpublic
entities, the amendments are effective prospectively for reporting periods beginning after December 15, 2013. Early adoption
is permitted.
|
Update
2013-01—
Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities
[Download]
|
|
January
2013
|
|
An
entity is required to apply the amendments for fiscal years beginning on or after January 1, 2013, and interim periods within
those annual periods. An entity should provide the required disclosures retrospectively for all comparative periods presented.
The effective date is the same as the effective date of Update 2011-11.
|
The
Company has either evaluated or is currently evaluating the implications, if any, of each of these pronouncements and the possible
impact they may have on the Company’s financial statements. In most cases, management has determined that the pronouncement
has either limited or no application to the Company and, in all cases, implementation would not have a material impact on the
financial statements taken as a whole.
NOTE
3
– LOANS RECEIVABLE
Loans
receivable consist of the following at June 30, 2017 and 2016:
Loans
Receivable
|
|
June
30, 2017
|
|
|
June
30, 2016
|
|
Loan to Myson Group, Inc.
|
|
$
|
-
|
|
|
$
|
2,282
|
|
Total
|
|
$
|
-
|
|
|
$
|
2,282
|
|
NOTE
4
– OTHER ASSETS
The
Other Assets comprise of the following as of June 30, 2017 and 2016:
|
|
2017
|
|
|
2016
|
|
Other Receivable
|
|
$
|
-
|
|
|
$
|
66,955
|
|
Deposit for purchases
|
|
$
|
-
|
|
|
$
|
75,000
|
|
Total Other Assets
|
|
$
|
-
|
|
|
$
|
141,955
|
|
During
the year ended June 30, 2011, the Company signed a consulting agreement to assist Agent155 Media Corp., a Delaware corporation,
with respect to its corporate restructuring and business combination with Freshwater Technologies, Inc., a Nevada corporation.
As part of the restructuring requirements, the Company made payment to Manning Elliot LLP in the amount of $24,476 on behalf of
Freshwater Technologies, Inc. and other loan amounts to Agent155 Media Corp. During the fiscal year ended June 30, 2014, the President
of Agent155 Media Corp. assumed the balance of $66,955 from Agent155 Media Corp. as his personal obligations to the Company.
On
July 17, 2015, the Company made an advance payment of $75,000 to Asia Green Corporation, a Nevada corporation, for a total of
500,000 shares of common stock of Asia Green Corporation. As of June 30, 2017, the Company wrote off the total amount owed by
Christopher Martinez and the deposit for purchase totaling $141,955.
NOTE
5
–
MARKETABLE EQUITY SECURITIES AVAILABLE FOR SALE
The
Company’s marketable securities are classified as available-for-sale and, as such, are carried at fair value. All of the
securities are comprised of shares of common stock of the investee. Securities classified as available-for-sale may be sold in
response to changes in interest rates, liquidity needs, and for other purposes. Each investment in marketable securities represents
less than twenty percent (20%) of the outstanding common stock and stock equivalents of the investee, and each security is nationally
quoted on the National Association of Securities Dealers OTC Bulletin Board (“OTCBB”) or the OTC Markets. As such,
each investment is accounted for in accordance with the provisions of SFAS No. 115.
Marketable
securities owned by the Company and classified as available for sale as of June 30, 2017 consisted of 33,975,106 shares of Myson
Group, Inc. (formerly Vanguard Mining Corporation) and 292,050,000 shares of Sports Pouch Beverage Company, both public companies
traded on the a public company traded on the OTC Markets (Trading symbols MYSN and SPBV, respectively). The fair value of the
marketable securities recorded as of June 30, 2017 was $502,696.
Securities available
for sale
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
June 30, 2017
|
|
|
-
|
|
|
$
|
210,646
|
|
|
$
|
292,050
|
|
|
$
|
502,696
|
|
June 30, 2016
|
|
$
|
-
|
|
|
$
|
60,054
|
|
|
$
|
323,717
|
|
|
$
|
383,770
|
|
During
the fiscal year ended June 30, 2017, there was no transfer of securities from level 3 to level 2.
NOTE
6
– PROPERTY AND EQUIPMENT
During
the fiscal year ended June 30, 2017, the Company sold ten acres of land, Parcel Identification Numbers 09705010180 & 190,
in Suwannee County, Florida, and as of June 30, 2017 the Company did not have any property or equipment.
NOTE
7
– DISCONTINUED OPERATIONS
As
of June 30, 2012, the Company decided to recognize the businesses of PHI Gold Corp. (formerly PHI Mining Corporation), Providential
Vietnam Ltd., PHI Energy Corp., and Philand Ranch Ltd., a United Kingdom corporation, together with its wholly-owned subsidiaries
Philand Corporation (USA), Philand Ranch Ltd. (Singapore) and Philand Vietnam Ltd. as discontinued operations for practical business
and accounting purposes. As of June 30, 2013, the Company recorded a total of $2,234,327 for the liabilities and potential liability
contingencies and wrote off all non-performing assets associated with these discontinued operations. As of June 30, 2017, the
Company had a balance of $1,040,037 as Long-term Liabilities from Discontinued Operations.
NOTE
8
– ACCOUNTS PAYABLE AND ACCRUED EXPENSES
The
accounts payable and accrued expenses at June 30, 2017 and 2016 consist of the following:
Accounts
Payable and Accrued Expenses
|
|
June
30, 2017
|
|
|
June
30, 2016
|
|
Accounts payable
|
|
$
|
159,875
|
|
|
$
|
144,212
|
|
Accrued salaries and payroll taxes
|
|
$
|
1,462,836
|
|
|
$
|
1,090,279
|
|
Accrued interest
|
|
$
|
2,715,963
|
|
|
$
|
2,879,655
|
|
Accrued legal expenses
|
|
$
|
172,091
|
|
|
$
|
172,091
|
|
Accrued consulting fees
|
|
$
|
173,870
|
|
|
$
|
173,870
|
|
Other accrued expenses
|
|
$
|
26,888
|
|
|
$
|
26,888
|
|
Total
|
|
$
|
4,711,523
|
|
|
$
|
4,486,995
|
|
NOTE
9
– DUE TO OFFICERS AND DIRECTORS
Due
to officer, represents loans and advances made by officers and directors of the Company and its subsidiaries, unsecured and due
on demand. During the fiscal year ended June 30, 2017, Henry Fahman converted $250,000 into 2,500,000 shares of restricted common
stock of the Company valued at $0.10 per share. In addition, the Company also repaid Frank Hawkins $7,500 in cash. As of June
30, 2017 and 2016, the balances were $592,141 and $899,674, respectively.
Officers/Directors
|
|
June
30, 2017
|
|
|
June
30, 2016
|
|
Henry Fahman
|
|
|
511,291
|
|
|
|
811,324
|
|
Tam Bui
|
|
|
63,350
|
|
|
|
63,350
|
|
Frank Hawkins
|
|
|
5,000
|
|
|
|
12,500
|
|
Lawrence Olson
|
|
|
12,500
|
|
|
|
12,500
|
|
Total
|
|
$
|
592,141
|
|
|
$
|
899,674
|
|
NOTE
10
– LOANS AND PROMISSORY NOTES
SHORT
TERM NOTES PAYABLE:
In
the course of its business, the Company has obtained short-term loans from individuals and institutional investors and from time
to time raised money by issuing restricted common stock of the Company under the auspices of Rule 144. As of June 30, 2017, the
Company reclassified $614,390 from short-term notes payable with accrued interest of $2,303,163 to long-term liabilities, as compared
to short-term notes payable of $673,660 with accrued interest of $2,879,655 as of June 30, 2016, respectively. These notes bear
interest rates ranging from 0% to 36% per annum.
CONVERTIBLE
PROMISSORY NOTES:
On
February 29, 2016, the Company issued a convertible promissory note in the amount of $56,750 to Auctus Fund, LLC, a Delaware limited
liability company. This convertible note is due and payable on November 29, 2016 with interest of 10% per annum. This note is
convertible at the election of Auctus Fund, LLC from time to time after the issuance date. In the event of default, the amount
of principal and interest not paid when due bear interest at the rate of 24% per annum and the note becomes immediately due and
payable. Should an event of default occur, the Company is liable to pay 150% of the then outstanding principal and interest. The
note agreement contains covenants requiring Auctus Fund’s written consent for certain activities not in existence or not
committed to by the Company on the issuance date of the note, as follows: dividend distributions in cash or shares, stock repurchases,
borrowings, sale of assets, certain advances and loans in excess of $100,000, and certain guarantees with respect to preservation
of existence of the Company and non-circumvention. Outstanding note principal and interest accrued thereon can be converted in
whole, or in part, at any time by Asher after the issuance date into an equivalent of the Company’s common stock determined
by 55% of the average of the two lowest closing trading prices of the Company’s common stock during the twenty (20) trading
days prior to the date the of the note. The Company may prepay the amounts outstanding to Auctus Fund at any time up to the 180
th
day following the issue date of this note by making a payment to the note holder of an amount in cash equal to 125% to 150%,
multiplied by the sum of: (w) the then outstanding principal amount of this Note
plus
(x) accrued and unpaid interest on
the unpaid principal amount of this Note
plus
(y) Default Interest, depending on the time of prepayment. On August 30,
2016, Auctus Fund, LLC converted the principal amount of $56,750 and $2,829.76 in accrued interest, totaling $59,579.76, into
529,598 shares of free-trading stock of the Company. This note was paid in full as of August 30, 2016.
