ITEM
1- CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
PHI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
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Deember 31,
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June 30,
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2020
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2020
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(AUDITED)
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ASSETS
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Current Assets
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Cash and cash equivalents
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$
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85,853
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$
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225,381
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Marketable securities
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120,712
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235,088
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Other current assets
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81,765
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-
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Total current assets
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288,330
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460,469
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Other assets:
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|
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Investments
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5,000
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|
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5,000
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Total Assets
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293,330
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465,469
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TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
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Current Liabilities
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Accounts payable
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397,395
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354,080
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Sub-fund obligations
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1,474,775
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1,266,634
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Accrued expenses
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2,942,290
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2,798,743
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Short-term notes payable (net)
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399,489
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395,950
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Convertible Promissory Notes (net)
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229,367
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272,207
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Due to officers
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1,689,799
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1,696,274
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Advances from customers
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516,410
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430,500
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Derivative liabilities (net)
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109,559
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310,870
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Mark to market
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(177,822
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)
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-
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Total Liabilities
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7,581,262
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7,525,259
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Stockholders’ deficit:
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Preferred Stock, $0.001 par value; 500,000,000 shares authorized. 10,000,000
shares Class A Series II issued and outstanding as of 12/31/2020 and 6/30/2020, respectively. Par value:
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10,000
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10,000
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180,000 shares and 120,000 shares Class B Series I issued and outstanding as of 12/31/2020 and 06/30/2020 respectively. Par value:
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180
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180
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Common stock, $0.001 par value; 40 billion shares authorized; 14,464,007,723 shares
issued and outstanding on 12/31/2020; 40 billion shares authorized and 13,232,408,755 shares issued and outstanding on 6/30/2020,
respectively, adjusted for 1 for 1,500 reverse split effective March 15, 2012. Par value:
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14,464,008
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13,232,410
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APIC - Common Stock
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22,874,033
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23,922,943
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Common Stock to be issued
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3,000
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-
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Common Stock to be cancelled
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(35,500
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)
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(35,500
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)
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Treasury stock: 484,767 shares as of 12/31/20 and 6/30/20, respectively - cost method.
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(44,170
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)
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(44,170
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)
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Accumulated deficit
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(44,559,483
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)
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(44,010,352
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)
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Total Acc. Other Comprehensive Income (Loss)
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-
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(135,301
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)
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Total stockholders’ deficit
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(7,287,932
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)
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(7,059,790
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)
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Total liabilities and stockholders’ deficit
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$
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293,330
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$
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465,469
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The accompanying notes form an integral part of these consolidated financial statements
PHI
GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENT OF OPERATIONS
UNAUDITED
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For the Three Months Ended
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For the Six Months Ended
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December 31,
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December 31,
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2020
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2019
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2020
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2019
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Net revenues
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Consulting, advisory and management services
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13,000
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-
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18,000
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8,531
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Total revenues
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$
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13,000
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$
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-
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$
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18,000
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$
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8,531
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Operating expenses:
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Salaries and wages
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52,500
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97,500
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105,000
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195,000
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Professional services, including non-cash compensation
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30,384
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50,075
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229,319
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63,775
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General and administrative
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27,008
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35,773
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92,596
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75,755
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Total operating expenses
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$
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109,892
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$
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183,348
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$
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426,915
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$
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334,529
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Income (loss) from operations
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$
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(96,892
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)
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$
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(183,348
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)
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$
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(408,915
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)
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$
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(325,998
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)
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Other income and expenses
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Interest expense
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(117,521
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)
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(41,464
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)
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(142,933
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)
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(249,593
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)
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Other income (expense)
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1,546
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(1,905
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)
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2,717
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(4,558
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)
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Net other income (expenses)
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$
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(115,975
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)
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$
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(43,369
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)
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$
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(140,216
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)
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$
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(254,151
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)
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Net income (loss)
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$
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(212,867
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)
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$
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(226,717
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)
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$
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(549,131
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)
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$
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(580,149
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)
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Other comprehensive income (loss)
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Accumulated other comprehensive gain (loss)
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-
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(89,632
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)
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-
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(89,632
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)
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Comprehensive income (loss)
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$
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-
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$
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(316,348
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)
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$
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-
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$
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(669,780
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)
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Net loss per share:
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Basic
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$
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(0.00
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)
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$
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(0.00
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)
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$
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(0.00
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)
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$
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(0.00
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)
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Diluted
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$
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(0.00
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)
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$
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(0.00
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)
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$
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(0.00
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)
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$
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(0.00
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)
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Weighted average number of shares outstanding:
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Basic
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13,910,822,958
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12,720,242,401
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13,910,822,958
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12,720,242,401
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Diluted
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13,910,822,958
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12,720,242,401
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13,910,822,958
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12,720,242,401
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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 SIX MONTHS ENDED DECEMBER 31, 2020 AND 2019
(UNAUDITED)
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DECEMBER 31,
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2020
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2019
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Cash flows from operating activities:
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|
|
|
|
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Net income (loss) from operations
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$
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(549,131
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)
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$
|
(580,149
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)
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Provisions for development costs of Asia Diamond Exchange
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(81,765
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)
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|
-
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(Increase) decrease in assets and prepaid expenses
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Total (increase) decrease in assets and prepaid expenses
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114,377
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(63,756
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)
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Increase (decrease) in accounts payable and accrued expenses
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Accounts payable
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43,315
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|
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45,365
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Sub-fund obligations
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208,141
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|
|
-
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Accrued expenses (net)
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|
143,547
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|
|
|
259,916
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Advances from customers
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85,910
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|
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(7,500
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)
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Change in notes payable and derivatives
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(65,211
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)
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|
70,493
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|
Mark to market - Derivatives and Marketable Securities
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|
(181,558
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)
|
|
|
-
|
|
Net cash provided by (used in) operating activities
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(282,375
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)
|
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(275,631
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)
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|
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Cash flows from investing activities:
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|
|
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Net cash provided by (used in) investing activities
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|
-
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|
|
|
-
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|
|
|
|
|
|
|
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Cash flows from financing activities:
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|
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|
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Common Stock
|
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|
142,848
|
|
|
|
314,828
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|
Preferred Stock
|
|
|
-
|
|
|
|
60
|
|
Accum. other comprehensive income (loss)
|
|
|
-
|
|
|
|
(89,632
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)
|
Net cash provided by (used in) financing activities
|
|
|
142,848
|
|
|
|
225,256
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|
Net decrease in cash and cash equivalents
|
|
|
(139,527
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)
|
|
|
(57,627
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)
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Cash and cash equivalents, beginning of period
|
|
|
225,381
|
|
|
|
71,768
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|
Cash and cash equivalents, end of period
|
|
$
|
85,853
|
|
|
$
|
14,141
|
|
The accompanying notes form an integral part of these 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”) (www.phiglobal.com) is primarily engaged in running PHILUX Global
Funds, SCA, SICAV-RAIF, a “Reserved Alternative Investment Fund” (“RAIF”) under the laws of Luxembourg, and establishing
the Asia Diamond Exchange in Vietnam. Besides, the Company provides corporate finance services, including merger and acquisition advisory
and consulting services for client companies through our wholly owned subsidiary PHILUX Capital Advisors, Inc. (formerly PHI Capital
Holdings, Inc.) (www.philuxcap.com) and invests in selective industries and special situations aiming to potentially create significant
long-term value for our shareholders. PHILUX Global Funds intends to include a number of sub-funds for investment in agriculture, renewable
energy, real estate, infrastructure, and the Asia Diamond Exchange in Vietnam.
BACKGROUND
Originally
incorporated on June 8, 1982 as JR Consulting, Inc., a Nevada corporation, the Company applied for a Certificate of Domestication and
filed Articles of Domestication to become a Wyoming corporation on September 20, 2017. In the beginning, the Company was foremost engaged
in mergers and acquisitions and had an operating subsidiary, Diva Entertainment, Inc., which operated two modeling agencies, one in New
York and one in California. In January 2000, the Company changed its name to Providential Securities, Inc., a Nevada corporation, following
a business combination with Providential Securities, Inc., a California-based financial services company. In February 2000, the Company
then changed its name to Providential Holdings, Inc. 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.
The
Company is currently focused on PHILUX Global Funds, SCA, SICAV-RAIF by launching a number of sub-funds for investment in real estate,
renewable energy, infrastructure, agriculture and healthcare and on developing and establishing the Asia Diamond Exchange in Vietnam.
In addition, PHILUX Capital Advisors, Inc. (formerly Capital Holdings, Inc.), a wholly owned subsidiary of the Company, continues to
provide corporate and project finance services, including merger and acquisition (M&A) advisory and consulting services for U.S.
and international companies. No assurances can be made that the Company will be successful in achieving its plans.
BUSINESS
STRATEGY
PHI’s
strategy is to:
1.
Identify, build, acquire, commit and deploy valuable resources with distinctive competitive advantages;
2.
Identify, evaluate, acquire, participate and compete in attractive businesses that have large, growing market potential;
3.
Build an attractive investment that includes points of exit for investors through capital appreciation or spin-offs of business units.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES
OF CONSOLIDATION
The
consolidated financial statements include the accounts of PHI Group, Inc. and its wholly owned subsidiaries:
(1)
American Pacific Plastics, Inc., a Wyoming corporation (100%), (2) American Pacific Resources, Inc., a Wyoming corporation (100%), (3)
PHILUX Capital Advisors, Inc., a Wyoming corporation (100%), (4) PHI Luxembourg Development S.A., a Luxembourg corporation (100%), (5)
PHILUX Global Funds SCA, SICAV-RAIF, a Luxembourg Reserved Alternative Investment Fund (100%), (6) PHILUX Global General Partners SA,
a Luxembourg corporation (100%), and (7) PHI Luxembourg Holding SA, a Luxembourg corporation (100%), 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, 2020. In the opinion of management, all adjustments consisting of normal reoccurring accruals
have been made to the financial statements. The results of operation for the three and six months ended December 30, 2020 are not necessarily
indicative of the results to be expected for the fiscal year ending June 30, 2021.
USE
OF ESTIMATES
The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could
differ from those estimates.
Cash
and Cash Equivalents
The
Company considers all liquid investments with a maturity of three months or less from the date of purchase that are readily convertible
into cash to be cash equivalents.
MARKETABLE
SECURITIES
The
Company’s securities are classified as available-for-sale and, as such, are carried at fair value. Securities classified as available-for-sale
may be sold in response to changes in interest rates, liquidity needs, and for other purposes.
