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UNITED
STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
FORM
10-Q
☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the
quarterly period ended:
September 30, 2021
or
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the
transition period from ___________________________ to
______________________________________
Commission
File Number:
2-78335-NY

PHI GROUP, INC.
(Exact name
of registrant as specified in its charter)
Wyoming |
|
90-0114535 |
(State or
other jurisdiction of
incorporation or
organization)
|
|
(I.R.S.
Employer
identification
Number)
|
2323 Main Street
Irvine, |
|
CA
92614 |
(Address of
principal executive offices) |
|
(Zip
Code) |
|
714-793-9227 |
|
|
(Registrant’s telephone
number, including area code) |
|
Securities
registered pursuant to Section 12(b) of the Act:
Title of
each class |
|
Trading
Symbol(s) |
|
Name of
exchange on which registered |
Common Stock |
|
PHIL |
|
OTC
Markets |
Indicate by
check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or such
shorter period that the registrant was required to file such
reports) and (2) has been subject to such filing requirements for
the past 90 days.
Yes ☒ No ☐
Indicate by
check mark whether the registrant has submitted electronically and
posted on its corporate website, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T (ss.232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required
to submit and post such files).
Yes ☐
No ☒
Indicate by
check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.
|
Large
accelerated filer |
☐ |
|
Accelerated
filer |
☐ |
|
|
|
|
|
|
|
Non-accelerated filer |
☐ |
|
Smaller reporting
company |
☒ |
Indicate by
check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes ☐
No ☒
Indicate the
number of shares outstanding of each of the issuer’s classes of
common stock, as of the latest practicable date: As of November 19,
2021, there were
28,578,055,259 shares of the registrant’s $0.001 par value
Common Stock issued and outstanding.
PHI
GROUP, INC.
INDEX TO
FORM 10-Q
PART I - FINANCIAL
INFORMATION
ITEM 1- CONSOLIDATED FINANCIAL
STATEMENTS – UNAUDITED
PHI
GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS (UNAUDITED)
The
accompanying notes form an integral part of these audited
consolidated financial statements
PHI
GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE
THREE MONTHS ENDED
The
accompanying notes form an integral part of these audited
consolidated financial statements
PHI
GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR THE
THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(UNAUDITED)
The accompanying notes form an integral part of these audited
consolidated financial statements
PHI
GROUP, INC. AND SUBSIDIARIES
STATEMENT OF
STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE
YEAR ENDED JUNE 30, 2021 (AUDITED)
AND THE
QUARTER ENDED 9/30/2021 (UNAUDITED)
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 mergers and acquisitions, 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. Recently, the
Company has signed a Memorandum of Agreement to acquire seventy
percent ownership in Five-Grain Treasure Spirits Company, Ltd., a
baiju distiller in Jilin Province, China. 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 (%), (7) PHI Luxembourg
Holding SA, a Luxembourg corporation (100%), and (8) Asia Diamond
Exchange, Inc., a Wyoming 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, 2021. 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
nine months ended September 30, 2021 are not necessarily indicative
of the results to be expected for the fiscal year ending June 30,
2022.
USE OF
ESTIMATES
The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
periods. Actual results could differ from those
estimates.
Cash and Cash
Equivalents
The Company
considers all liquid investments with a maturity of three months or
less from the date of purchase that are readily convertible into
cash to be cash equivalents.
MARKETABLE
SECURITIES
The
Company’s securities are classified as available-for-sale and, as
such, are carried at fair value. Securities classified as
available-for-sale may be sold in response to changes in interest
rates, liquidity needs, and for other purposes.
Typically,
each investment in marketable securities represents less than
twenty percent (20%)
of the outstanding common stock and stock equivalents of the
investee, and each security is quoted on either the OTC Markets or
other public exchanges. As such, each investment is accounted for
in accordance with the provisions of SFAS No. 115.
Unrealized
holding gains and losses for available-for-sale securities are
excluded from earnings and reported as a separate component of
stockholder’s equity. Realized gains and losses for securities
classified as available-for-sale are reported in earnings based
upon the adjusted cost of the specific security sold. On September
30, 2021, the marketable securities were recorded at $2,722,400 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. On September 30,
2021, the Company did not have any nonfinancial assets or
nonfinancial liabilities that are recognized or disclosed at fair
value. ASC 820 requires that financial assets and liabilities that
are reported at fair value be categorized as one of the types of
investments based upon the methodology mentioned in Level 1, Level
2 and Level 3 above for determining fair value.
Assets
measured at fair value on a recurring basis are summarized below.
The Company also has convertible notes and derivative liabilities
as disclosed in this report that are measured at fair value on a
regular basis until paid off or exercised.
Available-for-sale
securities
The Company
uses various approaches to measure fair value of available-for-sale
securities, while applying the three-level valuation hierarchy for
disclosures, specified in ASC 820. Our Level 1 securities were
measured using the quoted prices in active markets for identical
assets and liabilities.
The
company’s policy regarding the transfers in and/or out of Level 3
depends on the trading activity of the security, the volatility of
the security, and other observable units which clearly represents
the fair value of the security. If a level 3 security can be
measured using a more fairly represented fair value, we will
transfer these securities either into Level 1 or Level 2, depending
on the type of inputs.
ACCOUNTS
RECEIVABLE
Management
reviews the composition of accounts receivable and analyzes
historical bad debts. As of September 30, 2021, 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
In August 2020, the Financial Accounting Standards Board (“FASB”)
issued Accounting Standards Update (“ASU”) 2020-06-Debt-Debt with
Conversion and Other Options (Subtopic 470-20) and Derivatives and
Hedging-Contracts in Entity’s Own Equity (Subtopic
815-40)-Accounting For Convertible Instruments and Contracts in an
Entity’s Own Equity. The ASU simplifies accounting for convertible
instruments by removing major separation models required under
current GAAP. Consequently, more convertible debt instruments will
be reported as a single liability instrument with no separate
accounting for embedded conversion features. The ASU removes
certain settlement conditions that are required for equity
contracts to qualify for the derivative scope exception, which will
permit more equity contracts to qualify for it. The ASU also
simplifies the diluted net income per share calculation in certain
areas. The new guidance is effective for annual and interim periods
beginning after December 15, 2021, and early adoption is permitted
for fiscal years beginning after December 15, 2020. The Company
intends to adopt ASU 2020-06 for the quarter beginning January 1,
2022.
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 non-public
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 non-public
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 September 30, 2021 consisted of 905,000
shares of Myson Group, Inc. (formerly Vanguard Mining Corporation)
292,050,000
shares of Sports Pouch Beverage Co., both of which are
publicly-traded companies quoted on the OTC Markets (Trading
symbols “MYSN” and “SPBV,” respectively). The fair value of the
shares recorded as of September 30, 2021 was $2,722,400.
SCHEDULE
OF FAIR VALUE OF INVESTMENTS MARKETABLE EQUITY
SECURITIES
Securities available
for sale |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
September 30, 2021 |
|
|
None |
|
|
$ |
6,335 |
|
|
$ |
2,716,065 |
|
|
$ |
2,722,400 |
|
June 30, 2021 |
|
|
None |
|
|
$ |
5,792 |
|
|
$ |
379,665 |
|
|
$ |
385,457 |
|
NOTE 4 – PROPERTIES AND
EQUIPMENT
The Company
did not have any properties or equipment as of September 30,
2021.