During
the fiscal year ended June 30, 2017, the Company issued the following convertible promissory notes to various private investment
funds:
On
July 20, 2016, the Company issued a convertible promissory note in the amount of $50,000 to EMA Financial, LLC, a Delaware limited
liability company. The note has a coupon rate of 10%, matures in one year and is convertible to Common Stock of the Company at
a conversion price equals the lower of: (i) the closing sale price of the Common Stock on the Principal Market on the Trading
immediately preceding the Closing Date of this note, and (ii) 55% of the lowest sale price for the Common Stock on the Principal
Market during the twenty (20) consecutive Trading Days immediately preceding the Conversion Date. The note may be prepaid at 130%
- 145% of outstanding principal and interest up to 180 days. This note was paid off in full as of March 08, 2017.
On
August 16, 2016, the Company issued a convertible promissory note in the amount of $56,750 to Auctus Fund, LLC, a Delaware limited
liability company. The note has a coupon rate of 10%, matures on May 16, 2017 and is convertible to Common Stock of the Company
at a conversion price equals the lower of: (i) 50% multiplied by the average of the two lowest Trading Price during the previous
twenty-five Trading Day period ending on the latest complete Trading Date prior to the date of this note and (ii) 50% multiplied
by the average of the two lowest Trading Prices for the Common Stock during the twenty-five Trading Day period ending on the latest
complete Trading Day prior to the Conversion Date. The note may be prepaid at 135% - 150% of outstanding principal and interest
up to 180 days. This note was paid off in full as of April 6, 2017.
On
December 15, 2016, the Company issued a convertible promissory note in the amount of $32,000 to Power Up Lending Group. The note
has a coupon rate of 8%, matures on September 30, 2017 and is convertible (after 180 days) to Common Stock of the Company at a
conversion price equals to 58% multiplied by the average of the two lowest trading prices during the previous ten trading day
period ending on the latest complete trading date prior to the conversion date; and the note may be prepaid at 150% of outstanding
principal and interest up to 180 days. This note was paid off by conversions into shares of Common Stock of the Company as of
July 21, 2017.
On
February 2, 2017, the Company issued a convertible promissory note in the amount of $33,734.68 to JSJ Investments Inc. for the
assignment of a portion of principal amount and accrued interest of the EMA Financial, LLC convertible promissory note dated July
20, 2016. This note was converted into 657,169 shares of common stock of the Company by JSJ Investments, Inc. on February 7, 2017.
On
February 2, 2017, the Company issued a convertible promissory note in the amount of $42,000
to JSJ Investments Inc. with an interest rate of 10%, convertible to common stock at
45% discount. The maturity date of this note is 11/2/2017. On August 1, 2017, the Company
paid $31,462.60 to JSJ Investments for one half of the principal of the note, one half
of the prepayment premium and one half of the accrued and unpaid interest. As of September
30, 2017, the unpaid principal balance was $21,000.
On
February 23, 2017, the Company issued a new convertible promissory note to Power Up Lending Group for $28,000, with an interest
rate of 8% and convertible to Common Stock of the Company at 45% discount. The maturity date of this note is 11/30/2017. On August
14, 2017, the Company paid a total of $43,024.88 to Power Up Lending Group, which amount included the principal, prepayment premium
and accrued interest. This note was paid off in full as of August 14, 2017.
On
March 3, 2017, the Company issued a new convertible promissory note to Auctus Fund, LLC for $75,000, with an interest rate of
10% and convertible to Common Stock of the Company at 50% discount. The maturity date of this note is 12/3/2017. On September
9, 2017, the Company paid Auctus Fund, LLC $39,308.22, which amount included one third of the principal, one third of prepayment
premium and one third of accrued interest. As of September 30, 2017, the unpaid principal of the note was $50,000.
On
April 4, 2017, the Company issued a new convertible promissory note to EMA Financial LLC for $50,000, with an interest rate of
10% and convertible to Common Stock of the Company at 50% discount. The maturity date of this note is 4/4/2018.
On
April 5, 2017, the Company issued a new convertible promissory note to JSJ Investments, Inc. for $40,000, with an interest rate
of 10% and convertible to Common Stock of the Company at 45% discount. The maturity date of this note is 1/5/2018.
On
April 12, 2017, the Company issued a new convertible promissory note to Power Up Lending Group for $33,500, with an interest rate
of 12% and convertible to Common Stock of the Company at 42% discount. The maturity date of this note is 1/25/2018.
On
June 9, 2017, the Company issued a new convertible promissory note to Crown Bridge Partners LLC for $35,000, with an interest
rate of 5% and convertible to Common Stock of the Company at 50% discount. The maturity date of this note is June 9, 2018.
As
of June 30, 2017, the principal balance of the outstanding convertible notes was $364,098 and the value of the derivative liability
was $452,441. The Company relies on professional third-party valuation to record the value of derivative liability, discount,
and change in fair value of derivatives in connection with these convertible notes and warrants, if any, that are related to the
convertible notes. The Company intends and prefers to repay these notes in cash as much as practical.
NOTE
11
– LONG-TERM LIABILITIES
DUE
TO PREFERRED STOCKHOLDERS
As
of June 30, 2017, the Company re-classified $215,000 of preferred stock subscribed as Long-term Liabilities payable to holders
of preferred stock of Providential Securities, Inc., a previous subsidiary of the Company that was discontinued in the year 2000.
In the early 2000’s, the Company had made an offer for these preferred stockholders to receive shares of common stock in
the Company in exchange for the preferred shares in the discontinued subsidiary but only a small number of the preferred shareholders
responded and accepted the offer. In more recent years, the Company has also attempted to contact these preferred shareholders
from time to time but have not received further response from them. The Company has continued to accrue imputed interest expenses
on the balance of $215,000 on a periodic basis. As of June 30, 2017 and June 30, 2016, $438,600 and $413,255 have been included
on the balance sheets as accrued interest in connection with preferred stock liabilities, respectively.
ADVANCES
FROM CUSTOMERS
As
of September 30, 2012, the Company reclassified the previously recorded Unearned Revenues as Advances from Customers because the
Company was not able to complete the consulting services for the related client due to its inability to provide GAAP-compliant
audited financial statements in order to file a registration statement with the Securities and Exchange Commission. As of June
30, 2017, the Company recorded $288,219 of Advances from Customers as a Long-term Liability.
OTHER
LONG-TERM LIABILITIES
As
of June 30, 2017, the Company reclassified $26,888 of Other Accrued Expense, $172,091 of Accrued Legal Fees, $1,089,987 of Accrued
Salaries and Payroll Taxes, $173,870 of Consulting Fees, $2,303,163 of Accrued Interest on Notes Payable, $954,337 from Discontinued
Operations, and $85,700 of Contingent Liabilities from Short-term Liabilities to Long-term Liabilities because these items have
been more than two years old.
NOTE
12
– LITIGATION
LEGAL
PROCEEDING SETTLED AND UNPAID AS OF JUNE 30, 2016:
QUANG
VAN CAO AND NHAN THI NGUYEN CAO VS. PROVIDENTIAL SECURITIES, INC. ET AL.
This
case was originally submitted to Orange County Superior Court, CA on June 25, 1997, Case No. 781121, and subsequently moved to
NASD Dispute resolution for arbitration. On or about August 24, 2000, the Company’s legal counsel negotiated with the Claimant’s
counsel and unilaterally reached a settlement that had not been approved by the Company. While the Company was in the process
of re-negotiating the terms of said settlement, the Claimants filed a request for arbitration hearing before the National Association
of Securities Dealers on October 4, 2000, Case No. 99-03160. Thereafter, the Claimants filed a complaint with the Orange County
Superior Court, CA on October 31, 2000, Case No. 00CC13067 for alleged breach of contract for damages in the sum of $75,000 plus
pre-judgment interest, costs incurred in connection with the complaint, and other relief. Without admitting or denying any allegations,
the Company reached a settlement agreement with the Claimants whereby the Company would pay the Claimants a total of $62,500 plus
$4,500 in administrative costs. As the date of this report, the Company has paid $2,500 and is subject to an entry of judgment
for $79,000. In May 2011, the Claimants filed an application for and renewal of judgment for a total of $140,490.78. As of June
30, 2017 the Company accrued $172,091 for potential liabilities in connection with this case in the accompanying consolidated
financial statements.
