PHI GROUP INC - Quarter Report: 2011 December (Form 10-Q)

17011 Beach Blvd., Suite 1230, Huntington Beach, CA 92647

(Address of principal executive offices) (Zip Code)

714-843-5455

(Registrant's telephone number, including area code)

PROVIDENTIAL HOLDINGS, INC.

(Former name, former address and former fiscal year, if changed since last report)

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 past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days.

Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 for 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 [X]

Indicate by check mark whether the registrant is a large accelerated file, 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 [X]

Indicate the number of share outstanding of each of the issuer's classes of common stock, as of the latest practicable date: The number of shares outstanding of the registrant's Common Stock, $0.001 par value, was 247,993,301 as of February 21, 2012.  

PHI GROUP, INC.

For the Quarter Ended December 31, 2011

PART I - FINANCIAL INFORMATION

Item 1- Consolidated Financial Statements – Unaudited

Consolidated Balance Sheets as of December 31, 2011 and June 30, 2011

Consolidated Statements of Operations for Three and Six Months Ended December 31, 2011 and 2010

Consolidated Statements of Cash Flows for Six Months Ended December 31, 2011 and 2010

Notes to Consolidated Financial Statements

Item 2 -Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 3- Quantitative and Qualitative Disclosures about Market Risk

Item 4- Controls and Procedures

PART II - OTHER INFORMATION

Item 1- Legal Proceedings

Item 1A- Risk Factors

Item 2- Unregistered Sales of Equity Securities and Use of Proceeds

Item 3- Defaults Upon Senior Securities

Item 4- Submission of Matters to a Vote of Security Holders

Item 5- Other Information

Item 6- Exhibits

SIGNATURES

PHI GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - NATURE OF BUSINESS

PHI Group, Inc. (formerly Providential Holdings, Inc.), ("PHI") a Nevada corporation established in June 8, 1982, is primarily focused on energy and natural resources and engaged in real estate and hospitality development, and merger and acquisition advisory services through its subsidiaries. The Company acquires and consolidates coal deposits and energy-related assets, partners with local companies in Southeast Asia to develop power plants, collaborates with a U.S. company to furnish advanced clean coal combustion technology to coal-fired plants, arranges capital for energy-related projects, and provides financial consultancy and M&A advisory services to U.S. and foreign companies.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of PHI Group, Inc., and its subsidiaries, Providential Securities, Inc., PHI Capital Holdings, Inc., Provimex, Inc., PHI Energy Corporation (formerly Providential Energy Corporation), Touchlink Communications, PHI Gold Corporation (formerly PHI Mining Group), Providential Vietnam Ltd., and PhiLand Ranch Limited, collectively referred to as the "Company". All significant inter-company transactions have been eliminated in consolidation. Providential Securities, Inc., Provimex, Inc., PHI Energy Corporation, and Touchlink Communications are inactive.

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, 2011. 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 six months ended December 31, 2011 are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2012.

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.

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 “Pink Sheets” or the OTC Bulletin Board. As such, each investment is accounted for in accordance with the provisions of SFAS No. 115.

Unrealized holding gains and losses for available-for-sale securities are excluded from earnings and reported as a separate component of stockholder's equity. Realized gains and losses for securities classified as available-for-sale are reported in earnings based upon the adjusted cost of the specific security sold. On December 30, 2011, the marketable securities have been recorded at $894,650 based upon the fair value of the marketable securities. (Note 5)

FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is 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.

The Company's financial instruments primarily consist of cash and cash equivalents, accounts receivable, marketable securities, 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.

PROPERTIES AND EQUIPMENTS

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.

DERIVATIVES

 Derivative instruments are recognized as either assets or liabilities and are measured at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation.

REVENUE RECOGNITION

The Company's revenue recognition policies are in compliance with ASC 13 (previously Staff accounting bulletin (SAB) 104).  The Company recognizes consulting and advisory fee revenues when the transaction is completed and the service fees are earned.   Expenses are recognized in the period in which the corresponding liability is incurred. Payments received before all of the relevant criteria for revenue recognition are recorded as unearned revenue.

RECENT ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board (the "FASB") issued a new professional standard in June of 2009 which resulted in a major restructuring of U.S. accounting and reporting standards. The new professional standard, issued as ASC 105 ("ASC I 05"), establishes the Accounting Standards Codification ("Codification or ASC") as the source of authoritative accounting principles ("GAAP") recognized by the FASB. The principles embodied in the Codification are to be applied by nongovernmental entities in the preparation of financial statements in accordance with generally accepted accounting principles in the United States. Rules and interpretive releases of the Securities and Exchange Commission ("SEC") issued under authority of federal securities laws are also sources of GAAP for SEC registrants. Existing GAAP was not intended to be changed as a result of the Codification, and accordingly the change did not impact the financial statements of the Company.

For the year ending December 31, 2011, various Accounting Standard Updates ("ASU") issued by the FASB were either newly issued or had effective implementation dates that would require their provisions to be reflected in the financial statements for the year then ended. The Company has reviewed the following ASU releases to determine relevance to the Company's operations:

The Company has either evaluated or is currently evaluating the implications, if any, of each of these pronouncements and the possible impact they may have on the Company's financial statements. In most cases, management has determined that the pronouncement has either limited or no application to the Company and, in all cases, implementation would not have a material impact on the financial statements taken as a whole.

NOTE 2 – NASD EXAMINATION AND DISCONTINUANCE OF PROVIDENTIAL SECURITIES, INC.

After the completion of a routine audit of Providential Securities, Inc. ("Providential") in July and August 2000, the National Association of Securities Dealers, Inc. alleged that Providential violated certain provisions of the NASD's Conduct Rules 2120, 2330, 2110 and 3010, and Rules 15c2-4, 10b-5, 10b-9 and 15c3-3 of the Securities and Exchange Commission. Providential Securities, Inc. and Henry Fahman voluntarily submitted a Letter of Acceptance, Waiver and Consent ("AWC",), which was accepted by NASD Regulation, Inc. on October 27, 2000.

Providential Securities, Inc. was censured, fined $115,000.00 and required to offer rescission to those public customers who participated in the Providential Private Placement.  In addition, Henry Fahman was banned, in all capacities, from associating with any NASD member. Based upon the above-mentioned circumstances, Providential Securities, Inc. withdrew its membership from the NASD in October 2000 and ceased its securities brokerage operation.  The fine of $115,000 is included in accrued expenses in the accompanying consolidated financial statements.  The Company has offered all Preferred Stock holders rescission on their investment.  During the year ended June 30, 2004, $235,000 from the amount due to Preferred Stock Holders plus $105,600 in related dividends payable totaling $340,600 was paid either in cash or with the issuance of common stock. The balance of unredeemed preferred shares and the related interest has been included in current liabilities on the accompanying consolidated financial statements (Note 12).

NOTE 3 – LOANS RECEIVABLE FROM RELATED PARTIES

Loans receivable from related parties consist of the following at December 30, 2011 and June 30, 2011:

NOTE 4 – OTHER CURRENT ASSETS

The Other Assets comprise of the following as of December 31, 2011 and June 30, 2011:

NOTE 5 – MARKETABLE EQUITY SECURITIES AVAILABLE FOR SALE

The Company’s marketable securities are classified as available-for-sale and, as such, are carried at fair value.  All of the securities are comprised of shares of common stock of the investee.  Securities classified as available-for-sale may be sold in response to changes in interest rates, liquidity needs, and for other purposes.

Each investment in marketable securities represents less than twenty percent (20%) of the outstanding common stock and stock equivalents of the investee, and each security is nationally quoted on the National Association of Securities Dealers OTC Bulletin Board ("OTCBB") or the Pink Sheets.  As such, each investment is accounted for in accordance with the provisions of SFAS No. 115.

Marketable securities classified as available for sale consisted of 1,746,500 shares of Vietnam Mining Corporation, a public company traded on the OTC Markets (Pinksheet: VNMC) that were earned for consulting services rendered. The fair value of shares received was $174,650 as of September 30, 2011.

As of September 30, 2011, we recorded $600,000 from 4,000,000 shares of common stock of Agent 155 Media Corp, a fully reporting company traded on the OTCQB (Symbol: AGMC), for consulting services to be rendered to Agent155 Media Corp by PHI Group, Inc. We used the closing price of $0.15 per share as of September 30, 2011 for recording purpose.

As of December 31, 2011, we recorded $120,000 from 4,000,000 shares of common stock of Agent 155 Media Corp, a fully reporting company traded on the OTCQB (Symbol: AGMC), for consulting services to be rendered to Agent155 Media Corp by PHI Group, Inc. We used the closing price of $0.03 per share as of December 31, 2011 for recording purpose. There is no realized gain or loss on this transaction.