NOTE 5 – OTHER
ASSETS
Other Assets
comprise of the following as of September 30, 2021 and June 30,
2021
SCHEDULE
OF OTHER ASSETS
|
|
September 30, 21 |
|
|
June 30, 2021 |
|
Investment in Asia Diamond
Exchange, Inc. |
|
$ |
614,010 |
|
|
$ |
406,427 |
|
Investment in PHILUX Global Funds,
SCA, SICAV-RAIF |
|
$ |
34,743 |
|
|
$ |
35,568 |
|
Investment in AQuarius Power,
Inc. |
|
$ |
5,000 |
|
|
$ |
5,000 |
|
Total Other
Assets |
|
$ |
653,753 |
|
|
$ |
446,995 |
|
Other Assets
as of September 30, 2021 consist of a $5,000 investment in AQuarius Power,
Inc., a Texas renewable energy technology company, $614,010 in common
stock of Asia Diamond Exchange, Inc. and $34,743 in PHILUX
Global Funds.
During the
quarter ended September 30, 2021, the Company received 207,582,770 shares of
Common Stock of Asia Diamond Exchange, Inc., par value of
$0.001, for $207,572.77 paid by PHI Group, Inc.
up to June 30, 2021 for the development costs of the Asia Diamond
Exchange project.
For the
investment in PHILUX Global Funds, as of September 30, 2021, PHI
Luxembourg Development SA, a Luxembourg corporation and
wholly-owned subsidiary of PHI Group, Inc. held twenty-eight ordinary
shares of PHILUX Global Funds valued at EUR 28,000, PHI Luxembourg Holding
SA, a Luxembourg corporation 100% owned by PHI Group, Inc. as
the ultimate beneficiary owner (UBO), held one participating share
of PHILUX Global Funds valued at EUR
1,000, and PHILUX Global General Partner SA, a Luxembourg
corporation 100% owned by PHI Group, Inc. as
the ultimate beneficiary owner (UBO), held one management share of
PHILUX Global Funds valued at EUR 1,000. The total holdings in
PHILUX Global Funds were equivalent to $34,743 as of September 30, 2021
based on the prevalent exchange rate at that time.
NOTE 6 – CURRENT
LIABILITIES
Current
Liabilities of the Company consist of the followings as of
September 30, 2021 and June 30, 2021.
SCHEDULE OF CURRENT LIABILITIES
|
|
Sep 30, 2021 |
|
|
Jun 30, 2021 |
|
Current
Liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
|
|
589,903 |
|
|
|
608,521 |
|
Sub-fund obligations |
|
|
1,474,775 |
|
|
|
1,474,775 |
|
Accrued expenses |
|
|
983,763 |
|
|
|
1,993,478 |
|
Short-term notes and loans
payable |
|
|
342,030 |
|
|
|
325,621 |
|
Convertible Promissory Notes |
|
|
997,730 |
|
|
|
220,230 |
|
Due to officers |
|
|
1,119,118 |
|
|
|
1,720,322 |
|
Advances from customers |
|
|
572,237 |
|
|
|
582,237 |
|
Total
Current Liabilities |
|
$ |
6,079,556 |
|
|
$ |
6,925,185 |
|
ACCRUED
EXPENSES: Accrued expenses as of September 30, 2021 totaling
$983,763 consist of $741,683 in accrued salaries and
payroll liabilities and $242,079 in accrued interest from
short-term notes and convertible notes.
NOTES
PAYABLE: As of September 30, 2021, Notes Payable consist of
$289,280 in short-term notes payable,
$43,750
in PPP loan and $997,730 in convertible promissory
notes.
ADVANCES
FROM CUSTOMERS:
As of
September 30, 2021, the Company recorded $572,237 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 September 30, 2021 and June 30, 2021, the balances
were $1,119,118 and $1,720,322,
respectively.
COMPONENTS OF DUE TO OFFICERS
AND DIRECTORS
Officers/Directors |
|
Sep 30, 2021 |
|
|
Jun 30, 2021 |
|
Henry Fahman |
|
|
455,768 |
|
|
$ |
1,056,972 |
|
Tam Bui |
|
|
663,350 |
|
|
$ |
663,350 |
|
Total |
|
$ |
1,119,118 |
|
|
$ |
1,720,322 |
|
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
September 30, 2021, the Company had a total of $342,030 in short-term notes payable
with $242,079 in accrued and unpaid
interest. These notes bear interest rates ranging from 0% to
36% per
annum.
B. |
CONVERTIBLE
PROMISSORY NOTES OUTSTANDING AS OF SEPTEMBER 30, 2021 |
As of
September 30, 2021, the Company had a net balance of $997,730 in convertible promissory
notes.
NOTE 9 – PAYROLL TAX
LIABILITIES
As of
September 30, 2021, 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 September
30, 2021 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
September 30, 2021, the total number of authorized capital stock of
the Company consisted 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 September 30, 2021 was 484,767 shares valued at
$44,170 according to cost
method.
COMMON
STOCK
During the
quarter ended September 30, 2021, the Company issued a total of
1,093,102,837 shares any of its Common Stock for consulting
service, accrued salaries, and loan conversion and cancelled
784,249 shares of its Common
Stock that were issued in error in connection with a conversion of
promissory notes by a noteholder.
As of
September 30, 2021, there were 27,173,587,483
shares of the Company’s common stock issued and
outstanding.
PREFERRED STOCK
CLASS B SERIES I PREFERRED STOCK
As of
September 30, 2021, the following amounts of Preferred Stock were
issued and outstanding:
Class B
Series I Preferred Stock: 180,000
shares.
NOTE 13 – STOCK-BASED COMPENSATION
PLAN
1. On
February March 18, 2015, the Company adopted an Employee Benefit
Plan to set aside
1,000,000 shares of common stock for eligible employees and
independent contractors of the Company and its subsidiaries. As of
September 30, 2021 the Company has not issued any stock in lieu of
cash under this plan.
2. 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:
SCHEDULE OF FAIR VALUE OF STOCK OPTION
ASSUMPTIONS
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:
SCHEDULE OF FAIR VALUE OF STOCK OPTION ISSUANCE
DATE
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 |
|
3. On
September 9, 2021, the Company adopted the PHI Group 2021 Employee
Benefit Plan and set aside
2,600,000,000 shares of its common
stock to provide a means of non-cash remuneration to selected
eligible employees and independent contractors (“Eligible
Participants”) of the Company and its subsidiaries. On September
17, 2021, the Company filed Form S-8 Registration Statement under
the Securities Act of 1933 with the Securities and Exchange
Commission to register these shares for the above-mentioned plan.
As of September 30, 2021 the Company has issued
767,000,000 shares for consulting
service under the PHI Group 2021 Employee Benefit Plan.
NOTE 14 – RELATED PARTY
TRANSACTIONS
The Company
recognized a total of $90,000 in salaries for the
President, the Chief Operating Officer and the Secretary &
Treasurer of the Company during the quarter ended September 30,
2021.
Henry
Fahman, Chairman and Chief Executive Officer, and Tam Bui, a member
of the Board of Directors and Chief Operating Officer, of the
Company from time to time lend money to the Company. These loans
are without interest and payable upon demand.