WILLIAM
DAVIDSON VS. DOAN ET AL.
On
or about February 01, 2010, the company was notified of a suit that was filed with the Superior Court of the State of California
for the County of Los Angeles on November 24, 2009 by William Davidson, an individual against Martin Doan, Henry Fahman, Benjamin
Tran, HRCiti Corporation, and Providential Capital, Inc. (collectively referred to as “Defendants” - Case No. BC 426831).
Plaintiff demanded an amount of not less than $140,000.00 from Defendants for promissory notes outstanding between Plaintiff and
the company.
On
July 09, 2012 William Davidson and PHI Capital Holdings, Inc. (formerly Providential Capital, Inc.), a subsidiary of the Company,
reached a settlement agreement with respect to whereby PHI Capital agreed to pay William Davidson a total of $200,000 over a period
of nineteen months beginning September 1, 2012. Since November 30, 2012, William Davidson has converted portions of the total
amount into common stock of PHI Group, Inc. in lieu of cash payment. The Company has accrued $90,000 as the required liability
associated with the balance of these notes in the accompanying consolidated financial statements as of June 30, 2017.
NOTE
13
– PAYROLL LIABILITIES
The
payroll liabilities are accrued and recorded as accrued expenses in the consolidated balance sheet. During the quarter 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 plans
to resolve the remaining balances with the Internal Revenue Service and the State of California Employment Department by June
30, 2018.
NOTE
14
– BASIC AND DILUTED NET LOSS PER SHARE
Net
loss per share is calculated in accordance with SFAS No. 128, “Earnings per Share”. Under the provision of SFAS No.
128, basic net loss per share is computed by dividing the net loss for the period by the weighted-average number of common shares
outstanding for the period. Diluted EPS is based on the weighted-average number of shares of common stock outstanding for the
period and common stock equivalents outstanding at the end of the period. Basic and diluted weighted average numbers of shares
for the year ended June 30, 2017 were the same since the inclusion of Common stock equivalents is anti-dilutive.
NOTE
15
–
STOCKHOLDER’S EQUITY
As
of June 30, 2017, the total number of authorized capital stock of the Company was 1,000,000,000 shares with a par value of $0.001
per share, consisting of 900,000,000 shares of voting Common Stock with a par value of $0.001 per share and 100,000,000 shares
of Preferred Stock with a par value of $0.001 per share. The rights and terms associated with the Preferred Stock will be determined
by the Board of Directors of the Company.
Treasury
Stock:
The
balance of treasury stock as of June 30, 2017 was 321,569 shares valued at $40,908 based on cost basis.
Common
Stock:
Since
July 1, 2016, the Company has issued the following amounts of its Common Stock:
On
July 29, 2016, the Company issued 225,00 shares of PHI Group, Inc.’s restricted Common Stock valued at $0.40 per share to
Milost Advisors, Inc. for buy-side advisory services in connection with contemplated acquisitions of target companies in South
Africa and North America. These shares were later cancelled on June 28, 2017.
On
August 29, 2016, the Company issued 48,930 shares of PHI Group, Inc.’s restricted Common Stock to an investor under the
auspices of Rule 144 for $20,000 in cash, at the price of $0.4088 per share.
On
August 30, 2016, Auctus Fund, LLC converted the principal amount of $56,750 for the convertible promissory note dated February
29, 2016 and $2,829.76 in accrued interest, totaling $59,579.76, into 529,598 shares of free-trading stock of the Company.
On
October 30, 2016, the Company issued 200,000 shares of PHI Group, Inc.’s restricted Common Stock to two independent consultants
for consulting services at the price of $0.25 per share.
On
December 5, 2016, Rev. Thuong Le, a creditor of the Company, converted $150,000 in accrued interest into 606,060 shares of Common
Stock of the Company.
On
December 22, 2016, Henry Fahman, Chairman and Chief Executive of the Company, converted $250,000 from the balance of Loans from
Officers to 2,500,000 restricted shares of Common Stock of the Company.
On
January 30, 2017, EMA Financial, LLC converted $7,010.50 of the principal amount of the
convertible promissory note dated July 20, 2016 into 180,000 shares of Common Stock of
the Company.
On
February 7, 2017, JSJ Investments, Inc. converted $33,734.68 from the Replacement Convertible Note dated February 2, 2017, which
replaced the same amount of indebtedness with EMA Financial, LLC, into 657,169 shares of Common Stock of the Company.
On
February 9, 2017, EMA Financial, LLC converted $7,200 of the principal amount of the convertible promissory note dated July 20,
2016 into 200,000 shares of Common Stock of the Company.
On
March 08, 2017, EMA Financial, LLC converted $7,867.78 of the principal and accrued interest of the convertible promissory note
dated July 20, 2016 into 244,340 shares of Common Stock of the Company.
On
April 6, 2017, Auctus Fund LLC converted $20,651.71 principal amount of the convertible promissory note dated August 16, 2016
together with $3,498.29 of accrued and unpaid interest thereto, totaling $24,150 into 750,000 shares of Common Stock of the Company.
On
June 23, 2017, the Company issued 495,441 shares of free-trading Common Stock of PHI Group, Inc. to Power Up Lending Group Ltd.,
holder of a Convertible Promissory Note dated 12/15/2016 of the Company, for the conversion of $7,500.00 of the principal amount
of the Note, at the conversion price of $0.015138 per share. The principal amount of the Note after this conversion was $24,500.00.
On
June 28, 2017, the Company cancelled 225,000 of Common Stock of PHI Group, Inc. previously issued to Milost Advisors, Inc. for
consulting services valued at $90,000.00.
On
July 05, 2017, the Company issued 740,741 shares of free-trading Common Stock of PHI Group, Inc. to Power Up Lending Group Ltd.,
holder of a Convertible Promissory Note dated 12/15/2016 of the Company, for the conversion of $10,000.00 of the principal amount
of the Note, at the conversion price of $0.0135 per share. The principal amount of the Note after this conversion was $14,500.00.
On
July 11, 2017, the Company issued 800,000 shares of free-trading Common Stock of PHI Group, Inc. to Auctus Fund LLC, holder of
a Convertible Promissory Note dated 8/16/2016 of the Company, for the conversion of $5,152.00, consisting of $3,485.17 principal
amount of the Note and $1,666.83 of accrued and unpaid interest thereto, at the conversion price of $0.00644 per share. The principal
amount of the Note after this conversion was $32,613.12. Subsequently, on July 24, 2017, the Company paid a total of $49,530.72
to Auctus Fund LLC, consisting of $32,613.12 principal amount and the balance in pre-payment premium and accrued and unpaid interest
in connection with the Convertible Promissory Note dated 8/16/16. This note was paid in full and the principal balance due remaining
and accrued and unpaid interest remaining after this payment was $0.00.
On
July 17, 2017, the Company issued 880,000 shares of free-trading Common Stock of PHI Group, Inc. to Power Up Lending Group Ltd.,
holder of a Convertible Promissory Note dated 12/15/2016 of the Company, for the conversion of $7,920.00 of the principal amount
of the Note, at the conversion price of $0.009 per share.
On
July 21, 2017, the Company issued 1,019,872 shares of free-trading Common Stock of PHI Group, Inc. to Power Up Lending Group Ltd.,
holder of a Convertible Promissory Note dated 12/15/2016 of the Company, for the conversion of $7,955.00, consisting of $6,580
principal amount of the Note and $1,375.00 of accrued and unpaid interest thereto, at the conversion price of $0.0078 per share.
The principal balance due remaining and accrued and unpaid interest remaining after this conversion was $0.00.
On
July 25, 2017, Henry Fahman, Chairman and Chief Executive Officer of the Company, converted
$300,000 of indebtedness owed by the Company into 20,000,000 shares of restricted common
stock of PHI Group, Inc. at the conversion price of $0.015 per share. The conversion
into restricted common stock of the Company was effectuated pursuant to the resolutions
of the Company’s Board of Directors dated March 12, 2012, June 06, 2012, and November
2, 2012 which remain in full force and effect, allowing creditors of the Company to convert
any or all of their outstanding indebtedness and accrued and unpaid interest thereof
into shares of common stock of PHI Group, Inc. by relying on the exemption from the registration
requirements of the United States Securities Act of 1933, as amended (the “Act”).
