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 March 31, 2008 (unaudited) and as of December
31,
2007
|
3
|
Consolidated
Statements of Operations for the Three Months Ended March 31, 2008
and
2007 (unaudited)
|
4
|
Consolidated
Statement of Stockholders' Equity (unaudited)
|
5
|
Consolidated
Statements of Cash Flows for the Three Months Ended March 31, 2008
and
2007 (unaudited)
|
6-7
|
Notes
to Unaudited Consolidated Financial Statements
|
8-23
|
Item
2. Management's Discussion and Analysis of Financial Condition and
Results
of Operations
|
24
|
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
|
27
|
Item
4T.Controls and Procedures.
|
27
|
Part
II. Other Information
|
27
|
Item
1A. Risk Factors.
|
28
|
Item
5. Other Information.
|
29
|
Item
6. Exhibits.
|
30
|
Signatures
|
31
|
March 31,
|
December 31,
|
||||||
2008
|
2007
|
||||||
(Unaudited)
|
|||||||
ASSETS
|
|||||||
Current
Assets:
|
|||||||
Cash
|
$
|
12,697
|
$
|
57,633
|
|||
Investments
|
2,409,596
|
4,709,020
|
|||||
Prepaid
expenses
|
1,914
|
1,914
|
|||||
Total
Current Assets
|
2,424,207
|
4,768,567
|
|||||
Property
and equipment - net
|
356,915
|
368,123
|
|||||
Intangible
asset
|
124,529
|
126,317
|
|||||
Investments
in oil and gas concessions
|
2,300,000
|
2,300,000
|
|||||
Other
assets
|
650
|
650
|
|||||
TOTAL
ASSETS
|
$
|
5,206,301
|
$
|
7,563,657
|
|||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
Current
Liabilities:
|
|||||||
Accounts
payable
|
$
|
163,184
|
$
|
412,922
|
|||
Accrued
expenses
|
1,283,682
|
1,225,674
|
|||||
Convertible
debt
|
397,340
|
397,340
|
|||||
Notes
payable
|
2,601,655
|
2,540,655
|
|||||
Total
Current Liabilities
|
4,445,861
|
4,576,591
|
|||||
Minority
interest in consolidated subsidiaries
|
225,576
|
225,797
|
|||||
Stockholders'
Equity:
|
|||||||
Common
stock $0.0001 par value - authorized 250,000,000 shares: 218,882,953
and
208,882,953 outstanding, respectively
|
21,888
|
20,888
|
|||||
Additional
paid-in-capital
|
12,349,511
|
11,953,766
|
|||||
Accumulated
deficit
|
(11,836,535
|
)
|
(9,213,385
|
)
|
|||
Total
Stockholders' Equity
|
534,864
|
2,761,269
|
|||||
TOTAL
LIABILITIES AND
STOCKHOLDERS'
EQUITY
|
$
|
5,206,301
|
$
|
7,563,657
|
Three Months Ended March 31,
|
|||||||
2008
|
2007
|
||||||
Investment
results
|
$
|
(2,060,953
|
)
|
$
|
(483,523
|
)
|
|
General
and administrative expenses
|
601,678
|
540,323
|
|||||
Valuation
results
|
22
|
-
|
|||||
601,700
|
540,323
|
||||||
Loss
from operations
|
(2,662,653
|
)
|
(1,023,846
|
)
|
|||
Interest
expense
|
32,209
|
(6,983
|
)
|
||||
Loss
before minority interest
|
(2,630,444
|
)
|
(1,030,829
|
)
|
|||
Minority
interest share of income (loss) of consolidated
subsidiaries
|
7,295
|
(37,053
|
)
|
||||
Loss
before benefit from income taxes
|
(2,623,149
|
)
|
(1,067,882
|
)
|
|||
Benefit
from income taxes
|
-
|
-
|
|||||
Net
loss
|
$
|
(2,623,149
|
)
|
$
|
(1,067,882
|
)
|
|
Loss
per common share-
basic
and diluted
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
|
Weighted
average number of common shares outstanding-
basic
and diluted
|
211,994,064
|
192,185,922
|
Number
of
|
|
|
|
|
Deferred
|
|
||||||||||||||||
|
Common
|
Common
|
Paid
in
|
Accumulated
|
Subscription
|
Stock
|
|
|||||||||||||||
|
Shares
|
Stock
|
Capital
|
Deficit
|
Receivable
|
Purchase
|
Total
|
|||||||||||||||
Balance,
January 1, 2007
|
192,161,246
|
$
|
19,216
|
$
|
10,321,138
|
$
|
(5,883,087
|
)
|
$
|
(10,000
|
)
|
$
|
266,000
|
$
|
4,713,267
|
|||||||
Issuance
of common stock for interest expense
|
||||||||||||||||||||||