As of
September 30, 2021, the Company still owed the following amounts to
Related Parties:
SCHEDULE
OF RELATED PARTIES
No. |
|
Name: |
|
Title: |
|
Amount: |
|
Description: |
|
|
|
|
|
|
|
|
|
1) |
|
Tam Bui |
|
Director/COO |
|
$ |
75,000 |
|
Accrued salaries |
|
|
|
|
|
|
$ |
663,350 |
|
Loans |
|
|
|
|
|
|
|
|
|
|
2) |
|
Henry Fahman |
|
Chairman/CEO |
|
$ |
279,250 |
|
Accrued salaries |
|
|
|
|
|
|
$ |
455,768 |
|
Loans |
|
|
|
|
|
|
|
|
|
|
3) |
|
Tina Phan |
|
Secretary/Treasurer |
|
$ |
259,186 |
|
Accrued salaries |
NOTE 15 – CONTRACTS AND
COMMITMENTS
1.
ACQUISITION OF 51% EQUITY INTEREST IN VINAFILMS JOINT STOCK
COMPANY
On August
06, 2018, signed a Business Cooperation Agreement with Vinafilms
JSC (Công ty Cổ phần Màng Bao Bì Tân Vinh Nam Phát), a Vietnamese
joint stock company, with principal business address at Lot G9,
Road No. 9, Tan Do Industrial Zone, Duc Hoa Ha Village, Duc Hoa
District, Long An Province, Vietnam, hereinafter referred to as
“VNF” and its majority shareholder, to exchange fifty-one percent
ownership in VNF for Preferred Stock of PHI. According to the
Agreement, PHI will be responsible for filing a S-1 Registration
Statement with the Securities and Exchange Commission for American
Pacific Plastics, Inc., a subsidiary of PHI that holds the
51% equity ownership in VNF,
to become a fully-reporting public company in the U.S. Stock
Market.
On September
20, 2018, a Stock Swap Agreement was signed by and between Ms. Do
Thi Nghieu, the majority shareholder holding 76% of ownership in VNF, and
PHI to exchange 3,060,000 shares of ordinary
stock of VNF owned by Ms. Do Thi Nghieu for 50 million shares of Class A
Series III Cumulative, Convertible, Redeemable Preferred Stock of
PHI. Though this transaction was technically closed on September
28, 2018, the Company did not recognize the operations of Vinafilms
JSC in its consolidated financial statements as of September 30,
2021. 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.
2. 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 August 13, 2021, Tecco Group has paid
four billion Vietnam Dong (USD 156,366 net) towards the total
agreed amount.
3. 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 August 13, 2021, Phat Van Hung has not made any
payment towards the agreed amount.
4. 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 August 13, 2021, Xuan Quynh LLC has not made any
payment towards the agreed amount.
5.
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.
6. ISSUANCE
OF CONVERTIBLE PROMISSORY NOTES
During the
quarter ended September 30, 2021, the Company issued the following
convertible notes:
a. On July
22, 2021, the Company issued a Promissory Note to Power Up Lending
Group, Ltd., a Virginia corporation, in the amount of $80,000
at an
interest rate of
8% 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 39%
discount to the average of the two lowest closing bid prices during
the ten trading days immediately prior to the conversion date or
may be prepaid on or prior to the 180th calendar day
after the Issue Date at a Prepayment Factor of 125% to 139%
depending on the passage of time from the date of issuance to the
date of payment. The Company plans to prepay this note in cash
prior to the 180th calendar day after the Issue
Date.
b. On August
10, 2021, the Company issued a Promissory Note to Power Up Lending
Group, Ltd., a Virginia corporation, in the amount of $53,750
at an
interest rate of
8% 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 39%
discount to the average of the two lowest closing bid prices during
the ten trading days immediately prior to the conversion date or
may be prepaid on or prior to the 180th calendar day
after the Issue Date at a Prepayment Factor of 125% to 139%
depending on the passage of time from the date of issuance to the
date of payment. The Company plans to prepay this note in cash
prior to the 180th calendar day after the Issue
Date.
c. On August
31, 2021, the Company issued 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.
d. On
September 01 2021, the Company issued a Promissory Note to Power Up
Lending Group, Ltd., a Virginia corporation, in the amount of
$53,750
at an
interest rate of
8% 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 39%
discount to the average of the two lowest closing bid prices during
the ten trading days immediately prior to the conversion date or
may be prepaid on or prior to the 180th calendar day
after the Issue Date at a Prepayment Factor of 125% to 139%
depending on the passage of time from the date of issuance to the
date of payment. The Company plans to prepay this note in cash
prior to the 180th calendar day after the Issue
Date.
e. On
September 15, 2021, the Company issued
Promissory Note to Master Hill Fund, LLC, a Delaware limited
liability company, in the principal amount of $550,000
at an
interest rate of
12% 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 $0.0061
per share or may be prepaid at any time prior to the date that an
Event of Default occurs under this Note in a cash amount equal to
the sum of (i) 100% multiplied by the principal amount then
outstanding plus (ii) accrued and unpaid interest on the principal
amount to the prepayment date, plus (iii) $750.00 reimbursement for
administrative fees. The Company plans to prepay this note in cash
prior to the 180th calendar day after the Issue
Date.
f. Effective
September 27, 2021, the Company issued a 12% convertible promissory note to
Firstfire Global Opportunities Fund LLC, a Delaware limited
liability, for $275,000, the net proceeds of which were
received by the Company on October 05, 2021. This note matures one year from
the date of issuance and is convertible to Common Stock of the
Company at $0.0061 per share. The Company can
elect to prepay the note within 180 days of the issuance date in
cash with an amount equal to the sum of the principal amount then
outstanding plus any accrued and unpaid interest, fees and
defaults, and there shall be no prepayment penalty. The Company
intends to prepay this note during the allowable prepayment
period.
7.
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 in principle 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 the
implementation of the Asia Diamond Exchange. The Company plans to
return to Vietnam as soon possible to hold an international press
conference and complete the required documents with the Vietnamese
provincial and central governments.
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 additional land close to the Long Thanh International Airport
to develop Long Thanh Multi-Commodities Logistics Center
(LMLC).
8.
TERMINATION OF INVESTMENT AGREEMENT
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 reasonably
practical.
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
had 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.
On September
7, 2021 to terminate this Investment Agreement effective
retroactively January 11, 2021.
9. LETTER OF
INTENT WITH CHOKY F. SIMANJUNTAK (CYFS Group)
On August
02, 2021, the Company signed a Letter of Intent with
Indonesia-based CYFS Group, headed by Mr. Choky Fernando
Simanjuntak, to sponsor and co-found CO2-1-0 (CARBON) CORP to
implement a new disruptive carbon mitigation initiative through
environmentally sustainable projects starting in Indonesia,
Vietnam, other ASEAN countries, and worldwide. On September 21,
2021 CO2-1-0 (CARBON) CORP was incorporated as a Wyoming
corporation to manage this program. PHI Group will contribute a
major portion of the development budget and will hold 50.1% shares
of CO2-1-0 (CARBON).
