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PHI GROUP INC - Quarter Report: 2015 December (Form 10-Q)

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: DECEMBER 31, 2015

 

or

 

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _____________ to _____________

 

Commission File Number: 2-78335-NY

 

(Exact name of registrant as specified in its charter)

 

Nevada   90-0114535
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer identification Number)
     
5348 Vegas Drive,  # 237 Las Vegas,   NV 89108
(Address of principal executive offices)   (Zip Code)

 

702-475-5430
(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [  ] No [X]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [  ]   Accelerated filer [  ]
Non-accelerated filer   [  ]   Smaller reporting company [X]

 

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 shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of February 16, 2016, there were 9,878,461 shares of the registrant’s $0.001 par value Common Stock issued and outstanding, including 5,673,327 shares reserved for a special dividend distribution, following a 1:1,500 reverse split which came into effect March 15, 2012.

 

 

 

 
 

 

PHI GROUP, INC.

 

INDEX TO FORM 10-Q

 

PART I - FINANCIAL INFORMATION    
     
Item 1 - Consolidated Financial Statements – Unaudited   3
     
Consolidated Balance Sheets as of December 31, 2015 and June 30, 2015   3
     
Consolidated Statements of Operations for the three and six months ended December 31, 2015 and 2014   4
     
Consolidated Statements of Cash Flows for the six months ended December 30, 2015 and 2014   5
     
Notes to Consolidated Financial Statements   6
     
Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations   22
     
Item 3 - Quantitative and Qualitative Disclosures about Market Risk   29
     
Item 4 - Controls and Procedures   30
     
PART II - OTHER INFORMATION    
     
Item 1 - Legal Proceedings   31
     
Item 1A - Risk Factors   32
     
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds   34
     
Item 3 - Defaults Upon Senior Securities   34
     
Item 4 - Submission of Matters to a Vote of Security Holders   34
     
Item 5 - Other Information   34
     
Item 6 - Exhibits   35
     
SIGNATURES   36
     
Exhibit 21.1    
     
CERTIFICATIONS    

 

2 
 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1 -  FINANCIAL STATEMENTS

 

PHI GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

   December 31, 2015   June 30, 2015 
       (Audited) 
ASSETS          
Current assets:          
Cash and cash equivalents  $41,312   $10,654 
Marketable securities   270,997    350,556 
Loans receivable   12,123    9,841 
Total current assets  $324,432   $371,051 
Fixed assets          
Land   82,733    - 
Total fixed assets  $82,733   $- 
Other assets:          
Other assets   144,505    77,729 
Prepaid Expense   -    - 
Total other assets   144,505    77,729 
           
Total Assets  $551,670   $448,780 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
Current liabilities:          
Accounts payable  $126,614   $131,454 
Accrued expenses   4,532,130    4,253,280 
Short-term notes payable   1,313,500    1,342,618 
Due to officers   1,843,125    1,879,458 
Due to preferred stockholders   215,000    215,000 
Advances from customers   558,219    563,219 
Client deposits   49,961    - 
Liabilities from discontinued operations   1,045,232    1,045,232 
           
Total current liabilities  $9,683,782   $9,430,260 
           
Stockholders’ deficit:          
Preferred stock, $.001 par value, 100,000,000 shares authorized; none issued and outstanding   -    - 
Common stock, $.001 par value; 300,000,000 shares authorized; 9,559,165 issued and 3,885,838 outstanding on 12/31/2015, and 9,584,675 issued and 3,911,348 outstanding on 6/30/2015, respectively, adjusted for 1 for 1,500 reverse split effective March 15, 2012.   237,410    237,447 
           
Treasury stock, $.001 par value, 64,289 and 3,289 shares as of 12/31/2015 and 6/30/2015.   (3,851)   (3,801)
Paid-in capital   28,338,767    28,365,269 
Acc. other comprehensive gain (loss)   15,027    99,341 
Accumulated deficit   (37,719,465)   (37,679,736)
Total stockholders’ deficit  $(9,132,112)  $(8,981,480)
           
Total liabilities and stockholders’ deficit  $551,670   $448,780 

 

The accompanying notes form an integral part of these unaudited consolidated financial statements

 

3 
 

 

PHI GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED

 

   For the Three Months Ended
December 31,
   For the Six Months Ended
December 31,
 
   2015   2014   2015   2014 
Net revenues                    
Revenues  $194,700   $11,965   $234,700   $15,096 
                     
Operating expenses:                    
Salaries and wages   52,500    52,500    105,000    105,000 
Professional services, including non-cash compensation   36,661    24,100    60,810    41,841 
General and administrative   31,876    19,012    53,286    35,357 
Total operating expenses  $121,037   $95,612   $219,096   $182,198 
                     
Gain (loss) from operations  $73,663   $(83,647)  $15,604   $(167,102)
                     
Other income and (expenses)                    
Interest expense   (79,923)   (80,426)   (159,431)   (161,141)
Net gain (loss) on sale of marketable securities   36,886    27,601    193,196    (8,526)
Gain (loss) on settlement of debts   -    -    -    274 
Other income (expense)   (1,990)   (80)   (1,990)   (147)
Net other income (expenses)   (45,028)   (52,906)   31,776    (169,540)
                     
Net income (loss)  $28,635   $(136,553)  $47,379   $(336,642)
Other comprehensive Income                    
Acc. Other comprehensive loss  $(15,027)  $(671,434)  $(15,027)  $(671,434)
Comprehensive income (loss)   13,608    (807,987)   32,352    (1,008,076)
Net loss per share:                    
Basic  $0.01   $(0.02)  $0.01   $(0.05)
Diluted  $0.01   $(0.02)  $0.01   $(0.05)
                     
Weighted average number of shares outstanding:                    
Basic   5,542,307    6,755,910    5,542,307    6,755,910 
Diluted   5,542,307    6,755,910    5,542,307    6,755,910 

 

The accompanying notes form an integral part of these unaudited consolidated financial statements

 

4 
 

 

PHI GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

 

   For the Six Months Ended
December 31,
 
   2015   2014 
Cash flows from operating activities:          
Net income (loss) from operations  $47,379   $(336,642)
Adjustments to reconcile net income to net cash used in operating activities:          
(Increase) decrease in other assets and prepaid expenses   77,277    35,253 
Increase (decrease)  in accounts payable and accrued expenses   253,151    258,795 
Net cash provided by (used in) operating activities   377,807    (42,594)
           
Cash flows from investing activities:          
Land purchase   (82,733)   - 
Deposit for acquisition   (66,776)   - 
Net cash provided by (used in) investing activities   (149,509)   - 
           
Cash flows from financing activities:          
Changes in Common Stock   (26,588)   27,432 
Payments on notes payable   -    (33,881)
Borrowings from officer   -    13,152 
Change in other comprehensive loss   (84,314)   37,748 
Adjustment in Accumulated Deficit   (87,108)   - 
Net cash provided by (used in)  financing activities   (198,011)   44,452 
           
Net increase in cash and cash equivalents   30,288    1,858 
Cash and cash equivalents, beginning of period   11,024    30,623 
Cash and cash equivalents, end of period  $41,312   $32,481 

 

The accompanying notes form an integral part of these unaudited consolidated financial statements

 

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

 

NOTE 1 NATURE OF BUSINESS

 

Established in June 1982, PHI Group, Inc. (the “Company” or “PHI”) is a Nevada corporation primarily engaged in energy and natural resources (www.phiglobal.com). The Company has adopted a long-term plan to acquire energy-related assets and other natural resources, partner with other companies to develop energy projects in select geographical areas, and provide renewable energy solutions including bio-mass, wind, solar power and other technologies. The Company offers merger and acquisition advisory and consulting services to client companies through its wholly owned subsidiary PHI Capital Holdings, Inc.. In addition, the Company is also engaged in international trade activity.

 

The Company, originally incorporated under the name of JR Consulting, Inc., was initially engaged in mergers and acquisitions and had an operating subsidiary, Diva Entertainment, Inc., which operated two modeling agencies, one in New York and one in California. Following the business combination with Providential Securities, Inc., a California-based brokerage firm, in late 1999 the Company changed its name to Providential Securities, Inc. (Nevada) in January 2000. The Company then changed its name to Providential Holdings, Inc. in February 2000. In October 2000, Providential Securities withdrew its securities brokerage membership and ceased its financial services business. Subsequently, in April 2009, the Company changed its name to PHI Group, Inc. From October 2000 to October 2011, the Company was engaged in mergers and acquisitions advisory and consulting services, real estate and hospitality development, mining, oil and gas, telecommunications, technology, healthcare, private equity, and investment in special situations. Beginning October 2011, the Company discontinued the operations of Providential Vietnam Ltd., Philand Ranch Limited (together with its subsidiaries Philand Ranch - Singapore, Philand Corporation and Philand Vietnam Ltd.), PHI Gold Corporation (formerly PHI Mining Corporation), and PHI Energy Corporation, and has been mainly focusing on energy business and natural resources, including investing in and/or developing energy assets, independent power plant projects, renewable energy, industrial minerals, and international trade. In addition, PHI Capital Holdings, Inc., the Company’s wholly owned subsidiary, continues to provide corporate and project finance services, including merger and acquisition (M&A) advisory and consulting services and arranging capital for companies in a variety of industries. No assurances can be made that the Company will be successful in achieving its plan.

