PHI GROUP INC - FORM 10-Q

Attached files

file	filename
EX-32.2 - PHI GROUP INC	ex32-2.htm
EX-32.1 - PHI GROUP INC	ex32-1.htm
EX-31.2 - PHI GROUP INC	ex31-2.htm
EX-31.1 - PHI GROUP INC	ex31-1.htm
EX-21.1 - PHI GROUP INC	ex21-1.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, 2018

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

For the transition period from ___________________________ to _________________________________

Commission File Number: 001-38255

(Exact name of registrant as specified in its charter)

Nevada

90-0114535

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

identification Number)

5348 Vegas Drive, # 237		Las Vegas,		NV 89108
(Address of principal executive offices)				(Zip Code)

702-475-5430

(Registrant’s telephone number, including area code)

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

Yes [X] No [ ]

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

Yes [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 May 18, 2018, there were 123,378,297 shares of the registrant's $0.001 par value Common Stock issued and outstanding, excluding 5,673,327 shares reserved for a special dividend distribution.

PHI GROUP, INC.

INDEX TO FORM 10-Q

PART I - FINANCIAL INFORMATION

Item 1- Consolidated Financial Statements – Unaudited		3

Consolidated Balance Sheets as of March 31, 2018 and June 30, 2017		3

Consolidated Statements of Operations for the three and nine months ended March 31, 2018 and 2017		4

Consolidated Statements of Cash Flows for the nine months ended March 31, 2018 and 2017		5

Notes to Consolidated Financial Statements		6

Item 2 -Management’s Discussion and Analysis of Financial Condition and Results of Operations		31

Item 3- Quantitative and Qualitative Disclosures about Market Risk		40

Item 4- Controls and Procedures		40

PART II - OTHER INFORMATION

Item 1- Legal Proceedings		42

Item 1A- Risk Factors		43

Item 2- Unregistered Sales of Equity Securities and Use of Proceeds		46

Item 3- Defaults Upon Senior Securities		46

Item 4- Submission of Matters to a Vote of Security Holders		46

Item 5- Other Information		46

Item 6- Exhibits		46

SIGNATURES		47

Exhibit 21.1

CERTIFICATIONS

PART I - FINANCIAL INFORMATION

Item 1- Consolidated Financial Statements – Unaudited

PHI GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	March 31, 2018			June 30, 2017
				(Audited)
ASSETS
Current assets:
Cash and cash equivalents	$	160,585		$	38,369
Marketable securities		475,817			502,695
Accounts receivable		932,000			-
Other current assets		107,928			133,000
Total current assets	$	1,676,330		$	674,064
Long-term assets:
Investments		25,005,000			-
Total long-term assets	$	25,005,000			-

Total Assets	$	26,681,330		$	674,064

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Accounts payable	$	147,305		$	159,875
Accrued expenses		548,657			384,929
Short-term notes payable - Net		1,313,787			873,008
Due to officers		247,865			592,141
Client deposits		-			780
Derivative liabilities - Net		854,675			454,756
Dividends payable - Preferred Stock		784,640			-
Other current payable		92,781			-
Total current liabilities	$	3,989,709		$	2,465,489
Long-term Liabilities
Demand promissory note		4,809,500		$	-
Accrued expenses		1,244,816			1,462,836
Accrued interest		2,715,963			2,715,963
Advances from Customers		288,219			288,219
Liabilities from Discontinued Operations		1,255,037			1,255,037
Total Long-term Liabilities	$	10,313,536		$	5,722,056
Total Liabilities	$	14,303,245		$	8,187,545
Stockholders’ Equity (Deficit):
Preferred stock, $.001 par value, 100,000,000 shares authorized; none issued and outstanding as of 06/30/2017; 4,000,000 shares issued and outstanding as of 3/31/2018.		4,000			-
Common stock, $.001 par value; 900,000,000 shares authorized; 99,928,072 issued and outstanding on 3/31/2018; 300,000,000 authorized and 16,109,036 issued and outstanding on 06/30/2017.		350,103			249,645
Treasury stock, $.001 par value, 484,767 and 321,569 shares as of 3/31/2018 and 6/30/2017.		(44,170	)		(40,908	)
Paid-in capital		52,914,290			31,424,061
Acc. other comprehensive gain (loss)		127,296			153,474
Accumulated deficit		(40,973,433	)		(39,299,754	)
Total stockholders’ equity (deficit)	$	12,378,085		$	(7,513,481	)

Total liabilities and stockholders’ equity (deficit)	$	26,681,330		$	674,064

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

PHI GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED

	For the Three Months Ended March 31						For the Nine Months Ended March 31,
	2018			2017			2018			2017
Net revenues
Revenues	$	500,000		$	-		$	960,500		$	90,000

Operating expenses:
Salaries and wages		52,500			52,500			157,000			157,000
Professional services, including non-cash compensation		77,721			48,495			151,224			189,328
General and administrative		44,831			37,779			136,294			145,308
Total operating expenses	$	175,052		$	138,774		$	444,518		$	491,636

Gain (loss) from operations	$	324,948		$	(138,774	)	$	515,982		$	(401,636	)

Other income and (expenses)
Net interest income (expense)		(502,124	)		(157,107	)		(1,014,749	)		(380,870	)
Net gain (loss) on sale of marketable securities		-			12,010			-			14,649
Gain (loss) on sale of assets		-			-			-			(20,011	)
Prepayment premium		(105,313	)		(25,348	)		(155,939	)		(25,348	)
Loss on loan/note conversions		-			-			(140,000	)		(131,818	)
Dividends - Class A Series II Preferred Stock		(394,503	)		-			(784,640	)		-
Other income (expense)		(38	)		-			(94,334	)		-
Net other income (expenses)		(1,001,977	)		(170,445	)		(2,189,661	)		(543,398	)

Net income (loss)	$	(677,029	)	$	(309,219	)	$	(1,673,680	)	$	(945,035	)
Other comprehensive Income
Acc. Other comprehensive gain (loss)	$	127,296		$	199,042		$	127,296		$	199,042
Comprehensive income (loss)		(549,734	)		(110,177	)		(1,546,384	)		(745,993	)
Net loss per share:
Basic	$	(0.01	)	$	(0.03	)	$	(0.02	)	$	(0.08	)
Diluted	$	(0.01	)	$	(0.03	)	$	(0.02	)	$	(0.08	)

Weighted average number of shares outstanding:
Basic		84,816,801			11,845,876			84,816,801			11,845,876
Diluted		84,816,801			11,845,876			84,816,801			11,845,876

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

PHI GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

	For the Nine Months Ended March 31,
	2018			2017
Cash flows from operating activities:
Net income (loss) from operations	$	(1,673,680	)	$	(945,035	)
Adjustments to reconcile net income to net cash used in operating activities:
(Increase) decrease in other assets and prepaid expenses		(880,049	)		(169,947	)
Increase (decrease) in accounts payable and accrued expenses		1,524,220			(4,454	)
Net cash provided by (used in) operating activities		(1,029,509	)		(1,119,435	)

Cash flows from investing activities:
Land purchase		-			82,733
Investments in AQuarius Power Inc. and Oregon Gold Mining Claims		(25,005,000	)		-
Net cash provided by (used in) investing activities		(25,005,000	)		82,733

Cash flows from financing activities:
Changes in Common stock and APIC		1,594,686			965,493
Changes in Preferred stock and APIC		20,000,000			-
Acc. Other comprehensive income (loss)		(26,178	)		168,779
Common stock to be cancelled		-			(90,000	)
Changes in Treasury stock		(3,262	)		(6,394	)
Adjustment in Accumulated deficit		-			-
Demand Promissory Note		4,809,500			-
Changes in Long-term Liabilities		(218,020	)		-
Net cash provided by (used in) financing activities		26,156,725			1,037,878

Net increase in cash and cash equivalents		122,217			1,177
Cash and cash equivalents, beginning of period		38,369			2,482
Cash and cash equivalents, end of period	$	160,585		$	3,658

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

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

NOTE 1 – NATURE OF BUSINESS

INTRODUCTION

PHI Group, Inc. (the “Company” or “PHI”) is engaged in mergers and acquisitions as a principal (www.phiglobal.com) and invests in several selective industries. The Company has adopted plans to acquire established operating businesses in a number of industries and invest in various ventures that may potentially create significant long-term value for our shareholders. In addition, we also provide corporate finance services, including merger and acquisition advisory and consulting services for client companies through our wholly owned subsidiary PHI Capital Holdings, Inc. (www.phicapitalholdings.com). No assurances can be made that the Company will be successful in achieving its plans.

BACKGROUND

Originally incorporated on June 8, 1982 as JR Consulting, Inc., a Nevada corporation, the Company applied for a Certificate of Domestication and filed Articles of Domestication to become a Wyoming corporation on September 20, 2017. In the beginning, the Company was foremost engaged in mergers and acquisitions and had an operating subsidiary, Diva Entertainment, Inc., which operated two modeling agencies, one in New York and one in California. Following the business combination with Providential Securities, Inc., a California-based financial services company, the Company changed its name to Providential Securities, Inc., a Nevada corporation, in January 2000. The Company then changed its name to Providential Holdings, Inc. in February 2000. In October 2000, Providential Securities withdrew its securities brokerage membership and ceased its financial services business. Subsequently, in April 2009, the Company changed its name to PHI Group, Inc. From October 2000 to October 2011, the Company and its subsidiaries were engaged in mergers and acquisitions advisory and consulting services, real estate and hospitality development, mining, oil and gas, telecommunications, technology, healthcare, private equity, and special situations. In October 2011, the Company discontinued the operations of Providential Vietnam Ltd., Philand Ranch Limited, a United Kingdom corporation (together with its subsidiaries Philand Ranch - Singapore, Philand Corporation - US, and Philand Vietnam Ltd. - Vietnam), PHI Gold Corporation (formerly PHI Mining Corporation, a Nevada corporation), and PHI Energy Corporation (a Nevada corporation), and mainly focused on acquisition and development opportunities in energy and natural resource businesses. At the present, the Company is engaged in mergers and acquisitions as a principal and investments in natural resources, energy, agriculture, healthcare, pharmaceuticals, biotechnology and special situations. In addition, PHI Capital Holdings, Inc., a wholly owned subsidiary of PHI, continues to provide corporate and project finance services, including merger and acquisition (M&A) advisory and consulting services for other companies in a variety of industries.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of PHI Group, Inc., its wholly owned subsidiaries PHI Capital Holdings, Inc., Abundant Farms, Inc., American Pacific Resources, Inc., PHI EZ Water Tech, Inc., PHI Group EB-5 Regional Center, LLC. and its discontinued operations Providential Securities, Inc., PHI Energy Corporation, PHI Gold Corp, Providential Vietnam Ltd. and Philand Ranch Limited (including its 100% owned subsidiary Philand Corporation and Philand Vietnam Ltd) and Omni Resources, Inc., 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, 2017. In the opinion of management, all adjustments consisting of normal reoccurring accruals have been made to the financial statements. The results of operation for the three and nine months ended March 31, 2018 are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2018.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all liquid investments with a maturity of three months or less from the date of purchase that are readily convertible into cash to be cash equivalents.

MARKETABLE SECURITIES

The Company’s securities are classified as available-for-sale and, as such, are carried at fair value. Securities classified as available-for-sale may be sold in response to changes in interest rates, liquidity needs, and for other purposes.

Typically, each investment in marketable securities represents less than twenty percent (20%) of the outstanding common stock and stock equivalents of the investee, and each security is quoted on either the OTC Markets or other public exchanges. As such, each investment is accounted for in accordance with the provisions of SFAS No. 115.

Unrealized holding gains and losses for available-for-sale securities are excluded from earnings and reported as a separate component of stockholder’s equity. Realized gains and losses for securities classified as available-for-sale are reported in earnings based upon the adjusted cost of the specific security sold. On March 31, 2018, the marketable securities were recorded at $475,817, based upon the fair value of the marketable securities at that time.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair Value - Definition and Hierarchy

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

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

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

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

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

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

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

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

Fair Value - Valuation Techniques and Inputs

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

Equity Securities in Public Companies

Unrestricted

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

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

Restricted

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

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

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

The Company’s financial instruments primarily consist of cash and cash equivalents, accounts receivable, marketable securities, short-term notes payable, convertible notes, derivative liability and accounts payable.

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

Effective July 1, 2008, the Company adopted ASC 820 (previously SFAS 157), Fair Value Measurements and adopted this Statement for the assets and liabilities shown in the table below. ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, establishes a fair value hierarchy based on the inputs used to measure fair value, and expands disclosures about the use of fair value measurements. The adoption of ASC 820 did not have a material impact on our fair value measurements. ASC 820 permits the Company to defer the recognition and measurement of the nonfinancial assets and nonfinancial liabilities until January 1, 2010. At June 30, 2017, the Company did not have any nonfinancial assets or nonfinancial liabilities that are recognized or disclosed at fair value. ASC 820 requires that financial assets and liabilities that are reported at fair value be categorized as one of the types of investments based upon the methodology mentioned in Level 1, Level 2 and Level 3 above for determining fair value.