Typically,
each investment in marketable securities represents less than twenty percent (20%) of the outstanding common stock and stock equivalents
of the investee, and each security is quoted on either the OTC Markets or other public exchanges. As such, each investment is accounted
for in accordance with the provisions of SFAS No. 115.
Unrealized
holding gains and losses for available-for-sale securities are excluded from earnings and reported as a separate component of stockholder’s
equity. Realized gains and losses for securities classified as available-for-sale are reported in earnings based upon the adjusted cost
of the specific security sold. On December 31, 2020, the marketable securities were recorded at $120,712 based upon the fair value of
the marketable securities at that time.
FAIR
VALUE OF FINANCIAL INSTRUMENTS
Fair
Value - Definition and Hierarchy
Fair
value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. Assets and liabilities measured at fair value are categorized based on whether or not the
inputs are observable in the market and the degree that the inputs are observable. The categorization of financial assets and liabilities
within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
A
fair value hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of
unobservable inputs by requiring that the most observable inputs are to be used when available.
Valuation
techniques that are consistent with the market or income approach are used to measure fair value. The fair value hierarchy is categorized
into three levels based on the inputs as follows:
Level
1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability
to access.
Level
2 - Valuations based on inputs other than quoted prices included in Level 1 that are observable, either directly or indirectly.
Level
3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
Fair
value is a market-based measure, based on assumptions of prices and inputs considered from the perspective of a market participant that
are current as of the measurement date, rather than an entity-specific measure. Therefore, even when market assumptions are not readily
available, the Company’s own assumptions are set to reflect those that market participants would use in pricing the asset or liability
at the measurement date. The availability of valuation techniques and observable inputs can vary from investment to investment and are
affected by a wide variety of factors, including; type of investment, whether the investment is new and not yet established in the marketplace,
the liquidity of markets, and other characteristics particular to the transaction.
To
the extent that valuation is based upon models or inputs that are less observable or unobservable in the market, the determination of
fair value requires more judgment. Because of the inherent uncertainty of valuation, those estimated values may be materially higher
or lower than the values that would have been used had a ready market for the investments existed. Accordingly, the degree of judgment
exercised by the Fund in determining fair value is greatest for investments categorized in Level 3. In certain cases, the inputs used
to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy
in which the fair value measurement falls in its entirety is determined based upon the lowest level input that is significant to the
fair value measurement.
Fair
Value - Valuation Techniques and Inputs
The
Company holds and may invest public securities traded on public exchanges or over-the-counter (OTC), private securities, real estate,
convertible securities, interest bearing securities and other types of securities and has adopted specific techniques for their respective
valuations.
Equity
Securities in Public Companies
Unrestricted
The
Company values investments in securities that are freely tradable and listed on major securities exchanges at their last reported sales
price as of the valuation date. To the extent these securities are actively traded and valuation adjustments are not applied, they are
categorized in Level 1 of the fair value hierarchy.
Securities
traded on inactive markets or valued by reference to similar instruments are generally categorized in Level 2 or 3 of the fair value
hierarchy.
Restricted
Securities
traded on public exchanges or over-the-counter (OTC) where there are formal restrictions that limit (i.e. Rule 144 holding periods and
underwriter’s lock-ups) their sale shall be valued at the closing price on the date of valuation less applicable discounts. The
Company may apply a discount to securities with Rule 144 restrictions. Additional discounts may be assessed if the Company believes there
are other mitigating factors which warrant the additional discounting. When determining potential additional discounts, factors that
will be taken into consideration include, but are not limited to; securities’ trading characteristics, volume, length and overall
impact of the restriction as well as other macro-economic factors. Valuations should be discounted appropriately until the securities
may be freely traded.
If
it has been determined that the exchange or OTC listed price does not accurately reflect fair market value, the Company may elect to
treat the security as a private company and apply an alternative valuation method.
Investments
in restricted securities of public companies may be included in Level 2 of the fair value hierarchy. However, to the extent that significant
inputs used to determine liquidity discounts are not observable, investments in restricted securities in public companies may be categorized
in Level 3 of the fair value hierarchy.
The
Company’s financial instruments primarily consist of cash and cash equivalents, accounts receivable, marketable securities, short-term
notes payable, convertible notes, derivative liability and accounts payable.
As
of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying
values as presented on the balance sheet. This is primarily attributed to the short maturities of these instruments.
Effective
July 1, 2008, the Company adopted ASC 820 (previously SFAS 157), Fair Value Measurements and adopted this Statement for the assets
and liabilities shown in the table below. ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value,
establishes a fair value hierarchy based on the inputs used to measure fair value, and expands disclosures about the use of fair value
measurements. The adoption of ASC 820 did not have a material impact on our fair value measurements. At December 31, 2020, the Company
did not have any nonfinancial assets or nonfinancial liabilities that are recognized or disclosed at fair value. ASC 820 requires that
financial assets and liabilities that are reported at fair value be categorized as one of the types of investments based upon the methodology
mentioned in Level 1, Level 2 and Level 3 above for determining fair value.
Assets
measured at fair value on a recurring basis are summarized below. The Company also has convertible notes and derivative liabilities as
disclosed in this report that are measured at fair value on a regular basis until paid off or exercised.
Available-for-sale
securities
The
Company uses various approaches to measure fair value of available-for-sale securities, while applying the three-level valuation hierarchy
for disclosures, specified in ASC 820. Our Level 1 securities were measured using the quoted prices in active markets for identical assets
and liabilities.
The
company’s policy regarding the transfers in and/or out of Level 3 depends on the trading activity of the security, the volatility
of the security, and other observable units which clearly represents the fair value of the security. If a level 3 security can be measured
using a more fairly represented fair value, we will transfer these securities either into Level 1 or Level 2, depending on the type of
inputs.
ACCOUNTS
RECEIVABLE
Management
reviews the composition of accounts receivable and analyzes historical bad debts. As of December 31, 2020, the Company did not have any
accounts receivable.
PROPERTIES
AND EQUIPMENT
Property
and equipment are carried at cost less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated
useful life of the assets from three to five years. Expenditures for maintenance and repairs are charged to expense as incurred.
REVENUE
RECOGNITION STANDARDS
ASC
606-10 provides the following overview of how revenue is recognized from an entity’s contracts with customers: An entity recognizes
revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services.
Step
1: Identify the contract(s) with a customer.
Step
2: Identify the performance obligations in the contract.
Step
3: Determine the transaction price – The transaction price is the amount of consideration in a contract to which an entity expects
to be entitled in exchange for transferring promised goods or services to a customer.
Step
4: Allocate the transaction price to the performance obligations in the contract – Any entity typically allocates the transaction
price to each performance obligation on the basis of the relative standalone selling prices of each distinct good or service promised
in the contract.
Step
5: Recognize revenue when (or as) the entity satisfies a performance obligation – An entity recognizes revenue when (or as) it
satisfies a performance obligation by transferring a promised good or service to a customer (which is when the customer obtains control
of that good or service).
The
amount of revenue recognized is the amount allocated to the satisfied performance obligation. A performance obligation may be satisfied
at a point in time (typically for promises to transfer goods to a customer) or over time (typically for promises to transfer service
to a customer). For performance obligations satisfied over time, an entity recognizes revenue over time by selecting an appropriate method
for measuring the entity’s progress toward complete satisfaction of that performance obligation. (Paragraphs 606-10 25-23 through
25-30).
In
addition, ASC 606-10 contains guidance on the disclosures related to revenue, and notes the following:
It
also includes a cohesive set of disclosure requirements that would result in an entity providing users of financial statements with comprehensive
information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from the entity’s contracts with
customers. Specifically, Section 606-10-50 requires an entity to provide information about:
-
Revenue recognized from contracts with customers, including disaggregation of revenue into appropriate categories.
-
Contract balances, including the opening and closing balances of receivables, contract assets, and contract liabilities.
-
Performance obligations, including when the entity typically satisfies its performance obligations and the transaction prices is that
is allocated to the remaining performance obligations in a contract.
-
Significant judgments, and changes in judgments, made in applying the requirements to those contracts.
Additionally,
Section 340-40-50 requires an entity to provide quantitative and/or qualitative information about assets recognized from the costs to
obtain or fulfill a contract with a customer.
The
Company’s revenue recognition policies are in compliance with ASC 606-10. The Company recognizes consulting and advisory fee revenues
in accordance with the above-mentioned guidelines and expenses are recognized in the period in which the corresponding liability is incurred.
STOCK-BASED
COMPENSATION
Effective
July 1, 2006, the Company adopted ASC 718-10-25 (previously SFAS 123R) and accordingly has adopted the modified prospective application
method. Under this method, ASC 718-10-25 is applied to new awards and to awards modified, repurchased, or cancelled after the effective
date. Additionally, compensation cost for the portion of awards that are outstanding as of the date of adoption for which the requisite
service has not been rendered (such as unvested options) is recognized over a period of time as the remaining requisite services are
rendered.
RISKS
AND UNCERTAINTIES
In
the normal course of business, the Company is subject to certain risks and uncertainties. The Company provides its service and receives
marketable securities upon execution of transactions. Consequently, the value of the securities received from customers can be affected
by economic fluctuations and each customer’s business growth. The actual realized value of these securities could be significantly
different than recorded value.
RECENT
ACCOUNTING PRONOUNCEMENTS
Update
No. 2018-13 – August 2018
Fair
Value Measurement (Topic 820): Changes to the Disclosure Requirements for Fair Value Measurement
Modifications:
The following disclosure requirements were modified in Topic 820:
1.
In lieu of a roll-forward for Level 3 fair value measurements, a nonpublic entity is required to disclose transfers into and out of Level
3 of the fair value hierarchy and purchases and issues of Level 3 assets and liabilities.
2.
For investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an
investee’s assets and the date when restrictions from redemption might lapse only if the investee has communicated the timing to
the entity or announced the timing publicly.
3.
The amendments clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement
as of the reporting date.
Additions:
The following disclosure requirements were added to Topic 820; however, the disclosures are not required for nonpublic entities:
1.
The changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements
held at the end of the reporting period.
2.
The range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. For certain unobservable
inputs, an entity may disclose other quantitative information (such as the median or arithmetic average) in lieu of the weighted average
if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution
of unobservable inputs used to develop Level 3 fair value measurements.
