PHI GROUP, INC. AND SUBSIDIARIES

(FORMERLY, PROVIDENTIAL HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – NATURE OF BUSINESS

PHI Group, Inc., ("PHI") is engaged in a number of business activities, the scope of which includes consulting and merger and acquisition advisory services, real estate and hospitality development, mining, natural resources, and investing in special situations. The Company invests in various business opportunities within its chosen scope of business, provides financial consultancy and M&A advisory services to U.S. and foreign companies, and acquires selective target companies under special situations to create additional value for its shareholders.

In May 2003, the Company formed a subsidiary under the name of Providential Capital to provide financial products and services for the micro-small cap arenas and to manage the Company's proprietary merger and acquisition activities.  This subsidiary changed its name to PHI Capital Holdings, Inc. in May 2010.  

On July 7, 2003 a wholly-owned DBA of Providential Holdings, Inc, Touchlink Communications was formed to provide point-of-sale (POS) terminals and prepaid calling cards to retailers, convenient stores and non-profit organizations across the US. This company was later incorporated as a Nevada corporation in February 2004 under the name of Touchlink Communications, Inc. to provide long distance services to residential and business customers in the United States. This subsidiary, which did not have any operations during the years ended June 30, 2011 and 2010, is the process of re-organization to become a separate publicly traded company in which PHI Group, Inc. will hold a minority interest.

On December 31, 2003, the Company formed Providential Oil & Gas, Inc., a Nevada corporation and wholly-owned subsidiary, to pursue independent oil and gas business. On June 14, 2006, Providential Oil & Gas, Inc. changed its name to Providential Energy Corporation to expand its scope of business to potentially include alternative energy such as fuel cells and biodiesel. Subsequently, this subsidiary changed its name to PHI Energy Corporation. This entity did not have any operations during the years ended June 30, 2011 and 2010.

In September 2004, Provimex, Inc., formerly a majority-owned subsidiary of the Company, was incorporated as a Nevada corporation in September 2004 to engage in import and export business. This company, which did not have any operations during the years ended June 30, 2011 and 2010, is in the process of re-organization to become a separate public company in which PHI Group, Inc. holds a minority interest.

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

In March 2007, the Company received 900,000 shares of Bio-Warm Corp., a Nevada corporation, for advisory services valued at $675,000. Bio-Warm Corp. subsequently acquired 100% of Vietnam-based Dai Dung Metallic Manufacture Construction and Trade Company (DDMMCT) and changed its name to DDC Industries, Inc. In June 2007, the Company received 3,763,753 shares of DDC Industries’ common stock for services performed in the merger of Bio-Warm Corp. and DDMMCT which was closed on March 30, 2007. During the year ended June 30, 2008 PHI Group, Inc. received the remaining 3,763,753 shares of BioWarm Corp’s common stock pursuant to the Business and Consulting Agreement between Bio-Warm and the Company. The merger agreement with DDMMCT was rescinded on November 18, 2008 in entirety and shareholders of DDMMCT agreed to return 28,610,025 shares of 30,110,025 issued shares. On December 1, 2008, DDC Industries Inc. changed its name to PHI Mining Group, Inc. and as of December 31, 2010, the Company’s name was changed to PHI Gold Corp. to focus on gold mining business.

In March 2008, Indochina Mining Corporation, a Nevada corporation, was incorporated to engage in the exploitation and processing of diatomite mines. On April 14, 2008, Indochina Mining Corporation (IMC), entered into a Cooperation agreement with Phu Yen Minerals Joint Stock Company (PYMICO). Under this agreement, PYMICO and IMC would cooperate to contribute capital for establishment of a joint venture enterprise specializing in exploitation and processing of diatomite in Phu Yen Province, Vietnam and IMC would acquire a maximum of 30% shares of PYMICO. This joint venture did not materialize.

In May 2008, Providential Vietnam, Ltd., a Vietnamese limited liability company and wholly-owned subsidiary of the Company, was formed to provide M&A advisory services and other management consulting, services. This subsidiary did not generate any revenue during the fiscal year ended June 30, 2011.

In December 2008, Indochina Mining Corporation entered into stock purchase agreement with PHI Gold Corp (formerly PHI Mining Group and DDC Industries, Inc.) to exchange all of its capital stock for the same number of newly issued shares of PHI Gold Corp. As a result, PHI Group, Inc. owns approximately 83% of PHI Gold Corp.

On October 28, 2010, PHI Gold Corporation (formerly PHI Mining Group, Inc.) signed an agreement with CCHI Canadian Holdings Inc., a New Brunswick corporation, Canada, to acquire all the issued and outstanding stock of Maisy Mae Mining Inc., a New Brunswick corporation, Canada, with 100% owned by CCHI Canadian Holdings, Inc. The purchase price was $3,500,000, payable in a combination of cash and marketable securities. The transaction was closed effective April 4, 2011. The transaction closed with the issuance shares of the Company’s subsidiary PhiLand Ranch Limited (UK). Maisy Mae Mining Inc. is engaged in a placer mining business in the Yukon Territory, Canada in connection with a mine known as the Maisy Mae Creek Mine. 

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

On April 25, 2011, PHI Medical Ltd., a wholly owned subsidiary of PhiLand Ranch Limited (UK), changed its name to PHI Oil and Gas, Ltd., a Singapore public company limited by shares, to focus on oil and gas business.

On April 27, 2011, PHI Oil and Gas Ltd. signed a Business Cooperation with AXN Group, LLC, a Delaware corporation, to cooperate in oil and gas activities whereby AXN Group and its affiliates will own 70%, PHI Group will own 15% and PhiLand Ranch will own 15% of PHI Oil and Gas Ltd. PHI Oil and Gas Ltd. will be responsible for listing its shares on the Singapore Stock Exchange as soon as practical, but no later than six months following the acquisition of any oil and gas properties, assets or businesses through arrangements with AXNG.  PHI Group intends to continue to pursue its healthcare initiatives in Southeast Asia through a strategic alliance to be announced in the future.