On
July 25, 2017, the Company issued a total of 1,533,333 shares of restricted Common Stock of PHI Group, Inc. pursuant to Rule 144
to two non-US shareholders in connection with private stock purchase agreements dated July 19, 2017 and July 20, 2017, respectively,
between these shareholders and the Company, for a total of $23,000.00, at the purchase price of $0.015 per share.
As
of September 30, 2017, there were 41,082,982 shares of the Company’s common stock issued and outstanding, excluding 5,673,327
shares of common stock that have been set aside for a special dividend distribution.
Preferred
Stock:
There was no preferred stock issued and outstanding as of June 30, 2017.
Class
A Preferred Stock:
On April 2, 2015, the Company designated the first fifty million (50,000,000) shares of the Company’s
previously authorized 100,000,000 shares of Preferred Stock, with a par value of $0.001 per share, as Class A Cumulative Convertible
Redeemable Class A Preferred Stock (the “
Class A Preferred Stock
“) with the following rights and terms:
1)
Dividends: Each holder of Class A Preferred Stock is entitled to receive twelve percent (12%) non-compounding cumulative dividends
per annum, payable semi-annually.
2)
Conversion: Each share of the Class A Preferred Stock shall be convertible into the Company’s Common Stock any time after
one year from the date of issuance at a Variable Conversion Price (as defined herein) of the Common Stock. The “Variable
Conversion Price” shall mean 75% multiplied by the Market Price (as defined herein) (representing a discount rate of 25%).
“Market Price” means the average Trading Price for the Company’s Common Stock during the ten (10) trading-day
period ending one trading day prior to the date the Conversion Notice is sent by the Holder of the Class A Preferred Stock to
the Company via facsimile or email (the “Conversion Date”). “Trading Price” means, for any security as
of any date, the closing price on the OTC Markets, OTCQB, NASDAQ Stock Markets, NYSE or applicable trading market as reported
by a reliable reporting service (“Reporting Service”) mutually acceptable to the Company and Holder of the Class A
Preferred Stock.
3)
Redemption Rights: The Company, after a period of two years from the date of issuance, may at any time or from time to time redeem
the Class A Preferred Stock, in whole or in part, at the option of the Company’s Board of Directors, at a price equal to
one hundred twenty percent (120%) of the original purchase price of the Class A Preferred Stock or of a unit consisting of any
shares of Class A Preferred Stock and any warrants attached thereto, plus, in each case, accumulated and unpaid dividends to the
date fixed for redemption.
NOTE
16
–
STOCK-BASED COMPENSATION PLANS
On
February March 18, 2015, the Company adopted an Employee Benefit Plan to set aside 1,000,000 shares of common stock for eligible
employees and independent contractors of the Company and its subsidiaries. As of June 30, 2017 the Company has not issued any
stock in lieu of cash under this plan.
On
September 23, 2016, the Company issued incentive stock options and nonqualified stock options to certain key employee(s) (Henry
Fahman – CEO/CFO) and directors (Tam Bui, Henry Fahman, and Frank Hawkins constitute the Board of Directors) as deferred
compensation. The options allow the holders to acquire the Company’s Common Stock at the fair exercise price of the Company’s
Common Stock on the grant date of each option at $0.24 per share, based on the 10-days’ volume-weighted average price prior
to the grant date. The number of options is equal to a total of 6,520,000. The options terminate seven years from the date of
grant and become vested and exercisable after one year from the grant date. The following assumptions were used in the Monte Carlo
analysis by Doty Scott Enterprises, Inc., an independent valuation firm, to determine the fair value of the stock options:
Risk-free interest rate
|
|
|
1.18
|
%
|
Expected life
|
|
|
7
years
|
|
Expected volatility
|
|
|
239.3
|
%
|
Vesting is based on a one-year cliff from grant date.
|
|
|
|
|
Annual
attrition rates were used in the valuation since ongoing employment was condition for vesting the options.
The
fair value of the Company’s Stock Options as of issuance valuation date is as follows:
Holder
|
|
Issue
Date
|
|
Maturity
Date
|
|
Stock
Options
|
|
|
Exercise
Price
|
|
|
Fair
Value at
Issuance
|
|
Tam Bui
|
|
9/23/2016
|
|
9/23/2023
|
|
|
875,000
|
|
|
|
Fixed
price: $0.24
|
|
|
$
|
219,464
|
|
Frank Hawkins
|
|
9/23/2016
|
|
9/23/2023
|
|
|
875,000
|
|
|
|
Fixed
price: $0.24
|
|
|
$
|
219,464
|
|
Henry Fahman
|
|
9/23/2016
|
|
9/23/2023
|
|
|
4,770,000
|
|
|
|
Fixed
price: $0.24
|
|
|
$
|
1,187,984
|
|
NOTE
17
–
GAIN (LOSS) ON SETTLEMENT OF DEBTS
For
the fiscal year ended June 30, 2017, there was a net loss in the amount of $131,818 from conversions of debts into common stock
of the Company by creditors.
NOTE
18
–
OTHER INCOME (EXPENSE)
Net
Other Income (Expense) for the fiscal year ended June 30, 2017 consists of the following:
OTHER
INCOME (EXPENSE)
|
|
FY Ended June 30, 2017
|
|
Interest Expense
|
|
$
|
(526,562
|
)
|
Gain (loss) on sale of marketable securities
|
|
$
|
(2,874
|
)
|
Gain (loss) on sale of assets
|
|
$
|
(20,011
|
)
|
Loss on loan/note conversions
|
|
$
|
(131,818
|
)
|
Discount on Convertible Notes
|
|
$
|
(155,192
|
)
|
Prepayment Premium
|
|
$
|
(25,348
|
)
|
Write-offs
|
|
$
|
(141,955
|
)
|
NET
OTHER INCOME (EXPENSE)
|
|
$
|
(1,003,760
|
)
|
NOTE
19
–
RELATED PARTY TRANSACTIONS
The
Company accrued $210,000 in salaries for the President and Secretary of the Company during the year ended June 30, 2017.
On
June 5, 2017, the Company received a fee in the amount of $20,000 from American Laser Healthcare Corp. (“ALHC”), a
Delaware corporation, in connection with consulting service provided by PHI Capital Holdings, Inc. to assist ALHC to go public
in the U.S. The Chairman and CEO of the Company also serves as the Interim Chief Executive Officer of ALHC.
NOTE
20
–
INCOME TAXES
No
provision was made for income tax since the Company has significant net operating loss carry forward. Through June 30, 2017, the
Company incurred net operating losses for tax purposes of approximately $39,300,254. The net operating loss carry forward may
be used to reduce taxable income through the year 2032. Net operating loss for carry forwards for the State of California is generally
available to reduce taxable income through the year 2022. The availability of the Company’s net operating loss carry-forward
is subject to limitation if there is a 50% or more positive change in the ownership of the Company’s stock.
“Under
section 6501(a) of the Internal Revenue Code (Tax Code) and section 301.6501(a)-1(a) of the Income
Tax
Regulations (Tax Regulations), the IRS is required to assess tax within 3 years after the tax return was filed with the IRS.”
NOTE
21
–
CONTRACTS AND COMMITMENTS
BUSINESS
AND FINANCIAL CONSULTING AGREEMENT WITH THINH HUNG INVESTMENT CO.
During
the fiscal year ended June 30, 2010 the Company signed an agreement with Thinh Hung Investment Co., Ltd., a Vietnam-based company,
to assist Thinh Hung in identifying, locating and, possibly, acquiring various business opportunities for Thinh An Co., Ltd.,
a subsidiary of Thinh Hung, including but not limited to a reverse merger, a stock swap, or a business combination between Thinh
An and a publicly-traded company in the U.S. In exchange for the services rendered, the Company would receive compensation in
cash from Thinh Hung and common stock of the combined company. As of September 30, 2011, the Company consummated a stock purchase
and investment agreement between Thinh Anh Co., Ltd. and Vietnam Foods Corporation, a Nevada corporation. However, the combined
company has not filed a registration statement with the Securities and Exchange Commission to become a reporting company. The
Company has recognized $26,656 as only revenues from this transaction. During the fiscal year ended June 30, 2016, the Company
repaid $5,000 to Thinh Hung Investment Co. The balance of $288,219 was reclassified as Customer Advances in the Long-term Liability
portion of the balance sheet.
