SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended SEPTEMBER 30, 2010 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from 
_________
to 
_________Commission file number2-78335-NYPHI GROUP, INC.(Name of Issuer in its charter) Nevada
     90-0114535(State of Incorporation or Organization)
     (I.R.S. Employer Identification No.)
  17011 Beach Blvd., Suite 1230, Huntington Beach, California 92647(Address of Principal Executive Offices) (Zip Code) (714) 843-5450Issuer's Telephone Number, Including Area Code (Former name, former address and former fiscal year, if changed since last report)  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 for 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
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. 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 The number of shares outstanding of the registrant's Common Stock, $0.001 par value, was 198,280,961 as of November 19, 2010.
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PHI GROUP, INC.For the Period Ended September 30, 2010PART I - FINANCIAL INFORMATION Page Item 1- Consolidated Financial Statements  Unaudited                                                                                                     4 Unaudited Consolidated Balance Sheet as of September 30, 2010 and Consolidated Balance Sheet as of June 30, 2010                                                                                                                                                                               5 Unaudited Consolidated Statements of Operations for Three Months Ended September 30, 2010 and 2009             6 Unaudited Consolidated Statements of Cash Flows for Three Months Ended September 30, 2010 and 2009           7 Notes to Unaudited Consolidated Financial Statements                                                                                                    8 Item 2-Management's Discussion and Analysis of Financial Condition and Results of Operations                          18 Item 3- Quantitative and Qualitative Disclosures about Market Risk                                                                               26 Item 4- Controls and Procedures                                                                                                                                               26 PART II - OTHER INFORMATION Item 1- Legal Proceedings                                                                                                                                                         27 Item 1A- Risk Factors                                                                                                                                                                29 Item 2- Unregistered Sales of Equity Securities and Use of Proceeds                                                                               31 Item 3- Defaults Upon Senior Securities                                                                                                                                 31 Item 4- Submission of Matters to a Vote of Security Holders                                                                                            31 Item 5- Other Information                                                                                                                                                        31 Item 6- Exhibits                                                                                                                                                                           31 SIGNATURES32
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PART I - FINANCIAL INFORMATION
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ITEM 1 – CONSOLIDATED FINANCIAL STATEMENTS
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PHI GROUP, INC. AND SUBSIDIARIES(FORMERLY PROVIDENTIAL HOLDINGS, INC)CONSOLIDATED BALANCE SHEETS(UNAUDITED)September 30,
     
     June 30,2010
     
     2010ASSETSCurrent assets:Cash and cash equivalents
     $                3,013
     
     $            75,301Accounts receivable
     24,650
     
     -Marketable securities
     150,000
     
     -Loans receivable from related parties
     6,700
     
     2,120Prepaid Rent Expense
     1,348
     
     2,696Other current assets
     780
     
     780Total current assets
     186,491
     
     80,897Property and EquipmentProperty and equipment
     3,718
     
     4,516Construction in progress
     935,076
     
     935,076Other assets:Deposits
     20,016
     
     20,016Investement under the equity  method
     36,490
     
     44,846Total assets
     $         1,181,791
     
     $       1,085,351LIABILITIES AND STOCKHOLDERS' DEFICITCurrent liabilities:Accounts payable and accrued expenses
     $         3,773,691
     
     $       3,584,801Short-term notes payable
     2,462,046
     
     2,400,546Convertible promissory note, net of discount $35,092
     14,908
     
     -Derivative Liability
     39,471
     
     -Due to officers
     1,200,579
     
     1,126,529Payable to related party
     235,000
     
     235,000Due to preferred stockholders
     215,000
     
     215,000Unearned revenus
     293,219
     
     459,886Other current liabilities
     119,691
     
     119,691Total current liabilities
     8,353,606
     
     8,141,454Stockholders' equity:Preferred stock , $.001 par value, 100,000,000 sharesauthorized; none issued and outstanding
     -
     
     -Common stock, $.001 par value; 300,000,000 shares authorized;198,280,961 and 195,130,961 issued and outstanding, respectively
     198,281
     
     198,281Shares to be issued
     63,854
     
     63,854Treasury stock, $.001 par value, 1,330,440 shares
     (1,331)
     
     (1,331)of common stock, respectivelyAdditional paid-in-capital
     18,409,229
     
     18,409,229Prepaid consulting
     (2,500)
     
     (5,000)Accumulated deficit
     (27,042,887)
     
     (26,963,783)Total
     $       (8,375,354)
     
     $     (8,298,749)Non-Controlling interest
     1,203,539
     
     1,242,646Total stockholders' deficit
     $       (7,171,815)
     
     $     (7,056,103)Total liabilities and stockholders' deficit
     $         1,181,791
     
     $       1,085,351The accompanying notes form an integral part of these unaudited consolidated financial statements(0)
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PHI GROUP, INC. AND SUBSIDIARIES(FORMERLY, PROVIDENTIAL HOLDINGS, INC)CONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED)For the Three MonthsEnded September 30,2010
     2009Net revenuesConsulting and advisory fee income
     
     
     $      347,317
     $               6,000Operating expenses:Depreciation and amortization
     
     
     797
     3,938Salaries and wages
     
     
     75,347
     90,322Professional services, including non-cash compensation
     
     
     124,885
     116,979General and administrative
     
     
     94,087
     72,653Total operating expenses
     
     
     295,116
     283,891Income (loss) from operations
     
     
     52,201
     (277,891)Other income and (expenses)Interest expense
     
     
     (175,983)
     (143,791)Loss on equity investment
     
     
     (8,356)
     -Loss of Deposit
     
     
     -Loss on debt settlement-net
     
     
     -
     (2,701)Gain/(Loss) on conversion of note
     
     
     -Other income
     
     
     13,927
     2,041Net other expenses
     
     
     (170,412)
     (144,452)Lossfrom operations
     
     
     (118,211)
     (422,342)Non-Controlling interest
     
     
     39,107
     13,092Net loss
     
     
     (79,104)
     (409,251)Other comprehensive loss:Reclassification
     
     
     -
     -Unrealized loss on marketable securities
     
     
     -
     -Comprehensive loss
     
     
     (79,104)
     (409,251)Net income (loss) per share:Basic
     
     
     $          (0.00)
     $               (0.00)Diluted
     
     
     $          (0.00)
     $               (0.00)Weighted average number of shares outstanding:Basic
     
     
     197,122,935
     193,830,961Diluted
     
     
     197,122,935
     191,386,503The accompanying notes form an integral part of these unaudited consolidated financial statements
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PHI GROUP, INC. AND SUBSIDIARIES(FORMERLY PROVIDENTIAL HOLDINGS, INC)CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009(UNAUDITED)2010
     
     2009Cash flows from operating activities:Net loss from operations
     $        (79,104)
     
     $       (409,251)Depreciation
     797
     
     3,938Amortization of prepaid consulting fees
     -
     
     -Gain on debt settlement
     -
     
     2,701Amotization of Discount
     6,149
     
     -Change in Fair Value of Derivative liability
     (1,770)
     
     -Loss on equity investment
     8,356
     
     -Non-Controlling interest
     (39,107)
     
     (13,091)Issuance of shares for  consulting services
     2,500
     
     -Shares issued for director fees
     -
     
     -Marketable securities  received for consulting service
     (150,000)
     
     -Changes in operating assets and liabilities:Increase on accounts receivable
     (24,650)
     
     9,358Increase in other assets and prepaid expenses
     (3,232)
     
     (10,875)Increase  in accounts payable and accrued expenses
     74,722
     
     337,946Net cash used in operating activities
     (205,338)
     
     (79,273)Cash flows from investing activities:Construction in progress
     -
     
     (10,983)Purchase of marketable securities
     -
     
     -Net cash used in investing activities
     -
     
     (10,983)Cash flows from financing activities:Proceeds from sale of stock of subsidiary
     -
     
     45,000Proceeds on notes payable
     120,500
     
     50,000Payments on notes payable
     (9,000)
     
     (9,550)Borrowings from officer
     24,350
     
     -Payments on advances from officer
     (2,800)
     
     -Net cash provided by  financing activities
     133,050
     
     85,450Net decrease in cash and cash equivalents
     (72,288)
     
     (4,806)Cash and cash equivalents, beginning of period
     75,301
     
     37,813Cash and cash equivalents, end of period
     $            3,013
     
     $           33,007Supplemental disclosures of cash flow informationCash paid for taxes
     $                   -
     
