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EXCEL - IDEA: XBRL DOCUMENT - PHI GROUP INCFinancial_Report.xls
EX-21.1 - EXHIBIT 21.1 - PHI GROUP INCex21-1.htm
EX-31.2 - EXHIBIT 31.2 - PHI GROUP INCex31-2.htm
EX-32.1 - EXHIBIT 32.1 - PHI GROUP INCex32-1.htm
EX-31.1 - EXHIBIT 31.1 - PHI GROUP INCex31-1.htm
EX-32.2 - EXHIBIT 32.2 - PHI GROUP INCex32-2.htm

 

 

 

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: MARCH 31, 2014

 

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

 

 

Nevada   90-0114535
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer identification Number)

 

7251 W. Lake Mead Blvd., Suite 300, Las Vegas,   NV 89128
(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 Web site, 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 [X] No [  ]

 

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

 

  Large accelerated filer [  ]   Accelerated filer [  ]
       
  Non-accelerated filer [  ]   Smaller reporting company [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 November 21, 2014, there were 12,503,554 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   F-1
     
Consolidated Balance Sheets as of March 31, 2014 and June 30, 2013   F-1
     
Consolidated Statements of Operations for the Three and Nine Months Ended March 31, 2014 and 2013   F-2
     
Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2014 and 2013   F-3
     
Notes to Consolidated Financial Statements   F-4
     
Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations   3
     
Item 3 - Quantitative and Qualitative Disclosures about Market Risk   8
     
Item 4 - Controls and Procedures   8
     
PART II - OTHER INFORMATION    
     
Item 1 - Legal Proceedings   10
     
Item 1A - Risk Factors   10
     
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds   13
     
Item 3 - Defaults Upon Senior Securities   13
     
Item 4 - Submission of Matters to a Vote of Security Holders   13
     
Item 5 - Other Information   13
     
Item 6 - Exhibits   13
     
SIGNATURES   14
     
Exhibit 21.1    
     
CERTIFICATIONS    

 

2
 

 

PART I - FINANCIAL INFORMATION

 

Item 1 - Consolidated Financial Statements – Unaudited

 

PHI GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

   March 31, 2014   June 30, 2013 
       (Audited) 
ASSETS          
Current assets:        
Cash and cash equivalents  $13,789   $- 
Marketable securities   205,963    207,703 
Loans receivable   8,832    8,832 
Other current assets   -    864 
Total current assets  $228,584   $217,399 
           
Other assets:          
Other assets   70,243    70,243 
Receivable from Discontinued Operations   122,203    172,203 
Total other assets   192,446    242,446 
           
Total assets  $421,030   $459,845 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
Current liabilities:          
Accounts payable and accrued expenses   4,490,843    4,490,974 
Cash overdraft   -    677 
Short-term notes payable   1,298,700    1,426,456 
Due to officers   1,448,868    1,444,598 
Due to preferred stockholders   215,000    215,000 
Advances from customers   563,219    563,219 
Liabilities from Discontinued Operations   1,369,872    2,230,827 
Total current liabilities  $9,386,501   $10,371,750 
           
Stockholders’ equity:          
Preferred stock, $.001 par value, 100,000,000 shares authorized; none issued and outstanding   -    - 
Common stock, $.001 par value; 300,000,000 shares authorized; 12,412,114 issued and 6,729,656 outstanding on 3/31/2014, and 11,662,448 issued and 5,979,990 outstanding on 6/30/2013, respectively, adjusted for 1 for 1,500 reverse split effective March 15, 2012.   240,267    239,519 
Treasury stock, $.001 par value, 2,987 shares of common stock as of 3/31/2014 and 6/30/2013.   (3,801)   (3,801)
Paid-in capital   28,286,521    27,952,581 
Acc. Other Comprehensive Loss   (698,736)   (696,995)
Accumulated deficit   (36,789,723)   (36,699,002)
Total   (8,965,471)   (9,207,699)
Non-Controlling interest   -    (704,205)
Total stockholders’ deficit  $(8,965,471)  $(9,911,905)
           
Total liabilities and stockholders’ deficit  $421,030   $459,845 

 

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

 

F-1
 

 

PHI GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED

 

   For the Three Months Ended   For the Nine Months Ended 
   March 31,   March 31, 
   2014   2013   2014   2013 
Net revenues                    
Revenues  $54,960   $-   $54,960   $- 
                     
Operating expenses:                    
Depreciation and amortization   -    175    -    515 
Salaries and wages   52,500    62,664    157,500    177,353 
Professional services, including non-cash compensation   32,100    52,500    32,100    58,742 
General and administrative   54,440    20,141    85,323    58,499 
Total operating expenses   139,040    135,480    274,923    295,108 
                     
Loss from operations  $(84,079)  $(135,480)  $(219,963)  $(295,108)
                     
Other income and (expenses)                    
Interest expense   (81,142)   (106,296)   (242,606)   (390,026)
Loss on sale of marketable securities   -    -    -    (700)
Gain (loss) on settlement of debts   -    -    372,278    - 
Other income (expenses)   (781)   -    (441)   - 
Net other expenses   (81,923)   (106,296)   129,231    (390,726)
                     
Net income (loss)  $(166,003)  $(241,776)  $(90,731)  $(685,834)
Other comprehensive Income                    
Unrealized gain (loss) on marketable securities  $(690,037)  $-   $(690,037)  $- 
Comprehensive income (loss)   (856,040)   (241,776)   (780,768)   (685,834)
Net loss per share:                    
Basic  $(0.03)  $(0.05)  $(0.01)  $(0.58)
Diluted  $(0.03)  $(0.05)  $(0.01)  $(0.58)
                     
Weighted average number of shares outstanding:                    
Basic   6,501,316    4,607,443    6,425,425    1,178,520 
Diluted   6,501,316    4,607,443    6,425,425    1,178,520 

 

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

 

F-2
 

 

PHI GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

 

   For the Nine Months Ended March 31, 
   2014   2013 
Cash flows from operating activities:          
Net income (loss) from operations  $(90,731)  $(685,835)
Adjustments to reconcile net income to net cash used in operating activities:          
Depreciation   -    515 
Loss on sale of marketable securities   -    700 
Shares issued for services   -    53,288 
(Increase) decrease in other assets and prepaid expenses   2,864    (4,152)
Increase (decrease) in accounts payable and accrued expenses   (863,672)   1,477,278 
Net cash provided by (used in) operating activities   (951,539)   841,795 
           
Cash flows from investing activities:          
Proceeds from sales of marketable securities   -    14,300 
Purchase of marketable securities   -    (8,907)
Refund from Discontinued Operations   50,000    - 
Net cash provided by (used in) investing activities   50,000    5,393 
           
Cash flows from financing activities:          
Proceeds from Common Stock   334,690      
Purchase of treasury shares   -    (3,800)
Proceeds on notes payable   -    (57,000)
Payments on notes payable   (127,756)   (524,500)
Borrowings from officer   4,189    27,018 
Liabilities from discontinued operations        (3,500)
Payments on advances from officer   -    (281,880)
Decrease in minority interest   704,205      
Net cash provided by (used in) financing activities   915,328    (843,663)
           