On June 01, 2011, Provimex, Inc. (“Provimex”) acquired the 100% issued and outstanding capital stock of Humex Medical Group Corp., a California corporation, (“Humex”) in exchange solely for 58,333,333 share of Provimex’s common stock, par value 0.001. After the merger, shareholders of Humex owns 70% of Provimex Inc., The Provimex shares have not been registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”) and have not been listed on any foreign exchange. The Board of Directors and the majority shareholders of Humex approved the exchange and on June 30, 2011, and the business combination was completed. 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of PHI Group, Inc., and its subsidiaries, Providential Securities, Inc., PHI Capital Holdings, Inc. (formerly Providential Capital, Inc.), Provimex, Inc., PHI Energy Corporation, Touchlink Communications, PHI Gold Corp, Providential Vietnam and PhiLand Ranch Limited (UK), and its 100% owned subsidiary PhiLand Corporation, Ltd., collectively referred to as the "Company". All significant inter-company transactions have been eliminated in consolidation.  Providential Securities, Inc., Provimex, Inc., and Touchlink Communications are inactive.

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 period.  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 nationally quoted on the National Association of Securities Dealers OTC Bulletin Board ("OTC:BB") or Pink Sheets.  As such, each investment is accounted for in accordance with the provisions of ASC 320 (previously 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 June 30, 2011and 2010 the marketable securities have been recorded at $174,650 and $0.00, respectively based upon the fair value of the marketable securities.

ACCOUNTS RECEIVABLE

Management reviews the composition of accounts receivable and analyzes historical bad debts. As of June 30, 2011, the Company had balance of $6,000 as accounts receivable.

IMPAIRMENT OF LONG-LIVED ASSETS

Effective January 1, 2002, the Company adopted ASC 350 (Previously SFAS 144,  "Accounting  for  the Impairment or Disposal of Long-Lived Assets"), which addresses financial accounting and reporting for the impairment  or  disposal  of  long-lived  assets  and  supersedes  SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be  Disposed Of," and the accounting and reporting provisions of APB Opinion No. 30,  "Reporting  the  Results  of  Operations  for  a Disposal of a Segment of a Business."  The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with ASC 350.  ASC 350 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amounts.  In that  event,  a  loss  is  recognized  based on the amount by which the carrying amount  exceeds  the  fair  market  value  of  the  long-lived  assets.  Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Maintenance and repair costs are charged to expense as incurred; costs of major additions and betterments are capitalized. When property and equipment are sold or otherwise disposed of, the cost and related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is reflected in income.  Depreciation is computed using the straight-line method over the estimated useful lives of the assets, ranging from three to ten years.

DEPRECIATION AND AMORTIZATION

The cost of property and equipment is depreciated over the estimated useful lives of the related assets.  Depreciation and amortization of fixed assets are computed on a straight-line basis.

NET EARNINGS PER SHARE

The Company adopted the provisions of ASC 260 (previously SFAS 128). ASC 260 eliminates the presentation of primary and fully diluted earnings per share ("EPS") and requires presentation of basic and diluted EPS. Basic EPS is computed by dividing income (loss) available to common stockholders 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.

The Company has the following dilutive stock warrants as of June 30, 2011 and 2010.

The net earnings per share is computed as follows: 

STOCK-BASED COMPENSATION

Effective July 1, 2006, the Company adopted ASC 718-10-25 (previously SFAS 123R) and accordingly has adopted the modified prospective application method. Under this method, ASC 718-10-25 is applied to new awards and to awards modified, repurchased, or cancelled after the effective date. Additionally, compensation cost for the portion of awards that are outstanding as of the date of adoption for which the requisite service has not been rendered (such as unvested options) is recognized over a period of time as the remaining requisite services are rendered.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Effective July 1, 2008, the Company adopted ASC 820 (previously SFAS 157), Fair Value Measurements and adopted this Statement for the assets and liabilities shown in the table below. ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, establishes a fair value hierarchy based on the inputs used to measure fair value, and expands disclosures about the use of fair value measurements. The adoption of ASC 820 did not have a material impact on our fair value measurements. ASC 820, permits the Company to defer the recognition and measurement of the nonfinancial assets and nonfinancial liabilities until January 1, 2010. At June 30, 2011, the Company did not have any nonfinancial assets or nonfinancial liabilities that are recognized or disclosed at fair value. ASC 820 requires that financial assets and liabilities that are reported at fair value be categorized as one of the following types of investments based upon the methodology for determining fair value.

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The Company utilizes various approaches to measure fair value for available-for-sale securities. 

Assets measured at fair value on a recurring basis are summarized below. The Company has no financial liabilities measured at fair value on a recurring basis.

Available-for-sale securities 

The Company uses various approaches to measure fair value of available-for-sale securities, while applying the three-level valuation hierarchy for disclosures, specified in ASC 820. Our Level 1 securities were measured using the quoted prices in active markets for identical assets and liabilities.

PHI Group Inc., received 3,500,000 shares of Vietnam United Steel Corporation [VUSC] for consulting services provided during the year ended June 30, 2009. These shares constituted 20% ownership in VUSC and were valued at $1,750,000, and considered by management to be Level 3 in the valuation hierarchy, due to the share’s little or no market activity. These shares were valued using the (undiscounted) cash flow method. Based on the audited financial statements for the year ended December 31, 2007 of VUSC, a projected cash flow for three consecutive fiscal periods were calculated, with a conservative increase of 20% per year. In addition to the cash flow projection, the Company also discounted the quoted market price by 50% of the market price at the time of completion of the services provided. The management believed at the time of completion of the transaction that the fair value was approximately $0.50/share at that time. However, as of June 30, 2010, management have permanently impaired $1,750,000 from 3,500,000 shares of Vietnam United Steel Corporation due to this company’s lack of financial disclosure and trading activity. The company’s policy regarding the transfers in and/or out of Level 3 depends on the trading activity of the security, the volatility of the security, and other observable units which clearly represents the fair value of the security. If a level 3 security can be measured using a more fairly represented fair value, we will transfer these security either into Level 1 or Level 2, depending on the type of inputs.

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.

ADVERTISING

The Company expenses advertising costs as incurred.  Advertising costs for the years ended June 30, 2011 and 2010 were $4,346 and $1,910 respectively.

COMPREHENSIVE INCOME (LOSS)

ASC 220-10-45 (previously SFAS 130, Reporting Comprehensive Income), establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income is defined to include all changes in equity, except those resulting from investments by owners and distributions to owners. Among other disclosures, SFAS No. 130 requires that all items that are required to be recognized under current accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements.  As of June 30, 2011 and 2010, respectively, no comprehensive income or loss is presented on the accompanying consolidated balance sheets.  

