DELAWARE
|
14-1818394
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
|
incorporation
or organization)
|
Identification
No.)
|
Page
|
||
Part
I. Financial Information
|
3
|
|
Item
1. Financial Statements
|
3
|
|
Consolidated
Balance Sheet as of June 30, 2007 (unaudited)
|
3
|
|
Consolidated
Statements of Operations for the Three and Six Months Ended
June
30, 2007 and 2006 (unaudited)
|
4
|
|
Consolidated
Statements of Cash Flows for the Six Months Ended June 30, 2007
and
2006
(unaudited)
|
5-6
|
|
Notes
to Unaudited Consolidated Financial Statements
|
7
|
|
Item
2. Management's Discussion and Analysis or Plan of
Operation
|
12 | |
Item
3. Controls and Procedures
|
16 | |
Part
II. Other Information
|
16 | |
Item
4. Submission of Matters to Vote of Security Holders
|
16 | |
Item
5. Other Information
|
17 | |
Item
6. Exhibits
|
17 | |
Signatures
|
17 |
Six
Months Ended June 30,
|
Three
Months Ended June 30,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Revenue
|
$
|
-
|
$
|
260,704
|
$
|
-
|
$
|
99,982
|
|||||
Costs
and Expenses
|
|||||||||||||
Cost
of Sales
|
-
|
79,432
|
-
|
29,694
|
|||||||||
General
and administrative
expenses
|
1,275,477
|
1,363,702
|
733,542
|
620,288
|
|||||||||
1,275,477
|
1,443,134
|
733,542
|
649,982
|
||||||||||
Loss
from operations
|
(1,275,477
|
)
|
(1,182,430
|
)
|
(733,542
|
)
|
(550,000
|
)
|
|||||
Accretion
of convertible debt
|
-
|
(146,751
|
)
|
-
|
(58,798
|
)
|
|||||||
Interest
expense
|
(26,464
|
)
|
(23,543
|
)
|
(19,481
|
)
|
(11,604
|
)
|
|||||
Loss
before minority interest
|
(1,301,941
|
)
|
(1,352,724
|
)
|
(753,023
|
)
|
(620,402
|
)
|
|||||
Minority
interest share of (income)
|
|||||||||||||
loss
of consolidated subsidiaries
|
(47,825
|
)
|
(92,059
|
)
|
(10,772
|
)
|
(21,680
|
)
|
|||||
Loss
before benefit from income taxes
|
(1,349,766
|
)
|
(1,444,783
|
)
|
(763,795
|
)
|
(642,082
|
)
|
|||||
Benefit
from income taxes
|
-
|
-
|
-
|
-
|
|||||||||
Net
loss
|
$
|
(1,349,766
|
)
|
$
|
(1,444,783
|
)
|
$
|
(763,795
|
)
|
$
|
(642,082
|
)
|
|
Loss
per common share-
basic
and diluted
|
$
|
(0.02
|
)
|
$
|
(0.04
|
)
|
$
|
(0.01
|
)
|
$
|
(0.02
|
)
|
|
|
|||||||||||||
Weighted
average number of
common
shares outstanding-basic and diluted
|
62,229,342
|
41,030,224
|
62,272,286
|
41,865,537
|
Six
Months Ended June 30,
|
|||||||
2007
|
2006
|
||||||
Cash
flows from operating
activities:
|
|||||||
Net
loss
|
$
|
(1,349,766
|
)
|
$
|
(1,444,783
|
)
|
|
Adjustments
to reconcile net loss to
|
|||||||
net
cash used in operating activities:
|
|||||||
Depreciation
and amortization
|
26,116
|
22,896
|
|||||
Non-cash
compensation
|
13,880
|
168,432
|
|||||
Accretion
of convertible debt
|
-
|
146,751
|
|||||
Compensatory
element of option
issuance
|
393,490
|
447,435
|
|||||
Minority
interest in income (losses) of
consolidated
subsidiaries
|
47,825
|
92,059
|
|||||
Changes
in operating assets and liabilities
|
433,214
|
103,250
|
|||||
Net
cash used in operating activities
|
(435,241
|
)
|
(463,960
|
)
|
|||
Cash
flows from investing activities:
|
|||||||
Deposit
on land
|
(25,000
|
)
|
-
|
||||
Refund
of land deposit
|
35,500
|
-
|
|||||
Net
cash provided by
|
|||||||
investing
activities
|
10,500
|
-
|
|||||
Cash
flows from financing activities:
|
|||||||
Proceeds
from sale of common stock