Net decrease in cash and cash equivalents   13,789    3,525 
Cash and cash equivalents, beginning of period   -    - 
Cash and cash equivalents, end of period  $13,789   $3,525 
           
Supplemental disclosures of cash flow information          
Decrease in minority interest  $704,205   $- 

 

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

 

F-3
 

 

PHI GROUP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 – NATURE OF BUSINESS

 

Established in 1982, PHI Group, Inc. (the “Company” or “PHI”) is a Nevada corporation primarily engaged in energy and natural resources. The Company acquires and consolidates energy-related assets and other natural resources, partners with international companies to develop independent power plant projects in Southeast Asia, and collaborates with certain U.S. companies to provide renewable energy solutions using wind, solar power and hydro-magnetic gravitational systems. The Company also provides corporate finance services, including merger and acquisition advisory and consulting services, and arranges capital for energy-related, natural resource and infrastructure projects through its wholly owned subsidiary PHI Capital Holdings, Inc. In addition, the Company also participates in international trade activity.

 

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, 2013. 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 months ended March 31, 2014 are not necessarily indicative of the results to be expected for the fiscal year ended June 30, 2014.

 

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.

 

F-4
 

 

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 March 31, 2014, the marketable securities have been recorded at $205,963 based upon the fair value of the marketable securities. (Note 3)

 

FAIR VALUE OF FINANCIAL INSTRUMENTS

 

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

 

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

 

As of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying values as presented on the balance sheet. This is primarily attributed to the short maturities of these instruments.

 

PROPERTIES AND 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.

 

F-5
 

 

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.

 

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

 

NOTE 2 – LOANS RECEIVABLE FROM RELATED PARTIES

 

Loans receivable from related parties consist of the following at March 31, 2014 and June 30, 2013:

 

   March 31, 2014   June 30, 2013 
Loan to Catalyst Resource Group  $3,932   $3,932 
Loan to Catthai Corp.  $2,700   $2,700 
Loan to Provimex  $2,000   $2,000 
Loan to Vietnam Mining Corporation  $200   $200 
Total  $8,832   $8,832 

 

F-6
 

 

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 consisted of 1,746,500 shares of Vanguard Mining Corporation (formerly Vietnam Mining Corporation), a public company traded on the OTC Markets (Trading symbol: VNMC) that were earned for consulting services rendered. We recorded a fair value of $174,650 for the shares received.

 

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

 

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

 

During the quarter ended March 31, 2012, we converted $46,141.25 of promissory note in exchange for 3,076,073 shares of common stock of Agent155 Media Corp, a fully reporting company traded on the OTCQB at that time (Symbol: AGMC). We used the closing price of $0.015 per share as of March 31, 2012. During that same quarter, we sold 2,000,000 shares of common stock of Agent155 Media Corp to a third party for the purchased price of $0.001 per share and recorded a loss of $ 28,000.

 

During the quarter ended September 30, 2012, the Company sold 500,000 shares of common stock of Agent155 Media Corporation at the price of $0.0286 per share.

 

During the quarter ended December 31, 2012, the Company purchased 20,000 shares of common stock of Agent155 Media Corporation at an average price of $0.00536 per share.

 

During the quarter ended March 31, 2013, the Company purchased 8,800,000 shares of common stock of Agent155 Media Corporation from an officer of the Company at the price of $0.001 per share. The officer had purchased these shares at the same price per share from a non-affiliate shareholder of Agent155 Media Corporation.

 

As of March 31, 2014, the fair market value of marketable securities available for sale held by the Company was $205,963.

 

NOTE 4 – PROPERTY AND EQUIPMENT

 

The Company did not have any property and equipment at March 31, 2014 and June 30, 2013.

 

Depreciation expenses were $0.00 and $175 for the three-month periods ended March 31, 2014 and 2013, respectively.

 

F-7
 

 

NOTE 5 – OTHER ASSETS

 

During the fiscal year ended June 30, 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 the Pointe91 development project at Bien Rang, Chu Lai, Nui Thanh District, Quang Nam Province, Vietnam. This amount was later transferred to Ky Ha Chu Lai Investment and Development LLC (“KHCLIDC”) as a deposit for the clearing of land and resettlement of residents in the Pointe91 project area. As a result of the discontinuance of the Pointe91 development project, the Company is entitled to receive the refund of the deposit amount, less any expenses incurred in connection with the land clearing and resettlement activity, and has recorded this amount as Other Receivable. Philand Vietnam Ltd. received VND 1.5 billion back from KHCLIDC on or about January 21, 2014, of which $50,000 was transferred to PHI Group, Inc. on January 23, 2014. As of March 31, 2014, the Company recognized and recorded a balance of $122,203 as Other Assets - Receivable from Discontinued Operations.

 

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 has 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. On October 29, 2014, the President of Agent155 Media Corp. assumed the balance of $66,955 from Agent155 Media Corp. as his personal obligations to the Company retroactively December 31, 2011 (Note 19 – Subsequent Event).

 

On January 10, 2013, the Company issued 3,288,443 shares of its restricted Common Stock for deposit towards the total purchase price of the 70% equity interest in PT Tambang Sekarsa Adadaya. We recorded the value of these shares at par for a total of $3,288.

 

As of March 31, 2014, the amounts owed by Chu Lai Open Economic Zone Authority, the President of Agent155 Media Corp. and the par value of the deposit shares for the PT Tambang Sekarsa Adadaya acquisition were collectively reported as Other Assets totaling $192,446.

 

NOTE 6 – DISCONTINUED OPERATIONS

 

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 as of June 30, 2012 for practical business and accounting purposes. The Company has recorded a total of $1,369,872 for the liabilities and potential liability contingencies and written off all non-performing assets associated with these discontinued operations in the accompanying consolidated financial statements as of March 31, 2014.

 

NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

The accounts payable and accrued expenses at March 31, 2014 and June 30, 2013 consist of the following:

 

   March 31, 2014   June 30, 2013 
Accounts payable & Accrued Expenses  $555,963   $584,464 
Accrued salaries and payroll taxes   559,884    384,084 
Accrued interest   2,804,832    2,952,261 
Accrued legal fees   396,294    396,294 
Accrued consulting fees   173,870    173,870 
Total  $4,490,843   $4,490,974 

 

F-8
 

 

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 March 31, 2014 and June 30, 2013, the balances were $ 1,448,868 and $1,444,598, respectively.