The
amendments in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2019.
Update
No. 2018-07 – June 2018
Compensation
– Stock Compensation (Topic 718)
Improvements
to Nonemployee Share-Based Payment Accounting
Main
Provisions: The amendments in this Update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods
and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance
on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest
and the pattern of cost recognition over that period). The amendments specify that Topic 718 applies to all share-based payment transactions
in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment
awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to
the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under
Topic 606, Revenue from Contracts with Customers.
The
amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2018, including interim
periods within that fiscal year.
Update
No. 2017-13 - September 2017
Revenue
Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606)
FASB
Accounting Standards Updates No. 2014-09, Revenue from Contracts with Customers (Topic 606), issued in May 2014 and codified in ASC Topic
606, Revenue from Contracts with Customers, and No. 2016-02.
The
transition provisions in ASC Topic 606 require that a public business entity and certain other specified entities adopt ASC Topic 606
for annual reporting 3 periods beginning after December 15, 2017, including interim reporting periods within that reporting period. FN2
All other entities are required to adopt ASC Topic 606 for annual reporting periods beginning after December 15, 2018, and interim reporting
periods within annual reporting periods beginning after December 15, 2019.
Update
No. 2016-10 - April 2016
Revenue
from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing
The
core principle of the guidance in Topic 606 is that an entity should recognize revenue to depict the transfer of promised goods or services
to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
To achieve that core principle, an entity should apply the following steps:
1.
Identify the contract(s) with a customer.
2.
Identify the performance obligations in the contract.
3.
Determine the transaction price.
4.
Allocate the transaction price to the performance obligations in the contract.
5.
Recognize revenue when (or as) the entity satisfies a performance obligation.
The
amendments in this Update do not change the core principle of the guidance in Topic 606. Rather, the amendments in this Update clarify
the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining
the related principles for those areas.
The
Company has either evaluated or is currently evaluating the implications, if any, of each of these pronouncements and the possible impact
they may have on the Company’s financial statements. In most cases, management has determined that the implementation of these
pronouncements would not have a material impact on the financial statements taken as a whole.
NOTE
3 – MARKETABLE EQUITY SECURITIES AVAILABLE FOR SALE
The
Company’s marketable securities are classified as available-for-sale and, as such, are carried at fair value. All of the securities
are comprised of shares of common stock of the investee. Securities classified as available-for-sale may be sold in response to changes
in interest rates, liquidity needs, and for other purposes. These marketable securities are quoted on the OTC Markets or other public
exchanges and are accounted for in accordance with the provisions of SFAS No. 115.
Marketable
securities held by the Company and classified as available for sale as of December 31, 2020 consisted of 905,000 shares of Myson Group,
Inc. (formerly Vanguard Mining Corporation) 292,050,000 shares of Sports Pouch Beverage Co., both of which are publicly-traded companies
quoted on the OTC Markets (Trading symbols “MYSN” and “SPBV,” respectively). The fair value of the shares recorded
as of December 31, 2020 was $295,127.
Securities available for sale
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
December 31, 2020
|
|
|
None
|
|
|
$
|
3,892
|
|
|
$
|
116,820
|
|
|
$
|
120,712
|
|
June 30, 2020
|
|
|
None
|
|
|
$
|
1,448
|
|
|
$
|
233,640
|
|
|
$
|
235,088
|
|
NOTE
4 – PROPERTIES AND EQUIPMENT
The
Company did not have any properties or equipment as of December 31, 2020.
NOTE
5 – OTHER CURRENT ASSETS
As
of December 31, 2020, Other Current Assets consist of $81,765 of organizational and developmental costs for the Asia Diamond Exchange
to be established in Vietnam.
NOTE
6 – CURRENT LIABILITIES
Current
Liabilities of the Company consist of the followings as of December 31, 2020 and June 30, 2020.
|
|
December 31, 2020
|
|
|
June 30, 2020
|
|
Accounts payable
|
|
|
397,395
|
|
|
|
354,080
|
|
Subfund obligations
|
|
|
1,474,775
|
|
|
|
1,266,634
|
|
Accrued expenses
|
|
|
2,942,290
|
|
|
|
2,789,743
|
|
Notes payable (net)
|
|
|
628,856
|
|
|
|
668,157
|
|
Due to Directors and Officers
|
|
|
1,689,799
|
|
|
|
1,696,274
|
|
Advances from customers
|
|
|
516,410
|
|
|
|
430,500
|
|
Derivative liabilities
|
|
|
109,559
|
|
|
|
310,870
|
|
Total current liabilities
|
|
$
|
7,581,262
|
|
|
$
|
7,525,259
|
|
ACCRUED
EXPENSES: Accrued expenses as of December 31, 2020 totaling $2,942,641 consist of $1,632,649 in accrued salaries and $1,309,641in accrued
interest from short-term notes and convertible notes.
NOTES
PAYABLE (NET): As of December 31, 2020, Notes Payable consist of $399,489 in short-term notes payable and $299,367 in convertible promissory
notes.
ADVANCES
FROM CUSTOMERS:
As
of December 31, 2020, the Company recorded $516,410 as Advances from Customers for consulting fees previously received from a client
plus mutually agreed accrued interest. The Company was not able to complete the consulting services due to the client’s inability
to provide GAAP-compliant audited financial statements in order to file a registration statement with the Securities and Exchange Commission.
SUB-FUND
OBILGATIONS: The Company has recorded a total of $1,474,775 from three partners towards the expenses and capitalization for setting up
sub-funds under the master PHILUX Global Funds. These amounts are currently booked as liabilities until these sub-funds are set up and
activated, at which time the sub-fund participants will receive their respective percentages of the general partners’ portion of
ownership in the relevant sub-funds based on their actual total contributions.
NOTE
7 – DUE TO OFFICERS
Due
to officer, represents loans and advances made by officers and directors of the Company and its subsidiaries, unsecured and due on demand.
As of December 31, 2020 and June 30, 2020, the balances were $1,689,799 and $1,696,274, respectively.
Officers/Directors
|
|
December 31, 2020
|
|
|
June 30, 2020
|
|
Henry Fahman
|
|
|
1,026,449
|
|
|
$
|
1,032,924
|
|
Tam Bui
|
|
|
663,350
|
|
|
$
|
663,350
|
|
Total
|
|
$
|
1,689,799
|
|
|
$
|
1,696,274
|
|
NOTE
8 – LOANS AND PROMISSORY NOTES
A.
|
SHORT
TERM NOTES PAYABLE:
|
In
the course of its business, the Company has obtained short-term loans from individuals and institutional investors.
As
of December 31, 2020, the Company had a total of $399,489 in short-term notes payable with $1,303,461 accrued and unpaid interest. These
notes bear interest rates ranging from 0% to 36% per annum.
B.
|
CONVERTIBLE
PROMISSORY NOTES OUTSTANDING AS OF DECEMBER 31, 2020
|
As
of December 31, 2020, the Company had a net balance of $229,367 in convertible promissory notes. The derivative liabilities associated
with these notes are $261,145 and the accrued interest is $6,180 as of December 31, 2020.
The
Company relies on the results a professional, independent valuation firm to record the value of derivative liabilities, discounts, and
change in fair value of derivatives in connection with these convertible notes and warrants, if any, that are related to the convertible
notes.
NOTE
9 – PAYROLL TAX LIABILITIES
As
of December 31, 2020, payroll tax liabilities were $5,747.
NOTE
10 – BASIC AND DILUTED NET PROFIT (LOSS) PER SHARE
Net
loss per share is calculated in accordance with SFAS No. 128, “Earnings per Share”. Under the provision of SFAS No. 128,
basic net loss per share is computed by dividing the net loss for the period by the weighted-average number of common shares outstanding
for the period. Diluted EPS is based on the weighted-average number of shares of common stock outstanding for the period and common stock
equivalents outstanding at the end of the period. Basic and diluted weighted average numbers of shares for the period ended December
31, 2020 were the same since the inclusion of Common stock equivalents is anti-dilutive.
NOTE
11 - DOMESTICATION IN THE STATE OF WYOMING
On
September 20, 2017, the Company applied for a Certificate of Domestication and filed Articles of Domestication with the office of the
Secretary of State of Wyoming to re-domicile the Company’s jurisdiction to the State of Wyoming.
On
September 20, 2017, the Company filed Articles of Amendment with the Wyoming Secretary of State to amend the authorized capital of the
Company as follows:
“The
total number of shares into which the authorized capital stock of the corporation is divided is one billion shares, consisting of: nine
hundred million shares of voting Common Stock with a par value of $0.001 per share; fifty million shares of non-voting Class A Series
I Preferred Stock with a par value of $5.00 per share; twenty-five million shares of non-voting Class A Series II Preferred Stock with
a par value of $5.00 per share; twenty million shares of non-voting Class A Series III Preferred Stock with a par value of $5.00 per
share and five million shares of voting Class A Series IV Preferred Stock with a par value of $5.00 per share. The relative rights, preferences,
limitations and restrictions associated with the afore-mentioned shares of Class A Preferred Stock will be determined by the Board of
Directors of the corporation.”
On
June 25, 2020, the Company filed Articles of Amendment with the Wyoming Secretary of State to amend Article 10 of the Articles of Domestication
to authorize Forty Billion (40,000,000,000) shares of Common Stock with a par value of $0.001 per share and Five Hundred Million (500,000,000)
shares of Preferred Stock with a par value of $0.001 per share and to designate Classes A and B and the Series of those classes of Preferred
Stock as following:
I.
CLASS A PREFERRED STOCK
A.
DESIGNATIONS, AMOUNTS AND DIVIDENDS
1.
Class A Series I Cumulative Convertible Redeemable Preferred Stock
a.
Designation: Fifty million (50,000,000) shares of the authorized 500,000,000 shares of Preferred Stock, with a par value of $0.001 per
share, are designated as Class A Series I Cumulative Convertible Redeemable Preferred Stock
b.
Number of Shares: The number of shares of Class A Series I Preferred Stock authorized shall be fifty million (50,000,000) shares.
c.
Dividends: Each holder of Class A Series I Preferred Stock is entitled to receive ten percent (10%) non-compounding cumulative dividends
per annum, payable semi-annually.
2.
Class A Series II Cumulative Convertible Redeemable Preferred Stock
a.