CONSULTING
AGREEMENT WITH SPORTS POUCH BEVERAGE COMPANY
On
June 3, 2015, PHI Capital Holdings, Inc., a wholly owned subsidiary of the Company, signed a Consulting Engagement Agreement with
Sports Pouch Beverage Company (“SPBV”), a Nevada corporation, to provide consulting services and assist SPBV with
respect to business development, mergers and acquisitions, corporate governance, and corporate finance. PHI Capital Holdings,
Inc. is entitled to receive up to forty percent of common stock in SPBV as compensation for the services rendered. The duration
of this agreement is one year. As of December 31, 2016 PHI Capital Holdings, Inc. recorded a total of 292,050,000 shares SPBV
stock as earned revenues from this transaction and returned 97,350,000 shares to the client.
AGREEMENT
FOR DEFRAYAL OF EXPENSES AND STOCK COMPENSATION WITH ASIA GREEN CORPORATION
On
July 17, 2015, the Company signed an agreement to provide $75,000 to Asia Green Corporation (AGMC”), a Nevada corporation,
for AGMC to pay certain required expenses and resume its status as fully reporting company with the Securities and Exchange Commission.
In exchange for the fund, AGMC agrees to allocate 500,000 shares of its Common Stock upon the consummation of a business combination
between itself and a Vietnamese company engaged in agriculture and reforestation. This amount was written off as of June 30, 2017.
BUSINESS
COOPERATION AGREEMENT WITH PT JAYA SAKTI GLOBALINDO
On
March 17, 2016, the Company signed a Business Cooperation Agreement with PT Jaya Sakti Globalindo (JSG), an Indonesian company,
to utilize hard assets held by JSG and its affiliates as collaterals for project financing. The parties intend to enter into definitive
agreements for the collateral provision in connection with specific projects and the terms and conditions of such provisions.
As of the date of this report, the Company has not undertaken any projects that would qualify for the utilization of collateral
assets from JSG and its affiliates.
ENGAGEMENT
LETTER WITH MILOST ADVISORS, INC.
On
July 11, 2016, the Company signed an engagement letter with Milost Advisors, Inc. to assist the Company in its analysis, consideration
and, if appropriate, execution of various financial and strategic alternatives available to it, including securing additional
equity and/or debt capital, assisting the Company in its analysis and consideration of financial aspects of certain potential
strategic transactions such as mergers, acquisitions, spin-offs, joint ventures, minority investments, negotiated purchases, or
other similar transactions. In consideration for the services rendered by Milost, the Company agreed to pay Milost a retainer
fee equal to $100,000, payable in the form of $10,000 in cash and $90,000 in stock of the Company valued at $0.40 per share. The
Company also agreed to pay Milost a success fee of 8% for equity financing and 5% for mezzanine and senior debt financings. As
of June 30, 2017, Milost returned 225,000 shares of Common Stock of PHI Group, Inc. valued at $90,000 to the Company and this
engagement letter was null and void.
MEMORANDUM
OF UNDERSTANDING BETWEEN MILOST GLOBAL, INC.
On
July 18, 2016, the Company signed a Memorandum of Understanding with Milost Global, Inc., a U.S. private equity firm, to cooperate
in promoting the competitiveness of each other as well as joint activities to acquire cash-flow positive companies in North America,
South Africa, Australia, Singapore and New Zealand and seek growth through M&A alternatives in order to fast-track shareholder
value and dividend distribution. Both parties agreed to use Milost Advisors, Inc. as the first right of refusal advisor to conduct
a strategic planning exercise, form a new Special Purpose Company (SPC) through which the partnership activities would be carried
out. The same SPC would be held, managed and controlled by both parties pari passu. It was intended that this partnership would
assist both parties with the implementation of their combined growth strategies and would help identify areas where each party
could provide capacity building support. Subsequently, the Company terminated the engagement letter with Milost Advisors, Inc.
and the Memorandum of Understanding with Milost Global, Inc.
LETTER
OF INTENT TO ACQUIRE A SOUTH AFRICAN MINING SERVICES COMPANY
On
July 19, 2016, the Company presented a pre-conditional non-binding undertaking to make an offer to acquire the entire issued capital
of an undisclosed South African mining services company listed on the Johannesburg Stock Exchange (“SA Target”). On
July 25, 2016, approval was given by the SA Target’s Board of Directors to its management team to enter into further discussions
with PHI Group in good faith and to proceed with the due diligence process outlined in the undertaking.
Following
the completion of the due diligence process conducted by Milost Advisors, Inc. and the Company, on September 3, 2016, the Company
presented a Letter of Intent (“LOI”) to the SA Target to acquire all its issued capital in exchange for common stock
in PHI Group. The exchange rate would be determined on the basis of 10 days’ Volume-Weighted Average Price (VWAP) of both
companies before the day of the LOI. According to the LOI, the Company also commits to the provision of a USD $ 20 million shareholder
loan facility to the SA Target. Approximately USD $ 12 million will be used for the repayment of the SA Target subsidiary’s
term loan and the remaining USD $ 8 million will be available as a draw down facility for financing the working capital requirements
of the SA Target. The USD $ 12 million facility will be non-interest bearing until the company has effectively turned around or
whilst there are minority shareholders in Buildmax. Thereafter, interest of 5% per annum will be charged on the shareholder loan
and the loan will be repaid over a period to be agreed depending on the free cash flow generated by the SA Target.
On
September 6, 2016, approval was granted by both the SA Target’s Board of Directors and Independent Board to its management
team to enter into further discussions with PHI Group in good faith and to proceed with the transaction.
On
September 14, 2016, the Company received confirmation from SA Target’s management that 77% of the shareholders of the SA
Target approved the acquisition offer by PHI Group.
On
October 10, 2016, Milost Global, Inc. submitted a revised offer to SA Target, which was declined by SA Target’s Board of
Directors on October 11, 2016. Subsequently the Company decided not pursue this transaction.
SECURED
LINE OF CREDIT FACILITY WITH TCA GLOBAL CREDIT MASTER FUND, LP
On
August 30, 2016, the Company signed a term sheet with TCA Global Credit Master Fund, LP (“Investor”) for a maximum
$15,000,000 senior secured line of credit, of which $4,000,000 will be made available to the Company on the first drawdown (the
“Initial Line of Credit”) for acquisition financing. The Closing Date will be the start date for the Line of Credit
Facility.
The
Company, at the discretion of the Investor, may request an increase in the line of credit at agreed upon time periods and agreed
upon amounts. The sum of the Initial Line of Credit and the subsequent line increases, if any, (the “Then Current Line Size”)
shall not exceed the maximum line of credit. Each subsequent line increase will require the Company to execute and deliver a new
or revised revolving note to the Investor and be responsible for any fees and expenses associated with the line increase.
The
line of credit may be drawn down, at the Investor’s discretion, and repaid by the Company throughout the term of the facility.
The amount requested to be drawn down (the “Advance”) shall not exceed 80% of repayments to the Investor’s designated
account, less interest and fees, if the reserve amount on the Then Current Line Size has not been satisfied. The frequency of
Advances will be mutually agreed upon between the Investor and the Company. As of the date of this report, the Company has not
drawn down any amount from the line of credit.
MILOST
EQUITY SUBSCRIPTION AGREEMENT
On
September 8, 2016, the Company entered into a Letter of Intent with Milost Global, Inc., a U.S. private equity firm, with respect
to the principal terms and conditions under which Milost Global, Inc. would invest up to $100 million in PHI Group, Inc. Investment
in the amount of $50 million would be as equity and $50 million as loan.
On
September 25, 2016, the Company signed an agreement with Milost Global, Inc. for up to $50 million structured as a Milost Equity
Subscription Agreement (the ‘MESA”) whereby Milost Global was willing to initially invest $15 million for working
capital needs of PHI Group. The amount of $15 million would be drawn down in tranches at a minimum of $500,000 until fully utilized.
Further, the MESA would be utilized for the share exchange between Milost Global, Inc. and PHI Group and the balance of the $50
million facility would be available for equity leakage for future acquisitions of PHI Group. According to the structure of the
MESA, Milost Global, Inc. would be entitled to purchase shares of common stock of PHI Group for a price per share on the basis
of $2 at a discount of 20%. The Company and Milost agreed that for as long as the Company’s stock price has not reached
$2 per share, Milost Global, Inc. would receive the Company’s convertible notes instead of the Company’s shares for
each drawdown. Milost Global, Inc. would have the right to convert the convertible notes into common shares of the Company once
the price of PHI Group’s stock reaches the target price of $2. The Company agreed to pay Milost Global, Inc. a commitment
fee equal to 4% of the total commitment, payable within 3 business days after the price of the Company’s common stock reaches
the target price of $6.