and
deferred stock purchase
|
10,000
|
333,000
|
|||||
Proceeds
from exercise of warrants
|
-
|
73,000
|
|||||
Proceeds
from loans
|
-
|
30,000
|
|||||
Proceeds
from borrowings
|
-
|
16,000
|
|||||
Proceeds
from convertible debt
financing
|
267,000
|
-
|
|||||
Repayment
of loan
|
-
|
(23,910
|
)
|
||||
Payments
to minority interests
|
(47,375
|
)
|
(6,514
|
)
|
|||
Proceeds
from minority interest
|
50,818
|
79,941
|
|||||
Net
cash provided by
financing
activities
|
280,443
|
501,517
|
|||||
Net
increase (decrease) in cash
|
(144,298
|
)
|
37,557
|
||||
Cash
- Beginning of period
|
211,147
|
67,042
|
|||||
Cash
- End of period
|
$
|
66,849
|
$
|
104,599
|
Six
Months Ended June 30,
|
|||||||
2007
|
2006
|
||||||
Supplementary
information:
|
|||||||
Cash
paid during year for:
|
|||||||
Interest
|
$
|
-
|
$
|
1,564
|
|||
Income
taxes
|
$
|
-
|
$
|
-
|
|||
Changes
in operating assets and
|
|||||||
liabilities
consists of:
|
|||||||
(Increase)
in accounts receivable
|
-
|
(257,674
|
)
|
||||
(Increase)
decrease in prepaid expenses
|
248,000
|
17,809
|
|||||
(Increase)
decrease in deposits
|
-
|
(49,000
|
)
|
||||
Increase
in accounts payable and accrued expenses
|
185,214
|
392,115
|
|||||
$
|
433,214
|
$
|
103,250
|
||||
Non-cash
financing activities:
|
|||||||
Issuance
of common stock for debt
|
$
|
-
|
$
|
292,634
|
|||
Issuance
of convertible notes for
deferred
stock purchase
|
$
|
266,000
|
$
|
-
|
|||
Issuance
of convertible note in lieu of
payment
of commission
|
$
|
26,600
|
$
|
-
|
|||
Issuance
of common stock in lieu of
payment
of accured expenses
|
$
|
13,880
|
$
|
-
|
|||
Issuance
of common stock for services
|
$
|
-
|
$
|
307,841
|
|||
Issuance
of common stock
for
settlement
|
$
|
-
|
$
|
42,750
|
1. |
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
|
2. |
PROPERTY AND
EQUIPMENT
|
June
30, 2007
|
||||
Equipment
|
$
|
480,035
|
||
Leasehold
improvements
|
7,807 | |||
487,842 | ||||
Less
accumulated
|
||||
Depreciation
|
72,302 | |||
$
|
415,540
|
3. |
INTANGIBLE ASSETS
|
June
30, 2007
|
|||||||
Gross
Carrying
|
Accumulated
|
||||||
Amount
|
Amortization
|
||||||
Intellectual
property costs
|
$
|
143,000
|
$
|
13,108
|
|||
|
|||||||
$
|
143,000
|
$
|
13,108
|
Estimated
|
||||
|
Amortization
|
|||
Year
Ending
December
31,
|
Expense
|
|||
2007
|
$
|
3,575
|
||
2008
|
7,150
|
|||
2009
|
7,150
|
|||
2010
|
7,150
|
|||
2011
|
7,150
|
4. |
INVESTMENT IN JOINT
VENTURES
|
a. |
In
December 2003, the Company formed a joint venture project to
develop
Section 124, low income housing in the Commonwealth of Puerto
Rico. The
Company became the general partner and majority owner of a limited
partnership, Delta Development Partners, LP, that holds the 85%
majority
share of Delta Developers Corp., a Puerto Rico corporation, formed
to
manage the construction and related activities required to build
approximately 270 low income homes under Section 124. During
the year
ended December 31, 2006, the activities associated with this
joint venture
were discontinued. The operations of the joint venture have been
consolidated with the Company for the six and three months ended
June 30,
2007 and 2006, respectively.
|
b. |
In January 2004, the Company entered into a
joint
venture agreement with Hi Tech Consulting and Construction, Inc.