     $                950Cash paid for interest
     $            6,500
     
     $             1,800Non-cash investing and financing activities:Shares to be issued for payment of accrued salariesThe accompanying notes form an integral part of these unaudited consolidated financial statements
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PHI GROUP, INC. AND SUBSIDIARIES(FORMERLY PROVIDENTIAL HOLDINGS, INC.) NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - NATURE OF BUSINESS PHI GROUP, INC. (formerly Providential Holdings, Inc.), ("PHI") is engaged in a number of business activities, specifically merger and acquisition advisory services, real estate development, and mining. The Company acquires and consolidates special opportunities in selective industries to create additional value, acts as an incubator for emerging companies and technologies, and provides financial consultancy and M&A advisory services to U.S. and foreign companies. 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, 2010. In the opinion of management, all adjustments consisting of normal reoccurring accruals have been made to the financial statements. The results of operation for the three months ended September 30, 2010 are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2011. 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. MARKETABLE SECURITIES The Company's securities are classified as available-for-sale and, as such, are carried at fair value. Securities classified as available-for-sale may be sold in response to changes in interest rates, liquidity needs, and for other purposes. Each investment in marketable securities represents less than twenty percent (20%) of the outstanding common stock and stock equivalents of the investee, and each security is quoted on either the “Pink Sheets” or the OTC Bulletin Board. As such, each investment is accounted for in accordance with the provisions of SFAS No. 115. Unrealized holding gains and losses for available-for-sale securities are excluded from earnings and reported as a separate component of stockholder's equity. Realized gains and losses for securities classified as available-for-sale are reported in earnings based upon the adjusted cost of the specific security sold. On September 30, 2010, the marketable securities have been recorded at $150,000 based upon the fair value of the marketable securities. (Note 4) PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of PHI Group, Inc., and its subsidiaries, Providential Securities, Inc., PHI Capital Holdings, Inc. Provimex, Inc., Providential Energy Corporation, Touchlink Communications, PHI Mining Group, Providential Vietnam and PhiLand Ranch, and its 100% owned subsidiaries PhiLand Corporation, Ltd. and PhiLand Vietnam, Ltd., collectively referred to as the "Company". All significant inter-
company transactions have been eliminated in consolidation. Providential Securities, Inc, Provimex, Inc., Providential Energy Corporation, and Touchlink Communications are inactive.
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REPORTING OF SEGMENTS ASC 280 (previously Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information), which supersedes Statement of Financial Accounting Standards No. 14, Financial Reporting for Segments of a Business Enterprise, establishes standards for the way that public enterprises report information about operating segments in annual financial statements and requires reporting of selected information about operating segments in interim financial statements regarding products and services, geographic areas and major customers. ASC 280 defines operating segments as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company operates in one segment during the quarters ended September 30, 2010 and 2009. RECENT ACCOUNTING PRONOUNCEMENTS ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic 820)—Improving Disclosures about Fair Value Measurements (“ASU 2010-06”) was issued in January 2010. This ASU amends ASC Subtopic 820-10, Fair Value Measurements and Disclosures—Overall, to require new disclosures regarding transfers in and out of Level 1 and Level 2, as well as activity in Level 3, fair value measurements. This ASU also clarifies existing disclosures over the level of disaggregation in which a reporting entity should provide fair value measurement disclosures for each class of assets and liabilities. This ASU further requires additional disclosures about valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements.  The Company does not believe that the adoption will have a material impact on the Company’s consolidated financial position or results of operations. In January 2010, the FASB issued new accounting guidance which requires new disclosures regarding transfers in and out of Level 1 and Level 2 fair value measurements, as well as requiring presentation on a gross basis of information about purchases, sales, issuances and settlements in Level 3 fair value measurements. The guidance also clarifies existing disclosures regarding level of disaggregation, inputs and valuation techniques. The new guidance is effective for interim and annual reporting periods beginning after December 15, 2009.  Disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements are effective for fiscal years beginning after December 15, 2010.  As this guidance requires only additional disclosure, there should be no impact on the consolidated financial statements of the Company upon adoption. NOTE 2 - NASD EXAMINATION AND DISCONTINUANCE OF PROVIDENTIAL SECURITIES, INC. After the completion of a routine audit of Providential Securities, Inc. (“Providential”) in July and August 2000, the National Association of Securities dealers, Inc. alleged that Providential violated certain provisions of the NASD’s Conduct Rules 2120, 2330, 2110 and 3010, and Rules 15c2-4, 10b-5, 10b-9 and 15c3-3 of the Securities and Exchange Commission. Without admitting or denying any of the allegations, Providential Securities, Inc. and Henry Fahman voluntarily submitted a Letter of Acceptance, Waiver and Consent (“AWC”), which was accepted by NASD Regulation, Inc. on October 27, 2000. Providential Securities, Inc. was censured, fined $115,000 and required to offer rescission to those public customers who participated in the Providential Private Placement. In addition, Henry Fahman was banned, in all capacities, from associating with any NASD member. Based upon the above mentioned circumstances, Providential Securities, Inc. withdrew its membership from the NASD and ceased its securities brokerage operation in October 2000. The fine of $115,000 is included in accrued expenses in the accompanying consolidated financial statements. The Company has offered all Preferred Stock holders rescission on their investment. During the year ended June 30, 2004, $235,000 from the amount due to Preferred Stock Holders plus $105,600 in related interest payable totaling $340,600 was paid either in cash or with the issuance of common stock. The
 balance of unredeemed preferred shares and the related interest has been included in current liabilities on the accompanying consolidated financial statements.
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NOTE 3  LOANS RECEIVABLE FROM RELATED PARTIES Loans receivable from related parties consist of the following at  September 30, 2010 and June 30, 2010: Net book value @ 6-30-10
     
     
     
     $ 44,846Net loss for the quarter
     
     
     
     
     -24,719PHI Groups share (33.8%)
     
     
     
     -8,356Net book value @ 9-30-10
     
     
     
     $ 36,490Sep. 30, 2010
     
     
     June 30, 2010Equipment
     $
     89,691
     
     $
     89,691Furniture and Fixtures
     
     59,115
     
     
     59,115Automobiles
     
     58,000
     
     
     58,000Subtotal
     
     206,806
     
     
     206,806Less Accumulated Depreciation
     
     (203,088
     )
     
     (202,290
     )Total net fixed assets
     $
     3,718
     
     $
     4,51630-Sep-10
     
     30-Jun-10Loan to Catalyst Resource Group.
     $
     6,500
     $
     1,000Loan to Vietnam Mining Corporation
     100
     
     -Loan to Cavico Corporation
     
     -
     
     1,020Loan to Catthai Corporation
     
     100
     
     100$
     6,700
     $
     2,120
  NOTE 4- MARKETABLE EQUITY SECURITIES AVAILABLE FOR SALE The Companys marketable securities are classified as available-for-sale and, as such, are carried at fair value. All of the securities are comprised of shares of common stock of the investee. Securities classified as available-for-sale may be sold in response to changes in interest rates, liquidity needs, and for other purposes. Each investment in marketable securities represents less than twenty percent (20%) of the outstanding common stock and stock equivalents of the investee, and each security is quoted on either the, pink sheets or the OTC Bulletin Board. As such, each investment is accounted for in accordance with the provisions of SFAS No. 115. Marketable securities classified as available for sale consisted of the following as of September 30, 2010: As of September 30, 2010, we recorded $174,650 from 1,500,000 shares received & 246,500 shares to be received of Vietnam Mining Corporation that were earned for the consulting services.  NOTE 5 - PROPERTY AND EQUIPMENT Property and equipment at September 30, 2010 and June 30, 2010 consists of the following: Net book value @ 6-30-10
     
     
     
     $ 44,846Net loss for the quarter
     
     
     
     
     -24,719PHI Groups share (33.8%)
     
     
     
     -8,356Net book value @ 9-30-10
     
     
     
     $ 36,49036490Sep. 30, 2010
     
     
     June 30, 2010Equipment
     $
     89,691
     
     $
     89,691Furniture and Fixtures
     
     59,115
     
     
     59,115Automobiles
     
     58,000
     
     
     58,000Subtotal
     
     206,806
     
     
     206,806Less Accumulated Depreciation
     
     (203,088
     )
     
     (202,290
     )Total net fixed assets
     $
     3,718
     
     $
     4,51630-Sep-10
     
     30-Jun-10Loan to Catalyst Resource Group.
     $
     6,500
     $
     1,000Loan to Vietnam Mining Corporation
     100
     
