As
filed with the Securities and Exchange Commission on December 08 , 2017
Registration
No. 333-219769
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
AMENDMENT
NO. 3
FORM
S-1/A
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
PHI
GROUP, INC.
(Exact
name of Registrant as specified in its charter)
Nevada
|
|
8741
|
|
90-0114535
|
(State
or other jurisdiction of
incorporation or organization)
|
|
(Primary
Standard Industrial
Classification Code Number)
|
|
(I.R.S.
Employer
Identification Number)
|
5348
Vegas Drive
Las
Vegas, Nevada 89108
(702)
475-5430
(
Address,
including zip code, and telephone number, including
area
code, of Registrant’s principal executive offices)
Henry
Fahman
Chief
Executive Officer
PHI
GROUP, INC.
5348
Vegas Drive
Las
Vegas, Nevada 89108
(702)
475-5430
(
Name,
address, including zip code, and telephone number, including
area
code, of agent for service)
Copies
to:
Christopher
H. Dieterich, Esq.
Dieterich
& Associates
11835
West Olympic Blvd., Suite 1235E
Los
Angeles, California 90064
(310)
312-6888
Approximate
date of commencement of proposed sale to the public:
As
soon as practicable after the effective date of this Registration Statement.
If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933 check the following box: [X]
If
this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration statement number of the earlier effective registration statement
for the same offering. [ ]
If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If
this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated file, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated file” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated
filer [ ]
|
Accelerated
filer [ ]
|
Non-accelerated
filer [ ]
|
Smaller reporting
company [X]
|
|
|
(Do
not check if a smaller reporting company)
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|
CALCULATION
OF REGISTRATION FEE
Title
of Each Class of
Securities to be
Registered
|
|
Amount
to be
Registered (1)
|
|
|
Proposed
Maximum
Offering
Price
Per
Share (2)
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|
|
Proposed
Maximum
Aggregate
Offering
Price (3)
|
|
|
Amount
of
Registration
Fee
|
|
Common
Stock, $0.001 par value per share
|
|
|
7,936,600
|
|
|
$
|
0.0134
|
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$
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106,350
|
|
|
$
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13.24
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|
(1)
Pursuant to Rule 416 under the Securities Act, the shares being registered hereunder include such indeterminate number of shares
of common stock as may be issuable with respect to the shares being registered hereunder as a result of stock splits, stock dividends
or similar transactions.
(2)
Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(c) of the Securities Act
of 1933, using the average of the high and low prices as reported on the OTCQB market on December 07 , 2017.
(3)
Estimated assuming that all 7,936,600 shares are sold at the same price. This number of shares is limited by Rule 415,
however the share prices may increase over the life of the agreements and this registration, such that prices could cumulate to
$10,000,000 (the contractual limitation) if a large number of shares are sold at significantly higher prices than currently exist.
(4)
As of December 07 , 2017, the Company had 50,746,818 issued and outstanding shares of common stock. These 7,936,600
shares represent 15.64% of the number of currently outstanding shares. Upon issuance of these shares, the total number
of issued and outstanding shares of common stock will be 58,683,418 and the registered shares will then represent 13.52%
of those shares. Additionally, as of the date of this amended Registration Statement, these 7,936,600 shares
represent 33 % of the current float.
The
registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until
the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become
effective in accordance with section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective
on such date as the Securities and Exchange Commission acting pursuant to said section 8(a) may determine.
EXPLANATORY
NOTE
The
purpose of this Amendment No. 3 to PHI GROUP, INC.’s Registration Statement on Form S-1, File No. 333-219769/171012718,
filed with the Securities and Exchange Commission on August 07, 2017, Form S-1/A – Amendment No. 1 , File No. 333-219769/171087784,
filed with the Securities and Exchange Commission on September 15, 2017, and Form S-1/A – Amendment No. 2, File No. 333-219769/
171141298, filed with the Securities and Exchange Commission on October 17, 2017, is to provide the Supplemental Response
to the comment letter dated October 27 , 2017 by the Securities and Exchange, by filing herewith the updated legal
opinion of the Registrant’s counsel as Exhibit 5.1 to the afore-mentioned registration statement on Form S-1, as
amended.
General
1.
We
note your response to our prior comment 2. Please file counsel’s legal opinion as an exhibit to the registration statement
on Form S-1. Refer to Item 601(b)(5) of Regulation S-K.
Answer:
The updated legal opinion of the Registrant’s counsel is filed herewith as Exhibit 5.1 to the afore-mentioned registration
statement, as amended.
The
changes that have been made in this Amendment No. 3 to the Form S-1 include the amount of 7,936,600 shares of $0.001
par value Common Stock to be registered, the closing stock price of the company as of December 07 , 2017, which was
$0.0134, and the unaudited information as of September 30, 2017 in accordance with the quarterly report
on Form 10-Q that was filed with the Securities and Exchange Commission on November 20 , 2017. This Amendment No.
3 to the Form S-1 speaks as of the original filing date of the Form S-1 and also reflects events that may have occurred
subsequent to the original filing date, as well as modifies or updates certain disclosures made in the original Form S-1 up to
November 20, 2017, as indicated in the afore-mentioned Form 10-Q.
The
information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it
is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject
to Completion, Dated December 08 , 2017
Prospectus
PHI
GROUP, INC.
7,936,600
Shares
Common Stock
This
prospectus relates to the offer and resale of up to 7,936,600 shares of our common stock, par value $0.001 per share, by
the selling stockholder, Azure Capital, Inc., or “Azure”. Azure has agreed to purchase up to $10,000,000 in share
value pursuant to the investment agreement dated August 3, 2017 between Azure and us. Subject to the terms and conditions of such
investment agreement, which is referred to in this prospectus as the “Investment Agreement,” we have the right to
put up to $10,000,000 million in shares of our common stock to Azure. This arrangement is sometimes referred to as an “Equity
Line.” For more information on the selling stockholder, please see the section of this prospectus entitled “Selling
Stockholder”.
As
of December 07 , 2017, the Company had 50,746,818 issued and outstanding shares of common stock. The 7,936,600
shares represent 15.64 % of the number of currently outstanding shares. Upon issuance of these shares, the total number
of issued and outstanding shares of common stock will be 58,683,418 and the registered shares will then represent 13.52
% of those shares. Additionally, as of the date of this amended Registration Statement, these 7,936,600 shares
represent 33% of the current float.
We
will not receive any proceeds from the resale of these shares of common stock offered by Azure. We will, however, receive proceeds
from the sale of shares to Azure pursuant to the Equity Line. When we put an amount of shares to Azure, the per share purchase
price that Azure will pay to us in respect of such put will be determined in accordance with a formula set forth in the Investment
Agreement. Generally, in respect of each put, Azure will pay us a per share purchase price equal to ninety-four percent (94%)
of the lowest daily volume weighted average price of our common stock during the five (5) consecutive trading day period beginning
on the trading day immediately following the date of delivery of the applicable put notice.
Azure
may sell the shares of common stock from time to time at the prevailing market price on the OTCQB market, or on an exchange if
our shares of common stock become listed for trading on such an exchange, or in negotiated transactions. Azure is an “underwriter”
within the meaning of the Securities Act of 1933, as amended (the “Securities Act”) in connection with the resale
of our common stock under the Equity Line. For more information, please see the section of this prospectus entitled “Plan
of Distribution”.
Our
common stock is quoted on the OTCQB market under the symbol “PHIL”. The last reported sale price of our common stock
on the OTCQB market on December 07 , 2017 was $0.0134 per share.
Investing
in the offered securities involves a high degree of risk, including those risks set forth in the “Risk Factors” section
of this prospectus, as well as those set forth in any prospectus supplement.
We
will be responsible for all fees and expenses incurred in connection with the preparation and filing of this registration statement,
provided, however, we will not be required to pay any underwriters’ discounts or commissions relating to the securities
covered by the registration statement.
You
should read this prospectus and any prospectus supplement carefully before you decide to invest. You should not assume that the
information in this prospectus is accurate as of any date other than the date on the front of this document.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or
passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
The
date of this prospectus December 08 , 2017
TABLE
OF CONTENTS
This
prospectus is part of a registration statement that we filed with the Securities and Exchange Commission. You should rely only
on the information contained in this prospectus or to which we have referred you. We have not authorized anyone to provide you
with information or to make any representation on behalf of the Company that is different from that contained in this prospectus.
You should not rely on any unauthorized information or representation. This prospectus is an offer to sell only the securities
offered by this prospectus under circumstances and in jurisdictions where it is lawful to do so. The information in this prospectus
is accurate only as of the date of this prospectus, regardless of the date of delivery of this prospectus or of any sales of these
securities. Our business, financial condition, results of operations and prospects may have changed since the date of this prospectus.
This prospectus may be used only in jurisdictions where it is legal to sell these securities.
CAUTIONARY
STATEMENT REGARDING FORWARD LOOKING STATEMENTS
Some
of the statements contained or incorporated by reference in this prospectus are “forward-looking statements”. These
statements are based on the current expectations, forecasts, and assumptions of our management and are subject to various risks
and uncertainties that could cause our actual results to differ materially from those expressed or implied by the forward-looking
statements. Forward-looking statements are sometimes identified by language such as “believe,” “may,”
“could,” “estimate,” “continue,” “anticipate,” “intend,” “should,”
“plan,” “expect,” “appear,” “future,” “likely,” “probably,”
“suggest,” “goal,” “potential” and similar expressions and may also include references to
plans, strategies, objectives, and anticipated future performance as well as other statements that are not strictly historical
in nature. The risks, uncertainties, and other factors that could cause our actual results to differ materially from those expressed
or implied in this prospectus include, but are not limited to, those noted under the caption “Risk Factors” beginning
on page 8 of this prospectus. Readers should carefully review this information as well the risks and other uncertainties described
in other filings we may make after the date of this prospectus with the Securities and Exchange Commission.
Readers
are cautioned not to place undue reliance on forward-looking statements. They reflect opinions, assumptions, and estimates only
as of the date they were made, and we undertake no obligation to publicly update or revise any forward- looking statements in
this prospectus, whether as a result of new information, future events or circumstances, or otherwise.
PROSPECTUS
SUMMARY
This
summary highlights the information contained elsewhere in this prospectus. Because this is only a summary, it does not contain
all of the information that you should consider before buying shares of our common stock. You should read the entire prospectus
and any prospectus supplements carefully, especially the sections entitled “Caution Regarding Forward Looking Statements,”
“Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,”
together with our financial statements and the related notes included elsewhere in this prospectus and in any prospectus supplements
related thereto, before deciding to purchase shares of our common stock.
PHI
GROUP, INC.
Depending
upon the context, the terms “PHIL,” “PHI Group, Inc,” “Company,” “we,” “our”
and “us,” refers to either PHI Group, Inc. alone or PHI Group, Inc. and its subsidiaries collectively.
Organizational
History
PHI
Group, Inc. (the “Company” or “PHI”) is a Nevada corporation 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.
Background
Originally
incorporated in June 1982 as JR Consulting, Inc., 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. (Nevada) in January 2000. The Company then changed its name to Providential Holdings, Inc.
in February 2000. In October 2000, Providential Securities withdrew its securities brokerage membership and ceased its financial
services business. Subsequently, in April 2009, the Company changed its name to PHI Group, Inc. From October 2000 to October 2011,
the Company 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
began to mainly focus on acquisition and development opportunities in energy and natural resource businesses. 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.
Summary
Financial Data
Because
this is only a summary of our financial information, it does not contain all of the financial information that may be important
to you. Therefore, you should carefully read all of the information in this prospectus and any prospectus supplement, including
the financial statements and their explanatory notes and the section entitled “Management’s Discussion and Analysis
of Financial Condition and Results of Operations,” before making a decision to invest in our common stock. The information
contained in the following summary is derived from our financial statements for the fiscal years ended June 30, 2017, 2016, 2015,
2014 and 2013.
SELECTED
FINANCIAL DATA
JUNE
30,
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2017
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2016
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|
|
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2015
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|
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2014
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|
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2013*
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Net
Revenues
|
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$
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113,500
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$
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332,050
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$
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127,178
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|
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$
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77,439
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|
$
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-
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|
Income
(loss) from operations
|
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$
|
(556,958
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)
|
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$
|
(132,871
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)
|
|
$
|
(305,912
|
)
|
|
$
|
(304,043
|
)
|
|
$
|
(403,311
|
)
|
Net
other income (expense)
|
|
$
|
(1,003,760
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)
|
|
$
|
124,873
|
|
|
$
|
(1,063,003
|
)
|
|
$
|
48,048
|
|
|
$
|
(480,737
|
)
|
Net
income (loss)
|
|
$
|
(1,560,718
|
)
|
|
$
|
(7,998
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)
|
|
$
|
(1,368,915
|
)
|
|
$
|
(255,994
|
)
|
|
$
|
(884,047
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)
|
Net
income (loss) per share
|
|
$
|
(0.10
|
)
|
|
$
|
(-
|
)
|
|
$
|
(0.21
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(6.36
|
)
|
Total
assets
|
|
$
|
(674,064
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)
|
|
$
|
753,990
|
|
|
$
|
448,780
|
|
|
$
|
444,100
|
|
|
$
|
459,845
|
|
Total
liabilities
|
|
$
|
8,187,545
|
|
|
$
|
7,755,950
|
|
|
$
|
9,430,260
|
|
|
$
|
9,585,282
|
|
|
$
|
10,371,750
|
|
*
Note: Net loss per share adjusted for 1:1,500 reverse split of shares issued and outstanding.
Our
Principal Executive Offices.
Our principal executive offices are located at 5348 Vegas Drive, Las Vegas, Nevada 89108. Our
telephone number is (702) 475-5430 and our website address is
www.phiglobal.com
. Information included or referred to on
our website is not a part of this prospectus.
Market
Data and Industry Information
We
obtained the market data and industry information contained in this prospectus from internal surveys, estimates, reports and studies,
as appropriate, as well as from market research, publicly available information and industry publications. Although we believe
our internal surveys, estimates, reports, studies and market research, as well as industry publications are reliable, we have
not independently verified such information, and as such, we do not make any representation as to its accuracy.
Summary
of the Offering
This
prospectus relates to the resale of up to 7,936,600 shares of our common stock by Azure. The Investment Agreement with
Azure provides that Azure is committed to purchase up to $10,000,000 of our common stock over the course of 36 months. We may
draw on the facility from time to time, as and when we determine appropriate in accordance with the terms and conditions of the
Investment Agreement. A maximum of 65,445,000 shares (estimated by using the reported sale price of our common stock on the OTCQB
market on August 3, 2017 of $0.1528 per share) may be issued under the Equity Line at per-share prices set at ninety-four percent
(94%) of the lowest daily volume weighted average price (VWAP) of our common stock during the five (5) consecutive trading day
period beginning on the date of delivery of the applicable put notice (such five-day period, the “Pricing Period”).
The
Investment Agreement is further described below under the heading, “Investment Agreement”.
Shares
of common stock offered by us
|
|
None.
|
|
|
|
Shares
of common stock offered by the Selling Shareholder
|
|
7,936,600
shares which are
available for use under the Equity Line. As of December, 07 , 2017 the Company
had 50,746,818 issued and outstanding shares of common stock. These 7,936,600
shares represent 15.64% of the number of currently outstanding shares. Upon
issuance of these shares, the total number of issued and outstanding shares of common
stock will be 58,683,418 and the registered shares will then represent 13.52%
of those shares. Additionally, as of the date of this amended Registration
Statement, these 7,936,600 shares represent 33.00 % of the current float.
|
|
|
|
Offering
Price
|
|
To
be determined by the prevailing market price for the shares at the time of the sale or in negotiated transactions.
|
Use
of proceeds
|
|
We
will not receive any proceeds from the sale of shares by the selling stockholder. However, we will receive proceeds from the
Equity Line. See “Use of Proceeds.” We intend to use such proceeds for working capital, reduction of indebtedness,
acquisitions and other general corporate purposes.
|
|
|
|
Risk
Factors
|
|
An
investment in our common stock is speculative and involves substantial risks. You should read the “Risk Factors”
section of this prospectus for a discussion of certain factors to consider carefully before deciding to invest in shares of
our common stock.
|
|
|
|
Plan
of Distribution
|
|
The
shares of common stock covered by this prospectus may be sold by the selling stockholder in the manner described under “Plan
of Distribution.”
|
|
|
|
OTC
Markets Symbol
|
|
“PHIL”
|
Investment
Agreement
We
entered into the Investment Agreement with Azure on August 3, 2017. Pursuant to the Investment Agreement, Azure committed to purchase
up to $10,000,000 of our common stock, over the course of 36 months. The obligations of Azure as imposed by the terms of this
agreement are non-transferrable. The aggregate number of shares issuable by us and purchasable by Azure under the Investment Agreement
is 65,445,000 (estimated using the reported sale price of our common stock on the OTCQB market on August 3, 2017 of $0.1528 per
share). To date, we have sold none of the available shares.
We
may draw on the facility from time to time, as and when we determine appropriate in accordance with the terms and conditions of
the Investment Agreement. The maximum amount that we are entitled to put in any one notice is the greater of (i) 200%
of the average daily volume (U.S. market only) of the common stock for the three (3) trading days prior to the date of delivery
of the applicable put notice, multiplied by the average of the closing prices for such trading days or (ii) $250,000. The purchase
price shall be set at ninety-four percent (94%) of the lowest daily VWAP of our common stock during the Pricing Period. However,
if, on any trading day during a Pricing Period, the daily VWAP of the common stock is lower than the floor price specified by
us in the put notice, then we will withdraw that portion of the put amount for each such trading day during the Pricing Period,
with only the balance of such put amount above the minimum acceptable price being put to Azure. There are put restrictions applied
on days between the put notice date and the closing date with respect to that particular put. During such time, we are not entitled
to deliver another put notice.
There
are circumstances under which we will not be entitled to put shares to Azure, including the following:
●
we will not be entitled to put shares to Azure unless there is an effective registration statement under the Securities Act to
cover the resale of the shares by Azure;
●
we will not be entitled to put shares to Azure unless our common stock continues to be quoted on the OTCQB market, or becomes
listed on a national securities exchange;
●
we will not be entitled to put shares to Azure to the extent that such shares would cause Azure’s beneficial ownership to
exceed 4.99% of our outstanding shares; and
●
we will not be entitled to put shares to Azure prior to the closing date of the preceding put.
The
Investment Agreement further provides that the Company and Azure are each entitled to customary indemnification from the other
for any losses or liabilities we or it suffers as a result of any breach by the other of any provisions of the Investment Agreement
or our registration rights agreement with Azure, or as a result of any lawsuit brought by a third-party
arising
out of or resulting from the other party’s execution, delivery, performance or enforcement of the Investment Agreement or
the registration rights agreement.
The
Investment Agreement also contains 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. In addition, certain representations and
warranties were made as of a specific date, may be subject to a contractual standard of materiality different from what a stockholder
or investor might view as material, or may have been used for purposes of allocating risk between the respective parties rather
than establishing matters as facts.
In
connection with the preparation of the Investment Agreement and the registration rights agreement, we issued Azure a check for
$5,000 and a convertible promissory note for $15,000, having a conversion price equal to $0.03 per share.
Registration
Rights Agreement
Pursuant
to the terms of a Registration Rights Agreement, dated August 3, 2017, between Azure and us, we are obligated to file one or more
registration statements with the SEC to register the resale by Azure of shares of common stock issued or issuable under the Investment
Agreement. The aggregate number of shares registered prior to this registration statement is zero. We have agreed that, in the
event that this registration fails to register all of the shares necessary to fulfill our contractual obligations, we will amend
this statement and file new registration statements. This registration process will continue until such time as all of the dollar
amounts available under the credit line, using shares of common stock issuable under the Investment Agreement, have been registered
for resale on effective registration statements. In no event will we be obligated to register for resale more than $10,000,000
in value of shares of common stock, or 65,445,000 shares (estimated using the reported sale price of our common stock on the OTC
market on August 3, 2017 of $0.1528 per share).
RISK
FACTORS
An
investment in our common stock involves a high degree of risk. You should consider the risks described below and the other information
contained in this prospectus carefully before deciding to invest in our common stock. If any of the following risks actually occur,
our business, financial condition and operating results could be harmed. As a result, the trading price of our common stock could
decline, and you could lose a part or all of your investment.
Risks
Related to Our Business and Industries
Our
success depends on our management team and other key personnel, the loss of any of whom could disrupt our business operations.
Our
future success will depend in substantial part on the continued service of our senior management. The loss of the services of
one or more of our key personnel could impede implementation and execution of our business strategy and result in the failure
to reach our goals. We do not carry key person life insurance for any of our officers or employees. Our future success will also
depend on the continued ability to attract, retain and motivate highly qualified personnel in the diverse areas required for continuing
our operations. We cannot assure that we will be able to retain our key personnel or that we will be able to attract, train or
retain qualified personnel in the future.