On
September 27, 2016, the Company submitted a Drawdown Notice to Milost Global, Inc. for a total of $2,750,000 from the MESA’s
total $50-million commitment in form of a convertible note bearing annual interest of 5% and convertible to common stock at 20%
discount when PHI Group’s common stock reaches $2 per share. The proceeds from this drawdown would be allocated as follows:
$2,150,000 towards the cash payment for the purchase of the agricultural company (“Agri Target”) in Southeastern United
States, $500,000 for due diligence and document fees for the acquisitions of the SA Target, Agri Target and an educational company
in Canada, and $100,000 for general working capital. On September 28, 2016, Milost Global, Inc. confirmed that $500,000 had been
remitted to Milost Advisors from Milost Global, Inc. on behalf of PHI Group, Inc. as part of the first Drawdown Notice presented
to Milost Global, Inc. by the Company. As of the date of this report, the Company has not received any direct disbursements from
Milost Global, Inc. for the drawdown and has terminated the Milost Equity Subscription Agreement in its entirety.
CONSULTING
SERVICE AGREEMENT WITH TANS COMPANY LTD.
On
September 9, 2016, PHI Capital Holdings, Inc. signed a Consulting Service Agreement with Tans Company, Ltd., a Vietnam-based company,
to provide advisory and consulting services on a non-exclusive basis to assist Tans Co. in becoming a publicly traded company
in the U.S. Stock Market. The Company is entitled to cash compensations from Tans Co. and a portion of equity in the new public
company. As of the date of this report, this transaction is subject to further review by both parties.
MEMORANDUM
OF UNDERSTANDING TO ACQUIRE ABOUND FARMS, INC.
On
September 30, 2016, the Company signed a Memorandum of Understanding with Abound Farms, Inc., (“AFI Target”) a U.S.
company, to acquire 100% of AFI Target. AFI Target is engaged in hydroponics and possesses proprietary water treatment systems
and nutrients that are known to substantially enhance farming yields. The MOU sets forth the guidelines for further negotiations
between AFI Target and the Company before the signing of a definitive agreement that contains representations, warranties, covenants,
and indemnities customary for a transaction of this type. The Company intends to incorporate the AFI Target’s water treatment
systems and nutrients to the Agri Target’s business after the closing of these transactions.
MEMORANDUM
OF AGREEMENT WITH HOANG MINH CHAU HUNG YEN LLC.
On
January 26, 2017, the Company entered into a Memorandum of Agreement to acquire 51% of Hoang Minh Chau Hung Yen, LLC, (“HMC”)
a Vietnamese company specializing in growing and processing turmeric for food, cosmetic and medicinal usages. The Company intends
to apply HMC’s expertise and experience in turmeric cultivation and processing for its organic farming program in the U.S.
through its subsidiary Abundant Farms, Inc. The closing of this transaction is subject to further due diligence review and financial
audits of HMC.
BUSINESS
COOPERATION AGREEMENT WITH NATHAN TRADING LTD.
On
January 28, 2017, the Company entered into a Business Cooperation Agreement with Nathan Trading Limited Co., (“NTC”)
a Thai company engaged in the promotion of the cultivation and processing of sacha inchi seeds for food, cosmetics and healthcare.
The Company intends to initially purchase NTC’s sacha inchi products from NTC for distribution in the U.S. and international
markets and subsequently cooperate with NTC to promote the planting for sacha inchi plants and secure raw material sources to
increase production capacity in the future.
PURCHASE
AGREEMENT TO ACQUIRE A FARM IN HOLMES COUNTY, FLORIDA
In
March 2017, the Company signed a Commercial Contract to acquire a 408-acre farm together with buildings, fixtures, and farming
systems and in Bonifay, Holmes County, Florida for a total purchase price of $1,500,000. The Company made an initial deposit of
$37,500 towards the total purchase price and has negotiated with the farm owners to extend the closing date of the Purchase Agreement
until the end of December 2017. The Company intends to use this property for Abundant Farms, Inc., a wholly owned subsidiary of
the Company, to develop a proprietary organic farming program in conjunction with EB-5 investment capital from qualified international
investors.
INVESTMENT
AGREEMENT WITH AZURE CAPITAL, INC.
On
March 6, 2017, PHI Group, Inc., a Nevada corporation (the “Company”) and Azure Capital, a Massachusetts Corporation
(the “Investor”) entered into an Investment Agreement (the “Investment Agreement”) and a Registration
Rights Agreement (the “Registration Rights Agreement”), each dated March 6, 2017 between the Company and the Investor.
The Investment Agreement and the Registration Rights Agreement were amended on August 3, 2017. 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 agrees to reserve 65,445,000 shares of its Common
Stock for issuance to the Investor pursuant to the Investment Agreement. In the event the Company cannot register a sufficient
number of shares of its Common Stock for issuance pursuant to the Investment Agreement, the Company will use its best efforts
to authorize and reserve for issuance the number of shares required for the Company to perform its obligations in connection with
the Investment Agreement as soon as reasonable practical.
The
Company may in its discretion draw on the facility from time to time, as and when the Company determines appropriate in accordance
with the terms and conditions of the Investment Agreement. The maximum number of shares that the Company is entitled to put to
the Investor in any one draw down notice shall not exceed shares with a purchase price of $250,000 or 200% of the average daily
volume (U.S. market only) of the Company’s Common Stock for the three (3) Trading Days prior to the applicable put notice
date multiplied by the average of the three (3) daily closing prices immediately preceding the put date, calculated in accordance
with the Investment Agreement. The Company may deliver a notice for a subsequent put from time to time, after the pricing period
for the prior put has been completed.
The
purchase price shall be set at ninety-four percent (94%) of the lowest daily volume weighted average price (VWAP) of the Company’s
common stock during the five (5) consecutive trading days immediately following the put notice date. On each put notice submitted
to the Investor by the Company, the Company shall specify a suspension price for that put. In the event the price of Company’s
Common Stock falls below the suspension price, the put shall be temporarily suspended. The put shall resume at such time the price
of the Company’s Common Stock is above the suspension price, provided the dates for the pricing period for that particular
put are still valid. In the event the pricing period has been complete, any shares above the suspension price due to the Investor
shall be sold to the Investor by the Company at the suspension price under the terms of the Investment Agreement. The suspension
price for a put may not be changed by the Company once submitted to the Investor.
There
are put restrictions applied on days between the draw down notice date and the closing date with respect to that particular put.
During such time, the Company shall not be entitled to deliver another draw down notice. In addition, the Investor will not be
obligated to purchase shares if the Investor’s total number of shares beneficially held at that time would exceed 4.99%
of the number of shares of the Company’s common stock as determined in accordance with Rule 13d-1(j) of the Securities Exchange
Act of 1934, as amended. In addition, the Company is not permitted to draw on the facility unless there is an effective registration
statement to cover the resale of the shares.
The
Investment Agreement also contains customary representations and warranties of each of the parties. The assertions embodied in
those representations and warranties were made for purposes of the Investment Agreement and are subject to qualifications and
limitations agreed to by the parties in connection with negotiating the terms of the Investment Agreement. The Investment Agreement
further provides that the Company and the Investor are each entitled to customary indemnification from the other for, among other
things, any losses or liabilities they may suffer as a result of any breach by the other party of any provisions of the Investment
Agreement or Registration Rights Agreement (as defined below). Investor should read the Investment Agreement together with the
other information concerning the Company that the Company publicly files in reports and statements with the Securities and Exchange
Commission (the “SEC”).
Pursuant
to the terms of the Registration Rights Agreement, the Company is obligated to file one or more registrations statements with
the SEC within twenty-one (21) days after the date of the Registration Rights Agreement to register the resale by the Investor
of the shares of common stock issued or issuable under the Investment Agreement. In addition, the Company is obligated to use
all commercially reasonable efforts to have the registration statement declared effective by the SEC within 90 days after the
registration statement is filed.
The
Company filed an S-1 Registration Statement with the Securities and Exchange Commission on April 3, 2017 and a Withdrawal of Registration
Statement on August 7, 2017. Subsequently, a new S-1 Registration Statement was filed on August 7, 2017 and an S-1/A was filed
on September 15, 2017.
AGREEMENT
WITH PRIMEFORTH RENEWABLE ENERGY LTD.
On
June 24, 2015, PHI Capital Holdings, Inc., a wholly owned subsidiary of the Company, signed a Consulting Engagement Agreement
with Primeforth Renewable Energy Ltd. (“Primeforth”), a Singaporean company, to provide consulting services with respect
to corporate development, corporate finance and debt financing for Primeforth Renewable Energy. PHI Capital Holdings is entitled
to a one-time non-refundable professional fee of $20,000 and 4% cash success fee for any financing arranged for Primeforth. The
Company is also entitled to additional compensations for advisory and business development services for the client. The term of
this agreement is two years. The Company recognized $40,000 as revenues for the fiscal year ended June 30, 2016 and $40,000 for
the fiscal year ended June 30, 2017, respectively.