Assets measured at fair value on a recurring basis are summarized below. The Company also has convertible notes and derivative liabilities as disclosed in this report that are measured at fair value on a regular basis until paid off or exercised.

Available-for-sale securities

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

The company’s policy regarding the transfers in and/or out of Level 3 depends on the trading activity of the security, the volatility of the security, and other observable units which clearly represents the fair value of the security. If a level 3 security can be measured using a more fairly represented fair value, we will transfer these securities either into Level 1 or Level 2, depending on the type of inputs.

ACCOUNTS RECEIVABLE

Management reviews the composition of accounts receivable and analyzes historical bad debts. As of March 31, 2018, the Company had accounts receivable in the amount of $932,000.

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.

STOCK-BASED COMPENSATION

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

RISKS AND UNCERTAINTIES

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

RECENT ACCOUNTING PRONOUNCEMENTS 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 3 – MARKETABLE EQUITY SECURITIES AVAILABLE FOR SALE

The Company’s marketable securities are classified as available-for-sale and, as such, are carried at fair value. All of the securities are comprised of shares of common stock of the investee. Securities classified as available-for-sale may be sold in response to changes in interest rates, liquidity needs, and for other purposes. These marketable securities are quoted on the OTC Markets or other public exchanges and are accounted for in accordance with the provisions of SFAS No. 115.

Marketable securities held by the Company and classified as available for sale as of March 31, 2018 consisted of 33,805,106 shares of Myson Group, Inc., a public company quoted on the OTC Markets (Trading symbol “MYSN”) and 292,050,000 shares of Sports Pouch Beverage Co., a public company quoted on the OTC Markets (Trading symbol “SPBV”). The fair value of the shares recorded as of March 31, 2018 was $475,817.

Securities available for sale	Level 1		Level 2		Level 3		Total
March 31, 2018		None	$	212,972	$	262,845	$	475,817
June 30, 2017		None	$	210,646	$	292,050	$	502,696

NOTE 4 – PROPERTIES AND EQUIPMENT

The Company did not have any properties or equipment as of March 31, 2018.

NOTE 5 – LONG-TERM ASSETS

The Long-Term Assets comprise of the following: (1) As of March 31, 2018: $5,000 investment in Aquarius Power, Inc. and $25,000,000 investment in 51% of twenty-one mining claims over an area of approximately 400 acres situated five miles Northeast of the town of Granite, Grant County, Oregon, U.S.A., near Granite Creek, within a precious metals belt 30-40 miles wide (N-S) and 100 miles long (E-W); coincident with the core of the Blue Mountains, along the Snake River; (2) As of June 30, 2017: None.

	03/31/2018		6/30/2017
Investments	$	25,005,000	$	-
Total Long-Term Assets	$	25,005,000	$	-

NOTE 6 – DISCONTINUED OPERATIONS

As of June 30, 2012, the Company decided to recognize the businesses of PHI Gold Corp. (formerly PHI Mining Corporation), Providential Vietnam Ltd., PHI Energy Corp., and Philand Ranch Ltd., a United Kingdom corporation, together with its wholly-owned subsidiaries Philand Corporation (USA), Philand Ranch Ltd. (Singapore) and Philand Vietnam Ltd. as discontinued operations for practical business and accounting purposes. As of March 31, 2018, the Company had a balance of $1,255,037 as Long-term Liabilities from Discontinued Operations.

NOTE 7 – CURRENT LIABILITIES

Current liabilities of the Company consisted of the followings as of March 31, 2018 and June 30, 2017:

	March 31, 2018		June 30, 2017
Accounts Payable		147,305		159,875
Accrued Expenses		548,657		384,929
Short-term Notes Payable - Net		1,313,787		873,008
Due to Officers		247,865		592,141
Client Deposits		-		780
Derivative Liabilities– Net		854,675		454,756
Dividends Payable – Class A Series II Preferred Stock		784,640		-
Other Current Payable		92,781		-
Total Current Liabilities:	$	3,989,709	$	2,465,489

NOTE 8 – LONG-TERM LIABILITIES

Long-term liabilities of the Company consisted of the followings as of March 31, 2018 and June 30, 2017:

	March 31, 2018		June 30, 2017
Demand promissory note – American Pacific Resources, Inc.		4,809,500		-
Accrued Expenses		1,244,816		1,462,836
Accrued Interest		2,715,963		2,715,963
Advances from Customers		288,219		288,219
Liabilities from Discontinued Operations		1,255,037		1,255,037
Total Long-term Liabilities:	$	10,313,536	$	5,722,056

DUE TO PREFERRED STOCKHOLDERS

As of June 30, 2017, the Company re-classified $215,000 of preferred stock subscribed as Long-term Liabilities payable to holders of preferred stock of Providential Securities, Inc., a previous subsidiary of the Company that was discontinued in the year 2000. In the early 2000’s, the Company had made an offer for these preferred stockholders to receive shares of common stock in the Company in exchange for the preferred shares in the discontinued subsidiary but only a small number of the preferred shareholders responded and accepted the offer. In more recent years, the Company has also attempted to contact these preferred shareholders from time to time but have not received further response from them. The Company has continued to accrue imputed interest expenses on the balance of $215,000 on a periodic basis. As of March 31, 2018 and June 30, 2017, $457,950 and $438,600 have been included on the balance sheets as accrued interest in connection with preferred stock liabilities, respectively.

ADVANCES FROM CUSTOMERS

As of September 30, 2012, the Company reclassified the previously recorded Unearned Revenues as Advances from Customers because the Company was not able to complete the consulting services for the related client due to its 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, 2018, the Company recorded $288,219 of Advances from Customers as a Long-term Liability.

During the quarter ended September 30, 2017, the Company signed a Settlement Agreement and agreed to pay Thinh Hung Investment Co. a total amount of $381,000 which includes the outstanding balance of $288,219 mentioned above and $92,781 in accrued interest that is recorded as Other Current Liability in the balance sheets of the Company as of March 31, 2018.

According to the Settlement Agreement, the Compapny would transfer or cause to be transferred at least 480,000 shares of Common Stock of PHI Group, Inc. to an authorized represenatative of Thinh Hung. In the event Thinh Hung is unable to realize at least $381,000 from the sale of PHI Stock, PHI Group will either transfer additional Common Stock of PHI Group, Inc. or other marketable securities to the authorized reprenesattive designated Thinh Hung or pay cash directly to Thinh Hung until the total amount of $381,000 is reached. After the receipt of at least 480,000 shares of PHI Group Stock by the authorized representative of Thinh Hung, Thinh Hung would deliver and transfer all the Vietnam Foods Corporation Stock to PHI Group, Inc. or its authorized representative. As of March 31, 2018 no shares have been transferred to Thinh Hung or its authorized representative.

NOTE 9 – DUE TO OFFICERS

Due to officers, represents advances made by officers of the Company and its subsidiaries, which are non-interest bearing, unsecured and due on demand. As of March 31, 2018 and June 30, 2017, the balances were $247,865 and $592,141, respectively.

Officers/Directors	March 31, 2018		June 30, 2017
Henry Fahman		172,015	$	511,291
Tam Bui		63,350	$	63,350
Frank Hawkins		-	$	5,000
Lawrence Olson		12,500		12,500
Total	$	247,865	$	592,141

NOTE 10 – LOANS AND PROMISSORY NOTES

A.	SHORT TERM NOTES PAYABLE:

In the course of its business, the Company has obtained short-term loans from individuals and institutional investors and from time to time raised money by issuing restricted common stock of the Company under the auspices of Rule 144.

As of March 31, 2018, the Company had short-term notes payable of $808,310, with accrued interest of $2,391,162. These notes bear interest rates ranging from 0% to 36% per annum.

B.	CONVERTIBLE PROMISSORY NOTES:

1.	CONVERTIBLE PROMISSORY NOTES OUTSTANDING AS OF MARCH 31, 2018

As of March 31, 2018, the following convertible promissory notes that had been issued by the Company before January 1, 2018 were still outstanding:

On October 18, 2017, the Company issued a new convertible promissory note to Power Up Lending Group for $53,000, with an interest rate of 8% and convertible to Common Stock of the Company at 42% discount to the average of the two lowest trading prices or closing bids during the ten trading days immediately prior to the date of conversion. The maturity date of this note is 7/20/2018.

On October 26, 2017, the Company issued a new convertible promissory note to Crown Bridge Partners, LLC for $35,000, with an interest rate of 5% and convertible to Common Stock of the Company at 50% discount to the average of the two lowest trading prices or closing bids during the twenty trading days immediately prior to the date of conversion. The maturity date of this note is 10/26/2018. In connection with this note, the Company issued 87,500 warrants to Crown Bridge Partners, LLC for the purchase of Common Stock of the Company at the exercise price of $0.40 per share. The exercise period commences on the issuance date and ends on the one-year anniversary thereof.

On November 24, 2017, the Company issued a new convertible promissory note to Einstein Investments LLC for $115,500, with an interest rate of 10% and convertible to Common Stock of the Company at 50% discount to the average of the two lowest trading prices or closing bids during the ten trading days immediately prior to the date of conversion. The maturity date of this note is 10/26/2018.

2.	PREPAYMENTS OF CONVERTIBLE PROMISSORY NOTES

On January 18, 2018, the Company paid a total of $43,610.96 to Power Up Lending Group, which amount included the principal, prepayment premium and accrued interest. This note was paid off in full as of January 18, 2018.

On January 30, 2018, the Company paid a total of $117,984.76 to JSJ Investments, Inc., which amount included the principal amount of $78,750, prepayment premium of $35,437.50 and accrued and unpaid interest of $3,797.26. This note was paid off in full as of January 30, 2018.

On February 5, 2018, the Company paid a total of $51,300.99 to Power Up Lending Group, which amount included the principal, prepayment premium and accrued interest for the convertible promissory note dated August 15, 2017. This note was paid off in full as of February 5, 2018.

3.	CONVERSIONS OF CONVERTIBLE PROMISSORY NOTES AND EXERCISE OF WARRANTS

During the quarter ended March 31, 2018, certain holders of the Company’s convertible promissory notes converted the following amounts of principal and accrued interest into common stock of the Company and exercised the purchase of warrants in connection with certain convertible promissory note(s):

On January 08, 2018, the Company issued 1,835,795 shares of free-trading Common Stock of PHI Group, Inc. to Auctus Fund, LLC, holder of a Convertible Promissory Note dated March 03, 2017 of the Company, for the conversion of $6,745.50 of the principal balance of the Note, $97.68 of accrued and unpaid interest and $500.00 conversion fee under the Note totaling $7,343.18. The principal balance due remaining under this Note after this conversion was $0.00.

On January 09, 2018, the Company issued 2,601,957 shares of free-trading Common Stock of PHI Group, Inc. to JSJ Investments, Inc., holder of a Convertible Promissory Note dated April 05, 2017 of the Company, for the conversion of $11,499.78 of the principal balance and accrued and unpaid interest of $2,858.64 totaling $14,358.42. The principal balance due remaining under this Note after this conversion was $0.00.

On January 11, 2018, the Company issued 2,900,000 shares of free-trading Common Stock of PHI Group, Inc. to Crown Bridge Partners, LLC., holder of the $35,000.00 Convertible Promissory Note dated June 9, 2017 of the Company, for the conversion of $9,650.00 of the principal and $500.00 of fees under the Note totaling $10,150.00. The principal balance due remaining under this Note after this conversion was $17,800.00.

On January 25, 2018, the Company issued 2,500,000 shares of free-trading Common Stock of PHI Group, Inc. to EMA Financial LLC, holder of a Convertible Promissory Note dated April 4, 2017 of the Company, for the conversion of $9,625.00 of the principal balance of the Note, less $1,050 of conversion fees under the Note. The principal balance due remaining under this Note after this conversion is $9,977.50

On January 29, 2018, the Company issued 3,812,188 shares of free-trading Common Stock of PHI Group, Inc. to EMA Financial LLC, holder of a Convertible Promissory Note dated April 4, 2017 of the Company, for the conversion of $9,975.50 of the principal balance of the Note, $3,649.43 of accrued and unpaid interest, and $1,050 for legal and transfer agent fees for conversion, totaling $14,467.93. This Note was paid off in full as of January 29, 2018; the principal balance due remaining under this Note after this conversion is $0.00.