Our
strategy in mergers and acquisitions involves a number of risks and we have a limited history of successful acquisitions. Even
when an acquisition is completed, we may have to continue our service for integration that may not produce results as positive
as management may have projected.
The
Company is in the process of evaluating various opportunities and negotiating to acquire other companies, assets and technologies.
Acquisitions entail numerous risks, including difficulties in the assimilation of acquired operations and products, diversion
of management’s attention from other business concerns, amortization of acquired intangible assets and potential loss of
key employees of acquired companies. We have limited experience in assimilating acquired organizations into our operations. Although
potential synergy may be achieved by acquisitions of related technologies and businesses, no assurance can be given as to the
Company’s ability to integrate successfully any operations, personnel, services or products that have been acquired or might
be acquired in the future. Failure to successfully assimilate acquired organizations could have a material adverse effect on the
Company’s business, financial condition and operating results.
Acquisitions
involve a number of special risks, including:
|
●
|
failure
of the acquired business to achieve expected results;
|
|
●
|
diversion
of management’s attention;
|
|
●
|
failure
to retain key personnel of the acquired business;
|
|
●
|
additional
financing, if necessary and available, could increase leverage, dilute equity, or both;
|
|
●
|
the
potential negative effect on our financial statements from the increase in goodwill and other intangibles; and
|
|
●
|
the
high cost and expenses of completing acquisitions and risks associated with unanticipated events or liabilities
|
These
risks could have a material adverse effect on our business, results of operations and financial condition since the values of
the securities received for the consulting service at the execution of the acquisition depend on the success of the company involved
in acquisition. In addition, our ability to further expand our operations through acquisitions may be dependent on our ability
to obtain sufficient working capital, either through cash flows generated through operations or financing activities or both.
There can be no assurance that we will be able to obtain any additional financing on terms that are acceptable to us, or at all.
As
some of our business activities are currently involved with Southeast Asia and Eastern, any adverse change to the economy or business
environment in these countries could significantly affect our operations, which would lead to lower revenues and reduced profitability.
Some
of our business activities are currently involved with Southeast Asia and Eastern Europe. Because of this presence in specific
geographic locations, we are susceptible to fluctuations in our business caused by adverse economic or other conditions in this
region, including stock market fluctuation. A stagnant or depressed economy in these countries generally, or in any of the other
markets that we serve, could adversely affect our business, results of operations and financial condition.
Risks
Associated with Energy Business
As
part of our core business involves acquisitions of energy assets as well as production and trading of energy commodities, our
profitability will depend on the prices we receive for energy commodities such as coal and wood pellets. These prices are dependent
upon factors beyond our control, including: the strength of the global economy; the demand for electricity; the global supply
of thermal coal and biomass products; weather patterns and natural disasters; competition within our industry and the availability
and price of alternatives, including natural gas; the proximity, capacity and cost of transportation; coal industry capacity;
domestic and foreign governmental regulations and taxes, including those establishing air emission standards for coal-fueled power
plants or mandating increased use of electricity from renewable energy sources; regulatory, administrative and judicial decisions,
including those affecting future mining permits; and technological developments, including those intended to convert coal-to-liquids
or gas and those aimed at capturing and storing carbon dioxide.
Risks
Related to Our Securities
Insiders
have substantial control over the company, and they could delay or prevent a change in our corporate control, even if our other
stockholders wanted such a change to occur.
Our
executive officers and directors as of December 07 , 2017, in the aggregate, hold approximately 52.61% of our outstanding
common stock, and our Board of Directors is also able to decide the rights and terms associated with the Company’s Preferred
Stock, which decision may allow the Board of Directors to exercise significant control over all matters requiring stockholder
approval, including the election of directors and approval of significant corporate transactions. This could delay or prevent
an outside party from acquiring or merging with us even if our other stockholders wanted it to occur.
The
price at which investors purchase our common stock may not be indicative of the prevailing market price.
The
stock market often experiences significant price fluctuations that are unrelated to the operating performance of the specific
companies whose stock is traded. These market fluctuations could adversely affect the trading price of our shares. Investors may
be unable to sell their shares of common stock at or above their purchase price, which may result in substantial losses.
Since
we do not currently meet the requirements for our stock to be quoted on NASDAQ, NYSE MKT LLC or any other senior exchange, the
tradability in our securities will be limited under the penny stock regulations.
Under
the rules of the Securities and Exchange Commission, if the price of our securities on the OTCQB market is below $5.00 per share,
our securities are within the definition of a “penny stock.” As a result, it is possible that our securities may be
subject to the “penny stock” rules and regulations. Broker-dealers who sell penny stocks to certain types of investors
are required to comply with the Commission’s regulations concerning the transfer of penny stock. These regulations require
broker-dealers to:
*Make
a suitability determination prior to selling penny stock to the purchaser;
*Receive
the purchaser’s written consent to the transaction; and
*Provide
certain written disclosures to the purchaser.
These
requirements may restrict the ability of broker/dealers to sell our securities, and may affect the ability to resell our securities.
Our
compliance with the Sarbanes-Oxley Act and SEC rules concerning internal controls may be time consuming, difficult and costly
for us.
It
may be time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required
by the Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal controls and other finance staff in order
to develop and implement appropriate internal controls and reporting procedures. If we are unable to comply with the internal
controls requirements of the Sarbanes-Oxley Act, we may not be able to obtain the independent accountant certifications that the
Sarbanes-Oxley Act requires publicly traded companies to obtain.
Our
success depends on our management team and other key personnel, the loss of any of whom could disrupt our business operations.
Our
future success will depend in substantial part on the continued service of our senior management and founder. The loss of the
services of one or more of our key personnel could impede implementation and execution of our business strategy and result in
the failure to reach our goals. We do not carry key person life insurance for any of our officers or employees. Our future success
will also depend on the continued ability to attract, retain and motivate highly qualified personnel in the diverse areas required
for continuing our operations. We cannot assure that we will be able to retain our key personnel or that we will be able to attract,
train or retain qualified personnel in the future.
Risks
Related to this Offering
We
are registering the resale of a maximum of 7,936,600 shares of common stock, all of which may be issued to Azure under
the Equity Line. The resale of such shares by Azure could depress the market price of our common stock.
We
are registering the resale of a maximum of 7,936,600 shares of common stock under the registration statement of which this
prospectus forms a part. The sale of these shares into the public market by Azure could depress the market price of our common
stock. As of December 07 , 2017, there were 50,746,818 shares of our common stock issued and outstanding. In total,
we may issue up to 65,445,000 shares (estimated using the reported sale price of our common stock on the OTCQB market on August
3, 2017 of $0.1528 per share) to Azure pursuant to the Equity Line, meaning that, we are obligated to file one or more registration
statements covering the shares remaining of the eligible 65,445,000 shares not covered by the registration statement. The sale
of those additional shares into the public market by Azure could further depress the market price of our common stock. We entered
into an agreement with Dutchess Capital, a forerunner of Azure, in 2002, which did not progress to a registration statement and
was subsequently cancelled. We do not believe that this agreement has any impact on the valuation of the Company today or on its
trading price.
Existing
Stockholders Could Experience Substantial Dilution Upon the Issuance of Common Stock Pursuant to the Equity Line
Our
Equity Line with Azure contemplates our issuance of up to 65,445,000 shares (estimated using the reported sale price of our common
stock on the OTCQB market on August 3, 2017 of $0.1528 per share) of our common stock to Azure, subject to certain restrictions
and obligations. If the terms and conditions of the Equity Line are satisfied, and we choose to exercise our put rights to the
fullest extent permitted and sell all 65,445,000 shares of our common stock to Azure, our existing stockholders’ ownership
will be diluted by such sales. Unless our stock price recovers and we trade at much higher prices, we may not be able or may not
choose to access the entirety of the $10,000,000 possibly available under the Equity Line. However, we view the availability of
such an extensive resource to be valuable to us at this stage of our growth.
Azure
Will Pay Less Than the Then-Prevailing Market Price for Our Common Stock Under the Equity Line
The
common stock to be issued to Azure pursuant to the Investment Agreement will be purchased at a 6% discount to the volume weighted
average price of our common stock during the five consecutive trading day period beginning on the trading day immediately following
the date of delivery of a put notice by us to Azure, subject to certain exceptions. Therefore, Azure has a financial incentive
to sell our common stock upon receiving the shares to realize the profit equal to the difference between the discounted price
and the market price. If Azure sells the shares, the price of our common stock could decrease.
We
May Not Be Able to Access Sufficient Funds Under the Equity Line When Needed
Our
ability to put shares to Azure and obtain funds under the Equity Line is limited by the terms and conditions in the Investment
Agreement, including restrictions on when we may exercise our put rights, restrictions on the amount we may put to Azure at any
one time, which is determined in part by the trading volume of our common stock, and a limitation on our ability to put shares
to Azure to the extent that it would cause Azure to beneficial own more than 4.99% of our outstanding shares. In addition, we
do not expect the Equity Line to satisfy all of our funding needs, even if we are able and choose to take full advantage of the
Equity Line.
USE
OF PROCEEDS
We
will not receive any proceeds from the resale of our common stock offered by Azure. However, we will receive proceeds from the
sale of our common stock to Azure pursuant to the Investment Agreement. The proceeds from our exercise of the put option pursuant
to the Investment Agreement will be used to support the commercialization of our current and future product candidates, for general
working capital needs, for the reduction of indebtedness and for other purposes that our board of directors, in its good faith,
deems to be in our best interest.
All
net proceeds from the sale of the common stock covered by this prospectus will go to the selling stockholder. See “Selling
Stockholder” and “Plan of Distribution” described below.
SELLING
STOCKHOLDER
The
information provided in the table and discussions below has been obtained from the selling stockholder. The table below identifies
the selling stockholder and shows the number of shares of common stock beneficially owned by it before and after this offering,
and the numbers of shares offered for resale by the selling stockholder. Our registration of these shares does not necessarily
mean that the selling stockholder will sell all or any of their shares of common stock. However, the “Shares Beneficially
Owned After Offering” columns in the table assume that all shares covered by this prospectus will be sold by the selling
stockholder and that no additional shares of common stock will be bought or sold by the selling stockholder. No estimate can be
given as to the number of shares that will be held by the selling stockholder after completion of this offering because the selling
stockholder may offer some or all of the shares and, to our knowledge, there are currently no agreements, arrangements or understanding
with respect to the sale of any of the shares. In addition, the selling stockholder may have sold, transferred or otherwise disposed
of, or may sell, transfer or otherwise dispose of, at any time or from time to time since the date on which it provided the information
regarding the shares, all or a portion of the shares of common stock beneficially owned in transactions exempt from the registration
requirements of the Securities Act.
The
following table sets forth the name of the selling stockholder, an if applicable, the nature of any position, office, or other
material relationship which the selling stockholder has had, within the past three years, with us or with any of our predecessors
or affiliates, the amount of shares of our common stock beneficially owned by the stockholder prior to the offering, the amount
being offered for the stockholder’s account, the amount being offered for the stockholder’s account and the amount
to be owned by such stockholder after completion of the offering.
|
|
Shares
Beneficially Owned Prior to Offering (1)
|
|
|
Shares
Being Offered
Under this
|
|
|
Shares
Beneficially Owned After Offering (1)
|
Beneficial
Owner
|
|
Shares
|
|
|
%
|
|
|
Prospectus(3)
|
|
|
Shares
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Azure
Capital, Inc. (2)
|
|
|
0
|
|
|
|
0
|
%
|
|
|
7,936,600
|
|
|
None
|
|
|
None
|
|
(1)
Beneficial ownership is determined in accordance with Rule 13d-3(d) promulgated by the Securities and Exchange Commission under
the Exchange Act, and generally includes voting or investment power with respect to securities. The number and percentage of shares
beneficially owned is determined in accordance with Rule 13d-3 of the Exchange Act and is not necessarily indicative of beneficial
ownership for any other purpose. Applicable percentage ownership is based on 50,746,818 shares of common stock outstanding
as of December 07 , 2017. Except as otherwise noted, we believe that the stockholder named in the table has sole voting
and investment power with respect to all shares of common stock shown as beneficially owned by it, subject to applicable community
property laws.
(2)
Azure is a Massachusetts Corporation. Douglas H. Leighton is the sole owner of Azure Capital with voting and investment power
over the shares.
(3)
Represents 7,936,600 of the 65,445,000 shares (estimated using the reported sale price of our common stock on the OTCQB
market on August 3, 2017 of $0.1528 per share) of common stock issuable by us and purchasable by Azure under the Investment.
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The
Company’s Common Stock is currently trading on the OTCQB market under the symbol “PHIL”. The following sets
forth the high and low prices of the Company’s Common Stock in the US for the most recent month, two most recent quarters
and each quarter during the preceding two fiscal years.
The
prices for the Company’s common stock quoted by brokers are not necessarily a reliable indication of the value of the Company’s
common stock.
Per
Share Common Stock Prices for the Months
|
|
High
|
|
|
Low
|
|
Ended
November 30, 2017
|
|
|
0.04
|
|
|
|
0.017
|
|
Ended
October 31, 2017
|
|
|
0.988
|
|
|
|
0.312
|
|
Per
Share Common Stock Prices for the Quarter
|
|
High
|
|
|
Low
|
|
Ended
September 30, 2017
|
|
|
0.10
|
|
|
|
0.046
|
|
Per
Share Common Stock Prices by Quarter;
|
|
|
|
|
|
|
For
the Fiscal Year Ended June 30, 2017
|
|
High
|
|
|
Low
|
|
Ended
June 30, 2017
|
|
|
0.09
|
|
|
|
0.02
|
|
Ended
March 31, 2017
|
|
|
0.25
|
|
|
|
0.06
|
|
Ended
December 31, 2016
|
|
|
0.45
|
|
|
|
0.10
|
|
Ended
September 30, 2016
|
|
|
2.00
|
|
|
|
0.20
|
|
Per
Share Common Stock Prices by Quarter;
|
|
|
|
|
|
|
For
the Fiscal Year Ended June 30, 2016
|
|
High
|
|
|
Low
|
|
Quarter
Ended June 30, 2016
|
|
|
1.50
|
|
|
|
0.42
|
|
Quarter
Ended March 31, 2016
|
|
|
0.55
|
|
|
|
0.25
|
|
Quarter
Ended December 31, 2015
|
|
|
0.50
|
|
|
|
0.25
|
|
Quarter
Ended September 30, 2015
|
|
|
0.25
|
|
|
|
0.12
|
|
Holders
of Common Equity
:
There
are approximately 1,277 shareholders of record of the Company’s common stock. The number of record holders was determined
from the records of our transfer agent and does not include beneficial owner’s common stock whose shares are held in the
names of various securities brokers, dealers and registered clearing agencies. The transfer agent of our common stock is Worldwide
Stock Transfer LLC, One University Plaza, Suite 505, NJ 07601. The phone number of the transfer agent is (201) 820-2008.
Dividends:
Cash
dividend: The Company has not declared or paid a cash dividend to common stock shareholders since the Company’s inception.
The Board of Directors presently intends to retain any earnings to finance company operations and does not expect to authorize
cash dividends to common shareholders in the foreseeable future. Any payment of cash dividends in the future will depend upon
Company’s earnings, capital requirements and other factors.
Recent
Sales of Unregistered Securities
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.
On
October 17, 2017, the Company issued 434,783 shares of free-trading Common Stock of PHI Group, Inc. to Power Up Lending Group
Ltd., holder of a Convertible Promissory Note dated April 12, 2017 of the Company, for the conversion of $12,000.00 of the principal
amount of the Note. The principal amount of the Note after this conversion was $21,500.00.
On
October 19, 2017, the Company issued 371,057 shares of free-trading Common Stock of PHI Group, Inc. to JSJ Investments, Inc.,
holder of a Convertible Promissory Note dated February 2, 2017 of the Company, for the conversion of $10,000.00 of the principal
balance of the Note. The principal amount of the Note after this conversion was $11,000.00.
On
October 23, 2017, the Company issued 622,407 shares of free-trading Common Stock of PHI Group, Inc. to Power Up Lending Group
Ltd., holder of a Convertible Promissory Note dated April 12, 2017 of the Company, for the conversion of $15,000.00 principal
balance of the Note. The principal amount of the Note after this conversion was $6,500.00.
On
October 24, 2017, the Company issued 250,000 shares of free-trading Common Stock of PHI Group, Inc. to EMA Financial LLC., holder
of a Convertible Promissory Note dated April 04, 2017 of the Company, for the conversion of $3,587.50 of the principal amount
of the Note, less $750.00 of applicable fees under the Note. The principal balance of the Note after this conversion was $46,162.50.
On
October 31, 2017, the Company issued 419,212 shares of free-trading Common Stock of PHI Group, Inc. to Power Up Lending Group
Ltd., holder of a Convertible Promissory Note dated April 12, 2017 of the Company, for the conversion of $6,500.00 of the remaining
principal amount of the Note together with $2,010.00 of accrued and unpaid interest thereto, totaling $8,510.00. The principal
balance due remaining under this Note after this conversion was $0.00 and the accrued and unpaid interest remaining was $0.00.
On
November 7, 2017, the Company issued 600,000 shares of free-trading Common Stock of PHI Group, Inc. to EMA Financial LLC, holder
of a Convertible Promissory Note dated April 04, 2017 of the Company, for the conversion of $3,750.00 of the principal balance
of the Note, less $1,350.00 of applicable fees under the Note. The principal balance due remaining under this Note after this
conversion was $44,942.50.
On
November 8, 2017, the Company issued 2,154,700 shares of free-trading Common Stock of PHI Group, Inc. to Auctus Fund, LLC, holder
of a Convertible Promissory Note dated March 3, 2017 of the Company, for the conversion of $17,852.43 of the principal balance
of the Note together with $3,356.17 of accrued and unpaid interest thereto and $500.00 applicable fee, totaling $21,708.60. The
principal balance due remaining under this Note after this conversion was $32,147.57.
On
November 21, 2017, the Company issued 1,000,000 shares of free-trading Common Stock of PHI Group, Inc. to EMA Financial LLC, holder
of a Convertible Promissory Note dated April 04, 2017 of the Company, for the conversion of $5,950.00 of the principal balance
of the Note, less $1,050.00 of applicable fees under the Note. The principal balance due remaining under this Note after this
conversion was $40,042.50
On
December 01, 2017, the Company issued 2,346,000 shares of free-trading Common Stock of PHI Group, Inc. to Auctus Fund, LLC, holder
of a Convertible Promissory Note dated March 3, 2017 of the Company, for the conversion of $15,062.55 of the principal balance
of the Note together with $202.57 of accrued and unpaid interest thereto and $500.00 applicable fee, totaling $15,765.12. The
principal balance due remaining under this Note after this conversion was $17,085.02.
On
December 05, 2017, the Company issued 1,385,677 shares of free-trading Common Stock of PHI Group, Inc. to JSJ Investments, Inc.,
holder of a Convertible Promissory Note dated February 2, 2017 of the Company, for the conversion of $11,000.00 of the principal
balance of the Note together with $1,651.23 of accrued and unpaid interest thereto, totaling $12,651.23. The principal balance
due remaining under this Note after this conversion was $0.00.
As
of December 07, 2017 there are 50,746,818
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.
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.
OUR
BUSINESS
PHI
Group, Inc. (the “Company” or “PHI”) is a Nevada corporation 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.
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
began to mainly focus on acquisition and development opportunities in energy and natural resource businesses. 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.
Subsidiaries:
As
of December 07 , 2017, the Company owns 100% of PHI Capital Holdings, Inc., a Nevada corporation; 100% of American Pacific
Resources, Inc., a Wyoming corporation; 100% of Abundant Farms, Inc., a Florida corporation; 100% of PHI Group Regional Center,
LLC, a Florida limited liability company; 100% of Constructii SA Group, Inc., a Delaware corporation; 100% of Phivitae Corporation,
a Wyoming corporation, and 75% of PHI EZ Water Tech, Inc., a Wyoming corporation.
PHI
CAPITAL HOLDINGS, INC.
PHI
Capital Holdings, Inc., a Nevada corporation, was originally incorporated under the name of “Providential Capital, Inc.”
in 2004 as a wholly owned subsidiary of the Company to provide merger and acquisition (M&A) advisory services, consulting
services, project financing, and capital market services to clients in North America and Asia. In May 2010, Providential Capital,
Inc. changed its name to PHI Capital Holdings, Inc. This subsidiary has successfully managed merger plans for several privately
held and publicly traded companies and continues to focus on serving the Pacific Rim markets in the foreseeable future.
AMERICAN
PACIFIC RESOURCES, INC.
American
Pacific Resources, Inc. is a Wyoming corporation established in April 2016 with the intention to serve as a holding company for
various natural resource projects and mining activities. As of the date of this registration statement American Pacific Resources,
Inc. has not generated any revenues.