     -Loan to Cavico Corporation
     
     -
     
     1,020Loan to Catthai Corporation
     
     100
     
     100$
     6,700
     $
     2,120
 Depreciation expenses were $798 and $3,938for the periods ended September 30, 2010 and 2009, respectively. NOTE 6 - CONSTRUCTION IN PROGRESS
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Construction in progress represents the costs incurred by PhiLand Corporation, a subsidiary of the Company for real estate development amounting to $935,076 as of September 30, 2010. The costs included interest capitalized of $252,055. NOTE 7 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES The accounts payable and accrued expenses at September 30, 2010 and June 30, 2010 consist of the following: Sep 30, 2010
     June 30,2010Accounts payable & Accrued Expenses
     $ 1,376,966
     $ 1,462,010Accrued salaries and payroll taxes
     305,422
     292,519Accrued interest
     1,530,360
     1,267,207Accrued legal
     385,084
     385,084Accrued consulting fees
     175,859
     177,981$ 3,773,691
     $ 3,584,801
 NOTE 8 – DUE TO OFFICERS Due to officer, represents advances made by officers of the Company and its subsidiaries, which are non-interest bearing, except for $100,000 as described below, unsecured and due on demand. As of September 30, 2010 and June 30, 2010, the balances were $1,200,579 and $1,126,529, respectively. NOTE 9 - LOANS AND PROMISSORY NOTES SHORT TERM NOTES PAYABLE: As of September 30, 2010 and June 30, 2010, the Company had short term notes payable amounting $2,462,046, and $2,400,546 with accrued interest of $1,454,394 and $1,367,980 respectively. These notes bear interest rates ranging from 6% to 36% per annum. $1,931,482 of these short term notes are past due and $530,564 are due on demand. Some of the notes payable are secured by assets of the Company as summarized below: Note balance
     Secured by$
     115,000
     400,000 Catalyst Resource Group, Inc. shares500,000 Catthai Corporation shares$
     550,000
     35,000 Cavico Corp. shares500,000 Catthai Corporation shares$
     150,000
     1,500,000 PHI Mining Group shares$
     100,000
     1,500,000 PHI Mining Group shares
   The Convertible Promissory Note issued to Asher Enterprises, Inc. (“Asher”) on May 10, 2010 is $ 50,000, net of discount $35,092. This convertible note is due and payable on February 14, 2011 with interest of 8% per annum. This note is convertible at the election of Asher from time to time after the issuance date. In the event of default, the amount of principal and interest not paid when due bear interest at the rate of 22% per annum and the note becomes immediately due and payable. Should that occur, the Company is liable to pay Asher 150% of the then outstanding principal and interest. The note agreement contains covenants requiring Asher’s written consent for certain activities not in existence or not committed to by the Company on the issuance date of the note, as follows: dividend distributions in cash or shares,
stock repurchases, borrowings, sale of assets, certain advances and loans in excess of $50,000, and certain guarantees to third-party liabilities. Outstanding note principal and interest accrued thereon can be converted in whole, or in part, at any time by Asher after the issuance date into an equivalent of the Company’s common stock determined by 65% of the average of the three lowest closing trading prices of the Company’s common stock during the ten trading days prior to the date the conversion notice is sent by Asher. As of September 30, 2010 the Derivative Liability was 39,471.
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DUE TO PREFERRED STOCKHOLDERS: The Company classified $215,000 of preferred stock subscribed as a current liability payable to holders of preferred stock due to non compliance of preferred shares subscription agreement. This amount was past due as of September 30, 2010. The interest payable to holders of preferred stock of $264,905 and $258,455 has been included in accrued interest included in account payable and accrued expenses on the balance sheets as of September 30, 2010 and June 30, 2010, respectively. UNEARNED REVENUE  The Unearned Revenue of $293,219 is the consulting fee for the service performed by the Company that has not been completed as of September 30, 2010.  The Company is going to provide its clients on going public in the US stock markets and arrange funding after going public. OTHER CURRENT LIABILITIES Other current liabilities for the three months ended September 30, 2010 are $119,691, which includes an overpayment of $89,691 received by the Company for the exercise of stock options during the year ended June 30, 2004 and $30,000 for a refundable deposit in connection with a consulting agreement between the Company and its client. These amounts are shown as other current liabilities on the consolidated financial statements. NOTE 10 - LITIGATION LEGAL PROCEEDING SETTLED AND UNPAID AS OF SEPTEMBER 30, 2010: 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 complaintwith 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. The Company has paid $2,500 and is subject to an entry of judgment for $79,000. The settlement amount has been accrued in the accompanying consolidated financial statements as of September 30, 2010. CONSECO FINANCE VENDOR SERVICES CORPORATION FKA GREEN TREE VENDOR SERVICES CORPORATION VS. PROVIDENTIAL SECURITIES, INC., HENRY D. FAHMAN AND TINA T. PHAN
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In September 1997 Providential Securities, Inc. entered into a written Lease Agreement to lease certain items of equipment from Green Tree Vendor Services, in return for which Providential Securities, Inc. agreed to pay thirty-six monthly installments, each in the amount of $1,552. On or about September 12, 2000, and subsequently, Providential Securities, Inc. was unable to make the monthly payments to Claimant due to the lack of revenues following the interruption and subsequent closure of its securities brokerage operations. (See Note 3) Claimant filed a complaint for money with the Superior Court of the State of California, County of Orange (Case No. 01CC02613) on February 23, 2001 seeking $39,102 plus interest thereon at the legal rate from September 12, 2000. The claimant entered a judgment against Providential Securities, Inc., Henry Fahman and Tina Phan for $48,933. The judgment amount has been accrued in the accompanying consolidated financial statements as of September 30, 2010. PENDING LITIGATION: NGON VU VS. PROVIDENTIAL SECURITIES, INC. Claimant was a former employee of Providential Securities, Inc. who was laid off in 2000 due to closure of business. The Claimant complained to the Department of Industrial Relations (DIR) for allegedly unpaid vacation and salaries. On June 13, 2001, the DIR filed a request to enter a judgment against Providential Securities, Inc. for $9,074 including wages and interest, penalty, post hearing and filing fee. The sought amount of $9,074 has been accrued in the accompanying consolidated financial statements as of September 30, 2010. VERIO VS. PROVIDENTIAL SECURITIES, INC. On or about April 1, 2003, Verio, Inc. filed a judgment against Providential Securities, Inc., a wholly-owned subsidiary of the Company which was discontinued in October 2000, for a total of $9,141. This sum consists of $6,800 for services allegedly rendered by Verio, Inc. to Providential Securities, Inc. in 2000 and $2,341 for legal costs. Both amounts have been accrued in the accompanying consolidated financial statements as of September 30, 2010. DOW JONES & COMPANY, INC. VS. PROVIDENTIAL SECURITIES, INC. AND PROVIDENTIAL HOLDINGS, INC. On March 19, 2002 Dow Jones & Company filed a complaint with the Superior Court of California, County of Orange, West Justice Center (Case No. 02WL1633), against Providential Securities, Inc., the discontinued operations of the Company, and Providential Holdings, Inc. for $9,973 plus prejudgment interest at the rate of ten (10%) per annum from November 1, 2000, reasonable attorneys’ fees and other and further relief. This claim is in connection with services allegedly rendered by the Plaintiff to Providential Securities, Inc. prior to November 2000. The Company intends to settle this case. The sought amount of $9,973 (excluding interest) has been accrued in Accrued Expenses in the accompanying consolidated financial statements as of September 30, 2010. KEY EQUIPMENT FINANCE, INC., VS. 49-6215601204 PROVIDENTIAL SECURITIES, INC.; HENRY D. FAHMAN; TINA T. PHAN, CASE NO 06WL00289 On January 18, 2006 Key equipment Finance filed a suit in the Superior Court of the State of California, County of Orange –West District claiming breach of the terms of lease agreement by failure to make the monthly installment due although demand therefore was made. The remaining balance due and owing to plaintiff under the lease is $14,439 plus interest from the date of default. The plaintiff also claiming for breach of guaranty, common counts, unjust enrichment and cost of law suit and any other relief the Court may deem just and proper. The sought amount of $14,439 has been accrued in the accompanying consolidated financial statements as of September 30, 2010.  DAVIDSON VS. DOAN ET AL.
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On or about February 01, 2010, the company was notified of a suit that was filed with the Superior Court of the State of California for the County of Los Angeles on November 24, 2009 by William Davidson, an individual against Martin Doan, Henry Fahman, HRCiti Corporation, and Providential Capital, Inc. (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.  This amount has been accrued in the accompanying consolidated financial statements as of September 30, 2010. NASD CASE: After the completion of a routine audit of Providential Securities, Inc. in July and August 2000, the National Association of Securities Dealers, Inc. alleged that Providential violated certain provisions of the NASD's Conduct Rules. As a result, without admitting or denying any of the allegations, Providential Securities, Inc. withdrew its membership from the NASD in October 2000 and ceased its securities brokerage operation. $127,305, including $115,000 fine charged by NASD, is included in accrued expenses in the accompanying consolidated financial statements as of September 30, 2010 (Note 2). ARBITRATION CASES: The Company had four arbitration cases from day-traders against Providential Securities, Inc., a discontinued stock brokerage operation of the Company. The total amount of damages for these cases, which were closed as of June 30, 2001, was $54,505. This amount has been accrued in the accompanying consolidated financial statements as of September 30, 2010. NOTE 11 - BASIC AND DILUTED NET LOSS PER SHARE Net loss per share is calculated in accordance with SFAS No. 128, "Earnings per Share". Under the provision of SFAS No. 128, basic net loss per share is computed by dividing the net loss for the period by the weighted-average number of common shares outstanding for the period. Diluted EPS is based on the weighted-average number of shares of common stock outstanding for the period and common stock equivalents outstanding at the end of the period. Basic and diluted weighted average number of shares for the period ended September 30, 2010 were the same since the inclusion of Common stock equivalents is anti-dilutive. NOTE 12 - STOCKHOLDER'S EQUITY Effective April 13, 2009, the Company amended its articles of incorporation to change its par values of preferred and common stock to $0.001. The Company has 400,000,000 authorized capital stock, consisting of 300,000,000 shares of common stock and 100,000,000 shares of preferred stock. The effect of the change has been reflected retroactively in the consolidated financial statements. Treasury Stock: The balance of treasury stock as of September 30, 2010 was 1,330,440 shares valued at $1,330. Common Stock: There is no issuance of common stock during the three months ended September 30, 2010. Shares to be Issued: On June 6, 2006, Luberski Inc. transferred and subsequently sold 1,000,000 shares of common stock of Providential Holdings, which belonged to the officer of the Company and were given to Luberski, Inc. as collateral for the loan. As of
June 30, 2007, the Company agreed to pay back 1,000,000 shares valued at $57,000 to the officer and recorded the transaction as shares to be issued.
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Prepaid Consulting:  The Company amortized $2,500 prepaid consulting during the three months ended September30, 2010. NOTE 13 - STOCK BASED COMPENSATION PLAN Stock-Based Compensation: On February 7, 2005, the Company adopted a stock-based compensation plan and set aside 14,000,000 shares of common stock for selected eligible participants of the Company and subsidiaries, and certain independent contractors providing certain services to the Company. Prior to July 1, 2006, the Company measured stock compensation expense using the intrinsic value method of accounting in accordance with Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations (APB No. 25). The company adopted SFAS No. 123-R effective July 1, 2006 using the modified prospective method. Warrants: During the quarter ended September 30, 2006, the Company issued 250,000 stock warrants with a term of 5 years and a three year vesting period. The following assumptions were used in the Black-Scholes pricing model: Risk-free interest rate
     4.64%Expected life
     5.00 yearsExpected volatility
     198%Expected dividend yield
     0%
  Following is a summary of the warrant activity for the year ended September 30, 2010: Warrants outstanding
     Exercise Price
     Aggregate Intrinsic ValueOutstanding, June 30, 2010
     250,000          -
     $0.015
     $3,750Granted
     -
     