According to
the United Nation Framework Convention on Climate Change (UNFCCC),
together with the Paris agreement and Kyoto protocol in 2016, where
Indonesia has actively participated and agreed to maintain the
earth temperature not to exceed by 1,5 degrees Celsius by 2030. The
greenhouse gases (GHG), mainly CO2, CH4, N2O, SF6, HFCs, PFCs, are
the root cause of global climate change, each of which can be
calculated as CER (CO2 Emission Reduction) equivalent. The target
for Indonesia is 834 million tonnes of CER by 2030.
CO2-1-0
(CARBON) aims to provide a solution in disruptive decentralized new
carbon market system using blockchain technology which will be
empowering environmentally sustainable projects (renewable energy/
waste/ agriculture/ forestry/ etc.) starting in Indonesia, Vietnam,
other ASEAN countries and worldwide. It has a clear and systematic
product development roadmap, and the ultimate milestones of the
products estimated to be launched in the near future. The solution,
methodology, and improved TACCC (transparent, accurate, consistent,
complete, and comparable) business process originally introduced by
CO2-1-0 (CARBON) CORP are expected to bring full impact to better
environment and life of millions.
10.
MEMORANDUM OF UNDERSTANDING WITH FIVE-GRAIN TREASURE SPIRITS CO.,
LTD.
On September
16, 2021, PHI Group, Inc. entered into a Memorandum of
Understanding (“MOU”) with Five-Grain Treasure Spirits Co., Ltd.
(“FGTS”), a baiju distilling company with principal business
address at Jigu Road Economic Zone, Shulan City, Jilin Province,
China, to acquire seventy percent (70%) of ownership in FGTS
and provide the additional required capital for FGTS to implement
its business plan. The total budget for the purchase price and the
additional required capital is one hundred million U.S. dollars
(USD 100,000,000), whose
terms and conditions for payment will be stipulated in a Definitive
Agreement to be signed by both parties after satisfactory due
diligence of FGTS by the Company.
Completion
of this transaction will be conditioned, among other matters,
upon:
|
(a) |
Upon signing
of this MOU, FGTS will cooperate with and accommodate PHIL and/or
its representative(s) for further due diligence review of FGTS’s
business, including but not limited to its assets, liabilities,
property, plant and equipment, technologies, operations, books and
records, and business plan.
|
|
|
|
|
(b) |
The signing
of the Definitive Agreement by the parties within forty-five days
following the signing of this MOU and the closing of this
transaction by December 31, 2021, unless extended by the consent of
both parties in writing.
|
|
|
|
|
(c) |
The
establishment of a special purpose vehicle (SPV) as the holding
company for the seventy percent (70%)
ownership in FGTS.
|
PHI Group,
Inc. changed the name of its subsidiary “Provimex, Inc.”, a Nevada
corporation established on September 23, 2004, Entity Number
C25551-4, to Empire Spirits, Inc. as the holding company for the
acquisition of seventy percent (70%)
ownership in Five-Grain Treasure Spirits Company, Ltd.
Baijiu is a
white spirit distilled from sorghum. It is similar to vodka but
with a fragrant aroma and taste. It is currently the most consumed
spirit in the world. Mainly consumed in China, it is gaining
popularity in the rest of the world.
Five-Grain
specializes in the production and sales of spirits and the
development of proprietary spirit production processes. It also
possesses a patented technology to grow red sorghum for baiju
manufacturing. The patented grain produces superior yield and
quality. Five-Grain is a reputable bulk alcohol supplier to some of
the largest spirits companies in the world.
Empire
Spirits, Inc. will proceed to sign the Definitive Agreement with
Five-Grain to consummate this transaction.
11. SERVICES
AGREEMENTS FOR DEVELOPMENT OF ADE TOKENS USING BLOCKCHAIN AND
CRYPTO TECHNOLOGIES
On September
21, 2021, the Company signed Services Agreements with Johnny Park
(“JP”) and Whankuk Je (“WJ”), collectively (“the Consultants”), to
form an “Asia Diamond Exchange Blockchain Task Force” to develop
“ADE Tokens” in connection with the Asia Diamond Exchange to be
established in Vietnam. The Consultants will be totally responsible
for planning, organizing, designing, structuring, configuring,
programming and implementing the necessary systems, architecture,
and platform for launching a most optimum ADE Token possible in
connection with the Asia Diamond Exchange using advanced crypto and
blockchain technologies to finance the development and
implementation of the Asia Diamond Exchange project. According to
the Services Agreements, the Company will compensate the
Consultants by issuing One Billion One Hundred Fifty Million
(1,150,000,000)
shares of Common Stock of PHI Group, Inc. to JP and One Billion One
Hundred Fifty Million (1,150,000,000)
shares of Common Stock of PHI Group, Inc. to WJ from the 2021
Employee Benefit Plan of PHI Group, Inc. as filed with the
Securities and Exchange Commission on September 17,
2021.
NOTE 16 – GOING CONCERN
UNCERTAINTY
As shown in
the accompanying consolidated financial statements, the Company has
accumulated deficit of $56,523,700 as of September 30,
2021 and total stockholders’ deficit of $2,514,670. For the
quarter ended September 30, 2021, the Company incurred a net loss
of $5,960,170 as compared to a net loss in the
amount of $336,264 during the same period ended
September 30, 2020. 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 17 – SUBSEQUENT
EVENT
These financial statements were approved by management and
available for issuance on or about November 19, 2021. Subsequent
events have been evaluated through this date.
1. ISSUANCES
AND CANCELLATION OF COMMON STOCK
From October
01, 2021 to November 19, 2021, the Company issued and cancelled the
following shares of its Common Stock:
A.
Issuances:
a. Issuance
of
1,533,000,000 shares of Common Stock
for the Services Agreements dated September 21, 2021 with Johnny
Park and Whankuk Je regarding the development and launching of the
ADE Tokens in connection with the Asia Diamond Exchange.
b. Issuance
of
54,750,000 shares of Common Stock
for the conversion of one half of the principal amount and accrued
interest of the convertible note with EMA Financial LLC dated March
23, 2021.
c. Issuance
of 52,196,586 shares of Common
Stock for $215,898.13 accrued and
unpaid salaries.
B.
Cancellation:
Cancellation
of 235,478,810 shares of Common
Stock previously issued to PHILUX Global Funds SCA, SICAV-RAIF for
initial capitalization.
2. FINANCING
CONTRACT AGREEMENT WITH HAJ FINANCE GROUP
Effective
October 17, 2021 the Company signed a contract agreement with Haj
Finance Group, a corporation registered in Oman, Hatat House Ground
Floor, Ruwi, Muscat, Sultanate of Oman, for a financing program in
the amount of $1,500,000,000 which carries an interest
rate of 2.5% per annum for thirty-five years
with a three-year grace
period. The closing of this transaction is to occur after the
registration of a Special Purpose Vehicle (SPV) within United Arab
Emirates, the signing of the closing documents and the approval of
the transfer of funds by the Central Bank of United Arab Emirates
(CBUAE). The Company intends to use the funds for the establishment
of the Asia Diamond Exchange and the Multi-Commodities Center in
Vietnam, for financing selective projects in the areas of real
estate, renewable energy, healthcare, and for other investment
opportunities in connection with PHILUX Global Funds SCA,
SICA-RAIF, a group of Luxembourg bank funds sponsored by the
Company.