ABUNDANT
FARMS, INC.
Abundant
Farms, Inc., a Florida corporation, was established on December 19, 2016 to develop and operate an organic farming program in
Holmes County, Florida. The Company has signed a purchase agreement and opened escrow to acquire a 408-acre farm in Bonifay, Florida.
PHI
GROUP REGIONAL CENTER, LLC
PHI
Group Regional Center, LLC is a Florida limited liability company established on March 22, 2017 to serve as a new EB5 regional
center for Immigrant Investor Program in connection with Abundant Farms, Inc. Under the EB-5 Program, created by Congress to stimulate
the U.S. economy through job creation and capital investment and administered by the United States Citizenship and Immigration
Services (USCIS), an agency within the Department of Homeland Security, foreign entrepreneurs (and their spouses and unmarried
children under 21) are eligible to apply for a Green Card (permanent residence) if they make the necessary investment in a commercial
enterprise in the United States that creates or preserves at least 10 permanent, full-time jobs for qualified U.S. workers.
(https://www.uscis.gov/working-united-states/permanent-workers/employment-based-immigration-fifth-preference-eb-5/about-eb-5-visa-classification)
CONSTRUCTII
SA GROUP, INC.
Constructii
SA Group, Inc. is a Delaware corporation formed on July 6, 2017 as a wholly owned subsidiary of PHI Group, Inc. and a holding
company for the acquisition of 51% of Constructii SA, a Romanian company established in 1950. On June 29, 2017, PHI Group, Inc.
signed an agreement to acquire 51% interest in Constructii SA for $15,000,000 in cash. The first closing of this transaction is
scheduled to occur on August 28, 2017 and the final closing to occur thirty days after the first closing. The closing dates may
be extended upon mutual written consent by the selling shareholder and PHI Group, Inc.
PHIVITAE
CORPORATION
Phivitae
Corporation is a Wyoming company established on July 7, 2017 as a wholly owned subsidiary of PHI Group, Inc. to engage in the
distribution of consumer products, including but not limited to pharmaceuticals and dietary supplements.
PHI
EZ WATER TECH, INC.
PHI
EZ Water Tech, Inc. is a Wyoming corporation established on August 7, 2017 to engage in the manufacturing and sale of innovative
water treatment systems using complex electromagnetic force, advanced oxidation, electrocoagulation and ultrasound for agriculture,
healthcare and human consumption. PHI Group, Inc. owns 75% and Dr. Martin Nguyen, the inventor and Chief Technical Officer of
PHI EZ Water Tech, owns 25% stock in PHI EZ Water Tech, Inc.
Discontinued
operations:
The
Company has discontinued the operations of Providential Vietnam Ltd., Philand Ranch Limited – UK (together with its subsidiaries
Philand Ranch Ltd-Singapore, Philand Corporation-USA and Philand Vietnam Ltd.), PHI Gold Corporation (now known as NS International
Corp.), and PHI Energy Corporation since June 30, 2012.
Cornerstone
Biomass Corporation, a Florida corporation, was set up in January 2015 by the Company and the principals of AG Materials, LLC,
an Alabama company, to engage in biomass energy. The Company held 51% of equity ownership in Cornerstone Biomass Corporation.
This subsidiary’s plan was to develop and establish a 200,000 MT wood pellet plant adjacent to Klausner Lumber Mill in Live
Oak, Florida. In July 2015, the Company purchased a 10-acre parcel of land from Klausner Holding USA Corporation in order to build
the wood pellet plant. Due to subsequent changes in market conditions affecting industrial pellet usage in Europe, Cornerstone
Biomass Corp. decided not to pursue this project. The Company has written off its initial investment in the amount of $ 2,550
and sold the land back to Klausner Holding USA. Cornerstone Biomass Corporation was dissolved effective September 23, 2016.
Spun-off
subsidiaries:
TANS
GLOBAL, INC. (Formerly PROVIMEX, INC.)
Provimex,
Inc. was originally formed on April 10, 2001 under the name “Providential Imex”, to focus on trade commerce with Vietnam.
This division changed its name to Provimex on July 5, 2001. Provimex began to generate revenues from its import and export activities
in August 2002 through the fiscal year ended June 30, 2005 and was incorporated as a Nevada corporation on September 23, 2004.
The Company distributed a 15% stock dividend of Provimex, Inc. to PHI Group, Inc.’s shareholders of record as of September
15, 2004. On June 3, 2011, Provimex, Inc. signed an agreement to acquire all the issued and outstanding capital stock of Humex
Medical Group Corp., a California corporation, (“Humex”) in exchange solely for a certain amount of shares of Provimex’s
common stock, par value 0.001, to engage in stem research and therapy in Southeast Asia. On June 13, 2012 this transaction was
rescinded in its entirety effective retroactively June 3, 2011. On June 19, 2012, Provimex, Inc. changed its name to HP.ITA Corporation.
On July 20, 2012, HP.ITA Corporation (“HPUS”) signed a Corporate Combination Agreement to merge with HP.ITA Joint
Stock Company (“HPVN”), a Vietnamese company, in order to go public in the United States but the Corporate Combination
Agreement was subsequently rescinded because HPVN was not able to implement its business plan and complete financial audits according
to the U.S. Generally Accepted Accounting Principals (“GAAP”). On September 16, 2016 HP.ITA Corp. changed its name
to Tans Global, Inc. with the intention to merge with an operating company and file a registration statement with the Securities
and Exchange Commission to become a fully reporting public company in the U.S. This transaction is being put on hold and subject
to further modification.
OMNI
RESOURCES, INC. (Formerly TOUCHLINK COMMUNICATIONS, INC.)
Touchlink
Communications was formed on July 7, 2003 as a division of the Company to provide point-of-sale (POS) terminals and prepaid calling
cards to retailers, convenient stores and non-profit organizations across the US. This subsidiary was later incorporated as a
Nevada corporation in February 2004 under the name of Touchlink Communications, Inc. as a wholly owned subsidiary of the Company
to provide long distance services to residential and business customers in the United States. The Company has declared a 15% stock
dividend of Touchlink Communications, Inc. to shareholders of record as of September 15, 2004. On November 03, 2008, this subsidiary
changed its name to Vietnam Media Group, Inc. with the intent to develop a multi-media business in Vietnam and subsequently resumed
the corporate name of Touchlink Communications, Inc. in February 2011. On April 4, 2014, this company changed its name to Asia
Green Corporation (“AGC”) and entered into a business combination agreement with Asia Green Limited Liability Company,
a Vietnam-based company, to become a holding company for agroforestry and afforestation business in Vietnam and Southeast Asia.
On July 28, 2014, AGC changed its corporate name to Omni Resources, Inc. The Company expects to hold about 10% equity interest
in Omni Resources, Inc. following Omni’s recapitalization. As of the date of this registration statement Omni Resources,
Inc. is inactive and has not implemented any reorganization plan.
Stock
ownerships:
CATALYST
RESOURCE GROUP, INC. (formerly JEANTEX GROUP, INC.)
As
of December 07 , 2017, the Company owned 22,535,714 shares of Catalyst Resource Group, Inc. common stock, a Florida corporation,
or equivalent to 2.56%. This company is currently inactive.
MYSON
GROUP, INC. (formerly VANGUARD MINING CORPORATION)
As
of December 07 , 2017, PHI Group, Inc. and PHI Capital Holdings, Inc., a wholly owned subsidiary of the Company, together
owned 33,975,106 shares of Common Stock of Myson Group, Inc., a Nevada corporation currently traded on the OTC Markets under the
symbol “MYSN.”
SPORTS
POUCH BEVERAGE COMPANY, INC.
As
of December 07 , 2017, the Company through PHI Capital Holdings, Inc. owned 292,050,000 shares of Sports Pouch Beverage
Company, Inc., a Nevada corporation traded on the OTC Markets under the symbol “SPBV”.
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 as of June 30, 2017.
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 Company will transfer or cause to be transferred at least 480,000 shares of Common Stock of PHI
Group, Inc. to an authorized representative 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 efforts 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.
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 AGREEMNT 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 a Registration Statement on Form S-1 with the Securities and Exchange Commission on April 3, 2017
and a Withdrawal of that Registration Statement on August 7, 2017. Subsequently, a new Registration Statement on Form
S-1 was filed on August 7, 2017, which was subsequently amended on September 15, 2017 and October 17, 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.
AGREEMENT
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.
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
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 being put on hold and subject to further modification by both parties.
AGREEMENT
TO ACQUIRE A FARM IN HOLMES COUNTY, FLORIDA
On
March 3, 2017, the Company signed a commercial contract to purchase 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 has made a non-refundable
deposit of $37,500 towards to the total price and agreed to make five installment payments of $250,000 each and a final payment
in the amount of $212,500. The closing date for this transaction was previously scheduled to occur on July 3, 2017; however, both
the seller and the Company have agreed to extend the closing date until close to the next growing season in Holmes County, FL.
The Company intends to use this property to develop a proprietary organic farming project in conjunction with an EB-5 Immigrant
Investment Program.
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.
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.
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.
Properties
As
of December 07 , 2017, the Company did not have any properties or equipment.
Legal
proceedings
LEGAL
PROCEEDINGS SETTLED OR UNPAID AS OF THE FISCAL YEAR ENDED JUNE 31, 2017:
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 its consolidated audited 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 its consolidated audited financial statements as of June 30, 2017.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Except
for the audited historical information contained herein, this report specifies forward-looking statements of management of the
Company within the meaning of Section 27a of the Securities Act of 1933 and Section 21e of the Securities Exchange Act of 1934
(“forward-looking statements”) including, without limitation, forward-looking statements regarding the Company’s
expectations, beliefs, intentions and future strategies. Forward-looking statements are statements that estimate the happening
of future events and are not based on historical facts. Forward- looking statements may be identified by the use of forward-looking
terminology, such as “could”, “may”, “will”, “expect”, “shall”, “estimate”,
“anticipate”, “probable”, “possible”, “should”, “continue”, “intend”
or similar terms, variations of those terms or the negative of those terms. The forward-looking statements specified in this report
have been compiled by management of the Company on the basis of assumptions made by management and considered by management to
be reasonable. Future operating results of the Company, however, are impossible to predict and no representation, guaranty, or
warranty is to be inferred from those forward-looking statements. The assumptions used for purposes of the forward-looking statements
specified in this report represent estimates of future events and are subject to uncertainty as to possible changes in economic,
legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information
and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment.
To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results,
and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. In addition, those forward-looking
statements have been compiled as of the date of this report and should be evaluated with consideration of any changes occurring
after the date of this report. No assurance can be given that any of the assumptions relating to the forward-looking statements
specified in this report are accurate and the Company assumes no obligation to update any such forward-looking statements.
RESULTS
OF OPERATIONS FOR THE YEARS ENDED JUNE 30, 2017 AND JUNE 30, 2016
Revenues:
The
Company generated $113,500 in revenues from consulting, advisory and management services during the fiscal year ended June 30,
2017, as compared to $332,050 in revenue for the year ended June 30, 2016.
Operating
Expenses:
The
Company incurred total operating expenses of $670,458 for the year ended June 30, 2017 as compared to $464,921 for the year ended
June 30, 2016. This represents an increase of $205,537 or 44.21 % in total operating expenses from the prior year. The increase
was primarily due to an increase of $245,073 in professional services, offset by a decrease of $36,910 in general and administrative
expenses.
Income
(loss) from operations:
The
Company had a loss from operations of $556,958 for the fiscal year ended June 30, 2017 as compared to a loss from operations of
$132,871 for the year ended June 30, 2016. This represents an increase of $424,087 or 319.17 % in loss from operations during
the current year as compared to that of the precious year. This was mainly due to the fact that the Company generated $218,550
less in revenues while incurring $205,537 more in total operating expenses during the fiscal year ended June 30, 2017 as compared
to the corresponding items during the fiscal year ended June 30, 2016.
Other
income (expense)
The
Company had a net other expense of $1,003,760 for the fiscal year ended June 30, 2017 as compared to a net other income of $124,873
for the prior year. This was primarily due to the fact the Company had an increase in interest expense of $258,985, a loss on
sale of marketable securities of $2,874, a loss on sale of assets of $20,011, a loss on loan/note conversions of $131,818 and
other expense of $322,495 in the current year as compared to the prior year.
Net
income (loss):
The
Company had a net loss of $1,560,718 for the fiscal year ended June 30, 2017, as compared to a net loss of $7,998 for the prior
year, representing an increase in $1,552,720 in net loss between the two fiscal years. The net loss per share based on the basic
and diluted weighted average number of common shares outstanding for the fiscal year ended June 30, 2017 was $(0.10) as compared
to $(0.00) for the fiscal year ended June 30, 2016.
CASH
FLOWS
We
had $38,369 in cash and cash equivalents of as of June 30, 2017, as compared to $2,482 in cash and cash equivalents as of June
30, 2016, respectively.
Net
cash used in our operating activities was $6,924,748 for the fiscal year ended June 30, 2017 as compared to net cash used in operating
activities of $1,849,100 for the fiscal year ended June 30, 2016, respectively. The underlying reasons for the increase in net
cash used in operating activities between the two periods were mainly due to an increase of $108,876 in other assets and pre-paid
expenses, a decrease in accrued expenses of $5,254,654 due to reclassification to long-term liabilities, and an increase of $1,552,720
in net loss from operations between the current fiscal year and the previous fiscal year.
Net
cash provided by investing activities was $224,688 for the fiscal year ended June 30, 2017 as compared to cash used in investing
activities of $146,959 for the fiscal year ended June 30, 2016, respectively. The underlying reasons for the change in net cash
provided by (used in) investing activities between the two fiscal years were primarily due to write-offs of $157,733 from deposit
for acquisition and other asset receivable, and the sale of land in Live Oak, Florida in connection with the closure of Cornerstone
Biomass Corporation between the two corresponding fiscal years.
Net
cash provided by financing activities was $6,735,447 for the fiscal year ended June 30, 2017 as compared to cash provided by financing
activities of $$1,987,517 for the fiscal year ended June 30, 2016, respectively. The underlying reasons for the increase in cash
provided by financing activities during the current fiscal year were primarily due to a change from short-term to long-term liabilities
of $5,722,056, proceeds from Common Stock of $907,261, and a change in other comprehensive income (loss) of $123,211 in the current
fiscal year, as compared to the prior fiscal year.
HISTORICAL
FINANCING ARRANGEMENTS:
SHORT
TERM NOTES PAYABLE AND ISSUANCE OF COMMON STOCK
In
the course of its business, the Company has obtained short-term loans from individuals and institutional investors and from time
to time raised money by issuing restricted common stock of the Company under the auspices of Rule 144. 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.
COMPANY’S
PLAN OF OPERATION FOR THE FOLLOWING 12 MONTHS
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 energy, natural resources, agribusiness,
technology, transportation, consumer goods, healthcare, biotechnology and pharmaceuticals. In addition, the Company also plans
to invest in special situations that may potentially generate significant revenues and profitability for the Company in the short
term. We believe that by closing one or more sizable acquisitions we will be able to build a critical mass and uplist to the Nasdaq
Stock Market or NYSE in the near future. Moreover, 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, investment in special
situations, 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.
FINANCIAL
PLANS
MATERIAL
CASH REQUIREMENTS: We must raise substantial amounts of capital to fulfill our plan of acquiring energy-related and natural resource
assets as well as investing in special situations as part of our scope of business. We intend to use equity, debt and project
financing to meet our capital needs for acquisitions and investments.
Management
has taken action and formulated plans to strengthen the Company’s working capital position and generate sufficient cash
to meet its operating needs through June 30, 2018 and beyond. The working capital cash requirements for the next 12 months are
expected to be generated from operations, sale of marketable securities and additional financing. The Company plans to generate
revenues from its consulting services, merger and acquisition advisory services, and acquisitions of target companies with cash
flows.
AVAILABLE
FUTURE FINANCING ARRANGEMENTS: The Company may use various sources of funds, including short-term loans, long-term debt, equity
capital, and project financing as may be necessary. The Company believes it will be able to secure the required capital to implement
its business plan; however, no assurances could be made that management would be successful in achieving its plan.
EB-5
IMMIGRATION INVESTOR PROGRAM: The Company has filed an I-924 application with the United States Citizenship and Immigration Service
(USCIS) for the PHI Group EB5 Regional Center, LLC in order to raise capital through the EB-5 Immigration Investor Program
in
connection with the Company’s organic farming program, Abundant Farms, Inc., a wholly owned subsidiary of the Company, and
other potential business activities in the State of Florida. Under the EB-5 Program, created by Congress to stimulate the U.S.
economy through job creation and capital investment, foreign entrepreneurs (and their spouses and unmarried children under 21)
are eligible to apply for a Green Card (permanent residence) if they make the necessary investment in a commercial enterprise
in the United States that creates or preserves at least 10 permanent, full-time jobs for qualified U.S. workers. The operation
of this Regional Center is subject to the review and approval of
United States Citizenship
and Immigration Service.
EQUITY
FINANCING ARRANGEMENTS: On August 3, 2017, the Company entered into an Investment Agreement (“Investment Agreement”)
with Azure Capital (the “Investor”). Pursuant to the Investment Agreement, the Investor committed to purchase up to
$10,000,000 of the Company’s common stock over thirty-nine months (the “Equity Line”). The aggregate number
of shares issuable by the Company and purchasable by Azure under the Investment Agreement is 65,445,000 (estimated using the last
reported sale price of the Company’s common stock on the OTCQB market on August 3, 2017 of $0.1528 per share). The Company
may draw on the facility from time to time, as and when it determines appropriate in accordance with the terms and conditions
of the Investment Agreement. The maximum amount that the Company is entitled to put in any one notice is the greater of (i) 200%
of the average daily volume (U.S. market only) of the common stock for the three (3) trading days prior to the date of delivery
of the applicable put notice, multiplied by the average of the closing prices for such trading days or (ii) $250,000. The purchase
price shall be set at ninety-four per cent (94%) of the lowest daily VWAP of the Company’s common stock during the Pricing
Period. However, if, on any trading day during a Pricing Period, the daily volume-weighted average price (VWAP) of the common
stock is lower than the floor price specified by us in the put notice, then the Company reserves the right, to withdraw that portion
of the put amount for each such trading day during the Pricing Period, with only the balance of such put amount above the minimum
acceptable price being put to Azure. There are put restrictions applied on days between the put notice date and the closing date
with respect to that particular put. During such time, the Company is not entitled to deliver another put notice.
There
are circumstances under which the Company will not be entitled to put shares to Azure, including the following:
●
the Company will not be entitled to put shares to Azure unless there is an effective registration statement under the Securities
Act to cover the resale of the shares by Azure;
●
the Company will not be entitled to put shares to Azure unless its common stock continues to be quoted on the OTC Bulletin Board,
or becomes listed on a national securities exchange;
●
the Company will not be entitled to put shares to Azure to the extent that such shares would cause Azure’ beneficial ownership
to exceed 4.99% of our outstanding shares; and
●
the Company will not be entitled to put shares to Azure prior to the closing date of the preceding put.
The
Investment Agreement further provides that the Company and Azure are each entitled to customary indemnification from the other
for any losses or liabilities we or it suffers as a result of any breach by the other of any provisions of the Investment Agreement
or our registration rights agreement with Azure, or as a result of any lawsuit brought by a third-party arising out of or resulting
from the other party’s execution, delivery, performance or enforcement of the Investment Agreement or the registration rights
agreement.
The
Investment Agreement also contains 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. In addition, certain representations and
warranties were made as of a specific date, may be subject to a contractual standard of materiality different from what a stockholder
or investor might view as material, or may have been used for purposes of allocating risk between the respective parties rather
than establishing matters as facts.
The
Company also entered into a Registration Rights Agreement with Azure on August 3, 2017. Pursuant to the terms of the Registration
Rights Agreement, the Company is obligated to file one or more registration statements with the SEC to register the resale by
Azure of shares of common stock issued or issuable under the Investment Agreement. This registration process will continue until
such time as all of the dollar amounts available under the credit line, using shares of common stock issuable under the Investment
Agreement, have been registered for resale on effective registration statements. In no event will the Company be obligated to
register for resale more than $10,000,000 in value of shares of common stock, or 65,445,000 shares (estimated using the last reported
sale price of the Company’s common stock on the OTCQB market on August 3, 2017 of $0.1528 per share).
Reports
We
make available free of charge through our website,
www.phiglobal.com
, our annual report on Form 10-K, quarterly reports
on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or to be furnished pursuant to Section 13(a) of
the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file such material with, or furnish
it to, the SEC. Any information that is included on or linked to our Internet site is not a part of this report or any registration
statement that incorporates this report by reference.
You
may also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington,
DC 20549, on official business days during the hours of 10:00 am to 3:00 pm. Information on the operation of the Public Reference
Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers that file electronically with the SEC at
http://www.sec.gov
.
