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)

Securities registered pursuant to Section 12(b) of the Act:

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.

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 (100%), (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

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

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 

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

NOTE 8 – LOANS AND PROMISSORY NOTES

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.

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:

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 

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 

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

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 180^th 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 180^th 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 180^th 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 180^th 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 180^th calendar day after the Issue Date at a Prepayment Factor of 115%. The Company plans to prepay this note in cash prior to the 180^th 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 180^th 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 180^th 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:

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:

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:

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:

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:

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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