INCOME TAXES

The Company accounts for income taxes in accordance with ASC 740 (previously SFAS No. 109, "Accounting for Income Taxes"). Deferred taxes are provided on the liability method whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

REPORTING OF SEGMENTS

ASC 280 (previously Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information), which supersedes Statement of Financial Accounting Standards No. 14, Financial Reporting for Segments of a Business Enterprise, establishes standards for the way that public enterprises report information about operating segments in annual financial statements and requires reporting of selected information about operating segments in interim financial statements regarding products and services, geographic areas and major customers. ASC 280 defines operating segments as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company operated in one segment that generated revenues during the years ended June 30, 2011 and 2010.

RISKS AND UNCERTAINTIES

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

RECENT ACCOUNTING PRONOUNCEMENTS

In April 2010, the FASB issued Accounting Standards Update 2010-13 (ASU 2010-13), "Compensation - Stock Compensation (Topic 718)." This Update provides amendments to Topic 718 to clarify that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity's equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. The amendments in ASU 2010-13 are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. The provisions of ASU 2010-13 are not expected to have a material effect on the Company's consolidated financial statements. 

In July 2010, the FASB issued an accounting update to provide guidance to enhance disclosures related to the credit quality of a company's financing receivables portfolio and the associated allowance for credit losses. Pursuant to this accounting update, a company is required to provide a greater level of disaggregated information about its allowance for credit loss with the objective of facilitating users' evaluation of the nature of credit risk inherent in the company's portfolio of financing receivables, how that risk is analyzed and assessed in arriving at the allowance for credit losses, and the changes and reasons for those changes in the allowance for credit losses. The revised disclosures as of the end of the reporting period are effective for the Company beginning in the second quarter of fiscal 2011, and the revised discourses related to activities during the reporting period are effective for the Company beginning in the third quarter of fiscal 2011. The Company is currently evaluating the impact of this accounting update on its financial disclosures.

NOTE 3 – NASD EXAMINATION AND DISCONTINUANCE OF PROVIDENTIAL SECURITIES, INC.

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

Providential Securities, Inc. was censured, fined $115,000.00 and required to offer rescission to those public customers who participated in the Providential Private Placement.  In addition, Henry Fahman was banned, in all capacities, from associating with any NASD member. Based upon the above-mentioned circumstances, Providential Securities, Inc. withdrew its membership from the NASD in October 2000 and ceased its securities brokerage operation.  The fine of $115,000 is included in accrued expenses in the accompanying consolidated financial statements.  The Company has offered all Preferred Stock holders rescission on their investment.  During the year ended June 30, 2004, $235,000 from the amount due to Preferred Stock Holders plus $105,600 in related dividends payable totaling $340,600 has been paid either in cash or with the issuance of common stock. The balance of unredeemed preferred shares and the related interest has been included in current liabilities on the accompanying consolidated financial statements (Note 13).

NOTE 4 – LOANS RECEIVABLE FROM RELATED PARTIES

Loans receivable from related parties consist of the following at June 30, 2011 and 2010:

NOTE 5 – OTHER CURRENT ASSETS

The Other Assets comprise of the following as of June 30, 2011 and 2010:

NOTE 6 – MARKETABLE EQUITY SECURITIES AVAILABLE FOR SALE

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

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

Marketable securities classified as available for sale consisted of 1,746,500 shares of Vietnam Mining Corporation that were earned for consulting services rendered. The fair value of shares received was $174,650 as of June 30, 2011.

NOTE 7 – PROPERTY AND EQUIPMENT

Property and equipment at June 30, 2011 and 2010 consists of the following:

Depreciation expenses were $2,745 and $19,233 for the fiscal years ended June 30, 2011 and 2010, respectively.

NOTE 8 – OTHER ASSETS

During the quarter ended March 31, 2011, PhiLand Vietnam Ltd., a wholly owned subsidiary of the PhiLand Ranch Ltd., made a security deposit in the amount of $172,203 to the Chu Lai Open Economic Zone Authority, Quang Nam Province, Vietnam as a guarantee for its Pointe91 development project at Bien Rang, Chu Lai, Nui Thanh District, Quang Nam Province, Vietnam. During the quarter ended June 30, 2011, the Company signed a consulting agreement to assist Agent155 Media Corp., a Delaware corporation, with respect to its corporate restructuring and business combination with Freshwater Technologies, Inc., a Nevada corporation.  As part of the restructuring requirements, the Company made a payment to Manning Elliot LLP in the amount of $24,476 on behalf of Freshwater Technologies, Inc. to facilitate the transaction between Agent155 Media Corp. and Freshwater Technologies, Inc.

NOTE 9 – CONSTRUCTION IN PROGRESS

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

Construction in progress represents the costs incurred by PhiLand Corporation, a subsidiary of the Company for real estate development amounting to $1,153,632 as of June 30, 2011. The costs included interest capitalized of $456,400.

NOTE 10 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

The accounts payable and accrued expenses at June 30, 2011 and 2010 consist of the following:

NOTE 11 – 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 June 30, 2011 and 2010, the balances were $1,317,949 and $1,126,529, respectively.

As of June 30, 2011, the Company has a short term note payable amounting $100,000 with interest bearing $3,000 per month payable to member of the Board of Directors.

NOTE 12 – LOANS AND PROMISSORY NOTES

SHORT TERM NOTES PAYABLE:

As of June 30, 2011 and June 30, 2010, the Company had short term notes payable amounting to $2,432,456, and $2,400,546 with accrued interest of $1,872,479 and $1,367,980 respectively. These notes bear interest rates ranging from 6% to 36% per annum. $1,744,982 of these short term notes are past due and $258,976 are due on demand.