On January 29, 2018, the Company issued 2,500,000 shares of free-trading Common Stock of PHI Group, Inc. to Crown Bridge Partners, LLC., holder of the $35,000.00 Convertible Promissory Note dated June 9, 2017 of the Company, for the conversion of $9,562.50 of the principal and $500.00 of fees under the Note, totaling $10,062.50. The principal balance due remaining under this Note after this conversion was $8,237.50.

On February 8, 2018, the Company issued 2,509,693 shares of free-trading Common Stock of PHI Group, Inc. to Crown Bridge Partners, LLC., holder of the $35,000.00 Convertible Promissory Note dated June 9, 2017 of the Company, for the conversion of $8,237.50 of principal, $1,012.66 of accrued interest, and $500.00 of fees under the Note, totaling $9,750.16. The principal balance due remaining under this Note after this conversion was $0.00.

On February 28, 2018, the Company issued 4,744,007 shares of free-trading Common Stock of PHI Group, Inc. to Crown Bridge Partners, LLC., holder of the Common Stock Purchase Warrant dated as of June 9, 2017 in connection with the $35,000.00 Convertible Promissory Note of June 9, 2017 by the Company, for the cashless exercise of $17,300.00 value of warrants. The total warrant value remaining after this exercise was $17,700.00.

4.	ISSUANCE OF NEW CONVERTIBLE PROMISSORY NOTES

During the quarter ended March 31, 2018, the Company issued the following convertible promissory notes:

	Issuances
	Holder	Issue Date		Maturity Date		Note Amount		Interest Rate			Variable Conversion Rate	Derivative Value at issuance
Note #1	JSJ Investments - 01/18/18 - 78750 - 1		1/18/18		1/18/19		78,750		10.0	%	55% of 3 Low TP (closing bid) 20 TD		84,312
Note #2	Power Up Lending - 01/18/18 - 33000 - 2		1/18/18		10/10/18		33,000		8.0	%	58% of 2 Low TP (closing bid) 10 TD		32,312
Note #3	Power Up Lending - 01/26/18 - 33000 - 3		1/26/18		11/15/18		33,000		8.0	%	58% of 2 Low TP (closing bid) 10 TD		33,105
Note #4	JSJ Investments - 01/31/18 - 78750 - 4		1/31/18		1/31/19		78,750		10.0	%	55% of 3 Low TP (closing bid) 20 TD		93,729
Note #5	Crown Bridge Partners - 01/31/18 - 50000 - 5		1/31/18		1/31/19		50,000		5.0	%	50% of 2 Low TP (closing bid) 20 TD		69,020
Note #6	Adar Bays - 02/01/18 - 60000 - 6		2/1/18		2/1/19		60,000		6.0	%	50% of 2 Low TP's 25 TD		80,415
Note #7	Auctus Fund LLC - 02/02/18 - 75000 - 7		2/2/18		11/2/18		75,000		12.0	%	50% of 2 Low TP's 25 TD		113,043
Note #8	Power Up Lending - 02/22/18 - 33000 - 8		2/22/18		11/30/18		33,000		8.0	%	58% of 2 Low TP (closing bid) 10 TD		50,634
Note #9	JSJ Investments - 03/21/18 - 78750 - 9		3/21/18		3/21/19		78,750		10.0	%	55% of 3 Low TP (closing bid) 20 TD		132,243

As of March 31, 2018, the principal balance of the outstanding convertible notes was $723,750 and the value of net derivative liabilities in connection with these notes and the warrants attached to certain notes was $854,675. The Company relies on a professional third-party valuation to record the value of derivative liabilities, discounts, and change in fair value of derivatives in connection with these convertible notes and warrants, if any, that are related to the convertible notes. The Company intends and prefers to repay these notes in cash as much as practical.

NOTE 11 – LITIGATION

LEGAL PROCEEDING SETTLED AND UNPAID AS OF MARCH 31, 2018:

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

This case was originally submitted to Orange County Superior Court, CA on June 25, 1997, Case No. 781121, and subsequently moved to NASD Dispute resolution for arbitration. On or about August 24, 2000, the Company’s legal counsel negotiated with the Claimant’s counsel and unilaterally reached a settlement that had not been approved by the Company. While the Company was in the process of re-negotiating the terms of said settlement, the Claimants filed a request for arbitration hearing before the National Association of Securities Dealers on October 4, 2000, Case No. 99-03160. Thereafter, the Claimants filed a complaint with the Orange County Superior Court, CA on October 31, 2000, Case No. 00CC13067 for alleged breach of contract for damages in the sum of $75,000 plus pre-judgment interest, costs incurred in connection with the complaint, and other relief. Without admitting or denying any allegations, the Company reached a settlement agreement with the Claimants whereby the Company would pay the Claimants a total of $62,500 plus $4,500 in administrative costs. As the date of this report, the Company has paid $2,500 and is subject to an entry of judgment for $79,000. In May 2011, the Claimants filed an application for and renewal of judgment for a total of $140,490.78. As of March 31, 2018 the Company accrued $172,091 for potential liabilities in connection with this case in the accompanying consolidated financial statements.

WILLIAM DAVIDSON VS. DOAN ET AL.

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

On July 09, 2012 William Davidson and PHI Capital Holdings, Inc. (formerly Providential Capital, Inc.), a subsidiary of the Company, reached a settlement agreement with respect to whereby PHI Capital agreed to pay William Davidson a total of $200,000 over a period of nineteen months beginning September 1, 2012. Since November 30, 2012, William Davidson has converted portions of the total amount into common stock of PHI Group, Inc. in lieu of cash payment. The Company has accrued $90,000 as the required liability associated with the balance of these notes in the accompanying consolidated financial statements as of March 31, 2018.

NOTE 12 – PAYROLL LIABILITIES

The payroll liabilities are accrued and recorded as accrued expenses in the consolidated balance sheet. During the quarter ended June 30, 2014, the Company paid $41,974.22 to the Internal Revenue Service and $ 19,289.94 to the State of California Employment Development Department towards the balance of $118,399 of payroll tax, penalties and interest claimed by these agencies. The Company plans to resolve the remaining balances with the Internal Revenue Service and the State of California Employment Department by June 30, 2018.

NOTE 13 – BASIC AND DILUTED NET PROFIT (LOSS) PER SHARE

Net loss per share is calculated in accordance with SFAS No. 128, “Earnings per Share”. Under the provision of SFAS No. 128, basic net loss per share is computed by dividing the net loss for the period by the weighted-average number of common shares outstanding for the period. Diluted EPS is based on the weighted-average number of shares of common stock outstanding for the period and common stock equivalents outstanding at the end of the period. Basic and diluted weighted average numbers of shares for the period ended March 31, 2018 were the same since the inclusion of Common stock equivalents is anti-dilutive.

NOTE 14 – STOCKHOLDER’S EQUITY

In accordance with the Articles of Incorporation and Amendments to the Articles of Incorporation filed with the Nevada Secretary of State, the total number of authorized capital stock of the Company is 1,000,000,000 shares with a par value of $0.001 per share, consisting of 900,000,000 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.

Treasury Stock:

The balance of treasury stock as of March 31, 2018 was 484,767 post-split shares valued at $44,170 according to cost method.

Common Stock:

During the quarter ended March 31, 2018, the Company issued the following amounts of its Common Stock:

On January 30, 2018, the Company issued 100,000 shares of PHI Group, Inc.’s restricted common stock to Andreas Held, a long-term shareholder of PHI Group, Inc.’s, for $981.00 in cash.

On January 30, 2018, the Company issued 100,000 shares of PHI Group, Inc.’s restricted common stock to Cuong Tran, an independent consultant, for technical consulting service.

On February 8, 2018, Henry Fahman, the Company’s Chief Executive Officer and Chief Financial Officer, converted $150,000.00 of the accrued and unpaid salary for the fiscal year ended June 30, 2011 into 4,746,084 shares of Restricted Common Stock of PHI Group, Inc. at the effective price of $0.031605 per share, pursuant to the Company’s corporate resolutions dated November 2, 2012, which still remain in full force and effect.

On February 8, 2018, Tina Phan, the Company’s Corporate Secretary and Treasurer, converted $60,000.00 of the accrued and unpaid salary for the fiscal year ended June 30, 2011 into 1,898,434 shares of Restricted Common Stock of PHI Group, Inc. at the effective price of $0.031605 per share, pursuant to the Company’s corporate resolutions dated November 2, 2012, which still remain in full force and effect.

As of March 31, 2018, there were 99,928,072 shares of the Company’s common stock issued and outstanding, excluding 5,673,327 shares of common stock that have been set aside for a special dividend distribution.

Preferred Stock: On October 3, 2017, the Company issued 4,000,000 shares of Class A Series II Preferred Stock to Rush Gold Royalty, Inc. at the agreed value of $20,000,000 for the purchase of 51% interest in the twenty one mining claims over an area of approximately 400 acres in Granite Mining District, Grant County, Oregon, U.S.A. pursuant to the Agreement of Purchase and Sale dated September 2, 2017 between American Pacific Resources, Inc., a wholly owned subsidiary of PHI Group, Inc., and Rush Gold Royalty, Inc., a Wyoming corporation. The Company will reissue the same amount of Class A Series II Preferred Stock to Rush Gold Royalty, Inc. under the jurisdiction of the State of Wyoming when PHI withdraws from the State of Nevada.

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

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

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

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

Domestication in the State of Wyoming:

On September 20, 2017, the Company applied for a Certificate of Domestication and filed Articles of Domestication with the office of the Secretary of State of Wyoming to re-domicile the Company’s jurisdiction to the State of Wyoming.

On September 20, 2017, the Company filed Articles of Amendment with the Wyoming Secretary of State to amend the authorized capital of the Company as follows:

“The total number of shares into which the authorized capital stock of the corporation is divided is one billion shares, consisting of: nine hundred million shares of voting Common Stock with a par value of $0.001 per share; fifty million shares of non-voting Class A Series I Preferred Stock with a par value of $5.00 per share; twenty-five million shares of non-voting Class A Series II Preferred Stock with a par value of $5.00 per share; twenty million shares of non-voting Class A Series III Preferred Stock with a par value of $5.00 per share and five million shares of voting Class A Series IV Preferred Stock with a par value of $5.00 per share. The relative rights, preferences, limitations and restrictions associated with the afore-mentioned shares of Class A Preferred Stock will be determined by the Board of Directors of the corporation.”

NOTE 15 – STOCK-BASED COMPENSATION PLAN

On February March 18, 2015, the Company adopted an Employee Benefit Plan to set aside 1,000,000 shares of common stock for eligible employees and independent contractors of the Company and its subsidiaries. As of March 31, 2018 the Company has not issued any stock in lieu of cash under this plan.

On September 23, 2016, the Company issued incentive stock options and nonqualified stock options to certain key employee(s) (Henry Fahman – CEO/CFO) and directors (Tam Bui, Henry Fahman, and Frank Hawkins constitute the Board of Directors) as deferred compensation. The options allow the holders to acquire the Company’s Common Stock at the fair exercise price of the Company’s Common Stock on the grant date of each option at $0.24 per share, based on the 10-days’ volume-weighted average price prior to the grant date. The number of options is equal to a total of 6,520,000. The options terminate seven years from the date of grant and become vested and exercisable after one year from the grant date. The following assumptions were used in the Monte Carlo analysis by Doty Scott Enterprises, Inc., an independent valuation firm, to determine the fair value of the stock options:

Risk-free interest rate	1.18	%
Expected life	7 years
Expected volatility	239.3	%

Vesting is based on a one-year cliff from grant date.

Annual attrition rates were used in the valuation since ongoing employment was condition for vesting the options.

The fair value of the Company’s Stock Options as of issuance valuation date is as follows:

Holder

Issue Date

Maturity Date

Stock Options

Exercise Price

Fair Value at Issuance

Tam Bui

9/23/2016

9/23/2023

875,000

Fixed price: $0.24

219,464

Frank Hawkins

9/23/2016

9/23/2023

875,000

Fixed price: $0.24

219,464

Henry Fahman

9/23/2016

9/23/2023

4,770,000

Fixed price: $0.24

1,187,984

NOTE 16 – RELATED PARTY TRANSACTIONS

The Company accrued $52,500 in salaries for the President and the Secretary & Treasurer of the Company during the quarters ended March 31, 2018 and March 31, 2017.

NOTE 17 – CONTRACTS AND COMMITMENTS

EQUITY LINE FACILITY - INVESTMENT AGREEMENT WITH AZURE CAPITAL, INC.

On March 6, 2017, PHI Group, Inc., a Nevada corporation (the “Company”) and Azure Capital, a Massachusetts Corporation (the “Investor”) entered into an Investment Agreement (the “Investment Agreement”) and a Registration Rights Agreement (the “Registration Rights Agreement”), each dated March 6, 2017 between the Company and the Investor.

