DELAWARE
|
14-1818394
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
14301
North 87
th
Street, #130, Scottsdale, AZ
|
85260
|
(Zip
Code)
|
Page
|
||
Part I. Financial Information |
1
|
|
Item
1.
|
Financial
Statements
|
1
|
Consolidated
Balance Sheets as of March 31, 2009 and as of
|
||
December
31, 2008 (unaudited)
|
2
|
|
Consolidated
Statements of Operations for the Three Months Ended
|
||
March
31, 2009 and 2008 (unaudited)
|
3
|
|
Consolidated
Statements of Stockholders’ Equity (Deficiency) as of
|
||
March
31, 2009 (unaudited)
|
4-5
|
|
Consolidated
Statements of Cash Flows for the Three Months Ended
|
||
March
31, 2009 and 2008 (unaudited)
|
6-7
|
|
Notes
to Unaudited Consolidated Financial Statements
|
8
|
|
Item
2.
|
Management's
Discussion and Analysis of Financial Condition and
|
|
Results
of Operations
|
24
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
28
|
Item
4T.
|
Controls
and Procedures.
|
28
|
Part II. Other Information |
28
|
|
Item
1.
|
Legal
Proceedings
|
28
|
Item
5.
|
Other
Information.
|
29
|
Item
6.
|
Exhibits.
|
29
|
Signatures
|
30
|
March
31,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
ASSETS
|
||||||||
Current
Assets:
|
||||||||
Cash
|
$ | 4,801 | $ | 13,957 | ||||
Property
and equipment - net
|
634 | 804 | ||||||
Investments
in non-consolidated affiliates
|
1,973,524 | 1,780,024 | ||||||
Other
assets
|
7,083 | 650 | ||||||
TOTAL
ASSETS
|
$ | 1,986,042 | $ | 1,795,435 | ||||
LIABILITIES
AND DEFICIENCY
|
||||||||
Current
Liabilities:
|
||||||||
Accounts
payable
|
$ | 354,565 | $ | 363,004 | ||||
Accrued
expenses
|
1,406,557 | 1,363,395 | ||||||
Convertible
debt
|
253,740 | 253,740 | ||||||
Notes
payable
|
727,971 | 461,208 | ||||||
Total
current liabilities
|
2,742,833 | 2,441,347 | ||||||
Deficiency
|
||||||||
Delta
Mutual Inc. and Subsidiaries Stockholders' Deficiency:
|
||||||||
Common
stock $0.0001 par value - authorized
|
||||||||
250,000,000
shares; 221,849,158 shares issued
|
||||||||
and
outstanding at March 31, 2009 and
|
||||||||
December
31, 2008, respectively
|
22,185 | 22,185 | ||||||
Additional
paid-in-capital
|
3,958,576 | 3,762,831 | ||||||
Deficit
|
(4,737,552 | ) | (4,430,928 | ) | ||||
Total
Delta Mutual Inc. and Subsidiaries Stockholders'
Deficiency:
|
(756,791 | ) | (645,912 | ) | ||||
Noncontrolling
interest
|
- | - | ||||||
Total
Deficiency
|
(756,791 | ) | (645,912 | ) | ||||
TOTAL
LIABILITIES AND DEFICIENCY
|
$ | 1,986,042 | $ | 1,795,435 |
Three
Months Ended March 31,
|
||||||||
2009
|
2008
|
|||||||
Revenue:
|
$ | - | $ | - | ||||
Costs
and expenses:
|
||||||||
General
and administrative expenses
|
290,140 | 601,678 | ||||||
Loss
from continuing operations
|
(290,140 | ) | (601,678 | ) | ||||
- | ||||||||
Interest
expense
|
(9,971 | ) | 32,209 | |||||
Loss
from continuing operations before provision
|
||||||||
for
income taxes
|
(300,111 | ) | (569,469 | ) | ||||
Provision
for income taxes
|
- | - | ||||||
Net
loss from continuing operations
|
(300,111 | ) | (569,469 | ) | ||||
Discontinued
operations:
|
||||||||
Gain
(loss) of disposal of Far East operations
|
||||||||
and
South American Hedge Fund operations,
|
||||||||
and
United States construction technology
|
||||||||
activities
|
(6,513 | ) | (2,053,680 | ) | ||||
Net
loss
|
(306,624 | ) | (2,623,149 | ) | ||||
Less:
Net loss attributable to noncontrolling
|
||||||||
interest
|
- | - | ||||||
Net
loss attributable to Delta Mutual Inc.