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

The Convertible Promissory Note issued to Asher Enterprises, Inc. (“Asher”) on May 10, 2010 is $ 50,000, net of discount $18,500. This convertible note was due and payable on February 14, 2011 with interest of 8% per annum. This note is convertible at the election of Asher from time to time after the issuance date. In the event of default, the amount of principal and interest not paid when due bear interest at the rate of 22% per annum and the note becomes immediately due and payable. Should that occur, the Company is liable to pay Asher 150% of the then outstanding principal and interest. The note agreement contains covenants requiring Asher’s written consent for certain activities not in existence or not committed to by the Company on the issuance date of the note, as follows: dividend distributions in cash or shares, stock repurchases, borrowings, sale of assets, certain advances and loans in excess of $50,000, and certain guarantees to third-party liabilities. Outstanding note principal and interest accrued thereon can be converted in whole, or in part, at any time by Asher after the issuance date into an equivalent of the Company’s common stock determined by 65% of the average of the three lowest closing trading prices of the Company’s common stock during the ten trading days prior to the date the conversion notice is sent by Asher.

During the third quarter, the remaining $32,000 principal of the convertible notes issued in May 10, 2010 has been converted into 4,638,760 shares.

On January 24, 2011, the Company issued a second Convertible Promissory Note to Asher for $55,000 under similar terms and conditions.

The value of the derivative liability at June 30, 2011 is $97,049.

DUE TO PREFERRED STOCKHOLDERS:

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

The interest payable to holders of preferred stock of $284,255 and $258,455 has been included in accrued interest included in account payable and accrued expenses on the balance sheets as of June 30, 2011 and June 30, 2010, respectively.

UNEARNED REVENUE

The Unearned Revenue of $293,219 is the consulting fee for the service performed by the Company that has not been completed as of June 30, 2011.

OTHER CURRENT LIABILITIES

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

NOTE 13 – LITIGATION

LEGAL PROCEEDING SETTLED AND UNPAID AS OF JUNE 30, 2011:

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

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

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

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

PENDING LITIGATION:

NGON VU VS. PROVIDENTIAL SECURITIES, INC.

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

VERIO VS. PROVIDENTIAL SECURITIES, INC.

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

DOW JONES & COMPANY, INC. VS. PROVIDENTIAL SECURITIES, INC. AND PHI GROUP, INC.

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

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

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

DAVIDSON VS. DOAN ET AL.

On or about February 01, 2010, the company was notified of a suit that was filed with the Superior Court of the State of California for the County of Los Angeles on November 24, 2009 by William Davidson, an individual against Martin Doan, Henry Fahman, HRCiti Corporation, and Providential Capital, Inc. (collectively referred to as “Defendants” - Case No. BC 426831). Plaintiff demanded an amount of not less than $140,000.00 from Defendants for promissory notes outstanding between Plaintiff and the company. The Company has accrued the potential liabilities associated with these promissory notes in the accompanying consolidated financial statements as of June 30, 2011.

NASD CASE:

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

ARBITRATION CASES:

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

NOTE 14 – PAYROLL LIABILITIES

The payroll liabilities are accrued and recorded as accrued expenses in the consolidated balance sheet. As of June 30, 2011, the Company owed the Internal Revenue Service and State of California Employment Development Department payroll tax, penalties and interest amounting to $101,820.

NOTE 15 – BASIC AND DILUTED NET LOSS PER SHARE

Net loss per share is calculated in accordance with SFAS No. 128, "Earnings per Share". Under the provision of SFAS No. 128, basic net loss per share is computed by dividing the net loss for the period by the weighted-average number of common shares outstanding for the period.  Diluted EPS is based on the weighted-average number of shares of common stock outstanding for the period and common stock equivalents outstanding at the end of the period.  Basic and diluted weighted average numbers of shares for the year ended June 30, 2011 were the same since the inclusion of Common stock equivalents is anti-dilutive.

NOTE 16 – STOCKHOLDER'S EQUITY

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

Treasury Stock:

The balance of treasury stock as of June 30, 2011 was 1,330,440 shares valued at par, $1,330.

Common Stock:

During the year ended June 30, 2011 the company issued 14,600,395 shares of common stock valued at $529,206 in settlement of Asher Enterprise Convertible Promissory Notes.

Shares to be issued:

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

Prepaid Consulting:

During the year ended June 30, 2010, the Company signed a consulting agreement for consulting service for one year. The Company issued 200,000 shares of common stock to the consultant valued at $10,000 based upon the market value of the stock at the date of stock issuance.  The Company amortized $5,000 during the year ended June 30, 2011and 2010.

NOTE 17 – STOCK BASED COMPENSATION PLAN

Stock-Based Compensation:

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

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

Warrants:

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

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

Following is a summary of the status of warrants outstanding at June 30, 2011:

NOTE 18 – LOSS ON SETTLEMENT OF DEBTS

The Company settled the notes payable principal and related accrued interest of Asher Enterprise Inc. and Mr. Lukasik totaling $99,574 by issuance of 14,600,295 shares of its common stock for the fair value of 529,206 and 50,960 shares of a subsidiary for the fair value of $15,768.  As a result, the Company recorded a loss of $402,107 on settlement of debts as of June 30, 2011. For the same period in the prior year, the Company recorded a loss of $2,701 on settlement of debts.

NOTE 19 – RELATED PARTY TRANSACTIONS

The Company accrued $210,000 in salaries for Henry Fahman (President of the Company) and Tina Phan (Secretary of the Company) during the years ended June 30, 2011 and June 30, 2010.

All revenues of the Company were generated by PHI Group (parent company). The Company provides consulting services to its clients and revenues are considered earned when the services are deemed complete. The Company receives consideration for consulting services provided either with cash and/or common stock of the client company. No revenues were earned by any of the Company’s subsidiaries during the periods for which the income statements are presented.

During the period ended June 30, 2011, the Company earned the following revenues:

During the period ended June 30, 2010, the Company earned the following revenues:

NOTE 20 – INCOME TAXES

The components of the net deferred tax asset are summarized below:

The following is a reconciliation of the provision for income taxes at the U.S. federal income tax rate to the income taxes reflected in the Consolidated Statements of Operations:

NOTE 21 – CONTRACTS AND COMMITMENTS

AGREEMENT WITH HAWK ASSOCIATES, INC.

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

BUSINESS COOPERATION AGREEMENT WITH PHO EXPRESS

On September 19, 2007, Provimex, Inc., a subsidiary of the Company entered into business cooperation agreement with an owner of Pho Express to establish a new Vietnamese style noodle soup restaurant, Pho Express International, LLC. Pho Express agreed to contribute all assets and liabilities in exchange for 40% of equity ownership and Provimex agreed to pay $165,000 in exchange for 60% of equity ownership of Pho Express International, LLC. As of June 30, 2011, the business cooperation agreement could not be closed and the Company wrote off $91,600 previously deposited with Pho Express.