Pursuant to the Investment Agreement, the Investor committed to purchase, subject to certain restrictions and conditions, up to $10,000,000 worth of the Company’s common stock, over a period of 36 months from the effectiveness of the registration statement registering the resale of shares purchased by the Investor pursuant to the Investment Agreement. The Company agreed to initially reserve 20,000,000 shares of its Common Stock for issuance to the Investor pursuant to the Investment Agreement. In the event the Company cannot register a sufficient number of shares of its Common Stock for issuance pursuant to the Investment Agreement, the Company will use its best efforts to authorize and reserve for issuance the number of shares required for the Company to perform its obligations in connection with the Investment Agreement as soon as reasonable practical.

The Company may in its discretion draw on the facility from time to time, as and when the Company determines appropriate in accordance with the terms and conditions of the Investment Agreement. The maximum number of shares that the Company is entitled to put to the Investor in any one draw down notice shall not exceed shares with a purchase price of $250,000 or 200% of the average daily volume (U.S. market only) of the Company’s Common Stock for the three (3) Trading Days prior to the applicable put notice date multiplied by the average of the three (3) daily closing prices immediately preceding the put date, calculated in accordance with the Investment Agreement. The Company may deliver a notice for a subsequent put from time to time, after the pricing period for the prior put has been completed.

The purchase price shall be set at ninety-four percent (94%) of the lowest daily volume weighted average price (VWAP) of the Company’s common stock during the five (5) consecutive trading days immediately following the put notice date. On each put notice submitted to the Investor by the Company, the Company shall specify a suspension price for that put. In the event the price of Company’s Common Stock falls below the suspension price, the put shall be temporarily suspended. The put shall resume at such time the price of the Company’s Common Stock is above the suspension price, provided the dates for the pricing period for that particular put are still valid. In the event the pricing period has been complete, any shares above the suspension price due to the Investor shall be sold to the Investor by the Company at the suspension price under the terms of the Investment Agreement. The suspension price for a put may not be changed by the Company once submitted to the Investor.

There are put restrictions applied on days between the draw down notice date and the closing date with respect to that particular put. During such time, the Company shall not be entitled to deliver another draw down notice. In addition, the Investor will not be obligated to purchase shares if the Investor’s total number of shares beneficially held at that time would exceed 4.99% of the number of shares of the Company’s common stock as determined in accordance with Rule 13d-1(j) of the Securities Exchange Act of 1934, as amended. In addition, the Company is not permitted to draw on the facility unless there is an effective registration statement to cover the resale of the shares.

The Investment Agreement also contains customary representations and warranties of each of the parties. The assertions embodied in those representations and warranties were made for purposes of the Investment Agreement and are subject to qualifications and limitations agreed to by the parties in connection with negotiating the terms of the Investment Agreement. The Investment Agreement further provides that the Company and the Investor are each entitled to customary indemnification from the other for, among other things, any losses or liabilities they may suffer as a result of any breach by the other party of any provisions of the Investment Agreement or Registration Rights Agreement (as defined below). Investor should read the Investment Agreement together with the other information concerning the Company that the Company publicly files in reports and statements with the Securities and Exchange Commission (the “SEC”).

Pursuant to the terms of the Registration Rights Agreement, the Company is obligated to file one or more registrations statements with the SEC within twenty-one (21) days after the date of the Registration Rights Agreement to register the resale by the Investor of the shares of common stock issued or issuable under the Investment Agreement. In addition, the Company is obligated to use all commercially reasonable efforts to have the registration statement declared effective by the SEC within 90 days after the registration statement is filed.

This Investment Agreement was amended on August 3, 2017 to allow for the reservation of 65,445,000 shares of the Company’s Common Stock for issuance to the Investor pursuant to the corrected Investment Agreement.

The Company has filed a S-1 Registration Statement with the Securities and Exchange Commission to include 7,936,600 shares of its Common Stock for issuance in connection with the first tranche of the Equity Line Facility. The S-1 Registration Statement, as amended, was declared effective by the Securities and Exchange Commission on January 11, 2018. The Company intends to access the Equity Line Facility only when the Company’s stock prices reach levels that its management deems fairly-valued.

SETTLEMENT AGREEMENT WITH THINH HUNG INVESTMENT CO.

On August 3, 2017, the Company signed a Settlement Agreement and agreed to pay Thinh Hung Investment Co. a total amount of $381,000, which includes the outstanding balance of $288,219 that is reclassified as Customer Advances in the Long-term Liability portion of the attached balance sheet and accrued interest as agreed by the two parties.

According to the Settlement Agreement, the Compapny will transfer or cause to be transferred at least 480,000 shares of Common Stock of PHI Group, Inc. to an authorized represenatative of Thinh Hung. In the event Thinh Hung is unable to realize at least $381,000 from the sale of PHI Stock, PHI Group will either transfer additional Common Stock of PHI Group, Inc. or other marketable securities to the authorized reprenesattive designated Thinh Hung or pay cash directly to Thinh Hung until the total amount of $381,000 is reached. PHI Group, Inc. agreed to use its best efforst to pay off any outstanding balance by October 31, 2017. After the receipt of at least 480,000 shares of PHI Group Stock by the authorized representative of Thinh Hung, Thinh Hung shall deliver and transfer all the Vietnam Foods Corporation Stock to PHI Group, Inc. or its authorized representative. As of the day of this report, the Company has not been able to transfer 480,000 shares of its Common Stock to Thinh Hung’s authorized representative.

BUSINESS COOPERATION AGREEMENT WITH TNB VIETNAM JSC

On August 7, 2017, the Company signed a Business Cooperation Agreement with TNB Vietnam JSC, a Vietnamese company located in the Mekong Delta that specializes in cultivating and processing “forest” bitter melon (momordica charantia). According to the agreement, TNB and PHI Group plan to facilitate mutual growth and expansion including but not limited to: (1) Purchase of finished forest bitter melon products from TNB for distribution and sale in the U.S., Europe, China and other select international markets under PHI Group’s private labels; (2) Purchase of semi-processed ingredients from TNB in order to manufacture other end products for export markets; (3) Strategic alliance by acquisition of equity interest in TNB and/or exchange of ownership between TNB and PHI via stock swap; and (4) Co-developing and cultivating forest bitter melon as well as manufacturing and marketing its products in the U.S. and other international markets with potential for long-term growth.

FORMATION OF PHI EZ WATER TECH, INC. SUBSIDIARY

On August 7, 2017, the Company incorporated PHI EZ Water Tech, Inc., a Wyoming corporation, as a subsidiary to manage and commercialize the water treatment systems developed by Dr. Martin Nguyen, a Vietnamese-American scientist.

These systems are among a series of products developed by Dr. Nguyen using quantum technology in a combination of disciplines including applied physics, applied water science, biological system engineering and agricultural economics. Incorporating complex electromagnetic force, advanced oxidation, electrocoagulation and ultrasound, they can reduce water consumption by up to 30% and fertilizer usage by 30%-50% while boosting crop yields by 30%-50%. The water produced from these systems is also good for human health and able to stabilize water environments to increase yields for aquatic and wet paddy farming. (www.phiezwater.com).

MEMORANDUM OF UNDERSTANDING WITH AQUARIUS POWER, INC.

On August 9, 2017, the Company signed a Memorandum of Understanding (“MOU”) with Aquarius Power, Inc. (“AQP”), a Texas company, to provide renewable energy technology to Vietnam. PHI has also made an investment to become a strategic shareholder of AQP.

PHI and AQP will form a joint venture company which will have the exclusive right to sublicense, sell, build, own and/or operate the AQP energy systems in Vietnam on an exclusive basis.

PHI will be responsible for: Obtaining all necessary approvals to build, own and operate AQuarius Energy System; Securing a binding and acceptable power purchase agreement (PPA) from the governmental authority; Providing the land for the Aquarius Energy System; Providing the construction and civil engineering know-how to build the energy pools; Providing management, engineering and operational manpower to build and operate the AQuarius Engineering System; and Providing the interconnection of the AQuarius Energy System to the national grid.

AQP’s responsibilities include: Support PHI in obtaining the Power Purchase Agreement; Conduct a site survey and provide blueprints for a tailor made Energy System; Provide technical support for the construction and operation of the Energy System (Includes training for construction, installation and operations); Build, Ship, the AQuarius Energy System(s); and Install and commission the AQuarius Energy System as required.

AQuarius Wave Energy System is a land-based wave energy system that uses a combination of gravity and “buoyancy” found within the interaction between air and water to produce power that can be used to generate electricity and / or produce potable water. AQuarius is a baseload zero carbon footprint that uses no consumables and can be installed virtually anywhere on the planet that is cost effective against any fossil fuel alternatives. The system, which can be built turn-key within 6 months of obtaining permits, has an operating life of over 60 years and is clean, scalable, reliable, and extremely flexible. Its operating cost is comparably low as hydroelectric systems.

On October 6, 2017, the Company signed a new Memorandum of Understanding (“MOU”) with AQuarius Power, Inc. to expand the scope of cooperation and provide the same renewable energy technology to Eastern Europe and the European Region. For Eastern Europe the Company is in the process of planning to build a pilot unit in Romania using AQP technology. PHI also intends to make additional investments in AQP. As of the date of this report, the Company has made an investment of $5,000 in AQuarius Power, Inc. and intends to continue making additional investments via purchase of AQP’s Common Stock.

MASTER BUSINESS COOPERATION AGREEMENT WITH THO XUAN DUONG JOINT STOCK COMPANY

On August 14, 2017, the Company signed a Master Business Cooperation Agreement with Tho Xuan Duong Joint Stock Company, a Vietnamese traditional medicine company with 400 years of history, to cooperate with each other in the following areas: (1) PHI will assist TXD to promote and advertise TXD’s brand and traditional medicinal products and treatments on a global basis; (2) PHI will assist TXD to set up manufacturing facilities and/or establish strategic alliances with pharmaceutical production and distribution companies in Europe, the United States, the Middle East, Central and South America, Africa and other selective geographical areas; (3) PHI will assist TXD to access funding sources to implement TXD’s business plan; (4) PHI will discuss and negotiate with TXD to consider an acquisition of equity interest in TXD and/or exchange of ownership between TNB and PHI by way of stock swap to form a strategic alliance between the two companies; (5) PHI and TXD will further discuss the potential of taking TXD public in the U.S. and/or European Stock Markets to provide long-term financing capabilities for TXD’s development and growth; (6) PHI and TXD will cooperate to build and develop raw material areas, preliminary and full-scale processing facilities for herbal medicines, and herbal medicine tourism area in Sapa, Lao Cai Province, Northern Vietnam; (7) PHI will assist TXD to obtain special medical devices using Low Level Laser Light Therapy technologies developed by American Laser Healthcare Corp., a US company, and cleared by the U.S. FDA for pain treatment, needles acupuncture, diabetes Type 2, and 18 devices, as well as access other medical devices for TXD’s usage as needed; and (8) PHI and TXD may jointly develop, manufacture and market other products and/or engage in other business activities that may be of mutual interest to both parties.

AGREEMENT TO ACQUIRE 51% OWNERSHIP IN 400-ACRE MINING CLAIMS IN GRANT COUNTY, OREGON AND CLOSING OF TRANSACTION

On September 2, 2017, American Pacific Resources, Inc., a Wyoming corporation (“APR”) and wholly owned subsidiary of the Company, entered into an Agreement of Purchase and Sale with Rush Gold Royalty Inc, a Wyoming corporation, to acquire a 51% ownership in twenty-one mining claims over an area of approximately 400 acres in Granite Mining District, Grant County, Oregon, U.S.A., in exchange for a total purchase price of twenty-five million U.S. Dollars ($US 25,000,000) to be paid in a combination of $20 million in PHI Group, Inc.’s Class A Series II Convertible Cumulative Redeemable Preferred Stock (“Preferred Stock”), and $5 million in a combination of cash and a demand promissory note upon the closing of this contemplated transaction.

The PHI Group’s Class A Series II Preferred Stock is priced at $5 per share (“Original Price per Share”), carrying a cumulative dividend rate of 8%, redeemable at 120% premium to the Original Price per Share, and convertible to Common Stock of PHI Group at 25% discount any time after two years commencing its issuance or to Common Stock of APR at 50% discount to the market price when APR has become a fully-reporting company.

This transaction was closed effective October 3, 2017.