 

PRINCIPLES OF CONSOLIDATION

 

The consolidated financial statements include the accounts of PHI Group, Inc., its wholly-owned subsidiary PHI Capital Holdings, and the discontinued operations Providential Securities, Inc., 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.

 

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, 2015. In the opinion of management, all adjustments consisting of normal reoccurring accruals have been made to the financial statements. The results of operation for the three and six months ended December 31, 2015 are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2016.

 

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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 31, 2015, the marketable securities have been recorded at $270,997 based upon the fair value of the marketable securities. (Note 3)

 

FAIR VALUE OF FINANCIAL INSTRUMENTS

 

Fair Value - Definition and Hierarchy

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are categorized based on whether or not the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

 

A fair value hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs are to be used when available.

 

Valuation techniques that are consistent with the market or income approach are used to measure fair value. The fair value hierarchy is categorized into three levels based on the inputs as follows:

 

Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access.

 

Level 2 - Valuations based on inputs other than quoted prices included in Level 1 that are observable, either directly or indirectly.

 

Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

 

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Fair value is a market-based measure, based on assumptions of prices and inputs considered from the perspective of a market participant that are current as of the measurement date, rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Company’s own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. The availability of valuation techniques and observable inputs can vary from investment to investment and are affected by a wide variety of factors, including; type of investment, whether the investment is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the transaction.

 

To the extent that valuation is based upon models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the investments existed. Accordingly, the degree of judgment exercised by the Fund in determining fair value is greatest for investments categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy in which the fair value measurement falls in its entirety is determined based upon the lowest level input that is significant to the fair value measurement.

 

Fair Value - Valuation Techniques and Inputs

 

The Company holds and may invest public securities traded on public exchanges or over-the-counter (OTC), private securities, real estate, convertible securities, interest bearing securities and other types of securities and has adopted specific techniques for their respective valuations.

 

Equity Securities in Public Companies

 

Unrestricted

 

The Company values investments in securities that are freely tradable and listed on major securities exchanges at their last reported sales price as of the valuation date. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized in Level 1 of the fair value hierarchy.

 

Securities traded on inactive markets or valued by reference to similar instruments are generally categorized in Level 2 or 3 of the fair value hierarchy.

 

Restricted

 

Securities traded on public exchanges or over-the-counter (OTC) where there are formal restrictions that limit (i.e. Rule 144 holding periods and underwriter’s lock-ups) their sale shall be valued at the closing price on the date of valuation less applicable discounts. The Company may apply a discount to securities with Rule 144 restrictions. Additional discounts may be assessed if the Company believes there are other mitigating factors, which warrant the additional discounting. When determining potential additional discounts, factors that will be taken into consideration include, but are not limited to; securities’ trading characteristics, volume, length and overall impact of the restriction as well as other macro-economic factors. Valuations should be discounted appropriately until the securities may be freely traded.

 

If it has been determined that the exchange or OTC listed price does not accurately reflect fair market value, the Company may elect to treat the security as a private company and apply an alternative valuation method.

 

Investments in restricted securities of public companies may be included in Level 2 of the fair value hierarchy. However, to the extent that significant inputs used to determine liquidity discounts are not observable, investments in restricted securities in public companies may be categorized in Level 3 of the fair value hierarchy.

 

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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 EQUIPMENT

 

Property and equipment are carried at cost less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful life of the assets from three to five years. Expenditures for maintenance and repairs are charged to expense as incurred.

 

REVENUE RECOGNITION

 

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

 

RISKS AND UNCERTAINTIES

 

In the normal course of business, the Company is subject to certain risks and uncertainties. The Company provides its service and receives marketable securities upon execution of transactions. Consequently, the value of the securities received from customers can be affected by economic fluctuations and each customer’s business growth. The actual realized value of these securities could be significantly different than recorded value.

 

RECENT ACCOUNTING PRONOUNCEMENTS

 

Update No. 2013-11—Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force)
[Download]
  July 2013   Effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. For nonpublic entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. Early adoption is permitted.
         
Update No. 2013-09—Fair Value Measurement (Topic 820): Deferral of the Effective Date of Certain Disclosures for Nonpublic Employee Benefit Plans in Update No. 2011-04
[Download]
  July 2013   The deferral in this amendment is effective upon issuance for financial statements that have not been issued.
         
Update No. 2013-07—Presentation of Financial Statements (Topic 205): Liquidation Basis of Accounting
[Download]
  April 2013   Effective for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013. Early adoption is permitted.
         
Update No. 2013-04—Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date (a consensus of the FASB Emerging Issues Task Force)
[Download]
  February 2013   Effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2014, and interim periods and annual periods thereafter.
         
Update 2013-02—Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income
[Download]
  February 2013   For public entities, the amendments are effective prospectively for reporting periods beginning after December 15, 2012. For nonpublic entities, the amendments are effective prospectively for reporting periods beginning after December 15, 2013. Early adoption is permitted.
         
Update 2013-01—Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities
[Download]
  January 2013   An entity is required to apply the amendments for fiscal years beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the required disclosures retrospectively for all comparative periods presented. The effective date is the same as the effective date of Update 2011-11.

  

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The Company has either evaluated or is currently evaluating the implications, if any, of each of these pronouncements and the possible impact they may have on the Companys 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 – LOANS RECEIVABLE

 

Loans receivable consist of the following at December 31, 2015 and June 30, 2015:

 

   December 31, 2015   June 30, 2015 
Loan to Catalyst Group   5,140    5,140 
Loan to Provimex, Inc.   2,000    2,000 
Loan to Catthai Corp.   2,700    2,700 
Loan to Myson Group, Inc.   2,282    - 
TOTAL  $12,123   $9,841 

 

NOTE 3 MARKETABLE EQUITY SECURITIES AVAILABLE FOR SALE

 

The Company’s marketable securities are classified as available-for-sale and, as such, are carried at fair value.  All of the securities are comprised of shares of common stock of the investee.  Securities classified as available-for-sale may be sold in response to changes in interest rates, liquidity needs, and for other purposes. 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 as of December 31, 2015 consisted 34,642,106 shares of Myson Group, Inc. (formerly Vanguard Mining Corporation), a public company traded on the OTC Markets (Trading symbol “MYSN”) and 194,000,000 shares of Sports Pouch Beverage Co., a public company traded on the OTC Markets (Trading symbol “SPBV”). The fair value of the shares recorded as of December 31, 2015 was $270,997.

 

Securities Available for Sale  Level 1   Level 2   Level 3   Total 
December 31, 2015   -   $44,630   $226,367   $270,997 
June 30, 2015  $16,828   $301,562   $32,166   $350,556 

 

                                  Changes in  
                                  Unrealized  
                                  Gain (Loss)  
    Balance     Realized     Unrealized     Net     Balance     For Investments  
    06/30/15     Gain or     Gain or     Purchases     12/31/15     Still held at  
Assets   (Net)     (Loss)     (Loss)     (Sales)     (Net)     12/31/15  
Marketable Securities   $ 350,556     $ 36,886     $ 17,183     $ 196,332     $ 270,997     $ (14,777 )
Total   $ 350,556     $ 36,886     $ 17,183     $ 196,332     $ 270,997     $ (14,777 )

 

The change in unrealized appreciation (depreciation) related to the Level 2 investments still held at December 31, 2015 is ($14,777). Level 1 and Level 2 securities sold during the quarter ended September 30, 2015 were sold at net realized gain of $36,886.

 

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NOTE 4 – PROPERTIES AND EQUIPMENT

 

As of December 31, 2015, the Company owned and held title to ten acres of land, Parcel Identification Number 09705010180 & 190, in Suwannee County, Florida at historical cost of $82,733. The Company did not have any properties and equipment as of June 30, 2015.

 

NOTE 5 – OTHER ASSETS

 

The Other Assets comprise of the following as of December 31, 2015 and June 30, 2015:

 

   September 30, 2015   June 30, 2015 
Loans Receivable  $66,955   $66,955 
Investment in subsidiary  $2,550   $2,550 
Deposit for purchases  $75,000   $8,224 
Total Other Assets  $144,505   $77,729 

 

During the year ended June 30, 2011, the Company signed a consulting agreement to assist Agent155 Media Corp., a Delaware corporation, with respect to its corporate restructuring and business combination with Freshwater Technologies, Inc., a Nevada corporation.  As part of the restructuring requirements, the Company made payment to Manning Elliot LLP in the amount of $24,476 on behalf of Freshwater Technologies, Inc. and other loan amounts to Agent155 Media Corp. As of June 30, 2014, the President of Agent155 Media Corp. assumed the balance of $66,955 from Agent155 Media Corp. as his personal obligations to the Company.

 

As of December 31, 2015, the total amounts owed by the President of Agent155 Media Corp., deposits for acquisition and the investment in a subsidiary were collectively reported as Other Assets totaling $144,505.

 

NOTE 6 – DISCONTINUED OPERATIONS

 

As of June 30, 2012, the Company decided to recognize the businesses of PHI Gold Corp. (formerly PHI Mining Corporation), Providential Vietnam Ltd., PHI Energy Corp., and Philand Ranch Ltd., a United Kingdom corporation, together with its wholly-owned subsidiaries Philand Corporation (USA), Philand Ranch Ltd. (Singapore) and Philand Vietnam Ltd. as discontinued operations for practical business and accounting purposes. As of September 30, 2015, the Company had a balance of $1,045,232 as Liabilities from Discontinued Operations.