BUSINESS AND FINANCIAL CONSULTING AGREEMENT WITH MAST VENTURES, LLC 

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

BUSINESS AND FINANCIAL CONSULTING AGREEMENT WITH LINH THANH GROUP

Effective April 26, 2010 the Company signed an agreement with Linh Thanh Group Joint Stock Company, a Vietnam-based company, to take a majority-owned subsidiary of Linh Thanh Group, Linh Thanh Quang Binh Exploiting and Processing High Calcium Carbonate Powder Joint Stock Company (“LTQB”), public in the U.S. via a reverse merge, stock swap, or business combination with a U.S. publicly traded company. In exchange for the services rendered, the Company would receive compensation in cash from Linh Thanh Group and common stock of the combined company. The Stock Swap Agreement between LTQB and the U.S. public company was closed on June 28, 2010. However, the combined company has not reported updated financial information with the appropriate regulatory agencies as of the date of this report. The Company recognized $166,667 as revenues from this transaction as of June 30, 2011.

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 June 30, 2011, the Company has not completed the contemplated business combination for Thinh. For the fiscal year end 2010, the Company recognized $26,656 as only revenues from this transaction. The balance of $293,219 was booked as unearned income in the liability portion of the balance sheet.

OFFICE SPACE LEASE

The Company signed on a 5 year lease agreement for the corporate office effective May 1, 2008. AS of June 30, 2011, the monthly rental is $7,598 and will be increased by 3.5% per annum commencing in the thirteenth month of the initial lease term and continuing annually thereafter.

The leases for offices in Vietnam are for 12 months starting January 2008 and July 2008, respectively.  The monthly rental is approximately $450 per month.

 NOTE 22 – GOING CONCERN UNCERTAINTY

As shown in the accompanying consolidated financial statements, the Company has accumulated deficit of 28,256,269 and negative cash flow from operations amounting $441,519 for the period ended June 30, 2011. These factors as well as the uncertain conditions that the Company faces in its day-to-day operations with respect to cash flows create an uncertainty as to the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. The company currently has a significant asset balance labeled construction in progress, a real estate project called Pointe 91. However, this balance represents cost incurred and capitalized interest on borrowed funds [See Note 8]. This balance is also subject to the Company’s commitment with Vietnamese governmental authorities to carry out the development of Pointe 91 real estate project in Chu Lai, Quang Nam Province, Vietnam. Management has taken action to strengthen the Company's working capital position and generate sufficient cash to meet its operating needs through June 30, 2011 and beyond.  In the next twelve months, the Company will continue to focus on the following business activities: (1) mergers and acquisitions and consulting services through its subsidiaries PHI Capital Holdings, Inc. and PHI Vietnam Holdings; (2) mining through its majority owned subsidiary  PHI Gold Corporation and minority interest in Tricon Gold Corporation; (3) energy and oil and gas through  PHI Energy Corporation and PHI Oil and Gas Ltd; (4) real estate development through PhiLand Ranch Ltd, PhiLand Corporation, and PhiLand Vietnam Ltd; and (5) other special situations that may have the potential to create substantial shareholder value. The Company anticipates generating more revenues through its proposed mergers and acquisitions as well as other business activities mentioned herein. No assurances can be made that management will be successful in achieving its plan. The president and chairman of the Company has committed to funding the Company's operations for the next 12 months.

NOTE 23 – NON-CONTROLLING INTERESTS IN SUBSIDIARIES

The Company had non-controlling interests in a number of its subsidiaries. The balance of non-controlling interest as of June 30, 2011 and 2010 was as follows:

IMAGE OMITTED 

(A) PhiLand Ranch Limited

For the years ended June 30, 2011 and 2010 PhiLand Ranch Limited had net loss of $313,610 and $363,849.

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

For the years June 30, 2011 and 2010 PHI Gold Corp (f/k/a PHI Mining Group) had net loss of $29,558 and $23,430, respectively.

NOTE 24 – RESTATEMENT

Subsequent to the fiscal year ended June 30, 2010, the company discovered errors in the calculation of the minority interest and in the valuation of its investment account.  The table below reflects the adjustments made by the company. The Company restated the prior period financial statements and these adjustments are and have been carried forward into the financial statements contained in this filing. The restatements are “Unaudited” and the predecessor auditor reported on such financial statements before restatement.

NOTE 25 – SUBSEQUENT EVENT

On August 4, 2011, PhiLand Ranch was granted a Land Use Rights (also known as Land Title) for the first 23.55 hectares at Pointe 91 project by the Vietnamese government.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to provide reasonable assurance that the information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and accumulated and communicated to management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Our management, at the direction of our chief executive officer/acting chief financial officer, performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(f) under the Exchange Act). Based on that evaluation and the identification of material weaknesses in our internal control over financial reporting as described in this Item 9A below under the heading Management's Report on Internal Control over Financial Reporting, our management concluded that our disclosure controls and procedures were not effective as of June 30, 2011.

Notwithstanding these material weaknesses, management has concluded that the consolidated financial statements included in this report present fairly, in all material respects, PHI Group’s financial position and results of operations, and cash flows for the periods presented in conformity with U.S. generally accepted accounting principles ("GAAP").

Management’s Report on Internal Control over Financial Reporting

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

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

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

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

• Ineffective control over the financial statements closing process;

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

• Lack of segregation of duties; and

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

Our independent registered public accounting firm, Dave Banerjee, CPA, has not issued a report on our internal control over financial reporting as of June 30, 2011.

ITEM 9B.  OTHER MATTERS

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS, COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

The following table sets forth certain information as of June 30, 2011, with respect to the Directors and Executive Officers of the Company.

NAME                                                     AGE                                          POSITION

Henry D. Fahman      57                                     Chairman of the Board, President, Acting Chief

Financial Officer

Tina T. Phan                                           44  Treasurer, Secretary

Tam T. Bui 50                                     Director

Frank Hawkins 70 Director

Paul K. Nguyen 45 Director

Lawrence G. Olson 74 Director

Directors are elected at the annual meeting of shareholders and hold office until the following annual meeting and until their successors are elected and qualified. All Executive Officers serve at the discretion of the Board of Directors. The Company's securities are not registered under Section 12(g) of the Exchange Act. Accordingly, the Directors and Executive Officers of the Company are not required to file reports under Section 16(a) of that act.