On April 19, 2018, Rush Gold Royalty, Inc. (“RGRI”), American Pacific Resources, Inc. (“APRI”) and PHI Group, Inc. (“PHIL”) signed an Amendment to the Agreement of Purchase and Sale dated September 2, 2017 among the same parties with respect to Article 2 of said Agreement of Purchase and Sale as follows:

a. RGRI shall surrender and return to PHIL 4,000,000 shares of PHI Group, Inc.’s Series II Class A Convertible Cumulative Redeemable Preferred Stock, Certificate No. P-A-II-001, that was issued to RGRI by PHIL on 10/3/2017 in connection with the Closing of the referenced Agreement of Purchase and Sale.

b. PHIL shall cancel 4,000,000 shares of PHI Group, Inc.’s Series II Class A Convertible Cumulative Redeemable Preferred Stock, Certificate No. P-A-II-001, that was issued to RGRI on 10/3/2017 in connection with the Closing of the referenced Agreement of Purchase and Sale.

c. APRI shall issue 4,000,000 shares of American Pacific Resources, Inc.’s Series I Class A Convertible Cumulative Redeemable Preferred Stock to RGRI to replace the 4,000,000 shares of PHI Group, Inc.’s Series II Class A Convertible Cumulative Redeemable Preferred Stock, Certificate No. P-A-II-001, issued to RGRI on 10/3/2017, that will have been cancelled by PHIL pursuant to this Amendment.

On April 23, 2018, the Company’s Board of Directors passed a resolution to declare a twenty percent (20%) special stock dividend from its holdings of Common Stock in American Pacific Resources, Inc., a subsidiary of the Company, to shareholders of Common Stock of the Company as follows: (a) Declaration date: April 23, 2018; (b) Record date: May 31, 2018; (c) Payment date: October 31, 2018; (d) Dividend ratio: All eligible shareholders of Common Stock of the Company as of the Record date shall be entitled to receive two (2) shares of Common Stock of American Pacific Resources, Inc. for every ten (10) shares of Common Stock of PHI Group, Inc. held by such shareholders as of the referenced Record date.

TECHNICAL ASSISTANCE AGREEMENT WITH AUBURN UNIVERSITY

On September 25, 2017, the Company signed a Technical Assistance Agreement with Auburn University to conduct a research program in order to determine the market segments related to supply and demand of medicinal and aromatic plants in the world, and then focus more specifically on major production and consumption markets. The first four topics of the research program focus on the production, medicinal applications, and market analysis of turmeric, saffron, bitter melon, and some major potential and aromatic plants. The last topic covers the trends and solutions of switching from conventional farming to organic farming of these crops to meet the future food and medicinal consumption. The research program began on October 1, 2017 and will end on September 30, 2018.

APPOINTMENT OF CHIEF TECHNOLOGY OFFICER AND ORGANIC FERTILIZER PROGRAM

On October 28, 2017, Abundant Farms, Inc., a wholly owned subsidiary of PHI Group, Inc., signed an Employment Agreement with Mr. Lam Duong and appointed the same as Chief Technology Officer/Chief Operation Officer for Abundant Farms. After a trial period of three months, the Employment Agreement will be effective for three years and may be renewed by mutual consent of both the Company and the employee. Mr. Duong will be responsible for all technological aspects of Abundant Farms, including the development of organic fertilizers and other agricultural and medicinal products.

Holding a Master of Science in agriculture, Mr. Duong has held teaching and research positions at Nong Lam University, Vietnam, and Auburn University, Alabama, U.S.A. during the last sixteen years. He has researched, developed and successfully produced organic fertilizer with his proprietary formulations that has provided excellent results for a variety of crops. Mr. Duong will further enhance his methodologies and start production of organic fertilizer for Abundant Farms in North America and Eastern Europe.

AGREEMENT TO DEVELOP A 67,000-ACRE GOLD MINING PROJECT IN LAOS

On November 4, 2017, American Pacific Resources, Inc. (“APR”) (https://aprgold.com/) signed a Business Cooperation and Investment Agreement with Suda Lattana Co., a Lao company, to develop a 67,000-acre gold mining project in the Province of Savannakhet, Laos.

According to the Agreement, APR will be responsible for financing and operating the gold mining project and will share a majority of the project’s net profits after accounting for the costs of capital and operating expenses. It is estimated that 3,527,000 ounces of gold can be mined from this concession, subject to further professional study and verification. The Agreement is valid until December 31, 2066. It has been reported that Sepon, another gold mine in Savannakhet operated by Lane Xang Minerals Ltd., a majority-owned subsidiary of MMG Company (http://www.mmg.com/en/), has produced over 1.2 million ounces of gold through open pit mining and conventional treatment of oxide gold ore during its operations.

AGREEMENT TO SUPPLY PHARMACEUTICAL PRODUCTS, MEDICAL EQUIPMENT AND HEALTHCARE SUPPLIES TO LAOS.

On November 4, 2017, Phivitae Corporation, a wholly owned subsidiary of the Company, signed a Business Cooperation Agreement with Suda Lattana Co., a Lao company, to provide pharmaceutical products, medical equipment and healthcare supplies to Laos.

According to the Agreement, Phivitae Corp. will be responsible for identifying and forming strategic alliance with reputable international manufacturers and suppliers in North America, European Union and India to provide pharmaceutical products, medical equipment and healthcare supplies that meet or exceed international required standards to Laos and its neighboring markets. The term of the Agreement is for six years and may be renewed every five years thereafter by mutual consent of both parties.

BUSINESS CONSULANCY AND STRUCTURING AGENCY AGREEMENT TO SET UP INSTITUTIONAL BANK FUNDS IN LUXEMBOURG

On November 30, 2017, the Company signed an agreement with a structuring agent and legal experts to set up a bank fund in Luxembourg in order to provide financing for the Company’s and its clients’ projects.

The Reserved Alternative Investment Fund (RAIF) can be established under the form of common funds (“FCP”), investment companies with variable capital (“SICAV”) or under the form that does not have to have the legal form of a SICAV or an FCP. There will be no restriction in terms of eligible assets. RAIFs are free to introduce any kind of assets and financial instruments in their investment policy. According to the Luxembourg Law of July 12, 2013, RAIFs must entrust their assets to a Luxembourg custodian bank for safekeeping and must appoint an approved statutory auditor.

One of the distinctive advantages of RAIF is that it may have various sub-funds, each corresponding to a distinct part of the assets and liabilities of the RAIF. As such, sub-funds can be established under a RAIF umbrella to target different investment opportunities in a variety of industries as desired.

On February 21, 2018, the Company signed an amendment to the Business Consultancy and Structuring Agency Agreement to be solely responsible for all the costs of Euros 3,500,000 associated with establishing the RAIF.

INVESTMENT AGREEMENT WITH GRIDLINE COMMUNICATIONS, INC.

On December 15, 2017, PHI Group, Inc. entered into an Investment Agreement with Gridline Communications, Inc. (“Gridline”) to form a special purpose vehicle (“SPV”) under the name of Matrix Communications, Inc., as the holding company to acquire all the stock of Gridline Communications and its sister company GridlineX as well as finance and implement Gridline’s high-speed broadband communications business.

According to the Investment Agreement, the Matrix Communications will acquire all ownership and rights of the Investee in connection with high-speed broadband networks and related supporting assets to serve government, commercial and consumer telephony, data and video needs in the Republic of Equatorial Guinea as the first point of entry into the African Continent. Matrix Communications’ authorized capital will include 600 million shares of Common Stock and 300 million shares of Preferred Stock. PHI Group will be the sole holder of Common Stock in the SPV initially and will retain fifteen percent equity interest thereof following the capitalization plan. This transaction has not closed as of the date of this report.

MEMORANDUM OF UNDERSTANDING TO BUILD INDUSTRIAL PARK, GREENHOUSES, POWER PLANT AND WATER PARK IN TRANSYLVANIA, ROMANIA

On December 18, 2017, PHI Group, Inc. (the “Company”), entered into a Memorandum of Understanding (“MOU”) with SC Z.I.O.S. SRL, a Romanian company, to develop an industrial park in Transylvania, Romania.

According to the MOU, PHI Group will cooperate with the owner of SC Z.I.O.S SRL to develop, build and operate a gas-fired power plant and greenhouses over the ZIOS land parcel and water park adjacent to it.

The Company is committed to investing or causing to be invested the required capital to finance the building of a minimum 10-MW gas-fired power plant (renewable energy with steam processing plant), the building of a minimum 10-hectares of greenhouse and investing 20 million Euros in a water park and health retreat wellness resort taking advantage of the salt lakes adjacent to the ZIOS land parcel.

Both parties agree to accept the value of the ZIOS land parcel to be equivalent to seven (7) million Euros and acknowledge that ZIOS currently has a debt of 1.4 million Euros on its books.

The owner of SC Z.I.O.S. SRL agrees to contribute 3.5 million Euros from value of the ZIOS land parcel toward the total capitalization to develop, build and operate the gas-fired power plant, the greenhouse and the water park and will hold a proportionate percentage of ownership in the entity that owns these projects based on the total capitalization amount during the first two years.

PHI Group agrees to pay or cause to be paid to owner of SC Z.I.O.S. SRL two (2) million Euros after the all required approvals and permits are granted by the pertinent Romanian governmental authorities to build the gas-fired power plant, the greenhouse and the water park. This sum of money and the payment of 1.4 million Euros to the Z.I.O.S. creditor will come from the structured financing in connection with the capitalization for these projects, unless agreed otherwise by the pertinent parties afterwards. In addition, the balance of 1.5 million Euros will be paid to the owner of SC Z.I.O.S. SRL over a period of 5 years based on cash flow milestones from operations.

The Company and SC Z.I.O.S. SRL will proceed towards the signing of a definitive agreement to consummate the transactions mentioned herein between the two parties or as soon as practical.

MEMORANDUM OF UNDERSTANDING WITH VIETNAM GREEN AGRICULTURE COMPANY LTD.

On January 3, 2018, the Company signed a Memorandum of Understanding (“MOU”) with Vietnam Green Agriculture Company, Ltd. (“VinaXanh”) to cooperate in the manufacture and sale of bio-organic fertilizer products developed by VinaXanh, both in Vietnam and in international markets.

VinaXanh has successfully formulated and tested proprietary bio-organic fertilizer and obtained the required governmental licenses to produce about half a dozen products using amino acids, peptides, fulvic acid, organic chelates, and other organic ingredients. VinaXanh fertilizer products have been effectively applied to numerous plants and crops in Vietnam, including black pepper, coffee, orange, lime, tangerine, grapefruit, jackfruit, dragon fruit, red pepper, tea, rice, etc. and have been granted fifteen different awards for excellence from 2015 to 2017. VinaXanh fertilizer has shown to be especially potent in combatting the deadly greening disease.

PHI Group intends to work with VinaXanh to boost the production and sale of these bio-organic fertilizer products in Vietnam and also integrate certain applicable aspects of VinaXanh’s methodologies into Abundant Farms, Inc.’s organic fertilizer program in the U.S. and Romania. In addition, the Company plans to incorporate the special water treatment system by PHI EZ Water Tech, Inc., a subsidiary of PHI Group, (www.phiezwater.com) with VinaXanh’s products to optimize plant health and crop yields for farmers in Vietnam.

BLOCKCHAIN TECHNOLOGY CONSULTING SERVICE AGREEMENT

On February 23, 2018, the Company signed a consulting service agreement with International Blockchain Consulting (“IBC”), an Australian company, to provide information, evaluation and consulting services to the Company in IBC’s areas of knowledge and expertise, including but not limited to all the technical, legal, financial and marketing support services required to launch a successful ICO.

IBC agrees to perform services for the Company to launch an ICO for Asia Diamond Exchange (“ADE”), a subsidiary of PHI Group to be established in Singapore or another foreign country, or for any other entity the Company elects to engage that may be approved and adopted by PHI Group for use in its business strategy. As such, IBC will be providing bona fide services to PHI Group and/or its customers. The services to be provided by IBC will not be in connection with the offer or sale of securities in a capital-raising transaction, and will not directly or indirectly promote or maintain a market for PHI Group’s securities.

AGREEMENTS WITH VIETNAMESE COMPANIES TO GROW SACHA INCHI

In March 2018, the Company signed agreements with Bao Lam LLC, a company registered in the Province of Dak Lak Province, and Phuong Hoang Investment and Development LLC, a company registered in Ha Tinh Province, Vietnam, to grow a total of 3,000 hectares (approximately 7,400 acres) of sacha inchi in the provinces of Dak Lak, Dak Nong and Thua Thien Hue for export to the U.S. and European markets.

Originally from the Amazon rainforest and the high Andes Mountains of Peru, sacha inchi has been part of the Inca diet for 3,000 years. The sacha inchi plant, plukenetia volubilis, a rainforest vine, with star-shaped seed pods, is currently cultivated primarily in parts of Southeast Asia and South America. Sacha inchi has been recognized for a number of health benefits such as complete protein, weight loss, heart health, bone health, and skin and hair health.

According to the agreements, the Company will be responsible for providing the required capital for these projects and will own 70-75% equity interest in the joint venture companies.