NOTE 6 – PROPERTY AND EQUIPMENT

Property and equipment at December 31, 2011 and June 30, 2011 consists of the following:

Depreciation expenses were $ 628 and $ 1529 for the period ended December 30, 2011 and 2010, respectively.

NOTE 7 – OTHER ASSETS

During the quarter ended December 31, 2011, Philand Vietnam Ltd., a wholly owned subsidiary of the Philand Ranch Ltd., made a security deposit in the amount of $172,203 to the Chu Lai Open Economic Zone Authority, Quang Nam Province, Vietnam as a guarantee for its Pointe91 development project at Bien Rang, Chu Lai, Nui Thanh District, Quang Nam Province, Vietnam. During the quarter ended June 30, 2011, the Company signed a consulting agreement to assist Agent155 Media Corp., a Delaware corporation, with respect to its corporate restructuring and business combination with Freshwater Technologies, Inc., a Nevada corporation.  As part of the restructuring requirements, the Company made a payment to Manning Elliot LLP in the amount of $113,096 on behalf of Freshwater Technologies, Inc. to facilitate the transaction between Agent155 Media Corp. and Freshwater Technologies, Inc.

NOTE 8 – CONSTRUCTION IN PROGRESS

SFAS No. 34 “Capitalization of Interest” establishes the standards for capitalizing interest cost as part of the historical cost of acquiring certain assets. To qualify for interest capitalization, assets must require a period of time to get them ready for their intended use. Example is an asset that an enterprise constructs for its own use or lease that is constructed as a discrete project, such as real estate projects. Interest capitalization is required for those assets if its effect compared with the effect of expensing interest is material. The interest cost eligible for capitalization shall be the interest cost recognized on borrowings and other obligations.

Construction in progress represents the costs incurred by Philand Corporation, a subsidiary of the Company for real estate development amounting to $1,253,280 as of December 31, 2011. The costs included interest capitalized of $556,048.

NOTE 9 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

The accounts payable and accrued expenses at December 31, 2011 and June 30, 2011 consist of the following:

NOTE 10 – DUE TO OFFICER

Due to officer, represents advances made by officers of the Company and its subsidiaries, which are non-interest bearing, except for $100,000 as described below, unsecured and due on demand. As of December 31, 2011 and 2010, the balances were $1,451,713 and $1,317,949, respectively.

As of December 31, 2011, the Company has a short term note payable amounting $100,000 with interest bearing $3,000 per month payable to a member of the Board of Directors.

NOTE 11 – LOANS AND PROMISSORY NOTES

SHORT TERM NOTES PAYABLE:

As of December 31, 2011 and June 30, 2011, the Company had short-term notes payable amounting to $2,413,956, and $2,432,456 with accrued interest of $2,390,392 and $2,165,264 respectively. These notes bear interest rates ranging from 6% to 36% per annum. $1,739,982 of these short-term notes is past due and $258,976 is due on demand.

Some of the notes payable are secured by assets of the Company as summarized below:

The Convertible Promissory Note issued to Asher Enterprises, Inc. (“Asher”) on January 11, 2011 is $ 55,000, net of discount $51,250. This convertible note was due and payable on October 13, 2011 with interest of 8% per annum. This note is convertible at the election of Asher from time to time after the issuance date. In the event of default, the amount of principal and interest not paid when due bear interest at the rate of 22% per annum and the note becomes immediately due and payable. Should that occur, the Company is liable to pay Asher 150% of the then outstanding principal and interest. The note agreement contains covenants requiring Asher’s written consent for certain activities not in existence or not committed to by the Company on the issuance date of the note, as follows: dividend distributions in cash or shares, stock repurchases, borrowings, sale of assets, certain advances and loans in excess of $55,000, and certain guarantees to third-party liabilities. Outstanding note principal and interest accrued thereon can be converted in whole, or in part, at any time by Asher after the issuance date into an equivalent of the Company’s common stock determined by 65% of the average of the three lowest closing trading prices of the Company’s common stock during the ten trading days prior to the date the conversion notice is sent by Asher.

On 7/25/2011, $10,000 principal of the convertible notes issued on January 11, 2011 has been converted into 2,325,581 shares.

On 8/8/2011, $12,000 principal of the convertible notes issued on January 11, 2011 has been converted into 2,448,980 shares.

On 8/30/2011, $15,000 principal of the convertible notes issued on January 11, 2011 has been converted into 4,411,765 shares.

On 10/21/2011, $8,000 principal of the convertible notes issued on January 11, 2011 has been converted into 4,000,000 shares.

On 11/22/2011, $10,000 principal of the convertible notes issued on January 11, 2011 has been converted into 7,625,000 shares.

The value of the derivative liability at December 31, 2011 is $54,671.

DUE TO PREFERRED STOCKHOLDERS:

The Company classified $215,000 of preferred stock subscribed as a current liability payable to holders of preferred stock due to non-compliance of preferred shares subscription agreement. This amount was past due as of June 30, 2011.

The interest payable to holders of preferred stock of $297,155 and $271,355 has been included in accrued interest included in account payable and accrued expenses on the balance sheets as of December 31, 2011 and December 31, 2010, respectively.

UNEARNED REVENUE

The total amount of Unearned Revenue of $743,219 consists of consulting fees for services to be performed by the Company that have not been completed as of December 31, 2011. Among this total amount: (1) $293,219.21 is attributed to the Consulting Agreement dated May 21, 2010 with Thinh Hung Investment Co. and (2) $450,000 is attributed to two Consulting Agreements dated July 26, 2011 and October 27, 2011 with Agent155 Media Corp., respectively. The Company has realized $26,656.29 as earned revenue for assisting Thinh Hung Investment Co.’s subsidiary in a business combination with a U.S. company but has not realized the balance of $293,219.21 because the Company has not completed the registration for the combined company to become a publicly traded entity. With respect to the Consulting Agreements with Agent155 Media Corp., since the term of each of these agreements is one year, the Company realizes the earned portion of revenues according to the actual length of time that has elapsed for each contract.

OTHER CURRENT LIABILITIES

Other current liabilities of $30,000 as of December 31, 2011 represent a refundable deposit in connection with a consulting agreement between the Company and its client. These amounts are shown as other current liabilities on the consolidated financial statements.

NOTE 12 – LITIGATION

LEGAL PROCEEDING SETTLED AND UNPAID AS OF DECEMBER 31, 2011:

QUANG VAN CAO AND NHAN THI NGUYEN CAO VS. PROVIDENTIAL SECURITIES, INC. ET AL.

This case was originally submitted to Orange County Superior Court, CA on June 25, 1997, Case No. 781121, and subsequently moved to NASD Dispute resolution for arbitration. On or about August 24, 2000, the Company's legal counsel negotiated with the Claimant's counsel and unilaterally reached a settlement that had not been approved by the Company. While the Company was in the process of re-negotiating the terms of said settlement, the Claimants filed a request for arbitration hearing before the National Association of Securities Dealers on October 4, 2000, Case No. 99-03160. Thereafter, the Claimants filed a complaint with the Orange County Superior Court, CA on October 31, 2000, Case No. 00CC13067 for alleged breach of contract for damages in the sum of $75,000 plus pre-judgment interest, costs incurred in connection with the complaint, and other relief. Without admitting or denying any allegations, the Company reached a settlement agreement with the Claimants whereby the Company would pay the Claimants a total of $62,500 plus $4,500 in administrative costs. As the date of this report, the Company has paid $2,500 and is subject to an entry of judgment for $79,000. In May 2011, the Claimants filed an application for and renewal of judgment for a total of $140,490.78. This amount has been accrued in the accompanying consolidated financial statements.

CONSECO FINANCE VENDOR SERVICES CORPORATION FKA GREEN TREE VENDOR SERVICES CORPORATION VS. PROVIDENTIAL SECURITIES, INC., HENRY D. FAHMAN AND TINA T. PHAN

In September 1997 Providential Securities, Inc. entered into a written Lease Agreement to lease certain items of equipment from Green Tree Vendor Services, in return for which Providential Securities, Inc. agreed to pay thirty-six monthly installments, each in the amount of $1,552. On or about September 12, 2000, and subsequently, Providential Securities, Inc. was unable to make the monthly payments to Claimant due to the lack of revenues following the interruption and subsequent closure of its securities brokerage operations. (See Note 3) Claimant filed a complaint for money with the Superior Court of the State of California, County of Orange (Case No. 01CC02613) on February 23, 2001 seeking $39,102 plus interest thereon at the legal rate from September 12, 2000. The claimant entered a judgment against Providential Securities, Inc., Henry Fahman and Tina Phan for $48,933. The judgment amount has been accrued in the accompanying consolidated financial statements. 

