| Contracts and Commitments | NOTE 17 CONTRACTS
AND COMMITMENTS On January 26, 2017, the Company entered
into a Memorandum of Agreement to acquire 51% of Hoang Minh Chau Hung Yen, LLC, (“HMC”) a Vietnamese company specializing
in growing and processing turmeric for food, cosmetic and medicinal usages. The Company intends to apply HMC’s expertise
and experience in turmeric cultivation and processing for its organic farming program in the U.S. through its subsidiary Abundant
Farms, Inc. The closing of this transaction is subject to further due diligence review and financial audits of HMC. On January 28, 2017, the Company entered
into a Business Cooperation Agreement with Nathan Trading Limited Co., (“NTC”) a Thai company engaged in the promotion
of the cultivation and processing of sacha inchi seeds for food, cosmetics and healthcare. The Company will initially purchase
NTC’s sacha inchi products from NTC for distribution in the U.S. and international markets and cooperate with NTC to promote
the planting for sacha inchi plants and secure raw material sources to increase production capacity in the future. AGREEMENT AND RELINQUISHMENT OF A FARM PURCHASE IN HOLMES
COUNTY, FLORIDA On March 3, 2017, the Company signed
a Commercial Contract to acquire a 408-acre farm together with buildings, fixtures, and farming systems and in Bonifay, Holmes
County, Florida for a total purchase price of $1,500,000. The Purchase Agreement called for deposit of $37,500, installment payments
and the initial closing date of July 3, 2017. The closing was extended to a later date. However, during the quarter ending December
31, 2017 the Company decided to relinquish the purchase of this farm together with the deposit and began searching for other farmland
that is closer to peat mine sources and other raw materials in order to build an organic fertilizer plant in conjunction with Abundant
Farms, Inc.’s organic farming program. 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. As
of October 17, 2017, PHI EZ Water has completed the designs for water enhancement systems for both general agriculture and cannabis
crops ( www.phiezwater.com ). MEMORANDUM OF UNDERSTANDING WITH AQUARIUS
POWER, INC. On August
9, 2017, the Company signed a 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 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. LETTER OF INTENT TO ACQUIRE 80% OF MEDICAL CORP SRL, A ROMANIAN
COMPANY On August 23, 2017, the Company signed
a Letter of Intent to acquire eighty percent (80%) equity interest in Medical Corp SRL (“MDC”) for the price of one
million Euros. However, the final purchase price and payment schedule will be determined after an asset valuation of MDC. Both
companies intend to execute a Definite Agreement to consummate this transaction as soon as practical. As of the date of this report,
the Company has decided not to pursue this transaction further. 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. 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/ 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/ 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 tremendous 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. PHI Group intends to use its first sub-fund
to focus on organic agriculture, including growing selective crops and medicinal plants for healthcare supplements, producing proprietary
organic fertilizers, manufacturing PHI EZ Water Tech ( http://phiezwater.com/ 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. The closing of this
Investment Agreement is extended to April 15, 2018. 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. |