Designation. Two hundred million (200,000,000) shares of the authorized 500,000,000 shares of Preferred Stock, with a par value of $0.001
per share, are designated Class A Series II Cumulative Convertible Redeemable Preferred Stock (the “Class A Series II Preferred
Stock”).
b.
Number of Shares. The number of shares of Class A Series II Preferred
Stock authorized shall be two hundred million (200,000,000) shares.
c.
Dividends: Each holder of Class A Series II Preferred Stock is entitled to receive eight percent (8%) cumulative dividends per annum,
payable semi-annually.
3.
Class A Series III Cumulative Convertible Redeemable Preferred Stock
a.
Designation. Fifty million (50,000,000) shares of the authorized 500,000,000 shares of Preferred Stock, with a par value of $0.001 per
share, are designated as Class A Series III Cumulative Convertible Redeemable Preferred Stock (the “Class A Series III Preferred
Stock”).
b.
Number of Shares. The number of shares of Class A Series III Preferred Stock authorized shall be fifty million (50,000,000) shares.
c.
Dividends: Each holder of Class A Series III Preferred Stock is entitled to receive eight percent (8%) cumulative dividends per annum,
payable semi-annually.
4.
Class A Series IV Cumulative Convertible Redeemable Preferred Stock
a.
Designation. One hundred ninety-nine million (199,000,000) shares of the authorized 500,000,000 shares of Preferred Stock, with a par
value of $0.001 per share, are designated as Class A Series IV Cumulative Convertible Redeemable Preferred Stock (the “Class
A Series IV Preferred Stock”).
b.
Number of Shares. The number of shares of Class A Series III Preferred Stock authorized shall be one hundred ninety-nine million (199,000,000)
shares.
c.
Dividends: To be determined by the Corporation’s Board of Directors.
B.
CONVERSION
1.
Conversion of Series I, Series II and/or Series IV Class A Preferred Stock into Common Stock of PHI Group, Inc.
Each
share of the Class A Preferred Stock, either Series I, Series II or Series IV shall be convertible into the Company’s Common Stock
any time after two years from the date of issuance at a Variable Conversion Price (as defined herein) of the Common Stock. The “Variable
Conversion Price” shall mean 75% multiplied by the Market Price (as defined herein) (representing a discount rate of 25%). “Market
Price” means the average Trading Price for the Company’s Common Stock during the ten (10) trading-day period ending one trading
day prior to the date the Conversion Notice is sent by the Holder of the Class A Preferred Stock to the Company via facsimile or email
(the “Conversion Date”). “Trading Price” means, for any security as of any date, the closing price on the OTC
Markets, OTCQB, NASDAQ Stock Markets, or applicable trading market as reported by a reliable reporting service (“Reporting Service”)
mutually acceptable to the Company and Holder of the Class A Preferred Stock.
2.
Conversion of Series I, Series II and/or Series IV Class A Preferred Stock into Common Stock of a subsidiary of PHI Group, Inc.’s.
Alternatively,
each share of the Class A Preferred Stock, either Series I, Series II and/or Series IV may be convertible into Common Stock of a subsidiary
of PHI Group, Inc.’s, to be determined by the Company’s Board of Directors, any time after such subsidiary has become a fully-reporting
publicly traded company for at least three months, at a Variable Conversion Price (as defined herein). The Variable Conversion Price
to be used in connection with the conversion into Common Stock of a subsidiary of PHI Group, Inc.’s shall mean 50% multiplied by
the Market Price (as defined herein), representing a discount rate of 50%, of that Common Stock. “Market Price” means the
average Trading Price for the Common Stock of said subsidiary of PHI Group, Inc.’s during the ten (10) trading-day period ending
one trading day prior to the date the Conversion Notice is sent by the Holder of the Preferred Stock to the Company via facsimile or
email (the “Conversion Date”). “Trading Price” means, for any security as of any date, the closing price on the
OTC Markets, OTCQB, NASDAQ Stock Markets, NYSE or applicable trading market as reported by a reliable reporting service (“Reporting
Service”) mutually acceptable to the Company, said subsidiary and Holder of the Class A Preferred Stock.”
3.
Conversion of Class A Series III Preferred Stock of PHI Group, Inc. into Common Stock of American Pacific Plastics, Inc., a subsidiary
of PHI Group, Inc.’s.
The
entire Class A Series III Preferred Stock of PHI Group, Inc. (i.e. fifty million (50,000,000) shares) may be convertible into eighty
percent (80%) American Pacific Plastics, Inc.’s Common Stock which will have been issued and outstanding immediately after such
conversion or exchange on a pro rata basis.
4.
Conversion Shares.
The
amount of shares of Common Stock of PHI Group, Inc., or alternatively, of a subsidiary of PHI Group, Inc.’s, to be received by
Holder at the time of conversion of Class A Series I or Series II Preferred Stock of PHI Group, Inc. will be based on the following formula:
|
|
|
Where
|
CS:
|
Common
Shares of PHI Group, Inc.,
|
Amount
of CS =
|
OIP
+ AUD
|
|
|
|
or
alternatively, of a subsidiary of PHI Group, Inc.’s.
|
|
|
|
|
VCP
|
|
|
OIP:
|
Original
Issue Price of Class A Series I or Series II Preferred Stock of PHI Group, Inc.
|
|
|
|
|
AUD:
|
Accrued
and Unpaid Dividends.
|
|
|
|
|
VCP:
|
Variable
Conversion Price of PHI Common Stock or of a subsidiary of PHI Group, Inc.’s as defined above.
|
C.
REDEMPTION RIGHTS
The
Corporation, after a period of two years from the date of issuance, may at any time or from time to time redeem the Class A Preferred
Stock, either Series I, Series II, Series III or Series IV 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.
D.
LIQUIDATION
Upon
the occurrence of a Liquidation Event (as defined below), the holders of Class A Preferred Stock are entitled to receive net assets on
a pro rata basis. As used herein, “Liquidation Event” means (i) the liquidation, dissolution or winding-up, whether
voluntary or involuntary, of the Corporation, (ii) the purchase or redemption by the Corporation of shares of any class of stock or the
merger or consolidation of the Corporation with or into any other corporation or corporations, unless (a) the holders of the Class A
Preferred Stock receive securities of the surviving corporation having substantially similar rights as the Class A Preferred Stock and
the stockholders of the Corporation immediately prior to such transaction are holders of at least a majority of the voting securities
of the successor corporation immediately thereafter (the “Permitted Merger”), unless the holders of the shares of
Class A Preferred Stock elect otherwise or (b) the sale, license or lease of all or substantially all, or any material part of, the Corporation’s
assets, unless the holders of Class A Preferred Stock elect otherwise.
E.
RANK
All
shares of the Class A Preferred Stock shall rank (i) senior to the Corporation’s Common Stock and any other class or series of
capital stock of the Corporation hereafter created, (ii) pari passu with any class or series of capital stock of the Corporation
hereafter created and specifically ranking, by its terms, on par with the Class A Preferred Stock and (iii) junior to any class or series
of capital stock of the Corporation hereafter created specifically ranking, by its terms, senior to the Class A Preferred Stock, in each
case as to distribution of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary.
F.
VOTING RIGHTS
1.
Class A Series I, II, III and IV Preferred Stock of PHI Group, Inc. shall have no voting rights.
G.
PROTECTION PROVISIONS
So
long as any shares of Class A Preferred Stock are outstanding, the Corporation shall not, without first obtaining the majority written
consent of the holders of Class A Preferred Stock, alter or change the rights, preferences or privileges of the Class A Preferred Stock
so as to affect adversely the holders of Class A Preferred Stock.
H.
MISCELLANEOUS
1.
Status of Redeemed Stock: In case any shares of Class A Preferred Stock shall be redeemed or otherwise repurchased or reacquired,
the shares so redeemed, repurchased, or reacquired shall resume the status of authorized but unissued shares of preferred stock, and
shall no longer be designated as Class A Preferred Stock.
2.
Lost or Stolen Certificates: Upon receipt by the Corporation of (i) evidence of the loss, theft, destruction or mutilation of any
Preferred Stock Certificate(s) and (ii) in the case of loss, theft or destruction, indemnity (with a bond or other security) reasonably
satisfactory to the Corporation, or in the case of mutilation, the Preferred Stock Certificate(s) (surrendered for cancellation), the
Corporation shall execute and deliver new Preferred Stock Certificates. However, the Corporation shall not be obligated to reissue such
lost, stolen, destroyed or mutilated Preferred Stock Certificates if the holder of Class A Preferred Stock contemporaneously requests
the Corporation to convert such holder’s Class A Preferred Stock into Common Stock.
3.
Waiver: Notwithstanding any provision in this Certificate of Designation to the contrary, any provision contained herein and any
right of the holders of Class A Preferred granted hereunder may be waived as to all shares of Class A Preferred Stock (and the holders
thereof) upon the majority written consent of the holders of the Class A Preferred Stock.
4.
Notices: Any notices required or permitted to be given under the terms hereof shall be sent by certified or registered mail (return
receipt requested) or delivered personally, by nationally recognized overnight carrier or by confirmed facsimile transmission, and shall
be effective five (5) days after being placed in the mail, if mailed, or upon receipt or refusal of receipt, if delivered personally
or by nationally recognized overnight carrier or confirmed facsimile transmission, in each case addressed to a party as set forth below,
or such other address and telephone and fax number as may be designated in writing hereafter in the same manner as set forth in this
Section.
If
to the Corporation:
PHI
GROUP, INC.
30
N Gould Street, Suite R
Sheridan,
WY 82801
Facsimile:
702-472-8556
Email:
info@phiglobal.com
If
to the holders of Class Preferred Stock, to the address to be listed in the Corporation’s books and Records.
II.
CLASS B PREFERRED STOCK
1.
Class B Series I Preferred Stock
a.
Designation: One million (1,000,000) shares of the authorized 500,000,000 shares of Preferred Stock, with a par value of $0.001 per share,
are designated as Class B Series I Preferred Stock.
b.
Number of Shares: The number of shares of Class B Series I Preferred Stock authorized will be one million (1,000,000) shares.
c.
Dividend: None
d.
Voting rights: Except as provided by law, the shares of Class B Series I Preferred Stock shall have the same right to vote or act on
all matters on which the holders of Common Stock have the right to vote or act and the holders of the shares of Class B Series I shall
be entitled to notice of any stockholders’ meeting or action as to such matters on the same basis as the holders of Common Stock,
and the holders of Common Stock and shares of Class B Series I shall vote together or act together thereon as if a single class on all
such matters; provided, in such voting or action each one share of Class B Series I shall be entitled to one hundred thousand (100,000)
votes.