|
||||||||
and
Subsidiaries
|
$ | (306,624 | ) | $ | (2,623,149 | ) | ||
Loss
per common share - basic and diluted:
|
||||||||
Loss
from continuing operations attributable to
|
||||||||
Delta
Mutual Inc. and Subsidiaries
|
||||||||
common
shareholders
|
$ | - | $ | - | ||||
Discontinued
operations attributable to
|
||||||||
Delta
Mutual Inc. and Subsidiaries
|
||||||||
common
shareholders
|
- | (0.02 | ) | |||||
Net
loss attributable to Delta Mutual Inc. and
|
||||||||
Subsidiaries
common shareholders
|
||||||||
$ | - | $ | (0.02 | ) | ||||
Weighted
average common shares - basic
|
||||||||
and
diluted
|
221,849,158 | 157,652,474 | ||||||
Amounts
attributable to Delta Mutual Inc. and
|
||||||||
subsidiaries
common shareholders:
|
||||||||
Net
loss
|
$ | (306,624 | ) | $ | (2,623,149 | ) |
Number
of
|
Retained
|
|||||||||||||||||||||||
Common
|
Common
|
Paid
in
|
Earnings
|
Noncontrolling
|
||||||||||||||||||||
Shares
|
Stock
|
Capital
|
(Deficit)
|
Interest
|
Total
|
|||||||||||||||||||
Balance,
January 1, 2008
|
130,000,000 | $ | 13,000 | $ | 2,587,000 | $ | 1,869,468 | $ | - | 4,469,468 | ||||||||||||||
Effect
of reverse acquisition
|
78,882,953 | 7,888 | - | (1,716,087 | ) | (1,708,199 | ) | |||||||||||||||||
Issuance
of common stock for services
|
||||||||||||||||||||||||
(valued
at $0.02 - $0.05 per share)
|
10,550,000 | 1,055 | 237,445 | - | 238,500 | |||||||||||||||||||
Issuance
of common stock for debt
|
2,300,571 | 230 | 143,370 | - | 143,600 | |||||||||||||||||||
(valued
at $0.05 - $0.07per share)
|
||||||||||||||||||||||||
Issuance
of common stock for interest
|
115,634 | 12 | 7,036 | - | 7,048 | |||||||||||||||||||
(valued
at $0.05- $0.07 per share)
|
||||||||||||||||||||||||
Contribution
from stockholder
|
- | - | 1,000 | - | 1,000 | |||||||||||||||||||
Stock
based compensation expense
|
- | - | 786,980 | - | 786,980 | |||||||||||||||||||
Net
loss
|
- | - | - | (4,584,309 | ) | - | (4,584,309 | ) | ||||||||||||||||
Balance,
December 31, 2008
|
221,849,158 | 22,185 | 3,762,831 | (4,430,928 | ) | - | (645,912 | ) |
Number
of
|
Retained
|
|||||||||||||||||||||||
Common
|
Common
|
Paid
in
|
Earnings
|
Noncontrolling
|
||||||||||||||||||||
Shares
|
Stock
|
Capital
|
(Deficit)
|
Interest
|
Total
|
|||||||||||||||||||
Balance,
January 1, 2009
|
221,849,158 | 22,185 | 3,762,831 | (4,430,928 | ) | - | (645,912 | ) | ||||||||||||||||
Contribution
from stockholder
|
- | - | (1,000 | ) | - | (1,000 | ) | |||||||||||||||||
Stock
based compensation expense
|
- | - | 196,745 | - | 196,745 | |||||||||||||||||||
Net
loss
|
- | - | - | (306,624 | ) | - | (306,624 | ) | ||||||||||||||||
Balance,
March 31, 2009
|