MANAGEMENT
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS, COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The
following table sets forth certain information as of December 07 , 2017, with respect to the Directors and Executive Officers
of the Company.
Name
|
|
Age
|
|
Position
|
Henry
D. Fahman
|
|
64
|
|
Chairman
of the Board, CFO, President
|
Tina
T. Phan
|
|
51
|
|
Treasurer,
Secretary
|
Tam
T. Bui
|
|
57
|
|
Director
|
Frank
Hawkins
|
|
77
|
|
Director
|
Directors
are elected at the annual meeting of shareholders and hold office until the following annual meeting and until their successors
are elected and qualified. All Executive Officers serve at the discretion of the Board of Directors. The Company’s securities
are not registered under Section 12(g) of the Exchange Act. Accordingly, the Directors and Executive Officers of the Company are
not required to file reports under Section 16(a) of that act.
Henry
D. Fahman
has more than 30 years experience in general management, finance, investments and corporate strategy. He has been
President and Chairman of the Board of PHI Group, Inc. since January 2000, and is currently Acting Financial Officer of the Company.
Mr. Fahman served as President and Chairman of the Board of Providential Securities, Inc. from its inception in October 1992 to
October 2000. He holds a B.S., magna cum laude, in business administration from the University of California at Berkeley, with
emphasis in finance and economic analysis and policy, and is a graduate of the Advanced Management Program (AMP166) from Harvard
Business School. He has also attended other Executive Education programs at Harvard Business School and Stanford University, including
Mergers and Acquisitions, Creating Competitive Advantage, and Advanced General Management. He also serves as interim Chief Executive
Officer for American Laser Healthcare Corp, a Delaware corporation. Previously, he served as a Resettlement Coordinator for the
United Nations High Commissioner for Refugees. Mr. Fahman also serves as Chairman/Managing Director of PHI Capital Holdings, Inc.,
a wholly owned subsidiary of the Company, and interim Chief Executive Officer of American Laser Healthcare Corporation, a Delaware
corporation. Mr. Fahman is the husband of Tina T. Phan, our Secretary and Treasurer.
Tam
Bui
has been a Director of the Company since April 2009 and served as a Chief Technology Officer from May 2002 to April 2009.
Mr. Bui holds Bachelor and Master of Science degrees from the University of Minnesota and has attended continuing Education at
the University of California, Los Angeles. He has over 25 years of experience with Northrop Grumman, Honeywell, Inc. and TRW in
various capacities such Project Director, Project Manager, Department Manager, Program Manager and Implementation Manager. One
of Mr. Bui’s major responsibilities has been the construction of dual Emergency Command Control Communication (ECCC) centers
and implementation of the Los Angeles Police Department ECCC Systems. He has a broad knowledge and experience in the areas of
information technology, intranet/internet technology, inventory management, material resource planning, enterprise resource planning,
human resource management, investment management, real estate, and international business.
Frank
Hawkins, Director
has been a Director of the Company since April 2009 and Mr. Hawkins is a founder and CEO of Hawk Associates
with 30 years of award-winning investor relations experience, Mr. Hawkins has earned the wide respect of Wall Street’s investment
community for straight talk and integrity. He was formerly vice president/corporate relations and planning and head of the investor
relations program at Knight-Ridder, Inc. in Miami. Mr. Hawkins started his career as an agent handler in clandestine collection
operations for the Defense Intelligence Agency in Germany and went on to become a foreign and war correspondent, international
businessman, senior corporate executive and president of the Access Asia Group in Hong Kong. He has lived in eight countries.
He has been involved in stock listings in Tokyo and Frankfurt and company presentations in London, Zurich, Geneva and Singapore.
Fluent in German, he is a graduate of Cornell University and author of “Ritter’s Gold,” an adventure novel published
in several languages by the New American Library.
He
is a member of the Association of Former Intelligence Officers and the Audubon Society and is listed in Who’s Who in America
and Who’s Who in the World. He serves on the board of the Florida Keys Electric Cooperative.
Tina
T. Phan
has been Treasurer of the Company since April 2009. She served as a Director and Secretary of the Company from January
2000 to April 10, 2009 and was Vice President of Operations of Providential Securities, Inc. from 1995 to 2000. Mrs. Phan holds
a B.S. in management information system from California State University, Los Angeles. Currently Mrs. Phan serves as Treasurer
and Secretary of the Company. Mrs. Phan is the wife of Henry D. Fahman.
EXECUTIVE
COMPENSATION
(a)
Any compensation received by officers, directors, and management personnel of the Company will be determined and approved from
time to time by the Board of Directors of the Company as it deems appropriate and reasonable. Officers, directors, and management
personnel of the Company will be reimbursed for any out-of-pocket expenses incurred on behalf of the Company. Except for any non-cash
accruals disclosed in the financial reports for the previous fiscal years and quarters, there was no monetary compensation paid
to any officers of the Company during the last five years.
(b)
There are no annuity, pension or retirement benefits proposed to be paid to officers, directors, or employees of the Company in
the event of retirement at normal retirement date as there is no existing plan provided for or contributed to by the Company.
(c)
All members of the Company’s Board of Directors, whether officers of the Company or not, may receive an amount yet to be
determined annually for their participation in meetings of the Board and will be required to attend a minimum of four meetings
per fiscal year. The Company reimburses all expenses for meeting attendance or out of pocket expenses connected directly with
their Board participation.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information regarding the beneficial ownership of shares of the Company’s common stock as of
December 07 , 2017 ( 50,746,818 shares issued, excluding 5,673,327 shares reserved for a special dividend distribution)
by
|
(i)
|
all
shareholders known to the Company to be beneficial owners of more than 5% of the outstanding
common stock; and
|
|
|
|
|
(ii)
|
all
directors and executive officers of the Company, and as a group:
|
Title
of Class
|
|
Name
and Address of
Beneficial Owner (1)
|
|
Amount
of Beneficial
Ownership
|
|
|
Percent
of Class
|
|
Common
Stock
|
|
Henry
D. Fahman (2) 15272 Flintridge Lane Huntington Beach, CA 92647
|
|
|
25,728,347
|
|
|
|
50.70
|
%
|
Common
Stock
|
|
Natalie
Bui (3)
2563 W Rowland Ave Anaheim, CA 92804
|
|
|
1,032,502
|
|
|
|
2.03
|
%
|
Common
Stock
|
|
Tam
Bui
2563 W Rowland Ave Anaheim, CA 92804
|
|
|
956,881
|
|
|
|
1.89
|
%
|
Common
Stock
|
|
Tina
T. Phan (4) 15272 Flintridge Lane Huntington Beach, CA 92647
|
|
|
11,063
|
|
|
|
**
|
|
Common
Stock
|
|
Frank
Hawkins
227 Atlantic Boulevard Key Largo, FL 33037
|
|
|
200
|
|
|
|
**
|
|
Common
Stock
|
|
Shares
of all directors
and executive officers as a group (4 persons):
|
|
|
26,696,491
|
|
|
|
52.61
|
%
|
(1)
Each person has sole voting power and sole dispositive power as to all of the shares shown as beneficially owned by them.
(2
|
Certain
of these shares have been pledged to secure certain obligations of the Company.
|
|
|
(3)
|
Natalie
Bui is the spouse of Tam Bui.
|
|
|
(4)
|
Tina
Phan is the spouse of Henry Fahman.
|
|
|
**:
Less than 1%.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Henry
D. Fahman, Chairman and Chief Executive Officer of the Company, has from time to time made cash advances to the Company. The advances
are unsecured, interest free and payable on demand.
Certain
of the officers and directors of the Company are engaged in other businesses, either individually or through partnerships and
corporations in which they have an interest, hold an office, or serve on a board of directors. As a result, certain conflicts
of interest may arise between the Company and its officers and directors. The Company will attempt to resolve such conflicts of
interest in favor of the Company. The officers and directors of the Company are accountable to it and its shareholders as fiduciaries,
which require that such officers and directors exercise good faith and integrity in handling the Company’s affairs. A shareholder
may be able to institute legal action on behalf of the Company or on behalf of itself and other similarly situated shareholders
to recover damages or for other relief in cases of the resolution of conflicts is in any manner prejudicial to the Company.
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
Audit
Fees
The
negotiated package fees billed by Dave Banerjee, CPA, an independent accountancy firm, were $12,000 for the audit of the Company’s
annual consolidated financial statements for the year ended June 30, 2017 and $2,500 per quarter for the review of unaudited quarterly
financial statements.
All
Other Fees
The
Company did not pay Dave Banerjee, CPA any non-audit fees for fiscal year 2017 or 2016.
DESCRIPTION
OF CAPITAL STOCK
The
Company has two classes of stock authorized: 900,000,000 shares of $0.001 par value Common Stock and 100,000,000 shares of $0.001
par value Preferred Stock.
Common
Stock:
As
of December 07 , 2017 there were 50,746,818 shares of the Company’s $0.001 par value Common Stock issued, excluding
5,673,327 shares reserved for a special dividend distribution.
Preferred
Stock:
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.
There
are no shares of preferred stock issued or outstanding.
All
of these securities issuances were in private direct transactions, exempt under Section 4(2) of the Securities Act of 1933 or
Regulation D promulgated thereunder.
PLAN
OF DISTRIBUTION
The
purpose of this prospectus is to permit the selling stockholder to offer and resell up to 7,936,600 shares of our common
stock at such times and at such places as it chooses. To the extent required, we may amend and supplement this prospectus from
time to time to describe a specific plan of distribution. The decision to sell any shares offered pursuant to this prospectus
is within the sole discretion of the selling stockholder.
The
distribution of the common stock by the selling stockholder may be effected from time to time in one or more transactions. Any
of the common stock may be offered for sale, from time to time, by the selling stockholder at prices and on terms then obtainable,
at fixed prices, at prices then prevailing at the time of sale, at prices related to such prevailing prices, or in negotiated
transactions at negotiated prices or otherwise. The common stock may be sold by one or more of the following:
●
|
On
the OTCQB or any other national common stock exchange or automated quotation system on which our common stock is traded, which
may involve transactions solely between a broker-dealer and its customers which are not traded across an open market and block
trades.
|
|
|
●
|
Through
one or more dealers or agents (which may include one or more underwriters), including, but not limited to:
|
|
|
●
|
Block
trades in which the broker or dealer as principal and resale by such broker or dealer for its account pursuant to this prospectus.
|
|
|
●
|
Purchases
by a broker or dealer as principal and resale by such broker or dealer for its account pursuant to this prospectus.
|
|
|
●
|
Ordinary
brokerage transactions.
|
|
|
●
|
Transactions
in which the broker solicits purchasers.
|
|
|
●
|
Directly
to one or more purchasers.
|
|
|
●
|
A
combination of these methods.
|
Azure
and any broker-dealers who act in connection with the sale of its shares are “underwriters” within the meaning of
the Securities Act, and any discounts, concessions or commissions received by them and profit on any resale of the shares as principal
may be deemed to be underwriting discounts, concessions and commissions under the Securities Act. Because the selling stockholder
is an “underwriter” within the meaning of the Securities Act, it will be subject to the prospectus delivery requirements
of the Securities Act, including Rule 172 thereunder.
The
selling stockholder or its underwriters, dealers or agents may sell the common stock to or through underwriters, dealers or agents,
and such underwriters, dealers or agents may receive compensation in the form of discounts or concessions allowed or re-allowed .
Underwriters, dealers, brokers or other agents engaged by the selling stockholder may arrange for other such persons to participate.
Any fixed public offering price and any discounts and concessions may be changed from time to time. Underwriters, dealers and
agents who participate in the distribution of the common stock may be deemed to be underwriters within the meaning of the Securities
Act, and any discounts or commissions received by them or any profit on the resale of shares by them may be deemed to be underwriting
discounts and commissions thereunder. The proposed amounts of the common stock, if any, to be purchased by underwriters and the
compensation, if any, of underwriters, dealers or agents will be set forth in a prospectus supplement.
Unless
granted an exemption by the SEC from Regulation M under the Exchange Act, or unless otherwise permitted under Regulation M, the
selling stockholder will not engage in any stabilization activity in connection with our common stock, will furnish each broker
or dealer engaged by the selling stockholder and each other participating broker or dealer the number of copies of this prospectus
required by such broker or dealer, and will not bid for or purchase any common stock of our or attempt to induce any person to
purchase any of the common stock other than as permitted under the Exchange Act.
We
will not receive any proceeds from the sale of these shares of common stock offered by the selling stockholder. We shall use our
reasonable efforts to prepare and file with the SEC such amendments and supplements to the registration statement and this prospectus
as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with
respect to the disposition of the common stock covered by the registration statement for the period required to effect the distribution
of such common stock.
We
are paying certain expenses (other than commissions and discounts of underwriters, dealers or agents) incidental to the offering
and sale of the common stock to the public. If we are required to update this prospectus during such period, we may incur additional
expenses in excess of the amount estimated above. We have agreed to indemnify the selling stockholders against certain losses,
claims, damages and liabilities, including liabilities under the Securities Act and the Exchange Act, subject to certain exceptions.
In
order to comply with certain state securities laws, if applicable, the common stock will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In certain states the shares of common stock may not be sold unless they have been
registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied
with.
CHANGES
AND DISAGREEMENTS WITH ACCOUNTANTS
None.
LEGAL
MATTERS
Selected
legal matters with respect to the validity of the securities offered by this prospectus will be passed upon for us by Dieterich
& Associates, Los Angeles, California.
EXPERTS
The
financial statements as of and for the years ended June 30, 2017 and 2016, included in this prospectus have been audited by Dave
Banerjee, CPA, an independent registered public accounting firm, as stated in the reports appearing herein. Such financial statements
have been so included in reliance upon the reports of such firms given upon their authority as experts in accounting and auditing.
WHERE
YOU CAN FIND MORE INFORMATION
We
have filed a registration statement on Form S-1 with the SEC for the stock offered pursuant to this prospectus. This prospectus
does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto. Statements
contained in this prospectus as to the contents of any contract or other document referred to are not necessarily complete and
in each instance reference is made to the copy of such contract or other document filed as an exhibit to the registration statement,
each such statement being qualified in all respects by such reference. For further information with respect to us and the common
stock offered hereby, please refer to the registration statement and its exhibits and schedules for further information relating
to us and our common stock.
We
are subject to the information and periodic reporting requirements of the Securities Exchange Act of 1934 and in accordance therewith
file reports, proxy statements and other information with the SEC. Such reports, proxy statements, other information and a copy
of the registration statement may be inspected by anyone without charge and copies of these materials may be obtained upon the
payment of the fees prescribed by the SEC, at the Public Reference Room maintained by the SEC at Room 1580, 100 F Street, N.E.,
Washington, D.C. 20549. You may obtain information on the operation of this public reference room by calling 1-800-SEC-0330. The
Registration Statement, including all exhibits and schedules and amendments, has been filed with the SEC through the Electronic
Data Gathering Analysis and Retrieval system and is available to the public from the SEC’s web site at http://www.sec.gov.
ITEM
8. FINANCIAL STATEMENTS
PHI
GROUP, INC.
INDEX
TO FINANCIAL STATEMENTS
INDEPENDENT
AUDITOR’S REPORT
To
the Board of Directors and Stockholders
PHI
Group, Inc. (formerly Providential Holdings, Inc.)
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Shareholders of
PHI
Group, Inc.
We
have audited the accompanying consolidated balance sheets of PHI Group, Inc. (the “Company”) and its subsidiaries
as of June 30, 2017 and 2016, and the related consolidated statements of operations, shareholders’ deficit, and cash flows
for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion.
Our
audits included consideration of internal control relevant to the Company’s preparation and fair presentation of the financial
statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion.
In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of PHI
Group, Inc. as of June 30, 2017 and 2016, the results of its operations and its cash flows for the years then ended, in conformity
with accounting principles generally accepted in the United States of America.
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 22 to the financial statements, the Company had an accumulated deficit of $39,299,754 and total liabilities and stockholders’
deficit of $7,513,481 as of June 30, 2017. These factors raise substantial doubt about the Company’s ability to continue
as a going concern. Management’s plan in this regard is also described in Note 22. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Dave
Banerjee CPA, an Accountancy Corporation
Dave
Banerjee CPA, an Accountancy Corporation
Woodland
Hills, CA 91367
October
12, 2017
PHI
GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS (AUDITED)
|
|
June
30, 2017
|
|
|
June
30, 2016
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
38,369
|
|
|
|
2,482
|
|
Marketable
securities
|
|
|
502,696
|
|
|
|
481,120
|
|
Loans
receivable
|
|
|
-
|
|
|
|
2,282
|
|
Other
current assets
|
|
|
133,000
|
|
|
|
43,417
|
|
Total
current assets
|
|
$
|
674,064
|
|
|
$
|
529,302
|
|
Fixed
assets:
|
|
|
|
|
|
|
|
|
Land
|
|
|
-
|
|
|
|
82,733
|
|
Total
fixed assets
|
|
|
-
|
|
|
|
82,733
|
|
Other
assets:
|
|
|
|
|
|
|
|
|
Deposit
for acquisition
|
|
|
-
|
|
|
|
75,000
|
|
Other
Receivable
|
|
|
-
|
|
|
|
66,955
|
|
Total
other assets
|
|
|
-
|
|
|
|
141,955
|
|
Total
Assets
|
|
$
|
674,064
|
|
|
$
|
753,990
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
159,875
|
|
|
|
144,212
|
|
Accrued
expenses
|
|
|
384,929
|
|
|
|
4,342,783
|
|
Short-term
notes payable
|
|
|
873,008
|
|
|
|
673,660
|
|
Due
to officers
|
|
|
592,141
|
|
|
|
899,674
|
|
Due
to preferred stockholders
|
|
|
-
|
|
|
|
215,000
|
|
Advances
from customers
|
|
|
-
|
|
|
|
288,219
|
|
Other
current payable
|
|
|
-
|
|
|
|
97,350
|
|
Unearned
revenues
|
|
|
-
|
|
|
|
40,000
|
|
Client
deposits
|
|
|
780
|
|
|
|
9,821
|
|
Liabilities
from discontinued operations
|
|
|
-
|
|
|
|
1,045,232
|
|
Derivative
Liabilities
|
|
|
454,756
|
|
|
|
-
|
|
Total
current liabilities
|
|
$
|
2,465,489
|
|
|
$
|
7,755,950
|
|
Long-Term
Liabilities
|
|
|
|
|
|
|
|
|
Accrued
Expenses
|
|
|
1,462,836
|
|
|
|
-
|
|
Accrued
Interest
|
|
|
2,715,963
|
|
|
|
-
|
|
Advances
from Customers
|
|
|
288,219
|
|
|
|
-
|
|
Liabilities
from Discontinued Operations
|
|
|
1,040,037
|
|
|
|
-
|
|
Preferred
Stock Liabilities - Discont. Operations
|
|
|
215,000
|
|
|
|
-
|
|
Total
Long-Term Liabilities
|
|
$
|
5,722,056
|
|
|
$
|
-
|
|
Total
Liabilities
|
|
$
|
8,187,545
|
|
|
$
|
7,755,950
|
|
Stockholders’
deficit:
|
|
|
|
|
|
|
|
|
Preferred
stock, $.001 par value, 100,000,000 shares authorized; none issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
Common
stock, $0.001 par value; 900,000,000 shares authorized; 16,109,036 shares issued and outstanding on 06/30/2017, and 9,697,498
issued and outstanding on 6/30/2016, respectively, adjusted for 1 for 1,500 reverse split effective March 15, 2012.
|
|
|
249,645
|
|
|
|
243,234
|
|
Treasury
stock: 321,569 and 67,271 shares as of 6/30/17 and 6/30/16, respectively - cost method.
|
|
|
(40,908
|
)
|
|
|
(21,823
|
)
|
Paid-in
capital
|
|
|
31,424,061
|
|
|
|
30,521,209
|
|
Acc.