NOTE
12 – STOCKHOLDER’S EQUITY
As
of December 31, 2020, the total number of authorized capital stock of the Company was shares with a par value of $0.001 per share, consisting
of 40 billion shares of voting Common Stock with a par value of $0.001 per share and 500,000,000 shares of Preferred Stock with a par
value of $0.001 per share. The rights and terms associated with the Preferred Stock will be determined by the Board of Directors of the
Company.
TREASURY
STOCK
The
balance of treasury stock as of December 31, 2020 was 484,767 post-split shares valued at $44,170 according to cost method.
COMMON
STOCK
During
the quarter ended December 31, 2020, the Company issued 991,987,513 shares any of its Common Stock to Adar Alef LLC, JSJ Investments,
Inc. and One44 Capital LLC for conversions of convertible promissory notes.
As
of December 31, 2020, there were 14,464,007,723 shares of the Company’s common stock issued and outstanding.
PREFERRED
STOCK
CLASS
A PREFERRED STOCK
As
of December 31, 2020, the following amounts of Preferred Stock were issued and outstanding:
Class
A Series II Preferred Stock: 10,000,000 shares.
Class
B Series I Preferred Stock: 180,000 shares.
NOTE
13. DISSOLUTION OF NEVADA CORPORATION AND OPERATING AS A WYOMING CORPORATION.
On
June 30, 2020, the Company filed a Certificate of Dissolution/Withdrawal with the Nevada Secretary of State to cease its corporate registration
and dissolve PHI Group, Inc. in the State of Nevada. A Certificate of Dissolution/Withdrawal was issued by the Nevada Secretary of State
on June 30, 2020, Filing number 20200754868. The Company currently maintains its corporate registration with the State of Wyoming pursuant
to the Articles of Domestication filed with the Wyoming Secretary of State on September 20, 2017 and operates as a Wyoming corporation.
The Company filed a Form 8-K to report this event with the Securities and Exchange Commission on June 30, 2020.
NOTE
14 – STOCK-BASED COMPENSATION PLAN
On
February March 18, 2015, the Company adopted an Employee Benefit Plan to set aside 1,000,000 shares of common stock for eligible employees
and independent contractors of the Company and its subsidiaries. As of March 31, 2018 the Company has not issued any stock in lieu of
cash under this plan.
On
September 23, 2016, the Company issued incentive stock options and nonqualified stock options to certain key employee(s) (Henry Fahman
– CEO/CFO) and directors (Tam Bui, Henry Fahman, and Frank Hawkins constitute the Board of Directors) as deferred compensation.
The options allow the holders to acquire the Company’s Common Stock at the fair exercise price of the Company’s Common Stock
on the grant date of each option at $0.24 per share, based on the 10-days’ volume-weighted average price prior to the grant date.
The number of options is equal to a total of 6,520,000. The options terminate seven years from the date of grant and become vested and
exercisable after one year from the grant date. The following assumptions were used in the Monte Carlo analysis by Doty Scott Enterprises,
Inc., an independent valuation firm, to determine the fair value of the stock options:
Risk-free
interest rate
|
|
|
1.18
|
%
|
Expected
life
|
|
|
7
years
|
|
Expected
volatility
|
|
|
239.3
|
%
|
Vesting
is based on a one-year cliff from grant date.
|
|
|
|
|
Annual
attrition rates were used in the valuation since ongoing employment was condition for vesting the options.
The
fair value of the Company’s Stock Options as of issuance valuation date is as follows:
Holder
|
|
Issue
Date
|
|
Maturity
Date
|
|
Stock
Options
|
|
|
Exercise
Price
|
|
|
Fair
Value at Issuance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tam
Bui
|
|
9/23/2016
|
|
9/23/2023
|
|
|
875,000
|
|
|
|
Fixed
price: $0.24
|
|
|
$
|
219,464
|
|
Frank
Hawkins
|
|
9/23/2016
|
|
9/23/2023
|
|
|
875,000
|
|
|
|
Fixed
price: $0.24
|
|
|
$
|
219,464
|
|
Henry
Fahman
|
|
9/23/2016
|
|
9/23/2023
|
|
|
4,770,000
|
|
|
|
Fixed
price: $0.24
|
|
|
$
|
1,187,984
|
|
NOTE
15 – RELATED PARTY TRANSACTIONS
The
Company accrued $52,500 in salaries for the President and the Secretary & Treasurer of the Company during the quarter ended December
31, 2020.
Tam
Bui, a member of the Board of Directors, and Henry Fahman, Chairman and Chief Executive Officer, of the Company from time to time lend
money to the Company. These loans are without interest and payable upon demand.
NOTE
16 – CONTRACTS AND COMMITMENTS
1.
BUSINESS CONSULANCY AND STRUCTURING AGENCY AGREEMENT TO SET UP INSTITUTIONAL BANK FUNDS IN LUXEMBOURG
On
November 30, 2017, the Company signed an agreement with a structuring agent and legal experts to set up a bank fund in Luxembourg in
order to provide financing for the Company’s and its clients’ projects.
The
Reserved Alternative Investment Fund (RAIF) can be established under the form of common funds (“FCP”), investment companies
with variable capital (“SICAV”) or under the form that does not have to have the legal form of a SICAV or an FCP. There will
be no restriction in terms of eligible assets. RAIFs are free to introduce any kind of assets and financial instruments in their investment
policy. According to the Luxembourg Law of July 12, 2013, RAIF’s must entrust their assets to a Luxembourg custodian bank for safekeeping
and must appoint an approved statutory auditor.
One
of the distinctive advantages of RAIF is that it may have various sub-funds, each corresponding to a distinct part of the assets and
liabilities of the RAIF. As such, sub-funds can be established under a RAIF umbrella to target different investment opportunities in
a variety of industries as desired.
On
February 21, 2018, the Company signed an amendment to the Business Consultancy and Structuring Agency Agreement to be solely responsible
for all the costs of Euros 3,500,000 associated with establishing the RAIF. On October 4, 2018, a Payment Agreement was signed by the
structuring agent and the Company calling for an extra amount of Euros 1,500,000 to be paid to the structuring agent. The master Luxembourg
RAIF fund named “PHILUX Global Funds SCA, SICAV – RAIF” was registered and activated with the Luxembourg Commission
de Surveillance du Secteur Financier (CSSF) on June 11, 2020, Registration No. B244952.
2.
ACQUISITION OF 51% EQUITY INTEREST IN VINAFILMS JOINT STOCK COMPANY
On
August 06, 2018, signed a Business Cooperation Agreement with Vinafilms JSC (Công ty Cổ phần Màng Bao Bì
Tân Vinh Nam Phát), a Vietnamese joint stock company, with principal business address at Lot G9, Road No. 9, Tan Do Industrial
Zone, Duc Hoa Ha Village, Duc Hoa District, Long An Province, Vietnam, hereinafter referred to as “VNF” and its majority
shareholder, to exchange fifty-one percent ownership in VNF for Preferred Stock of PHI. According to the Agreement, PHI will be responsible
for filing a S-1 Registration Statement with the Securities and Exchange Commission for American Pacific Plastics, Inc., a subsidiary
of PHI that holds the 51% equity ownership in VNF, to become a fully-reporting public company in the U.S. Stock Market.
On
September 20, 2018, a Stock Swap Agreement was signed by and between Ms. Do Thi Nghieu, the majority shareholder holding 76% of ownership
in VNF, and PHI to exchange 3,060,000 shares of ordinary stock of VNF owned by Ms. Do Thi Nghieu for 50 million shares of Class A Series
III Cumulative, Convertible, Redeemable Preferred Stock of PHI. Though this transaction was technically closed on September 28, 2018,
the Company did not recognize the operations of Vinafilms JSC in its consolidated financial statements as of December 31, 2020. However,
it intends to combine Vinafilms’ operating results when GAAP audits of Vinafilms JSC financial statements are conducted and completed
by a PCAOB-registered auditing firm.
3.
AGREEMENT WITH TECCO GROUP FOR PARTICIPATION IN PHILUX INFRASTRUCTURE FUND COMPARTMENT OF PHILUX GLOBAL FUNDS
On
August 10, 2020, Tecco Group, a Vietnamese company, signed an agreement with PHI Luxembourg Development SA, a subsidiary of the Company,
to participate in the proposed infrastructure fund compartment of PHILUX Global Funds SCA, SICAV-RAIF. According to the agreement, Tecco
Group will contribute $2,000,000 for 49% ownership of the general partners’ portion of said infrastructure fund compartment. As
of July 9, 2021, Tecco Group has paid four billion Vietnam Dong (VND) towards the total agreed amount.
4.
AGREEMENT WITH PHAT VAN HUNG CO. LTD. FOR PARTICIPATION IN PHILUX REAL ESTATE FUND COMPARTMENT OF PHILUX GLOBAL FUNDS
On
November 09, 2020, Phat Van Hung Co. Ltd. signed an agreement with PHI Luxembourg Development SA, a subsidiary of the Company, to participate
in the real estate fund compartment of PHILUX Global Funds SCA, SICAV-RAIF. According to the agreement, Phat Van Hung Co. Ltd. will contribute
$2,000,000 for 49% ownership of the general partners’ portion of said real estate fund compartment. As of July 20, 2021, Phat Van
Hung has not made any payment towards the agreed amount.
5.
AGREEMENT WITH XUAN QUYNH LLC FOR PARTICIPATION IN PHILUX INFRASTRUCTURE FUND COMPARTMENT OF PHILUX GLOBAL FUNDS
On
November 20, 2020, Xuan Quynh LLC, a Vietnamese company, signed an agreement with PHI Luxembourg Development SA, a subsidiary of the
Company, to participate in the proposed infrastructure fund compartment of PHILUX Global Funds SCA, SICAV-RAIF. According to the agreement,
Xuan Quynh LLC will contribute $2,000,000 for 49% ownership of the general partners’ portion said infrastructure fund compartment.
As of July 20, 2021, Xuan Quynh LLC has not made any payment towards the agreed amount.
6.