AGREEMENT BETWEEN AMERICAN PACIFIC RESOURCES, INC. AND GILDEXSHOP

On February 28, 2018, American Pacific Resources, Inc. (“APRI”), a subsidiary of the Company, signed a Business Cooperation with GildexShop Pte Ltd. (“GLDX”), a company to be established in Singapore. According to the agreement, APRI and GLDX will primarily cooperate with each other to accomplish the following objectives:

1. Capitalization of APRI: GLDX will issue and circulate a certain amount of cryptocurrency tokens using blockchain technology in order to raise capital for APRI to implement its business plan.

2. Using APRI’s assets as guarantee for GLDX ICO’s: APRI agrees to guarantee the value of the GLDX ICO tokens pursuant to the following terms and conditions:

a. In the event the trading prices of GLDX ICO tokens fall below their original purchase prices anytime after GLDX tokens are listed on a reputable cryptocurrency exchange, APRI agrees to guarantee the value of all such GLDX ICO tokens that are purchased by investors by allowing the token holders to exchange the original purchase prices of such ICO tokens for gold from APRI at 50% discount to the Market Price (as defined herein) of gold at the time of exchange. Market Price shall mean the 10-day average closing spot price of gold on the London Metal Exchange (LME) immediately prior to the date of the request for exchange by the ICO token holders.

b. Holders of GLDX ICO tokens may select one of the following options for the receipt of the APRI gold guarantee:

(i). Receipt of physical gold bar(s) from APRI or its affiliate(s).

(ii). Receipt of Ethereum or alternatively acceptable crytocurrencies equivalent to the value of the original ICO purchase prices.

(iii) Receipt of cash through wire transfer to token-holder’s bank account after sale of the guarantee gold position(s).

3. GLDX shall be responsible for providing the required capital for APRI to set up the processing facilities to recover gold and other precious metals from its Gold Assets. The amounts of capital to be provided to APRI by GLDX will be done in tranches and based on a schedule of funding and use of proceeds to be determined and agreed upon by both APRI and GLDX.

4. APRI covenants and warrants that it shall sell refined gold and other products of precious metals from its Gold Assets to GLDX at 50% discount to Market Price as defined above until GLDX has recovered at least twice the amount(s) of its capital investment in APRI or the end of the five-year term of this Agreement, whichever occurs later.

5. Compliance with Various Jurisdictions and the Requirements of the U.S. Securities and Exchange Commission: GLDX shall strictly comply with the requirements of the appropriate jurisdictions with respect to the offerings of its GLDX ICO tokens and shall not offer any of such tokens to U.S. investors unless and until it has met all the requirements of the U.S. Securities and Exchange Commission in connection with the offering and sale of the tokens.

AGREEMENT WITH CLIENT-PARTNER FOR PARTICIPATION IN LUXEMBOURG RESERVED ALTERNATIVE INVESTMENT FUND

On March 27, 2018, Thanh T. Vu, an individual, (“TTV”) signed an agreement with the Company to participate in a Luxembourg Reserved Alternative Investment Fund (“RAIF”). According to the agreement, TTV will pay the Company $2,000,000 to participate in the RAIF, of which $500,000 is due upon the signing and $1,500,000 to be paid fifteen days after the signing of the agreement. As of March 31, 2018, the Company recorded $500,000 as Accounts Receivable, of which $320,000 was received from TTV on April 10, 2018. TTV shall be entitled to all the benefits in connection with the RAIF, including but not limited to voting rights, profit sharing, cash and securities dividends, as well as other benefits related to ownership in the fund.

NOTE 18 – GOING CONCERN UNCERTAINTY

As shown in the accompanying consolidated financial statements, the Company has accumulated deficit of $40,973,433 as of March 31, 2018. For the quarter ended March 31, 2018, the Company incurred a net loss of $677,029 as compared to a net loss in the amount of $309,219 during the same period ended March 31, 2017. 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, 2018 and beyond.

In the next twelve months the Company intends to continue pursuing its scope of business consisting of mergers and acquisitions, investment in selective industries and providing advisory and consulting services through our wholly owned subsidiary PHI Capital Holdings, Inc. In particular, we will seek and buy all or controlling interests in target companies of various industries, including but not limited to energy, natural resources, agribusiness, technology, transportation, mining, oil & gas, financial services, healthcare, and pharmaceuticals. In addition, we also plan to invest in special situations that may potentially generate significant revenues and profitability for the Company both in the short term and the long term. Furthermore, we will continue to advise and consult for international clients and are in the process of setting up a Reserved Alternative Investment Fund in Luxembourg in order to raise capital for various investment projects. The Company anticipates generating substantial amounts of revenues through the merger and acquisition program, investment in special situations, and advisory services mentioned herein. We will strive to build a critical mass through acquisition and organic growth in order to uplist the Company’s stock to national exchange in the near future. However, no assurances could be made that management would be successful in achieving its plan. The president and chairman of the Company is committed to securing funding for the Company’s operations from various sources for the next 12 months.

NOTE 19 – SUBSEQUENT EVENT

These financial statements were approved by management and available for issuance on May 15, 2018. Subsequent events have been evaluated through this date.

JOINT BUSINESS COOPERATION AGREEMENT WITH INDONESIAN AND GERMAN COMPANIES

On April 5, 2018 , the Company signed a Joint Business Cooperation Agreement with PT Mega Kencana Persada, an Indonesian company with principal address at No 2, Jln Kepodang Raya K9, Jakarta Selatan 15412, Indonesia, (hereinafter referred to as “MKP”), and Smartway GmbH, a company organized and existing under the laws of Federal Republic of Germany, with principal address at Liszstr. 17, D-53115, Bonn, Germany (hereinafter referred to as “SMW” to primarily cooperate with one other to develop certain joint business opportunities, particularly research and development in the Indonesian maritime commuter segment, including application of SMW’s logistical technology for optimized inter-provincial ferry operations and digital online payment system for maritime passengers. Moreover, the parties may from time to time cooperate with each other and jointly engage in other business activities that deem mutually desirable and beneficial to all parties.

The Parties agree that:

a) MKP shall be responsible for conducting all research and development, field survey, data collection and capturing business opportunities and securing local government licensing requirements.

b) SMW shall provide or cause to be provided system technologies to support market segments submitted by MKP with respect to the Indonesian maritime transportation, land transportation, and online payment for Indonesian overseas travel.

c) PHI shall provide assistance with respect to financing, capitalization, investor and public relations, business development, going public, corporate governance, growth and expansion strategy and other pertinent corporate activities that deem beneficial to the scope of business cooperation mentioned herein.

d) MKP, PHI and SMW agree to form a Singaporean company as the holding company (“HoldCo”) for the contemplated business activities mentioned herein.

e) The roles, responsibilities and benefits of each party in connection with the scope of business mentioned herein will be determined by HoldCo.

ISSUANCE OF COMMON STOCK OF PHI GROUP, INC.

On April 13, 2018, the Company issued 4,653,954 shares of free-trading Common Stock of PHI Group, Inc. to Crown Bridge Partners, LLC., holder of the Common Stock Purchase Warrant dated June 9, 2017 in connection with the $35,000.00 Convertible Promissory Note of June 9, 2017 by the Company, for the cashless exercise of $17,700.00 value of warrants. The total warrant value remaining after this exercise was $0.00.

On April 17, 2018, the Company made a payment in the amount of $25,000.00, consisting of $16,666.67 of principal and $8,333.33 of prepayment premium, to Power Up Lending Group, LLC. Investments, Inc. towards the total principal balance of $53,000.00 from the Convertible Promissory Note dated as of 10/18/2017 between Power Up Lending Group, LLC. and the Company. The principal balance due remaining under this Note after this payment was $36,333.33.

On April 19, 2018, the Company issued 1,169,591 shares of free-trading Common Stock of PHI Group, Inc. to Power Up Lending Group Ltd., holder of a Convertible Promissory Note dated as of 10/18/2017 by the Company, for the conversion of $20,000.00 of the principal amount of the Note, at the conversion price of $0.0171 per share. The principal amount of the Note remaining after this conversion was $16,333.33.

On April 23, 2018, the Company issued 1,127,820 shares of free-trading Common Stock of PHI Group, Inc. to Power Up Lending Group Ltd., holder of a Convertible Promissory Note dated as of 10/18/2017 by the Company, for the conversion of $15,000.00 of the principal amount of the Note, at the conversion price of $0.0133 per share. The principal amount of the Note remaining after this conversion was $1,333.33.

On April 24, 2018, the Company issued 295,156 shares of free-trading Common Stock of PHI Group, Inc. to Power Up Lending Group Ltd., holder of a Convertible Promissory Note dated as of 10/18/2017 by the Company, for the conversion of $1,333,33 of the principal amount of the Note together with $2,120 of accrued and unpaid interest thereto, totaling $3,453.33, at the conversion price of $0.0117 per share. The principal amount of the Note remaining after this conversion was $0.00.

On April 27, 2018, Tina Phan, the Company’s Corporate Secretary and Treasurer, converted $120,000.00 of the accrued and unpaid salaries for the fiscal years ended June 30, 2012 and June 30, 2013 into 4,629,630 shares of Restricted Common Stock of PHI Group, Inc. at the effective price of $0.02592 per share, pursuant to the Company’s corporate resolutions dated November 2, 2012, which still remain in full force and effect.

On April 27, 2018, Henry Fahman, the Company’s Chief Executive Officer and Chief Financial Officer, converted $300,000.00 of the accrued and unpaid salaries for the fiscal years ended June 30, 2012 and June 30, 2013 into 11,574,074 shares of Restricted Common Stock of PHI Group, Inc. at the effective price of $0.02592 per share, pursuant to the Company’s corporate resolutions dated November 2, 2012, which still remain in full force and effect.

SECOND AMENDMENT TO AGREEMENT OF PURCHASE AND SALE BETWEEN AMERICAN PACIFIC RESOURCES, INC. AND RUSH GOLD ROYALTY, INC.

On April 19, 2018, Rush Gold Royalty, Inc. (“RGRI”), American Pacific Resources, Inc. (“APRI”) and PHI Group, Inc. (“PHIL”) signed a Second Amendment to the Agreement of Purchase and Sale dated September 2, 2017 among the same parties with respect to Article 2 of said Agreement of Purchase and Sale as follows:

1.	REPLACEMENT OF PREFERRED STOCK.

SPECIAL STOCK DIVIDEND FROM AMERICAN PACIFIC RESOURCES, INC. SUBSIDIARY

AGREEMENT WITH CLIENT-PARTNER FOR PARTICIPATION IN LUXEMBOURG RESERVED ALTERNATIVE INVESTMENT FUND

On April 23, 2018, Dien V. Nguyen, an individual, (“DVN”) signed an agreement with the Company to participate in a sub-fund of Luxembourg Reserved Alternative Investment Fund (“RAIF”). According to the agreement, DVN will pay the Company $2,000,000 upon signing to participate in a RAIF sub-fund. NVD shall be entitled to all the benefits in connection with the sub-fund, including but not limited to voting rights, profit sharing, cash and securities dividends, as well as other benefits related to ownership in the sub-fund.

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. (the “Company” or “PHI”) is a Nevada corporation engaged in mergers and acquisitions as a principal (www.phiglobal.com). The Company has adopted plans to acquire established operating businesses in selective industries and invest in various ventures that may potentially create significant long-term value for our shareholders. In addition, we also provide corporate finance services, including merger and acquisition advisory and consulting services for client companies through our wholly owned subsidiary PHI Capital Holdings, Inc. (www.phicapitalholdings.com). No assurances can be made that the Company will be successful in achieving its plans.

BACKGROUND

Originally incorporated in June 1982 as JR Consulting, Inc., the Company was foremost engaged in mergers and acquisitions and had an operating subsidiary, Diva Entertainment, Inc., which operated two modeling agencies, one in New York and one in California. Following the business combination with Providential Securities, Inc., a California-based financial services company, the Company changed its name to Providential Securities, Inc. (Nevada) in January 2000. The Company then changed its name to Providential Holdings, Inc. in February 2000. In October 2000, Providential Securities withdrew its securities brokerage membership and ceased its financial services business. Subsequently, in April 2009, the Company changed its name to PHI Group, Inc. From October 2000 to October 2011, the Company and its subsidiaries were engaged in mergers and acquisitions advisory and consulting services, real estate and hospitality development, mining, oil and gas, telecommunications, technology, healthcare, private equity, and special situations. In October 2011, the Company discontinued the operations of Providential Vietnam Ltd., Philand Ranch Limited, a United Kingdom corporation (together with its subsidiaries Philand Ranch - Singapore, Philand Corporation - US, and Philand Vietnam Ltd. - Vietnam), PHI Gold Corporation (formerly PHI Mining Corporation, a Nevada corporation), and PHI Energy Corporation (a Nevada corporation), and began to mainly focus on acquisition and development opportunities in energy and natural resource businesses. Starting July 2016, the Company has engaged Milost Advisors, Inc., a New York-based investment-banking firm, as its buy-side advisor and begun to seek acquisition opportunities in other industries besides energy and natural resources. In addition, PHI Capital Holdings, Inc., a wholly owned subsidiary of PHI, continues to provide corporate and project finance services, including merger and acquisition (M&A) advisory and consulting services for other companies in a variety of industries.