     -Forfeited
     -                  -
     
     -Exercised
     -                -
     
     -Outstanding, September 30, 2010
     250,000
     $0.015
     $3,750
 Following is a summary of the status of warrants outstanding at September 30, 2010:  Exercise Price
     
     Total
Warrants
Outstanding
     
     Remaining Life
(Years)
     
     Total
Exercise Price
     
     Warrants
Exercisable
     
     Exercise Price$0.015
     
     250,000
     
     1.
     
     $0.015
     
     250,000
     
     $0.015
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NOTE 14 - RELATED PARTY TRANSACTIONS The Company accrued $52,500salaries for the President and the Secretary of the Company during the periods ended September 30, 2010 and 2009. NOTE 15 - CONTRACTS AND COMMITMENTS AGREEMENT WITH HAWK ASSOCIATES, INC.  On August 11, 2006, the Company entered into an investor relations consulting agreement with Hawk Associates, Inc., a Florida corporation, to be effective September 1, 2006. According to the agreement, Hawk Associates will provide investor relations consulting services to the Company for a period of six months, after which the agreement will automatically renew monthly until notice is provided by one of the parties to the other. The Company agrees to pay Hawk Associates $4,500 per month for the investor relations consulting services and Hawk Associates will be issued warrants to purchase 250,000 common shares of the Company based on the closing price of $0.015 per share as of September 1, 2006. These warrants will be valid until August 30, 2011.  BUSINESS AND FINANCIAL CONSULTING AGREEMENT WITH MAST VENTURES, LLC  Effective April 1, 2008, the Company entered into a business and financial consulting agreement with Mast Ventures, LLC  to raise capital for a wholly owned subsidiary, PhiLand Corporation for 5 years. The service includes assistance identifying potential investors, developing an approach in seeking such current financing and investor relations. The Company agreed to pay 5% of  the total funds raised by the consultant.  BUSINESS AND FINANCIAL CONSULTING AGREEMENT WITH LINH THANH GROUP  Effective April 26, 2010 the Company signed an agreement with Linh Thanh Group Joint Stock Company, a Vietnam-based company, to take a majority-owned subsidiary of Linh Thanh Group,  Linh Thanh Quang Binh Exploiting and Processing High Calcium Carbonate Powder Joint Stock Company (“LTQB”),  public in the U.S. via a reverse merge, stock swap, or business combination with a U.S. publicly traded company. In exchange for the services rendered, the Company would receive compensation in cash from Linh Thanh Group and common stock of the combined company. The Stock Swap Agreement between LTQB and Vietnam Mining Corporation, the U.S. public company, was closed on June 28, 2010.  As a result of the completion of this transaction, the Company received 1,500,000shares of common stock of Vietnam Mining Corporation on August 08, 2010.  The balance of 246,500 shares was issued to the Company on October 4, 2010 and recorded as account receivable as of September 30, 2010. BUSINESS AND FINANCIAL CONSULTING AGREEMENT WITH THINH HUNG INVESTMENT CO.  Effective May 21, 2010 the Company signed an agreement with Thinh Hung Investment Co., Ltd., a Vietnam-based company, to assist Thinh Hung in identifying, locating and, possibly, acquiring various business opportunities for Thinh An Co., Ltd., a subsidiary of Thinh Hung, including but not limited to a reverse merger, a stock swap, or a business combination between Thinh An and a publicly-traded company in the U.S. In exchange for the services rendered, the Company would receive compensation in cash from Thinh Hung and common stock of the combined company. As of September 30, 2010, the Company has not completed the contemplated business combination for Thinh An and has not recognized any revenues from this transaction.
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OFFICE SPACE LEASE  The Company signed on a 5 year lease agreement for the corporate office effective May 1, 2008. The monthly rental is $6,690.70 and will be increased by 3.5% per annum commencing in the thirteenth month of the initial lease term and continuing annually thereafter.  Theleases for offices in Vietnam are for 12 months starting January 2008 and July 2008, respectively.  The monthly rental is approximately $450 per month. Future commitments under operating leases are as follows for the twelve months ending September 30: 2011                                                           86,007 2012                                                          89,017 2013                                                          76,777 2014- Total minimum lease payments$251,801 NOTE 16 - INVESTMENT IN CATALYST RESOURCE GROUP, INC. As of June 30, 2009, the Company exchanged 900,000 shares of PhiLand Corporation which were owned by the Company for 23,285,714 shares of Catalyst Resource  Group, Inc. As of the date of this report, the Company currently owned 32,539,822 shares Catalyst Resource  Group, Inc. common stock, or equivalent to approximately 34% of all the issued and outstanding common shares of Catalyst Resource  Group  , Inc.  The Company accounting for this equity method investee is discussed below. The  following is the condensed financial position and result of operation of Catalyst Resource  Group, Inc.  as of September 30, 2010 presented below: September 30, 2010Total Assets
     1,539Liabilities
     1,078,340Stockholders' Deficit
     (1,076,801)Total Liabilities and Stockholders' Deficit
     1,539Operations
     For The Three Months Ended
September 30, 2010Net Revenue
     -Expenses
     (24,718)Net Income
     (24,718)
  The Company's investment in equity for the period ended September 30, 2010 is as follows:
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Net book value @ 6-30-10
     
     
     
     $ 44,846Net loss for the quarter
     
     
     
     
     -24,719PHI Group’s share (33.8%)
     
     
     
     -8,356Net book value @ 9-30-10
     
     
     