PENDING LITIGATION:

NGON VU VS. PROVIDENTIAL SECURITIES, INC.

Claimant was a former employee of Providential Securities, Inc. who was laid off in 2000 due to closure of business. The Claimant complained to the Department of Industrial Relations (DIR) for allegedly unpaid vacation and salaries. On June 13, 2001, the DIR filed a request to enter a judgment against Providential Securities, Inc. for $9,074 including wages and interest, penalty, post hearing and filing fee. The sought amount of $9,074 has been accrued in the accompanying consolidated financial statements.

VERIO VS. PROVIDENTIAL SECURITIES, INC.

On or about April 1, 2003, Verio, Inc. filed a judgment against Providential Securities, Inc., a wholly owned subsidiary of the Company which was discontinued in October 2000, for a total of $9,141.  This sum consists of $6,800 for services allegedly rendered by Verio, Inc. to Providential Securities, Inc. in 2000 and $2,341 for legal costs.  Both amounts have been accrued in the accompanying consolidated financial statements.

DOW JONES & COMPANY, INC. VS. PROVIDENTIAL SECURITIES, INC. AND PROVIDENTIAL HOLDINGS, INC.

On March 19, 2002 Dow Jones & Company filed a complaint with the Superior Court of California, County of Orange, West Justice Center (Case No. 02WL1633), against Providential Securities, Inc., the discontinued operations of the Company, and PHI Group, Inc. for $9,973 plus prejudgment interest at the rate of ten (10%) per annum from November 1, 2000, reasonable attorneys’ fees and other and further relief. This claim is in connection with services allegedly rendered by the Plaintiff to Providential Securities, Inc. prior to November 2000. The Company intends to settle this case. The sought amount of $9,973 (excluding interest) has been accrued in Accrued Expenses in the accompanying consolidated financial statements.

KEY EQUIPMENT FINANCE, INC., VS. 49-6215601204 PROVIDENTIAL SECURITIES, INC.; HENRY D. FAHMAN; TINA T. PHAN, CASE NO 06WL00289

On January 18, 2006 Key equipment Finance filed a suit in the Superior Court of the State of California, County of Orange – West District claiming breach of the terms of lease agreement by failure to make the monthly installment due although demand therefore was made. The remaining balance due and owing to plaintiff under the lease is $14,439 plus interest from the date of default. The plaintiff also claiming for breach of guaranty, common counts, unjust enrichment and cost of law suit and any other relief the Court may deem just and proper. The amount of $14,439 has been accrued in the accompanying consolidated financial statements as of December 30, 2011.

DAVIDSON VS. DOAN ET AL.

On or about February 01, 2010, the company was notified of a suit that was filed with the Superior Court of the State of California for the County of Los Angeles on November 24, 2009 by William Davidson, an individual against Martin Doan, Henry Fahman, HRCiti Corporation, and Providential Capital, Inc. (collectively referred to as “Defendants” - Case No. BC 426831). Plaintiff demanded an amount of not less than $140,000.00 from Defendants for promissory notes outstanding between Plaintiff and the company. The Company has accrued the potential liabilities associated with these promissory notes in the accompanying consolidated financial statements as of December 31, 2011.

NASD CASE:

After the completion of a routine audit of Providential Securities, Inc. in July and August 2000, the National Association of Securities Dealers, Inc. alleged that Providential violated certain provisions of the NASD's Conduct Rules. As a result, Providential Securities, Inc. withdrew its membership from the NASD in October 2000 and ceased its securities brokerage operation. $127,305, including $115,000 fine charged by NASD, is included in accrued expenses in the accompanying consolidated financial statements. (Note 3)

ARBITRATION CASES:

The Company had four arbitration cases from day-traders against Providential Securities, Inc., a discontinued stock brokerage operation of the Company.  The total amount of damages for these cases, which were closed as of December 31, 2001, was $54,505.  This amount has been accrued in the accompanying consolidated financial statements.

NOTE 13 – PAYROLL LIABILITIES

The payroll liabilities are accrued and recorded as accrued expenses in the consolidated balance sheet. As of December 31, 2011, the Company owed the Internal Revenue Service and the State of California Employment Development Department payroll tax, penalties and interest amounting to $109,882. The Company is currently working with the Internal Revenue Service and the State of California Employment Department to resolve these matters.

NOTE 14 – BASIC AND DILUTED NET LOSS PER SHARE

Net loss per share is calculated in accordance with SFAS No. 128, "Earnings per Share". Under the provision of SFAS No. 128, basic net loss per share is computed by dividing the net loss for the period by the weighted-average number of common shares outstanding for the period.  Diluted EPS is based on the weighted-average number of shares of common stock outstanding for the period and common stock equivalents outstanding at the end of the period.  Basic and diluted weighted average numbers of shares for the period ended December 31, 2011 were the same since the inclusion of Common stock equivalents is anti-dilutive.

NOTE 15 – STOCKHOLDER'S EQUITY

Effective April 13, 2009, the Company amended its articles of incorporation to change its par values of preferred and common stock to $0.001. The Company has 400,000,000 authorized capital stock, consisting of 300,000,000 shares of common stock and 100,000,000 shares of preferred stock. The effect of the change has been reflected retroactively in the consolidated financial statements.

Treasury Stock:

The balance of treasury stock as of December 31, 2011 was 1,330,440 shares valued at par, $1,330.

Common Stock:

During the quarter ended December 31, 2011 the company issued 11,625,000 shares of common stock valued at $11,625 in settlement of Asher Enterprise Convertible Promissory Notes.

Shares to be issued:

On 06/09/2006, Luberski Inc. transferred and subsequently sold 1,000,000 shares of common stock of PHI Group, Inc. which belonged to the officer of the Company and were given to Luberski, Inc. as collateral for the loan. As of June 30, 2007, the Company agreed to pay back 1,000,000 shares valued at $57,000 to the officer and recorded the transaction as shares to be issued.

NOTE 16 – STOCK BASED COMPENSATION PLAN

Stock-Based Compensation:

On February 7, 2005, the Company adopted a stock-based compensation plan and set aside 14,000,000 shares of common stock for selected eligible participants of the Company and subsidiaries, and certain independent contractors providing certain services to the Company.  

Prior to July 1, 2006, the Company measured stock compensation expense using the intrinsic value method of accounting in accordance with Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations (APB No. 25). The company adopted SFAS No. 123-R effective July 1, 2006 using the modified prospective method.

Warrants:

During the quarter ended September 30, 2006, the Company issued 250,000 stock warrants with a term of 5 years and a three-year vesting period.  The following assumptions were used in the Black-Scholes pricing model:

Following is a summary of the warrant activity for the year ended June 30, 2011

Following is a summary of the status of warrants outstanding at December 31, 2011:

NOTE 17 – LOSS ON SETTLEMENT OF DEBTS

The Company settled the notes payable principal and related accrued interest of Asher Enterprise Inc. totaling $55,000 by issuance of 20,811,326 shares of its common stock for the fair value of $ 156,010.  As a result, the Company recorded a loss of $38,579 on settlement of debts as of December 31, 2011. For the same period in the prior year, the Company recorded a loss of $24,668 on settlement of debts.

NOTE 18 – RELATED PARTY TRANSACTIONS

The Company accrued $105,000 in salaries for Henry Fahman (President of the Company) and Tina Phan (Secretary of the Company) during the quarters ended December 31, 2011 and December 31, 2010.

NOTE 19 – CONTRACTS AND COMMITMENTS

AGREEMENT WITH HAWK ASSOCIATES, INC.

On August 11, 2006, the Company entered into an investor relations consulting agreement with Hawk Associates, Inc., a Florida corporation, to be effective September 1, 2006. According to the agreement, Hawk Associates would provide investor relations consulting services to the Company for a period of six months, after which the agreement would automatically renew monthly until notice is provided by one of the parties to the other. The Company agreed to pay Hawk Associates $4,500 per month for the investor relations consulting services and Hawk Associates would be issued warrants to purchase 250,000 common shares of the Company based on the closing price of $0.015 per share as of September 1, 2006. These warrants were valid until August 30, 2011.