 

Officers/Directors  March 31, 2014   June 30, 2013 
Henry Fahman  $1,147,368   $1,143,098 
Tam Bui  $276,500   $276,500 
Frank Hawkins  $12,500   $12,500 
Lawrence Olson  $12,500   $12,500 
Total  $1,448,868   $1,444,598 

 

As of March 31, 2014, 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 9 – LOANS AND PROMISSORY NOTES

 

SHORT TERM NOTES PAYABLE:

 

As of March 31, 2014 and June 30, 2013, the Company had short-term notes payable amounting to $1,298,700 and $1,426,456 with accrued interest of $2,804,832 and $2,952,261 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

 

CONVERTIBLE PROMISSORY NOTE. The last Convertible Promissory Note issued to Asher Enterprises, Inc. (“Asher”) on June 17, 2011 was $42,500, with interest of 8% per annum, due and payable March 21, 2012. This note is convertible at the election of Asher from time to time after the issuance date, at 39% discount to the average of the lowest closing bid prices for the Company’s common stock during the ten trading day period ending on the latest complete trading prior to the conversion 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 agreements contain covenants requiring Asher’s written consent for certain activities not in existence or not committed to by the Company on the issue date of the note. Outstanding note principal and interest amounts 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 the discount rate mentioned in the note.

 

F-9
 

 

Additionally, the note contains a reset provision to the exercise price and conversion price if the Company issues equity or other derivatives at a price less than the exercise price set forth in such warrants and note. This ratchet provision results in a derivative liability in our financial statements.

 

On July 25, 2011, $10,000 principal of the convertible note issued on January 11, 2011 was converted into an equivalent of 1,550 shares of post-split common stock of the Company (2,325,581 pre-split shares).

 

On August 8, 2011, $12,000 principal of the convertible note issued on January 11, 2011 was converted into an equivalent of 1,633 shares of post-split common stock of the Company (2,448,980 pre-split shares).

 

On August 30, 2011, $15,000 principal of the convertible note issued on January 11, 2011 was converted into an equivalent of 2,941 shares of post-split common stock of the Company (4,411,765 pre-split shares).

 

On October 21, 2011, $8,000 principal of the convertible note issued on January 11, 2011 was converted into an equivalent of 2,667 shares of post-split common stock of the Company (4,000,000 pre-split shares).

 

On November 22, 2011, $10,000 principal of the convertible note issued on January 11, 2011 was converted into an equivalent of 5,083 shares of post-split common stock of the Company (7,625,000 pre-split shares).

 

On 01/03/2012, $10,000 principal of the convertible note issued on June 17, 2011 was converted into an equivalent of 4,444 shares of post-split common stock of the Company (6,666,667 pre-split shares).

 

On January 11, 2012, $11,000 principal of the convertible note issued on June 17, 2011 was converted into an equivalent of 5,641 shares of post-split common stock of the Company (8,461,538 pre-split shares).

 

On March 01, 2012, $12,000 principal of the convertible note issued on June 17, 2011 was converted into an equivalent of 5,741 shares of post-split common stock of the Company (8,571,429 pre-split shares).

 

On April 23, 2012, Asher Enterprises, Inc. converted $7,000 principal amount of the convertible note dated June 17, 2011 into 8,197 shares of post-split common stock of the Company at the price of $0.854 per share. As of March 31, 2014, the total outstanding balance amount due Asher Enterprises, Inc. was $3,750.

 

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 non-compliance of preferred shares subscription agreement 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 few preferred shareholders have accepted the offer.

 

The interest expenses payable to holders of preferred stock of $355,205 and $335,855 have been included in accrued interest included in account payable and accrued expenses on the balance sheets as of March 31, 2014 and June 30, 2013, respectively.

 

F-10
 

 

ADVANCES FROM CUSTOMERS (PREVIOUSLY CLASSIFIED AS UNEARNED REVENUE)

 

As of June 30, 2012, the Company decided to reclassify 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 March 31, 2014, the Company recorded $563,219 as Advances from Customers.

 

NOTE 10 – LITIGATION

 

LEGAL PROCEEDING SETTLED AND UNPAID AS OF MARCH 31, 2014:

 

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.

 

WILLIAM DAVIDSON VS. MARTIN 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. William Davidson has elected to convert a portion of the total amount into common stock of PHI Group, Inc. in lieu of cash payment. The Company has accrued the liabilities associated with these promissory notes in the accompanying consolidated financial statements as of March 31, 2014.

 

NOTE 11 – PAYROLL LIABILITIES

 

The payroll liabilities are accrued and recorded as accrued expenses in the consolidated balance sheet. As of March 31, 2014, the Internal Revenue Service and the State of California Employment Development Department claimed that the Company still owed payroll tax, penalties and interest amounting to $118,399. The Company is currently working with the Internal Revenue Service and the State of California Employment Department to resolve these matters. (Note 19 – Subsequent Event).

 

F-11
 

 

NOTE 12 – BASIC AND DILUTED NET LOSS PER SHARE

 

Net loss per share is calculated in accordance with SFAS No. 128, “Earnings per Share”. Under the provision of SFAS No. 128, basic net loss per share is computed by dividing the net loss for the period by the weighted-average number of common shares outstanding for the period. Diluted EPS is based on the weighted-average number of shares of common stock outstanding for the period and common stock equivalents outstanding at the end of the period. Basic and diluted weighted average numbers of shares for the period ended March 31, 2014 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, 2013 was 2,987 post-split shares, valued at $3,801.

 

Common Stock:

 

On July 19, 2012, an officer of the Company converted a total of $307,000 debts owed by the Company into 1,196,424 shares of PHI Group, Inc.’s restricted common stock.

 

On July 31, 2012, seven creditors of the Company converted a total of $177,333.33 debts owed by the Company into 504,865 shares of PHI Group, Inc.’s common stock.

 

On November 19, 2012, the Company reserved 5,673,327 shares of its common stock for a special dividend distribution.

 

On November 30, 2012, four creditors of the Company converted a total of $220,079.06 debts owed by the Company into 81,737 shares of PHI Group, Inc.’s common stock.

 

On January 10, 2013, the Company issued 3,288,443 shares of PHI Group, Inc.’s common stock registered in the name of the majority shareholder of PT Tambang Sekarsa Adadaya as a deposit towards the total purchase price of the 70% equity interest in PT Tambang Sekarsa Adadaya.

 

On February 14, 2013, two creditors of the Company converted a total of $150,000 debts owed by the Company into 155,885 shares of PHI Group, Inc.’s common stock.

 

On February 22, 2013, the Company issued 44,763 shares of PHI Group, Inc.’s common stock valued at $50,000 to an Indonesian attorney as payment for legal services in connection with the purchase of PT Tambang Sekarsa Adadaya.

 

On February 22, 2013, a creditor of the Company converted a total of $33,633 debts owed by the Company into 44,844 shares of PHI Group, Inc.’s common stock.

 

On April 11, 2013, a creditor of the Company converted $50,000 owed by the Company into 76,540 shares of PHI Group, Inc.’s common stock.

 

F-12
 

 

On April 26, 2013, three creditors of the Company converted a total of $180,000 of debts owed by the Company into 304,913 shares of PHI Group, Inc.’s common stock.

 

On May 10, 2013, the Company issued 100,887 shares of its restricted common stock for $40,000 cash under Rule 144 for working capital.

 

On July 1, 2013, three creditors of the Company converted a total of $177,940 of principal and interest owed by the Company into 412,569 shares of common stock of PHI Group, Inc.