Henry D. Fahman has been President and Chairman of the Board of PHI Group, Inc. since January 14, 2000, and is currently Acting Financial Officer of the Company. Mr. Fahman served as President and Chairman of the Board of Providential Securities, Inc. from its inception in October 1992 to October 2000. He holds a B.S., magna cum laude, in business administration from the University of California at Berkeley, with emphasis in finance and economic analysis and policy, and is a graduate of the Advanced Management Program (AMP166) from Harvard Business School. He has also attended other Executive Education programs at Harvard Business School and Stanford University, including Mergers and Acquisitions, Creating Competitive Advantage, and Advanced General Management. Previously, he served as a Resettlement Coordinator for the United Nations High Commissioner for Refugees.  Mr. Fahman also serves as Executive Chairman of PhiLand Ranch Limited. Mr. Fahman is the husband of Tina T. Phan, our Secretary and Treasurer.

Tam Bui has been a Director of the Company since April 10, 2009 and served as a Chief Technology Officer from May 2002 to April 10, 2009. Mr. Bui holds Bachelor and Master of Science degrees from the University of Minnesota and has attended continuing Education at the University of California, Los Angeles. He has over 18 years of experience with Honeywell, Inc. and TRW as Senior Production Engineer/Computer Application Engineer, Project Manager, Department Manager, Program Manager and Implementation Manager. He was responsible for the implementation of LAPD Emergency Command Control Communications Systems. He has a broad knowledge and experience in the areas of information technology, intranet/internet technology, inventory management, material resource planning, enterprise resource planning, human resource management, and international business. 

Frank Hawkins, Director has been a Director of the Company since April 10, 2009 and Mr. Hawkins is a founder and CEO of Hawk Associates with nearly 30 years of award-winning investor relations experience, Mr. Hawkins has earned the wide respect of Wall Street's investment community for straight talk and integrity.  He was formerly vice president/corporate relations and planning and head of the investor relations program at Knight-Ridder, Inc. in Miami. Mr. Hawkins started his career as an agent handler in clandestine collection operations for the Defense Intelligence Agency in Germany and went on to become a foreign and war correspondent, international businessman, senior corporate executive and president of the Access Asia Group in Hong Kong. He has lived in eight countries. He has been involved in stock listings in Tokyo and Frankfurt and company presentations in London, Zurich, Geneva and Singapore. Fluent in German, he is a graduate of Cornell University and author of "Ritter's Gold," an adventure novel published in several languages by the New American Library. He is a member of the Association of Former Intelligence Officers and the Audubon Society and is listed in Who's Who in America and Who's Who in the World. He serves on the board of the Florida Keys Electric Cooperative. 

Paul Nguyen has been a Director of the Company since April 10, 2009 and is currently Senior Partner of Nguyen & Larsen, LLP, a law firm, and Chief Executive Officer of Summit Medical Group, Inc. in Orange County, CA, Mr. Nguyen received a MS in aeronautical engineering from California Institute of Technology in 1984 and was named Research Scientist by NASA from 1984-1987.  After graduating from the Harvard Business School JD/MBA program in 1991, Mr. Nguyen served as Institutional Investment Associate from 1991-1992 and Managing Director from 1992-1993 for JP Morgan in New York and Tokyo. Mr. Nguyen served as Senior Associate attorney for Baker & McKenzie in Ha Noi, Vietnam from 1993-1995. In 2000, Mr. Nguyen received a MD from Loma Linda School of Medicine and was board certified in plastic surgery in 2005.

Lawrence G. Olson became a director of PHI Group, Inc. in January 2008. Mr. Olson has been a director of Santa Fe Gold Corp., a public company (OTCBB:SGFE), since March 1999 in connection with the Company's acquisition of Arizona Mica Properties, Inc., a private Arizona corporation owned by Mr. Olson and his partners. He has held the position of Chairman of Santa Fe Gold’s Board of Directors since October 2000, and until October 2003 also held the positions of President and Chief Executive Officer. Mr. Olson has owned and operated a successful business, Olson Precast of Arizona Inc., since 1973. Mr. Olson received a B.S. Degree in Civil Engineering from the University of Southern California.

Tina T. Phan has been a Treasurer since April 10, 2009. She served as a Director and Secretary of the Company from January 2000 to April 10, 2009 and was Vice President of Operations of Providential Securities, Inc. from 1995 to 2000. Mrs. Phan holds a B.S. in management information system from California State University, Los Angeles. Currently Mrs. Phan serves as Treasurer and Secretary of the Company. Mrs. Phan is the wife of Henry D. Fahman.

ITEM 11. EXECUTIVE COMPENSATION

    (a) Any compensation received by officers, directors, and management personnel of the Company will be determined and approved from time to time by the Board of Directors of the Company as it deems appropriate and reasonable. Officers, directors, and management personnel of the Company will be reimbursed for any out-of-pocket expenses incurred on behalf of the Company.

Except for non-cash payments mentioned in this report, there was no monetary compensation paid to any officers of the Company during the year ended June 30, 2009.

    (b) There are no annuity, pension or retirement benefits proposed to be paid to officers, directors, or employees of the Company in the event of retirement at normal retirement date as there is no existing plan provided for or contributed to by the Company.

    (c) All members of the Company's Board of Directors, whether officers of the Company or not, may receive an amount yet to be determined annually for their participation in meetings of the Board and will be required to attend a minimum of four meetings per fiscal year. The Company reimburses all expenses for meeting attendance or out of pocket expenses connected directly with their Board participation.