BUSINESS AND FINANCIAL CONSULTING AGREEMENT WITH MAST VENTURES, LLC 

Effective April 1, 2008, the Company entered into a business and financial consulting agreement with Mast Ventures, LLC to raise capital for a wholly owned subsidiary, PhiLand Corporation for 5 years. The service includes assistance identifying potential investors, developing an approach in seeking such current financing and investor relations. The Company agreed to pay 5% of the total funds raised by the consultant.

BUSINESS AND FINANCIAL CONSULTING AGREEMENT WITH THINH HUNG INVESTMENT CO.

Effective May 21, 2010 the Company signed an agreement with Thinh Hung Investment Co., Ltd., a Vietnam-based company, to assist Thinh Hung in identifying, locating and, possibly, acquiring various business opportunities for Thinh An Co., Ltd., a subsidiary of Thinh Hung, including but not limited to a reverse merger, a stock swap, or a business combination between Thinh An and a publicly-traded company in the U.S. In exchange for the services rendered, the Company would receive compensation in cash from Thinh Hung and common stock of the combined company. As of September 30, 2011, the Company has completed a stock purchase and investment agreement between Thinh Anh Co., Ltd. and Vietnam Foods Corporation, a Nevada corporation. However, the combined company has not filed a registration statement with the Securities and Exchange Commission to become a reporting company. For the fiscal year end 2010, the Company recognized $26,656 as only revenues from this transaction. The balance of $293,219 was booked as unearned income in the liability portion of the balance sheet.

LAND LEASE AGREEMENT

On July 15, 2011, Philand Vietnam Ltd. a wholly owned subsidiary of Philand Ranch Ltd. signed a land lease agreement with the Authority of Chu Lai Open Economic Zone (“CLOEZA”), Quang Nam Province, Vietnam for the first 23.55 hectares of land as part of the total area that has been approved by the CLOEZA for the Pointe91 luxury resort and residential community project. On the same date, CLOEZA issued a decision to allow Philand Vietnam Ltd. to lease said 23.55 hectares of land. The duration of the lease will be fifty years and will expire in April 2061. Annual lease payment will be VND 4,235 per square meter, equivalent to VND 997,342,500 for 23.55 hectares, for the first five years from April 28, 2011 to April 28, 2016 and will be adjusted for subsequent five-year intervals until expiration.

LAND USE RIGHTS

On August 4, 2011, the People’s Committee of Quang Nam Province issued a Certificate of Land Use Rights to Philand Vietnam Ltd. for the initial 23.55 hectares of land as part of the total area that has been approved by the Authority of Chu Lai Open Economic Zone for the Company’s Pointe91 luxury resort and residential community development project.

AGREEMENT OF PURCHASE AND SALE WITH PT. BINDAKAR

On December 17, 2011, the Company signed an Agreement of Purchase and Sale with PT. Bindakar, an Indonesia corporation, to acquire approximately 2,670 hectares of coal concession in Marga Mulya, Kecamatan Rambah Samo, Kabupaten Rokan Hulu, Propinsi Riau, Indonesia from PT. Bindakar for a total purchase price of twenty five billion Indonesian Rupiahs. According to the agreement, PT. Bindakar will pay all and any liabilities related to the acquired assets and obtain a valid IUP Production License for the coal concession prior to the intended closing date of March 31, 2012. This Agreement may be terminated at any time prior to the closing date: (a) by mutual agreement of PT. Bindakar and the Company; (b) if there is another buyer to the acquired assets who can close the transaction sooner than the Company; (c) if PT Bindakar is unable to obtain the IUP Production License by March 30, 2012, unless both parties agree to extend such date in writing; (d) if there is a material breach by either party of any material representation, warranty, covenant or agreement set forth in the agreement that is not cured, to the reasonable satisfaction of the other party, within ten business days after notice of such breach is given by the informing party; (e) if the transaction contemplated by the Agreement of Purchase and Sale is not consummated by March 31, 2012 unless both parties agree to extend such closing date in writing; and (f) if any injunction or other order of a governmental entity of competent authority prevents the consummation of the transaction contemplated by the agreement.

OFFICE SPACE LEASE

The Company signed on a 5-year lease agreement for the corporate office effective May 1, 2008. As of December 31, 2011, the monthly rental is $7,598 and will be increased by 3.5% per annum commencing in the thirteenth month of the initial lease term and continuing annually thereafter.

The leases for offices in Vietnam are on a month-to-month basis.  The monthly rental is approximately $450 per month.

NOTE 20 – GOING CONCERN UNCERTAINTY

As shown in the accompanying consolidated financial statements, the Company has accumulated deficit of $ 28,367,853 and cash flow from operations amounting $5,119 for the period ended December 31, 2011. 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. The company currently has a significant asset balance labeled construction in progress, a real estate project called Pointe 91 in Vietnam. However, this balance represents cost incurred and capitalized interest on borrowed funds [See Note 8]. This balance is also subject to the Company’s commitment with Vietnamese governmental authorities to carry out the development of Pointe 91 real estate project in Chu Lai, Quang Nam Province, Vietnam. Management has taken action to strengthen the Company's working capital position and generate sufficient cash to meet its operating needs through December 31, 2012 and beyond.  In the next twelve months, the Company will continue to focus on the following business activities: (1) energy, oil and gas, and natural resources, (2) real estate and hospitality development; (3) mergers and acquisitions and consulting services; and (4) other special situations that may have the potential to create substantial shareholder value. The Company anticipates generating more revenues through its energy-related business, potential mergers and acquisitions as well as other business activities mentioned herein. No assurances can be made that management will be successful in achieving its plan. The president and chairman of the Company has committed to funding the Company's operations for the next twelve months.

NOTE 21 – NON-CONTROLLING INTERESTS IN SUBSIDIARIES

The Company had non-controlling interests in a number of its subsidiaries. The balance of non-controlling interest as of December 31, 2011 and 2010 was as follows:

(A) PhiLand Ranch Limited:

For the period ended December 31, 2011 and 2010 PhiLand Ranch Limited had net loss of $90,528 and $203,200.

(B) Phi Gold Corp (f/k/a PHI Mining Group):

For the period ended December 31, 2011 and 2010 PHI Gold Corp (f/k/a PHI Mining Group) had net loss of $11,169 and $10,623, respectively.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Except for the audited historical information contained herein, this report specifies forward-looking statements of management of the Company within the meaning of Section 27a of the Securities Act of 1933 and Section 21e of the Securities Exchange Act of 1934 ("forward-looking statements") including, without limitation, forward-looking statements regarding the Company's expectations, beliefs, intentions and future strategies. Forward-looking statements are statements that estimate the happening of future events and are not based on historical facts. Forward- looking statements may be identified by the use of forward-looking terminology, such as "could", "may", "will", "expect", "shall", "estimate", "anticipate", "probable", "possible", "should", "continue", "intend" or similar terms, variations of those terms or the negative of those terms. The forward-looking statements specified in this report have been compiled by management of the Company on the basis of assumptions made by management and considered by management to be reasonable. Future operating results of the Company, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements. The assumptions used for purposes of the forward-looking statements specified in this report represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. In addition, those forward-looking statements have been compiled as of the date of this report and should be evaluated with consideration of any changes occurring after the date of this report. No assurance can be given that any of the assumptions relating to the forward-looking statements specified in this report are accurate and the Company assumes no obligation to update any such forward-looking statements.

INTRODUCTION

PHI Group, Inc. (formerly Providential Holdings, Inc.), ("PHI") a Nevada corporation established in June 8, 1982, is primarily focused on energy and natural resources and engaged in real estate and hospitality development, and merger and acquisition advisory services through its subsidiaries. The Company acquires and consolidates coal deposits and energy-related assets, partners with local companies in Southeast Asia to develop power plants, collaborates with a U.S. company to furnish advanced clean coal combustion technology to coal-fired plants, arranges capital for energy-related projects, and provides financial consultancy and M&A advisory services to U.S. and foreign companies. No assurances can be made that management will be successful in achieving its plan.

BACKGROUND

PHI Group, Inc. ("PHI"), formerly Providential Holdings, Inc., was organized under the laws of the State of Nevada on June 8, 1982 under the name of JR Consulting, Inc. Following the acquisition of Providential Securities, Inc., a California-based brokerage firm, the Company changed its name to Providential Securities, Inc. (Nevada) on January 12, 2000. Subsequently, the Company changed its corporate name to Providential Holdings, Inc. on February 9, 2000 and to PHI Group, Inc. on April 13, 2009. From its inception through September 7, 1995, the Company generated nominal revenues and did not actively engage in business. Prior to the corporate combination agreement with Providential Securities, Inc., JR Consulting had an operating subsidiary, Diva Entertainment, Inc., which operated two modeling agencies, one in New York and one in California. In October 2000, Providential Securities withdrew its membership and ceased its securities brokerage business. The Company currently focuses on energy and natural resources, real estate and hospitality development, and merger and acquisition advisory services.