3.
BUSINESS
COOPERATION AGREEMENT WITH DIGITAL SOLUTIONS COMPANY
LTD.
On November
1, 2021, the Company signed an Business Cooperation Agreement with
Digital Solutions Company Limited, a Vietnamese company, to
cooperate in developing technical solutions for a variety of
industries, including real estate, energy, agriculture and
healthcare using digital, blockchain and crypto
technologies.
Digital
Solutions currently assists CO2-1-0 (CARBON) CORP, a subsidiary of
PHI Group, Inc., to launch the new disruptive carbon mitigation
initiative and will also support PHI Group with technological
solutions for the Asia Diamond Exchange to be established in
Vietnam, as well as jointly advance a number of special projects
for the benefits of both companies.
4. LOAN
AGREEMENT DEED WITH NEOK FINANCIAL INCORPORATED
On November
14, 2021 the Company signed a Loan Agreement Deed with Neok
Financial Incorporated, a corporation organized and existing under
the laws of United Arab Emirates, with office address located at
Trade Center Road, Bur Dubai, Dubai, United Arab Emirates, for a
financing program in the amount of $2,000,000,000
which
carries an rate of fixed interest of
2.00% per annum for the term
of thirty-five (35) years. The closing of this transaction is
subject to the registration of a Special Purpose Vehicle (SPV)
within United Arab Emirates, the signing of the closing documents
and the approval of the transfer of funds by the appropriate
oversight authorities. The Company intends to use the funds for the
establishment of the Asia Diamond Exchange and the
Multi-Commodities Center in Vietnam, for financing selective
projects in the areas of real estate, infrastructure, renewable
energy, healthcare, and for other investment opportunities in
connection with PHILUX Global Funds SCA, SICA-RAIF, a group of
Luxembourg bank funds sponsored by the Company.
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.
NOTE 1 – NATURE OF
BUSINESS
INTRODUCTION
PHI Group,
Inc. (the “Company” or “PHI”) (www.phiglobal.com) is primarily
engaged in mergers and acquisitions, 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. Recently, the
Company has signed a Memorandum of Agreement to acquire seventy
percent ownership in Five-Grain Treasure Spirits Company, Ltd., a
baiju distiller in Jilin Province, China. 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
November 19, 2021, the Company owned the following
subsidiaries:
(1) Asia
Diamond Exchange, Inc., a Wyoming corporation (100%), (2) Empire
Spirits, Inc., a Nevada corporation (85% - formerly Provimex,
Inc.),(3) (4) PHILUX Global Funds SCA, SICAV-RAIF, a Luxembourg
Reserved Alternative Investment Fund (100%) (4) PHILUX Capital
Advisors, Inc., a Wyoming corporation (100%), (5) CO2-1-0 (CARBON)
CORP., a Wyoming corporation (51%), (6) PHI Luxembourg Development
S.A., a Luxembourg corporation (100%), (7) PHILUX Global General
Partners SA, a Luxembourg corporation (100%), (8) PHI Luxembourg
Holding SA, a Luxembourg corporation (100%), (9) PHI Vietnam
Investment and Development Company Ltd., a Vietnamese limited
liability company (100%), (10) Phivitae Healthcare, Inc. (100%),
(11) American Pacific Plastics, Inc., a Wyoming corporation (100%),
and (12) American Pacific Resources, Inc., a Wyoming corporation
(100%),
ASIA
DIAMOND EXCHANGE, INC. AND THE DEVELOPMENT OF 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) with a plan to house the proposed
International Financial Center, an Urban Area and other hi-tech
industrial operations. 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 project.
EMPIRE
SPIRITS, INC. (FORMERLY PROVIMEX, INC.)
Provimex,
Inc. was originally incorporated as a Nevada corporation on
September 23, 2004, Entity Number C25551-4, to engage in
international trade. On 9/26/2021, the company changed its name to
Empire Spirits, Inc. as the holding company for the acquisition of
seventy percent (70%) ownership in Five-Grain Treasure Spirits
Company, Ltd., a baiju distiller in Jilin Province, China. PHI
Group, Inc., through Empire Spirits, Inc. will provide additional
required capital for Five-Grain to fully execute its business plan.
The budget for this transaction will be one hundred million U.S.
dollars (USD 100,000,000), to be paid in three tranches. The
Company will complete the due diligence of Five-Grain before
signing a Definitive Agreement for the consummation of this
transaction, which is scheduled to close by the end of
2021.
Baijiu is a
white spirit distilled from sorghum. It is similar to vodka but
with a fragrant aroma and taste. It is currently the most consumed
spirit in the world. Mainly consumed in China, it is gaining
popularity in the rest of the world.
Five-Grain
specializes in the production and sales of spirits and the
development of proprietary spirit production processes. It also
possesses a patented technology to grow red sorghum for baiju
manufacturing. The patented grain produces superior yield and
quality. Five-Grain is a reputable bulk alcohol supplier to some of
the largest spirits companies in the world.
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.
Other
subsidiaries of the Company that are established in conjunction
with PHILUX Global Funds include PHI Luxembourg Development S.A.,
PHILUX Global General Partners SA, and PHI Luxembourg Holding
SA.
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 and also arranges debt financing for its
international clients.
CO2-1-0
(CARBON) CORP
In August
2021, PHI Group signed a Letter of Intent with Indonesia-based CYFS
Group, headed by Mr. Choky Fernando Simanjuntak, to sponsor and
co-found CO2-1-0 (CARBON) CORP to implement a new disruptive carbon
mitigation initiative through environmentally sustainable projects
starting in Indonesia, Vietnam, other ASEAN countries, and
worldwide. On September 21, 2021 CO2-1-0 (CARBON) CORP was
incorporated as a Wyoming corporation to manage this program. PHI
Group will contribute a major portion of the development budget and
will hold 50.1% shares of CO2-1-0 (CARBON).
According to
the United Nation Framework Convention on Climate Change (UNFCCC),
together with the Paris agreement and Kyoto protocol in 2016, where
Indonesia has actively participated and agreed to maintain the
earth temperature not to exceed by 1,5 degrees Celsius by 2030. The
greenhouse gases (GHG), mainly CO2, CH4, N2O, SF6, HFCs, PFCs, are
the root cause of global climate change, each of which can be
calculated as CER (CO2 Emission Reduction) equivalent. The target
for Indonesia is 834 million tonnes of CER by 2030.
Currently,
CER is being tediously registered, validated, and certified
centrally under UNFCCC methodology by a few independent
institutions, mostly in the US and Europe, where the CER later can
be traded (as carbon credits) voluntarily. For the past 5 years,
the market for carbon credits is nearly zero, and due to complexity
of the processes, many companies/ projects have less appetite to be
engaged into the carbon credit opportunity. Many environmentally
sustainable projects (renewable energy/ waste/
agriculture/forestry/ etc.) have failed to get financial support
especially at the initial/ development stage, due to the above
reasons, causing less economic value of the project or
delays.