 

On February 11, 2014, a creditor of the Company converted a total of $156,750 of debts owed by the Company into 337,097 shares of PHI Group, Inc.’s common stock.

 

As of March 31, 2014, there were 6,729,656 post-split shares of the Company’s $0.001 par value Common Stock issued and outstanding, excluding 5,673,327 shares reserved for a special dividend distribution and 7,485 shares reserved for potential conversion of debt from a creditor.

 

As of November 21, 2014, there were 12,503,554 post-split shares of the Company’s $0.001 par value Common Stock issued and outstanding, including 5,673,327 shares reserved for a special dividend distribution and 7,485 shares reserved for potential conversion of debt by a creditor.

 

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

 

NOTE 14STOCK BASED COMPENSATION PLAN

 

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.

 

NOTE 15 GAIN ON SETTLEMENT OF DEBTS

 

For the quarters ended March 31, 2014 and 2013, there was no gain or loss on settlement of debts. For the nine-month periods ended March 31, 2014 there was $372,278 of gain on settlement of debts, compared to no gain or loss on settlement of debts during the same nine-month period in 2013. The gain of $372,278 during the nine-month period ended March 31, 2014 was a result of reconciliation of debts that had been forgiven, settlement of debts and write-offs of aged debt balances that had been past their statutory limits. There was no consideration required in connection with the amounts forgiven, settled or written off.

 

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 March 31, 2014 and March 31, 2013.

 

F-13
 

 

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 $293,219 was booked as Customer Advances in the liability portion of the balance sheet.

 

CORPORATE COMBINATION AGREEMENT BETWEEN PROVIMEX, INC. AND HP.ITA JSC.

 

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 will 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 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.

 

AGREEMENT WITH GLOBAL DEVELOPMENT SYSTEMS, INC.: On or about August 11, 2012 the Company signed a Business Cooperation Agreement with Global Development Systems, Inc., a Texas corporation, to market a renewable energy electricity generation using Global Development Systems, Inc.’s proprietary hydro-magnetic gravitational renewable energy technologies. The term of this agreement is two years.

 

OFFICE RENTAL AGREEMENTS: On August 11, 2012, the Company signed an agreement to rent a business center office in Las Vegas, Nevada for approximately $100 per month plus administrative expenses, if any. The one-year term of the rental agreement expired on August 31, 2013 was renewed for another twelve-month term which would expire on August 31, 2014.

 

AGREEMENT WITH MAKANI POWER, INC.: On August 16, 2012 the Company signed a Business Cooperation Agreement with Makani Power, Inc., a Delaware corporation, to market a renewable energy electricity generation system using Makani Power’s proprietary airborne wind turbine technology. The term of this agreement is two years.

 

AGREEMENT WITH HAPPENEX HOLDING, BV: On December 22, 2012, the Company signed a Business Cooperation Agreement with Happenex Holding, BV, a Dutch corporation, to cooperate in international trade of coal and other natural resource commodities. The term of this agreement is two years.

 

AGREEMENT OF PURCHASE AND SALE WITH PT. TAMBANG SEKARSA ADADAYA: On December 24, 2012, the Company signed an Agreement of Purchase and Sale with PT. Tambang Sekarsa Adadaya (“TSA”), an Indonesian limited liability company, and the holder(s) of a minimum of seventy percent (70%) of equity ownership in TSA to acquire a seventy percent (70%) equity interest in TSA in exchange for a total purchase price of ten million five hundred thousand U.S. dollars ($US 10,500,000) in cash and stock of the Company. TSA currently owns two coal concessions together with the operation and production licenses (Izin Usaha Pertambangan Operasi Produksi) and the other pertinent license(s) and permits covering a total area of 9,690 hectares, purportedly containing approximately 205 million metric tonnes of indicative coal resources, in Kecamatan Baras and Sarudu, Kabupaten Mamuju Utara, Propinsi Sulawesi Barat, Indonesia. On January 10, 2013, the Company issued 3,288,443 shares of common stock of PHI Group, Inc. as a deposit towards the total purchase price. On March 16, 2013, the Company signed an amendment with TSA and the majority shareholder of TSA to extend the closing date of this transaction to June 30, 2013. The Company engaged PT Runge Indonesia, a subsidiary of RungePincockMinarco, an Australian company, to conduct the independent technical due diligence of the TSA coal concessions and ES&P Law Firm, an Indonesia legal firm, to conduct the legal due diligence of TSA. Since the technical, legal, and financial due diligence results were incomplete by the extension date, this transaction was terminated on June 30, 2013. However, the Company and TSA have recently continued to renegotiate the terms and conditions for a revised transaction.

 

F-14
 

 

AGREEMENT WITH HP.ITA JSC: On January 11, 2013 the Company signed a Business Cooperation Agreement with HP.ITA Joint Stock Company, a company organized and existing under the laws of Vietnam, to participate in international trade of base and precious metals and cross-border financial intermediation. The term of this agreement is two years.

 

BUSINESS AND FINANCIAL CONSULTING AGREEMENT: On January 16, 2013, PHI Capital Holdings, Inc., a subsidiary of the Company, signed a consulting agreement with HPI, a company organized and existing under the laws of Vietnam, to provide business and consulting services to HPI. The term of this agreement is six months and the fee compensation is one hundred thousand US dollars. As of December 31, 2013, PHI Capital Holdings has completed the services under the consulting agreement but has not received any compensation.

 

AGREEMENT WITH ES&P LAW FIRM: On January 25, 2013, the Company signed an agreement to retain ES&P Law Firm, an Indonesian advocate and legal consultant firm, to conduct the legal due diligence on behalf of the Company in connection with the PT Tambang Sekarsa Adadaya acquisition. The Company agreed to pay ES&P Law Firm $10,000 in cash and $50,000 in restricted common stock of PHI Group, Inc.’s for legal services related to this contemplated acquisition.

 

AGREEMENT WITH COLEBRAND INTERNATIONAL LTD.: On January 28, 2013 the Company signed a Business Cooperation Agreement with Colebrand International Ltd., a company organized and existing under the laws of the United Kingdom, to cooperate in international trade and financial intermediation. The term of this agreement is two years.

 

AGREEMENT WITH PT RUNGE INDONESIA: On February 6, 2013, the Company signed an agreement to retain PT Runge Indonesia, a subsidiary of RungePincockMinarco, an Australian company, to provide technical assistance to the Company in developing a potential JORC Resources and Reserves statement for open cut coal deposit in PT Tambang Sekarsa Adadaya’s concessions located in Sulawesi Barat, Indonesia. According to the agreement, PT Runge Indonesia will conduct the technical due diligence in several stages in order to provide an estimate of Resources and Reserves compliant with the JORC Code and the Company will be invoiced as work progresses.

 

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. PACA will be entitled to cash success fee and equity success fee for each successful financing transaction.

 

INDONESIAN OFFICE RENTAL AGREEMENT: On May 7, 2013, the Company signed an agreement with PT Karya Central Bisnis, an Indonesian company, to rent a business center office in Pondok Indah, South Jakarta, Indonesia. The term of this agreement is one year and would expire in May 2014, unless renewed.