BUSINESS STRATEGY

PHI Group Inc.’s strategy is to:

1. Identify, build, acquire, commit and deploy valuable resources with distinctive competitive advantages;

2. Design, evaluate, participate and compete in attractive businesses that have large, growing market potential;

3. Design and implement best-of-breed management systems; and

4. Build an attractive investment that includes points of exit for investors through capital appreciation or spin-offs of business units.

SUBSIDIARIES:

PHI CAPITAL HOLDINGS, INC. (formerly Providential Capital, Inc.)

In May 2003, the Company formed a wholly owned subsidiary under the name of Providential Capital to provide financial products and services for the micro-small cap arenas and manage the Company's proprietary merger and acquisition activities.  Providential Capital has mainly focused its attention on the underserved segment of smaller companies in the U.S. and abroad. Providential Capital began providing merger and acquisition advisory services to its clients since the fourth quarter of the fiscal year ended June 30, 2003.  On May 11, 2010, Providential Capital changed its name to PHI Capital Holdings, Inc. The Company has successfully managed merger plans for several privately held and publicly traded companies and continues to focus on the Pacific Rim markets in the next twelve months.

PROVIDENTIAL VIETNAM LTD.

Providential Vietnam, Ltd. is a Vietnamese limited liability company and wholly owned subsidiary of PHI Group, Inc. This subsidiary started operation in May 2008 to provide M&A advisory services, financial and management consulting, corporate restructuring, and investment banking services to companies in Vietnam.

PHILAND RANCH LIMITED and PHILAND CORPORATION

In July 2007, PhiLand Corporation, a Nevada corporation and wholly owned subsidiary of the Company, was formed to engage in real estate development in Quang Nam Province, Vietnam.  In July 2007, PHI Group, Inc. entered into a principle agreement with the People’s Committee of Quang Nam Province, which would allow the Company to lease approximately 8,000 acres of land south of Hoi An City, Quang Nam Province, Vietnam to develop an integrated tourism zone under a 70-year lease term.  In December 2007, PhiLand Corporation formed a wholly owned subsidiary Philand Vietnam Ltd., a limited liability company registered under the laws of Socialist Republic of Vietnam to manage the luxury resort and residential community development project in Chu Lai, Nui Thanh District, Quang Nam Province (“Pointe91”). In April 2007, the Company formed a Singapore-based public company limited by shares under the laws of the laws of the Republic of Singapore, Philand Ranch Ltd. (Singapore), Company No. 200906217G, ISIN No. SG9999006092, intended to be the publicly traded holding company for real estate and hospitality development in Vietnam and Southeast Asia. In June 2009, the Company formed Philand Ranch Limited (UK), a company registered under the laws of England and Wales, Company No. 6923797, ISIN No. GB00B5461K52, to be the global holding company listed on the Frankfurt Stock Exchange to consolidate all real estate and hospitality business activities of the Company. In June 2009, Philand Ranch Limited (UK) acquired all the issued and outstanding common stock of PhiLand Corporation in exchange for 23,849,800 ordinary shares of Philand Ranch Limited (UK) and also exchanged 1,000,000 shares of its ordinary stock for all the issued and outstanding stock of Philand Ranch Ltd. (Singapore). As a result, Philand Ranch Limited (UK) has become the parent of Philand Corporation, Philand Vietnam Ltd., and Philand Ranch Ltd (Singapore), now known as PHI Oil & Gas, Ltd. PHI Group, Inc. received 18,734,753 shares of ordinary stock of Philand Ranch Limited (UK) in exchange for its holding in Philand Corporation. PhiLand Ranch Limited’s ordinary shares are listed on the Open Market Segment of the Frankfurt Stock Exchange under the symbol 1P8.F, WKN A0RPEA.

On May 14, 2010 PhiLand Ranch Ltd. entered into a EUR 50 Million Subscription Commitment with an international emerging markets fund for working capital, general corporate purposes, and acquisitions. According to the Subscription Commitment, the fund is committed to buying shares of ordinary stock of PhiLand Ranch based upon a per share purchase price equal to ninety percent (90%) of the average closing bid price during the fifteen (15) consecutive trading days following the purchase date. As of the date of this report, PhiLand Ranch Ltd. has not signed the definitive documentation for the closing of this Subscription Commitment. The success of the Pointe91 and other projects of PhiLand Ranch are dependent upon its ability to raise the required capital and to execute its business plan. On August 4, 2011, Philand Vietnam Ltd. was granted a Land Use Rights (also known as Land Title) for the first 23.55 hectares at Pointe 91 project by the Vietnamese government.

PHI GOLD CORPORATION (formerly PHI MINING GROUP, INC.) and TRICON GOLD CORP.

In March 2007, the Company received 900,000 shares of common stock of Bio-Warm Corp., a Nevada corporation, for advisory services rendered. Bio-Warm Corp. subsequently acquired 100% of Vietnam-based Dai Dung Metallic Manufacture Construction and Trade Company (DDMMCT) and changed its name to DDC Industries, Inc. In June 2007, the Company received 3,763,753 shares of DDC Industries for services performed in the merger of Bio-Warm Corp. and DDMMCT which was closed on March 30, 2007 and received the remaining 3,763,753 shares during the year ended June 30, 2008 per the agreement, which in total, was equivalent to 20% of all issued and outstanding shares of DDC Industries, Inc. at that time. The merger agreement with DDMMCT was rescinded on November 18, 2008 in entirety and shareholders of DDMMCT agreed to return 28,610,025 shares of the 30,110,025 shares of DDC Industries, Inc. which they had received pursuant to the business combination agreement between Bio-Warm Corp. and DDMMCT. On December 1, 2008, DDC Industries Inc. changed its name to PHI Mining Group, Inc. On December 1, 2008, DDC Industries Inc. changed its name to PHI Mining Group, Inc. and on December 13, 2010, the Company’s name was changed to PHI Gold Corp. to focus on gold mining business. The common stock of PHI Gold Corporation was traded on the Pink Sheets under the symbol “PHIG”. PHI Gold Corporation did not generate any revenues in the period ended December 31, 2011.

Indochina Mining Corporation, a Nevada corporation, was incorporated on March 20, 2008 for exploitation and processing of diatomite mines. On April 14, 2008, Indochina Mining Corporation (IMC), entered into a Cooperation agreement with Phu Yen Minerals Joint Stock Company (PYMICO). Under this agreement, PYMICO and IMC would cooperate to contribute capital for establishment of a joint venture specializing in exploitation and processing of diatomite in Phu Yen province and IMC would participate in PYMICO through purchasing a maximum of 30% shares of PYMICO. During the year ended June 30, 2010, Indochina Mining also entered into an agreement with Mr. Chinnawat Chaikijjanuwat of Thailand to establish a joint venture company to exploit and process a black pearl granite mine in Nakhornrajchasima province, Thailand and an agreement with Truong Son Group to establish a joint venture company to survey, mine and process lead and zinc in Tuyen Quang province, Vietnam. Indochina Mining Corp. did not consummate interest in these joint venture companies.

On December 1, 2008, Indochina Mining Corporation entered into stock purchase agreement with PHI Mining Group (now known as PHI Gold Corporation) to exchange all of its capital stock with the same number of newly issued shares of PHI Mining Group. As a result, the Company owns approximately 83% of PHI Gold Corporation. Indochina Mining Corporation changed its name to Tricon Gold Corporation in May 2011.

PROVIMEX, INC.

Provimex, Inc. was originally formed on April 10, 2001 under the name "Providential Imex", to focus on trade commerce with Vietnam. This division changed its name to Provimex on July 5, 2001.  Provimex began to generate revenues from its import and export activities in August 2002 through the fiscal year ended June 30, 2005 and incorporated as a Nevada corporation on September 23, 2004. The Company distributed a 15% stock dividend of Provimex, Inc. to shareholders of record as of September 15, 2004. On June 01, 2011, Provimex, Inc. signed an agreement to acquire the 100% issued and outstanding capital stock of Humex Medical Group Corp., a California corporation, (“Humex”) in exchange solely for a certain amount of shares of Provimex’s common stock, par value 0.001, to engage in stem research and therapy in Southeast Asia. After the merger, shareholders of Humex will own 90% of Provimex Inc. The Provimex shares have not been registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”) and have not been listed on any foreign exchange. The Board of Directors and the majority shareholders of Humex approved the exchange on June 30, 2011. Prior to the business combination agreement between Provimex, Inc., and Humex Medical Group Corp., PHI Group, Inc. owned 17,000,000 shares of common stock of Provimex, Inc. out of 20,000,000 shares issued and outstanding, or equivalent to 85% of Provimex, Inc. Following the business combination between Provimex, Inc. and Humex Medical Group Corp., PHI Group, Inc. and its shareholders will own ten percent of all the issued and outstanding shares of Provimex, Inc. PHI Group, Inc. has signed an agreement to assist the combined company to register with the Securities and Exchange Commission to become a separate fully reporting publicly traded company. As of the date of this report Provimex, Inc. has not issued the shares to Humex pursuant to the business combination agreement. For the three and six months ended December 31, 2011, Provimex, Inc. did not generate any sales.