Though the
carbon market is still on hibernate stage, CER value is estimated
to rise to US$ 100/ ton CER by 2030, while crypto currency is just
starting and has attracted many millennials and gen-Z who are more
aware to green environment and sustainability (recent survey
result, Indonesian college students, 12-13 July 2021). It is
believed that from year 2022 onward the world will witness the boom
of renewable energy projects/ sustainability initiatives that are
related to Carbon Credits, with an enormous market size of 23 Giga
tones of CO2 emission to be reduced in 2030. The Taskforce on
Scaling Voluntary Carbon Markets (TSVCM), sponsored by the
Institute of International Finance (IIF) with knowledge support
from McKinsey, estimates that demand for carbon credits could
increase by a factor of 15 or more by 2030 and by a factor of up to
100 by 2050. Overall, the market for carbon credits could be worth
upward of $50 billion in 2030.
CO2-1-0
(CARBON) aims to provide a solution in disruptive decentralized new
carbon market system using blockchain technology which will be
empowering environmentally sustainable projects (renewable energy/
waste/ agriculture/ forestry/ etc.) starting in Indonesia, Vietnam,
other ASEAN countries and worldwide. It has a clear and systematic
product development roadmap, and the ultimate milestones of the
products estimated to be launched in the near future. The solution,
methodology, and improved TACCC (transparent, accurate, consistent,
complete, and comparable) business process originally introduced by
CO2-1-0 (CARBON) will bring full impact to better environment and
life of millions.
AMERICAN
PACIFIC RESOURCES, INC.
American
Pacific Resources, Inc. (“APR”) is a Wyoming corporation
established in April 2016 to serve as a holding company for various
natural resource projects. On September 2, 2017, APR entered into
an Agreement of Purchase and Sale with Rush Gold Royalty, Inc.
(“RGR”), a Wyoming corporation, to acquire a 51% ownership in
twenty-one mining claims over an area of approximately 400 acres in
Granite Mining District, Grant County, Oregon, U.S.A., in exchange
for a total purchase price of twenty-five million U.S. Dollars ($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.
On April 23,
2018, the Company’s Board of Directors passed a resolution to
declare a twenty percent (20%) special stock dividend from its
holdings of Common Stock in American Pacific Resources, Inc., a
subsidiary of the Company, to shareholders of Common Stock of the
Company as follows: (a) Declaration date: April 23, 2018; (b)
Record date: May 31, 2018; (c) Payment date: October 31, 2018; (d)
Dividend ratio: All eligible shareholders of Common Stock of the
Company as of the Record date shall be entitled to receive two (2)
shares of Common Stock of American Pacific Resources, Inc. for
every ten (10) shares of Common Stock of PHI Group, Inc. held by
such shareholders as of the referenced Record date. The payment
date was rescheduled for March 29, 2019.
Most
recently, on 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 well as any other
business activities deemed mutually beneficial. PHIVITAE is also in
the process of entering into a strategic alliance with a
Vietnam-based medical supply company.
STOCK
OWNERSHIPS:
MYSON
GROUP, INC.
As of
September 30, 2021, 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
September 30, 2021, 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 has
changed the name 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 September 30, 2021, 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 and nine-month periods ended September 30, 2021
and 2020, our financial condition on September 30, 2021 and factors
that we believe could affect our future financial condition and
results of operations. Historical results may not be indicative of
future performance.
This
discussion and analysis should be read in conjunction with our
consolidated financial statements and the notes thereto included
elsewhere in this Form 10-Q. Our consolidated financial statements
are prepared in accordance with Generally Accepted Accounting
Principles in the United States (“GAAP”). All references to dollar
amounts in this section are in United States dollars.
Three months ended September 30, 2021
compared to the three months ended September 30,
2020
Total
Revenues:
The Company
primarily focused on developing the Asia Diamond Exchange and
launching PHILUX Global Funds and only generated $20,000 in
revenues from consulting services for the quarter ended September
30, 2021 as compared to $5,000 in revenues from consulting services
for the quarter ended September 30, 2020.
Total
Operating Expenses:
Total
operating expenses were $5,229,229 and $317,023 for the three
months ended September 30, 2021, and 2020, respectively. The
increase of $4,912,206 in total operating expenses between the two
periods was mainly due to an increase of $4,950,065 in general and
administrative expenses as a result of consulting services for the
development of the ADE token in connection with the Asia Diamond
Exchange.
Loss from
Operations:
Loss from
operations for the quarter ended September 30, 2021 was $5,209,229,
as compared to loss from operations of $312,023 for the
corresponding period ended September 30, 2020. The increase of
$4,897,206 in the loss from operations between the two periods was
mainly due to a decrease of $4,912,206 in general and
administrative expenses as mentioned above.
Other
Income and Expenses:
The Company
had a net other expenses of $750,941for the three months ended
September 30, 2021, as compared to net other expenses of $24,241
for the three months ended September 30, 2020. The increase in
other expenses of $726,700 between the two periods was mainly due
to a decrease of $947 in Other Income, an increase of $26,533 in
interest expenses and an increase of $699,220 in other expense
stemming primarily from loss on conversions of stock in the amount
of $571,042, prepayment premium of $7,908, and origination costs of
$118,245 associated with the new convertible notes for the three
months ended September 30, 2021 and 2020, respectively.
Net
Income (Loss):
Net loss for
the three months ended September 30, 2021 was $5,960,170, as
compared to net loss of $336,264 for the same period in 2020, which
is equivalent to ($0.00) per share for the current period and
($0.00) per share for the corresponding period ended September 30,
2020, 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 balances were $188,734 and
$151,549 as of September 30, 2021 and September 30, 2020,
respectively.
Net cash
used in the Company’s operating activities during the three months
ended September 30, 2021 was $406,732, as compared to net cash used
in operating activities of $139,665 during the corresponding period
ended September 30, 2020. This represents an increase of $267,067
in net cash used in operating activities between the two periods.
The underlying reasons for the variance were primarily due to an
increase of $5,623,906 in loss from operations, net change in stock
issuances for conversion of notes and salaries in the amount of
$5,478,306, a decrease in accounts payable of $41,000, a decrease
of $156,366 in provision for subfund obligations, and an increase
in accrued expenses of $48,258 between the two periods.
Net cash
used in investing activities during the three months ended
September 30, 2021 was $207,583 in connection with the development
of the Asia Diamond Exchange. There was no cash provided by or used
in investing activities in the corresponding period ended September
30, 2020.
Cash
provided by financing activities was $707,705 for the three months
ended September 30, 2021, as compared to cash provided by financing
activities in the amount of $65,834 for the same period ended
September 30, 2020. The primary underlying reasons for an increase
of $641,871 in cash provided by financing activities between the
two corresponding periods were primarily due to a decrease in loans
from Directors and Officers in the amount of $101,205, an net
increase in loans and notes payable in the amount of $738,494, and
an increase in common stock of $4,581.
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 a
roll-up strategy and also invest in special situations. Moreover,
we will continue to 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
The
following discussion about PHI Group Inc.’s market risk involves
forward-looking statements. Actual results could differ materially
from those projected in the forward-looking statements.
Currency
Fluctuations and Foreign Currency Risk
Some of our
operations are conducted in other countries whose official
currencies are not U.S. dollars. However, the effect of the
fluctuations of exchange rates is considered minimal to our
business operations.
Interest
Rate Risk
We do not
have significant interest rate risk, as most of our debt
obligations are primarily short-term in nature to individuals, with
fixed interest rates.