AGREEMENT
FOR DEFRAYAL OF EXPENSES AND STOCK COMPENSATION WITH ASIA GREEN CORPORATION
On
July 17, 2015, the Company signed an agreement to provide $75,000 to Asia Green Corporation (AGMC”), a Nevada corporation,
for AGMC to pay certain required expenses and resume its status as fully reporting company with the Securities and Exchange Commission.
In exchange for the fund, AGMC agrees to allocate 500,000 shares of its Common Stock upon the consummation of a business combination
between itself and a Vietnamese company engaged in agriculture and reforestation. This amount was written off from the Company’s
balance sheet as of June 30, 2017.
CONSULTING SERVICE AGREEMENT
On September 23, 2016, the Company signed
an agreement to engage a consultant for M&A due diligence, business development, and other corporate services for a period
of on year. The Company has agreed to pay the consultant a one-time fee of one hundred thousand restricted shares of the PHI Group’s
stock as compensations for the term of the agreement.
OPTION
GRANTS
On
September 23, 2016, the Board of Directors of the Company approved option grants for the current members of the Board of Directors
and the President and Chief Executive Officer of PHI Group, Inc. to acquire up to 6,520,000 shares of the Company’s common
stock at an exercise price of $0.24 per share, based on the 10-days’ volume-weighted average price of PHI Group, Inc.’s
Common Stock prior to the grant date. These options will be vested in one year after the grant date.
PRIVATE
STOCK PURCHASE AND SALE AGREEMENT WITH MAXAGRO GROUP
On
May 26, 2017, the Company entered into a Private Stock Purchase and Sale Agreement (“Agreement”) to purchase 51% of
equity ownership in Maxagro Farm SRL (“MXG”), a Romanian company, in exchange for cash or stock of the Company (or
of a Company’s subsidiary). The fair value of the transaction will be determined by both parties after the completion of
a business valuation of MXG by one or more reputable, qualified independent business valuation firms and the financial audits
of MXG by a PCAOB-registered auditing firm. This closing of this transaction was originally scheduled to occur on August 08, 2017
and is extended to the end of December 2017, unless further extended by mutual consent of both parties.
BUSINESS
COOPERATION AGREEMENT WITH HUNG VUONG EXPORT IMPORT AND CONSTRUCTION JOINT STOCK COMPANY
On
May 6, 2017, the Company signed a Business Cooperation Agreement with Hung Vuong Export Import and Construction Joint Stock Company,
a Vietnamese company, to form a new corporation or utilize Philand Corporation, a Wyoming corporation previously formed by the
Company, as the holding company for the purpose of acquiring an eighty-five percent ownership in VIDIFI JSC, a Vietnamese company
that owns and operates the 105-Km Hanoi-Haiphong Expressway together with other industrial zone and urban centers along this expressway.
This transaction is subject to the approval of the appropriate ministries and the Prime Minister of the central government of
Vietnam as well as available financing options.
AGREEMEN
TO PURCHASE 51% EQUITY OWNERSHIP IN CONSTRUCTII SA
On
June 29, 2017, the “Company entered into a “Contract for Transfer of Shares” to purchase 51% of equity ownership
in Constructii SA, (“CSA”), a Romanian company engaged in construction and manufacturing since 1950, from Ioan Tusinean,
the majority shareholder of CSA, in exchange for fifteen million U.S. dollars in cash. The first closing of this transaction was
scheduled to occur within a maximum of sixty days from the date of signing of the Contract and the final closing to occur thirty
days after the first closing. Subject to mutual written consent of the Company and the selling shareholder of CSA, the final closing
may occur at other times.
NOTE
22
–
GOING CONCERN UNCERTAINTY
As
shown in the accompanying consolidated financial statements, the Company has accumulated deficit of $39,299,754 and total liabilities
and stockholders’ deficit of $7,513,481 as of June 30, 2017. These factors as well as the uncertain conditions that the
Company faces in its day-to-day operations with respect to cash flows create an uncertainty as to the Company’s ability
to continue as a going concern. The financial statements do not include any adjustments that might be necessary should the Company
be unable to continue as a going concern. Management has taken action to strengthen the Company’s working capital position
and generate sufficient cash to meet its operating needs through June 30, 2018 and beyond.
In
the next twelve months the Company intends to continue pursuing its merger and acquisition program by acquiring all or controlling
interests in target companies in a number of industries, including but not limited to conventional energy, renewables, natural
resources, agribusiness, technology, transportation, education, distribution, mining, oil & gas, financial services, healthcare,
biotechnology and pharmaceuticals. We believe that by closing one or more of the transactions contemplated in Note 23 –
Subsequent Event - we will be able to build a critical mass and uplist to the Nasdaq Stock Market or NYSE in the near future.
In addition, we will continue to provide advisory and consulting services to international clients through our wholly owned subsidiary
PHI Capital Holdings, Inc.
The Company anticipates
generating substantial amounts of revenues through the merger and acquisition program and advisory services mentioned herein.
However, no assurances could be made that management would be successful in achieving its plan. The president and chairman of
the Company has committed to funding the Company’s operations from various sources for the next 12 months.
NOTE
23 – SUBSEQUENT EVENT
These
financial statements were approved by management and available for issuance on October 12, 2017. Subsequent events have been evaluated
through this date.
PAYMENTS
OF CONVERTIBLE PROMISSORY NOTES
On
July 24, 2017, the Company paid $49,530.72 to Auctus Fund, LLC for the balance of the principal, prepayment premium and accrued
and unpaid interest of the convertible promissory note dated August 16, 2016 between Auctus Fund, LLC and the Company. This note
was paid in full as of July 24,2017.
On
August 1, 2017, the Company paid $31,462.60 to JSJ Investments for one half of the principal of the note, one half of the prepayment
premium and one half of the accrued and unpaid interest for the convertible promissory note dated February 2, 2017. As of September
30, 2017, the unpaid principal balance was $21,000.
On
August 14, 2017, the Company paid a total of $43,024.88 to Power Up Lending Group, which amount included the total principal,
prepayment premium and accrued interest for the convertible promissory note dated February 23, 2017. This note was paid in full
as of August 14, 2017.
On
September 9, 2017, the Company paid Auctus Fund, LLC $39,308.22, which amount included one third of the principal, one third of
prepayment premium and one third of accrued interest of the convertible promissory note dated March 3, 2017. As of September 30,
2017, the unpaid principal of the note was $50,000.
ISSUANCES
OF NEW CONVERTIBLE PROMISSORY NOTES
On
July 20, 2017, the Company issued a new convertible promissory note to Power Up Lending Group for $28,000, with an interest rate
of 8% and convertible to Common Stock of the Company at 42% discount. The maturity date of this note is 4/30/2018.
On
August 3, 2017, the Company issued a new convertible promissory note to JSJ Investments, Inc. for $78,750, with an interest rate
of 10% and convertible to Common Stock of the Company at 45% discount. The maturity date of this note is 5/3/2018.
On
August 15, 2017, the Company issued a new convertible promissory note to Power Up Lending
Group for $33,000, with an interest rate of 10% and convertible to Common Stock of the
Company at 42% discount. The maturity date of this note is 5/15/2018.
On
August 24, 2017, the Company issued a new convertible promissory note to LG Capital for $78,750, with an interest rate of 8% and
convertible to Common Stock of the Company at 50% discount. The maturity date of this note is 5/26/2018.
The
Company intends to prepay these notes in cash.
SETTLEMENT
AGREEMENT WITH THINH HUNG INVESTMENT CO.
On
August 3, 2017, the Company signed a Settlement Agreement and agreed to pay Thinh Hung Investment Co. a total amount of $381,000,
which includes the outstanding balance of $288,219 that is reclassified as Customer Advances in the Long-term Liability portion
of the attached balance sheet and accrued interest as agreed by the two parties.
According
to the Settlement Agreement, the Compapny will transfer or cause to be transferred at least 480,000 shares of Common Stock of
PHI Group, Inc. to an authorized represenatative of Thinh Hung. In the event Thinh Hung is unable to realize at least $381,000
from the sale of PHI Stock, PHI Group will either transfer additional Common Stock of PHI Group, Inc. or other marketable securities
to the authorized reprenesattive designated Thinh Hung or pay cash directly to Thinh Hung until the total amount of $381,000 is
reached. PHI Group, Inc. agreed to use its best efforst to pay off any outstanding balance by October 31, 2017. After the receipt
of at least 480,000 shares of PHI Group Stock by the authorized representative of Thinh Hung, Thinh Hung shall deliver and transfer
all the Vietnam Foods Corporation Stock to PHI Group, Inc. or its authorized representative.