TOUCHLINK COMMUNICATIONS, INC.

Touchlink Communications was formed on July 7, 2003 as a division of the Company to provide point-of-sale (POS) terminals and prepaid calling cards to retailers, convenient stores and non-profit organizations across the US. Touchlink Communications signed an agreement with KAGRO (Korean American Grocer Association) to provide pre-paid services to its member stores in the US and Canada.  This subsidiary was later incorporated as a Nevada corporation in February 2004 under the name of Touchlink Communications, Inc. as a wholly owned subsidiary of the Company to provide long distance services to residential and business customers in the United States. The Company has declared a 15% stock dividend of Touchlink Communications, Inc. to shareholders of record as of September 15, 2004 and currently owns 85% of Touchlink Communications. On November 03, 2008, this subsidiary changed its name to Vietnam Media Group, Inc. and subsequently resumed the corporate name of Touchlink Communications, Inc. in February 2011. This subsidiary did not have any activities during the quarters ended December 31, 2011 or 2010.

NON-CONTROLLING INTERESTS:

CATALYST RESOURCE GROUP, INC. (formerly JEANTEX GROUP, INC.)

On May 13, 2005, Providential Capital, Inc., a wholly-owned subsidiary of the Company, entered into a business consulting agreement with Lexor Holdings, Inc. to provide merger and acquisition advisory services to Lexor Holdings, Inc. with regard to a proposed merger between Lexor Holdings, Inc. and SB Chemical Co., Ltd., a Republic of Korea corporation. According to this agreement, the Company would be entitled to an additional 14% equity interest in Lexor Holdings, Inc. following the consummation of a merger between Lexor Holdings, Inc. and SB Chemical Co, Ltd. or another established business entity.  

On June 22, 2005, Lexor Holdings, Inc. entered into a Stock Purchase Agreement with Jeantex, Inc., a California corporation and Susan Shin, an individual who is the president and sole shareholder of Jeantex Pursuant to the terms of the Agreement, Lexor acquired 100% of the issued and outstanding equity interests of Jeantex in exchange for 56,350,000 shares of Lexor restricted common stock.  The Stock Purchase Agreement was closed on June 29, 2005. PHI Group, Inc. received 7,300,000 shares of restricted common stock of Lexor for services rendered in connection with this transaction. Lexor Holdings, Inc. has changed its corporate name to Jeantex Group, Inc. following the merger with Jeantex, Inc.

 During the year ended June 30, 2009, 23,285,714 shares of Jeantex Group, Inc. were exchanged with 900,000 shares of PhiLand Corporation which were owned by the Company. In April 2010, Jeantex Group, Inc. changed its corporate name to Catalyst Resource Group, Inc. and its trading symbol to “CATA”.  As of December 31, 2011 the Company owned 32,539,822 shares of Catalyst Resource Group, Inc. common stock, or equivalent to 12.64%.

VIETNAM MINING CORPORATION

As a result of a merger between Vietnam-based Linh Thanh Quang Binh Exploiting and Processing High Calcium Carbonate Powder Joint Stock Company and Vietnam Mining Corporation that was closed on June 28, 2010, the Company received 1,746,500 shares of common stock of Vietnam Mining Corporation. These shares represent approximately 5% of ownership in Vietnam Mining Corporation.

PHI ENERGY CORPORATION

On May 9, 2005, the Company formed Providential Oil & Gas, Inc., a Nevada corporation and wholly owned subsidiary of the Company, to engage in independent oil and gas business activities in the U.S. and abroad. In November 2005, Providential Oil & Gas signed an agreement with Terra-Firma Gas & Oil, LLC, a Nevada corporation with headquarters in Midland, Texas, to co-develop up to twenty four gas wells in Crockett County, West Texas. This transaction under the agreement with Terra-Firma Gas & Oil did not materialize. In June 2006, Providential Oil & Gas, Inc. changed its corporate name to Providential Energy Corporation, which subsequently changed its corporate name to PHI Energy Corporation in January 2001.

On April 8, 2011, PHI Energy Corporation signed an Asset Purchase Agreement with PT. Dian Anugrah Pratama (“DAP”), an Indonesia corporation, to acquire an estimated mineable reserve of ten million (10,000,000) metric tons of coal located in an area of approximately 423 hectares, at Kecamatan Kapur IX, Kabupaten Lima Puluh Kota, Propinsi Sumatera Barat, Indonesia, from DAP in exchange for 20,000,000 shares of common stock of PHI Energy Corporation. Subsequently, on May 10, 2011 PHI Energy signed an Agreement of Purchase and Sale with DAP, which superseded and replaced all prior arrangements and understandings with DAP, whereby PHI Energy Corporation will buy total estimated mineable reserves of thirty-three million (33,000,000) metric tons of coal from DAP in exchange for $3,000,000 in cash and 47,000,000 in common stock of PHI Energy Corporation. This transaction was closed on May 31, 2011. PHI Energy Corporation agreed to file a registration statement to register 4,700,000 shares of its common stock within two months following the closing of this transaction for the benefits of DAP, PHI Group Inc. and all related shareholders. However, as of the date of this report, this transaction may be subject to a mutual rescission because certain terms and conditions have not been met by the parties. PHI Energy Corporation did not generate any revenue during the quarters ended December 30, 2011 and 2010.

CRITICAL ACCOUNTING POLICIES

The Company’s financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported. These estimates can also affect supplemental information contained in the external disclosures of the Company including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. Valuations based on estimates are reviewed by us for reasonableness and conservatism on a consistent basis throughout the Company. Primary areas where financial information of the Company is subject to the use of estimates, assumptions and the application of judgment include acquisitions, valuation of long-lived and intangible assets, recoverability of deferred tax and the valuation of shares issued for services. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions.

Valuation of Long-Lived and Intangible Assets

The recoverability of long-lived assets requires considerable judgment and is evaluated on an annual basis or more frequently if events or circumstances indicate that the assets may be impaired. As it relates to definite life intangible assets, we apply the impairment rules as required by SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and Assets to Be Disposed Of” as amended by SFAS No. 144, which also requires significant judgment and assumptions related to the expected future cash flows attributable to the intangible asset. The impact of modifying any of these assumptions can have a significant impact on the estimate of fair value and, thus, the recoverability of the asset.

Income Taxes

We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities. We regularly review our deferred tax assets for recoverability and establish a valuation allowance based upon historical losses, projected future taxable income and the expected timing of the reversals of existing temporary differences. As of December 31, 2011, 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 six-month periods ended December 31, 2011 and 2010, our financial condition at December 31, 2011 and factors that we believe could affect our future financial condition and results of operations. Historical results may not be indicative of future performance.

This discussion and analysis should be read in conjunction with our consolidated financial statements and the notes thereto included elsewhere in this Form 10-Q. Our consolidated financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States (“GAAP”). All references to dollar amounts in this section are in United States dollars.

Three months ended December 31, 2011 compared to the three months ended December 31, 2010

Total Revenues:

Total revenues were $ 215,000 and $ 6,000 for the three months ended December 31, 2011, and 2010, respectively from management services. The increase of revenues for the three months ended December 31, 2011 was due to the increase consulting services during this period compared to the previous year.

Operating Costs and Expenses:

Total operating expenses were $142,651 and $265,713 for the three months ended December 31, 2011, and 2010, respectively. The decrease is primarily due to the decrease in professional expenses. Professional services were $4,090 and $117,850 for the comparable periods. General and administrative expenses were $69,499 and $70,978 for the comparable periods. The decrease in general and administrative expenses between the two comparable periods was due to a decrease in expenditures associated with travel and investor relations. During the current three months, the Company recorded salaries and wages of $68,748 as compared to $76,154 in the three months of the previous fiscal year. The decrease in salaries and wages for the quarter ended December 31, 2011 was due to the reduction of staff during this period compared to that of the comparable previous period.