Valuation
of Securities Risk
Since a part
of our assets is in the form of marketable securities, the value of
our assets may fluctuate significantly depending on the market
value of the securities we hold.
ITEM 4. Controls and
Procedures
Disclosure Controls
and Procedures
As required
by Rule 13a-15(b) under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), our management carried out an
evaluation, with the participation of our Chief Executive Officer,
of the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rules 13a-15(e) of the
Exchange Act), as of the period covered by this report. Disclosure
controls and procedures are defined as controls and other
procedures that are designed to ensure that information required to
be disclosed by us in reports filed with the SEC under the Exchange
Act is (i) recorded, processed, summarized and reported within the
time periods specified in the SEC’s rules and forms and (ii)
accumulated and communicated to the Company’s management, including
its principal executive officer and principal financial officer, as
appropriate to allow timely decisions regarding required
disclosure. Based upon their evaluation, our management (including
our Chief Executive Officer) concluded that our disclosure controls
and procedures were not effective as of September 30, 2021, based
on the material weaknesses defined below.
Internal
Control over Financial Reporting
Management’s Report
on Internal Control of Financial Reporting
Our
management is responsible for establishing and maintaining adequate
internal control over financial reporting. Internal control over
financial reporting is a set of processes designed by, or under the
supervision of, a company’s principal executive and principal
financial officers, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with GAAP and
includes those policies and procedures that:
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pertain to
the maintenance of records that in reasonable detail accurately and
fairly reflect our transactions and dispositions of our
assets, |
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provide
reasonable assurance that our transactions are recorded as
necessary to permit preparation of our financial statements in
accordance with GAAP, and that receipts and expenditures are being
made only in accordance with authorizations of our management and
directors, and |
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provide
reasonable assurance regarding prevention or timely detection of
authorized acquisition, use or disposition of our assets that could
have a material effect on our financial statements. |
Because of
its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. It should be noted that
any system of internal control, however well designed and operated,
can provide only reasonable, and not absolute, assurance that the
objectives of the system will be met. Also, projections of any
evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
Under the
supervision and with the participation of management, including its
principal executive officer and principal financial officer, the
Company’s management assessed the design and operating
effectiveness of internal control over financial reporting as of
September 30, 2021 based on the framework set forth in Internal
Control—Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
We have
identified material weaknesses in our internal control over
financial reporting:
|
(i) |
inadequate
segregation of duties consistent with control
objectives; |
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(ii) |
ineffective
controls over period-end financial disclosure and reporting
processes. |
If we fail
to develop and maintain an effective system of internal control
over financial reporting, we may not be able to accurately report
our financial results in a timely manner, which may adversely
affect investor confidence in our company.
Based on
this assessment, management concluded that the Company’s internal
control over financial reporting was not effective as of September
30, 2021.
Management’s
Remediation Plan
We plan to
take steps to enhance and improve the design of our internal
control over financial reporting. During the period covered by this
quarterly report on Form 10-Q, we have not been able to remediate
the material weaknesses identified above. To remediate such
weaknesses, we plan to implement the following changes in the
future:
(i) |
appoint
additional qualified personnel to address inadequate segregation of
duties and ineffective risk management; and |
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|
(ii) |
adopt
sufficient written policies and procedures for accounting and
financial reporting. |
The
remediation efforts set out in (i) are largely dependent upon our
company securing additional financing to cover the costs of
implementing the changes required. If we are unsuccessful in
securing such funds, remediation efforts may be adversely affected
in a material manner. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute
assurance that all control issues, if any, within our company have
been detected. These inherent limitations include the realities
that judgments in decision-making can be faulty and that breakdowns
can occur because of simple error or mistake.
Management
believes that despite our material weaknesses set forth above, our
consolidated financial statements for the quarterly report ended
September 30, 2021 are fairly stated, in all material respects, in
accordance with US GAAP.
Attestation Report of
the Registered Accounting Firm
This
Quarterly Report does not include an attestation report of the
Company’s independent registered public accounting firm regarding
internal control over financial reporting. Management’s report was
not subject to attestation by the Company’s independent registered
public accounting firm pursuant to Rule 308(b) of Regulation S-K,
which permits the Company to provide only management’s report in
this Quarterly Report.
Changes
in Internal Control over Financial Reporting
No changes
in the Company’s internal control over financial reporting have
come to management’s attention during the fiscal quarter ended
September 30, 2021 that have materially affected, or are likely to
materially affect, the Company’s internal control over financial
reporting.
PART II - OTHER
INFORMATION
ITEM 1. LEGAL
PROCEEDINGS
The Company
is not a party to any material pending legal proceedings and, to
the best of its knowledge, no such action by or against Company has
been threatened.
ITEM 1A. RISK
FACTORS
Investment in our
securities is subject to various risks, including risks and
uncertainties inherent in our business. The following sets forth
factors related to our business, operations, financial position or
future financial performance or cash flows which could cause an
investment in our securities to decline and result in a
loss.
General Risks Related to Our
Business
Our
success depends on our management team and other key personnel, the
loss of any of whom could disrupt our business
operations.
Our future
success will depend in substantial part on the continued service of
our senior management and certain external experts. The loss of the
services of one or more of our key personnel and/or outside experts
could impede implementation and execution of our business strategy
and result in the failure to reach our goals. We do not carry key
person life insurance for any of our officers or employees. Our
future success will also depend on the continued ability to
attract, retain and motivate highly qualified personnel in the
diverse areas required for continuing our operations. We cannot
assure that we will be able to retain our key personnel or that we
will be able to attract, train or retain qualified personnel in the
future.
Risks Related to Mergers and
Acquisitions
Our
strategy in mergers and acquisitions involves a number of risks and
we have a limited history of successful acquisitions. Even when an
acquisition is completed, we may have to continue our service for
integration that may not produce results as positive as management
may have projected.
The Company
continues evaluating various opportunities and negotiating to
acquire other companies, assets and technologies. Acquisitions
entail numerous risks, including difficulties in the assimilation
of acquired operations and products, diversion of management’s
attention from other business concerns, amortization of acquired
intangible assets and potential loss of key employees of acquired
companies. We have limited experience in assimilating acquired
organizations into our operations. Although potential synergy may
be achieved by acquisitions of related technologies and businesses,
no assurance can be given as to the Company’s ability to
successfully integrate any operations, personnel, services or
products that have been acquired or might be acquired in the
future. Failure to successfully assimilate acquired organizations
could have a material adverse effect on the Company’s business,
financial condition and operating results.
Acquisitions
involve a number of special risks, including:
● |
failure of
the acquired business to achieve expected results; |
● |
diversion of
management’s attention; |
● |
failure to
retain key personnel of the acquired business; |
● |
additional
financing, if necessary and available, could increase leverage,
dilute equity, or both; |
● |
the
potential negative effect on our financial statements from the
increase in goodwill and other intangibles; and |
● |
the high
cost and expenses of completing acquisitions and risks associated
with unanticipated events or liabilities. |
These risks
could have a material adverse effect on our business, results of
operations and financial condition since the values of the
securities received for the consulting service at the execution of
the acquisition depend on the success of the company involved in
acquisition. In addition, our ability to further expand our
operations through acquisitions may be dependent on our ability to
obtain sufficient working capital, either through cash flows
generated through operations or financing activities or both. There
can be no assurance that we will be able to obtain any additional
financing on terms that are acceptable to us, or at all.