     $ 36,49036490
  NOTE 18 - GOING CONCERN UNCERTAINTY As shown in the accompanying consolidated financial statements, the Company has accumulated deficit of $27,042,887 and negative cash flow from operations amounting $205,338 for the period ended September 30, 2010.These factors as well as the uncertain conditions that the Company faces in its day-to-day operations with respect to cash flows create an uncertainty as to the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.The company currently has a significant asset balance labeled construction in progress; this balance is subject to the renewal with Vietnamese governmental authorities.  This contract is due to expire on October 22, 2010, if the contract is not renewed this amount may be impaired.Management has taken action to strengthen the Company's working capital position and generate sufficient cash to meet its operating needs through June 30, 2011 and beyond. The Company also anticipates generating more revenue through its proposed mergers and acquisitions. No assurances can be made that management will be successful in achieving its plan. The president and chairman of the Company has committed to funding the Company's operations for the next 12 months. 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.
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INTRODUCTION PHI Group, Inc. ("PHI"), formerly Providential Holdings, Inc., through its wholly-owned and majority-owned subsidiaries engages in a number of diverse business activities including merger and acquisition advisory services, consulting, real estate development, mining, independent energy, import and export, fund management, and multimedia and maintains minority interests in various companies operating in the areas of infrastructure, construction, natural resources, finance, manufacturing, services and retail. The Company provides financial consultancy and M&A advisory services to U.S. and foreign companies and invests in selective businesses that may create long-term shareholder value. No assurances can be made that management will be successful in achieving its plan. BACKGROUND PHI Group, Inc. ("PHI"), formerly Providential Holdings, Inc., was organized under the laws of the State of Nevada on June 8, 1982 under the name of JR Consulting, Inc. Following the acquisition of Providential Securities, Inc., a California-based brokerage firm, the Company changed its name to Providential Securities, Inc. (Nevada) on January 12, 2000. Subsequently, the Company changed its corporate name to Providential Holdings, Inc. on February 9, 2000 and to PHI Group, Inc. on April 13, 2009. From its inception through September 7, 1995, the Company generated nominal revenues and did not actively engage in business. Prior to the corporate combination agreement with Providential Securities, Inc., JR Consulting had an operating subsidiary, Diva Entertainment, Inc., which operated two modeling agencies, one in New York and one in California.In October 2000,Providential Securities withdrew its membership and ceased its securities brokerage business. BUSINESS RESTRUCTURING Following the termination of its securities brokerage operations in October 2000, the Company restructured its primary scope of business to engage in merger and acquisition advisory services, with particular emphasis on: (1) Consulting and Financial services (2) Real estate development, (3) Independent Energy and Resources, and (4) Special Situations. The Company has continued to increase its focus on real estate development activity in Vietnam and Southeast Asia through Philand Ranch Limited, a majority-owned subsidiary of the Company, on mining activity in Southeast Asia through PHI Mining Group, Inc., a majority-owned subsidiary of the Company, and on assisting Vietnamese companies to go public in the U.S. stock market and investing in Vietnam through PHI Capital Holdings, Inc. and Providential Vietnam, Ltd., both of which are wholly-owned subsidiaries of the Company. Events and developments relating to these areas are described in more detail below. BUSINESS STRATEGY PHI GROUP INC.’s strategy is to: 1. Identify, build, acquire, commit and deploy valuable resources with distinctive competitive advantages;  2. Design, evaluate, participate and compete in attractive businesses that have large, growing market potential;  3. Design and implement best-of-breed management systems; and  4. Build an attractive investment that includes points of exit for investors through capital appreciation or spin-offs of business units.
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SUBSIDIARIES: PHILAND RANCH LIMITED and PHILAND CORPORATION Philand Ranch Limited is a company registered under the laws of England and Wales. On June 5, 2009, Philand Ranch Limited acquired all the issued and outstanding common stock of PhiLand Corporation in exchange for the same amount of ordinary shares of Philand Ranch Limited. Philand Corporation, a Nevada corporation, was incorporated in July 2007 to manage the real estate development project in South Hoi An, Quang Nam Province, Vietnam.  In July 2007, PHI Group, Inc. entered into a principle agreement with the People’s Committee of Quang Nam Province, which allows the Company to lease approximately 8,000 acres of land in South Hoi An, Quang Nam Province, Vietnam to develop an integrated tourism zone under a 70-year lease term.  The total cost of the land lease once it is signed will be $250,250,000 which can be paid over a period of time to be determined by both parties. As of the date of this report, the Company has not made any payment towards the lease. On December 14, 2007, PhiLand Corporation was granted Investment License No.333043000025 by the Authority of Chu Lai Open Economic Zone, Quang Nam Province, Vietnam and  formed PhiLand Vietnam, Ltd., a wholly-owned subsidiary of PhiLand Corporation, to manage Pointe 91, its first development project of a 118-acre  residential community and resort in Bien Rang, Nui Thanh District, Quang Nam Province, Vietnam. PhiLand Corporation has engaged Urban Arena to coordinate and provide survey, site plan and architectural designs for Pointe91; CB Richard Ellis Vietnam, Ltd. to provide marketing and selling of the residential units; and Mayer Brown JSM for legal representation in connection with our real estate development activities. During the year ended June 30, 2009, 3,500,000 shares of PhiLand Corporation were issued to employees and consultants of the Company.  244,286 shares which were owned by the Company were sold to individuals for $140,000 and 900,000 shares which were owned by the Company were exchanged with 23,285,714 shares of Jeantex Group, Inc and 29,000 shares which were owned by the Company were exchanged for the payment of note of $29,000.  In addition, during the year ended June 30, 2009, 208,000 shares of PhiLand Corporation were issued for cash in the amount of $24,000 and 200,000 shares were issued for consulting service. The total of 5,081,287 shares held by minority shareholders makes up approximately 21% of outstanding shares.  As a result of the stock exchange between Philand Corporation and Philand Ranch Limited in June 2009, the Company received 18,734,753 shares of ordinary stock of Philand Ranch Limited.  Philand Ranch Limited ordinary shares are listed on the Open Market Segment of the Frankfurt Stock Exchange under the symbol 1P8.F, WKN A0RPEA.  On   October 24, 2009, Philand Corporation signed an agreement with EMHI Land Corporation, a Nevada corporation, to co-develop a 300-500 hectare township to be anchored with a GMG-branded theme park in South Hoi An, Quang Nam Province, Vietnam.  On October 31, 2009, Philand Corporation, a wholly-owned subsidiary of the Company, signed an agreement with Paul Cham Group Company, Ltd., a company organized and existing under the laws of the Kingdom of Cambodia, (“PaulCham) to co-develop and resort and residential project on Koh Tonsay Island, Kep Province, Kingdom of Cambodia. The investment license has been granted to PaulCham under a ninety-nine year lease covering an area of approximately 200 hectares for this development project, which includes a casino. The capital contributions for and ownership structure in this co-development project will be determined and agreed upon by both parties following a mutually acceptable feasibility study.  On May 14, 2010 Philand Ranch Ltd. entered into a EUR 50 Million Subscription Commitment with an international emerging markets fund for working capital, general corporate purposes, and acquisitions. According to the Subscription Commitment, the fund is committed to buying shares of ordinary stock of Philand Ranch based upon a per share purchase price equal to ninety percent (90%) of the average closing bid price during the fifteen (15) consecutive trading days following the purchase date.  As of the date of this report, Philand Ranch Ltd. has received but not signed the definitive documentation for the closing of this Subscription Commitment. The success of the Pointe91 and other projects of Philand Ranch is dependent upon its ability to raise the required capital and to execute its business plan. On October 22, 2010, Philand Vietnam Ltd., a wholly owned subsidiary of Philand Ranch Ltd., submitted  the implementation schedule for Pointe91 as required by the Chu Lai Open Economic Zone Authority of Quang Nam Province.