 

AGREEMENT WITH PT RAKSASA METAL AGUNG: On June 29, 2013 the Company signed a Business Cooperation Agreement with PT. Raksasa Metal Agung (“Agung”), an Indonesian company, to co-develop gold mining projects in Central Java, Indonesia. Subsequently, Agung and the Company signed two addenda to the Business Cooperation Agreement, dated October 7, 2013 and January 29, 2014, respectively, to set forth the capital requirements for the gold mining projects and the profit sharing agreement. According to the addenda, the Company will be entitled to 60% and Agung 40% of the net profits to be derived from these operations. The second addendum also allows the Company to right to assign the responsibilities and benefits in connection with this Business Cooperation Agreement to Vietnam Mining Corporation (“VNMC”), a Nevada corporation, or another entity. On April 29, 2014, the Company signed an Assignment Agreement to assign, convey and transfer all rights, interests and obligations in connection with said Business Cooperation Agreement and addenda to VNMC. As part of said Assignment Agreement, the Company also committed itself to arranging the required capital for VNMC to co-develop gold mining opportunities in Central Java, Indonesia with Agung. VNMC agreed to issue two million shares of its $0.001 par value Common Stock to the Company as consideration for said Assignment Agreement.

 

F-15
 

 

WITHDRAWAL FROM POINTE91 HOSPITALITY DEVELOPMENT PROJECT BY PHILAND RANCH LTD.

 

On September 20, 2013, Philand Vietnam Limited, a wholly-owned subsidiary of Philand Corporation, submitted a request to the Chu Lai Open Economic Zone Authority (“CLOEZA”), Quang Nam Province to voluntarily withdraw from the Pointe91 hospitality development project in Tam Quang Village, Nui Thanh District, Quang Nam Province and surrender the investment license due to changed market conditions. After a meeting was held on October 28, 2013 among CLOEZA, Ky Ha Chu Lai Investment and Development Company (“KHCLIDC”) and Philand Vietnam Ltd., CLOEZA agreed to Philand Vietnam Ltd.’s request for the termination of the Pointe91 development project and instructed the appropriate CLOEZA departments and KHCLIDC to return the unspent deposits to Philand Vietnam Ltd. and to assist it in the termination process. In November 2013, KHCLIDC and Philand Vietnam Ltd. signed a settlement agreement to terminate the previously executed land clearance and compensation agreement between the two companies and agreed that KHCLIDC would return VND 2,705,349,242 from the deposit amount to Philand Vietnam Ltd.

 

AGREEMENT WITH VINABENNY ENERGY JOINT STOCK COMPANY: On November 12, 2013 the Company signed a Business Cooperation and Investment Agreement with Vinabenny Joint Stock Company, a Vietnamese company, to cooperate and co-develop, invest or cause to be invested in, implement and operate a 84,000 MT LPG terminal project in Can Giuoc District, Long An Province, Vietnam. Both parties will agree on the roles, responsibilities and benefits of each party in connection with the terminal project in a separate subsequent agreement. The term of this agreement is one year.

 

AGREEMENT WITH NE NORD ENERGY JOINT STOCK COMPANY: On November 14, 2013 the Company signed a Business Cooperation and Investment Agreement with NE Nord Energy Joint Stock Company, a Vietnamese company, to cooperate, co-develop, invest or cause to be invested in, produce, market and sell LED lighting, solar energy, kinetic power supply system, renewable energy, and other energy-related products and services in geographical areas and markets that deem economically beneficial to both parties. The term of this agreement is two years.

 

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.

 

STOCK PURCHASE AGREEMENTS FOR COMMON STOCK OF VIETNAM MINING CORPORATION: On January 24, 2014 the Company signed stock purchase agreements to acquire a total of fourteen million shares of common stock of Vietnam Mining Corporation (“VNMC”), a Nevada corporation, from two individuals for a total purchase price of $141,175.00. The closing of these transactions is scheduled to occur on the twentieth business day following VNMC’s regaining current and good standing status with the State of Nevada, OTC Markets, its transfer agent(s), Depository Trust Corporation, and other pertinent entities. On June 27, 2014, the Company made a partial payment in the amount of $20,000 towards the purchase price for 8,750,000 shares. The Stock Purchase Agreements were subsequently terminated on November 1, 2014.

 

CONSULTING ENGAGEMENT AGREEMENT WITH VIETNAM MINING CORPORATION (n/k/a VANGUARD MINING CORPORATION): On January 24, 2014 PHI Capital Holdings, Inc., a wholly-owned subsidiary of the Company, signed a Consulting Engagement Agreement with Vietnam Mining Corporation (“VNMC”), a Nevada corporation, to assist VNMC to regain its current and good standing status with the pertinent regulatory agencies in the United States and certain private service providers and to seek new business opportunities for VNMC. PHI Capital Holdings is entitled to receive four million shares of restricted common stock of VNMC pursuant to the provisions of Rule 144 as compensation for the services rendered. The term of this agreement is six months. PHI Capital Holdings has not received stock compensation from VNMC.

 

F-16
 

 

MEMORANDUM OF UNDERSTANDING WITH PT BUMI PERMATA INDONESIA: On January 29, 2014 the Company signed a Memorandum of Understanding (“MOU”) with PT Bumi Permata Indonesia, an Indonesian company, to co-develop a 199-hectare coal concession in Kecamatan Rantau Pandan, Kabupaten Bungo, Provinsi Jambi, Indonesia. Both parties agree to sign a definitive agreement containing representations, warranties, covenants and indemnities customary for a transaction of this time within 30 days following the date of the MOU.

 

MEMORANDUM OF UNDERSTANDING WITH PT CENDRAWASIH INTERNATIONAL: On January 29, 2014 the Company signed a Memorandum of Understanding (“MOU”) with PT Cendrawasih International, an Indonesian company, to co-develop an 8,100-hectare gold concession in Kecamatan Kotannopan and Tambangan, Kabupaten Mandailing Natal, Sumatra Utara, Indonesia. The estimated amount of gold deposits in this concession area is between 400,000 to 1,000,000 ounces, subject to independent verification. Both parties agree to sign a definitive agreement containing representations, warranties, covenants and indemnities customary for a transaction of this time within 30 days following the date of the MOU. The MOU also allows the Company the right to assign the responsibilities and benefits in connection with project to Vietnam Mining Corporation, a Nevada corporation, or another entity. On April 29, 2014, the Company signed an Assignment Agreement to assign, convey and transfer all rights, interests and obligations in connection with said MOU to VNMC. As part of said Assignment Agreement, the Company also committed itself to arranging the required capital for VNMC to co-develop the 8,100-hectare gold concession with PT Cendrawasih International. VNMC agreed to issue three million shares of its $0.001 par value Common Stock to the Company as consideration for said Assignment Agreement. The Company has not received the stock compensation from VNMC.