Risks associated with private equity
(PE) funds
There are,
broadly, five key risks to private equity investing:
1.
Operational risk: The risk of loss resulting from
inadequate processes and systems supporting the organization. It is
a key consideration for investors regardless of the asset classes
that funds invest into.
2.
Funding risk: This is the risk that investors are not
able to provide their capital commitments and is effectively the
‘investor default risk’. PE funds typically do not call upon all
the committed investor capital and only draw capital once they have
identified investments. Funding risk is closely related to
liquidity risk, as when investors are faced with a funding
shortfall, they may be forced to sell illiquid assets to meet their
commitments.
3.
Liquidity risk: This refers to an investor’s
inability to redeem their investment at any given time. PE
investors are ‘locked-in’ for between five and ten years, or more,
and are unable to redeem their committed capital on request during
that period. Additionally, given the lack of an active market for
the underlying investments, it is difficult to estimate when the
investment can be realized and at what valuation.
4.
Market risk: There are many forms of market risk
affecting PE investments, such as broad equity market exposure,
geographical/sector exposure, foreign exchange, commodity prices,
and interest rates. Unlike in public markets where prices fluctuate
constantly and are marked-to-market, PE investments are subject to
infrequent valuations and are typically valued quarterly and with
some element of subjectivity inherent in the assessment. However,
the market prices of publicly listed equities at the time of sale
of a portfolio company will ultimately impact realization
value.
5.
Capital risk: The capital at risk is equal to the net
asset value of the unrealized portfolio plus the future undrawn
commitments. In theory, there is a risk that all portfolio
companies could experience a decline in their current value, and in
the worst-case drop to a valuation of zero. Capital risk is closely
related to market risk. Whilst market risk is the uncertainty
associated with unrealized gains or losses, capital risk is the
possibility of having a realized loss of the original capital at
the end of a fund’s life.
There are
two main ways that capital risk brings itself to bear - through the
failure of underlying companies within the PE portfolio and
suppressed equity prices which make exits less attractive. The
former is impacted by the quality of the fund manager, i.e. their
ability to select portfolio companies with good growth prospects
and to create value, hence why fund manager selection is key for
investors. The condition, method, and timing of the exit are all
factors that can affect how value can be created for
investors.
Risks Associated with Building and
Operating a Diamond Exchange
Fundamentally, the key
requirements for a successful diamond exchange include the
following:
1.
Supply: One of the most important things for a
successful trading hub is the ability to secure ample, stable, and
sustainable supply of commodities. In the case of a diamond
exchange, adequate supply of rough diamond must be secured to make
it successful.
2.
Capital: Besides the infrastructure, facilities,
systems, and amenities to operate the diamond exchange, the
organizers must be able to arrange very large amounts of capital to
facilitate the trade and other business activities related to the
exchange.
3.
Participants: The organizers must be able to attract
a large number of international diamonteers to participate in the
exchange. There is no guarantee that people will come when the
exchange is built.
4.
Venue: The venue must be able to provide competitive
advantages compared with existing diamond exchanges in the world in
terms of (a) modern facilities, latest technologies and
state-of-the-art provisions, (b) tax relief, (c) financial
facilitating network from big investors, (d) retail banking,
lending institutions and foreign exchange facilities, (e) licenses
and registrations, (f) global multi-commodities trading flatform,
and (g) other amenities.
Risks Associated with International
Markets
As
some of our business activities are currently involved with
international markets, any adverse change to the economy or
business environment in these countries could significantly affect
our operations, which would lead to lower revenues and reduced
profitability.
Some of our
business activities are currently involved with non-US countries.
Because of this presence in specific geographic locations, we are
susceptible to fluctuations in our business caused by adverse
economic or other conditions in this region, including stock market
fluctuation. A stagnant or depressed economy in these countries
generally, or in any of the other markets that we serve, could
adversely affect our business, results of operations and financial
condition.
Risks Related to Our
Securities
Insiders have
substantial control over the company, and they could delay or
prevent a change in our corporate control, even if our other
stockholders wanted such a change to occur.
Though our
executive officers and directors as of the date of this report, in
the aggregate, only hold a small portion of our outstanding common
stock, we have the majority voting rights associated with the
Company’s Class B Series I Preferred Stock, which decision may
allow the Board of Directors to exercise significant control over
all matters requiring stockholder approval, including the election
of directors and approval of significant corporate transactions.
This could delay or prevent an outside party from acquiring or
merging with us even if our other stockholders wanted it to
occur.
The
price at which investors purchase our common stock may not be
indicative of the prevailing market price.
The stock
market often experiences significant price fluctuations that are
unrelated to the operating performance of the specific companies
whose stock is traded. These market fluctuations could adversely
affect the trading price of our shares. Investors may be unable to
sell their shares of common stock at or above their purchase price,
which may result in substantial losses.
Since
we do not currently meet the requirements for our stock to be
quoted on NASDAQ, NYSE MKT LLC or any other senior exchange, the
tradability in our securities will be limited under the penny stock
regulations.
Under the
rules of the Securities and Exchange Commission, as the price of
our securities on the OTCQB or OTC Markets is below $5.00 per
share, our securities are within the definition of a “penny stock.”
As a result, it is possible that our securities may be subject to
the “penny stock” rules and regulations. Broker-dealers who sell
penny stocks to certain types of investors are required to comply
with the Commission’s regulations concerning the transfer of penny
stock. These regulations require broker-dealers to:
*Make a
suitability determination prior to selling penny stock to the
purchaser;
*Receive the
purchaser’s written consent to the transaction; and
*Provide
certain written disclosures to the purchaser.
These
requirements may restrict the ability of broker/dealers to sell our
securities, and may affect the ability to resell our
securities.
Our
compliance with the Sarbanes-Oxley Act and SEC rules concerning
internal controls may be time consuming, difficult and costly for
us.
It may be
time consuming, difficult and costly for us to develop and
implement the internal controls and reporting procedures required
by the Sarbanes-Oxley Act. We may need to hire additional financial
reporting, internal controls and other finance staff in order to
develop and implement appropriate internal controls and reporting
procedures. If we are unable to comply with the internal controls
requirements of the Sarbanes-Oxley Act, we may not be able to
obtain the independent accountant certifications that the
Sarbanes-Oxley Act requires publicly traded companies to
obtain.
ITEM 2. UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS
None, except
as noted elsewhere in this report.
ITEM 3. DEFAULTS UPON SENIOR
SECURITIES
None, except
as may be noted elsewhere in this report.
ITEM 4. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER
INFORMATION
None, except
as may be noted elsewhere in this report.
ITEM 6. EXHIBITS
The
following exhibits are filed as part of this report:
SIGNATURES
Pursuant to
the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
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PHI GROUP,
INC. |
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(Registrant) |
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Date: |
November 22,
2021 |
By: |
/s/ Henry
D. Fahman |
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Henry D.
Fahman |
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President and Chief
Executive Officer |
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(Principal Executive
Officer) |
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Date: |
November 22,
2021 |
By: |
/s/ Henry
D. Fahman |
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Henry D.
Fahman |
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Acting Chief Financial
Officer |
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(Principal Financial and
Accounting Officer) |
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