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On September 08, 2010, Philand Ranch Ltd. entered into a business and investment cooperation agreement with Huong Viet International Investment and Trade Company, Ltd. to co-develop a 2.5-hectare mixed use project entitled “HH3” in South An Khanh, Lang Hoa Lac, Hoai Duc, Hanoi, Vietnam and a 60-hectare ecological tourism and entertainment zone in Tuan Chau, Quoc Oai, Hanoi, Vietnam.  As of the date of this report, Philand Ranch Ltd. has not made any capital contribution to these projects. PHI MINING GROUP, INC. (FORMERLY, DDC INDUSTRIES, INC.) and INDOCHINA MINING CORPORATION In March 2007, the Company received 900,000 shares, valued at $675,000, of Bio-Warm, which subsequently acquired 100% of Vietnam-based Dai Dung Metallic Manufacture Construction and Trade Company (DDMMCT) and changed its name to DDC Industries, Inc. The Company received these shares for advisory services completed earlier in that month. In June 2007, the Company received 3,763,753 shares of DDC Industries for services performed in the merger of Bio-Warm Corp. and DDMMCT which was closed on March 30, 2007 and received the remaining 3,763,753 shares during the year ended June 30, 2008 per the agreement, which in total, is equivalent to 20% of all issued and outstanding shares of DDC Industries, Inc. The merger agreement with DDMMCT was rescinded on November 18, 2008 in entirety and shareholders of DDMMCT agreed to return 28,610,025 shares of 30,110,025 issued shares. On December 1, 2008, DDC Industries Inc. changed its name to PHI Mining Group, Inc. The common stock of PHI Mining Group, Inc. is currently trading on the Pink Sheets under the symbol “PHIG”. PHI Mining Group did not generate any revenues in the year ended June 30, 2009. IndoChina Mining Corporation, a Nevada corporation., was incorporated on March 20, 2008 for exploitation and processing of diatomite mines. On April 14, 2008, IndoChina Mining Corporation (IMC), entered into a Cooperation agreement with Phu Yen Minerals Joint Stock Company (PYMICO). Under this agreement, PYMICO and IMC will cooperate to contribute capital for establishment of a joint venture specializing in exploitation and processing of diatomite in Phu Yen province and IMC will participate in PYMICO through purchasing a maximum of 30% shares of PYMICO when the latter issues additional shares in 2008. During the year ended June 30, 2009, IndoChina Mining also entered into an agreement with Mr. Chinnawat Chaikijjanuwat of Thailand to establish a joint venture company to exploit and process a black pearl granite mine in Nakhornrajchasima province, Thailand and an agreement with Truong Son Group to establish a joint venture company to survey, mine and process lead and zinc in Tuyen Quang  province, Vietnam. As of the date of this report, IndoChina Mining Corp. has not perfected its interest in these joint venture companies. On December 1, 2008, Indochina Mining Corporation entered into stock purchase agreement with PHI Mining Group (formerly DDC Industries, Inc.) to exchange all of its capital stock with the same number of newly issued shares of PHI Mining Group. As a result, the Company currently owns approximately 83% of PHI Mining Group. PHI CAPITAL HOLDINGS, INC. (formerly Providential Capital, Inc.) In May 2003, the Company formed a wholly-owned subsidiary under the name of Providential Capital to provide financial products and services for the micro-small cap arenas and manage the Company's proprietary merger and acquisition activities.  Providential Capital has mainly focused its attention on the underserved segment of smaller companies in the U.S. and abroad. Providential Capital began providing merger and acquisition advisory services to its clients since the fourth quarter of the fiscal year ended June 30, 2003.  On May 11, 2010, Providential Capital changed its name to PHI Capital Holdings, Inc. The Company has successfully managed merger plans for several privately held and publicly traded companies and continues to focus on the Pacific Rim markets in the next twelve months. PROVIDENTIAL VIETNAM LTD. Providential Vietnam is a Vietnamese corporation and wholly-owned subsidiary of PHI Group, Inc.. This subsidiary started operation in May 2008 to provide M&A advisory services, financial and management consulting, corporate restructuring, and investment banking services to companies in Vietnam.
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PROVIMEX, INC. Provimex, Inc. was originally formed on April 10, 2001 under the name "Providential Imex", to focus on trade commerce with Vietnam. This division changed its name to Provimex on July 5, 2001. Provimex began to generate revenues from its import and export activities in August 2002 through the fiscal year ended June 30, 2005 and incorporated as a Nevada corporation on September 23, 2004. The Company has declared a 15% stock dividend of Provimex, Inc. to shareholders of record as of September 15, 2004 and currently owns 85% of Provimex, Inc. For the three-month periods ended September 30, 2010 and 2009, this subsidiary did not generate any sales. VIETNAM MEDIA GROUP, 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. Touchlink Communications signed an agreement with KAGRO (Korean American Grocer Association) to provide pre-paid services to its member stores in the US and Canada. 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 and currently owns 85% of Touchlink Communications. On November 03, 2008, Touchlink Communications, Inc. changed its name to Vietnam Media Group, Inc. to focus on multi-media business. This subsidiary did not have any activities during the three-month periods ended September 30, 2010 or 2009. PROVIDENTIAL ENERGY CORPORATION On May 9, 2005, the Company formed Providential Oil & Gas, Inc., a Nevada corporation and wholly-owned subsidiary of the Company, to begin investigating a number of lease properties in the US and abroad. On November 25, 2005, Providential Oil & Gas signed an agreement with Terra-Firma Gas & Oil, LLC, a Nevada corporation with headquarters in Midland, Texas, to co-develop up to twenty four gas wells in Crockett County, West Texas. As of the date of this report, this subsidiary has not begun drilling any of the gas wells in conjunction with Terra-Firma Gas & Oil under the agreement. Effective June 1, 2006, Providential Oil & Gas amended its Articles of Incorporation and changed its corporate name to Providential Energy Corporation with an intention to broaden its scope of business to include alternative energy. During the Fiscal Year ended June 30, 2007 Providential Energy Corporation entered into a Business Cooperation Agreement with Unitex Energy, LLC, a Texas Limited Liability Company, to establish PhiTex Energy Group, Inc., a Nevada corporation, in order to acquire and develop oil and gas properties. Providential Energy Corporation currently owns 87.75% stock of PhiTex Energy Group.. In September 2007, Providential Energy Corp entered into an agreement to form a joint-venture company, WRCP PEC Mining Corporation (CPMC), with WRC Partners (WRCP), in order to acquire up to 2,700 acres of mineral, oil and gas rights near Bakersfield, California for development. According to the agreement, Providential Holdings will be responsible for taking CPMC public and will manage the public company related activities required to be in full compliance with regulatory and market demands and Providential Energy Corporation will own up to a maximum of 40% of the equity interest in CPMC. Providential Energy Corporation did not generate any revenue during the periods ended September 30, 2010 and 2009. MINORITY INTERESTS: CATALYST RESOURCE GROUP, INC. (formerly JEANTEX GROUP, INC.)  On May 13, 2005, Providential Capital, Inc., a wholly-owned subsidiary of the Company, entered into a business consulting agreement with Lexor Holdings, Inc. to provide merger and acquisition advisory services to Lexor Holdings, Inc. with regard to a proposed merger between Lexor Holdings, Inc. and SB Chemical Co., Ltd., a Republic of Korea corporation. According to this agreement, the Company would be entitled to an additional 14% equity interest in Lexor Holdings, Inc. following the consummation of a merger between Lexor Holdings, Inc. and SB Chemical Co, Ltd. or another established business entity.
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On June 22, 2005, Lexor Holdings, Inc. entered into a Stock Purchase Agreement with Jeantex, Inc., a California corporation and Susan Shin, an individual who is the president and sole shareholder of Jeantex Pursuant to the terms of the Agreement, Lexor acquired 100% of the issued and outstanding equity interests of Jeantex in exchange for 56,350,000 shares of Lexor restricted common stock.  The Stock Purchase Agreement was closed on June 29, 2005. PHI Group, Inc. received 7,300,000 shares of restricted common stock of Lexor for services rendered in connection with this transaction. Lexor Holdings, Inc. has changed its corporate name to Jeantex Group, Inc. following the merger with Jeantex, Inc.  During the year ended June 30, 2009, 23,285,714 shares of Jeantex Group, Inc. were exchanged with 900,000 shares of PhiLand Corporation which were owned by the Company. In April 2010, Jeantex Group, Inc. changed its corporate name to Catalyst Resource Group, Inc. and its trading symbol to “CATA”.  As of June 30, 2010 the Company owned 32,539,822 shares of Catalyst Resource Group, Inc. common stock, or equivalent to 33.80%.  VIETNAM MINING CORPORATION  As a result of a merger between Vietnam-based Linh Thanh Quang Binh Exploiting and Processing High Calcium Carbonate Powder Joint Stock Company and Vietnam Mining Corporation that was closed on June 28, 2010, the Company received1,746,500 shares of common stock of Vietnam Mining Corporation. These shares represent approximately 5% of ownership in Vietnam Mining Corporation. JOINT VENTURES:PROVIMEX-HTV JOINT VENTURE COMPANY, LTD.  On October 18, 2004, the People's Committee of Ho Chi Minh City, Vietnam approved the joint venture application by the Company and HTV, Ltd., a Vietnam-based company, to form a Joint Venture company under the name of "Provimex-HTV Joint Venture Company, Ltd."  This joint venture company primarily focused on providing equipment and liquid gas to high rise buildings and premium residential housings in Vietnam. The Company was to own 80% equity in the joint venture company.  The investment in Provimex-HTV Joint Venture Company, Ltd. has been written off as an impairment of assets as of June 30, 2005. On May 13, 2007, the Company loaned $67,000 to Provimex-HTV Joint Venture Company with interest rate of 8.5% per year. This Note was written off as bad debt of as June 30, 2009.  CAVICO-PHI CEMENT JOINT STOCK COMPANY  On August 29, 2006, the Company entered into a Principle Business Cooperation Agreement with Cavico Vietnam Joint Stock Company, a Socialist Republic of Vietnam corporation, which is a business conglomerate engaged in various business activities including, but not limited to, infrastructure, construction, energy, mining, information technology, and real estate development.  Pursuant to the terms of the Agreement, Providential and Cavico have agreed to cooperate in funding, building, owning and operating certain businesses in Vietnam and other regions of the world and share in the benefits of these business operations.  In September 2006 Cavico and the Company formed a joint-venture company, namely Cavico PHI Cement Joint Stock Company (“CPCC”), to jointly fund, build, own, and operate a cement plant in Phu Ly, Ha Nam province. It is anticipated that the Company will contribute 10% of the equity investment towards CPCC. During the fiscal year ended June 30, 2007, the Company has contributed $30,000 towards the joint venture project. This investment was impaired as of June 30, 2007.