other comprehensive gain (loss)
|
|
|
153,474
|
|
|
|
30,263
|
|
Accumulated
deficit
|
|
|
(39,299,754
|
)
|
|
|
(37,774,842
|
)
|
Total
stockholders’ deficit
|
|
$
|
(7,513,481
|
)
|
|
$
|
(7,001,960
|
)
|
Total
liabilities and stockholders’ deficit
|
|
$
|
674,064
|
|
|
$
|
753,990
|
|
The
accompanying notes form an integral part of these audited consolidated financial statements
PHI
GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENT OF OPERATIONS (AUDITED)
FOR
THE YEARS ENDED
|
|
JUNE
30, 2017
|
|
|
JUNE
30, 2016
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
|
|
|
|
|
|
|
Consulting,
advisory and management services
|
|
$
|
113,500
|
|
|
$
|
332,050
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Salaries
and wages
|
|
|
238,374
|
|
|
|
241,000
|
|
Professional
services, including non-cash compensation
|
|
|
311,911
|
|
|
|
66,838
|
|
General
and administrative
|
|
|
120,173
|
|
|
|
157,083
|
|
Total
operating expenses
|
|
$
|
670,458
|
|
|
$
|
464,921
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from operations
|
|
$
|
(556,958
|
)
|
|
$
|
(132,871
|
)
|
|
|
|
|
|
|
|
|
|
Other
income and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(526,562
|
)
|
|
|
(267,577
|
)
|
Gain
(loss) on sale of marketable securities
|
|
|
(2,874
|
)
|
|
|
137,017
|
|
Gain
(loss) on sale of assets
|
|
|
(20,011
|
)
|
|
|
-
|
|
Loss
on loan/note conversion
|
|
|
(131,818
|
)
|
|
|
-
|
|
Other
income (expense)
|
|
|
(322,495
|
)
|
|
|
255,433
|
|
|
|
|
|
|
|
|
|
|
Net
other income (expenses)
|
|
$
|
(1,003,760
|
)
|
|
$
|
124,873
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
(1,560,718
|
)
|
|
$
|
(7,998
|
)
|
Other
comprehensive income (loss)
|
|
|
|
|
|
|
|
|
Accumulated
other comprehensive gain (loss)
|
|
|
153,974
|
|
|
|
30,263
|
|
Comprehensive
income (loss)
|
|
$
|
(1,406,744
|
)
|
|
$
|
22,265
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.10
|
)
|
|
$
|
(0.00
|
)
|
Diluted
|
|
$
|
(0.10
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
15,553,354
|
|
|
|
5,324,120
|
|
Diluted
|
|
|
15,553,354
|
|
|
|
5,324,120
|
|
The
accompanying notes form an integral part of these audited consolidated financial statements
PHI
GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR
THE YEARS ENDED JUNE 30, 2017 AND 2016
AUDITED
|
|
2017
|
|
|
2016
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
Net
income (loss) from operations
|
|
$
|
(1,560,718
|
)
|
|
$
|
(7,998
|
)
|
Adjustments
to reconcile net income to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
(Increase)
decrease in other assets and prepaid expenses
|
|
|
(108,876
|
)
|
|
|
(69,072
|
)
|
Increase
(decrease) in accounts payable and accrued expenses
|
|
|
(5,254,654
|
)
|
|
|
(1,772,030
|
)
|
Net
cash provided by (used in) operating activities
|
|
|
(6,924,248
|
)
|
|
|
(1,849,100
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Deposit
for acquisition
|
|
|
75,000
|
|
|
|
(66,776
|
)
|
Land
purchase
|
|
|
82,733
|
|
|
|
(82,733
|
)
|
Investment
in joint venture
|
|
|
-
|
|
|
|
2,550
|
|
Other
Assets Receivable - Agent155 Media Corp.
|
|
|
66,955
|
|
|
|
-
|
|
Net
cash provided by (used in) investing activities
|
|
|
224,688
|
|
|
|
(146,959
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds
from common stock
|
|
|
907,261
|
|
|
|
2,161,726
|
|
Change
in Accum. other comprehensive income (loss)
|
|
|
123,211
|
|
|
|
(69,078
|
)
|
Change
in Accumulated deficit
|
|
|
-
|
|
|
|
(87,108
|
)
|
Change
in treasury stock
|
|
|
(17,081
|
)
|
|
|
(18,022
|
)
|
Change
from short-term to long-term liabilities
|
|
|
5,722,056
|
|
|
|
-
|
|
Net
cash provided by (used in) financing activities
|
|
|
6,735,447
|
|
|
|
1,987,517
|
|
|
|
|
|
|
|
|
|
|
Net
decrease in cash and cash equivalents
|
|
|
35,886
|
|
|
|
(8,542
|
)
|
Cash
and cash equivalents, beginning of period
|
|
|
2,482
|
|
|
|
11,024
|
|
Cash
and cash equivalents, end of period
|
|
$
|
38,369
|
|
|
$
|
2,482
|
|
The
accompanying notes form an integral part of these audited consolidated financial statements
PHI
GROUP, INC. AND SUBSIDIARIES
STATEMENT
OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR
THE YEARS ENDED JUNE 30, 2017 AND 2016
(Audited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Other
|
|
|
|
|
|
Total
|
|
|
|
Common
Stock
|
|
|
Treasury
Stock
|
|
|
Paid-in
|
|
|
Comprehensive
|
|
|
Accumulated
|
|
|
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Income/(loss)
|
|
|
(Deficit)
|
|
|
(Deficit)
|
|
Balance
at June 30, 2015
|
|
|
3,911,348
|
|
|
$
|
237,467
|
|
|
|
(3,289
|
)
|
|
$
|
(3,801
|
)
|
|
$
|
28,365,269
|
|
|
$
|
99,341
|
|
|
$
|
(37,679,736
|
)
|
|
$
|
(8,981,460
|
)
|
Cancellation
of 25,510 shares - Uy Tran 9/28/2015
|
|
|
-25,510
|
|
|
$
|
(26
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(9,974
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(10,000
|
)
|
Shares
issued for cash - 2/2/2016
|
|
|
121,212
|
|
|
$
|
121
|
|
|
|
|
|
|
|
|
|
|
$
|
39,879
|
|
|
|
|
|
|
|
|
|
|
$
|
40,000
|
|
Shares
issued for conversion of notes - 2/2/2016
|
|
|
98,084
|
|
|
$
|
98
|
|
|
|
|
|
|
|
|
|
|
$
|
31,902
|
|
|
|
|
|
|
|
|
|
|
$
|
32,000
|
|
Shares
issued for consulting service - 2/4/2016
|
|
|
100,000
|
|
|
$
|
100
|
|
|
|
|
|
|
|
|
|
|
$
|
32,900
|
|
|
|
|
|
|
|
|
|
|
$
|
33,000
|
|
Shares
issued for conversion of notes and accruals - 3/28/2016
|
|
|
4,670,540
|
|
|
$
|
4,671
|
|
|
|
|
|
|
|
|
|
|
$
|
1,732,770
|
|
|
|
|
|
|
|
|
|
|
$
|
1,737,441
|
|
Shares
issued for conversion of notes - 5/9/2016
|
|
|
691,824
|
|
|
$
|
692
|
|
|
|
|
|
|
|
|
|
|
$
|
274,308
|
|
|
|
|
|
|
|
|
|
|
$
|
275,000
|
|
Shares
issued for consulting service - 6/13/2016
|
|
|
100,000
|
|
|
$
|
100
|
|
|
|
|
|
|
|
|
|
|
$
|
39,150
|
|
|
|
|
|
|
|
|
|
|
$
|
39,250
|
|
Shares
issued for consulting service - 6/28/2016
|
|
|
30,000
|
|
|
$
|
30
|
|
|
|
|
|
|
|
|
|
|
$
|
14,970
|
|
|
|
|
|
|
|
|
|
|
$
|
15,000
|
|
Adjustment
to APIC for treasury stock
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
$
|
36
|
|
|
|
|
|
|
|
|
|
|
$
|
36
|
|
Change
in treasury stock
|
|
|
|
|
|
|
-
|
|
|
|
-63,982
|
|
|
$
|
(18,022
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(18,022
|
)
|
Acc.
Other Comprehensive Gain (Loss)
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
30,263
|
|
|
|
|
|
|
$
|
30,263
|
|
Net
income (loss) for the year ended June 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(7,998
|
)
|
|
$
|
(7,998
|
)
|
Balance
at June 30, 2016
|
|
|
9,697,498
|
|
|
$
|
243,234
|
|
|
|
-67,271
|
|
|
$
|
(21,823
|
)
|
|
$
|
30,521,209
|
|
|
$
|
30,263
|
|
|
$
|
(37,774,842
|
)
|
|
$
|
(7,001,960
|
)
|
Adjustment
to Accumulated Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
35,807
|
|
|
$
|
35,807
|
|
Shares
issued to Milost Advisors for consulting service (7/29/16)
|
|
|
225,000
|
|
|
$
|
225
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
89,775
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
90,000
|
|
Shares
issued to Steve Truong for cash (8/29/16)
|
|
|
48,930
|
|
|
$
|
49
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
19,951
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
20,000
|
|
Shares
issued for conversion of note by Auctus Fund LLC (8/30/16)
|
|
|
529,598
|
|
|
$
|
530
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
138,412
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
138,942
|
|
Shares
issued for prepaid consulting expense (10/31/16)
|
|
|
100,000
|
|
|
$
|
100
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
32,900
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
33,000
|
|
Shares
issued for consulting expense (10/31/16)
|
|
|
100,000
|
|
|
$
|
100
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
32,900
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
33,000
|
|
Shares
issued for conversion of note by Thuong Le (12/5/16)
|
|
|
606,060
|
|
|
$
|
606
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
181,212
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
181,818
|
|
Shares
issued to Henry Fahman for payment of debts (12/22/16)
|
|
|
2,500,000
|
|
|
$
|
2,500
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
347,500
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
350,000
|
|
Shares
issued for conversion of note by EMA Financial LLC (1/30/17)
|
|
|
180,000
|
|
|
$
|
180
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
19,036
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
19,216
|
|
Shares
issued for conversion of note by JSJ Investments (2/7/17)
|
|
|
657,169
|
|
|
$
|
657
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
71,556
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
72,213
|
|
Shares
issued for conversion of note by EMA Financial LLC (2/9/17)
|
|
|
200,000
|
|
|
$
|
200
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
15,785
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
15,985
|
|
Shares
issued for conversion of note by EMA Financial LLC (3/10/17)
|
|
|
244,340
|
|
|
$
|
244
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
13,078
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
13,323
|
|
Shares
issued for conversion of note by Auctus Fund LLC (4/6/17)
|
|
|
750,000
|
|
|
$
|
750
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
23,400
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
24,150
|
|
Shares
issued for conversion of note by Power Up Lending Group (6/23/17)
|
|
|
495,441
|
|
|
$
|
495
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
7,123
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
7,618
|
|
Cancellation
of shares previously issued to Milost Advisors (6/28/17)
|
|
|
-225,000
|
|
|
$
|
(225
|
)
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
(89,775
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(90,000
|
)
|
Net
income (loss) for the year ended June 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1,560,718
|
)
|
|
$
|
(1,560,718
|
)
|
Balance
at June 30, 2017
|
|
|
16,109,036
|
|
|
$
|
249,645
|
|
|
|
-321,569
|
|
|
$
|
(40,908
|
)
|
|
$
|
31,424,061
|
|
|
$
|
153,474
|
|
|
$
|
(39,299,754
|
)
|
|
$
|
(7,513,481
|
)
|
The
accompanying notes form an integral part of these audited consolidated financial statements
PHI
GROUP, INC. AND SUBSIDIARIES
(FORMERLY PROVIDENTIAL HOLDINGS, INC.)
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 Company will transfer or cause to be transferred at least 480,000 shares of Common Stock of PHI
Group, Inc. to an authorized representative 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 efforts 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.
PHI
GROUP, INC.
10-Q
REPORT FOR THE QUARTER
ENDED
SEPTEMBER 30, 2017
PART
I - FINANCIAL INFORMATION
Item
1- Consolidated Financial Statements – Unaudited
PHI
GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
UNAUDITED
|
|
September
30, 2017
|
|
|
June
30, 2017
|
|
|
|
|
|
|
Audited
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
4,590
|
|
|
|
38,369
|
|
Marketable
securities
|
|
|
500,671
|
|
|
|
502,696
|
|
Other
current assets
|
|
|
128,899
|
|
|
|
133,000
|
|
Total
current assets
|
|
$
|
634,160
|
|
|
$
|
674,064
|
|
Other
assets:
|
|
|
|
|
|
|
|
|
Investments
|
|
|
35,500
|
|
|
|
-
|
|
Total
other assets
|
|
|
35,500
|
|
|
|
-
|
|
Total
Assets
|
|
$
|
669,660
|
|
|
$
|
674,064
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
148,362
|
|
|
|
159,875
|
|
Accrued
expenses
|
|
|
471,059
|
|
|
|
384,929
|
|
Short-term
notes payable
|
|
|
900,658
|
|
|
|
873,008
|
|
Due
to officers
|
|
|
279,142
|
|
|
|
592,141
|
|
Client
deposits
|
|
|
780
|
|
|
|
780
|
|
Derivative
Liabilities - Net
|
|
|
605,389
|
|
|
|
454,756
|
|
Other
current payable
|
|
|
92,781
|
|
|
|
-
|
|
Total
current liabilities
|
|
$
|
2,498,171
|
|
|
$
|
2,465,489
|
|
Long-Term
Liabilities
|
|
|
|
|
|
|
|
|
Accrued
Expenses
|
|
|
1,462,836
|
|
|
|
1,462,836
|
|
Accrued
Interest
|
|
|
2,715,963
|
|
|
|
2,715,963
|
|
Advances
from Customers
|
|
|
288,219
|
|
|
|
288,219
|
|
Liabilities
from Discontinued Operations
|
|
|
1,040,037
|
|
|
|
1,040,037
|
|
Preferred
Stock Liabilities - Discontinued Operations
|
|
|
215,000
|
|
|
|
215,000
|
|
Total
Long-Term Liabilities
|
|
$
|
5,722,056
|
|
|
$
|
5,722,056
|
|
Total
Liabilities
|
|
$
|
8,220,226
|
|
|
$
|
8,187,545
|
|
Stockholders’
deficit:
|
|
|
|
|
|
|
|
|
Preferred
stock, $.001 par value, 100,000,000 shares authorized; none issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
Common
stock, $0.001 par value; 900,000,000 shares authorized; 41,082,982 shares issued and outstanding as of 09/30/2017, and 16,109,036
issued and outstanding as of 6/30/2017, respectively, after adjustment for 1-for-1,500 reverse split effective March 15, 2012.
|
|
|
274,620
|
|
|
|
249,645
|
|
Treasury
stock: 483,269 shares & 321,56 shares as of 9/30/17 and 6/30/17, respectively - cost method.
|
|
|
(44,148
|
)
|
|
|
(40,908
|
)
|
Paid-in
capital
|
|
|
31,928,659
|
|
|
|
31,424,061
|
|
Acc.
other comprehensive gain (loss)
|
|
|
151,474
|
|
|
|
153,474
|
|
Accumulated
deficit
|
|
|
(39,861,171
|
)
|
|
|
(39,299,754
|
)
|
Total
stockholders’ deficit
|
|
$
|
(7,550,566
|
)
|
|
$
|
(7,513,481
|
)
|
Total
liabilities and stockholders’ deficit
|
|
$
|
669,660
|
|
|
$
|
674,064
|
|
The
accompanying notes form an integral part of these audited consolidated financial statements
PHI
GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENT OF OPERATIONS
FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
UNAUDITED
|
|
2017
|
|
|
2016
|
|
Net
revenues
|
|
|
|
|
|
|
|
|
Consulting,
advisory and management services
|
|
$
|
28,500
|
|
|
$
|
50,000
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Salaries
and wages
|
|
|
59,166
|
|
|
|
59,875
|
|
Professional
services, including non-cash compensation
|
|
|
38,332
|
|
|
|
151,299
|
|
General
and administrative
|
|
|
36,797
|
|
|
|
28,772
|
|
Total
operating expenses
|
|
$
|
134,294
|
|
|
$
|
239,946
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from operations
|
|
$
|
(105,794
|
)
|
|
$
|
(189,946
|
)
|
|
|
|
|
|
|
|
|
|
Other
income and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(217,580
|
)
|
|
|
(175,136
|
)
|
Gain
(loss) on sale of marketable securities
|
|
|
-
|
|
|
|
(25
|
)
|
Gain
(loss) on debt settlement
|
|
|
(92,781
|
)
|
|
|
-
|
|
Gain
(Loss) on loan/note conversion
|
|
|
(94,539
|
)
|
|
|
-
|
|
Other
income (expense)
|
|
|
(50,722
|
)
|
|
|
(10,425
|
)
|
|
|
|
|
|
|
|
|
|
Net
other income (expenses)
|
|
$
|
(455,623
|
)
|
|
$
|
(185,586
|
)
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
(561,417
|
)
|
|
$
|
(375,532
|
)
|
Other
comprehensive income (loss)
|
|
|
|
|
|
|
|
|
Accumulated
other comprehensive gain (loss)
|
|
|
151,474
|
|
|
|
12,533
|
|
Comprehensive
income (loss)
|
|
$
|
(409,943
|
)
|
|
$
|
(362,998
|
)
|
|
|
|
|
|
|
|
|
|
Net
loss per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.02
|
)
|
|
$
|
(0.04
|
)
|
Diluted
|
|
$
|
(0.02
|
)
|
|
$
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
34,508,277
|
|
|
|
10,045,706
|
|
Diluted
|
|
|
34,508,277
|
|
|
|
10,045,706
|
|
The
accompanying notes form an integral part of these audited consolidated financial statements
PHI
GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
UNAUDITED
|
|
2017
|
|
|
2016
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
Net
income (loss) from operations
|
|
$
|
(561,417
|
)
|
|
$
|
(375,531
|
)
|
Adjustments
to reconcile net income to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
(Increase)
decrease in other assets and prepaid expenses
|
|
|
6,126
|
|
|
|
(29,332
|
)
|
Increase
(decrease) in accounts payable and accrued expenses
|
|
|
(60,099
|
)
|
|
|
177,693
|
|
Net
cash provided by (used in) operating activities
|
|
|
(615,390
|
)
|
|
|
(227,170
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Investments
in AQuarius Power, Inc. and Rush Gold Royalty, Inc.
|
|
|
(35,500
|
)
|
|
|
-
|
|
Net
cash provided by (used in) investing activities
|
|
|
(35,500
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds
from common stock
|
|
|
529,572
|
|
|
|
248,942
|
|
Change
in Accum. other comprehensive income (loss)
|
|
|
(2,000
|
)
|
|
|
(17,730
|
)
|
Change
in treasury stock
|
|
|
(3,241
|
)
|
|
|
(319
|
)
|
Liabilities
due to settlement of debt
|
|
|
92,781
|
|
|
|
-
|
|
Net
cash provided by (used in) financing activities
|
|
|
617,112
|
|
|
|
230,893
|
|
|
|
|
|
|
|
|
|
|
Net
decrease in cash and cash equivalents
|
|
|
(33,778
|
)
|
|
|
3,723
|
|
Cash
and cash equivalents, beginning of period
|
|
|
38,369
|
|
|
|
2,482
|
|
Cash
and cash equivalents, end of period
|
|
$
|
4,590
|
|
|
$
|
6,205
|
|
The
accompanying notes form an integral part of these audited consolidated financial statements
PHI
GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1
–
NATURE OF BUSINESS
INTRODUCTION
PHI
Group, Inc. (the “Company” or “PHI”) is engaged in mergers and acquisitions as a principal (www.phiglobal.com)
and invests in several selective industries. The Company has adopted plans to acquire established operating businesses in a number
of 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.
BACKGROUND
Originally
incorporated on June 8, 1982 as JR Consulting, Inc., a Nevada corporation, the Company applied for a Certificate of Domestication
and filed Articles of Domestication to become a Wyoming corporation on September 20, 2017. In the beginning, the Company was foremost
engaged in mergers and acquisitions and had an operating subsidiary, Diva Entertainment, Inc., which operated two modeling agencies,
one in New York and one in California. Following the business combination with Providential Securities, Inc., a California-based
financial services company, the Company changed its name to Providential Securities, Inc., a Nevada corporation, in January 2000.
The Company then changed its name to Providential Holdings, Inc. in February 2000. In October 2000, Providential Securities withdrew
its securities brokerage membership and ceased its financial services business. Subsequently, in April 2009, the Company changed
its name to PHI Group, Inc. From October 2000 to October 2011, the Company and its subsidiaries were engaged in mergers and acquisitions
advisory and consulting services, real estate and hospitality development, mining, oil and gas, telecommunications, technology,
healthcare, private equity, and special situations. In October 2011, the Company discontinued the operations of Providential Vietnam
Ltd., Philand Ranch Limited, a United Kingdom corporation (together with its subsidiaries Philand Ranch - Singapore, Philand Corporation
- US, and Philand Vietnam Ltd. - Vietnam), PHI Gold Corporation (formerly PHI Mining Corporation, a Nevada corporation), and PHI
Energy Corporation (a Nevada corporation), and mainly focused on acquisition and development opportunities in energy and natural
resource businesses. At the present, the Company is engaged in mergers and acquisitions as a principal and investments in natural
resources, energy, agriculture, 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., PHI EZ Water Tech, Inc., PHI Group Regional Center, LLC, Phivitae
Corporation, Constructii SA Group, Inc. and 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) and Omni Resources, Inc., collectively referred to as the “Company.” All significant inter-company
transactions have been eliminated in consolidation.
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
The
accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles
generally accepted in the United States of America for complete financial statements. These statements should be read in conjunction
with the audited financial statements for the year ended June 30, 2017. In the opinion of management, all adjustments consisting
of normal reoccurring accruals have been made to the financial statements. The results of operation for the three months ended
September 30, 2017 are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2018.