   (d) On July 10, 2000 the Company adopted a Stock Option and Incentive Plan (the "Plan") which provides for the issuance of up to a maximum of 16 million shares of the Company's common stock to officers, employees and non-employee directors at the sole discretion of the board of directors. On August 10, 2000 the Company granted fully vested 14 million options under the Plan to officers, directors and employees at an exercise price of $.50 per share. All the options were exercisable on July 1, 2001 and would expire on December 31, 2002. On June 15, 2002, the Company extended the expiration date of these employee stocks to December 31, 2005. As of the date of this report, there have been no options exercised and all of these options have been forfeited.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 The following table sets forth information regarding the beneficial ownership of shares of the Company's common stock as of June 30, 2011 (212,881,356 shares issued and outstanding,) by (i) all shareholders known to the Company to be beneficial owners of more than 5% of the outstanding common stock; and (ii) all directors and executive officers of the Company, and as a group:

                                          NAME AND ADDRESS OF                  AMOUNT OF BENEFICIAL              PERCENT OF

TITLE OF CLASS           BENEFICIAL OWNER (1)                      OWNERSHIP                                      CLASS

Common Stock                  Henry D. Fahman                                     28,160,594 (2)                                       13.23%

  17011 Beach Blvd., Suite 1230 

Huntington Beach, CA 92647

Common Stock                  Tina T. Phan (3)                                         16,579,646                                             7.79%                

17011 Beach Blvd., Suite 1230   

Huntington Beach, CA 92647

Common Stock Tam Bui 10,519,480 4.94%

17011 Beach Blvd., Suite 1230 

Huntington Beach, CA 92647

Common Stock Frank Hawkins 300,000 *

227 Atlantic Boulevard

Key Largo, FL 33037

Common Stock Paul Nguyen 300,000 *

17011 Beach Blvd., Suite 1230 

Huntington Beach, CA 92647

Common Stock Lawrence G. Olson 300,000 *

3045 S. 35^th Avenue

              Phoenix, AZ 85009

Common Stock                   Shares of all directors and                         56,459,720                                  26.38%

executive officers as a group

   (6 persons)

(1) Each person has sole voting power and sole dispositive power as to all of the shares shown as beneficially owned by them

(2) Certain of these shares have been pledged to secure certain obligations of the Company.

 (3) Tina Phan is the wife of Henry Fahman.

* Less than 1%.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Henry D. Fahman, Chairman and Chief Executive Officer of the Company, has from time to time made cash advances to the Company. The advances are unsecured, interest free and payable on demand.

Certain of the officers and directors of the Company are engaged in other businesses, either individually or through partnerships and corporations in which they have an interest, hold an office, or serve on a board of directors. As a result, certain conflicts of interest may arise between the Company and its officers and directors. The Company will attempt to resolve such conflicts of interest in favor of the Company. The officers and directors of the Company are accountable to it and its shareholders as fiduciaries, which require that such officers and directors exercise good faith and integrity in handling the Company's affairs. A shareholder may be able to institute legal action on behalf of the Company or on behalf of itself and other similarly situated shareholders to recover damages or for other relief in cases of the resolution of conflicts is in any manner prejudicial to the Company.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

The aggregate fees billed by Kabani & Company, the previous independent auditors of the Company, for the audit of the Company’s annual consolidated financial statements and reviews of quarterly financial statements for the year ended June 30, 2010 $54,500. The aggregate fees billed by Dave Benerjee, CA, the current independent auditors of the Company, for the audit of the Company’s annual consolidated financial statements for the year ended June 30, 2011 were $26,800.

All Other Fees

The Company did not pay Kabani & Company or Dave Banerjee, CPA any non-audit fees for fiscal year 2011 or 2010.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES

Financial Statements

The following consolidated financial statements of PHI Group, Inc. and its subsidiaries are included:

Consolidated Balance Sheets — June 30, 2011 and 2010.

Consolidated Statements of Operations — For the fiscal years ended June 30, 2011 and 2010

Consolidated Statements of Cash Flows — For the fiscal years ended June 30, 2011 and 2010

Consolidated Statements of Changes in Owners’ Equity — For the fiscal years ended June 30, 2011 and 2010

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm (Dave Banerjee, CPA)

EXHIBIT  NO.    DESCRIPTION

 2.1 Plan of Exchange between the Company and Prima Eastwest Model Management, Inc. (incorporated by reference to Exhibit 2 to the Form 8-K filed on March 1, 1996) 

2.2 Corporate Combination Agreement between the Company and Providential Securities, Inc., effective on January 14, 2000  (incorporated by reference to Exhibit 10.12 to the Form 10-KSB filed on January 10, 2000).

3.1 Articles of Incorporation (1) 

3.2 Amendment to Articles of Incorporation (incorporated by reference to Exhibit 3.1 of the Form 10-KSB for the fiscal year ended June 30, 1995). 

3.3 Amendment to Articles of Incorporation (6)

3.4 Certificate of Amendment to Articles of Incorporation (6)3.5 Bylaws, as amended (6) 

4.1 Form of Series 1 Bridge Notes Purchase and Security Agreement between the Company and investors, dated March 27, 2000 (6)  

4.2 Form of Series 1 Bridge Note executed by the Company issued by the Company to Investors. (6) 

4.3 Form of Common Stock Purchase Warrant issued by the Company to investors. (6) 

4.4 Form of Re-pricing Warrant issued by the Company to investors. (6) 

4.5 Form of Registration Rights Agreement between the Company and investors, dated March 27, 2000 (6) 

4.6 Form of Common Stock Purchase Warrant to be issued by the Company to Sovereign Capital Advisors, LLC (6) 

4.7 Form of Convertible Promissory Note issued by the Company to preferred shareholders of Providential Securities, Inc. (6) 