(valued
at $0.06 - $0.125 per share)
|
135,040
|
13
|
15,307
|
-
|
-
|
-
|
15,320
|
|||||||||||||||
Issuance
of common stock for convertible debt
|
||||||||||||||||||||||
(valued
at $0.05 - $0.125 per share)
|
16,586,667
|
1,659
|
830,341
|
-
|
-
|
-
|
832,000
|
|||||||||||||||
Conversion
to convertible notes
|
-
|
-
|
-
|
-
|
-
|
(266,000
|
)
|
(266,000
|
)
|
|||||||||||||
Receipt
of subscribed stock
|
10,000
|
10,000
|
||||||||||||||||||||
Stock
based compensation expense
|
-
|
-
|
786,980
|
-
|
-
|
-
|
786,980
|
|||||||||||||||
Net
(loss)
|
-
|
-
|
-
|
(3,330,298
|
)
|
-
|
-
|
(3,330,298
|
)
|
|||||||||||||
Balance,
December 31, 2007
|
208,882,953
|
20,888
|
11,953,766
|
(9,213,385
|
)
|
-
|
-
|
2,761,269
|
||||||||||||||
Issuance
of common stock for services
|
||||||||||||||||||||||
(valued
at $0.02 per share)
|
10,000,000
|
1,000
|
199,000
|
-
|
-
|
-
|
200,000
|
|||||||||||||||
Stock
based compensation expense
|
-
|
-
|
196,745
|
-
|
-
|
-
|
196,745
|
|||||||||||||||
Net
(loss)
|
-
|
-
|
-
|
(2,623,149
|
)
|
-
|
-
|
(2,623,149
|
)
|
|||||||||||||
Balance,
March 31, 2008
|
218,882,953
|
$
|
21,888
|
$
|
12,349,511
|
$
|
(11,836,534
|
)
|
-
|
-
|
$
|
534,864
|
Three
Months Ended March 31,
|
|||||||
2008
|
2007
|
||||||
Cash
flows from operating activities:
|
|||||||
Net
loss
|
$
|
(2,623,149
|
)
|
$
|
(1,067,882
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|||||||
Depreciation
and amortization
|
12,996
|
13,121
|
|||||
Non-cash
compensation
|
200,000
|
13,880
|
|||||
Compensatory
element of option issuance
|
196,745
|
196,745
|
|||||
Minority
interest in income (losses) of consolidated subsidiaries
|
(7,295
|
)
|
37,053
|
||||
Changes
in operating assets and liabilities
|
(191,730
|
)
|
107,031
|
||||
Net
cash used in operating activities
|
(2,412,433
|
)
|
(700,052
|
)
|
|||
Cash
flows from investing activities:
|
|||||||
Deposit
on land
|
-
|
(25,000
|
)
|
||||
Decrease
in investments
|
2,299,424
|
480,299
|
|||||
Refund
of land deposit
|
-
|
35,500
|
|||||
Net
cash provided by investing activities
|
2,299,424
|
490,799
|
|||||
Cash
flows from financing activities:
|
|||||||
Proceeds
from loans
|
121,000
|
-
|
|||||
Proceeds
from convertible debt financing
|
-
|
17,000
|
|||||
Repayment
of loan
|
(60,000
|
)
|
-
|
||||
Payments
to minority interests
|
-
|
(5,000
|
)
|
||||
Proceeds
from minority interest
|
7,073
|
20,880
|
|||||
Net
cash provided by financing activities
|
68,073
|
32,880
|
|||||
Net
decrease in cash
|
(44,936
|
)
|
(176,373
|
)
|
|||
Cash
- Beginning of period
|
57,633
|
211,147
|
|||||
Cash
- End of period
|
$
|
12,697
|
$
|
34,774
|
Three
Months Ended March 31,
|
|||||||
2008
|
2007
|
||||||
Supplementary
information:
|
|||||||
Cash
paid during year for:
|
|||||||
Interest
|
$
|
-
|
$
|
-
|
|||
Income
taxes
|
$
|
-
|
$
|
-
|
|||
Changes
in operating assets and liabilities consists of:
|
|||||||
Decrease
in prepaid expenses
|
-
|
47,250
|
|||||
(Increase)
decrease in accrued expenses
|
(191,730
|
)
|
59,781
|
||||
$
|
(191,730
|
)
|
$
|
107,031
|
|||
Non-cash
financing activities:
|
|||||||
Issuance
of convertible notes for deferred stock purchase
|
$
|
-
|
$
|
283,000
|
|||
Issuance
of common stock in lieu of payment of accrued expenses
|
$
|
-
|
$
|
13,880
|
|||
Issuance
of common stock for services
|
$
|
200,000
|
$
|
-
|
March
31,
|
December
31,
|
||||||
2008
|
2007
|
||||||
Public
securities
|
$
|
—
|
$
|
322,300
|
|||
Private
securities
|
2,409,596
|
4,386,720
|
|||||
Current
investments
|
2,409,596
|
4,709,020
|
|||||