(”Hi
Tech”) forming Delta- Envirotech, Inc. for the purpose of providing
environmental technologies and services to markets in the Middle
East. The
joint venture company is based in Virginia and focuses on participating
in
foreign government sponsored pollution remediation and other
projects.
|
c. |
Minority interests primarily consist of ownership
interest in Delta Development Partners, LP; Delta Development Partners
II,
LP; Delta TA, LP; Delta Developers Corp.; Delta Developers Guayanilla
Corp.; Delta-Envirotech, Inc. and PT Triyudha-Envirotech.
|
2007
|
||||
Delta
Development Partners LP
|
$
|
144,757
|
||
Delta
Development Partners II, LP
|
39,634
|
|||
Delta
TA, LP
|
108,427
|
|||
Delta
Developers Corp.
|
—
|
|||
Delta
Developers Guayanilla Corp.
|
—
|
|||
Delta-Envirotech,
Inc.
|
—
|
|||
PT
Triyudha - Envirotech
|
—
|
|||
$
|
292,818
|
5.
|
NOTES PAYABLE
|
6. |
CONVERTIBLE
DEBT
|
2007
|
$
|
269,740
|
||
2008
|
659,600
|
|||
929,340
|
7. |
ACCRUED
EXPENSES
|
June
30
|
||||
2007
|
||||
Professional
fees
|
$
|
8,105
|
||
Interest
expense
|
75,862
|
|||
Payroll
Expense
|
407,320
|
|||
Payroll
expense officers
|
121,499
|
|||
Payroll
tax expense
|
36,147
|
|||
Other
accrued expenses
|
334,109
|
|||
$
|
983,042
|
8. |
LOANS FROM RELATED
PARTIES
|
9. |
OTHER RELATED PARTY
TRANSACTIONS
|
10. |
STOCKHOLDERS'
DEFICIENCY
|
11. |
BUSINESS SEGMENT
INFORMATION
|
Six
Months
ended
June 30
|
Three
Months
ended
June 30,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Total
Revenue:
|
|||||||||||||
North
America
|
$
|
—
|
—
|
$
|
—
|
$
|
—
|
||||||
Indonesia
|
—
|
$
|
260,704
|
—
|
99,982
|
||||||||
Middle
East
|
—
|
—
|
—
|
—
|
|||||||||
Puerto
Rico
|
—
|
—
|
—
|
—
|
|||||||||
|
$
|
—
|
$
|
260,704
|
$
|
—
|
$
|
99,982
|
|||||
Operating
Loss:
|
|||||||||||||
North
America
|
$
|
(1,221,001
|
)
|
$
|
(1,077,311
|
)
|
$
|
(705,324
|
)
|
$
|
(540,283
|
)
|
|
Indonesia
|
(18,975
|
)
|
75,319
|
(9,987
|
)
|
25,705
|
|||||||
Middle
East
|
(10,000
|
)
|
(29,400
|
)
|
(5,000
|
)
|
(14,700
|
)
|
|||||
Puerto
Rico
|
(25,501
|
)
|
(151,038
|
)
|
(13,231
|
)
|
(20,722
|
)
|
|||||
$
|
(1,275,477
|
)
|
$
|
(1,182,430
|
)
|
$
|
(733,542
|
)
|
$
|
(550,000
|
)
|
12. |
SHARE BASED
COMPENSATION
|
Weighted
|
|||||||||||||
Average
|
|||||||||||||
Weighted
|
Remaining
|
Aggregate
|
|||||||||||
Average
|
Contractual
|
Intrinsic
|
|||||||||||
Options
|
Shares
|
Exercise
Price
|
Term
|
Value
|
|||||||||
Outstanding
at January 1, 2007:
|
7,978,000
|
$
|
0.11
|
||||||||||
Granted
|
—
|
—
|
|||||||||||
Exercised
|
—
|
—
|
|||||||||||
Forfeited,
expired or cancelled:
|
—
|
—
|
|||||||||||
Outstanding
at June 30, 2007
|
7,978,000
|
$
|
0.11
|
4.0
|
$
|
(319,120
|
)
|
||||||
Exercisable
at June 30, 2007
|
3,908,940
|
$
|
0.11
|
4.0
|
$
|
(156,358
|
)
|
Weighted-Average
|
|||||||
Grant-Date
|
|||||||
Nonvested
Options
|
Options
|
Fair
Value
|
|||||
Nonvested
at January 1, 2007:
|
4,069,060
|
$
|
0.11
|
||||
Granted
|
—
|
—
|
|||||
Vested
|
—
|
—
|
|||||
Forfeited,
expired or cancelled:
|
—
|
—
|
|||||
Nonvested
at June 30, 2007
|
4,069,060
|
$
|
0.11
|
13. |
COMMITMENTS AND
CONTINGENCIES
|
14. |
INCOME TAXES
|
15. |
SUBSEQUENT EVENTS
|
a. |
I
n
July 2007, the Company received $150,000 from an investor pursuant to
the terms of a convertible promissory note in the aggregate
principal
amount of $550,000 dated May 1, 2007
(the
“Note”). The
Company
has not received the balance of $150,000 due from the investor
pursuant to
the Note.