 

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NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

The accounts payable and accrued expenses at December 31, 2015 and June 30, 2015 consist of the following:

 

   December 31, 2015   June 30, 2015 
Accounts payable   126,614    131,454 
Accrued salaries and payroll taxes   970,029    849,279 
Accrued interest   3,189,253    3,031,152 
Accrued legal expenses   172,091    172,091 
Accrued consulting fees   173,870    173,870 
Other accrued expenses   26,888    26,888 
Total  $4,658,744   $4,384,734 

 

NOTE 8 – 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, 2015 and June 30, 2015, the balances were $1,843,125 and $1,879,458, respectively.

 

Officers/Directors  December 31, 2015   June 30, 2015 
Henry Fahman   1,541625    1,577,958 
Tam Bui   276,500    276,500 
Frank Hawkins   12,500    12,500 
Lawrence Olson   12,500    12,500 
Total  $1,843,125   $1,879,458 

 

As of December 31, 2015, 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 9 – LOANS AND PROMISSORY NOTES

 

SHORT TERM NOTES PAYABLE:

 

As of December 30, 2015 and June 30, 2015, the Company had short-term notes payable amounting to $1,313,500 and $1,342,618 with accrued interest of $3,189,253 and $3,031,152, respectively. These notes bear interest rates ranging from 0% to 36% per annum.

 

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

 

Note Balance:   Secured by:
     
$115,000   400,000 Catalyst Resource Group, Inc. shares
     500,000 Catthai Corporation shares
      
$550,000   500,000 Catthai Corporation shares
      
$150,000   1,500,000 PHI Gold Corp shares
      
$100,000   1,500,000 PHI Gold Corp shares

 

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DUE TO PREFERRED STOCKHOLDERS:

 

The Company classified $215,000 of preferred stock subscribed as a current liability payable to holders of preferred stock in a previously discontinued subsidiary of the Company due to deficiency in compliance of the preferred shares subscription agreement in connection with the referenced subsidiary in the year 2000. The Company has made an offer for these preferred stock holders to receive shares of common stock in the Company in exchange for the preferred shares but so far only a small number of the preferred shareholders have accepted the offer.

 

The interest expenses payable to holders of preferred stock of $400,355 and $387,455 have been included in accrued interest included in the accrued expenses on the balance sheets as of December 31, 2015 and June 30, 2015, respectively.

 

ADVANCES FROM CUSTOMERS (PREVIOUSLY CLASSIFIED AS UNEARNED REVENUE)

 

As of September 30, 2012, the Company reclassified the previously recorded Unearned Revenues as Advances from Customers because the Company has not been able to complete the consulting services for the related clients due to their inability to provide GAAP-compliant audited financial statements in order to file a registration statement with the Securities and Exchange Commission. As of December 31, 2015, the Company recorded $558,219 as Advances from Customers.

 

NOTE 10 – LITIGATION

 

LEGAL PROCEEDING SETTLED AND UNPAID AS OF DECEMBER 31, 2015:

 

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

 

This case was originally submitted to Orange County Superior Court, CA on June 25, 1997, Case No. 781121, and subsequently moved to NASD Dispute resolution for arbitration. On or about August 24, 2000, the Company’s legal counsel negotiated with the Claimant’s counsel and unilaterally reached a settlement that had not been approved by the Company. While the Company was in the process of re-negotiating the terms of said settlement, the Claimants filed a request for arbitration hearing before the National Association of Securities Dealers on October 4, 2000, Case No. 99-03160. Thereafter, the Claimants filed a complaint with the Orange County Superior Court, CA on October 31, 2000, Case No. 00CC13067 for alleged breach of contract for damages in the sum of $75,000 plus pre-judgment interest, costs incurred in connection with the complaint, and other relief. Without admitting or denying any allegations, the Company reached a settlement agreement with the Claimants whereby the Company would pay the Claimants a total of $62,500 plus $4,500 in administrative costs. As the date of this report, the Company has paid $2,500 and is subject to an entry of judgment for $79,000. In May 2011, the Claimants filed an application for and renewal of judgment for a total of $140,490.78. As of December 31, 2015 the Company accrued $172,091 for potential liabilities in connection with this case in the accompanying consolidated financial statements.

 

WILLIAM DAVIDSON VS. DOAN ET AL.

 

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

 

On July 09, 2012 William Davidson and PHI Capital Holdings, Inc. (formerly Providential Capital, Inc.), a subsidiary of the Company, reached a settlement agreement with respect to whereby PHI Capital agreed to pay William Davidson a total of $200,000 over a period of nineteen months beginning September 1, 2012. Since November 30, 2012, William Davidson has converted portions of the total amount into common stock of PHI Group, Inc. in lieu of cash payment. The Company has accrued the required liabilities associated with the balance of these notes in the accompanying consolidated financial statements as of December 31, 2015.

 

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NOTE 11 – PAYROLL LIABILITIES

 

The payroll liabilities are accrued and recorded as accrued expenses in the consolidated balance sheet. During the fiscal year ended June 30, 2014, the Company paid $41,974.22 to the Internal Revenue Service and $ 19,289.94 to the State of California Employment Development Department towards the balance of $118,399 of payroll tax, penalties and interest claimed by these agencies. The Company is currently working with the Internal Revenue Service and the State of California Employment Department to resolve the remaining balance.

 

NOTE 12 – BASIC AND DILUTED NET PROFIT (LOSS) PER SHARE

 

Net loss per share is calculated in accordance with SFAS No. 128, “Earnings per Share”. Under the provision of SFAS No. 128, basic net loss per share is computed by dividing the net loss for the period by the weighted-average number of common shares outstanding for the period.  Diluted EPS is based on the weighted-average number of shares of common stock outstanding for the period and common stock equivalents outstanding at the end of the period.  Basic and diluted weighted average numbers of shares for the period ended December 31, 2015 were the same since the inclusion of Common stock equivalents is anti-dilutive.

 

NOTE 13 STOCKHOLDER’S EQUITY

 

The total number of authorized capital stock of the Company is 400,000,000 shares with a par value of $0.001 per share, consisting of 300,000,000 shares of voting Common Stock with a par value of $0.001 per share and 100,000,000 shares of Preferred Stock with a par value of $0.001 per share. The rights and terms associated with the Preferred Stock will be determined by the Board of Directors of the Company.

 

On March 15, 2012, the Company effectuated a 1 for 1,500 reverse split of the Company’s Common Stock.

 

Treasury Stock:

 

The balance of treasury stock as of December 31, 2015 was 64,289 post-split shares, valued at $3,851.

 

Common Stock:

 

As of December 31, 2015, there were 9,559,165 post-split shares of the Company’s $0.001 par value Common Stock issued, including 5,673,327 shares reserved for a special dividend distribution.

 

Preferred Stock: There is no preferred stock issued and outstanding.

 

Class A Preferred Stock: On April 2, 2015, the Company designated the first fifty million (50,000,000) shares of the Company’s previously authorized 100,000,000 shares of Preferred Stock, with a par value of $0.001 per share, as Class A Cumulative Convertible Redeemable Class A Preferred Stock (the “Class A Preferred Stock “) with the following rights and terms:

 

1) Dividends: Each holder of Class A Preferred Stock is entitled to receive twelve percent (12%) non-compounding cumulative dividends per annum, payable semi-annually.

 

2) Conversion: Each share of the Class A Preferred Stock shall be convertible into the Company’s Common Stock any time after one year from the date of issuance at a Variable Conversion Price (as defined herein) of the Common Stock. The “Variable Conversion Price” shall mean 75% multiplied by the Market Price (as defined herein) (representing a discount rate of 25%). “Market Price” means the average Trading Price for the Company’s Common Stock during the ten (10) trading-day period ending one trading day prior to the date the Conversion Notice is sent by the Holder of the Class A Preferred Stock to the Company via facsimile or email (the “Conversion Date”). “Trading Price” means, for any security as of any date, the closing price on the OTC Markets, OTCQB, NASDAQ Stock Markets, NYSE or applicable trading market as reported by a reliable reporting service (“Reporting Service”) mutually acceptable to the Company and Holder of the Class A Preferred Stock.

 

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3) Redemption Rights: The Company, after a period of two years from the date of issuance, may at any time or from time to time redeem the Class A Preferred Stock, in whole or in part, at the option of the Company’s Board of Directors, at a price equal to one hundred twenty percent (120%) of the original purchase price of the Class A Preferred Stock or of a unit consisting of any shares of Class A Preferred Stock and any warrants attached thereto, plus, in each case, accumulated and unpaid dividends to the date fixed for redemption.

 

NOTE 14 STOCK-BASED COMPENSATION PLAN

 

On March 18, 2015, the Company adopted an Employee Benefit Plan to set aside 1,000,000 shares of common stock for eligible employees and independent contractors of the Company and its subsidiaries.  As of December 31, 2015 the Company has not issued any stock in lieu of cash under this plan.

 

NOTE 15 OTHER EXPENSE

 

Net Other Expense for the fiscal quarter ended December 31, 2015 consists of the following:

 

OTHER INCOME (EXPENSE)  December 31, 2015 
Interest expense (net)  $(79,923)
Gain on sale of marketable securities  $36,886 
Other income (expense) – net  $(1,990)
NET OTHER INCOME (EXPENSE)  $(45,028)

 

NOTE 16 RELATED PARTY TRANSACTIONS

 

The Company accrued $52,500 in salaries for Henry Fahman (President of the Company) and Tina Phan (Secretary and Treasurer of the Company) during the quarters ended December 31, 2015 and December 31, 2014.