BUSINESS
COOPERATION AGREEMENT WITH TNB VIETNAM JSC
On
August 7, 2017, the Company signed a Business Cooperation Agreement with TNB Vietnam JSC, a Vietnamese company located in the
Mekong Delta that specializes in cultivating and processing “forest” bitter melon (momordica charantia). According
to the agreement, TNB and PHI Group plan to facilitate mutual growth and expansion including but not limited to: (1) Purchase
of finished forest bitter melon products from TNB for distribution and sale in the U.S., Europe, China and other select international
markets under PHI Group’s private labels; (2) Purchase of semi-processed ingredients from TNB in order to manufacture other
end products for export markets; (3) Strategic alliance by acquisition of equity interest in TNB and/or exchange of ownership
between TNB and PHI via stock swap; and (4) Co-developing and cultivating forest bitter melon as well as manufacturing and marketing
its products in the U.S. and other international markets with potential for long-term growth.
FORMATION
OF PHI EZ WATER TECH, INC. SUBSIDIARY
On
August 7, 2017, the Company incorporated PHI EZ Water Tech, Inc., a Wyoming corporation, as a subsidiary to manage and commercialize
the water treatment systems developed by Dr. Martin Nguyen, a Vietnamese-American scientist.
These
systems are among a series of products developed by Dr. Nguyen using quantum technology in a combination of disciplines including
applied physics, applied water science, biological system engineering and agricultural economics. Incorporating complex electromagnetic
force, advanced oxidation, electrocoagulation and ultrasound, they can reduce water consumption by up to 30% and fertilizer usage
by 30%-50% while boosting crop yields by 30%-50%. The water produced from these systems is also good for human health and able
to stabilize water environments to increase yields for aquatic and wet paddy farming.
MEMORANDUM
OF UNDERSTANDING WITH AQUARIUS POWER, INC.
On
August 9, 2017, the Company signed a Memorandum of Understanding (“MOU”) with Aquarius Power, Inc. (“AQP”),
a Texas company, to provide renewable energy technology to Vietnam. PHI has also made an investment to become a strategic shareholder
of AQP.
PHI
and AQP will form a joint venture company which will have the exclusive right to sublicense,
sell, build, own and/or operate the AQP energy systems in Vietnam on an exclusive basis.
PHI
will be responsible for: Obtaining all necessary approvals to build, own and operate AQuarius Energy System; Securing a binding
and acceptable power purchase agreement (PPA) from the governmental authority; Providing the land for the Aquarius Energy System;
Providing the construction and civil engineering know-how to build the energy pools; Providing management, engineering and operational
manpower to build and operate the AQuarius Engineering System; and Providing the interconnection of the AQuarius Energy System
to the national grid.
AQP’s
responsibilities include: Support PHI in obtaining the Power Purchase Agreement; Conduct a site survey and provide blueprints
for a tailor made Energy System; Provide technical support for the construction and operation of the Energy System (Includes training
for construction, installation and operations); Build, Ship, the AQuarius Energy System(s); and Install and commission the AQuarius
Energy System as required.
AQuarius
Wave Energy System is a land-based wave energy system that uses a combination of gravity and “buoyancy” found within
the interaction between air and water to produce power that can be used to generate electricity and / or produce potable water.
AQuarius is a baseload zero carbon footprint that uses no consumables and can be installed virtually anywhere on the planet that
is cost effective against any fossil fuel alternatives. The system, which can be built turn-key within 6 months of obtaining permits,
has an operating life of over 60 years and is clean, scalable, reliable, and extremely flexible. Its operating cost is comparably
low as hydroelectric systems.
On
October 6, 2017, the Company signed a new Memorandum of Understanding (“MOU”) with Aquarius Power, Inc. to expand
the scope of cooperation and provide the same renewable energy technology to Eastern Europe and the European Region. For Eastern
Europe the Company is in the process of planning to build a pilot unit in Romania using AQP technology. PHI also intends to make
additional investments in AQP.
MASTER
BUSINESS COOPERATION AGREEMENT WITH THO XUAN DUONG JOINT STOCK COMPANY
On
August 14, 2017, the Company signed a Master Business Cooperation Agreement with Tho Xuan Duong Joint Stock Company, a Vietnamese
traditional medicine company with 400 years of history, to cooperate with each other in the following areas: (1) PHI will assist
TXD to promote and advertise TXD’s brand and traditional medicinal products and treatments on a global basis; (2) PHI will
assist TXD to set up manufacturing facilities and/or establish strategic alliances with pharmaceutical production and distribution
companies in Europe, the United States, the Middle East, Central and South America, Africa and other selective geographical areas;
(3) PHI will assist TXD to access funding sources to implement TXD’s business plan; (4) PHI will discuss and negotiate with
TXD to consider an acquisition of equity interest in TXD and/or exchange of ownership between TNB and PHI by way of stock swap
to form a strategic alliance between the two companies; (5) PHI and TXD will further discuss the potential of taking TXD public
in the U.S. and/or European Stock Markets to provide long-term financing capabilities for TXD’s development and growth;
(6) PHI and TXD will cooperate to build and develop raw material areas, preliminary and full-scale processing facilities for herbal
medicines, and herbal medicine tourism area in Sapa, Lao Cai Province, Northern Vietnam; (7) PHI will assist TXD to obtain special
medical devices using Low Level Laser Light Therapy technologies developed by American Laser Healthcare Corp., a US company, and
cleared by the U.S. FDA for pain treatment, needles acupuncture, diabetes Type 2, and 18 devices, as well as access other medical
devices for TXD’s usage as needed; and (8) PHI and TXD may jointly develop, manufacture and market other products and/or
engage in other business activities that may be of mutual interest to both parties.
LETTER
OF INTENT TO ACQUIRE 80% OF MEDICAL CORP SRL, A ROMANIAN COMPANY
On
August 23, 2017, the Company signed a Letter of Intent to acquire eighty percent (80%) equity interest in Medical Corp SRL (“MDC”)
for the price of one million Euros. However, the final purchase price and payment schedule will be determined after an asset valuation
of MDC. Both companies intend to execute a Definite Agreement to consummate this transaction as soon as practical.
AGREEMENT
TO ACQUIRE 51% OWNERSHIP IN 400-ACRE MINING CLAIMS IN GRANT COUNTY, OREGON
On
September 2, 2017, American Pacific Resources, Inc., a Wyoming corporation (“APR”) and wholly owned subsidiary of
the Company, entered into an Agreement of Purchase and Sale with Rush Gold Royalty Inc, a Wyoming corporation, to acquire a 51%
ownership in twenty-one mining claims over an area of approximately 400 acres in Granite Mining District, Grant County, Oregon,
U.S.A., in exchange for a total purchase price of twenty-five million U.S. Dollars ($US 25,000,000) to be paid in a combination
$20 million in PHI Group, Inc.’s Class A Series II Convertible Cumulative Redeemable Preferred Stock (“Preferred Stock”),
and $5 million in cash and demand promissory note upon the closing of this contemplated transaction.
The
PHI Group’s Class A Series II Preferred Stock is priced at $5 per share (“Original Price per Share”), carrying
a cumulative dividend rate of 8%, redeemable at 120% premium to the Original Price per Share, and convertible to Common Stock
of PHI Group at 25% discount six months after issuance or to Common Stock of APR at 50% discount to the then relevant market price
when APR has become a fully-reporting company.
This
transaction was closed effective October 3, 2017.
PHI
GROUP, INC.’S 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.”
PHI
CAPITAL HOLDINGS, INC.’S DOMESTICATION IN THE STATE OF WYOMING
On
September 20, 2017, PHI Capital Holdings, Inc., a wholly owned subsidiary of 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 this subsidiary’s
jurisdiction to the State of Wyoming.
TECHNICAL
ASSISTANCE AGREEMENT WITH AUBURN UNIVERSITY
On
September 25, 2017, the Company signed a Technical Assistance Agreement with Auburn University to conduct a research program in
order to determine the market segments related to supply and demand of medicinal and aromatic plants in the world, and then focus
more specifically on major production and consumption markets. The first four topics of the research program focus on the production,
medicinal applications, and market analysis of turmeric, saffron, bitter melon, and some major potential and aromatic plants.
The last topic covers the trends and solutions of switching from conventional farming to organic farming of these crops to meet
the future food and medicinal consumption. The research program begins on October 1, 2017 and ends on September 30, 2018.