Investments
in oil
and
gas concessions
|
2,300,000
|
2,300,000
|
March
31,
|
December
31,
|
||||||
2008
|
2007
|
||||||
Equipment
|
$
|
455,035
|
$
|
455,035
|
|||
Deposits
on land
|
—
|
—
|
|||||
Leasehold
improvements
|
7,807
|
7,807
|
|||||
462,842
|
462,842
|
||||||
Less
accumulated depreciation
|
105,927
|
94,719
|
|||||
$
|
356,915
|
$
|
368,123
|
March
31,
|
December
31,
|
||||||
2008
|
2007
|
||||||
Gross
Carrying Amount
|
$
|
143,000
|
$
|
143,000
|
|||
Accumulated
Amortization
|
18,471
|
16,683
|
|||||
Intellectual
property costs
|
$
|
124,529
|
$
|
126,317
|
Estimated
|
||||
Year Ending
|
Amortization
|
|||
December 31,
|
Expense
|
|||
2008
|
5,364
|
|||
2009
|
7,150
|
|||
2010
|
|
7,150
|
||
2011
|
7,150
|
|||
2012
|
7,150
|
a.
|
In
December 2003, the Company formed a joint venture to develop Section
124,
low income housing in the Commonwealth of Puerto Rico. The Company
became
the general partner and 75% majority owner of a limited partnership,
Delta
Development Partners, LP that owns 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
homes under Section 124. During the year ended December 31, 2006,
the
activities associated with this joint venture were discontinued.
|
b.
|
On
January 14, 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 outside investors ownership interest
in
Delta Development Partners, L.P.; Delta Development Partners II,
L.P.;
Delta TA, LP; Delta Developers Corp.; Delta Developers Guayanilla
Corp.;
Delta-Envirotech, Inc. and PT Triyudha–
Envirotech.
|
March
31,
|
December
31,
|
||||||
2008
|
2007
|
||||||
Delta
Development Partners L.P.
|
$
|
81,966
|
$
|
82,087
|
|||
Delta
Development Partners II, L.P.
|
36,739
|
36,808
|
|||||
Delta
TA L.P.
|
106,871
|
106,902
|
|||||
Delta
Developers Corp.
|
—
|
—
|
|||||
Delta
Developers Guayanilla Corp.
|
—
|
—
|
|||||
Delta-Envirotech,
Inc.
|
—
|
—
|
|||||
PT
Triyudha - Envirotech
|
—
|
—
|
|||||
$
|
225,576
|
$
|
225,797
|
2008
|
$
|
397,340
|
||
$
|
397,340
|
March
31,
|
December
31,
|
||||||
2008
|
2007
|
||||||
Professional
fees
|
$
|
49,257
|
$
|
34,703
|
|||
Interest
expense
|
48,230
|
80,439
|
|||||
Payroll
expense
|
494,661
|
462,195
|
|||||
Payroll
expense-officers
|
126,061
|
117,436
|
|||||
Payroll
tax expense
|
38,614
|
34,742
|
|||||
Accrued
consulting fees
|
144,000
|
144,000
|
|||||
Other
accrued expenses
|
382,859
|
352,159
|
|||||
$
|
1,283,682
|
$
|
1,225,674
|
Three Months Ended
|
|||||||
March 31,
|
|||||||
2008
|
2007
|
||||||
Total
Revenue:
|
|||||||
North
America
|
$
|
—
|
$
|
—
|
|||
Indonesia
|
—
|
—
|
|||||
Middle
East
|
—
|
—
|
|||||
Puerto
Rico
|
—
|
—
|
|||||
South
America
|
(2,060,953
|
)
|
(483,523
|
)
|
|||
$
|
(2,060,953
|
)
|
$
|
(483,523
|
)
|
||
Loss
from Operations:
|
|||||||
North
America
|
$
|
(554,371
|
)
|
$
|
(515,677
|
)
|
|
Indonesia
|
(8,988
|
)
|
(8,988
|
)
|
|||
Middle
East
|
(38,006
|
)
|
(5,000
|
)
|
|||
Puerto
Rico
|
(313
|
)
|
(12,270
|
)
|
|||
South
America
|
(2,060,975
|
)
|
(488,894
|
)
|
|||
$
|
(2,662,653
|
)
|
$
|
(1,030,829
|
)
|
Options
|
Shares
|
Weighted-Average
Exercise
Share Price
|
Weighted-
Average
Remaining
Contractual
Term
|
Aggregate
Intrinsic
Value
|
|||||||||
Outstanding
at January 1, 2008
|
7,978,000
|
$
|
0.11
|
||||||||||
Options
granted
|
-
|
$
|
-
|
||||||||||
Options
exercised
|
-
|
$
|
-
|
||||||||||
Options
cancelled/expired
|
(980,000
|
)
|
$
|
0.11
|
|||||||||
Outstanding
at March 31, 2008
|
6,998,000
|
$
|
0.11
|
3.2
|
$
|
(419,880
|
)
|
||||||
Exercisable
at March 31, 2008
|
6,998,000
|
$
|
0.11
|
3.2
|
—
|
a.