 

NOTE 17 CONTRACTS AND COMMITMENTS

 

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. The Company has recognized $26,656 as only revenues from this transaction. The balance of $288,219 was booked as Customer Advances in the liability portion of the balance sheet.

 

AGREEMENT WITH PACA

 

On February 25, 2013, PHI Capital Holdings, Inc., a subsidiary of the Company, signed a consulting/engagement agreement with PACA, a New York corporation, to contemplate raising capital for the purpose of financing PHI Group, Inc.’s business plan including acquisition of various energy properties and general working capital. The term of the engagement is two years and has been extended to February 24, 2016. PACA will be entitled to cash success fee and equity success fee for each successful financing transaction.

 

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BUSINESS AND FINANCIAL CONSULTING AGREEMENT WITH ASIA GREEN CORP.

 

On January 17, 2014 PHI Capital Holdings, Inc., a wholly-owned subsidiary of the Company, signed a Business and Financial Consulting Agreement with Asia Green LLC (“Asia Green VN”), a Vietnamese company engaged in afforestation and reforestation projects in Vietnam, to assist Asia Green in becoming a fully reporting publicly traded company in the United States and in arranging capital for Asia Green to execute its business plan. PHI Capital Holdings is entitled to receive six hundred twenty thousand U.S. dollars as compensation for the services rendered. The term of this agreement is one year or until Asia Green has become a fully reporting public company. On April 4, 2014 Touchlink Communications, Inc., a Nevada corporation, a majority-owned subsidiary of the Company, changed its name to Asia Green Corporation and entered into a Corporate Combination Agreement with Asia Green VN to become the holding company for Asia Green VN’s agroforestry and afforestation business. On July 28, 2014 Asia Green Corporation changed its name to Omni Resources, Inc to pursue a new business.

 

ASSUMPTION OF DEBT BY AGENT155 MEDIA CORP’S OFFICER.

 

October 29, 2014, Christopher Martinez, President of Agent155 Media Corp. personally assumed the balance of $66,955 previously owed to the Company by Agent155 Media Corp. as his personal obligations retroactively December 31, 2011.

 

BUSINESS COOPERATION AND INVESTMENT AGREEMENT WITH AG MATERIALS, LLC.

 

On January 7, 2015, the Company signed a Business Cooperation and Investment Agreement with AG Materials, LLC, an Alabama limited liability company, (“AGM”) to primarily cooperate with each other to establish and operate a 200,000 MT wood pellet plant in Live Oak, Suwannee County, Florida. Both AGM and the Company intend to utilize the benefits of AGM’s previous arrangements with Klausner Lumber One, LLC, a wholly-owned subsidiary of Klausner Group, an Australian company, to purchase 400,000 to 800,000 short tons (ST) of feedstock per year from Klausner Lumber One, to purchase a fifteen-acre parcel of land to build the new wood pellet plant in Live Oak, Suwannee County, Florida. The Company will be responsible for providing the required capital for the purchase of land, machinery and equipment, and accessories, for construction and for working capital of the new wood pellet plant. AGM and the Company will enter into a definitive agreement which includes specific terms and conditions, obligations, benefits, representations, warranties, covenants, and indemnities customary for a transaction of this type. Both parties have incorporated Cornerstone Biomass Corporation, a Florida corporation, as the entity to manage the joint-venture wood pellet project in Live Oak, Florida. Moreover, AGM and the Company may from time to time cooperate with each other and jointly engage in other business activities that deem mutually acceptable and beneficial to both parties.

 

BUSINESS COOPERATION AGREEMENT AND MASTER CONTRACT FOR PURCHASE AND SALE OF SAND WITH KIEN HOANG MINERALS JOINT STOCK COMPANY

 

On May 8, 2015, the Company signed a Business Cooperation Agreement with Kien Hoang Minerals Joint Stock Company (“ KHM JSC”), a Vietnamese company, to develop and expand international markets for KHM’s mineral products, particularly exports of reclamation sand and granite to Singapore through Primearth Resources Asia Pte Ltd, another strategic partner of the Company’s. The Company was granted the first right of refusal by KHM to purchase approximately 102 million cubic meters of sand and 40 million cubic meters of granite. On June 12, 2015, the Company signed a Master Contract for Purchase and Sale of 60 million cubic meters of sand recovered from the dredging and clearing of traffic pathways at De Gi estuary and surrounding areas in Binh Dinh Province, Vietnam over a period of five years for exports to Singapore and other Asian markets.

 

CONSULTING AGREEMENT WITH SPORTS POUCH BEVERAGE COMPANY

 

On June 3, 2015, PHI Capital Holdings, Inc., a wholly owned subsidiary of the Company, signed a Consulting Engagement Agreement with Sports Pouch Beverage Company (“SPBV”), a Nevada corporation, to provide consulting services and assist SPBV with respect to business development, mergers and acquisitions, corporate governance, and corporate finance. PHI Capital Holdings, Inc. is entitled to receive up to forty percent of common stock in SPBV as compensation for the services rendered. The duration of this agreement is one year. As of December 31, 2015, PHI Capital Holdings, Inc. received 389,400,000 shares of SPBV stock and recorded 194,700,000 shares as partial earned revenues from this transaction.

 

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AGREEMENT WITH PRIMEFORTH RENEWABLE ENERGY LTD.

 

On June 24, 2015, PHI Capital Holdings, Inc., a wholly owned subsidiary of the Company, signed a Consulting Engagement Agreement with Primeforth Renewable Energy Ltd. (“Primeforth”), a Singaporean company, to provide consulting services with respect to corporate development, corporate finance and debt financing for Primeforth Renewable Energy. PHI Capital Holdings is entitled to a one-time non-refundable professional fee of $20,000 and 4% cash success fee for any financing arranged for Primeforth. The term of this agreement is two years. Primeforth is engaged in developing alternative energy using patented microalgae technologies.

 

SETTLEMENT AGREEMENT WITH HAI P. NGUYEN

 

On July 16, 2015, the Company signed a Settlement and Payment Agreement with Hai P. Nguyen and agreed to pay the latter $25,000 in cash and 500,000 shares of Common Stock of Myson Group, Inc. as compensation for Hai P. Nguyen’s portion of contribution towards the budget to complete the services in connection with the Consulting Agreement dated January 24, 2014 between Vietnam Mining Corporation (now known as Myson Group, Inc.) and PHI Capital Holdings, Inc. As of December 31, 2015, the Company has fulfilled its obligations under this agreement.

 

AGREEMENT FOR DEFRAYAL OF EXPENSES AND STOCK COMPENSATION WITH ASIA GREEN CORPORATION

 

On July 17, 2015, the Company signed an agreement to provide $75,000 to Asia Green Corporation (AGMC”), a Nevada corporation, for AGMC to pay certain required expenses and resume its status as fully reporting company with the Securities and Exchange Commission. In exchange for the fund, AGMC agrees to allocate 500,000 shares of its Common Stock upon the consummation of a business combination between itself and a Vietnamese company engaged in agriculture and reforestation.

 

MASTER AGREEMENT FOR BUSINESS COOPERATION AND INVESTMENT AGREEMENT WITH RAT SOKHORN INCORPORATION CO., LTD.

 

On July 31, 2015, the Company signed a Master Agreement for Business Cooperation and Investment Agreement with Rat Sokhorn Incorporation Co., Ltd., a Cambodian company, to cooperate in the development and implementation of the following projects: (1) a 5,160-ha thermal coal concession in Sdach Kong Khang Lech and Kanthaor Khang Cheung areas, Banteay Meas and Kampong Trach Districts, Kampot Province, Cambodia; (2) a mine-mouth coal-fired power plant at the referenced coal concession; (3) a limestone concession in Sdach Kong Khang Lech and Kanthaor Khang Cheung areas, Banteay Meas and Kampong Trach Districts, Kampot Province, Cambodia for the cement and precipitated calcium carbonate; (4) a container seaport in Kampot Province; and (5) exploration and exploitation of precious and base metals in Cambodia. The Company will be responsible for arranging the required capital, technical expertise, engineering, procurement, construction (EPC), operations, and sales and marketing in connection with the proposed projects. The implementation of any one of these projects is subject to satisfactory due diligence and feasibility study by the Company. The Company’s management has conducted site visits with qualified technical professionals and consulted with Royal Haskoning DHV (www.royalhaskoningdhv.com) regarding these projects.

 

BUSINESS COOPERATION AND INVESTMENT AGREEMENT WITH CAVICO LAO MINING CO. LTD.

 

On August 7, 2015, the Company signed a Business Cooperation and Investment Agreement with Cavico Lao Mining Co., Ltd. (“CLM”) to provide the initial required capital to be raised from the Company’s 506(c) private placement for CLM’s interim operations and a budget to conduct an independent JORC report for the nickel portion of the CLM’s a 80-hectare multi-mineral mine in the Khoam Bang mountainous area at Ban Bo, Bulikhamsay, Laos People’s Democratic Republic. In addition, the Company shall establish a subsidiary to be the holding company for the CLM’s assets to be spun off as a separate publicly traded company (“PubCo”) on the NASDAQ Stock Markets, subject to certain conditions and requirements. CLM management believes the estimated value of the nickel portion in the afore-mentioned multi-mineral mine is approximately $1.5 billion - $4 billion, subject to further independent validation.