Other Income and Expenses:

Total other expense was $156,634 for the three months ended December 31, 2011 compared to $ 90,819 for the three months ended December 2010. The increase in other expense was due to the increase in interest expense, and decrease in other income.

Interest expense was $138,376 and $85,456 for the three months ended December 30, 2011, and 2010, respectively.

Net Income and Loss:

Net loss for the three months ended December 31, 2011 was $ 61,486 as compared to net loss $303,019 for the same period in 2010, which is equivalent to ($0.00) per share for the current period and ($0.00) per share for the same period in 2010, both based on the weighted average number of basic and diluted shares outstanding.

The decrease net loss between the two comparable periods is primarily due to an increase in revenue. The decrease in professional expenses of $113,760 the three-month period ended December 31, 2011 compared to the same period in 2010, a decrease in total operating expenses of $123,062 in the three-month period ended December 31, 2011 compared to the same period in 2010, and net other expenses of $97 in the three-month period ended December 31, 2011 compared to net other income of $27,756 in the three-month period ended December 31, 2010.

Six months ended December 31, 2011 compared to the six months ended December 31, 2010

Total Revenues:

Total revenues were $390,000 and $353,317 for the six months ended December 31, 2011, and 2010, respectively from management services. The increase of revenues for the six months ended December 31, 2011 was due to the increase consulting services during this period compared to the previous year.

Operating Costs and Expenses:

Total operating expenses were $323,467 and $560,829 for the six months ended December 31, 2011, and 2010, respectively. The decrease is primarily due to the decrease in professional expenses. Professional services were $34,990 and $242,735 for the comparable periods. General and administrative expenses were $149,055 and $165,065 for the comparable periods. The decrease in general and administrative expenses between the two comparable periods was due to a decrease in expenditures associated with travel and investor relations. During the current six months, the Company recorded salaries and wages of $138,794 as compared to $151,500 in the six months of the previous fiscal year. The decrease in salaries and wages for the six months ended December 31, 2011 was due to the reduction of staff during this period compared to that of the comparable previous period.

Other Income and Expenses:

Total other expense was $298,077 for the six months ended December 31, 2011 compared to $ 252,875 for the six months ended December 2010. The increase in other expense was due to the increase in interest expense, increase in loss on debt settlement, increase in change in derivative liability, and offset by increase in other income.

Interest expense was $270,832 and $261,439 for the six months ended December 30, 2011, and 2010, respectively.

Net Income and Loss:

Net loss for the six months ended December 31, 2011 was $190,064 as compared to net loss $373,766 for the same period in 2010, which is equivalent to ($0.00) per share for the current period and ($0.00) per share for the same period in 2010, both based on the weighted average number of basic and diluted shares outstanding.

The decrease net loss between the two comparable periods is primarily due to an increase in revenue. The decrease in professional expenses of $207,745 the six-month period ended December 31, 2011 compared to the same period in 2010, a decrease in total operating expenses of $237,362 in the six-month period ended December 31, 2011 compared to the same period in 2010, and net other income of $43,780 in the six-month period ended December 31, 2011 compared to net other income of $39,913 in the six-month period ended December 31, 2010.

LIQUIDITY AND CAPITAL RESOURCES

The Company had consolidated cash of $5,119 and $3,115 as of December 31, 2011 and 2010, respectively.

The Company's operating activities provided $100,553 and used $ 157,304 in the six months ended December 31, 2011 and 2010, respectively.

Cash used in investing activities was $99,648 for the six months ended December 31, 2011 as compared to cash used in investing of $103,920 for the same period in 2010, respectively.

Cash used by financing activities was $57,057 for the six months ended December 31, 2011, as compared to cash provided $189,039 for the six months ended September 30, 2010. The increase in cash used by financing activities is mainly, due to an increase on payments on notes payable and officers between the six-month periods ended December 31, 2011 and 2010, respectively.

The Company’s operations are currently financed through various loans and sale of marketable securities. Management has taken action to strengthen the Company's working capital position and generate sufficient cash to meet its operating needs. In addition, the Company also anticipates generating more revenue through its coal and energy-related activities as well as merger and acquisition advisory business. No assurances can be made that management will be successful in achieving its plan or that additional capital will be available on a timely basis or at acceptable terms.

COMPANY'S PLAN OF OPERATION FOR NEXT 12 MONTHS

For the next twelve months, the Company intends to focus on the following business activities: (1) energy and natural resources; (2) mergers and acquisitions and advisory services; (3) real estate and hospitality development; and (5) special situations that may have the potential to create substantial shareholder value. There is no guaranty that the Company will be successful in any of its plans.

FINANCIAL PLANS

Management has taken action and is formulating additional plans to strengthen the Company's working capital position and generate sufficient cash to meet its operating needs through December 31, 2012 and beyond. Among the actions to be taken, the Company intends to raise additional capital from the US and international markets and is currently in the process of attaining additional financing. In addition, the Company also anticipates generating more revenue through its coal and energy-related activities as well as merger and acquisition advisory business. No assurances can be made that management will be successful in achieving its plan.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discussion about PHI Group Inc.’s market risk involves forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements.

Currency Fluctuations and Foreign Currency Risk

Some of our operations are conducted in Vietnam using Vietnamese Dong, which is the official currency of Vietnam. The effect of the fluctuations of exchange rates is considered minimal to our business operations.

Interest Rate Risk

We do not have significant interest rate risk, as most of our debt obligations are primarily short-term in nature to individuals, with fixed interest rates.

Valuation of Securities Risk

Since majority of our income is paid with the marketable securities, the value of our assets may fluctuate significantly depending on the market value of the securities we hold.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure and Procedures

As of December 31, 2011, the end of the period covered by this report, the Company’s Chief Executive Officer and Chief Financial Officer reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e) and 15d-15(e). As of the end of the period covered by this report, based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective in ensuring that material information that the Company must disclose in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, the “Exchange Act”, is recorded, processed, summarized, and reported on a timely basis, and that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s chief executive officer and chief financial officer as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls

There was no change in our internal control over financial reporting that occurred during this fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.    

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting at PHI Group. Internal control over financial reporting is a process designed by or under the supervision of our chief executive officer/acting chief financial officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with GAAP. A company's internal control over financial reporting includes policies and procedures that (1) pertain to the maintenance of records that accurately and fairly reflect, in reasonable detail, transactions and dispositions of our assets, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and that receipts and expenditures are being made only in accordance with authorizations of our management and board of directors, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.

Our management assessed the effectiveness of PHI Group's internal control over financial reporting as of September 30, 2011. In making this assessment, our management used the criteria established in the Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").

In connection with the evaluation of our disclosure controls and procedures, our management team attempted to identify any "material weakness" in our internal control environment. We defined "material weakness" as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We defined "significant deficiency" as a deficiency, or combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting.

We identified on a preliminary basis the following material weaknesses in internal control over financial reporting:

• Ineffective control over the financial statements closing process;

• Insufficient personnel with an appropriate level of accounting knowledge, experience with the Company and/or industry, and training in the application of GAAP;

• Lack of segregation of duties; and

• Inadequate monitoring of non-routine and non-systematic transactions.

PART II-OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Other than as set forth below, Company is not a party to any material pending legal proceedings and, to the best of its knowledge, no such action by or against Company has been threatened. The majority of the legal proceedings and arbitration cases are related to the discontinued operations of Providential Securities, Inc. since 2000.

LEGAL PROCEEDING SETTLED AND UNPAID AS OF DECEMBER 31, 2011:

QUANG VAN CAO AND NHAN THI NGUYEN CAO VS. PROVIDENTIAL SECURITIES, INC. ET AL.

This case was originally submitted to Orange County Superior Court, CA on June 25, 1997, Case No. 781121, and subsequently moved to NASD Dispute resolution for arbitration. On or about August 24, 2000, the Company's legal counsel negotiated with the Claimant's counsel and unilaterally reached a settlement that had not been approved by the Company. While the Company was in the process of re-negotiating the terms of said settlement, the Claimants filed a request for arbitration hearing before the National Association of Securities Dealers on October 4, 2000, Case No. 99-03160. Thereafter, the Claimants filed a complaint with the Orange County Superior Court, CA on October 31, 2000, Case No. 00CC13067 for alleged breach of contract for damages in the sum of $75,000 plus pre-judgment interest, costs incurred in connection with the complaint, and other relief. Without admitting or denying any allegations, the Company reached a settlement agreement with the Claimants whereby the Company would pay the Claimants a total of $62,500 plus $4,500 in administrative costs. As the date of this report, the Company has paid $2,500 and is subject to an entry of judgment for $79,000. In May 2011, the Claimants filed an application for and renewal of judgment for a total of $140,490.78. This amount has been accrued in the accompanying consolidated financial statements as of December 30, 2011.