BUSINESS STRATEGY

PHI Group Inc.’s strategy is to:

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

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

3. Design and implement robust management systems; and

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

SUBSIDIARIES:

As of March 31, 2018, the Company owns 100% of the following subsidiaries: PHI Capital Holdings, Inc., a Wyoming corporation, American Pacific Resources, Inc., a Wyoming corporation, Abundant Farms, Inc., a Florida corporation, PHI Group EB-5 Regional Center, LLC, a Florida limited liability company, PHIVITAE Corporation, a Wyoming corporation, and Constructii SA Group, Inc., a Delaware corporation. In addition, the Company owns 75% of PHI EZ Water Tech, Inc., a Wyoming corporation.

PHI CAPITAL HOLDINGS, INC.

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

On September 20, 2017, PHI Capital Holdings, Inc. applied for a Certificate of Domestication and filed Articles of Domestication with the office of the Secretary of State of Wyoming to re-domicile this subsidiary’s jurisdiction to the State of Wyoming. On October 11, 2017 the Company dissolved PHI Capital Holdings, Inc. with the State of Nevada.

AMERICAN PACIFIC RESOURCES, INC.

American Pacific Resources, Inc. (“APR”) is a Wyoming corporation established in April 2016 with the intention to serve as a holding company for various natural resource projects. On September 2, 2017, APR entered into an Agreement of Purchase and Sale with Rush Gold Royalty, Inc. (“RGR”), a Wyoming corporation, to acquire a 51% ownership in twenty-one mining claims over an area of approximately 400 acres in Granite Mining District, Grant County, Oregon, U.S.A., in exchange for a total purchase price of twenty-five million U.S. Dollars ($US 25,000,000) to be paid in a combination $20 million in PHI Group, Inc.’s Class A Series II Convertible Cumulative Redeemable Preferred Stock (“Preferred Stock”), and $5 million in cash and demand promissory note upon the closing of this transaction. This transaction was closed effective October 3, 2017.

The PHI Group’s Class A Series II Preferred Stock was priced at $5 per share (“Original Price per Share”), carrying a cumulative dividend rate of 8%, redeemable at 120% premium to the Original Price per Share, and convertible to Common Stock of PHI Group at 25% discount two years after issuance or to Common Stock of APR at 50% discount to the then relevant market price when APR has become a fully-reporting company.

On April 19, 2018, Rush Gold Royalty, Inc., American Pacific Resources, Inc. and PHI Group, Inc. (“PHI”) signed an Amendment to the Agreement of Purchase and Sale dated September 2, 2017 among the same parties with respect to Article 2 of said Agreement of Purchase and Sale as follows:

a. RGRI shall surrender and return to PHI 4,000,000 shares of PHI Group, Inc.’s Series II Class A Convertible Cumulative Redeemable Preferred Stock, Certificate No. P-A-II-001, that was issued to RGR by PHI on 10/3/2017 in connection with the Closing of the referenced Agreement of Purchase and Sale.

b. PHI shall cancel 4,000,000 shares of PHI Group, Inc.’s Series II Class A Convertible Cumulative Redeemable Preferred Stock, Certificate No. P-A-II-001, that was issued to RGRI on 10/3/2017 in connection with the Closing of the referenced Agreement of Purchase and Sale.

c. APR shall issue 4,000,000 shares of American Pacific Resources, Inc.’s Series I Class A Convertible Cumulative Redeemable Preferred Stock to RGRI to replace the 4,000,000 shares of PHI Group, Inc.’s Series II Class A Convertible Cumulative Redeemable Preferred Stock, Certificate No. P-A-II-001, issued to RGR on 10/3/2017, that will have been cancelled by PHI pursuant to this Amendment.

SPECIAL STOCK DIVIDEND FROM AMERICAN PACIFIC RESOURCES, INC. SUBSIDIARY

ABUNDANT FARMS, INC.

Abundant Farms, Inc., a Florida corporation formed on December 19, 2106, is engaged in organic farming activity. It seeks to acquire farmland, form joint ventures with governments and other farmers, and lease arable land to grow select crops and medicinal plants that potentially provide superior return on investment. It also plans to produce proprietary organic fertilizer and provides special water treatment systems by PHI EZ Water Tech, Inc. for its own organic farming program and for sale to farmers worldwide.

PHI GROUP REGIONAL CENTER, LLC

PHI Group Regional Center, LLC was formed on March 23, 2017 with the intention to manage a new EB-5 Regional Center in connection with the Company’s organic farming program, Abundant Farms, Inc., and other potential business activities in the State of Florida. On April 27, 2017, an I-924 application was filed with the United States Citizenship and Immigration Service (USCIS) for PHI Group Regional Center, LLC. Under the EB-5 Program, created by Congress to stimulate the U.S. economy through job creation and capital investment, foreign entrepreneurs (and their spouses and unmarried children under 21) are eligible to apply for a Green Card (permanent residence) if they make the necessary investment in a commercial enterprise in the United States that creates or preserves at least 10 permanent, full-time jobs for qualified U.S. workers. The operation of this Regional Center is subject to the review and approval of United States Citizenship and Immigration Service.

PHI EZ WATER TECH, INC.

PHI EZ Water Tech, Inc., a Wyoming corporation, is a majority-owned subsidiary of PHI Group that manages, manufactures and markets a portfolio of innovative water treatment systems and other products developed by Dr. Martin Nguyen for agriculture, healthcare and human consumption. Website: www.phiezwater.com

PHIVITAE CORPORATION

PHIVITAE CORPORATION, a Wyoming corporation, is a wholly-owned subsidiary of PHI Group set up with the intention to acquire a pharmaceutical and medical equipment distribution company in Romania and to manage distribution of medical equipment and pharmaceutical products to emerging markets.

CONSTRUCTII SA GROUP, INC.

CONSTRUCTII SA GROUP, INC., a Delaware corporation, is a wholly-owned subsidiary of PHI Group set up with the intention to acquire a construction and manufacturing company in Romania.

LUXEMBOURG RESERVED ALTERNATIVE INVESTMENT FUND

The Company has engaged a professional structuring agency and a law firm in Luxembourg to assist the Company with respect to the establishment of “PHI Vietnam Growth and Income Funds”, also known as “PHI Vietnam GI Funds,” a Reserved Alternative Investment Fund according to the laws of Luxembourg, as well as establishing a number of sub-funds under it in order to raise capital and invest in certain industries such as energy, agriculture, real estate and hospitality, natural resources and consumer goods.

DISCONTINUED OPERATIONS:

The Company has discontinued the operations of Providential Vietnam Ltd., Philand Ranch Limited – UK (together with its subsidiaries Philand Ranch Ltd-Singapore, Philand Corporation-USA and Philand Vietnam Ltd.), PHI Gold Corporation (now known as NS International Corp.), and PHI Energy Corporation since June 30, 2012.

Cornerstone Biomass Corporation, a Florida corporation, was set up in January 2015 by the Company and the principals of AG Materials, LLC, an Alabama company, to engage in biomass energy. The Company held 51% and the principals of AG Materials held 49% of equity ownership in Cornerstone Biomass Corporation. This subsidiary’s plan was to develop and establish a 200,000 MT wood pellet plant adjacent to Klausner Lumber Mill in Live Oak, Florida. In July 2015, the Company purchased a 10-acre parcel of land from Klausner Holding USA Corporation in order to build the wood pellet plant. Due to subsequent changes in market conditions affecting industrial pellet usage in Europe, Cornerstone Biomass Corp. decided not to pursue this project. The Company has written off its initial investment in Cornerstone Biomass Corp. and sold the land parcel. Cornerstone Biomass Corporation was dissolved effective September 23, 2016.

SPUN-OFF SUBSIDIARIES:

TANS GLOBAL, INC. (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 was incorporated as a Nevada corporation on September 23, 2004. The Company distributed a 15% stock dividend of Provimex, Inc. to PHI Group, Inc.’s 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. 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 merge with HP.ITA Joint Stock Company (“HPVN”), a Vietnamese company, in order to go public in the United States but the Corporate Combination Agreement was subsequently rescinded because HPVN was not able to implement its business plan and complete financial audits according to the U.S. Generally Accepted Accounting Principals (“GAAP”). On September 16, 2016 HP.ITA Corp. changed its name to Tans Global, Inc. with the intention to merge with an operating company and file a registration statement with the Securities and Exchange Commission to become a fully reporting public company in the U.S. PHI Group is expected to hold a small portion of stock in Tans Global, Inc. following the contemplated business combination. This transaction is subject to further review by Tans Global, Inc. and the Company.

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. On April 4, 2014, this company changed its name to Asia Green Corporation (“AGC”) and entered into a business combination agreement with Asia Green Limited Liability Company, a Vietnam-based company, to become a holding company for agroforestry and afforestation business in Vietnam and Southeast Asia. On July 28, 2014, AGC changed its corporate name to Omni Resources, Inc. The Company expects to hold about 10% equity interest in Omni Resources, Inc. following Omni’s recapitalization. As of the date of this report Omni Resources, Inc. is inactive and has not implemented any reorganization plan.

SOUTHEAST ASIA CAPITAL GROUP, INC. (Formerly E-CHECK RECOVERY, INC.)

E-Check Recovery, Inc. was formed in 2004 as a Nevada corporation to engage in financial services. This company has changed its name to Southeast Asia Capital Group, Inc. and is being reorganized to engage in real estate development and investment as well as trading of essential commodities. PHI Group, Inc. will hold minority shares in Southeast Asia Capital after the reorganization.

STOCK OWNERSHIPS:

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

As of March 31, 2018, the Company owned 22,535,714 shares of Catalyst Resource Group, Inc. common stock, a Florida corporation, or equivalent to 2.56%. This company is currently inactive.

MYSON GROUP, INC. (formerly VANGUARD MINING CORPORATION)

As of March 31, 2018, PHI Group, Inc. and PHI Capital Holdings, Inc., a wholly owned subsidiary of the Company, together owned 33,805,106 shares of Common Stock of Myson Group, Inc., a Nevada corporation currently traded on the OTC markets under the symbol “MYSN.”

SPORTS POUCH BEVERAGE COMPANY, INC.

As of March 31, 2018, the Company through PHI Capital Holdings, Inc. owned 292,050,000 shares of Sports Pouch Beverage Company, Inc., a Nevada corporation traded on the OTC Markets under the symbol “SPBV”.

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 March 31, 2018, we estimated the allowance on net deferred tax assets to be one hundred percent of the net deferred tax assets.

RESULTS OF OPERATIONS

The following is a discussion and analysis of our results of operations for the three-month and nine-month periods ended March 31, 2018 and 2017, our financial condition at March 31, 2018 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, 2018 compared to the three months ended March 31, 2017

Total Revenues:

The Company had $500,000 in revenue for the quarter ended March 31, 2018 as compared to no revenue for the quarter ended March 31, 2017, an increase of $500,000 between the two periods. The reason for the increase in revenues between the two periods was due to fee income during the current period versus no earned revenue during the corresponding quarter last year.

Operating Costs and Expenses:

Total operating expenses were $175,052 and $138,774 for the three months ended March 31, 2018, and 2017, respectively. The increase of $36,278 on total operating expenses between the two periods was mainly due to increases in professional services and general and administrative expenses.

Income (Loss) from Operations:

Income from operations for the quarter ended March 31, 2018 was $324,948, as compared to loss from operations of $138,774 for the previous corresponding period ended March 31, 2017. A variance of $463,722 in the gain from operations of the current period and loss from operations of the previous corresponding period was mainly due to the net changes in revenues and total operating expenses between the two quarters.

Other Income and Expenses:

Net other expenses were $1,001,977 for the three months ended March 31, 2018, as compared to net other expenses of $170,445 for the three months ended March 31, 2017. The increase in other expenses of $831,532 between the two periods was mainly due to an increase of $345,017 in net interest expenses, an increase of $79,965 in pre-payment premium, an increase of $394,503 in dividends from Class A Series II Preferred Stock, offset by a decrease of $12,010 from loss on sale of marketable securities between the two periods.

Interest expenses were $502,124 and $157,107 for the three months ended March 31, 2018 and 2017, respectively.

Net Income (Loss):

Net loss for the three months ended March 31, 2018 was $677,029, as compared to net loss of $309,219 for the same period in 2017, which is equivalent to ($0.01) per share for the current period and ($0.03) per share for the corresponding period ended March 31, 2017, based on the weighted average number of basic and diluted shares outstanding at the end of each corresponding period.