 

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MASTER AGREEMENT FOR BUSINESS COOPERATION WITH DREDGE MASTERS AND CIVIL WORKS

 

On August 19, 2015, the Company signed an agreement with Dredge Masters and Civil Works, Inc., a Filipino corporation, to cooperate with each other in order to optimize the dredging, transshipment, loading, shipping and unloading of saline sand on large scales to serve the needs of land reclamation in Singaporean and other Asian countries. The term of this agreement is one year.

 

STOCK PURCHASE AND INVESTMENT AGREEMENT WITH VINABENNY ENERGY JOINT STOCK COMPANY

 

On September 1, 2015, the Company signed an agreement to acquire a 50.10% equity ownership in VinaBenny Energy Joint Stock Company (“VinaBenny”, a Vietnamese company, for $10,700,000 and to arrange capital for VinaBenny to complete a 84,000 MT Liquefied Petroleum Gas (LPG) terminal in Can Giuoc District, Long An Province, Vietnam. This agreement expired on December 31, 2015.

 

AGREEMENT WITH REDICSACO JOINT STOCK COMPANY

 

On September 11, 2015, the Company signed a Principle Business and Investment Agreement with Redicsaco JSC, a Vietnamese company, to cooperate with each other with respect to the dredging, transshipment, loading, sale and export of saline reclamation sand from the Ham Luong River waterway, Ben Tre Province, Vietnam to Singapore, Brunei and other Asian markets. The initial authorized volume of sand from this location is 25 million cubic meters and the total reserve is more than 390 million cubic meters.

 

AGREEMENT WITH HATICO INVESTMENT DEVELOPMENT JOINT STOCK COMPANY

 

On September 11, 2015, the Company signed a Principle Business Cooperation Agreement with HATICO Investment Development Joint Stock Company, a Vietnamese company, to cooperate with each other in order to dredge, sell and export saline reclamation sand from Ha Tien, Kien Giang Province, Vietnam and to develop a deep-water seaport terminal at this location. It is estimated that the volume of sand from this location is approximately one billion cubic meters. Both parties have agreed in principle for the Company to acquire 50.90% of HATICO or own the same percentage in a joint venture company to be set up.

 

BUSINESS COOPERATION AND INVESTMENT AGREEMENT WITH HUNG THINH MINERALS INVESTMENT CO., LTD

 

On October 26, 2015 the Company signed a Principle Business Cooperation and Investment Agreement with Hung Thinh Minerals Investment Co., Ltd. “(HTMI”), a Vietnamese company that owns a titanium mine and a slag processing plant in Binh Thuan Province, Vietnam to cooperate with HTMI to increase its capacity to produce 150,000 MT of titanium slag per year, to develop HTMI into a major refiner of titanium-related products, including titanium pigments, ingots, sponge, and alloys, and to list HTMI on an international stock exchange to raise capital for its growth and expansion program. PHI Group, Inc. will acquire 49% of HTMI, plus 2% proxy voting right in HTMI, as a prerequisite to cooperate with HTMI in this development program. The closing of this transaction is subject to satisfactory due diligence review of HTMI, the signing of a definitive agreement, and HTMI’s compliance with the U.S. Generally Accepted Accounting Principles (GAAP). As of the day of this report, the Company has not completed the required due diligence review of HTMI.

 

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BUSINESS COOPERATION AND INVESTMENT AGREEMENT WITH SPARTAN MINING AND DEVELOPMENT CORPORATION

 

On October 30, 2015, the Company signed a Principle Business Cooperation and Investment Agreement with Spartan Mining and Development Corporation (“SMDC”), a Philippine company, to form a joint venture between SMDC and PHI Group, Inc. to dredge, extract, process, sell and export lahar sand from the Sto. Tomas, Maloma and Bucao Rivers in the Province of Zamales, the Philippines. The total volume of the lahar sand to be dredged from these rivers is estimated at 1.4 billion metric tonnes. The sand was created by the Mount Pinatubo volcanic eruption in June 1991.

 

On November 24, 2015 both parties signed a Joint Venture Agreement to form a joint venture corporation, to be preferably styled “PHI-Spartan Resources, Inc.,” in order to implement the provisions of the Principle Business Cooperation and Agreement. The Company is in the process of arranging the investment capital for this project.

 

SALE AND PURCHASE AGREEMENTS OF MARINE SAND FOR EXPORT TO SINGAPORE

 

On December 16, 2015, the Company signed Sale and Purchase Agreements with two Vietnamese companies to export marine sand recovered from dredging projects in Central Vietnam to Singapore for reclamation purposes. The Company expects to begin shipments of sand in April 2016 after the monsoon season is over.

 

NOTE 18 GOING CONCERN UNCERTAINTY

 

As shown in the accompanying consolidated financial statements, the Company has accumulated deficit of $37,719,465 as of December 31, 2015 and net income from operations of only $47,379 for the six months ended December 31, 2015. The financial condition as well as the uncertain circumstances that the Company faces in its day-to-day operations with respect to cash flows create an uncertainty as to the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. Management has taken action to strengthen the Company’s working capital position and generate sufficient cash to meet its operating needs through June 30, 2016 and beyond.  In the next twelve months, the Company intends to focus on closing the acquisition of a majority interest in Pacific Petro Commercial Joint Stock Company in Vietnam, implementing the reclamation sand business in Southeast Asia, and engaging in international trade involving energy products and industrial commodities. The Company will also use its best efforts to acquire energy-related and natural resource assets and carry out various business cooperation and investment agreements that have been signed with certain international partners. The Company anticipates generating substantial amounts of revenues through the acquisition of Pacific Petro Commercial Joint Stock Company, the reclamation sand business, certain activities in the area of natural resources and international trade. The president and chairman of the Company has committed to funding the Company’s operations from various sources for the next 12 months. The Company has launched a private placement program under the auspices of Rule 506(c) to raise $60 million by offering 40 million units at the price of $1.50 per unit, consisting of one share of Class A 12% cumulative convertible redeemable preferred stock, convertible to Common Stock at 25% discount to market price at the time of conversion, and a warrant to purchase one share of the Company’s Common Stock at 25% discount to market price at the time of exercise. As of the date of this report the Company has not obtained any funding through the private placement program and is considering other financing alternatives. No assurances could be made that management would be successful in achieving its plan.

 

NOTE 19 – SUBSEQUENT EVENT

 

INVESTMENT IN ANTIMONY MINE IN LAO PEOPLE’S DEMORACTIC REPUBLIC

 

On January 19 and 20, 2016, the Company signed a Business Cooperation Agreement and an Investment Agreement with Khamchaleun Investment Sole Co., Ltd., a Laotian company, to acquire a 35% equity interest in Hung Kham Lao Investment Co., Ltd and co-invest in a 92km2 antimony mine in Chalet Village, Boualapha District, Khammuane Province, People’s Democratic Republic. The closing of this transaction is expected to occur by February 20, 2016, subject to satisfactory due diligence review of Hung Kham Lao Investment Co., Ltd. and the antimony mine by PHI Group. The antimony mining company has been granted a quota to extract, process and sell 350,000 metric tons of antimony from this mine.

 

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ACQUISITION OF MAJORITY INTEREST IN A LIQUEFIED PETROLEUM GAS COMPANY IN VIETNAM

 

On January 23, 2016, PHI Group, Inc. (the “Company”) entered into an agreement to purchase 50.90% of equity ownership (the “Exchange Ownership”) in Pacific Petro Commercial Joint Stock Company (aka Pacific Petro Trading Corporation), a Vietnamese company, hereinafter referred to as “Pacific Petro,” in exchange for a combination of $2 million in cash and/or Common Stock and/or Preferred Stock of the Company. The fair value for the Exchange Ownership will be determined by the majority shareholders of Pacific Petro (the “Majority Shareholders”) and the Company after the completion of a business valuation of Pacific Petro by an independent reputable appraisal company and the financial audits of Pacific Petro by a PCAOB-registered auditing firm.

 

Originally established as Binh Duong Gas LLC in 1998, Pacific Petro changed its name to Pacific Petro Commercial Joint Stock Company (aka Pacific Petro Trading Corporation) in May 2010. This company’s headquarters is located at 99 Ich Thanh Street, Truong Thanh Ward, District 9, Ho Chi Minh City, Vietnam. Website: http://www.pacificpetro.com.vn/

 

Pacific Petro is the third largest liquefied petroleum gas (LPG) company in Southern Vietnam, engaged in sales of liquefied petroleum gas (LPG), manufacturing of gas canisters and cylinders, filling of LPG, repair and maintenance of gas tanks, and wholesale of solid fuels, liquid, gas and related petroleum products.

 

This company owns a gas canister-manufacturing factory on a 215,200 square-foot lot in Ben Cat District, Binh Duong Province and a gas filling plant on a 65,600 square-foot lot in District 9, Ho Chi Minh City, Vietnam. It has also acquired a 93,600 square-foot lot Go Dau Industrial Park, Dong Nai Province to build a proprietary LPG storage area and has been granted 83 acres in Phu Huu Village, Nhon Trach District, Dong Nai Province to build an integrated port for imports of energy-related commodities and products.