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CRITICAL ACCOUNTING POLICIES The Company’s financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported. These estimates can also affect supplemental information contained in the external disclosures of the Company including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. Valuations based on estimates are reviewed by us for reasonableness and conservatism on a consistent basis throughout the Company. Primary areas where financial information of the Company is subject to the use of estimates, assumptions and the application of judgment include acquisitions, valuation of long-lived and intangible assets, recoverability of deferred tax and the valuation of shares issued for services. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. Valuation of Long-Lived and Intangible Assets The recoverability of long lived assets requires considerable judgment and is evaluated on an annual basis or more frequently if events or circumstances indicate that the assets may be impaired. As it relates to definite life intangible assets, we apply the impairment rules as required by SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and Assets to Be Disposed Of” as amended by SFAS No. 144, which also requires significant judgment and assumptions related to the expected future cash flows attributable to the intangible asset. The impact of modifying any of these assumptions can have a significant impact on the estimate of fair value and, thus, the recoverability of the asset. Income Taxes We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities. We regularly review our deferred tax assets for recoverability and establish a valuation allowance based upon historical losses, projected future taxable income and the expected timing of the reversals of existing temporary differences. As of September 30, 2009, 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 September, 2009 and 2008, our financial condition at September 30, 2009 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 September 30, 2010 compared to the three months ended September 30, 2009 Total Revenues: Total revenues were $347,317 and $6,000 for the three months ended September 30, 2010, and 2009, respectively from management services and consulting services. During the three months ended September 30, 2010, we generated $341,317 revenues from consulting services for transactions consummated. No consulting revenue was generated in the three months ended September 30, 2009. The increase of revenues for the three months ended September 30, 2010 was
due to the consulting services completed during this period compared to none in the comparable period in the previous year.
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Operating Costs and Expenses: Total operating expenses were $295,116 and $283,891 for the three months ended September 30, 2010, and 2009, respectively. The increase is primarily due to the increase in professional services, and general and administrative expenses. Professional services were $124,885 and $116,979 for the comparable periods. General and administrative expenses were $94,087 and $72,653 for the comparable periods. The increase in general and administrative expenses between the two comparable periods was due to an increase in expenditures associated with travel and investor relations. During the current three months, the Company recorded salaries and wages of $75,347 as compared to $90,322 in the first three months of the previous fiscal year. The decrease in salaries and wages for the period ended September 30, 2010 was due to the reduction of staff during this period compared to that of the comparable previous period. Other Income and Expenses: Total other expense was $170,412 for the three months ended September 30, 2010 compared to other income of $144,452 for the three months ended September 30, 2009. The increase in other expense was due primarily to the increase in interest expense of $32,192 and a gain on recovery of bad debt $11,680 in the same period of prior year. Interest expense was $175,983 and $143,791 for the three months ended September 30, 2010, and 2009, respectively. The increase in interest expense for the period ended September 30, 2010 was due to an increase in short-term notes payable and the addition of a convertible note compared with the comparable previous period. Net Income and Loss: Net loss for the three months ended September 30, 2010 was $79,104 as compared to net loss $409,251 for the same period in 2009, which is equivalent to $(0.00) per share for the current period and $0.00 per share for the same period in 2009, both based on the weighted average number of basic and diluted shares outstanding. The decrease net loss between the two comparable periods  is primarily due to a increase in consulting revenues of $341,317 in the three-month period ended September 30, 2010 compared to the same period in 2009, a increase in total operating expenses of $11,225 in the three-month period ended September 30, 2010 compared to the same period in 2009, and net other expenses of $170,412  in the three-month period ended September 30, 2010 compared to net other income of $144,452 in the three-month period ended September 30, 2009. LIQUIDITY AND CAPITAL RESOURCES The Company had consolidated cash of $3,013 and $33,007 as of September 30, 2010 and 2009, respectively. The Company's operating activities used $205,338 and $79,273 in the three months ended September 30, 2010 and 2009, respectively. The difference is mainly attributable to the increase in activities of the Company. Cash used in investing activities was $0 for the three months ended September 30, 2010 as compared to cash used in investing of $10,983 for the same period in 2009, respectively. Cash provided by financing activities was $133,050 for the three months ended September 30, 2010, as compared to $85,450 for the three months ended September 30, 2009. The increase in cash provided by financing activities is mainly due an increase of $24,350 in cash received from notes and borrowings from officers, an increase of $120,500 from proceeds on notes payable between the three-month periods ended September 30, 2010 and 2009, respectively.
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The Company’s operations are currently financed through various loans and sale of marketable securities. Management has taken action to strengthen the Company's working capital position and generate sufficient cash to meet its operating needs. In addition, the Company also anticipates generating more revenue through its proposed mergers and acquisitions. No assurances can be made that management will be successful in achieving its plan or that additional capital will be available on a timely basis or at acceptable terms. COMPANY'S PLAN OF OPERATION FOR NEXT 12 MONTHS For the next twelve months, the Company intends to: (1) emphasize on M&A advisory services for small and mid-sized companies in the US and the Pacific Rim; (2) focus on the development of the real estate program in central Vietnam, including the Pointe 91 luxury hotel resort and premium residential community at Bien Rang, the co-development of residential projects in Hanoi and Ho Chi Minh City, and the co-development of Koh Tonsay Island resort in Kep Province, Cambodia, through the Company’s majority-owned subsidiary, PhiLand Ranch Limited; (3)  develop the mining business inSoutheast Asia and other regions of the world through the Company’s majority-owned subsidiary PHI Mining Group, Inc., and (4) engage in other special situations that may create significant value for the Company’s shareholders. There is no guaranty that the Company will be successful in any of its plans. FINANCIAL PLANS Management has taken action and is formulating additional plans to strengthen the Company's working capital position and generate sufficient cash to meet its operating needs through June 30, 2010 and beyond. Among the actions to be taken, the Company intends to raise additional capital from the US and international markets and is currently in the process of attaining additional financing. In addition, the Company also anticipates generating more revenue through its proposed mergers and acquisitions. No assurances can be made that management will 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 Vietnam using Vietnamese Dong, which is the official currency of Vietnam. The effect of the fluctuations of exchange rates is considered minimal to our business operations. Interest Rate Risk We do not have significant interest rate risk, as most of our debt obligations are primarily short-term in nature to individuals, with fixed interest rates. Valuation of Securities Risk Since majority of our income is paid with the marketable securities, the value of our assets may fluctuate significantly depending on the market value of the securities we hold. ITEM4. CONTROLS AND PROCEDURES Evaluation of Disclosure and Procedures As of September 30, 2010 , the end of the period covered by this report, the Company’s Chief Executive Officer and Chief Financial Officer reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures,
as defined in Exchange Act Rule 13a-15(e) and 15d-15(e). As of the end of the period covered by this report, based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective in ensuring that material information that the Company must disclose in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, the “Exchange Act”, is recorded, processed, summarized, and reported on a timely basis, and that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s chief executive officer and chief financial officer as appropriate to allow timely decisions regarding required disclosure.
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Changes in Internal Controls There was no change in our internal control over financial reporting that occurred during this fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 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. The majority of the legal proceedings and arbitration cases are related to the discontinued operations of Providential Securities, Inc. since 2000. LEGAL PROCEEDING SETTLED AND UNPAID AS OF SEPTEMBER 30, 2010: 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. The settlement amount has been accrued in the accompanying consolidated financial statements as of September 30, 2010. CONSECO FINANCE VENDOR SERVICES CORPORATION AKA GREEN TREE VENDOR SERVICES CORPORATION VS. PROVIDENTIAL SECURITIES, INC., HENRY D. FAHMAN AND TINA T. PHAN In September 1997 Providential Securities, Inc. entered into a written Lease Agreement to lease certain items of equipment from Green Tree Vendor Services, in return for which Providential Securities, Inc. agreed to pay thirty-six monthly installments, each in the amount of $1,552. On or about September 12, 2000, and subsequently, Providential Securities, Inc. was unable to make the monthly payments to Claimant due to the lack of revenues following the interruption and subsequent closure of its securities brokerage operations. (See Note 3) Claimant filed a complaint for money with the Superior Court of the State of California, County of Orange (Case No. 01CC02613) on February 23, 2001 seeking $39,102 plus interest thereon at the legal rate from September 12, 2000. The claimant entered a judgment against Providential Securities, Inc., Henry Fahman and Tina Phan for $48,933. The judgment amount has been accrued in the accompanying consolidated financial statements as of September 30, 2010.