INVESTMENT AGREEMENTS AND MEMORANDUM OF UNDERSTANDING
From
August 24, 2020 to November 11, 2020, the Company through its Luxembourg bank fund mother holding company PHI Luxembourg Development
SA and PHILUX Global Funds SCA, SICAV-RAIF has signed investment agreements and memorandum of understanding with three non-US entities
for total investments of more than one billion U.S. dollars. However, as of the date of this report, the Company has not received any
money from these investment agreements and there is no guarantee that any money will be received from these agreements and memorandum
of understanding in the future.
NOTE
17 – GOING CONCERN UNCERTAINTY
As
shown in the accompanying consolidated financial statements, the Company has accumulated deficit of $44,559,483 as of December 31, 2020
and total stockholders’ deficit of $7,287,932. For the quarter ended December 31, 2020, the Company incurred a net loss of $212,867
as compared to a net loss in the amount of $226,717 during the same period ended December 31, 2019. 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, 2022 and beyond.
NOTE
18 – SUBSEQUENT EVENT
These
financial statements were approved by management and available for issuance on or about July 22, 2021. Subsequent events have been evaluated
through this date.
1.
ISSUANCE OF COMMON STOCK.
The
Company has issued a total of shares of its Common Stock since the end of the quarter ended December 31, 2020 until July 22, 2021, consisting
of the following: 10,508,948,593 shares for conversion of convertible promissory notes, 867,049,520 shares for cash, 235,478,810 shares
for investment in PHILUX Global Funds, and 5,000,000 shares in connection with the terms and conditions of a non-convertible promissory
note.
2.
DEVELOPMENT OF THE MULTI-COMMODITIES CENTER, ASIA DIAMOND EXCHANGE AND LOGISTICS CENTER IN VIETNAM
Along
with the establishment of PHILUX Global Funds, since March 2018 the Company has worked closely with the Authority of Chu Lai Open Economic
Zone and the Provincial Government of Quang Nam, Vietnam to develop the Asia Diamond Exchange. Quang Nam Provincial Government has agreed
to allocate more than 200 hectares in the sanctioned Free-Trade Zone near Chu Lai Airport, Nui Thanh District, Quang Nam Province in
Central Vietnam for us to set up a multi-commodities center which would include the Asia Diamond Exchange.
On
June 04, 2021 the Company incorporated Asia Diamond Exchange, Inc., a Wyoming corporation, ID number 2021-001010234, as the holding company
for the development of the Asia Diamond Exchange in Vietnam.
On
July 07, 2021, the Company had an online meeting with the Chairman of Quang Nam Province, the Authority of Chu Lai Open Economic Zone
and the heads of various Provincial Departments to update and plan for implementation of the Asia Diamond Exchange. The Company plans
to return to Vietnam as soon possible to hold an international press conference and announce further execution details.
In
addition, another opportunity has arisen with the start of construction of the new international airport in Long Thanh District, Dong
Nai Province near Ho Chi Minh City in Southern Vietnam. In December 2020, the Vietnamese central government designated 1,200 hectares
of land in Bau Can village, Long Thanh District, Dong Nai Province as a new industrial zone. The Company is in the process of applying
for 600 hectares close to the Long Thanh International Airport to develop Long Thanh Multi-Commodities Logistics Center (LMLC).
3.
ISSUANCE OF CONVERTIBLE PROMISSORY NOTES
On
March 23, 2021, the Company issued a Promissory Note to EMA Financial LLC, a Delaware limited liability company, in the amount of $100,000
at an interest rate of 6% per annum. This note will mature twelve months from the Issue Date and may be convertible into shares of common
stock of the Company at a fixed conversion price of $0.001 per share or may be prepaid on or prior to the 180th calendar day
after the Issue Date at a Prepayment Factor of 115%. The Company plans to prepay this note in cash prior to the 180th calendar
day after the Issue Date.
On
June 7, 2021, the Company issued a Promissory Note to EMA Financial LLC, a Delaware limited liability company, in the amount of $100,000
at an interest rate of 6% per annum. This note will mature twelve months from the Issue Date and may be convertible into shares of common
stock of the Company at a fixed conversion price of $0.001 per share or may be prepaid on or prior to the 180th calendar day
after the Issue Date at a Prepayment Factor of 115%. The Company plans to prepay this note in cash prior to the 180th calendar
day after the Issue Date.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Except
for the audited historical information contained herein, this report specifies forward-looking statements of management of the Company
within the meaning of Section 27a of the Securities Act of 1933 and Section 21e of the Securities Exchange Act of 1934 (“forward-looking
statements”) including, without limitation, forward-looking statements regarding the Company’s expectations, beliefs, intentions
and future strategies. Forward-looking statements are statements that estimate the happening of future events and are not based on historical
facts. Forward- looking statements may be identified by the use of forward-looking terminology, such as “could”, “may”,
“will”, “expect”, “shall”, “estimate”, “anticipate”, “probable”,
“possible”, “should”, “continue”, “intend” or similar terms, variations of those terms
or the negative of those terms. The forward-looking statements specified in this report have been compiled by management of the Company
on the basis of assumptions made by management and considered by management to be reasonable. Future operating results of the Company,
however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements.
The assumptions used for purposes of the forward-looking statements specified in this report represent estimates of future events and
are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification
and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives
require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated
or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. In addition,
those forward-looking statements have been compiled as of the date of this report and should be evaluated with consideration of any changes
occurring after the date of this report. No assurance can be given that any of the assumptions relating to the forward-looking statements
specified in this report are accurate and the Company assumes no obligation to update any such forward-looking statements.
INTRODUCTION
PHI
Group, Inc. (the “Company” or “PHI”) (www.phiglobal.com) is primarily engaged in running PHILUX Global
Funds, SCA, SICAV-RAIF, a “Reserved Alternative Investment Fund” (“RAIF”) under the laws of Luxembourg, and establishing
the Asia Diamond Exchange in Vietnam. Besides, the Company provides corporate finance services, including merger and acquisition advisory
and consulting services for client companies through our wholly owned subsidiary PHILUX Capital Advisors, Inc. (formerly PHI Capital
Holdings, Inc.) (www.philuxcap.com) and invests in selective industries and special situations aiming to potentially create significant
long-term value for our shareholders. PHILUX Global Funds intends to include a number of sub-funds for investment in agriculture, renewable
energy, real estate, infrastructure, and the Asia Diamond Exchange in Vietnam.
BACKGROUND
Originally
incorporated on June 8, 1982 as JR Consulting, Inc., a Nevada corporation, the Company applied for a Certificate of Domestication and
filed Articles of Domestication to become a Wyoming corporation on September 20, 2017. In the beginning, the Company was foremost engaged
in mergers and acquisitions and had an operating subsidiary, Diva Entertainment, Inc., which operated two modeling agencies, one in New
York and one in California. In January 2000, the Company changed its name to Providential Securities, Inc., a Nevada corporation, following
a business combination with Providential Securities, Inc., a California-based financial services company. In February 2000, the Company
then changed its name to Providential Holdings, Inc. 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.
The
Company is currently focused on PHILUX Global Funds, SCA, SICAV-RAIF by launching a number of sub-funds for investment in real estate,
renewable energy, infrastructure, agriculture and healthcare and on developing and establishing the Asia Diamond Exchange in Vietnam.
In addition, PHILUX Capital Advisors, Inc. (formerly Capital Holdings, Inc.), a wholly owned subsidiary of the Company, continues to
provide corporate and project finance services, including merger and acquisition (M&A) advisory and consulting services for U.S.
and international companies. No assurances can be made that the Company will be successful in achieving its plans.
BUSINESS
STRATEGY
PHI’s
strategy is to:
1.
Identify, build, acquire, commit and deploy valuable resources with distinctive competitive advantages;
2.
Identify, evaluate, acquire, participate and compete in attractive businesses that have large, growing market potential;
3.
Build an attractive investment that includes points of exit for investors through capital appreciation or spin-offs of business units.
SUBSIDIARIES:
As
of December 31, 2020, the Company owned the following subsidiaries: (1) American Pacific Plastics, Inc., a Wyoming corporation (100%),
(2) American Pacific Resources, Inc., a Wyoming corporation (100%), (3) PHILUX Capital Advisors, Inc., a Wyoming corporation (100%),
(4) PHI Vietnam Investment and Development Company Ltd., a Vietnamese limited liability company (100%), (5) Phivitae Healthcare, Inc.
(100%), (6) PHI Luxembourg Development S.A., a Luxembourg corporation (100%), PHILUX Global Funds SCA, SICAV-RAIF, a Luxembourg Reserved
Alternative Investment Fund (100%), PHILUX Global General Partners SA, a Luxembourg corporation (100%), and PHI Luxembourg Holding SA,
a Luxembourg corporation (100%).
PHILUX
GLOBAL FUNDS SCA, SICAV-RAIF
On
June 11, 2020, the Company received the approval from the Luxembourg Commission de Surveillance du Secteur Financier (CSSF) and successfully
established and activated PHILUX GLOBAL FUNDS SCA, SICAV-RAIF (the “Fund”), Registration No. B244952, a Luxembourg bank fund
organized as a Reserved Alternative Investment Fund in accordance with the Luxembourg Law of July 23, 2016 relative to reserved alternative
investment funds, Law of August 23, 2016 relative to commercial companies, and Modified Law of July 12, 2013 relative to alternative
investment fund managers.
The
following entities have been engaged to support the Fund’s operations: a) Custodian Bank: Hauck & Aufhauser Privatbankiers
AG, b) Administrative Registrar & Transfer Agent: Hauck & Aufhauser Alternative Investment Services S.A., c) Fund Manager: Hauck
& Aufhauser Fund Services S.A., d) Fund Attorneys: DLP Law Firm SARL and VCI Legal, e) Investment Advisor: PHILUX Capital Advisors,
Inc., f) Fund Auditors: E&Y Luxembourg and E&Y Vietnam, g) Fund Tax Advisor: ATOZ Tax Management, Luxembourg, h) Fund Independent
Asset Valuator: Cushman & Wakefield, Vietnam.
The
Fund is an umbrella fund containing one or more sub-fund compartments intended to invest in real estate, infrastructure, renewable energy,
agriculture, healthcare and especially the Multi-Commodities Center (MCC) in Vietnam which will include the Asia Diamond Exchange and
potentially the proposed International Financial Center.