 

MEMORANDUM OF UNDERSTANDING WITH CV SINDO MAKMUR COAL MINING: On January 31, 2014 the Company signed a Memorandum of Understanding (“MOU”) with CV Sindo Makmur Coal Mining, an Indonesian company, to co-develop and operate various coal and metal concessions in Indonesia, particularly a 100-hectare coal concession in Dondang Kecamatan Muara Jawa, Kabupaten Kutai Kartanegara, East Kalimantan, and a 119.60-hectare coal concession in Bukit Pinang Kecamatan Samarinda Ulu, Kota Samarinda, East Kalimantan, Indonesia. Both parties agree to sign a definitive agreement containing representations, warranties, covenants and indemnities customary for a transaction of this time within 30 days following the date of the MOU.

 

FUNDING AGREEMENT REGARDING PETROBRAS BONDS: On February 4, 2014 the Company signed a Funding Agreement with The Dieterich Group and Robert M. Terry to provide up to $300,000, more likely increasing to $400,000 in funding, on a best efforts and non-exclusive basis to underwrite the collection efforts being undertaken on a series of 500 bonds originally issued by Petrobras, a Brazilian corporation focused on oil and gas exploration and development. These bonds are currently owned and controlled by Starboard Financial, a Nevada LLC. In the most recent valuation report, each of these bonds had a published discounted value of $750,000 including 7% interest through February 2008 and a possible published redemption face value of $2,300,000. According to the Funding Agreement, the Company will receive a total recovery of 10 times its investment in funding and 12.5% of the net proceeds, assuming the entire funding is provided by the Company and/or its investors, from the bond collections after deduction of trading or selling expenses, and expenses of the Brazilian agents once Starboard Financial and Brazilian parties have received the first $20,000,000 recovered.

 

NOTE 18 GOING CONCERN UNCERTAINTY

 

As shown in the accompanying consolidated financial statements, the Company has accumulated deficit of $36,789,723 as of March 31, 2014 and net loss from operations of $90,731 for the nine months ended March 31, 2014. These factors as well as the uncertain conditions that the Company faces in its day-to-day operations with respect to cash flows create an uncertainty as to the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. Management has taken action to strengthen the Company’s working capital position and generate sufficient cash to meet its operating needs through June 30, 2014 and beyond. In the next twelve months, the Company would focus on energy and natural resources, including investing in and developing coal assets, independent power plant projects, renewable energy, and industrial minerals, as well as engaging in international trade. PHI Capital Holdings, Inc., the Company’s wholly owned subsidiary, would also continue to provide corporate and project finance services, including merger and acquisition advisory and consulting services for companies in a variety of industries and arranging funding for energy-related, natural resource and infrastructure projects. The Company anticipated generating more revenues through its proposed mergers and acquisitions as well as other business activities mentioned herein. No assurances could be made that management would be successful in achieving its plan. The president and chairman of the Company has committed to funding the Company’s operations from various sources for the next 12 months.

 

F-17
 

 

NOTE 19 – SUBSEQUENT EVENT

 

ASSIGNMENT OF BUSINESS COOPERATION AGREEMENT WITH PT RAKSASA METAL AGUNG TO VANGUARD MINING CORPORATION: On April 29, 2014, the Company signed an Assignment Agreement to assign, convey and transfer all rights, interests and obligations in connection with the Business Cooperation Agreement between PT Raksasa Metal Agung and the Company to Vanguard Mining Corporation (f/k/a Vietnam Mining Corporation), a Nevada corporation. As part of said Assignment Agreement, the Company also committed itself to arranging the required capital for VNMC to co-develop gold mining opportunities in Central Java, Indonesia with PT Raksasa Metal Agung. VNMC agreed to issue two million shares of its $0.001 par value Common Stock to the Company as consideration for said Assignment Agreement. The Company has not received the stock compensation from VNMC.

 

ASSISTING VANGUARD MINING CORPORATION (F/K/A VIETNAM MINING CORPORATION) IN ACQUISITION OF LIMESTONE CONCESSION IN INDONESIA

 

During the quarter ended June 30, 2014, the Company provided consulting service and assisted Vietnam Mining Corporation (N/K/A Vanguard Mining Corporation; Trading Symbol: “VNMC”) to acquire a 75% equity interest in PT Mega Kencana Persada (“MKPI”), an Indonesian company which owns of limestone tenement of approximate 330 hectares with an IUP Exploration License No. 540/112/K/2012 dated January 27, 2012, in Desa Sipapaga, Kecamatan Panyabungan, Kabupaten Mandailing Natal, Sumatra Utara, Republic of Indonesia. The estimated amount of limestone deposits in this concession area is between 150,000,000 metric tons, subject to independent verification The Company also committed itself to arranging the required capital for VNMC to develop this limestone concession with MKPI. VNMC agreed to issue three million shares of its $0.001 par value Common Stock to the Company as consideration for this transaction. The Company has not received the stock compensation from VNMC.

 

CONSULTING AGREEMENT WITH INDEPENDENT SENIOR GEOLOGIST

 

On April 30, 2014, the Company signed a consulting agreement with an independent senior geologist for certain necessary technical services that will be required in connection with the review, survey, evaluation, and recommendation of mining opportunities and mineral assets, including but not limited to gold, copper, limestone, coal, manganese, and iron ores in Indonesia and elsewhere that may be approved and adopted by the Company. The term of the agreement is two years. The Company agreed to pay the consultant one million shares of Common Stock of Vietnam Mining Corporation (N/K/A Vanguard Mining Corporation) for the duration of the agreement.

 

BUSINESS COOPERATION AGREEMENT WITH DAYAK UNITED ENERGY, LLC.

 

On August 25, 2014, the Company signed a business cooperation agreement with Dayak United Energy, LLC, a Nevada limited liability company (“DUE”), to cooperate with each other to arrange financing, mine, market and sell coal products from DUE’s current joint operation contracts with mine owners in Kalimantan as well as other joint operation contracts that DUE will be able to secure in the future. In addition, both parties may from time to time cooperate with each other and jointly engage in other business activities that deem mutually desirable and beneficial to both parties.

 

F-18
 

 

BUSINESS COOPERATION AND INVESTMENT AGREEMENT WITH PT. RAY WOLTER ENERGI

 

On September 10, 2014 the Company signed an Business Cooperation and Investment Agreement with PT. Ray Wolter Energi (RWE), a member of Raywolter Group, a company duly organized and existing under and by virtue of the laws of Republic of Indonesia, to primarily cooperate with each other with respect to (1) developing two 225-MW thermal power plants in East Kalimantan, two 50-MW thermal power plants in North Sulawesi, two 50-MW thermal power plants in Nusa Tenggara Timur, (2) manufacturing and installing 1,000 electricity transmission towers, in addition to communications towers, across Indonesia, and (3) mining coal to supply to Indonesian domestic and export customers, as well as other pertinent business activities that are deemed beneficial to both parties. PHI shall utilize its best efforts to invest and/or cause to be invested in RWE and/or its respective projects and to provide and/or cause to be provided best possible technologies and engineering, procurement and construction (EPC) services to jointly develop, construct and operate the projects mentioned herein. RWE and PHI will enter into a separate definitive agreement which includes specific terms and conditions, obligations, benefits, representations, warranties, covenants, and indemnities customary for a transaction of this type with respect to each of the projects mentioned herein. Moreover, RWE and PHI 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.