Nine months ended March 31, 2018 compared to the nine months ended March 31, 2017

Total Revenues:

The Company had $960,500 in revenues for the nine months ended March 31, 2018, as compared to $90,000 in revenues for the nine months ended March 31, 2017, an increase of $870,500 between the two periods. The reason for the increase in revenues between the two periods was due to sales of goods by one of the Company’s subsidiaries and fee income during the current period versus revenues from consulting services during the corresponding nine-month period last fiscal year.

Operating Costs and Expenses:

Total operating expenses were $444,518 and $491,636 for the nine months ended March 31, 2018, and 2017, respectively. The decrease of $47,118 on total operating expenses between the two periods was mainly due to an decrease in professional services of $38,104 and a decrease in general and administrative expenses of $9,014.

Income (Loss) from Operations:

Income from operations for the nine months ended March 31, 2018 was $515,982, as compared to loss from operations of $401,636 for the previous corresponding period ended March 31, 2017. A variance of $917,618 in the gain from operations of the current period and loss from operations of the previous corresponding period was mainly due to the net changes in revenues and total operating expenses between the two nine-month periods.

Other Income and Expenses:

Net other expenses were $2,189,661 for the nine months ended March 31, 2018, as compared to net other expenses of $543,398 for the nine months ended March 31, 2017. The increase in other expenses of $1,646,263 was mainly due to an increase of $633,879 in net interest expenses, an increase of $784,640 in dividends from Class A Series II Preferred Stock, an increase in pre-payment premium of $130,591, an increase in other expense of $94,334, offset by a decrease in loss on sale of assets of $20,011 between the two periods.

Interest expenses were $1,014,749 and $380,870 for the nine months ended March 31, 2018 and 2017, respectively.

Net Income (Loss):

Net loss for the nine months ended March 31, 2018 was $1,673,680, as compared to net loss of $945,035 for the same period in 2017, which is equivalent to ($0.02) per share for the current period and ($0.08) per share for the corresponding period ended March 31, 2017, based on the weighted average number of basic and diluted shares outstanding at the end of each corresponding period.

CASH FLOWS

The Company’s cash and cash equivalents balance were $160,585 and $3,658 as of March 31, 2018 and March 31, 2017, respectively.

Net cash used in the Company’s operating activities during the nine-month period ended March 31, 2018 was $1,029,509, as compared to net cash used in operating activities of $1,119,435 during the nine-month period ended March 31, 2017. This represents a variance of $89,926 in net cash used in operating activities between the two periods. The underlying reason for the variance was primarily due to an increase of $728,645 in loss from operations, an increase in other assets and prepaid expenses in the amount of $710,102 and a decrease in accounts payable and accrued expenses in the amount of $1,528,675 between the two nine-month periods.

Net cash used in investing activities during the nine-month period ended March 31, 2018 was $25,005,000, as compared to cash provided by investing activities of $82,733 during the nine-month period ended March 31, 2017, respectively. The variance was due to investments in AQuarius Power Technology and Oregon gold claims during the current period.

Cash provided by financing activities was $26,156,725 for the nine-month period ended March 31, 2018, as compared to cash provided by financing activities in the amount of $1,037,878 for the nine-month period ended March 31, 2017. The primary underlying reasons for an increase of $25,118,847 in cash provided by financing activities between the two nine-month periods were primarily due to an increase in common stock and paid-in capital in the amount $629,193, in Class A Series II Preferred Stock in the amount of $20,000,000, in Demand Promissory Note of $4,809,500, offset by change in Treasury Stock of $3,132, change in long-term liabilities of $218,020 and a change in accumulated other comprehensive income (loss) in the amount of $194,957.

HISTORICAL FINANCING ARRANGEMENTS

SHORT TERM NOTES PAYABLE AND ISSUANCE OF COMMON STOCK: In the course of its business, the Company has obtained short-term loans from individuals and institutional investors and from time to time raised money by issuing restricted common stock of the Company under the auspices of Rule 144. In the course of its business, the Company has obtained short-term loans from individuals and institutional investors and from time to time raised money by issuing restricted common stock of the Company under the auspices of Rule 144.

As of March 31, 2018, the Company had short-term notes payable of $808,310, with accrued interest of $2,391,162. These notes bear interest rates ranging from 0% to 36% per annum. (Note 10).

EQUITY LINE FACILITY WITH AZURE CAPITAL, INC.

As noted in Note 17, the Company has signed an Investment Agreement, with Azure Capital, Inc. for a $10,000,000 equity line facility. The Company filed an S-1 Registration Statement with the Securities and Exchange Commission on April 3, 2017 and a Withdrawal of Registration Statement on August 7, 2017. Subsequently, a new S-1 Registration Statement filed on August 7, 2017, as amended, was declared effective by the Securities and Exchange Commission on January 11, 2018. As of the date of this report, the Company has not drawn on the equity line.

EB-5 IMMIGRATION INVESTOR PROGRAM

The Company has filed an I-924 application with the United States Citizenship and Immigration Service (USCIS) for the PHI Group EB5 Regional Center, LLC in order to raise capital through the EB-5 Immigration Investor Program in connection with the Company’s organic farming program, Abundant Farms, Inc., a wholly owned subsidiary of the Company, and other potential business activities in the State of Florida. Under the EB-5 Program, created by Congress to stimulate the U.S. economy through job creation and capital investment, foreign entrepreneurs (and their spouses and unmarried children under 21) are eligible to apply for a Green Card (permanent residence) if they make the necessary investment in a commercial enterprise in the United States that creates or preserves at least 10 permanent, full-time jobs for qualified U.S. workers. The operation of this Regional Center is subject to the review and approval of United States Citizenship and Immigration Service.

COMPANY’S PLAN OF OPERATION FOR THE FOLLOWING 12 MONTHS

In the next twelve months the Company intends to continue pursuing its merger and acquisition program by acquiring all or controlling interests in target companies in a number of industries, including but not limited to energy, natural resources, agribusiness, technology, transportation, education, distribution, mining, oil & gas, financial services, healthcare, and pharmaceuticals. In addition, the Company also plans to invest in special situations that may potentially generate significant revenues and profitability for the Company in the short term. We believe that by closing one or more of the contemplated acquisitions we will be able to build a critical mass and uplist to the Nasdaq Stock Market or NYSE in the near future. Moreover, we will continue to provide advisory and consulting services to international clients through our wholly owned subsidiary PHI Capital Holdings, Inc. The Company anticipates generating substantial amounts of revenues through the merger and acquisition program, investment in special situations, and advisory services mentioned herein. However, 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.

FINANCIAL PLANS

MATERIAL CASH REQUIREMENTS: We must raise substantial amounts of capital to fulfill our plan of acquiring potential target companies and investing in certain selective industries that are part of our scope of business. We intend to use equity, debt and project financing to meet our capital needs for acquisitions. In addition, we are in the process of establishing a Reserved Alternative Investment Fund and a number of sub-funds under the Luxembourg laws in order to raise capital for our investment programs.

Management has taken action and formulated plans to strengthen the Company’s working capital position and generate sufficient cash to meet its operating needs through June 30, 2018 and beyond. The working capital cash requirements for the next 12 months are expected to be generated from operations, sale of marketable securities and additional financing. The Company plans to generate revenues from its consulting services, merger and acquisition advisory services, and acquisitions of target companies with cash flows.

AVAILABLE FUTURE FINANCING ARRANGEMENTS: The Company may use various sources of funds, including short-term loans, long-term debt, equity capital, and project financing as may be necessary. The Company believes it will be able to secure the required capital to implement its business plan; however, no assurances could be made that management would be successful in achieving its plan.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Currency Fluctuations and Foreign Currency Risk

Some of our operations are conducted in other countries whose official currencies are not U.S. dollars. However, the effect of the fluctuations of exchange rates is considered minimal to our business operations.

Interest Rate Risk

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

Valuation of Securities Risk

Since a part of our assets is in the form of marketable securities, the value of our assets may fluctuate significantly depending on the market value of the securities we hold.

ITEM 4. Controls and Procedures

Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management carried out an evaluation, with the participation of our Chief Executive Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) of the Exchange Act), as of the period covered by this report. Disclosure controls and procedures are defined as controls and other procedures that are designed to ensure that information required to be disclosed by us in reports filed with the SEC under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Based upon their evaluation, our management (including our Chief Executive Officer) concluded that our disclosure controls and procedures were not effective as of March 31, 2018, based on the material weaknesses defined below.

Internal Control over Financial Reporting

Management’s Report on Internal Control of Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a set of processes designed by, or under the supervision of, a company’s principal executive and principal financial officers, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:

	-	pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of our assets,
	-	provide reasonable assurance that our transactions are recorded as necessary to permit preparation of our financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors, and
	-	provide reasonable assurance regarding prevention or timely detection of authorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. It should be noted that any system of internal control, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of management, including its principal executive officer and principal financial officer, the Company’s management assessed the design and operating effectiveness of internal control over financial reporting as of March 31, 2018 based on the framework set forth in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have identified material weaknesses in our internal control over financial reporting:

	(i)	inadequate segregation of duties consistent with control objectives;

	(ii)	ineffective controls over period-end financial disclosure and reporting processes.

If we fail to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in our company.

Based on this assessment, management concluded that the Company’s internal control over financial reporting was not effective as of March 31, 2018.

Management’s Remediation Plan

We plan to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes in the future:

(i)	appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and

(ii)	adopt sufficient written policies and procedures for accounting and financial reporting.

The remediation efforts set out in (i) are largely dependent upon our company securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.

Management believes that despite our material weaknesses set forth above, our consolidated financial statements for the quarterly report ended March 31, 2018 are fairly stated, in all material respects, in accordance with US GAAP.

Attestation Report of the Registered Accounting Firm

This Quarterly Report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to Rule 308(b) of Regulation S-K, which permits the Company to provide only management’s report in this Annual Report.

Changes in Internal Control over Financial Reporting

No changes in the Company’s internal control over financial reporting have come to management’s attention during the fiscal quarter ended March 31, 2018 that have materially affected, or are likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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, 2018:

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

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.

ITEM 1A. RISK FACTORS

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

General Risks Related to Our Business

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

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

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

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

Acquisitions involve a number of special risks, including:

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

As some of our business activities are currently involved with Southeast Asia and Eastern Europe, any adverse change to the economy or business environment in these countries could significantly affect our operations, which would lead to lower revenues and reduced profitability.

Some of our business activities are currently involved with Southeast Asia and Eastern Europe. Because of this presence in specific geographic locations, we are susceptible to fluctuations in our business caused by adverse economic or other conditions in this region, including stock market fluctuation. A stagnant or depressed economy in these countries generally, or in any of the other markets that we serve, could adversely affect our business, results of operations and financial condition.

Risks associated with energy business

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

Risks Related to Our Securities

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

Though our executive officers and directors as of May 15, 2018, in the aggregate, hold less than 51% of our outstanding common stock, we are 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.

The price at which investors purchase our common stock may not be indicative of the prevailing market price.

The stock market often experiences significant price fluctuations that are unrelated to the operating performance of the specific companies whose stock is traded. These market fluctuations could adversely affect the trading price of our shares. Investors may be unable to sell their shares of common stock at or above their purchase price, which may result in substantial losses.

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

Under the rules of the Securities and Exchange Commission, 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.

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

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

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

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

Acquisitions involve a number of special risks, including:

	●	failure of the acquired business to achieve expected results;

	●	diversion of management’s attention;

	●	failure to retain key personnel of the acquired business;

	●	additional financing, if necessary and available, could increase leverage, dilute equity, or both;

	●	the potential negative effect on our financial statements from the increase in goodwill and other intangibles; and

	●	the high cost and expenses of completing acquisitions and risks associated with unanticipated events or liabilities.

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

None, except as noted elsewhere in this report.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

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

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

None

ITEM 5. OTHER INFORMATION

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

ITEM 6. EXHIBITS

The following exhibits are filed as part of this report:

Exhibit No.	Description

21.1	Subsidiaries of registrant
31.1	Certification by Henry D. Fahman, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification by Henry D. Fahman, Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification by Henry D. Fahman, Chief Executive Officer of the Registrant, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification by Henry D. Fahman, Chief Executive Officer of the Registrant, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	PHI GROUP, INC.
	(Registrant)

Date: May 21, 2018	By:	/s/ Henry D. Fahman
		Henry D. Fahman
		President and Chief Executive Officer
		(Principal Executive Officer)

Date: May 21, 2018	By:	/s/ Henry D. Fahman
		Henry D. Fahman
		Acting Chief Financial Officer
		(Principal Financial and Accounting Officer)

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