DEVELOPMENT
OF THE ASIA DIAMOND EXCHANGE IN VIETNAM
Along
with the establishment of PHILUX Global Funds, since March 2018 the Company has worked closely with the Authority of Chu Lai Open Economic
Zone and the Provincial Government of Quang Nam, Vietnam to develop the Asia Diamond Exchange. Quang Nam Provincial Government has agreed
to allocate more than 200 hectares in the sanctioned Free-Trade Zone near Chu Lai Airport, Nui Thanh District, Quang Nam Province in
Central Vietnam for us to set up a multi-commodities center which would include the Asia Diamond Exchange. Recently, another opportunity
has arisen with the start of construction of the new international airport in Long Thanh District, Dong Nai Province near Ho Chi Minh
City in Southern Vietnam. In December 2020, the Vietnamese central government designated 1,200 hectares of land in Bau Can village, Long
Thanh District, Dong Nai Province as a new industrial zone. We are in the process of applying for 600 hectares close to the Long Thanh
International Airport to develop Long Thanh Multi-Commodities Logistics Center (LMLC. On June 04, 2021, the Company incorporated Asia
Diamond Exchange, Inc., a Wyoming corporation, ID number 2021-001010234, as the holding company for the Asia Diamond Exchange to be established
in Vietnam.
PHILUX
CAPITAL ADVISORS, INC.
PHILUX
Capital Advisors, Inc. was originally incorporated under the name of “Providential Capital, Inc.” in 2004 as a Nevada corporation
and 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. It was re-domiciled as a Wyoming corporation on September 20, 2017 and changed its name to “PHILUX
Capital Advisors, Inc.” on June 03, 2020. This subsidiary has successfully managed merger plans for several privately held and
publicly traded companies and continues to focus on serving the Pacific Rim markets in the foreseeable future. This subsidiary currently
serves as the investment advisor to “PHILUX Global Funds SCA, SICAV-RAIF,” a Luxembourg Reserved Alternative Investment Fund
established by PHI Luxembourg Development S.A.
AMERICAN
PACIFIC RESOURCES, INC.
American
Pacific Resources, Inc. (“APR”) is a Wyoming corporation established in April 2016 to serve as a holding company for various
natural resource projects. On September 2, 2017, APR entered into an Agreement of Purchase and Sale with Rush Gold Royalty, Inc. (“RGR”),
a Wyoming corporation, to acquire a 51% ownership in twenty-one mining claims over an area of approximately 400 acres in Granite Mining
District, Grant County, Oregon, U.S.A., in exchange for a total purchase price of twenty-five million U.S. Dollars ($US 25,000,000) to
be paid in a combination of cash, convertible demand promissory note and PHI Group, Inc.’s Class A Series II Convertible Cumulative
Redeemable Preferred Stock (“Preferred Stock”). This transaction was closed effective October 3, 2017. Following the first
amendment dated April 19, 2018 and the second amendment dated September 29, 2018 retroactively effective April 20, 2018, to the afore-mentioned
Agreement of Purchase and Sale, PHI Group, Inc. paid ten million shares of its Class A Series II Convertible Cumulative Redeemable Preferred
Stock, a convertible demand promissory note and cash totaling $25,000,000 to Rush Gold Royalty, Inc. As of June 30, 2020, the Company
has recorded $462,000 paid for this transaction as expenses for research and development in connection with the Granite Mining Claims
project. The value of these mining claims is expected to be adjusted later after a new valuation of these mining assets is conducted
by an independent third-party valuator.
SPECIAL
STOCK DIVIDEND FROM AMERICAN PACIFIC RESOURCES, INC. SUBSIDIARY
On
April 23, 2018, the Company’s Board of Directors passed a resolution to declare a twenty percent (20%) special stock dividend from
its holdings of Common Stock in American Pacific Resources, Inc., a subsidiary of the Company, to shareholders of Common Stock of the
Company as follows: (a) Declaration date: April 23, 2018; (b) Record date: May 31, 2018; (c) Payment date: October 31, 2018; (d) Dividend
ratio: All eligible shareholders of Common Stock of the Company as of the Record date shall be entitled to receive two (2) shares of
Common Stock of American Pacific Resources, Inc. for every ten (10) shares of Common Stock of PHI Group, Inc. held by such shareholders
as of the referenced Record date. The payment date was rescheduled for a number of times due to various uncontrollable factors.
Most
recently, on June 25, 2021, the Board of Directors of PHI Group, Inc., adopted a resolution to further extend the Record Date to December
31, 2021 and amend the provisions for the afore-mentioned stock dividend as follows: (a) Eligible shareholders: In order to be eligible
for the above-mentioned special stock dividend, the minimum amount of Common Stock of PHI Group, Inc. each shareholder must hold as of
December 31, 2021 (the New Record Date) is two thousand (2,000) shares; (b) Dividend ratio: All eligible shareholders of Common Stock
of the Company as of the new Record Date will be entitled to receive one (1) share of Common Stock of American Pacific Resources, Inc.
for every two thousand (2,000) shares of Common Stock of PHI Group, Inc. held by such shareholders as of the new Record date; and (c)
Payment Date: the Payment Date for the distribution of the special stock dividend to be ten (10) business days after a registration statement
for said special stock dividend shares is declared effective by the Securities and Exchange Commission.
PHIVITAE
HEALTHCARE, INC.
PHIVITAE
HEALTHCARE, INC., a Wyoming corporation, is a wholly-owned subsidiary of PHI Group established on July 07, 2017 under the name of “PHIVATAE
Corporation, Inc.” with the intention to acquire a pharmaceutical and medical equipment distribution company in Romania and to
manage distribution of medical equipment and pharmaceutical products to emerging markets. This subsidiary changed its name to PHIVITAE
HEALTHCARE, INC. on March 17, 2020. On April 27, 2020, PHI Group, Inc. signed a business cooperation agreement with Natural Well Technical
Ltd. (“NWTL”), Taiwanese company, to jointly cooperate in the research and development activities of pertinent technologies
that have been initiated and continue to be carried out by NWTL and applying them to produce commercial products and services in the
fields of healthcare, beauty supply, agriculture and industry, as the case may be, as well as any other business activities deemed mutually
beneficial.
In
particular, NWTL and PHI Group will initially focus on the following activities:
1.
Developing and implementing a comprehensive plan to increase the production, marketing and sale of the “Super Green” High
Energy Drop Drink and “Mistyrious” Fine Mist Spray products on a large scale worldwide;
2.
Developing and implementing a plan to increase the production, marketing and sale of “Super Cassava” and “Uni-Wash”
Engine Booster products as well as other products related to the fields of agriculture and energy that have been studied and developed
by NWTL;
3.
Continuing to conduct research and accumulate clinical data for NWTL’s biotechnologies in order to obtain U.S. FDA’s approval
of cancer treatments and other healthcare products. In addition, both parties also develop, produce and market beauty supply products.
4.
Designing a financial plan and providing the required funding for NWTL to execute its business plan.
Both
companies intend to conduct the activities mentioned in 1. and 3. above through PHIVITAE HEALTHCARE, INC. or a subsidiary under it.
STOCK
OWNERSHIPS:
MYSON
GROUP, INC.
As
of December 31, 2020, PHI Group, Inc. and PHI Capital Holdings, Inc., a wholly owned subsidiary of the Company, together owned 33,805,106
shares of Common Stock of Myson Group, Inc., a Nevada corporation currently traded on the OTC markets under the symbol “MYSN.”
The Company wrote off 32,900,106 shares of MYSN stock held in certificate form as worthless as of June 30, 2019, as Myson Group was not
in good standing with the State of Nevada at that time. Subsequently, Myson Group filed a Certificate of Reinstatement with the Secretary
of State of Nevada on June 04, 2021.
SPORTS
POUCH BEVERAGE COMPANY, INC.
As
of December 31, 2020, the Company through PHILUX Capital Advisors, Inc. owned 292,050,000 shares of Sports Pouch Beverage Company, Inc.,
a Nevada corporation traded on the OTC Markets under the symbol “SPBV”. On March 19, 2021 this company signed a Business
Combination Agreement with Glink Apps International, Inc. and on May 26, 2021 the corporate name was changed to Glink Arts Global Group,
Inc.
CRITICAL
ACCOUNTING POLICIES
The
Company’s financial statements and related public financial information are based on the application of accounting principles generally
accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations
of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported. These estimates can also
affect supplemental information contained in the external disclosures of the Company including information regarding contingencies, risk
and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and
conservatively applied. Valuations based on estimates are reviewed by us for reasonableness and conservatism on a consistent basis throughout
the Company. Primary areas where financial information of the Company is subject to the use of estimates, assumptions and the application
of judgment include acquisitions, valuation of long-lived and intangible assets, recoverability of deferred tax and the valuation of
shares issued for services. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable
under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions.
Valuation
of Long-Lived and Intangible Assets
The
recoverability of long-lived assets requires considerable judgment and is evaluated on an annual basis or more frequently if events or
circumstances indicate that the assets may be impaired. As it relates to definite life intangible assets, we apply the impairment rules
as required by SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and Assets to Be Disposed Of” as amended
by SFAS No. 144, which also requires significant judgment and assumptions related to the expected future cash flows attributable to the
intangible asset. The impact of modifying any of these assumptions can have a significant impact on the estimate of fair value and, thus,
the recoverability of the asset.
Income
Taxes
We
recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases
of assets and liabilities. We regularly review our deferred tax assets for recoverability and establish a valuation allowance based upon
historical losses, projected future taxable income and the expected timing of the reversals of existing temporary differences. As of
December 31, 2020, 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 December 31, 2020 and 2019, our
financial condition at December 31, 2020 and factors that we believe could affect our future financial condition and results of operations.
Historical results may not be indicative of future performance.
This
discussion and analysis should be read in conjunction with our consolidated financial statements and the notes thereto included elsewhere
in this Form 10-Q. Our consolidated financial statements are prepared in accordance with Generally Accepted Accounting Principles in
the United States (“GAAP”). All references to dollar amounts in this section are in United States dollars.
Three
months ended December 31, 2020 compared to the three months ended December 31, 2019
Total
Revenues:
During
the three months ended December 31, 2020, the generated $13,000 in revenues from consulting services as compared to no revenue for the
corresponding quarter ended December 31, 2019.
Total
Operating Expenses:
Total
operating expenses were $109,892 and $183,348 for the three months ended December 31, 2020, and 2019, respectively. A decrease of $73,456
in total operating expenses between the two periods was mainly due to a decrease of $45,000 in salaries and wages, a decrease in general
and administrative expenses of $8,765 and a decrease in professional services of $19,691.