|
a.
|
Disclosure
controls and procedures.
|
b.
|
Changes
in internal controls over financial
reporting.
|
Abstentions/
|
||||||||||
Proposal
|
Shares
in Favor
|
Shares
Against
|
Broker
Nonvotes
|
|||||||
Increase
authorized common stock
|
32,965,811
|
—
|
—
|
3.1c
|
Certificate
of Amendment to Certificate of Incorporation, filed June 26,
2007.
|
|
3.1d
|
Form
of Restatement of Certificate of Incorporation of Delta Mutual,
Inc., as
amended.
|
|
4.6e
|
Amendment,
dated April 4, 2007, to 4% Convertible Promissory Note in the principal
amount of $193,740.
|
|
31.1
|
Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
31.2
|
Certification
of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
32.1
|
Certification
of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350,
as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
32.2
|
Certification
of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350,
as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
DELTA MUTUAL, INC. | ||
|
|
|
BY: | /s/ Peter F. Russo | |
Peter F. Russo |
||
President
and Chief
Executive
Officer
|
3.1c
|
Certificate
of Amendment to Certificate of Incorporation, filed June 26,
2007.
|
|
3.1d
|
Form
of Restatement of Certificate of Incorporation of Delta Mutual,
Inc., as
amended.
|
|
4.6e
|
Amendment,
dated April 4, 2007, to Convertible Promissory Note in the principal
amount of $193,740.
|
|
31.1
|
Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
31.2
|
Certification
of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
32.1
|
Certification
of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350,
as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
32.2
|
Certification
of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350,
as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
Delta
Mutual, Inc.
|
||
|
|
|
By: | /s/ Peter F. Russo | |
|
Peter
F. Russo
President
|
NAME |
MAILING
ADDRESS
|
Charles G. Youngblood |
4
Tower Place
Albany,
New York 12203
|
/S/
Charles G. Youngblood
|
||
Charles
G. Youngblood, Incorporator
|
DELTA
MUTUAL INC.
(BORROWER)
|
NEIL
BERMAN
(HOLDER)
|
||
By: /s/ Peter Russo | By: /s/ Neil Berman | ||
Peter
F. Russo
President
& CEO
|
Neil
Berman
|
1. |
I
have reviewed this quarterly report on Form 10-QSB of Delta Mutual,
Inc.;
|
2. |
Based
on my knowledge, this report does not contain any untrue statement
of
material fact or omit to state a material fact necessary to make
the
statements
made, in light of the circumstances under which such statements
were
made, not misleading with respect to the period covered by this
report;
|
3. |
Based
on my knowledge, the financial statements, and other financial
information
included in this report, fairly present in all material
respects
the financial condition, results of operations and cash flows of
the
small business issuer as of, and for, the periods presented in this
report;
|
4. |
The
small business issuer's other certifying officer(s) and I are responsible
for
establishing
and maintaining disclosure controls and procedures (as
defined
in Exchange Act Rules 13a-14 and 15d-14) for the small business issuer
and
have:
|
a) |
designed
such disclosure controls and procedures, or caused such
disclosure
controls and procedures to be designed under our
supervision,
to ensure that material information relating to the
small
business issuer, including its consolidated subsidiaries, is made
known
to us by others within those entities, particularly during the period
in
which this report is being prepared;
|
(b) |
designed
such internal control over financial reporting, or caused
such
internal control over financial reporting to be designed under
our
supervision, to provide reasonable assurance regarding the
reliability
of financial reporting and the preparation of financial
statements
for external purposes in accordance with generally
accepted
accounting principles;
|
(c) |
evaluated
the effectiveness of the small business issuer's disclosure controls
and
procedures and presented in this report our conclusions about the
effectiveness
of the disclosure controls and procedures, as of the
end
of the period covered by this report based on such evaluation; and
|
(d) |
disclosed
in this report any change in the small business issuer’s internal
control
over financial reporting that occurred during the Company's
most
recent fiscal quarter (the Company's fourth quarter in the case
of
an annual report) that has materially affected, or is reasonably
likely
to materially affect, the small business issuer's internal control
over
financial reporting; and
|
5. |
The
small business issuer's other certifying officer(s) and I have disclosed,
based on
our
most recent evaluation of internal control over financial reporting,
to
the small business issuer's auditors and the audit committee of the
small
business issuer's board of directors (or persons performing the equivalent
functions):
|
(a) |
all
significant deficiencies and material weaknesses in the design
or
operation of internal control over financial reporting which are
reasonably
likely to adversely affect the small business issuer's ability to
record,
process, summarize and report financial information; and
|
(b) |
any
fraud, whether or not material, that involves management or
other
employees who have a significant role in the small business issuer's
internal
control over financial reporting.