 

PAYMENTS OF PAYROLL LIABILITIES

 

On April 29, 2014 the Chairman and President of the Company made a payment in the amount of $19,289.94 to the Employment Development Department of the State of California and another payment in the amount of $41,974.22 to the Department of Treasury, Internal Revenue Service, on behalf of the Company for accrued payroll tax liabilities.

 

STOCK PAYMENT TO WILLIAM H. DAVIDSON

 

On April 8, 2014, the Company transferred 100,000 shares of common stock of Vietnam Mining Corporation (n/k/a Vanguard Mining Corporation, trading symbol: VNMC) from the balance of VNMC shares held by PHI Capital Holdings, Inc. to William H. Davidson as payment towards the settlement amount owed by the Company (Note 10 – Litigation).

 

PAYMENT TO LUBERSKI, INC.

 

On April 29, 2014, the Chairman and President of the Company made a payment in the amount of $322,285.00 to Luberski, Inc. to settle the outstanding balances of principal and accrued interest of the loan dated March 30, 2009 on behalf of the Company. In addition, on April 8, 2014, PHI Capital Holdings, Inc. paid 15,000 shares of Common Stock of Vietnam Mining Corporation (k/n/a Vanguard Mining Corporation) to Luberski, Inc. and its assignee as part of the settlement agreement.

 

ISSUANCES OF THE COMPANY’S COMMON STOCK

 

On August 27, 2014, a creditor of the Company converted a total of $27,706.26 of short-term notes and accrued interest owed by the Company into 91,440 shares of PHI Group, Inc.’s common stock.

 

ASSUMPTION OF DEBTS FROM AGENT155 MEDIA CORP.

 

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.

 

F-19
 

  

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

 

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

 

INTRODUCTION

 

PHI Group, Inc. (formerly Providential Holdings, Inc.), (the “Company” or “PHI”) a Nevada corporation established on June 8, 1982, is primarily focused on energy and natural resources. The Company has discontinued its operations in real estate and hospitality development and other non-core business activities. The Company acquires and consolidates energy-related assets and other natural resources, partners with international companies to develop independent power plant projects in Southeast Asia, collaborates with certain U.S. companies to provide renewable energy solutions using wind, solar power and hydro-magnetic gravitational systems to Asia Pacific markets, and arranges capital for energy-related and mineral projects. No assurances can be made that the Company will be successful in achieving its plan.

 

BACKGROUND

 

PHI Group, Inc. (“PHI”), formerly Providential Holdings, Inc., was organized under the laws of the State of Nevada on June 8, 1982 under the name of JR Consulting, Inc. Following the acquisition of Providential Securities, Inc., a California-based brokerage firm, the Company changed its name to Providential Securities, Inc. (Nevada) on January 12, 2000. Subsequently, the Company changed its corporate name to Providential Holdings, Inc. on February 9, 2000 and to PHI Group, Inc. on April 13, 2009. Prior to the corporate combination agreement with Providential Securities, Inc., JR Consulting had an operating subsidiary, Diva Entertainment, Inc., which operated two modeling agencies, one in New York and one in California. In October 2000, Providential Securities withdrew its securities brokerage membership and ceased its financial services business. 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 special situations. Since October 2011, the Company has primarily focused on energy and natural resources, including investing in coal assets, international trade, independent power plant projects, renewable energy, and industrial minerals. PHI Capital Holdings, Inc., the Company’s wholly owned subsidiary, continues to provide corporate and project finance services, including merger and acquisition advisory and consulting services for companies in a variety of industries and arranging funding for energy-related, natural resource and infrastructure projects.

 

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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

 

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

 

As of the date of this report, PHI Capital Holdings, Inc. is the only active wholly owned operating subsidiary of the Company.

 

In May 2003, the Company formed a division under the name of Providential Capital to provide financial products and services for the micro-small cap arenas and manage the Company’s proprietary merger and acquisition activities. In September 2004, Providential Capital, Inc. was incorporated under the laws of the State of Nevada as a wholly owned subsidiary of the Company to provide merger and acquisition advisory services, consulting services, project financing, and capital market services to clients in North America and Asia. In May 2010, Providential Capital changed its name to PHI Capital Holdings, Inc. This subsidiary has successfully managed merger plans for several privately held and publicly traded companies and continues to focus on serving the Pacific Rim markets in the foreseeable future.

 

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.

 

4
 

 

OMNI RESOURCES, INC. (FORMERLY 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. This subsidiary has 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 Asia Green Corporation changed its 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. (Note 19 -Subsequent Event).

  

VANGUARD MINING CORPORATION (FORMERLY VIETNAM MINING CORPORATION)

 

As a result of a merger between Vietnam-based Linh Thanh Quang Binh Exploiting and Processing High Calcium Carbonate Powder Joint Stock Company and Vietnam Mining Corporation that was closed on June 28, 2010, the Company received 1,746,500 shares of common stock of Vietnam Mining Corporation for advisory and consulting services rendered. These shares were recorded at $0.10 per share when received and represented approximately 4.85% of ownership in Vietnam Mining Corporation. Vietnam Mining Corporation changed its name to Vanguard Mining Corporation on April 30, 2014. (Note 19: Subsequent Event).

 

CRITICAL ACCOUNTING POLICIES

 

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

 

Valuation of Long-Lived and Intangible Assets

 

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

 

Income Taxes

 

We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities. We regularly review our deferred tax assets for recoverability and establish a valuation allowance based upon historical losses, projected future taxable income and the expected timing of the reversals of existing temporary differences. As of September 30, 2012, we estimated the allowance on net deferred tax assets to be one hundred percent of the net deferred tax assets.

 

5
 

 

RESULTS OF OPERATIONS

 

The following is a discussion and analysis of our results of operations for the three-month and nine-month periods ended March 31, 2014 and 2013, our financial condition at March 31, 2014 and factors that we believe could affect our future financial condition and results of operations. Historical results may not be indicative of future performance.

 

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

 

Three months ended March 31, 2014 compared to the three months ended March 31, 2013

 

Total Revenues:

 

During the quarter ended March 31, 2014, the Company generated $54,960 in revenues from consulting and advisory services, as compared to no revenue for the same period ended March 31, 2013.

 

Operating Costs and Expenses:

 

Total operating expenses were $139,040 and $135,480 for the three months ended March 31, 2014, and 2013, respectively. The increase in total operating expenses is primarily due to an increase in general and administrative expenses, offset by decreases in professional service expenses and salaries and wages. General and administrative expenses were $54,440 and $20,141 for the three months ended March 31, 2014, and 2013, respectively. The increase in general and administrative expenses between the two comparable periods was due to increases in expenditures associated with travel, investor relations, filing fees and transfer agent services for clients of the Company.