CONSECO FINANCE VENDOR SERVICES CORPORATION FKA GREEN TREE VENDOR SERVICES CORPORATION VS. PROVIDENTIAL SECURITIES, INC., HENRY D. FAHMAN AND TINA T. PHAN

In September 1997 Providential Securities, Inc. entered into a written Lease Agreement to lease certain items of equipment from Green Tree Vendor Services, in return for which Providential Securities, Inc. agreed to pay thirty-six monthly installments, each in the amount of $1,552. On or about September 12, 2000, and subsequently, Providential Securities, Inc. was unable to make the monthly payments to Claimant due to the lack of revenues following the interruption and subsequent closure of its securities brokerage operations. (See Note 3) Claimant filed a complaint for money with the Superior Court of the State of California, County of Orange (Case No. 01CC02613) on February 23, 2001 seeking $39,102 plus interest thereon at the legal rate from September 12, 2000. The claimant entered a judgment against Providential Securities, Inc., Henry Fahman and Tina Phan for $48,933. The judgment amount has been accrued in the accompanying consolidated financial statements as of December 31, 2011.

PENDING LITIGATION:

NGON VU VS. PROVIDENTIAL SECURITIES, INC.

Claimant was a former employee of Providential Securities, Inc. who was laid off in 2000 due to closure of business. The Claimant complained to the Department of Industrial Relations (DIR) for allegedly unpaid vacation and salaries. On June 13, 2001, the DIR filed a request to enter a judgment against Providential Securities, Inc. for $9,074 including wages and interest, penalty, post hearing and filing fee. The sought amount of $9,074 has been accrued in the accompanying consolidated financial statements as of December 31, 2011.

VERIO VS. PROVIDENTIAL SECURITIES, INC.

On or about April 1, 2003, Verio, Inc. filed a judgment against Providential Securities, Inc., a wholly owned subsidiary of the Company which was discontinued in October 2000, for a total of $9,141. This sum consists of $6,800 for services allegedly rendered by Verio, Inc. to Providential Securities, Inc. in 2000 and $2,341 for legal costs. Both amounts have been accrued in the accompanying consolidated financial statements as of December 31, 2011.

DOW JONES & COMPANY, INC. VS. PROVIDENTIAL SECURITIES, INC. AND PROVIDENTIAL HOLDINGS, INC.

On March 19, 2002 Dow Jones & Company filed a complaint with the Superior Court of California, County of Orange, West Justice Center (Case No. 02WL1633), against Providential Securities, Inc., the discontinued operations of the Company, and Providential Holdings, Inc. for $9,973 plus prejudgment interest at the rate of ten (10%) per annum from November 1, 2000, reasonable attorneys’ fees and other and further relief. This claim is in connection with services allegedly rendered by the Plaintiff to Providential Securities, Inc. prior to November 2000. The Company intends to settle this case. The sought amount of $9,973 (excluding interest) has been accrued in Accrued Expenses in the accompanying consolidated financial statements as of December 31, 2011.

KEY EQUIPMENT FINANCE, INC., VS. 49-6215601204 PROVIDENTIAL SECURITIES, INC.; HENRY D. FAHMAN; TINA T. PHAN, CASE NO 06WL00289

On January 18, 2006 Key equipment Finance filed a suit in the Superior Court of the State of California, County of Orange –West District claiming breach of the terms of lease agreement by failure to make the monthly installment due although demand therefore was made. The remaining balance due and owing to plaintiff under the lease is $14,439 plus interest from the date of default. The plaintiff also claiming for breach of guaranty, common counts, unjust enrichment and cost of law suit and any other relief the Court may deem just and proper. The sought amount of $14,439 has been accrued in the accompanying consolidated financial statements as of December 31, 2011.

DAVIDSON VS. DOAN ET AL.

On or about February 01, 2010, the company was notified of a suit that was filed with the Superior Court of the State of California for the County of Los Angeles on November 24, 2009 by William Davidson, an individual against Martin Doan, Henry Fahman, HRCiti Corporation, and Providential Capital, Inc. (collectively referred to as “Defendants” - Case No. BC 426831). Plaintiff demanded an amount of not less than $140,000.00 from Defendants for promissory notes outstanding between Plaintiff and the company. The Company has accrued the potential liabilities associated with these promissory notes in the accompanying consolidated financial statements as of December 31, 2011.

NASD CASE:

After the completion of a routine audit of Providential Securities, Inc. in July and August 2000, the National Association of Securities Dealers, Inc. alleged that Providential violated certain provisions of the NASD's Conduct Rules. As a result, without admitting or denying any of the allegations, Providential Securities, Inc. withdrew its membership from the NASD in October 2000 and ceased its securities brokerage operation. $127,305, including $115,000 fine charged by NASD, is included in accrued expenses in the accompanying consolidated financial statements as of December 31, 2011.

ARBITRATION CASES:

The Company had four arbitration cases from day-traders against Providential Securities, Inc., a discontinued stock brokerage operation of the Company. The total amount of damages for these cases, which were closed as of June 30, 2001, was $54,505. This amount has been accrued in the accompanying consolidated financial statements as of December 31, 2011.

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 founder. The loss of the services of one or more of our key personnel could impede implementation and execution of our business strategy and result in the failure to reach our goals. We do not carry key person life insurance for any of our officers or employees. Our future success will also depend on the continued ability to attract, retain and motivate highly qualified personnel in the diverse areas required for continuing our operations. We cannot assure that we will be able to retain our key personnel or that we will be able to attract, train or retain qualified personnel in the future.

Our service strategy in merger and acquisition involves a number of risks and we have a limited history of successful acquisitions. Even when an acquisition is completed, we may have to continue our service for integration that may not produce results as positive as management may have projected.

The Company is in the process of evaluating various opportunities and negotiating to acquire other companies and technologies. Acquisitions entail numerous risks, including difficulties in the assimilation of acquired operations and products, diversion of management's attention from other business concerns, amortization of acquired intangible assets and potential loss of key employees of acquired companies. We have limited experience in assimilating acquired organizations into our operations. Although potential synergy may be achieved by acquisitions of related technologies and businesses, no assurance can be given as to the Company's ability to integrate successfully any operations, personnel, services or products that have been acquired or might be acquired in the future. Failure to successfully assimilate acquired organizations could have a material adverse effect on the Company's business, financial condition and operating results.

Acquisitions involve a number of special risks, including:

• failure of the acquired business to achieve expected results;
• diversion of management’s attention;
• failure to retain key personnel of the acquired business;
• additional financing, if necessary and available, could increase leverage, dilute equity, or both;
• the potential negative effect on our financial statements from the increase in goodwill and other intangibles; and
• the high cost and expenses of completing acquisitions and risks associated with unanticipated events or liabilities.

These risks could have a material adverse effect on our business, results of operations and financial condition since the values of the securities received for the consulting service at the execution of the acquisition depend on the success of the company involved in acquisition. In addition, our ability to further expand our operations through acquisitions may be dependent on our ability to obtain sufficient working capital, either through cash flows generated through operations or financing activities or both. There can be no assurance that we will be able to obtain any additional financing on terms that are acceptable to us, or at all.

Our businesses are currently focused in Vietnam, and any adverse change to the economy or business environment in Vietnam could significantly affect our operations, which would lead to lower revenues and reduced profitability.

Our operations are currently concentrated in Vietnam. Because of this concentration in a specific geographic location, 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 Vietnam 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.

Our executive officers/directors and principal stockholders who hold 5% or more of the outstanding common stock owned as of September 30, 2011, in the aggregate, approximately 28% of our outstanding common stock. These stockholders will be able 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. 

In addition, 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.

The price at which investors purchase shares of our common stock may not be indicative of the price that will prevail in the trading market. Investors may be unable to sell their shares of common stock at or above their purchase price, which may result in substantial losses.

We do not meet the requirements for our stock to be quoted on NASDAQ, the American Stock Exchange or any other senior exchange, the tradability in our securities will be limited under the penny stock regulations.   

Under the rules of the Securities and Exchange Commission, if the price of our securities on the OTCQB 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 may be 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:

Exhibit No. Description

21.1 Subsidiaries of registrant

SIGNATURES

Pursuant to the requirement of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

PHI GROUP, INC.

Date: February 21, 2012
By: /s/ Henry D. Fahman
Henry D. Fahman, President

In accordance with the Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.