USE
OF ESTIMATES
The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual
results could differ from those estimates.
Cash
and Cash Equivalents
The
Company considers all liquid investments with a maturity of three months or less from the date of purchase that are readily convertible
into cash to be cash equivalents.
MARKETABLE
SECURITIES
The
Company’s securities are classified as available-for-sale and, as such, are carried at fair value. Securities classified
as available-for-sale may be sold in response to changes in interest rates, liquidity needs, and for other purposes.
Typically,
each investment in marketable securities represents less than twenty percent (20%) of the outstanding common stock and stock equivalents
of the investee, and each security is quoted on either the OTC Markets or other public exchanges. As such, each investment is
accounted for in accordance with the provisions of SFAS No. 115.
Unrealized
holding gains and losses for available-for-sale securities are excluded from earnings and reported as a separate component of
stockholder’s equity. Realized gains and losses for securities classified as available-for-sale are reported in earnings
based upon the adjusted cost of the specific security sold. On September 30, 2017, the marketable securities were recorded at
$500,671, based upon the fair value of the marketable securities at that time.
FAIR
VALUE OF FINANCIAL INSTRUMENTS
Fair
Value - Definition and Hierarchy
Fair
value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Assets and liabilities measured at fair value are categorized based on whether
or not the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial
assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair
value measurement.
A
fair value hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the
use of unobservable inputs by requiring that the most observable inputs are to be used when available.
Valuation
techniques that are consistent with the market or income approach are used to measure fair value. The fair value hierarchy is
categorized into three levels based on the inputs as follows:
Level
1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the
ability to access.
Level
2 - Valuations based on inputs other than quoted prices included in Level 1 that are observable, either directly or indirectly.
Level
3
- Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
Fair
value is a market-based measure, based on assumptions of prices and inputs considered from the perspective of a market participant
that are current as of the measurement date, rather than an entity-specific measure. Therefore, even when market assumptions are
not readily available, the Company’s own assumptions are set to reflect those that market participants would use in pricing
the asset or liability at the measurement date. The availability of valuation techniques and observable inputs can vary from investment
to investment and are affected by a wide variety of factors, including; type of investment, whether the investment is new and
not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the transaction.
To
the extent that valuation is based upon models or inputs that are less observable or unobservable in the market, the determination
of fair value requires more judgment. Because of the inherent uncertainty of valuation, those estimated values may be materially
higher or lower than the values that would have been used had a ready market for the investments existed. Accordingly, the degree
of judgment exercised by the Fund in determining fair value is greatest for investments categorized in Level 3. In certain cases,
the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in
the fair value hierarchy in which the fair value measurement falls in its entirety is determined based upon the lowest level input
that is significant to the fair value measurement.
Fair
Value - Valuation Techniques and Inputs
The
Company holds and may invest public securities traded on public exchanges or over-the-counter (OTC), private securities, real
estate, convertible securities, interest bearing securities and other types of securities and has adopted specific techniques
for their respective valuations.
Equity
Securities in Public Companies
Unrestricted
The
Company values investments in securities that are freely tradable and listed on major securities exchanges at their last reported
sales price as of the valuation date. To the extent these securities are actively traded and valuation adjustments are not applied,
they are categorized in Level 1 of the fair value hierarchy.
Securities
traded on inactive markets or valued by reference to similar instruments are generally categorized in Level 2 or 3 of the fair
value hierarchy.
Restricted
Securities
traded on public exchanges or over-the-counter (OTC) where there are formal restrictions that limit (i.e. Rule 144 holding periods
and underwriter’s lock-ups) their sale shall be valued at the closing price on the date of valuation less applicable discounts.
The Company may apply a discount to securities with Rule 144 restrictions. Additional discounts may be assessed if the Company
believes there are other mitigating factors which warrant the additional discounting. When determining potential additional discounts,
factors that will be taken into consideration include, but are not limited to; securities’ trading characteristics, volume,
length and overall impact of the restriction as well as other macro-economic factors. Valuations should be discounted appropriately
until the securities may be freely traded.
If
it has been determined that the exchange or OTC listed price does not accurately reflect fair market value, the Company may elect
to treat the security as a private company and apply an alternative valuation method.
Investments
in restricted securities of public companies may be included in Level 2 of the fair value hierarchy. However, to the extent that
significant inputs used to determine liquidity discounts are not observable, investments in restricted securities in public companies
may be categorized in Level 3 of the fair value hierarchy.
The
Company’s financial instruments primarily consist of cash and cash equivalents, accounts receivable, marketable securities,
short-term notes payable, convertible notes, derivative liability and accounts payable.
As
of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying
values as presented on the balance sheet. This is primarily attributed to the short maturities of these instruments.
Effective
July 1, 2008, the Company adopted ASC 820 (previously SFAS 157),
Fair Value Measurements
and adopted this Statement for
the assets and liabilities shown in the table below. ASC 820 clarifies the definition of fair value, prescribes methods for measuring
fair value, establishes a fair value hierarchy based on the inputs used to measure fair value, and expands disclosures about the
use of fair value measurements. The adoption of ASC 820 did not have a material impact on our fair value measurements. 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 exercised.
Available-for-sale
securities
The
Company uses various approaches to measure fair value of available-for-sale securities, while applying the three-level valuation
hierarchy for disclosures, specified in ASC 820. Our Level 1 securities were measured using the quoted prices in active markets
for identical assets and liabilities.
The
company’s policy regarding the transfers in and/or out of Level 3 depends on the trading activity of the security, the volatility
of the security, and other observable units which clearly represents the fair value of the security. If a level 3 security can
be measured using a more fairly represented fair value, we will transfer these securities either into Level 1 or Level 2, depending
on the type of inputs.
ACCOUNTS
RECEIVABLE
Management
reviews the composition of accounts receivable and analyzes historical bad debts. As of September 30, 2017, the Company did not
have any accounts receivable.
PROPERTIES
AND EQUIPMENT
Property
and equipment are carried at cost less accumulated depreciation. Depreciation is provided using the straight-line method over
the estimated useful life of the assets from three to five years. Expenditures for maintenance and repairs are charged to expense
as incurred.
REVENUE
RECOGNITION
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.
STOCK-BASED
COMPENSATION
Effective
July 1, 2006, the Company adopted ASC 718-10-25 (previously SFAS 123R) and accordingly has adopted the modified prospective application
method. Under this method, ASC 718-10-25 is applied to new awards and to awards modified, repurchased, or cancelled after the
effective date. Additionally, compensation cost for the portion of awards that are outstanding as of the date of adoption for
which the requisite service has not been rendered (such as unvested options) is recognized over a period of time as the remaining
requisite services are rendered.
RISKS
AND UNCERTAINTIES
In
the normal course of business, the Company is subject to certain risks and uncertainties. The Company provides its service and
receives marketable securities upon execution of transactions. Consequently, the value of the securities received from customers
can be affected by economic fluctuations and each customer’s business growth. The actual realized value of these securities
could be significantly different than recorded value.
RECENT
ACCOUNTING PRONOUNCEMENTS
Update
No. 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]
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July
2013
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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.
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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]
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July
2013
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The
deferral in this amendment is effective upon issuance for financial statements that have not been issued.
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Update
No. 2013-07—
Presentation of Financial Statements (Topic 205): Liquidation Basis of Accounting
[Download]
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April
2013
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Effective
for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013. Early
adoption is permitted.
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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]
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February
2013
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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.
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Update
2013-02—
Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive
Income
[Download]
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February
2013
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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.
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Update
2013-01—
Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities
[Download]
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January
2013
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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.
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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
– MARKETABLE EQUITY SECURITIES AVAILABLE FOR SALE
The
Company’s marketable securities are classified as available-for-sale and, as such, are carried at fair value. All of the
securities are comprised of shares of common stock of the investee. Securities classified as available-for-sale may be sold in
response to changes in interest rates, liquidity needs, and for other purposes. These marketable securities are quoted on the
OTC Markets or other public exchanges and are accounted for in accordance with the provisions of SFAS No. 115.
Marketable
securities held by the Company and classified as available for sale as of September 30, 2017 consisted of 33,975,106 shares of
Myson Group, Inc., a public company quoted on the OTC Markets (Trading symbol “MYSN”) and 292,050,000 shares of Sports
Pouch Beverage Co., a public company quoted on the OTC Markets (Trading symbol “SPBV”). The fair value of the shares
recorded as of September 30, 2017 was $500,671.
Securities
available for sale
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Level
1
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Level
2
|
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Level
3
|
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Total
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September
30, 2017
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None
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$
|
237,826
|
|
|
$
|
262,845
|
|
|
$
|
500,671
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June 30, 2017
|
|
None
|
|
$
|
210,646
|
|
|
$
|
292,050
|
|
|
$
|
502,696
|
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NOTE
4
– PROPERTIES AND EQUIPMENT
The
Company did not have any properties or equipment as of September 30, 2017.
NOTE
5
– OTHER ASSETS
The
Other Assets comprise of the following as of September 30, 2017 and June 30, 2017:
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9/30/2017
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6/30/2017
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Equity
Investments
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$
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35,500
|
|
|
$
|
-
|
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Total
Other Assets
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$
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35,500
|
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$
|
-
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NOTE
6
– 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 September 30, 2017,
the Company had a balance of $1,040,037 as Long-term Liabilities from Discontinued Operations.
NOTE
7
– CURRENT LIABILITIES
Current
liabilities of the Company consisted of the followings as of September 30, 2017 and June 30, 2017:
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September
30, 2017
|
|
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June
30, 2017
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Accounts
Payable
|
|
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148,362
|
|
|
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159,875
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Accrued
Expenses
|
|
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471,059
|
|
|
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384,929
|
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Notes
Payable
|
|
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900,658
|
|
|
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873,008
|
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Due
to Officers
|
|
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279,142
|
|
|
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592,141
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Client
Deposits
|
|
|
780
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|
|
|
780
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Derivative
Liabilities – Net
|
|
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605,389
|
|
|
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454,756
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Other
Current Payable
|
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92,781
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|
|
-
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Total
Current Liabilities:
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$
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2,498,171
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$
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2,465,489
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NOTE
8
– DUE TO OFFICERS
Due
to officers, represents advances made by officers of the Company and its subsidiaries, which are non-interest bearing, unsecured
and due on demand. During the quarter ended September 30, 2017, Henry Fahman converted $300,000 into 20,000,000 shares of restricted
common stock of the Company valued at $0.015 per share. As of September 30, 2017 and June 30, 2017, the balances were $279,142
and $592,141, respectively.
Officers/Directors
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September
30, 2017
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June
30, 2017
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Henry
Fahman
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|
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198,292
|
|
|
$
|
511,291
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Tam
Bui
|
|
|
63,350
|
|
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$
|
63,350
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Frank
Hawkins
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|
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5,000
|
|
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$
|
5,000
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Lawrence
Olson
|
|
|
12,500
|
|
|
|
12,500
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|
Total
|
|
$
|
279,142
|
|
|
$
|
592,141
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NOTE
9
– 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 September 30, 2017,
the Company had $626,390 from short-term notes payable with accrued interest of $2,444,141. These notes bear interest rates ranging
from 0% to 36% per annum.
CONVERTIBLE
PROMISSORY NOTES:
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.
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
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 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.
As
of September 30, 2017, the principal balance of the outstanding convertible notes was $415,387 and the value of net derivative
liabilities in connection with these notes was $605,389. 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
10
– 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 September 30, 2017 and June 30, 2017, $445,050 and $438,600 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 September
30, 2017, the Company recorded $288,219 of Advances from Customers as a Long-term Liability.
During
the quarter ended September 30, 2017, the Company signed a Settlement Agreement and agreed to pay Thinh Hung Investment Co. a
total amount of $381,000 which includes the outstanding balance of $288,219 mentioned above and $92,781 in accrued interest that
is recorded as Other Current Liability in the attached balance sheet of the Company as of 9/30/2017.
According
to the Settlement Agreement, the Company would transfer or cause to be transferred at least 480,000 shares of Common Stock of
PHI Group, Inc. to an authorized representative 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. After the receipt of at least 480,000 shares of PHI Group Stock by the authorized representative of Thinh Hung, Thinh
Hung would deliver and transfer all the Vietnam Foods Corporation Stock to PHI Group, Inc. or its authorized representative.
OTHER
LONG-TERM LIABILITIES
As
of September 30, 2017, the Company recorded the following items which are more than two years old as other long-term liabilities:
$1,462,836 of Accrued Expenses, $2,715,963 of Accrued Interest, and $1,040,037 of Liabilities from Discontinued Operations.
Long-term
liabilities of the Company consisted of the followings as of September 30, 2017 and June 30, 2017:
|
|
September 30, 2017
|
|
|
June
30, 2017
|
|
Accrued
Expenses
|
|
|
1,462,836
|
|
|
|
1,462,836
|
|
Accrued
Interest
|
|
|
2,715,963
|
|
|
|
2,715,963
|
|
Advances
from Customers
|
|
|
288,219
|
|
|
|
288,219
|
|
Liabilities
from Discontinued Operations
|
|
|
1,040,037
|
|
|
|
1,040,037
|
|
Preferred
Stock Liabilities – Discontinued Operations
|
|
|
215,000
|
|
|
|
215,000
|
|
Total
Long-term Liabilities:
|
|
$
|
5,722,056
|
|
|
$
|
5,722,056
|
|
NOTE
11
– LITIGATION
LEGAL
PROCEEDING SETTLED AND UNPAID AS OF SEPTEMBER 30, 2017:
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 September
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 September 30, 2017.
NOTE
12
– 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
13
– BASIC AND DILUTED NET PROFIT (LOSS) PER SHARE
Net
loss per share is calculated in accordance with SFAS No. 128, “Earnings per Share”. Under the provision of SFAS No.
128, basic net loss per share is computed by dividing the net loss for the period by the weighted-average number of common shares
outstanding for the period. Diluted EPS is based on the weighted-average number of shares of common stock outstanding for the
period and common stock equivalents outstanding at the end of the period. Basic and diluted weighted average numbers of shares
for the period ended September 30, 2017 were the same since the inclusion of Common stock equivalents is anti-dilutive.
NOTE
14
–
STOCKHOLDER’S EQUITY
In
accordance with the Articles of Incorporation and Amendments to the Articles of Incorporation filed with the Nevada Secretary
of State, the total number of authorized capital stock of the Company is 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.
On
March 15, 2012, the Company effectuated a 1 for 1,500 reverse split of the Company’s Common Stock.
Treasury
Stock:
The
balance of treasury stock as of September 30, 2017 was 483,269 post-split shares valued at $44,148 according to cost method.
Common
Stock:
Since
July 1, 2017, the Company has issued the following amounts of its Common Stock:
On
July 05, 2017, the Company issued 740,741 shares of free-trading Common Stock of PHI Group, Inc. to Power Up Lending Group Ltd.,
holder of a Convertible Promissory Note dated 12/15/2016 of the Company, for the conversion of $10,000.00 of the principal amount
of the Note, at the conversion price of $0.0135 per share. The principal amount of the Note after this conversion was $14,500.00.
On
July 11, 2017, the Company issued 800,000 shares of free-trading Common Stock of PHI Group, Inc. to Auctus Fund LLC, holder of
a Convertible Promissory Note dated 8/16/2016 of the Company, for the conversion of $5,152.00, consisting of $3,485.17 principal
amount of the Note and $1,666.83 of accrued and unpaid interest thereto, at the conversion price of $0.00644 per share. The principal
amount of the Note after this conversion was $32,613.12. Subsequently, on July 24, 2017, the Company paid a total of $49,530.72
to Auctus Fund LLC, consisting of $32,613.12 principal amount and the balance in pre-payment premium and accrued and unpaid interest
in connection with the Convertible Promissory Note dated 8/16/16. This note was paid in full and the principal balance due remaining
and accrued and unpaid interest remaining after this payment was $0.00.
On
July 17, 2017, the Company issued 880,000 shares of free-trading Common Stock of PHI Group, Inc. to Power Up Lending Group Ltd.,
holder of a Convertible Promissory Note dated 12/15/2016 of the Company, for the conversion of $7,920.00 of the principal amount
of the Note, at the conversion price of $0.009 per share.
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.
As
of November 20, 2017 there were 45,935,141 shares of the Company’s $0.001 par value Common Stock issued and outstanding,
excluding 5,673,327 shares reserved for a special dividend distribution.
Preferred
Stock:
There is no preferred stock issued and outstanding.
Class
A Preferred Stock as filed with the State of Nevada:
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.
The
Company has never issued any Class A Preferred Stock.
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.”
NOTE
15
–
STOCK-BASED COMPENSATION PLAN
On
February March 18, 2015, the Company adopted an Employee Benefit Plan to set aside 1,000,000 shares of common stock for eligible
employees and independent contractors of the Company and its subsidiaries. As of September 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:
|
|
|
|
|
|
|
|
|
|
|
Fair
Value at
|
|
Holder
|
|
Issue
Date
|
|
Maturity
Date
|
|
Stock
Options
|
|
|
Exercise
Price
|
|
Issuance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tam
Bui
|
|
9/23/2016
|
|
9/23/2023
|
|
|
875,000
|
|
|
Fixed
price: $0.24
|
|
$
|
219,464
|
|
Frank
Hawkins
|
|
9/23/2016
|
|
9/23/2023
|
|
|
875,000
|
|
|
Fixed
price: $0.24
|
|
$
|
219,464
|
|
Henry
Fahman
|
|
9/23/2016
|
|
9/23/2023
|
|
|
4,770,000
|
|
|
Fixed
price: $0.24
|
|
$
|
1,187,984
|
|
NOTE
16
–
RELATED PARTY TRANSACTIONS
The
Company accrued $52,500 in salaries for the President and the Secretary & Treasurer of the Company during the quarters ended
September 30, 2017 and September 30, 2016.
During
the quarter ended September 30, 2017, the Company received a fee in the amount of $25,000 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
17
–
CONTRACTS AND COMMITMENTS
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.
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 will initially purchase NTC’s sacha inchi products from NTC for distribution in the U.S. and international markets
and 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
On
March 3, 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 Purchase Agreement initially called
for deposit of $37,500, installment payments and a final closing date of July 3, 2017. The Company is in the process of amending
the Commercial Contract to reduce the purchase price and close this transaction by January 31, 2018 or as soon as possible. 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.
EQUITY
LINE FACILITY - INVESTMENT AGREEMENT WITH AZURE CAPITAL, INC.
On
March 6, 2017, PHI Group, Inc., a Nevada corporation (the “Company”) and Azure Capital, a Massachusetts Corporation
(the “Investor”) entered into an Investment Agreement (the “Investment Agreement”) and a Registration
Rights Agreement (the “Registration Rights Agreement”), each dated March 6, 2017 between the Company and the Investor.
Pursuant
to the Investment Agreement, the Investor committed to purchase, subject to certain restrictions and conditions, up to $10,000,000
worth of the Company’s common stock, over a period of 36 months from the effectiveness of the registration statement registering
the resale of shares purchased by the Investor pursuant to the Investment Agreement. The Company agrees to reserve 20,000,000
shares of its Common Stock for issuance to the Investor pursuant to the Investment Agreement. In the event the Company cannot
register a sufficient number of shares of its Common Stock for issuance pursuant to the Investment Agreement, the Company will
use its best efforts to authorize and reserve for issuance the number of shares required for the Company to perform its obligations
in connection with the Investment Agreement as soon as reasonable practical.
The
Company may in its discretion draw on the facility from time to time, as and when the Company determines appropriate in accordance
with the terms and conditions of the Investment Agreement. The maximum number of shares that the Company is entitled to put to
the Investor in any one draw down notice shall not exceed shares with a purchase price of $250,000 or 200% of the average daily
volume (U.S. market only) of the Company’s Common Stock for the three (3) Trading Days prior to the applicable put notice
date multiplied by the average of the three (3) daily closing prices immediately preceding the put date, calculated in accordance
with the Investment Agreement. The Company may deliver a notice for a subsequent put from time to time, after the pricing period
for the prior put has been completed.
The
purchase price shall be set at ninety-four percent (94%) of the lowest daily volume weighted average price (VWAP) of the Company’s
common stock during the five (5) consecutive trading days immediately following the put notice date. On each put notice submitted
to the Investor by the Company, the Company shall specify a suspension price for that put. In the event the price of Company’s
Common Stock falls below the suspension price, the put shall be temporarily suspended. The put shall resume at such time the price
of the Company’s Common Stock is above the suspension price, provided the dates for the pricing period for that particular
put are still valid. In the event the pricing period has been complete, any shares above the suspension price due to the Investor
shall be sold to the Investor by the Company at the suspension price under the terms of the Investment Agreement. The suspension
price for a put may not be changed by the Company once submitted to the Investor.