 

In 2014 Pacific Petro generated approximately $26,670,000 in revenues and $613,000 in net profits. In 2015 it recorded $19,491,800 in revenues and $523,400 (unaudited) in net profits. The decreases in revenues and profits in 2015 were primarily due to declining prices of petroleum and its byproducts during last year. Pacific Petro expects to generate an average of $10,280,000 in additional revenues and $690,000 in net profits per annum from the new LPG storage facilities in Go Dau Industrial Park, and $4,000,000 in additional revenues and $530,000 in net profits by adding a new line of gas-canister manufacturing in 2016, respectively.

 

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PHI Group has contacted Grant Thornton, BDO, and RSM, and one of these firms will be chosen by the Company’s auditing firm to conduct the business valuation for Pacific Petro in the next few weeks in order to determine the fair value for the transaction. This transaction will be terminated and become null and void if not closed by June 30, 2016, except otherwise agreed by the Majority Shareholders and the Company at a later time.

 

ISSUANCE OF PHI GROUP, INC.’S COMMON STOCK

 

On February 2, 2016, the Company issued 121,212 shares of PHI Group, Inc.’s restricted Common Stock to an investor under the auspices of Rule 144 for $40,000 in cash, at the price of $0.33 per share.

 

On February 2, 2016, the Company issued 98,084 shares of PHI Group, Inc.’s free-trading Common Stock to a creditor for conversion of a $32,000 loan principal at the price of $0.3263 per share.

 

On February 4, 2016, the Company issued 100,000 shares of PHI Group, Inc.’s restricted Common Stock to an independent consultant for marketing and investor relation services.

 

As of February 16, 2016, the Company had 9,878,461 shares of Common Stock issued, including 5,673,327 shares reserved for a special dividend distribution. The total amount of Common Stock issued and outstanding as of February 16, 2016 was 4,205,134 shares.

 

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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

 

Established in June 1982, PHI Group, Inc. (the “Company” or “PHI”) is a Nevada corporation primarily engaged in energy and natural resources (www.phiglobal.com). The Company has adopted a long-term plan to acquire energy-related assets and other natural resources, partner with other companies to develop energy projects in select geographical areas, and provide renewable energy solutions including bio-mass, wind, solar power and other technologies. The Company offers merger and acquisition advisory and consulting services to client companies through its wholly owned subsidiary PHI Capital Holdings, Inc.. In addition, the Company is also engaged in international trade activity.

 

The Company, originally incorporated under the name of JR Consulting, Inc., was initially engaged in mergers and acquisitions and had an operating subsidiary, Diva Entertainment, Inc., which operated two modeling agencies, one in New York and one in California. Following the business combination with Providential Securities, Inc., a California-based brokerage firm, in late 1999 the Company changed its name to Providential Securities, Inc. (Nevada) in January 2000. The Company then changed its name to Providential Holdings, Inc. in February 2000. In October 2000, Providential Securities withdrew its securities brokerage membership and ceased its financial services business. Subsequently, in April 2009, the Company changed its name to PHI Group, Inc. From October 2000 to October 2011, the Company was engaged in mergers and acquisitions advisory and consulting services, real estate and hospitality development, mining, oil and gas, telecommunications, technology, healthcare, private equity, and investment in special situations. Beginning October 2011, the Company discontinued the operations of Providential Vietnam Ltd., Philand Ranch Limited (together with its subsidiaries Philand Ranch - Singapore, Philand Corporation and Philand Vietnam Ltd.), PHI Gold Corporation (formerly PHI Mining Corporation), and PHI Energy Corporation, and has been mainly focusing on energy business and natural resources, including investing in and/or developing energy assets, independent power plant projects, renewable energy, industrial minerals, and international trade. In addition, PHI Capital Holdings, Inc., the Company’s wholly owned subsidiary, provides corporate and project finance services, including merger and acquisition (M&A) advisory and consulting services and arranging capital for companies in a variety of industries. No assurances can be made that the Company will be successful in achieving its plan.

 

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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

 

SUBSIDIARIES:

 

Since October 2011 the Company has divested its holdings in other subsidiaries that are not directly related to energy and natural resources in order to focus on its new scope of business. As of the date of this report, the Company owns one hundred percent of PHI Capital Holdings, Inc., a Nevada corporation, and 51% of Cornerstone Biomass Corporation, a Florida corporation engaged in biomass energy.

 

PHI CAPITAL HOLDINGS, INC.

 

PHI Capital Holdings, Inc., a Nevada corporation, was originally incorporated under the name of “Providential Capital, Inc.” in 2004 as a wholly owned subsidiary of the Company to provide merger and acquisition (M&A) advisory services, consulting services, project financing, and capital market services to clients in North America and Asia.  In May 2010, Providential Capital, Inc. changed its name to PHI Capital Holdings, Inc. This subsidiary has successfully managed merger plans for several privately held and publicly traded companies and provided M&A consulting services to clients in the U.S. and abroad.

 

CORNERSTONE BIOMASS CORPORATION

 

Cornerstone Biomass Corporation, a Florida corporation, was set up in January 2015 by the Company and the principals of AG Materials, LLC, an Alabama company, to engage in biomass energy. The Company holds 51% and the principals of AG Materials hold 49% of equity ownership in Cornerstone Biomass Corporation. This subsidiary is currently developing and establishing a 200,000 MT wood pellet plant in Live Oak, Florida. The Company has purchased a 10-acre parcel of land from Klausner Holding USA Corporation in order to build the wood pellet plant adjacent to Klausner Lumber Mill. Cornerstone has been guaranteed a stable supply of feedstock from Klausner Lumber Mill in Live Oak, Florida for its production of wood pellets.

 

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DISCONTINUED OPERATIONS:

 

The Company has discontinued the operations of Providential Vietnam Ltd., Philand Ranch Limited (together with its subsidiaries Philand Ranch Ltd-Singapore, Philand Corporation-USA and Philand Vietnam Ltd.), PHI Gold Corporation (formerly PHI Mining Corporation), and PHI Energy Corporation as of June 30, 2012. (Note 6)

 

SPIN-OFF SUBSIDIARIES:

 

HP.ITA CORPORATION (FORMERLY PROVIMEX, INC.)

 

Provimex, Inc. was originally formed on April 10, 2001 under the name “Providential Imex”, to focus on trade commerce with Vietnam. This division changed its name to Provimex on July 5, 2001.  Provimex began to generate revenues from its import and export activities in August 2002 through the fiscal year ended June 30, 2005 and 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 3, 2011, Provimex, Inc. signed an agreement to acquire all the issued and outstanding capital stock of Humex Medical Group Corp., a California corporation, (“Humex”) in exchange solely for a certain amount of shares of Provimex’s common stock, par value 0.001, to engage in stem research and therapy in Southeast Asia. After the merger, shareholders of Humex would own 90% of Provimex Inc. On June 13, 2012 this transaction was rescinded in its entirety effective retroactively June 3, 2011. On June 19, 2012, Provimex, Inc. changed its name to HP.ITA Corporation. On July 20, 2012, HP.ITA Corporation (“HPUS”) signed a Corporate Combination Agreement to acquire all the issued and outstanding stock of HP.ITA Joint Stock Company, a company organized and existing under the laws of Vietnam, in exchange solely for such amount of authorized but unissued common stock of HPUS that would have been equal to 95% of all the issued and outstanding shares of HPUS’s common stock immediately following the issuance of such shares. HPUS intends to complete the required financial audits and file a Form 10 or S-1 registration statement with the Securities and Exchange Commission to become a separate fully reporting publicly traded company in the U.S. As of the date of this report, HPUS has not filed a registration statement with the Securities and Exchange Commission.

 

OMNI RESOURCES, INC. (F/K/A ASIA GREEN CORPORATION AND TOUCHLINK COMMUNICATIONS, INC.)

 

Touchlink Communications was formed on July 7, 2003 as a division of the Company to provide point-of-sale (POS) terminals and prepaid calling cards to retailers, convenient stores and non-profit organizations across the US.  This subsidiary was later incorporated as a Nevada corporation in February 2004 under the name of Touchlink Communications, Inc. as a wholly owned subsidiary of the Company to provide long distance services to residential and business customers in the United States. The Company has declared a 15% stock dividend of Touchlink Communications, Inc. to shareholders of record as of September 15, 2004. On November 03, 2008, this subsidiary changed its name to Vietnam Media Group, Inc. with the intent to develop a multi-media business in Vietnam and subsequently resumed the corporate name of Touchlink Communications, Inc. in February 2011. On April 11, 2014 this subsidiary changed its name to Asia Green Corporation (“AGC”) and entered into a business combination agreement with Asia Green Limited Liability Company, a Vietnam-based company, to become a holding company for agroforestry and afforestation business in Vietnam and Southeast Asia. On July 28, 2014 AGC changed its corporate name to Omni Resources, Inc. to pursue a new business venture. The Company anticipates holding about 10% equity interest in Omni Resources, Inc. following its recapitalization plan.

 

STOCK OWNERSHIPS:

 

As of December 31, 2015 the Company owned 22,535,714 shares of Catalyst Resource Group, Inc. common stock, or equivalent to 2.56%.