|
In
April 2008, the Company issued 924,320 shares of common stock as
payment
of $43,600 principal amount and accrued interest, pursuant to two
convertible notes issued by the Company in April 2007. Also in
April 2008,
the Company issued 1,491,885 shares of common stock as payment
of $100,000
principal amount and accrued interest pursuant to a convertible
note
issued by the Company in May 2004.
|
b. |
In
April 2008, the Company issued 550,000 shares of common stock to
a
consultant for services valued at $38,500, at a price per share
of $0.07.
|
c. |
During
the second quarter of 2008, the Company borrowed $46,450, in the
aggregate, from two stockholders of the Company pursuant to 6%
promissory
notes maturing in October and November 2008.
|
ITEM 2. |
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS
OF OPERATIONS
|
Ø
|
changes
in laws and regulations, import, export and use of products, environmental
protection, climate change and energy security, all of which may
increase
costs or reduce the demand for our products;
|
Ø
|
expropriation
of our assets and properties; and
|
Ø
|
refusal
to extend or grant, or delay in the extension or grant of, energy
production or development
contracts.
|
DELTA
MUTUAL, INC.
|
||
BY:
|
/s/
Peter F. Russo
|
|
Peter
F. Russo
|
||
President
and Chief
|
||
Executive
Officer
|
$20,000
|
April
15, 2008
|
Sellersville,
Pennsylvania
|
DELTA
MUTUAL, INC.
|
||
a
Delaware corporation
|
||
By:
/s/
Peter F.
Russo
|
||
Name:
Peter
F. Russo
|
||
Title:
President
& CEO
|
$9,550
|
April
28, 2008
|
Sellersville,
Pennsylvania
|
DELTA MUTUAL, INC. | ||
a Delaware corporation | ||
By:
/s/
Peter F.
Russo
|
||
Name:
Peter
F. Russo
|
||
Title:
President
& CEO
|
$16,900
|
May
14, 2008
|
Sellersville,
Pennsylvania
|
DELTA
MUTUAL, INC.
|
||
a
Delaware corporation
|
||
By:
/s/
Peter F.
Russo
|
||
Name:
Peter
F. Russo
|
||
Title:
President
& CEO
|
1. |
I
have reviewed this quarterly report on Form 10-Q 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
registrant as of, and for, the periods presented in this report;
|
4. |
The
registrant'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 registrant 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
registrant,
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 registrant'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 registrant’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 registrant's internal control over
financial
reporting; and
|
5. |
The
registrant's other certifying officer(s) and I have disclosed, based
on
our
most recent evaluation of internal control over financial reporting,
to
the registrant's auditors and the audit committee of the registrant’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 registrant'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 registrant's
internal
control over financial reporting.
|
Date:
July 3, 2008
|
/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
registrant as of, and for, the periods presented in this report;
|
4. |
The
registrant'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 registrant 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
registrant,
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 registrant'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 registrant’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 registrant's internal control over
financial
reporting; and
|
5. |
The
registrant's other certifying officer(s) and I have disclosed,
based
on
our
most recent evaluation of internal control over financial reporting,
to
the registrant'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 registrant'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 registrant's
internal
control over financial reporting.
|
Date:
July 3, 2008
|
/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
|