There
are put restrictions applied on days between the draw down notice date and the closing date with respect to that particular put.
During such time, the Company shall not be entitled to deliver another draw down notice. In addition, the Investor will not be
obligated to purchase shares if the Investor’s total number of shares beneficially held at that time would exceed 4.99%
of the number of shares of the Company’s common stock as determined in accordance with Rule 13d-1(j) of the Securities Exchange
Act of 1934, as amended. In addition, the Company is not permitted to draw on the facility unless there is an effective registration
statement to cover the resale of the shares.
The
Investment Agreement also contains customary representations and warranties of each of the parties. The assertions embodied in
those representations and warranties were made for purposes of the Investment Agreement and are subject to qualifications and
limitations agreed to by the parties in connection with negotiating the terms of the Investment Agreement. The Investment Agreement
further provides that the Company and the Investor are each entitled to customary indemnification from the other for, among other
things, any losses or liabilities they may suffer as a result of any breach by the other party of any provisions of the Investment
Agreement or Registration Rights Agreement (as defined below). Investor should read the Investment Agreement together with the
other information concerning the Company that the Company publicly files in reports and statements with the Securities and Exchange
Commission (the “SEC”).
Pursuant
to the terms of the Registration Rights Agreement, the Company is obligated to file one or more registrations statements with
the SEC within twenty-one (21) days after the date of the Registration Rights Agreement to register the resale by the Investor
of the shares of common stock issued or issuable under the Investment Agreement. In addition, the Company is obligated to use
all commercially reasonable efforts to have the registration statement declared effective by the SEC within 90 days after the
registration statement is filed.
This
Investment Agreement was amended on August 3, 2017 to allow for the reservation of 65,445,000 shares of the Company’s Common
Stock for issuance to the Investor pursuant to the corrected Investment Agreement.
The
Company has filed a S-1 Registration Statement with the Securities and Exchange Commission to include 4,794,500 shares of its
Common Stock for issuance in connection with the first tranche of the Equity Line Facility.
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 Company will transfer or cause to be transferred at least 480,000 shares of Common Stock of PHI
Group, Inc. to an authorized representative 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 efforts 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.
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.
NOTE
18
–
GOING CONCERN UNCERTAINTY
As
shown in the accompanying consolidated financial statements, the Company has accumulated deficit of $39,861,171 and stockholders’
deficit of $7,550,566 as of September 30, 2017. For the quarter ended September 30, 2017, the Company incurred a net loss from
operations of $105,794 as compared to a net loss from operations in the amount of $189,946 during the same period ended September
30, 2016. 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 energy, natural resources, agribusiness,
technology, transportation, mining, oil & gas, financial services, healthcare, and pharmaceuticals. In addition, the Company
also plans to invest in special situations that may potentially generate significant revenues and profitability for the Company
in the short term. Furthermore, 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, investment in special situations, and advisory services mentioned herein. We will strive to
build a critical mass through acquisition and organic growth in order to uplist the Company’s stock to national exchange
in the near future. 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
19 – SUBSEQUENT EVENT
These
financial statements were approved by management and available for issuance on November 20, 2017. Subsequent events have been
evaluated through this date.
CLOSING
OF THE 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.
APPOINTMENT
OF CHIEF TECHNOLOGY OFFICER FOR ABUNDANT FARMS, INC.
On
October 28, 2017, Abundant Farms, Inc., a wholly owned subsidiary of PHI Group, Inc., signed an Employment Agreement with Mr.
Lam Duong and appointed the same as Chief Technology Officer/Chief Operation Officer for Abundant Farms. After a trial period
of three months, the Employment Agreement will be effective for three years and may be renewed by mutual consent of both the Company
and the employee. Mr. Duong will be responsible for all technological aspects of Abundant Farms, including the development of
organic fertilizers and other agricultural and medicinal products.
BUSINESS
COOPERATION AND INVESTMENT AGREEMENT WITH SUDA LATTANA CO., LTD. FOR GOLD MINING PROJECT
On
November 4, 2017, American Pacific Resources, Inc. (“APR”), a subsidiary of PHI Group, Inc., signed a Business Cooperation
and Investment Agreement (the “Agreement”) with Suda Lattana Co., Ltd. a company duly organized and existing under
the laws of Lao People’s Democratic Republic, to develop a 67,000-acre (27,000-hectare) gold mining project in the Province
of Savannakhet, Laos. APR will be responsible for financing and operating the gold mining project and will share a majority of
the project’s net profits after accounting for the costs of capital and operating expenses. The Agreement is valid until
December 31, 2066.
BUSINESS
COOPERATION AGREEMENT WITH SUDA LATTANA CO., LTD. FOR IMPORT AND DISTRIBUTION OF PHARMACEUTICAL PRODUCTS AND MEDICAL EQUIPMENT
On
November 4, 2017, Phivitae Corporation, a wholly owned subsidiary of PHI Group, Inc. signed a Business Cooperation Agreement with
Suda Lattana Co., Ltd., a Lao company, to provide pharmaceutical products, medical equipment and healthcare supplies to Laos and
its neighboring countries. According to the Agreement, Phivitae Corp. will be responsible for identifying and forming strategic
alliance with reputable international manufacturers and suppliers in North America, European Union and India to provide pharmaceutical
products, medical equipment and healthcare supplies that meet or exceed international required standards to Laos and its neighboring
markets. The term of the Agreement is for six years and may be renewed every five years thereafter by mutual consent of both parties.
The sharing of profits from this operation will be determined by both parties in a subsequent appendix to the Business Cooperation
Agreement.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Except
for the audited historical information contained herein, this report specifies forward-looking statements of management of the
Company within the meaning of Section 27a of the Securities Act of 1933 and Section 21e of the Securities Exchange Act of 1934
(“forward-looking statements”) including, without limitation, forward-looking statements regarding the Company’s
expectations, beliefs, intentions and future strategies. Forward-looking statements are statements that estimate the happening
of future events and are not based on historical facts. Forward- looking statements may be identified by the use of forward-looking
terminology, such as “could”, “may”, “will”, “expect”, “shall”, “estimate”,
“anticipate”, “probable”, “possible”, “should”, “continue”, “intend”
or similar terms, variations of those terms or the negative of those terms. The forward-looking statements specified in this report
have been compiled by management of the Company on the basis of assumptions made by management and considered by management to
be reasonable. Future operating results of the Company, however, are impossible to predict and no representation, guaranty, or
warranty is to be inferred from those forward-looking statements. The assumptions used for purposes of the forward-looking statements
specified in this report represent estimates of future events and are subject to uncertainty as to possible changes in economic,
legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information
and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment.
To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results,
and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. In addition, those forward-looking
statements have been compiled as of the date of this report and should be evaluated with consideration of any changes occurring
after the date of this report. No assurance can be given that any of the assumptions relating to the forward-looking statements
specified in this report are accurate and the Company assumes no obligation to update any such forward-looking statements.
INTRODUCTION
PHI
Group, Inc. (the “Company” or “PHI”) is a Nevada corporation 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.
BACKGROUND
Originally
incorporated in June 1982 as JR Consulting, Inc., 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. (Nevada) in January 2000. The Company then changed its name to Providential Holdings, Inc.
in February 2000. In October 2000, Providential Securities withdrew its securities brokerage membership and ceased its financial
services business. Subsequently, in April 2009, the Company changed its name to PHI Group, Inc. From October 2000 to October 2011,
the Company 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
began to mainly focus on acquisition and development opportunities in energy and natural resource businesses. Starting July 2016,
the Company has engaged Milost Advisors, Inc., a New York-based investment-banking firm, as its buy-side advisor and begun to
seek acquisition opportunities in other industries besides energy and natural resources. 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.
BUSINESS
STRATEGY
PHI
Group Inc.’s strategy is to:
1.
Identify, build, acquire, commit and deploy valuable resources with distinctive competitive advantages;
2.
Identify, evaluate, acquire, participate and compete in attractive businesses that have large, growing market potential;
3.
Design and implement best-of-breed management systems; and
4.
Build an attractive investment that includes points of exit for investors through capital appreciation or spin-offs of business
units.
SUBSIDIARIES:
As
of September 30, 2017, the Company owns 100% of the following subsidiaries: PHI Capital Holdings, Inc., a Wyoming corporation,
American Pacific Resources, Inc., a Wyoming corporation, Abundant Farms, Inc., a Florida corporation, PHI Group EB-5 Regional
Center, LLC, a Florida limited liability company, PHIVITAE Corporation, a Wyoming corporation, and Constructii SA Group, Inc.,
a Delaware corporation. In addition, the Company owns 75% of PHI EZ Water Tech, Inc., a Wyoming corporation.
PHI
CAPITAL HOLDINGS, INC.
PHI
Capital Holdings, Inc., a wholly-owned subsidiary of the Company, was originally incorporated in 2004 as a Nevada corporation
under the name of “Providential Capital, Inc.” to provide merger and acquisition (M&A) advisory services, consulting
services, project financing, and capital market services to clients in North America and Asia. In May 2010, Providential Capital,
Inc. changed its name to PHI Capital Holdings, Inc. This subsidiary has successfully managed merger plans for several privately
held and publicly traded companies and continues to focus on serving the Pacific Rim markets in the foreseeable future.
On
September 20, 2017, PHI Capital Holdings, Inc. 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.
On October 11, 2017 the Company dissolved PHI Capital Holdings, Inc. with the State of Nevada.
AMERICAN
PACIFIC RESOURCES, INC.
American
Pacific Resources, Inc. (“APR”) is a Wyoming corporation established in April 2016 with the intention to serve as
a holding company for various natural resource projects. On September 2, 2017, APR entered into an Agreement of Purchase and Sale
with Rush Gold Royalty, Inc., 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. This transaction was closed effective October 3, 2017.
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.
ABUNDANT
FARMS, INC.
Abundant
Farms, Inc., a Florida corporation formed on December 19, 2106, is engaged in organic farming activity. It seeks to acquire farmland,
form joint ventures with governments and other farmers, and lease arable land to grow select crops and medicinal plants that potentially
provide superior return on investment. It also plans to produce proprietary organic fertilizer and provides special water treatment
systems by PHI EZ Water Tech, Inc. for its own organic farming program and for sale to farmers worldwide.
PHI
GROUP REGIONAL CENTER, LLC
PHI
Group Regional Center, LLC was formed on March 23, 2017 with the intention to manage a new EB-5 Regional Center in connection
with the Company’s organic farming program, Abundant Farms, Inc., and other potential business activities in the State of
Florida. On April 27, 2017, an I-924 application was filed with the United States Citizenship and Immigration Service (USCIS)
for PHI Group Regional Center, LLC. Under the EB-5 Program, created by Congress to stimulate the U.S. economy through job creation
and capital investment, foreign entrepreneurs (and their spouses and unmarried children under 21) are eligible to apply for a
Green Card (permanent residence) if they make the necessary investment in a commercial enterprise in the United States that creates
or preserves at least 10 permanent, full-time jobs for qualified U.S. workers. The operation of this Regional Center is subject
to the review and approval of United States Citizenship and Immigration Service.
PHI
EZ WATER TECH, INC.
PHI
EZ Water Tech, Inc., a Wyoming corporation, is a majority-owned subsidiary of PHI Group that manages, manufactures and markets
a portfolio of innovative water treatment systems and other products developed by Dr. Martin Nguyen for agriculture, healthcare
and human consumption. Website:
www.phiezwater.com
PHIVITAE
CORPORATION
PHIVITAE
CORPORATION, a Wyoming corporation, is a wholly-owned subsidiary of PHI Group set up with the intention to acquire a pharmaceutical
and medical equipment distribution company in Romania and to manage distribution of medical equipment and pharmaceutical products
to emerging markets.
CONSTRUCTII
SA GROUP, INC.
CONSTRUCTII
SA GROUP, INC., a Delaware corporation, is a wholly-owned subsidiary of PHI Group set up with the intention to acquire a construction
and manufacturing company in Romania.
DISCONTINUED
OPERATIONS:
The
Company has discontinued the operations of Providential Vietnam Ltd., Philand Ranch Limited – UK (together with its subsidiaries
Philand Ranch Ltd-Singapore, Philand Corporation-USA and Philand Vietnam Ltd.), PHI Gold Corporation (now known as NS International
Corp.), and PHI Energy Corporation since June 30, 2012.
Cornerstone
Biomass Corporation, a Florida corporation, was set up in January 2015 by the Company and the principals of AG Materials, LLC,
an Alabama company, to engage in biomass energy. The Company held 51% and the principals of AG Materials held 49% of equity ownership
in Cornerstone Biomass Corporation. This subsidiary’s plan was to develop and establish a 200,000 MT wood pellet plant adjacent
to Klausner Lumber Mill in Live Oak, Florida. In July 2015, the Company purchased a 10-acre parcel of land from Klausner Holding
USA Corporation in order to build the wood pellet plant. Due to subsequent changes in market conditions affecting industrial pellet
usage in Europe, Cornerstone Biomass Corp. decided not to pursue this project. The Company has written off its initial investment
in Cornerstone Biomass Corp. and sold the land parcel. Cornerstone Biomass Corporation was dissolved effective September 23, 2016.
SPUN-OFF
SUBSIDIARIES:
TANS
GLOBAL, INC. (Formerly PROVIMEX, INC.)
Provimex,
Inc. was originally formed on April 10, 2001 under the name “Providential Imex”, to focus on trade commerce with Vietnam.
This division changed its name to Provimex on July 5, 2001. Provimex began to generate revenues from its import and export activities
in August 2002 through the fiscal year ended June 30, 2005 and was incorporated as a Nevada corporation on September 23, 2004.
The Company distributed a 15% stock dividend of Provimex, Inc. to PHI Group, Inc.’s shareholders of record as of September
15, 2004. On June 3, 2011, Provimex, Inc. signed an agreement to acquire all the issued and outstanding capital stock of Humex
Medical Group Corp., a California corporation, (“Humex”) in exchange solely for a certain amount of shares of Provimex’s
common stock, par value 0.001, to engage in stem research and therapy in Southeast Asia. On June 13, 2012 this transaction was
rescinded in its entirety effective retroactively June 3, 2011. On June 19, 2012, Provimex, Inc. changed its name to HP.ITA Corporation.
On July 20, 2012, HP.ITA Corporation (“HPUS”) signed a Corporate Combination Agreement to merge with HP.ITA Joint
Stock Company (“HPVN”), a Vietnamese company, in order to go public in the United States but the Corporate Combination
Agreement was subsequently rescinded because HPVN was not able to implement its business plan and complete financial audits according
to the U.S. Generally Accepted Accounting Principals (“GAAP”). On September 16, 2016 HP.ITA Corp. changed its name
to Tans Global, Inc. with the intention to merge with an operating company and file a registration statement with the Securities
and Exchange Commission to become a fully reporting public company in the U.S. PHI Group is expected to hold a small portion of
stock in Tans Global, Inc. following the contemplated business combination. This transaction is subject to further review by Tans
Global, Inc. and the Company.
OMNI
RESOURCES, INC. (Formerly TOUCHLINK COMMUNICATIONS, INC.)
Touchlink
Communications was formed on July 7, 2003 as a division of the Company to provide point-of-sale (POS) terminals and prepaid calling
cards to retailers, convenient stores and non-profit organizations across the US. This subsidiary was later incorporated as a
Nevada corporation in February 2004 under the name of Touchlink Communications, Inc. as a wholly owned subsidiary of the Company
to provide long distance services to residential and business customers in the United States. The Company has declared a 15% stock
dividend of Touchlink Communications, Inc. to shareholders of record as of September 15, 2004. On November 03, 2008, this subsidiary
changed its name to Vietnam Media Group, Inc. with the intent to develop a multi-media business in Vietnam and subsequently resumed
the corporate name of Touchlink Communications, Inc. in February 2011. On April 4, 2014, this company changed its name to Asia
Green Corporation (“AGC”) and entered into a business combination agreement with Asia Green Limited Liability Company,
a Vietnam-based company, to become a holding company for agroforestry and afforestation business in Vietnam and Southeast Asia.
On July 28, 2014, AGC changed its corporate name to Omni Resources, Inc. The Company expects to hold about 10% equity interest
in Omni Resources, Inc. following Omni’s recapitalization. As of the date of this report Omni Resources, Inc. is inactive
and has not implemented any reorganization plan.
SOUTHEAST
ASIA CAPITAL GROUP, INC. (Formerly E-CHECK RECOVERY, INC.)
E-Check
Recovery, Inc. was formed in 2004 as a Nevada corporation to engage in financial services. This company has changed its name to
Southeast Asia Capital Group, Inc. and is being reorganized to engage in real estate development and investment as well as trading
of essential commodities. PHI Group, Inc. will hold minority shares in Southeast Asia Capital after the reorganization.
STOCK
OWNERSHIPS:
CATALYST
RESOURCE GROUP, INC. (formerly JEANTEX GROUP, INC.)
As
of September 30, 2017, the Company owned 22,535,714 shares of Catalyst Resource Group, Inc. common stock, a Florida corporation,
or equivalent to 2.56%. This company is currently inactive.
MYSON
GROUP, INC. (formerly VANGUARD MINING CORPORATION)
As
of September 30, 2017, PHI Group, Inc. and PHI Capital Holdings, Inc., a wholly owned subsidiary of the Company, together owned
33,975,106 shares of Common Stock of Myson Group, Inc., a Nevada corporation currently traded on the OTC markets under the symbol
“MYSN.”
SPORTS
POUCH BEVERAGE COMPANY, INC.
As
of September 30, 2017, the Company through PHI Capital Holdings, Inc. owned 292,050,000 shares of Sports Pouch Beverage Company,
Inc., a Nevada corporation traded on the OTC Markets under the symbol “SPBV”.
CRITICAL
ACCOUNTING POLICIES
The
Company’s financial statements and related public financial information are based on the application of accounting principles
generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective
interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported.
These estimates can also affect supplemental information contained in the external disclosures of the Company including information
regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere
to GAAP and are consistently and conservatively applied. Valuations based on estimates are reviewed by us for reasonableness and
conservatism on a consistent basis throughout the Company. Primary areas where financial information of the Company is subject
to the use of estimates, assumptions and the application of judgment include acquisitions, valuation of long-lived and intangible
assets, recoverability of deferred tax and the valuation of shares issued for services. We base our estimates on historical experience
and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially
from these estimates under different assumptions or conditions.
Valuation
of Long-Lived and Intangible Assets
The
recoverability of long-lived assets requires considerable judgment and is evaluated on an annual basis or more frequently if events
or circumstances indicate that the assets may be impaired. As it relates to definite life intangible assets, we apply the impairment
rules as required by SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and Assets to Be Disposed Of”
as amended by SFAS No. 144, which also requires significant judgment and assumptions related to the expected future cash flows
attributable to the intangible asset. The impact of modifying any of these assumptions can have a significant impact on the estimate
of fair value and, thus, the recoverability of the asset.
Income
Taxes
We
recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the
tax bases of assets and liabilities. We regularly review our deferred tax assets for recoverability and establish a valuation
allowance based upon historical losses, projected future taxable income and the expected timing of the reversals of existing temporary
differences. As of September 30, 2017, we estimated the allowance on net deferred tax assets to be one hundred percent of the
net deferred tax assets.
RESULTS
OF OPERATIONS
The
following is a discussion and analysis of our results of operations for the three-month periods ended September 30, 2017 and 2016,
our financial condition at September 30, 2017 and factors that we believe could affect our future financial condition and results
of operations. Historical results may not be indicative of future performance.
This
discussion and analysis should be read in conjunction with our consolidated financial statements and the notes thereto included
elsewhere in this Form 10-Q. Our consolidated financial statements are prepared in accordance with Generally Accepted Accounting
Principles in the United States (“GAAP”). All references to dollar amounts in this section are in United States dollars.
Three
months ended September 30, 2017 compared to the three months ended September 30, 2016
Total
Revenues:
The
Company had $28,500 in revenue for the quarter ended September 30, 2017 as compared to $50,000 in revenue for the quarter ended
September 30, 2016, a decrease of $21,500 between the two periods. The reason for the decrease in revenues between the two periods
was due to the Company’s focus on new business development and less on providing consulting services during the current
quarter.
Operating
Costs and Expenses:
Total
operating expenses were $134,294 and $239,946 for the three months ended September 30, 2017, and 2016, respectively. The $105,652
decrease on total operating expenses between the two periods was mainly due to a $112,968 reduction in professional expenses,
offset by an increase of $8,025 in general and administrative expenses.
Income
(Loss) from Operations:
Loss
from operations for the three months ended September 30, 2017 was $105,794, as compared to a loss from operations of $189,946
for the previous period ended September 30, 2016. The $84,152 variance in the loss from operations between the two periods was
due to the fact that there was a decrease of $21,500 in revenue and a decrease of $105,652 in total operating expenses as mentioned
above.