 

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MYSON GROUP, INC. (FORMERLY VANGUARD MINING CORPORATION AND VIETNAM MINING CORPORATION)

 

Since June 2010, the Company has provided consulting and advisory services to Myson Group, Inc. (formerly Vanguard Mining Corporation and Vietnam Mining Corporation) and has been compensated with Common Stock of Vanguard Mining Corporation in lieu of cash for services rendered. As of December 31, 2015, the Company owned 34,642,106 post-split shares of Myson Group, Inc., or equivalent to 4.97%.

 

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, 2015, 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, 2015 and 2014, our financial condition at December 31, 2015 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.

 

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Three months ended December 31, 2015 compared to the three months ended December 31, 2014

 

Total Revenues:

 

The Company had $194,700 in revenue from consulting services for the quarter ended December 31, 2015 as compared to $11,965 in revenue from management service for the quarter ended December 31, 2014, an increase of $182,735 between the two periods.

 

Operating Costs and Expenses:

 

Total operating expenses were $121,037 and $95,612 for the three months ended December 31, 2015, and 2014, respectively.

 

The variance between the two periods was due to an increase in professional services of $12,561 and an increase in general and administrative expenses of $12,864 during the quarter ended December 31, 2015 compared to the corresponding period in 2014. General and administrative expenses were $31,876 and $19,012 for the three months ended December 31, 2015, and 2014, respectively. The increase in general and administrative expenses between the two comparable periods was primarily due to an increase in travel expenses of $6,736, an increase in filing fees of $2,406 and an increase in advertising expense of $6,922, respectively.

 

Other Income and Expenses:

 

Net other expenses were $45,028 for the three months ended December 31, 2015, as compared to $52,906 for the three months ended December 31, 2014. The decrease in other expenses of $7,878 between the two periods was mainly due to a decrease in interest expense of $503, an increase in net gain from sale of marketable securities of $9,285, and an increase in miscellaneous expense of 1,820.

 

Interest expenses were $79,923 and $80,426 for the three months ended December 31, 2015 and 2014, respectively.

 

Net Income (Loss):

 

Net income for the three months ended December 31, 2015 was $28,635, as compared to a net loss of ($136,553) for the same period in 2014, which is equivalent to $0.01 per share for the current period and ($0.02) per share for the same period in 2014, both based on the weighted average number of basic and diluted shares outstanding at the end of each corresponding period after adjusting for the 1 for 1,500 reverse split effected on March 15, 2012.

 

The variance of $165,188 between the two comparable periods is primarily due to the following factors: an increase of $182,735 in revenues, an increase of $25,425 in total operating expenses, and a decrease in other expense of $7,878.

 

Six months ended December 31, 2015 compared to the six months ended December 31, 2014

 

Total Revenues:

 

The Company had $234,700 in revenues for the six months ended December 31, 2015, as compared to $15,096 of revenues for same six-month period ended 2014, an increase of $219,604 between the two periods.

 

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Operating Costs and Expenses:

 

Total operating expenses were $219,096 and $182,198 for the six months ended December 31, 2015, and 2014, respectively. The increase in total operating expenses of $36,899 during the current six-month period is primarily due to an increase in professional services in the amount of $18,969 and an increase in general and administrative expenses of $17,929, as compared to the six months ended December 31, 2014. Salaries and wages were the same for both periods. There was a total of $60,810 in professional services during the current six-month period as compared to $41,841 in professional services during the corresponding six-month period ended December 31, 2014. General and administrative expenses were $53,286 during the six months ended December 31, 2015 as compared to $35,357 during the same corresponding period in 2014. The increase in general and administrative expenses during the current six-month period, as compared to the same period ended December 31,2014, was primarily due to a decrease in expense of $3,075 related to the collection of the Petrobras bond transaction, an increase of $7,984 in advertising expense, an increase of $1,700 in donations, an increase of $1,791 in filing fees, an increase of $8,200 in travel expenses, and a decrease in $1,145 in transfer agent fees, respectively. The increase in total operating expenses between the two periods was due to increased business development activities during the current period.

 

Other Income and Expenses:

 

Net other income was $31,776 for the six-month ended December 31, 2015, as compared to net other expenses of $169,540 for the six-month ended December 31, 2014. Interest expense were $159,431 and $161,141 for the six months ended December 31, 2015, and 2014, respectively. The variance in net other income and expenses between the two periods is primarily due to a gain on sale of marketable securities in the amount of $193,196 during the six months ended December 31, 2015, as compared to a loss on sale of marketable securities in the amount of $8,526 during the same period ended December 31, 2014, offset by an increase in miscellaneous expenses of $1,910 between the two periods.

 

Net Income (Loss):

 

Net income for the six months ended December 31, 2015 was $47,379, as compared to net loss of $336,642 for the same period in 2014, which is equivalent to $0.01 per share for the current period and ($0.05) per share for the same period in 2013, both based on the weighted average number of basic and diluted shares outstanding at the end of each corresponding period after adjusting for the 1 for 1,500 reverse split effected on March 15, 2012.

 

The variance between the two comparable periods is mainly due to the following factors: an increase of $219,604 in revenues, an increase of $36,899 in total operating expenses, and an increase of $201,316 in net other income and expenses during the six-month period ended December 31, 2015 compared to the six-month period ended December 31, 2014.

 

CASH FLOWS

 

The Company’s cash and cash equivalents balance were $41,312 and $32,481 as of December 31, 2015 and December 31, 2014, respectively.

 

Net cash provided by the Company’s operating activities during the six-month period ended December 31, 2015 was $377,807, as compared to net cash used in operating activities of $42,594 during the six-month period ended December 31, 2014. This represents an increase of $420,401 between the two periods. The underlying reason for the variance was primarily due to a net income from operations of $47,379 during the six-month period ended December 31, 2015, as compared to a net loss from operations in the amount of $336,642 during the corresponding six-month period ended December 31, 2014, a decrease in other assets and prepaid expenses in the amount of $42,024 and an increase in accounts payable and accrued expenses in the amount of $5,644 during the six-month period ended December 31, 2015, as compared to a decrease in other assets and prepaid expenses in the amount of $2,864 and a decrease in accounts payable and accrued expenses of $834,719 during the six months ended December 31, 2014.

 

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The Company used $149,509 in investing activities during the six-month period ended December 31, 2015 whereas there was no cash provided by or used in investing activities for the six-month period ended December 31, 2014. The increase in cash used in investing activities during the current period is due to the purchase of 10 acres of land in Live Oak, Florida and a deposit for purchase of equity in a company during the current period.

 

Cash used in financing activities was $198,011 for the six-month period ended December 31, 2015, as compared to cash provided by financing activities in the amount of $44,452 for the six-month period ended December 31, 2014. The primary underlying reasons for the variance were due to changes in common stock of ($26,588) and $27,432, changes in Accumulated Other Comprehensive Income (Loss) of ($84,314) and $37,748, and changes in Accumulated Deficit of ($87,108) and 0 for the six-month periods ended December 31, 2015 and 2014, respectively. The Company repurchased 38,500 shares of its Common Stock from the open market and cancelled 25,510 restricted shares of its Common Stock during the six-month ended December 31, 2105.

 

HISTORICAL FINANCING ARRANGEMENTS

 

SHORT TERM NOTES PAYABLE:

 

In the course of its business, the Company has obtained short-term loans from individuals and institutional investors and from time to time raised money by issuing restricted common stock of the Company under the auspices of Rule 144. As of December 31, 2015 and June 30, 2015, the Company had short-term notes payable amounting to $1,313,500 and $1,342,618 with accrued interest of $3,189,253 and $3,031,152, respectively. These notes bear interest rates ranging from 6% to 36% per annum. Some of the notes payable are secured by assets of the Company as summarized below:

 

Note Balance:   Secured by:
     
$115,000   400,000 Catalyst Resource Group, Inc. shares
     500,000 Catthai Corporation shares
      
$550,000   500,000 Catthai Corporation shares
      
$150,000   1,500,000 PHI Gold Corp shares
      
$100,000   1,500,000 PHI Gold Corp shares

 

FINANCIAL PLANS

 

LIQUIDITY AND CAPITAL RESOURCES: The Company’s operations are currently financed through income from consulting and advisory services, various loans, sale of marketable securities and issuance of common stock under the auspices of Rule 144. In addition, the Company also anticipates generating revenues through energy-related and natural resource activities, and international trade and joint operations with other companies. However, 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.

 

MATERIAL CASH REQUIREMENTS: We must raise substantial amounts of capital to fulfill our plan of acquiring energy-related and natural resource assets as part of our scope of business. We intend to use equity, debt and project financing to meet our capital needs for acquisitions.

 

Management has taken action and formulated plans to strengthen the Company’s working capital position and generate sufficient cash to meet its operating needs through June 30, 2016 and beyond. The working capital cash requirements for the next 12 months following the end of the current quarter would be generated from operations, sale of marketable securities and additional financing.

 

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AVAILABLE FUTURE FINANCING ARRANGEMENTS:

 

The Company has engaged a number of investment banking firms and negotiated with private equity firms to arrange financing for potential acquisitions. The Company believes it will be able to secure the required financing arrangements; however, no assurances could be made that management would be successful in achieving its plan. 

 

AVAILABLE FUTURE FINANCING ARRANGEMENTS: The Company has engaged a number of investment banking firms, worked with some commercial banks and negotiated with private equity firms to arrange financing for potential acquisitions. The Company has also launched a private placement memorandum to raise $60 million by offering investment units consisting of Class A cumulative convertible preferred stock and warrants under the auspices of Regulation 506(c). However, as of the date of this report the Company has not raised any capital through this offering and may choose an alternative financing plan. No assurances could be made that management would be successful in achieving its new plan. 