|
Date: August 10, 2007 | /s/ Peter F. Russo | |
Peter
F. Russo
Chief
Executive Officer
|
1. |
I
have reviewed this quarterly report on Form 10-QSB of Delta Mutual,
Inc.;
|
2. |
Based
on my knowledge, this report does not contain any untrue statement
of
material fact or omit to state a material fact necessary to make
the
statements
made, in light of the circumstances under which such statements
were
made, not misleading with respect to the period covered by this
report;
|
3. |
Based
on my knowledge, the financial statements, and other financial
information
included in this report, fairly present in all material
respects
the financial condition, results of operations and cash flows of
the
small business issuer as of, and for, the periods presented in this
report;
|
4. |
The
small business issuer's other certifying officer(s) and I are responsible
for
establishing
and maintaining disclosure controls and procedures (as
defined
in Exchange Act Rules 13a-14 and 15d-14) for the small business issuer
and
have:
|
a) |
designed
such disclosure controls and procedures, or caused such
disclosure
controls and procedures to be designed under our
supervision,
to ensure that material information relating to the
small
business issuer, including its consolidated subsidiaries, is made
known
to
us by others within those entities, particularly during the period
in
which this report is being
prepared;
|
(b) |
designed
such internal control over financial reporting, or caused
such
internal control over financial reporting to be designed under
our
supervision, to provide reasonable assurance regarding the
reliability
of financial reporting and the preparation of financial
statements
for external purposes in accordance with generally
accepted
accounting principles;
|
(c) |
evaluated
the effectiveness of the small business issuer's disclosure controls
and
procedures
and presented in this report our conclusions about the
effectiveness
of the disclosure controls and procedures, as of the
end
of the period covered by this report based on such evaluation;
and
|
(d) |
disclosed
in this report any change in the small business issuer’s internal
control
over financial reporting that occurred during the Company's
most
recent fiscal quarter (the Company's fourth quarter in the case
of
an annual report) that has materially affected, or is reasonably
likely
to materially affect, the small business issuer's internal control
over
financial reporting; and
|
5. |
The
small business issuer's other certifying officer(s) and I have disclosed,
based on
our
most recent evaluation of internal control over financial reporting,
to
the small business issuer's auditors and the audit committee of the
small
business issuer's board of directors (or persons performing the equivalent
functions):
|
(a) |
all
significant deficiencies and material weaknesses in the design
or
operation of internal control over financial reporting which are
reasonably
likely to adversely affect the small business issuer's ability to
record,
process, summarize and report financial information; and
|
(b) |
any
fraud, whether or not material, that involves management or
other
employees who have a significant role in the small business issuer's
internal
control over financial reporting.
|
Date: August 10, 2007 |
/s/
Martin G. Chilek
|
|
Martin
G. Chilek
Chief
Financial Officer
|
/s/
Peter F. Russo
|
||
Peter
F. Russo
President
and
Chief
Executive Officer
|
/s/
Martin G. Chilek
|
||
Martin
G. Chilek
Chief
Financial Officer
|
||
August
10, 2007
|