Loss
from Operations:
Loss
from operations for the quarter ended December 31, 2020 was $96,892, as compared to loss from operations of $183,348 for the corresponding
period ended December 31, 2019. A decrease of $86,456 in the loss from operations between the two periods was mainly due to reasons mentioned
in total operating expenses above and the absence of revenues during the quarter ended December 31, 2019 as compared to revenues of $13,000
for the corresponding quarter in 2020.
Other
Income and Expenses:
The
Company had a net other expenses of $115,975 for the three months ended December 31, 2020, as compared to net other expenses of $43,369
for the three months ended December 31, 2019. The increase in other expenses of $72,606 between the two periods was mainly due to an
increase of $76,057 in net interest expenses and an increase of $3,451 in other expense. Interest expenses were $117,532 and $41,464
for the three months ended December 31, 2020 and 2019, respectively.
Net
Income (Loss):
Net
loss for the three months ended December 31, 2020 was $212,867, as compared to net loss of $226,717 for the same period in 2019, which
is equivalent to ($0.00) per share for the current period and ($0.00) per share for the corresponding period ended December 31, 2019,
based on the weighted average number of basic and diluted shares outstanding at the end of each corresponding period.
Six
months ended December 31, 2020 compared to the six months ended December 31, 2019
Total
Revenues:
The
Company generated $18,000 from consulting services for the six months ended December 31, 2020 as compared to $8,531 in revenues for the
same period ended December 31, 2019.
Total
Operating Expenses:
Total
operating expenses were $426,915 and $334,529 for the six months ended December 31, 2020, and 2019, respectively. An increase of $92,386
in total operating expenses between the two periods was mainly due to an increase in professional services of $165,544 and an increase
in general and administrative expenses of $16,841, offset by a decrease of $90,000 in salaries and wages.
Loss
from Operations:
Loss
from operations for the six months ended December 31, 2020 was $408,915, as compared to loss from operations of $325,998 for the corresponding
period ended December 31, 2018. An increase of $82,917 in the loss from operations between the two periods was mainly due to the changes
in the components of the Company’s operating expenses as mentioned above.
Other
Income and Expenses:
The
Company had a net other expenses of $140,216 for the six months ended December 31, 2020, as compared to net other expenses of $254,151
for the six months ended December 31, 2019. The decrease in other expenses of $113,935 between the two six-month periods was mainly due
to a decrease of $106,660 in net interest expenses and an increase of $7,275 in other income. Interest expenses were $142,933 and $249,593
for the six months ended December 31, 2020 and 2019, respectively.
Net
Income (Loss):
Net
loss for the six months ended December 31, 2020 was $549,131, as compared to net loss of $580,149 for the same period in 2019, which
is equivalent to ($0.00) per share for the current period and ($0.00) per share for the corresponding period ended December 31, 2019,
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 $85,853 and $14,141 as of December 31, 2020 and December 31, 2019, respectively.
Net
cash used in the Company’s operating activities during the six months ended December 31, 2020 was $282,375, as compared to net
cash used in operating activities of $275,631 during the corresponding period ended December 31, 2019. This represents a variance of
$6,744 in net cash used in operating activities between the two periods, which is less than 2.50%.
There
was no net cash provided by or used in investing activities during either the six months ended December 31, 2020 or December 31, 2019.
Cash
provided by financing activities was $142,848 for the six months ended December 31, 2020, as compared to cash provided by financing activities
in the amount of $225,256 for the same period ended December 31, 2019. The primary underlying reasons for a decrease of $82,408 in cash
provided by financing activities between the two corresponding periods were primarily due to a decrease in common stock and paid-in capital
in the amount $171,980 and a change in comprehensive loss of $89,632 between the two periods.
HISTORICAL
FINANCING ARRANGEMENTS
SHORT
TERM NOTES PAYABLE AND ISSUANCE OF COMMON STOCK
In
the course of its business, the Company has obtained short-term loans from individuals and institutional investors and from time to time
raised money by issuing restricted common stock of the Company under the auspices of Rule 144. These notes bear interest rates ranging
from 0% to 36% per annum.
CONVERTIBLE
PROMISSORY NOTES
The
Company has also from time to time issued convertible promissory notes to various private investment funds for short-term working capital
and special projects. Typically these notes bear interest rates from 5% to 12% per annum, mature within one year, are convertible to
common stock of the Company at a discount ranging from 42% to 50%, and may be repaid within 180 days at a prepayment premium ranging
from 130% to 150%.
COMPANY’S
PLAN OF OPERATION FOR THE FOLLOWING 12 MONTHS
In
the next twelve months the Company’s goals are to create a number of sub-funds under PHILUX Global Funds SCA, SICAV-RAIF for investment
in real estate, renewable energy, agriculture, infrastructure, and healthcare, as well as develop the Asia Diamond Exchange in Vietnam.
In addition, the Company will continue to carry out its merger and acquisition program by acquiring target companies for roll-up strategy
and also invest in special situations. Moreover, we will provide advisory and consulting services to international clients through our
wholly owned subsidiary PHILUX Capital Advisors, Inc. (formerly known as PHI Capital Holdings, Inc.)
MATERIAL
CASH REQUIREMENTS: We must raise substantial amounts of capital to fulfill our plans for PHILUX Global Funds and for acquisitions. We
intend to use equity, debt and project financing to meet our capital needs for acquisitions and investments.
Management
has taken action and formulated plans to meet the Company’s operating needs through June 30, 2022 and beyond. The working capital
cash requirements for the next 12 months are expected to be generated from operations, sale of marketable securities and additional financing.
The Company plans to generate revenues from its consulting services, merger and acquisition advisory services, and acquisitions of target
companies with cash flows.
AVAILABLE
FUTURE FINANCING ARRANGEMENTS: The Company may use various sources of funds, including short-term loans, long-term debt, equity capital,
and project financing as may be necessary. The Company believes it will be able to secure the required capital to implement its business
plan.
EQUITY
LINE FACILITY
On
March 6, 2017, PHI Group, Inc., a Nevada corporation (the “Company”) and Azure Capital, a Massachusetts Corporation (the
“Investor”) entered into an Investment Agreement (the “Investment Agreement”) and a Registration Rights Agreement
(the “Registration Rights Agreement”), each dated March 6, 2017 between the Company and the Investor.
Pursuant
to the Investment Agreement, the Investor committed to purchase, subject to certain restrictions and conditions, up to $10,000,000 worth
of the Company’s common stock, over a period of 36 months from the effectiveness of the registration statement registering the
resale of shares purchased by the Investor pursuant to the Investment Agreement. The Company agreed to initially reserve 20,000,000 shares
of its Common Stock for issuance to the Investor pursuant to the Investment Agreement. In the event the Company cannot register a sufficient
number of shares of its Common Stock for issuance pursuant to the Investment Agreement, the Company will use its best efforts to authorize
and reserve for issuance the number of shares required for the Company to perform its obligations in connection with the Investment Agreement
as soon as reasonable practical.
The
Company may in its discretion draw on the facility from time to time, as and when the Company determines appropriate in accordance with
the terms and conditions of the Investment Agreement. The maximum number of shares that the Company is entitled to put to the Investor
in any one draw down notice shall not exceed shares with a purchase price of $250,000 or 200% of the average daily volume (U.S. market
only) of the Company’s Common Stock for the three (3) Trading Days prior to the applicable put notice date multiplied by the average
of the three (3) daily closing prices immediately preceding the put date, calculated in accordance with the Investment Agreement. The
Company may deliver a notice for a subsequent put from time to time, after the pricing period for the prior put has been completed.
The
purchase price shall be set at ninety-four percent (94%) of the lowest daily volume weighted average price (VWAP) of the Company’s
common stock during the five (5) consecutive trading days immediately following the put notice date. On each put notice submitted to
the Investor by the Company, the Company shall specify a suspension price for that put. In the event the price of Company’s Common
Stock falls below the suspension price, the put shall be temporarily suspended. The put shall resume at such time the price of the Company’s
Common Stock is above the suspension price, provided the dates for the pricing period for that particular put are still valid. In the
event the pricing period has been complete, any shares above the suspension price due to the Investor shall be sold to the Investor by
the Company at the suspension price under the terms of the Investment Agreement. The suspension price for a put may not be changed by
the Company once submitted to the Investor.
There
are put restrictions applied on days between the draw down notice date and the closing date with respect to that particular put. During
such time, the Company shall not be entitled to deliver another draw down notice. In addition, the Investor will not be obligated to
purchase shares if the Investor’s total number of shares beneficially held at that time would exceed 4.99% of the number of shares
of the Company’s common stock as determined in accordance with Rule 13d-1(j) of the Securities Exchange Act of 1934, as amended.
In addition, the Company is not permitted to draw on the facility unless there is an effective registration statement to cover the resale
of the shares.
The
Investment Agreement also contains customary representations and warranties of each of the parties. The assertions embodied in those
representations and warranties were made for purposes of the Investment Agreement and are subject to qualifications and limitations agreed
to by the parties in connection with negotiating the terms of the Investment Agreement. The Investment Agreement further provides that
the Company and the Investor are each entitled to customary indemnification from the other for, among other things, any losses or liabilities
they may suffer as a result of any breach by the other party of any provisions of the Investment Agreement or Registration Rights Agreement
(as defined below). Investor should read the Investment Agreement together with the other information concerning the Company that the
Company publicly files in reports and statements with the Securities and Exchange Commission (the “SEC”).
Pursuant
to the terms of the Registration Rights Agreement, the Company is obligated to file one or more registrations statements with the SEC
within twenty-one (21) days after the date of the Registration Rights Agreement to register the resale by the Investor of the shares
of common stock issued or issuable under the Investment Agreement. In addition, the Company is obligated to use all commercially reasonable
efforts to have the registration statement declared effective by the SEC within 90 days after the registration statement is filed.
This
Investment Agreement was amended on August 3, 2017 to allow for the reservation of 65,445,000 shares of the Company’s Common Stock
for issuance to the Investor pursuant to the corrected Investment Agreement.
The
Company has filed a S-1 Registration Statement with the Securities and Exchange Commission to include 7,936,600 shares of its Common
Stock for issuance in connection with the first tranche of the Equity Line Facility. The S-1 Registration Statement, as amended, was
declared effective by the Securities and Exchange Commission on January 11, 2018. As of the day of this report, the Company has not accessed
the Equity Line Facility for funding.