PHI Group Inc (PHIL)

[rhod]

It's a little complicated. The latest 10-Q does state the basics:

Page F-21
The availability of the Company?s net operating loss carry-forward is subject to limitation if there is a 50% or more positive change in the ownership of the Company?s stock.

And on Page 8,
Insiders have substantial control over the company, and they could delay or prevent a change in our corporate control, even if our other stockholders wanted such a change to occur.

Though our executive officers and directors as of the date of this report, in the aggregate, only hold a small portion of our outstanding common stock, we have the majority voting rights associated with the Company?s Class B Series I Preferred Stock, which decision may allow the Board of Directors to exercise significant control over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This could delay or prevent an outside party from acquiring or merging with us even if our other stockholders wanted it to occur.

Control and ownership are not necessarily the same thing. Referencing Page 13 of;

https://www.alvarezandmarsal.com/sites/default/files/90507_tax_pli_section_382_white_paper_03.pdf

For ownership change purposes, the term “stock” generally means stock other than pure preferred stock. IRC § 382(k)(6)(A); Treas. Reg. § 1.382-2(a)(3)(i).

As discussed on Page 14, the issue centers around stockholders with 5% or more and whether or not they increased their ownership by more than 50% during a testing period. Today that would be someone with more than 1.25b shares.

I have personally experienced this as a CTO in a C-corp. Due to cashflow issues, I purchased more shares that changed my ownership by more than 50% and put me as the President of the company. I did not find out until later that the existing NOL was now impeded. It's something to avoid if at all possible.