 

DUE TO PREFERRED STOCKHOLDERS: The Company classified $215,000 of preferred stock previously subscribed in one of its long discontinued subsidiaries as a current liability payable to holders of preferred stock in this subsidiary due to deficiencies in connection with previous preferred share subscription agreements. This amount was past due as of December 31, 2015.

 

The interest payable to holders of preferred stock of the above-mentioned discontinued subsidiary in the amounts of $400,355 and $387,455 has been included in accrued interest included in account payable and accrued expenses on the balance sheet as of December 31, 2015 and June 30, 2015.

 

COMPANY’S PLAN OF OPERATION FOR THE FOLLOWING 12 MONTHS

 

While the Company is currently engaged in energy and natural resources, it intends to primarily focus on the following plan of operation for the next twelve months:

 

Complete the acquisition of a majority interest in Pacific Petro Commercial Joint Stock Company in Vietnam, build the gas storage facilities in Go Dau Industrial Park, Dong Nai Province, Vietnam, and begin consolidating other businesses in the fields of liquefied petroleum gas and natural gas.
   
 Implement the reclamation and construction sand business among our Vietnamese and Filipino partners, Singapore, Brunei and other Asian countries. The Company has signed agreements with five Vietnamese companies and a joint venture agreement with a Filipino company to secure over 1.5 billion cubic meters of saline and construction sand for future sale.
   
 Supply coal from Indonesia to Asian markets.
   
 Cooperate with Khamchaleun Investment Sole Co., Ltd. to develop and operate an antimony mine in Boualapha District, Khammuane Province, Lao People’s Democratic Republic.
   
 The Company may consider spinning off its M&A advisory services and its mining activities into separate subsidiaries in conjunction with the closing of the Pacific Petro Commercial Joint Stock Company transaction to primarily concentrate on energy business, both conventional and renewable. However, no guarantee could be made that the Company would be successful in any of its plans during this time frame.

 

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.

 

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Currency Fluctuations and Foreign Currency Risk

 

Some of our operations are conducted in Vietnam and Indonesia using Vietnamese Dong and Indonesian Rupiahs, which are the official currencies of these countries. 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, 2015, 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.

 

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Our management assessed the effectiveness of PHI Group’s internal control over financial reporting as of December 31, 2015. 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.

 

LEGAL PROCEEDING SETTLED AND UNPAID AS OF DECEMBER 31, 2015:

 

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

 

This case was originally submitted to Orange County Superior Court, CA on June 25, 1997, Case No. 781121, and subsequently moved to NASD Dispute resolution for arbitration. On or about August 24, 2000, the Company’s legal counsel negotiated with the Claimant’s counsel and unilaterally reached a settlement that had not been approved by the Company. While the Company was in the process of re-negotiating the terms of said settlement, the Claimants filed a request for arbitration hearing before the National Association of Securities Dealers on October 4, 2000, Case No. 99-03160. Thereafter, the Claimants filed a complaint with the Orange County Superior Court, CA on October 31, 2000, Case No. 00CC13067 for alleged breach of contract for damages in the sum of $75,000 plus pre-judgment interest, costs incurred in connection with the complaint, and other relief. Without admitting or denying any allegations, the Company reached a settlement agreement with the Claimants whereby the Company would pay the Claimants a total of $62,500 plus $4,500 in administrative costs. As the date of this report, the Company has paid $2,500 and is subject to an entry of judgment for $79,000. In May 2011, the Claimants filed an application for and renewal of judgment for a total of $140,490.78. As of December 31, 2015 the Company accrued $172,091 for potential liabilities in connection with this case in the accompanying consolidated financial statements.

 

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WILLIAM DAVIDSON VS. DOAN ET AL.

 

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

 

On July 09, 2012 William Davidson and PHI Capital Holdings, Inc. (formerly Providential Capital, Inc.), a subsidiary of the Company, reached a settlement agreement with respect to whereby PHI Capital agreed to pay William Davidson a total of $200,000 over a period of nineteen months beginning September 1, 2012. Since November 30, 2012, William Davidson has converted portions of the total amount into common stock of PHI Group, Inc. in lieu of cash payment. The Company has accrued the required liabilities associated with the balance of these notes in the accompanying consolidated financial statements as of December 31, 2015.

 

ITEM 1A. RISK FACTORS

 

RISK FACTORS

 

Investment in our securities is subject to various risks, including risks and uncertainties inherent in our business. The following sets forth factors related to our business, operations, financial position or future financial performance or cash flows which could cause an investment in our securities to decline and result in a loss.

 

General Risks Related to Our Business

 

Our success depends on our management team and other key personnel, the loss of any of whom could disrupt our business operations.

 

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

 

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

 

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

 

Acquisitions involve a number of special risks, including:

 

 failure of the acquired business to achieve expected results;
   
 diversion of management’s attention;
   
 failure to retain key personnel of the acquired business;

 

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 additional financing, if necessary and available, could increase leverage, dilute equity, or both;
   
 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 Southeast Asia, particularly Indonesia and Vietnam, and any adverse change to the economy or business environment in these countries could significantly affect our operations, which would lead to lower revenues and reduced profitability.

 

Our operations are currently concentrated in Indonesia and Vietnam. Because of this concentration in specific geographic locations, we are susceptible to fluctuations in our business caused by adverse economic or other conditions in this region, including stock market fluctuation. A stagnant or depressed economy in Indonesia and/or Vietnam generally, or in any of the other markets that we serve, could adversely affect our business, results of operations and financial condition.

 

Risks associated with coal business

 

As part of our core business involves acquisitions of coal assets, production of coal, and coal trading, our profitability will depend upon the prices we receive for our coal. Coal prices are dependent upon factors beyond our control, including: the strength of the global economy; the demand for electricity; the demand for steel, which may lead to price fluctuations in the periodic repricing of our metallurgical coal contracts; the global supply of thermal and metallurgical coal; weather patterns and natural disasters; competition within our industry and the availability and price of alternatives, including natural gas; the proximity, capacity and cost of transportation; coal industry capacity; domestic and foreign governmental regulations and taxes, including those establishing air emission standards for coal-fueled power plants or mandating increased use of electricity from renewable energy sources; regulatory, administrative and judicial decisions, including those affecting future mining permits; and technological developments, including those intended to convert coal-to-liquids or gas and those aimed at capturing and storing carbon dioxide.

 

Risks Related to Our Securities

 

Insiders have substantial control over the company, and they could delay or prevent a change in our corporate control, even if our other stockholders wanted such a change to occur.

 

Although our executive officers/directors and principal stockholders who hold 5% or more of the outstanding common stock owned as of December 31, 2015, in the aggregate, less than 10% of our outstanding common stock, our Board of Directors is able to decide the rights and terms associated with the Company’s Preferred Stock, which decision may allow the Board of Directors to exercise significant control over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This could delay or prevent an outside party from acquiring or merging with us even if our other stockholders wanted it to occur. 

 

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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.

 

Since we do not currently meet the requirements for our stock to be quoted on NASDAQ, the NYSE MKT LLC or any other senior exchange, the tradability in our securities will be limited under the penny stock regulations.   

 

Under the rules of the Securities and Exchange Commission, if the price of our securities on the OTCQB or OTC Markets is below $5.00 per share, our securities are within the definition of a “penny stock.” As a result, it is possible that our securities may be subject to the “penny stock” rules and regulations. Broker-dealers who sell penny stocks to certain types of investors are required to comply with the Commission’s regulations concerning the transfer of penny stock.

 

These regulations require broker-dealers to:

 

*Make a suitability determination prior to selling penny stock to the purchaser;

 

*Receive the purchaser’s written consent to the transaction; and

 

*Provide certain written disclosures to the purchaser.

 

These requirements may restrict the ability of broker/dealers to sell our securities, and may affect the ability to resell our securities. 

 

Our compliance with the Sarbanes-Oxley Act and SEC rules concerning internal controls may be time consuming, difficult and costly for us.  

 

It may be time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required by the Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal controls and other finance staff in order to develop and implement appropriate internal controls and reporting procedures. If we are unable to comply with the internal controls requirements of the Sarbanes-Oxley Act, we may not be able to obtain the independent accountant certifications that the Sarbanes-Oxley Act requires publicly traded companies to obtain.

 

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.

 

 

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ITEM 6. EXHIBITS

The following exhibits are filed as part of this report:

 

Exhibit No.   Description
     
21.1   Subsidiaries of registrant
     
31.1   Certification by Henry D. Fahman, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
31.2   Certification by Henry D. Fahman, Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
32.1   Certification by Henry D. Fahman, Chief Executive Officer of the Registrant, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
32.2   Certification by Henry D. Fahman, Chief Executive Officer of the Registrant, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

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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 16, 2016

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.

 

SIGNATURE   TITLE   DATE
         
/s/ Henry D. Fahman   Chairman/President/Chief Financial Officer   February 16, 2016
HENRY D. FAHMAN        
         
/s/ Tina T. Phan   Treasurer   February 16, 2016
TINA T. PHAN        
         
/s/ Tam T. Bui   Director    February 16, 2016
TAM T. BUI        
         
/s/ Frank Hawkins   Director   February 16, 2016
FRANK HAWKINS        

 

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