5.1 Opinion Re Validity of Agreements (6) 10.1 Benatone Exchange Agreement, with Creditors (2)

10.2 Benatone Share Acquisition Agreement (for Weldnow Enterprise, Ltd.) (2)

10.3 Benatone Share Acquisition Agreement (Dynedeem Limited) (2)

10.4 Benatone Exchange Agreement (2)

10.5 Benatone Asset Sale Agreement (2)

10.6 Benatone Royalty Agreement (2)

10.7 Benatone Consultancy Agreement (2)

10.8 Benatone Deed (2)

10.9 Autokraft Stock Purchase Agreement (3) 

10.10  Autokraft Stock Subscription Agreement (3)

10.11 Prima Agreement and Plan of Merger (4)

10.12 Escrow Agreement between the Company and Warshaw Burstein Cohen Schelsinger & Kuh, LLP, dated March 28, 2000. (6)

10.13 Placement Agency Agreement between the Company and Sovereign Capital Advisors, LLC, dated March 28, 2000. (6)

10.14 Guaranty Agreement between Henry Fahman and SovCap Equity Partners, Ltd, dated March 28, 2000. (6)

10.15 Pledge Agreement between Henry Fahman and SovCap Equity Partners, Ltd, dated March 28, 2000. (6)

 10.16 Partnership Purchase Agreement between the Company and Holt Collins, dated May 31, 2000. (6)  

10.17 Memorandum of Agreement between DataLogic Consulting, Inc. and PHI Group, Inc., dated April 25, 2001. (5)

10.18.1 Letter of Intent between PHI Group, Inc. and Epicenter, Inc., dated October 30, 2000. (5)

10.18.2 Amendment to Letter of Intent between PHI Group, Inc. and Epicenter, Inc., dated November 30, 2000. (5) 

10.18.3 Amendment to Letter of Intent between PHI Group, Inc. and Epicenter, Inc., dated January 12, 2001. (5)

10.18.4 Amendment to Letter of Intent between PHI Group, Inc. and Epicenter, Inc., dated June 26, 2001. (5)

10.18.5 Amendment to Letter of Intent between PHI Group, Inc. and Epicenter, Inc., dated October 02, 2001. (5)

10.19  Joint Venture Agreement between Providential Holdings, Inc and Boxo, Inc., dated January 1, 2001. (5)

10.20 License of Manna Technologies Joint Venture Company, dated March 21, 2001. (5)

10.21 Memorandum of Agreement between International Consulting and Training Center, Ministry of Trade, Vietnam and the Company, dated March 24, 2001. (5) 

10.22 Memorandum of Agreement among General Transportation Company No. 5, Chu Lai Industrial Zone and the Company, dated March 25, 2001. (5)

10.23 Letter of Intent between PHI Group, Inc. and Global Systems and Technologies, Corp. dated October 18, 2001. (6)

10.24 Letter of Intent between PHI Group, Inc. and Estate Planning and Investment Company dated November 7, 2001. (6)

10.25 Joint Venture Agreement between PHI Group, Inc. and Mimi Ban dated November 23, 2001. (6)

10.26 Plan of acquisition of Nettel Global Communication Corp.  (incorporated by reference to the Company's Current Report on Form 8-K filed May 3, 2002)

10.27 Joint Venture Agreement with Vietnam's Minh Hieu Joint Stock Company. (7)

10.28 Memorandum of Agreement with HDT Enterprises, LLC dated March 15, 2002. (7)

10.29 Memorandum of Agreement and Principle Contract with Vietnam's Center of Telecom Technology. (7)

10.30 Stock Purchase Agreement with SlimTech, Inc. (incorporated by reference to the Company's Current Report on Form 8-K, filed May 1, 2002).

10.31 Stock Purchase Agreement with ATC Technology Corp. (incorporated by reference to the Company's Current Report on Form 8-K, Filed September 17, 2002)

10.32 Mutual Rescission of Stock Purchase Agreement with Nettel Global Communication Corp. (8).

10.33 Business Consulting Agreement with Nettel Global Communication Corp. (8)

10.34 Business Consulting Agreement with Medical Career College (8)

10.35  Mutual Rescission of Stock Purchase Agreement with SlimTech (8)

10.36 Mutual Rescission of Stock Purchase Agreement with Clear Pass, Inc. (8).

10.37 Mutual Rescission of Joint Venture Agreement with HTV CO, Ltd. (8).

10.38 Mutual Rescission of Stock Purchase Agreement with Real ID Technology (8).

10.39 Business Consulting Agreement with Lexor Incorporated (8).

10.40 Amended Closing Memorandum with ATC Technology Corp. (8)

10.41 Stock Purchase Agreement with Tangshan YutianSaw Corporation (incorporated by reference to the Company's Current Report on Form 8-K filed June 15, 2004)   

10.42 Asset Purchase Agreement with Western Medical, Inc. (incorporated by reference to the Company's Current Report on Form 8-K, file June 2, 2006)

10.43      Principle Business Cooperation Agreement with Cavico Vietnam Joint Stock Corporation (incorporated by reference to the Company's Current Report on Form 8-K, filed October 2, 2006)

16.1 Notification of Change of Accountants, Kabani & Co. appointed (incorporated by reference to exhibits filed with Form 8-K/A, filed September 10, 2001)

17.1 Resignation of Nhi T. Le as director and officer and appointment of Thorman Hwinn as Director (incorporated by reference to exhibits filed with Form 8-K, filed July 9, 2001)

17.2 Resignation of Tam Bui as Director (incorporated by reference to the Company's Current Report on Form 8-K, filed September 30, 2004). 

17.3       Resignation of Gene M. Bennett as Chief Financial Officer (incorporated by reference to the Company's Current Report on Form 8-K, filed March 23, 2005) 

17.4        Resignation of Robert Stevenson as Director (incorporated by reference to the Company's Current Report on Form 8-K, filed July 18, 2006)

17.5 Resignation of Ghanshyam Dass as Director (incorporated by reference to the Company’s Current Report on Form 8-K, filed September 29, 2010)

21.1 Subsidiaries of the Registrant

23.1 Consent of Accountants

32.1-32.2 Certifications in Accordance with Sections 302 and 906 of the Sarbanes-Oxley Act of 2002

(1) Incorporated by reference to the Company's Registration  Statement on Form S-18, declared effective August 10, 1982 (SEC File No. 2-78335-NY), and to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1995.

(2) Incorporated by reference to the Company's Current Report on Form 8-K, dated September 7, 1995

 (3) Incorporated by reference to the Company's Current Report on Form 8-K/A, dated September 12, 1995.

 (4) Incorporated by reference to the Company's Current Report on Form 8-K, dated March 1, 1996.

 (5) Incorporated reference to Form 10KSB for the year ended June 30, 2000 filed October 16, 2001.

 (6) Incorporated by reference to Form 10KSB for the year ended June 30, 2001 filed December 17, 2001.

(7) Incorporated by reference to Form 10QSB for the quarter ended March 31, 2002 filed May 14, 2002.

(8) Incorporated by reference to Form 10KSB for the year ended June 30, 2003, filed October 17, 2003.

 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:

October 13, 2011

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.