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PENDING LITIGATION: NGON VU VS. PROVIDENTIAL SECURITIES, INC. Claimant was a former employee of Providential Securities, Inc. who was laid off in 2000 due to closure of business. The Claimant complained to the Department of Industrial Relations (DIR) for allegedly unpaid vacation and salaries. On June 13, 2001, the DIR filed a request to enter a judgment against Providential Securities, Inc. for $9,074 including wages and interest, penalty, post hearing and filing fee. The sought amount of $9,074 has been accrued in the accompanying consolidated financial statements as of September 30, 2010. VERIO VS. PROVIDENTIAL SECURITIES, INC. On or about April 1, 2003, Verio, Inc. filed a judgment against Providential Securities, Inc., a wholly-owned subsidiary of the Company which was discontinued in October 2000, for a total of $9,141. This sum consists of $6,800 for services allegedly rendered by Verio, Inc. to Providential Securities, Inc. in 2000 and $2,341 for legal costs. Both amounts have been accrued in the accompanying consolidated financial statements as of September 30, 2010. DOW JONES & COMPANY, INC. VS. PROVIDENTIAL SECURITIES, INC. AND PROVIDENTIAL HOLDINGS, INC. On March 19, 2002 Dow Jones & Company filed a complaint with the Superior Court of California, County of Orange, West Justice Center (Case No. 02WL1633), against Providential Securities, Inc., the discontinued operations of the Company, and Providential Holdings, Inc. for $9,973 plus prejudgment interest at the rate of ten (10%) per annum from November 1, 2000, reasonable attorneys’ fees and other and further relief. This claim is in connection with services allegedly rendered by the Plaintiff to Providential Securities, Inc. prior to November 2000. The Company intends to settle this case. The sought amount of $9,973 (excluding interest) has been accrued in Accrued Expenses in the accompanying consolidated financial statements as of September 30, 2010. KEY EQUIPMENT FINANCE, INC., VS. 49-6215601204 PROVIDENTIAL SECURITIES, INC.; HENRY D. FAHMAN; TINA T. PHAN, CASE NO 06WL00289 On January 18, 2006 Key equipment Finance filed a suit in the Superior Court of the State of California, County of Orange –West District claiming breach of the terms of lease agreement by failure to make the monthly installment due although demand therefore was made. The remaining balance due and owing to plaintiff under the lease is $14,439 plus interest from the date of default. The plaintiff also claiming for breach of guaranty, common counts, unjust enrichment and cost of law suit and any other relief the Court may deem just and proper. The sought amount of $14,439 has been accrued in the accompanying consolidated financial statements as of September 30, 2010. DAVIDSON VS. DOAN ET AL. On or about February 01, 2010, the company was notified of a suit that was filed with the Superior Court of the State of California for the County of Los Angeles on November 24, 2009 by William Davidson, an individual against Martin Doan, Henry Fahman, HRCiti Corporation, and Providential Capital, Inc. (collectively referred to as “Defendants” - Case No. BC 426831). Plaintiff demanded an amount of not less than $140,000.00 from Defendants for promissory notes outstanding between Plaintiff and the company. The Company has accrued the potential liabilities associated with these promissory notes in the accompanying consolidated financial statements as of September 30, 2010. NASD CASE: After the completion of a routine audit of Providential Securities, Inc. in July and August 2000, the National Association of Securities Dealers, Inc. alleged that Providential violated certain provisions of the NASD's Conduct Rules. As a result, without admitting or denying any of the allegations, Providential Securities, Inc. withdrew its membership from the
NASD in October 2000 and ceased its securities brokerage operation. $127,305, including $115,000 fine charged by NASD, is included in accrued expenses in the accompanying consolidated financial statements as of September 30, 2010.
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ARBITRATION CASES: The Company had four arbitration cases from day-traders against Providential Securities, Inc., a discontinued stock brokerage operation of the Company. The total amount of damages for these cases, which were closed as of June 30, 2001, was $54,505. This amount has been accrued in the accompanying consolidated financial statements as of September 30, 2010. 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 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 asto 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 orliabilities.
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These risks could have a material adverse effect on our business, results of operations and financial condition since the values of the securities received for the consulting service at the execution of the acquisition depend on the success of the company involved in acquisition. In addition, our ability to further expand our operations through acquisitions may be dependent on our ability to obtain sufficient working capital, either through cash flows generated through operations or financing activities or both. There can be no assurance that we will be able to obtain any additional financing on terms that are acceptable to us, or at all. Our businesses are currently focused in Vietnam, and any adverse change to the economy or business environment in Vietnam could significantly affect our operations, which would lead to lower revenues and reduced profitability. Our operations are currently concentrated in Vietnam. Because of this concentration in a specific geographic location, 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 Vietnam generally, or in any of the other markets that we serve, could adversely affect our business, results of operations and financial condition. 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. Our executive officers/directors and principal stockholders who hold 5% or more of the outstanding common stock owned as of September 30, 2010, in the aggregate, approximately 28% of our outstanding common stock. These stockholders will be able to exercise significant control over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This could delay or prevent an outside party from acquiring or merging with us even if our other stockholders wanted it to occur. In addition, the stock market often experiences significant price fluctuations that are unrelated to the operating performance of the specific companies whose stock is traded. These market fluctuations could adversely affect the trading price of our shares. The price at which investors purchase shares of our common stock may not be indicative of the price that will prevail in the trading market. Investors may be unable to sell their shares of common stock at or above their purchase price, which may result in substantial losses. We do not meet the requirements for our stock to be quoted on NASDAQ, the American Stock Exchange or any other senior exchange, the tradability in our securities will be limited under the penny stock regulations. Under the rules of the Securities and Exchange Commission, if the price of our securities on the OTC Bulletin Board 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 besubject 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.
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Our compliance with the Sarbanes-Oxley Act and SEC rules concerning internal controls may be time consuming, difficult and costly for us. It may be time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required by the Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal controls and other finance staff in order to develop and implement appropriate internal controls and reporting procedures. If we are unable to comply with the internal controls requirements of the Sarbanes-Oxley Act, we may not be able to obtain the independent accountant certifications that the Sarbanes-Oxley Act requires publicly-traded companies to obtain. ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None, except as may be noted elsewhere in this report. ITEM 3 DEFAULTS UPON SENIOR SECURITIES None, except as may be noted elsewhere in this report. ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5 OTHER INFORMATIONNone, except as may be noted elsewhere in this report.ITEM 6. EXHIBITSThe following exhibits are filed as part of this report: Exhibit No.Description 21.1
     Subsidiaries of registrant31.1
     Certification by Henry D. Fahman, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002.31.2
     Certification by Henry D. Fahman, Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.32.1
     Certification by Henry D. Fahman, Chief Executive Officer of the Registrant, pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.32.2
     Certification by Henry D. Fahman, Chief Financial Officer of the Registrant, pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
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SIGNATURES Pursuant to the requirement of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized. PHI GROUP, INC. Date: November 22, 2010By: /s/ Henry D. FahmanHenry D. Fahman, President In accordance with the Exchange Actof 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated. SIGNATURETITLEDATE /s/ Henry D. Fahman HENRY D. FAHMAN               Chairman/President/Acting Chief Financial Officer               November 22, 2010  /s/ Tina T. PhanSecretary & Treasurer                                                                     November 22, 2010 TINA T. PHAN  /s/ Tam T. BuiDirector                                                                              November 22, 2010 TAM T. BUI  /s/Frank HawkinsDirector                                                                                            November 22, 2010 FRANK HAWKINS  /s/Paul K. NguyenDirector                                                                                            November 22, 2010 PAUL K. NGUYEN  /s/ Lawrence G. OlsonDirector                                                                                               November 22, 2010 LAWRENCE G. OLSON
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