Other
Income and Expenses:
Net
other expenses were $455,623 for the three months ended September 30, 2017, as compared to net other expenses of $185,586 for
the three months ended September 30, 2016. The increase in other expenses of $270,037 was mainly due to an increase of $42,444
in net interest expenses between the two periods, in addition to loss on debt settlement of $92,781 and loss on loan/note conversion
during the current period.
Interest
expenses were $217,580 and $175,136 for the three months ended September 30, 2017 and 2016, respectively.
Net
Income (Loss):
Net
loss for the three months ended September 30, 2017 was $561,417, as compared to net loss of $375,532 for the same period in 2016,
which is equivalent to ($0.02) per share for the current period and ($0.04) for the corresponding period ended September 30, 2016,
based on the weighted average number of basic and diluted shares outstanding at the end of each corresponding period.
CASH
FLOWS
The
Company’s cash and cash equivalents balance were $4,590 and $6,205 as of September 30, 2017 and September 30, 2016, respectively.
Net
cash used in the Company’s operating activities during the three-month period ended September 30, 2017 was $615,390, as
compared to net cash used in operating activities of $227,170 during the three-month period ended March 31, 2016. This represents
a variance of $388,220 in net cash used in operating activities between the two periods. The underlying reason for the variance
was primarily due to changes in accounts receivable and prepaid expenses during the previous period, coupled with a net decrease
of $237,792 in accrued expenses and a net increase in derivative liabilities during the current period.
Net
cash used in investing activities during the three-month period ended September 30, 2017 was $35,500, as compared to no cash used
in investing activities during the three-month period ended September 30, 2016, respectively.
Cash
provided by financing activities was $617,112 for the three-month period ended September 30, 2017, as compared to cash provided
by financing activities in the amount of $230,893 for the three-month period ended September 30, 2016. The primary underlying
reasons for an increase of $386,219 in cash provided by financing activities between the two three-month periods were due to an
increase in additional proceeds from common stock and paid-in capital in the amount $280,630 and non-cash settlement of debt in
the amount of $92,781 during the current period.
HISTORICAL
FINANCING ARRANGEMENTS
SHORT
TERM NOTES PAYABLE AND ISSUANCE OF COMMON STOCK: In the course of its business, the Company has obtained short-term loans from
individuals and institutional investors and from time to time raised money by issuing restricted common stock of the Company under
the auspices of Rule 144. As of September 30, 2017 and June 30, 2017, the Company had short-term notes payable amounting to $626,393
and $614,390 with accrued interest of $2,444,141 and $2,423,627, 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.
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 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.
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.
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, LL 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
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
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.
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
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 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 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
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.
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.
On
October 18, 2017, the Company issued a new convertible promissory note to Power Up Lending Group for $53,000, with an interest
rate of 8% and convertible to Common Stock of the Company at 42% discount. The maturity date of this note is 7/30/2018.
On
October 26, 2017, the Company issued a new convertible promissory note to Crown Bridge Partners LLC for $35,000, with an interest
rate of 5% and convertible to Common Stock of the Company at 50% discount. The maturity date of this note is October 26, 2018.
EQUIITY
LINE FACILITY 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. The new Registration
Statement was amended on September 15, 2017 and October 17, 2017, respectively.
EB-5
IMMIGRATION INVESTOR PROGRAM
The
Company has filed an I-924 application with the United States Citizenship and Immigration Service (USCIS) for the PHI Group EB5
Regional Center, LLC in order to raise capital through the EB-5 Immigration Investor Program in connection with the Company’s
organic farming program, Abundant Farms, Inc., a wholly owned subsidiary of the Company, and other potential business activities
in the State of Florida. Under the EB-5 Program, created by Congress to stimulate the U.S. economy through job creation and capital
investment, foreign entrepreneurs (and their spouses and unmarried children under 21) are eligible to apply for a Green Card (permanent
residence) if they make the necessary investment in a commercial enterprise in the United States that creates or preserves at
least 10 permanent, full-time jobs for qualified U.S. workers. The operation of this Regional Center is subject to the review
and approval of United States Citizenship and Immigration Service.
COMPANY’S
PLAN OF OPERATION FOR THE FOLLOWING 12 MONTHS
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 energy, natural resources, agribusiness,
technology, transportation, education, distribution, mining, oil & gas, financial services, healthcare, and pharmaceuticals.
In addition, the Company also plans to invest in special situations that may potentially generate significant revenues and profitability
for the Company in the short term. We believe that by closing one or more of the contemplated acquisitions we will be able to
build a critical mass and uplist to the Nasdaq Stock Market or NYSE in the near future. Moreover, 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, investment in special situations,
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.
FINANCIAL
PLANS
MATERIAL
CASH REQUIREMENTS: We must raise substantial amounts of capital to fulfill our plan of acquiring energy-related and natural resource
assets as part of our scope of business. We intend to use equity, debt and project financing to meet our capital needs for acquisitions.
Management
has taken action and formulated plans to strengthen the Company’s working capital position and generate sufficient cash
to meet its operating needs through June 30, 2018 and beyond. The working capital cash requirements for the next 12 months are
expected to be generated from operations, sale of marketable securities and additional financing. The Company plans to generate
revenues from its consulting services, merger and acquisition advisory services, and acquisitions of target companies with cash
flows.
AVAILABLE
FUTURE FINANCING ARRANGEMENTS: The Company may use various sources of funds, including short-term loans, long-term debt, equity
capital, and project financing as may be necessary. The Company believes it will be able to secure the required capital to implement
its business plan; however, no assurances could be made that management would be successful in achieving its plan.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The
following discussion about PHI Group Inc.’s market risk involves forward-looking statements. Actual results could differ
materially from those projected in the forward-looking statements.
Currency
Fluctuations and Foreign Currency Risk
Some
of our operations are conducted in other countries whose official currencies are not U.S. dollars. However, the effect of the
fluctuations of exchange rates is considered minimal to our business operations.
Interest
Rate Risk
We
do not have significant interest rate risk, as most of our debt obligations are primarily short-term in nature to individuals,
with fixed interest rates.
Valuation
of Securities Risk
Since
majority of our income is paid with the marketable securities, the value of our assets may fluctuate significantly depending on
the market value of the securities we hold.
ITEM
4.
Controls
and Procedures
Disclosure
Controls and Procedures
As
required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management
carried out an evaluation, with the participation of our Chief Executive Officer, of the effectiveness of the design and operation
of our disclosure controls and procedures (as defined in Rules 13a-15(e) of the Exchange Act), as of the period covered by this
report. Disclosure controls and procedures are defined as controls and other procedures that are designed to ensure that information
required to be disclosed by us in reports filed with the SEC under the Exchange Act is (i) recorded, processed, summarized and
reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the Company’s
management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions
regarding required disclosure. Based upon their evaluation, our management (including our Chief Executive Officer) concluded that
our disclosure controls and procedures were not effective as of September 30, 2017, based on the material weaknesses defined below.
Internal
Control over Financial Reporting
Management’s
Report on Internal Control of Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control
over financial reporting is a set of processes designed by, or under the supervision of, a company’s principal executive
and principal financial officers, to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:
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pertain
to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of
our assets,
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provide
reasonable assurance that our transactions are recorded as necessary to permit preparation of our financial statements in
accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management
and directors, and
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provide
reasonable assurance regarding prevention or timely detection of authorized acquisition, use or disposition of our assets
that could have a material effect on our financial statements.
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Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. It should be noted
that any system of internal control, however well designed and operated, can provide only reasonable, and not absolute, assurance
that the objectives of the system will be met. Also, projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies
or procedures may deteriorate.
Under
the supervision and with the participation of management, including its principal executive officer and principal financial officer,
the Company’s management assessed the design and operating effectiveness of internal control over financial reporting as
of September 30, 2017 based on the framework set forth in
Internal Control—Integrated Framework (2013)
issued by
the Committee of Sponsoring Organizations of the Treadway Commission.
We
have identified material weaknesses in our internal control over financial reporting:
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(i)
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inadequate
segregation of duties consistent with control objectives;
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(ii)
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ineffective
controls over period-end financial disclosure and reporting processes.
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If
we fail to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately
report our financial results in a timely manner, which may adversely affect investor confidence in our company.
Based
on this assessment, management concluded that the Company’s internal control over financial reporting was not effective
as of September 30, 2017.
Management’s
Remediation Plan
We
plan to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered
by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above.
To
remediate such weaknesses, we plan to implement the following changes in the future:
(i)
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appoint
additional qualified personnel to address inadequate segregation of duties and ineffective
risk
management;
and
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(ii)
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adopt
sufficient written policies and procedures for accounting and financial reporting.
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The
remediation efforts set out in (i) are largely dependent upon our company securing additional financing to cover the costs of
implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected
in a material manner. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute
assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities
that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.
Management
believes that despite our material weaknesses set forth above, our consolidated financial statements for the quarterly report
ended September 30, 2017 are fairly stated, in all material respects, in accordance with US GAAP.
Attestation
Report of the Registered Accounting Firm
This
Quarterly Report does not include an attestation report of the Company’s independent registered public accounting firm regarding
internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent
registered public accounting firm pursuant to Rule 308(b) of Regulation S-K, which permits the Company to provide only management’s
report in this Annual Report.
Changes
in Internal Control over Financial Reporting
No
changes in the Company’s internal control over financial reporting have come to management’s attention during the
fiscal quarter ended September 30, 2017 that have materially affected, or are likely to materially affect, the Company’s
internal control over financial reporting.
PART
II - OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
Other
than as set forth below, Company is not a party to any material pending legal proceedings and, to the best of its knowledge, no
such action by or against Company has been threatened.
LEGAL
PROCEEDING SETTLED AND UNPAID AS OF SEPTEMBER 30, 2017:
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 September
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 September 30, 2017.
ITEM
1A. RISK FACTORS
Investment
in our securities is subject to various risks, including risks and uncertainties inherent in our business. The following sets
forth factors related to our business, operations, financial position or future financial performance or cash flows which could
cause an investment in our securities to decline and result in a loss.
General
Risks Related to Our Business
Our
success depends on our management team and other key personnel, the loss of any of whom could disrupt our business operations.
Our
future success will depend in substantial part on the continued service of our senior management. The loss of the services of
one or more of our key personnel could impede implementation and execution of our business strategy and result in the failure
to reach our goals. We do not carry key person life insurance for any of our officers or employees. Our future success will also
depend on the continued ability to attract, retain and motivate highly qualified personnel in the diverse areas required for continuing
our operations. We cannot assure that we will be able to retain our key personnel or that we will be able to attract, train or
retain qualified personnel in the future.
Our
strategy in mergers and acquisitions involves a number of risks and we have a limited history of successful acquisitions. Even
when an acquisition is completed, we may have to continue our service for integration that may not produce results as positive
as management may have projected.
The
Company is in the process of evaluating various opportunities and negotiating to acquire other companies, assets and technologies.
Acquisitions entail numerous risks, including difficulties in the assimilation of acquired operations and products, diversion
of management’s attention from other business concerns, amortization of acquired intangible assets and potential loss of
key employees of acquired companies. We have limited experience in assimilating acquired organizations into our operations. Although
potential synergy may be achieved by acquisitions of related technologies and businesses, no assurance can be given as to the
Company’s ability to integrate successfully any operations, personnel, services or products that have been acquired or might
be acquired in the future. Failure to successfully assimilate acquired organizations could have a material adverse effect on the
Company’s business, financial condition and operating results.
Acquisitions
involve a number of special risks, including:
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failure
of the acquired business to achieve expected results;
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diversion
of management’s attention;
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failure
to retain key personnel of the acquired business;
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additional
financing, if necessary and available, could increase leverage, dilute equity, or both;
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the
potential negative effect on our financial statements from the increase in goodwill and other intangibles; and
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the
high cost and expenses of completing acquisitions and risks associated with unanticipated events or liabilities
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These
risks could have a material adverse effect on our business, results of operations and financial condition since the values of
the securities received for the consulting service at the execution of the acquisition depend on the success of the company involved
in acquisition. In addition, our ability to further expand our operations through acquisitions may be dependent on our ability
to obtain sufficient working capital, either through cash flows generated through operations or financing activities or both.
There can be no assurance that we will be able to obtain any additional financing on terms that are acceptable to us, or at all.
As
some of our business activities are currently involved with Southeast Asia and Eastern Europe, any adverse change to the economy
or business environment in these countries could significantly affect our operations, which would lead to lower revenues and reduced
profitability
.
Some
of our business activities are currently involved with Southeast Asia and Eastern Europe. Because of this presence in specific
geographic locations, we are susceptible to fluctuations in our business caused by adverse economic or other conditions in this
region, including stock market fluctuation. A stagnant or depressed economy in these countries generally, or in any of the other
markets that we serve, could adversely affect our business, results of operations and financial condition.
Risks
associated with energy business
As
part of our business involves acquisitions of energy assets as well as production and trading of energy commodities, our profitability
will depend on the prices we receive for energy commodities such as coal and wood pellets. These prices are dependent upon factors
beyond our control, including: the strength of the global economy; the demand for electricity; the global supply of thermal coal
and biomass products; weather patterns and natural disasters; competition within our industry and the availability and price of
alternatives, including natural gas; the proximity, capacity and cost of transportation; coal industry capacity; domestic and
foreign governmental regulations and taxes, including those establishing air emission standards for coal-fueled power plants or
mandating increased use of electricity from renewable energy sources; regulatory, administrative and judicial decisions, including
those affecting future mining permits; and technological developments, including those intended to convert coal-to-liquids or
gas and those aimed at capturing and storing carbon dioxide.
Risks
Related to Our Securities
Insiders
have substantial control over the company, and they could delay or prevent a change in our corporate control, even if our other
stockholders wanted such a change to occur.
Our
executive officers and directors as of November 20, 2017, in the aggregate, hold 58.12% of our outstanding common stock, and are
able to decide the rights and terms associated with the Company’s Preferred Stock, which decision may allow the Board of
Directors to exercise significant control over all matters requiring stockholder approval, including the election of directors
and approval of significant corporate transactions. This could delay or prevent an outside party from acquiring or merging with
us even if our other stockholders wanted it to occur.
The
price at which investors purchase our common stock may not be indicative of the prevailing market price.
The
stock market often experiences significant price fluctuations that are unrelated to the operating performance of the specific
companies whose stock is traded. These market fluctuations could adversely affect the trading price of our shares. Investors may
be unable to sell their shares of common stock at or above their purchase price, which may result in substantial losses.
Since
we do not currently meet the requirements for our stock to be quoted on NASDAQ, NYSE MKT LLC or any other senior exchange, the
tradability in our securities will be limited under the penny stock regulations.
Under
the rules of the Securities and Exchange Commission, if the price of our securities on the OTCQB or OTC Markets is below $5.00
per share, our securities are within the definition of a “penny stock.” As a result, it is possible that our securities
may be subject to the “penny stock” rules and regulations. Broker-dealers who sell penny stocks to certain types of
investors are required to comply with the Commission’s regulations concerning the transfer of penny stock. These regulations
require broker-dealers to:
*Make
a suitability determination prior to selling penny stock to the purchaser;
*Receive
the purchaser’s written consent to the transaction; and
*Provide
certain written disclosures to the purchaser.
These
requirements may restrict the ability of broker/dealers to sell our securities, and may affect the ability to resell our securities.
Our
compliance with the Sarbanes-Oxley Act and SEC rules concerning internal controls may be time consuming, difficult and costly
for us.
It
may be time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required
by the Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal controls and other finance staff in order
to develop and implement appropriate internal controls and reporting procedures. If we are unable to comply with the internal
controls requirements of the Sarbanes-Oxley Act, we may not be able to obtain the independent accountant certifications that the
Sarbanes-Oxley Act requires publicly traded companies to obtain.
Our
success depends on our management team and other key personnel, the loss of any of whom could disrupt our business operations.
Our
future success will depend in substantial part on the continued service of our senior management and founder. The loss of the
services of one or more of our key personnel could impede implementation and execution of our business strategy and result in
the failure to reach our goals. We do not carry key person life insurance for any of our officers or employees. Our future success
will also depend on the continued ability to attract, retain and motivate highly qualified personnel in the diverse areas required
for continuing our operations. We cannot assure that we will be able to retain our key personnel or that we will be able to attract,
train or retain qualified personnel in the future.
Our
service strategy in merger and acquisition involves a number of risks and we have a limited history of successful acquisitions.
Even when an acquisition is completed, we may have to continue our service for integration that may not produce results as positive
as management may have projected.
The
Company is in the process of evaluating various opportunities and negotiating to acquire other companies and technologies. Acquisitions
entail numerous risks, including difficulties in the assimilation of acquired operations and products, diversion of management’s
attention from other business concerns, amortization of acquired intangible assets and potential loss of key employees of acquired
companies. We have limited experience in assimilating acquired organizations into our operations. Although potential synergy may
be achieved by acquisitions of related technologies and businesses, no assurance can be given as to the Company’s ability
to integrate successfully any operations, personnel, services or products that have been acquired or might be acquired in the
future. Failure to successfully assimilate acquired organizations could have a material adverse effect on the Company’s
business, financial condition and operating results.
Acquisitions
involve a number of special risks, including:
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●
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failure
of the acquired business to achieve expected results;
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diversion
of management’s attention;
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failure
to retain key personnel of the acquired business;
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additional
financing, if necessary and available, could increase leverage, dilute equity, or both;
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the
potential negative effect on our financial statements from the increase in goodwill and other intangibles; and
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the
high cost and expenses of completing acquisitions and risks associated with unanticipated events or liabilities.
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These
risks could have a material adverse effect on our business, results of operations and financial condition since the values of
the securities received for the consulting service at the execution of the acquisition depend on the success of the company involved
in acquisition. In addition, our ability to further expand our operations through acquisitions may be dependent on our ability
to obtain sufficient working capital, either through cash flows generated through operations or financing activities or both.
There can be no assurance that we will be able to obtain any additional financing on terms that are acceptable to us, or at all.
Item
16.
Exhibits and Financial Statement Schedules
The
exhibits set forth under the caption “Exhibit Index” below are included in this filing and incorporated by reference.
The financial statement schedules have been omitted because they are not applicable, not required, or the information is included
in the consolidated financial statements or notes thereto.
Item
17.
Undertakings
The
undersigned registrant hereby undertakes:
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1.
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To
file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
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i.
To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;
ii.
To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering
price set forth in the “Calculation of Registration Fee” table in the effective registration statement.
iii.
To include any material information with respect to the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
2.
That, for the purpose of determining any liability under the Securities Act of 1933, each such post- effective amendment shall
be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial
bona fide
offering thereof.
3.
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold
at the termination of the offering.
4.
That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant
to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule
430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement
or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference
into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such document immediately prior to such date of first use.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933, may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that, in the opinion
of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by them is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement on Form S-1/A –
Amendment No. 3 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Huntington Beach,
State of California, on December 08 , 2017.
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PHI
GROUP, INC.
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By:
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/s/
Henry D. Fahman
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Name:
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Henry
D. Fahman
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Title:
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Chief
Executive Officer
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POWER
OF ATTORNEY
We,
the undersigned officers and directors of PHI Group, Inc., do hereby constitute and appoint Henry Fahman, our true and lawful
attorney-in-fact and agent with full power of substitution and re-substitution, for him and in his name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, or any
related registration statement that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as
amended, and to file the same, with exhibits thereto, and other documents in connection therewith, with the SEC, granting unto
said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or his substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement on Form S-1/A – Amendment No. 3 has
been signed below by the following persons in the capacities and on the dates indicated.
Name
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|
Title
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Date
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|
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|
|
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Henry
D. Fahman
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Chief
Executive Officer and Chairman
(Principal
Executive Officer)
|
|
December
08
, 2017
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Henry
D. Fahman
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Chief
Financial Officer and Director
(Principal
Accounting Officer)
|
|
December
08
, 2017
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EXHIBIT
INDEX
Exhibit
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Number
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Description
of Exhibit
|
|
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5.1
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Opinion
of Legal Counsel, Dieterich & Associates, LLP
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10.20
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Investment
Agreement (Corrected) between the Company and Azure Capital, a Massachusetts corporation, dated August 3, 2017*
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10.21
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Registration
Rights Agreement between the Company and Azure Capital, a Massachusetts corporation, dated August 3, 2017*
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23.1
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Consent
of Independent Registered Public Accounting Firm (David Banerjee, CPA)**
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23.2
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Consent of Dieterich & Associates, LLP (Legal Counsel, included in Exhibit 5.1)
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24.1
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Power
of Attorney (included in the Signature Page to Registration Statement).
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*
Filed as exhibits to the Company’s Registration Statements on Form S-1 on August 07, 2017 and Form S-1/A on September
15, 2017.
**
Filed as exhibits to the Company’s Registration Statements on Form S-1 on August 07, 2017 and Forms S-1/A’s on September
15, 2017 and October 17, 2017.
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