 

Other Income and Expenses:

 

Total other expenses were $81,923 for the three months ended March 31, 2014 compared to $106,296 for the three months ended March 31, 2013. The decrease in other expenses was mainly due to the decrease in interest expenses.

 

Interest expense was $81,142 and $ 106,296 for the three months ended March 31, 2014 and 2013, respectively.

 

Net Loss:

 

Net loss for the three months ended March 31, 2014 was $166,003 as compared to a net loss of $241,776 for the same period in 2013, which is equivalent to ($0.03) 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 after adjusting for the 1 for 1,500 reverse split effected on March 15, 2012.

 

The decrease in net loss between the two comparable periods is primarily due to decreases in professional service expenses, salaries and wages, and interest expenses during the current period as compared to corresponding previous period.

 

6
 

 

Nine months ended March 31, 2014 compared to nine months ended March 31, 2013

 

Total Revenues:

 

The Company generated $54,960 from consulting and advisory services for the nine months ended March 31, 2014 and no revenue for the corresponding period in 2013.

 

Operating Costs and Expenses:

 

Total operating expenses were $274,923 and $295,198 for the nine months ended March 31, 2014, and 2013, respectively. The decrease in total operating expenses during the current period is primarily due to decreases in salaries and wages and professional services, offset by an increase general and administrative expenses during the current period. Salaries and wages were $157,500 for the nine-month period ended March 31, 2014 as compared to $177,353 for the nine-month period ended March 31, 2013. General and administrative expenses were $85,323 during the nine months ended March 31, 2014 as compared to $58,499 during the same corresponding period in 2013.

 

Other Income and Expenses:

 

Interest expense was $242,606 and $390,026 for the nine months ended March 31, 2014, and 2013, respectively. During the nine months ended March 31, 2014, the Company recorded a gain of $372,278 on settlement of debts whereas there was no gain or loss on settlement of debts in the same period ended March 31, 2013.

 

Net Income (Loss):

 

Net loss for the nine months ended March 31, 2014 was $90,731 as compared to net loss of $685,834 for the same period in 2013, which is equivalent to $0.01 per share for the current period and ($0.58) per share for the same period in 2013, based on the revised weighted average number of basic and diluted shares outstanding for each period, after adjusting for 1 for 1,500 reverse stock split in March 2012.

 

LIQUIDITY AND CAPITAL RESOURCES

 

The Company had a cash balance of $13,789 as of March 31, 2014 as compared to a cash balance of $3,525 as of March 31, 2013, respectively.

 

The Company’s operating activities used $951,539 and provided $841,795 in the nine months ended March 31, 2014 and 2013, respectively.

 

There was $50,000 of cash provided by investing activities in the nine-month period ended March 31, 2014 as compared to $5,393 of cash provided by investing activities for the nine months ended March 31, 2013, respectively.

 

Cash provided by financing activities was $915,328 for the nine months ended March 31, 2014, as compared to cash used in financing activities of $843,663 for the nine months ended March 31, 2013. The increase in cash provided by financing activities in the current nine-month period is mainly due to an increase in conversion of short-term notes and accrued interest into the Company’s common stock by certain creditors and a decrease in minority interests, compared to payments of $524,500 on notes payable and payments of $281,880 on borrowings from officer during the corresponding period in 2013.

 

The Company’s operations are currently financed through various loans, sale of marketable securities and financing by the Company’s common stock. Management has taken action to strengthen the Company’s working capital position and generate sufficient cash to meet its operating needs. In addition, the Company also anticipated generating more revenue through its proposed mergers and acquisitions activities while developing long-term energy asset projects. No assurances could be made that management would be successful in achieving its plan or that additional capital would be available on a timely basis or at acceptable terms.

 

7
 

 

COMPANY’S PLAN OF OPERATION FOR NEXT 12 MONTHS

 

For the next twelve months, the Company would primarily focus on energy and natural resources, including acquisitions of energy assets in Indonesia and other countries in South East Asia, coal production through joint operations, international trade involving coal, oil, precious metals, and other industrial commodities, developing independent power plant projects in Southeast Asia in conjunction with local and international partners, and providing renewable energy solutions in forms of wind turbines, solar power and biomass. In addition, the Company would also provide M&A advisory and consulting services through its wholly owned subsidiary PHI Capital Holdings Inc. No guaranty could be made that the Company would be successful in any of its plans.

 

FINANCIAL PLANS

 

Management has taken action and formulated additional plans to provide for the Company’s working capital to meet its operating needs through June 30, 2015 and beyond. Among the actions to be taken, the Company intended to raise additional capital from the US and international markets. In addition, the Company would also anticipate generating more revenue through its M&A advisory and consulting services. No assurances could be made that management would be successful in achieving its financial plans.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

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

 

Currency Fluctuations and Foreign Currency Risk

 

Some of our operations are conducted in Vietnam and Indonesia using Vietnamese Dong and Indonesian Rupiah, 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 currently paid with 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 March 31, 2014, 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.

 

8
 

 

Changes in Internal Controls

 

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

 

Management’s Report on Internal Control over Financial Reporting

 

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

 

Our management assessed the effectiveness of PHI Group’s internal control over financial reporting as of March 31, 2014. 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.

 

9
 

 

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 MARCH 31, 2014:

 

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.

 

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. As of March 31, 2014, William Davidson has elected to convert a portion of the total amount into common stock of PHI Group, Inc. in lieu of cash payment. The Company has accrued the potential liabilities associated with these promissory notes in the accompanying consolidated financial statements as of March 31, 2014.

  

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.

 

10
 

 

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;
     
  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.

 

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Risks Related to Our Securities

 

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

 

Though our executive officers/directors holds 13.49 % of the Company’s outstanding common stock owned as of March 31, 2014, in the aggregate, 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.

 

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 American Stock Exchange or any other senior exchange, the tradability in our securities will be limited under the penny stock regulations.

 

Under the rules of the Securities and Exchange Commission, if the price of our securities on the OTCQB 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.

 

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None, except as may be noted elsewhere in this report.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None, except as may be noted elsewhere in this report.

 

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

None

 

ITEM 5. OTHER INFORMATION

 

None, except as may be noted elsewhere in this report.

 

ITEM 6. EXHIBITS

 

The following exhibits are filed as part of this report:

  

Exhibit No.   Description
     
21.1   Subsidiary 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 Financial Officer of the Registrant, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
     
101.INS   XBRL Instance Document**
101.SCH   XBRL Taxonomy Extension Schema Document**
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document**
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document**
101.LAB   XBRL Taxonomy Extension Label Linkbase Document**
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document**

 

* Filed herewith.
** In accordance with Regulation S-T, the XBRL-formatted interactive data files that comprise Exhibit 101 in this Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed”.

 

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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: November 24, 2014

 

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   November 24, 2014
 HENRY D. FAHMAN        
         
/s/ Tina T. Phan   Treasurer   November 24, 2014
TINA T. PHAN        
         
/s/ Tam T. Bui   Director   November 24, 2014
TAM T. BUI        
         
/s/Frank Hawkins   Director   November 24, 2014

FRANK HAWKINS

 

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