221,849,158 | $ | 22,185 | $ | 3,958,576 | $ | (4,737,552 | ) | $ | - | $ | (756,791 | ) |
Three
Months Ended March 31,
|
||||||||
2009
|
2008
|
|||||||
Cash
flows from operating
|
||||||||
activities:
|
||||||||
Net
loss
|
$ | (306,624 | ) | $ | (2,623,149 | ) | ||
Adjustments
to reconcile net loss to
|
||||||||
net
cash used in operating activities:
|
||||||||
Depreciation
and amortization
|
170 | 12,996 | ||||||
Non-cash
compensation
|
- | 200,000 | ||||||
Noncontrolling
interest in income (loss) of
|
||||||||
consolidated
subsidiaries
|
- | (7,295 | ) | |||||
Compensatory
element of option
|
||||||||
issuance
|
196,745 | 196,745 | ||||||
Changes
in operating assets
|
||||||||
and
liabilities
|
28,290 | (191,730 | ) | |||||
Net
cash used in operating activities
|
(81,419 | ) | (2,412,433 | ) | ||||
Cash
flows from investing activities:
|
||||||||
Increase
in investments
|
(193,500 | ) | - | |||||
Proceeds
from sale of investments
|
- | 2,299,424 | ||||||
Net
cash provided by (used in)
|
||||||||
investing
activities
|
(193,500 | ) | 2,299,424 | |||||
Cash
flows from financing activities:
|
||||||||
Proceeds
from loans
|
266,763 | 121,000 | ||||||
Repayment
of loan
|
- | (60,000 | ) | |||||
Contribution
from stockholder
|
(1,000 | ) | - | |||||
Proceeds
from minority interest
|
- | 7,073 | ||||||
Net
cash provided by
|
||||||||
financing
activities
|
265,763 | 68,073 | ||||||
Net
decrease in cash
|
(9,156 | ) | (44,936 | ) | ||||
Cash
- Beginning of period
|
13,957 | 57,633 | ||||||
Cash
- End of period
|
$ | 4,801 | $ | 12,697 |
Three
Months Ended March 31,
|
||||||||
2009
|
2008
|
|||||||
Supplementary
information:
|
||||||||
Changes
in operating assets and
|
||||||||
liabilities
consists of:
|
||||||||
Decrease
in other assets
|
$ | (6,433 | ) | $ | - | |||
Increase
in accounts payable
|
||||||||
and
accrued expenses
|
34,723 | (191,730 | ) | |||||
$ | 28,290 | $ | (191,730 | ) | ||||
Issuance
of common stock for services
|
$ | - | $ | 200,000 |
Three
Months Ended March 31,
|
||||||||
2009
|
2008
|
|||||||
Net
sales
|
$ | — | $ | — | ||||
Impairment
|
— | — | ||||||
Provision
for income taxes
|
— | — | ||||||
Loss
from operations,net of tax
|
(6,513 | ) | (2,053,680 | ) | ||||
Gain
on disposition of minority interests
|
— | — | ||||||
Provision
for income taxes
|
— | — | ||||||
Loss
from discontinued operations, net of tax
|
$ | (6,513 | ) | $ | (2,053,680 | ) |
Cash
|
$ | 57,623 | ||
Prepaid
expenses
|
1,914 | |||
Property
and equipment
|
462,842 | |||
Accumulated
depreciation
|
(94,719 | ) | ||
Intangible
asset-net
|
126,317 | |||
Other
assets
|
650 | |||
Accounts
payable
|
(173,370 | ) | ||
Accrued
expenses
|
(1,225,674 | ) | ||
Convertible
debt
|
(397,340 | ) | ||
Notes
payable
|
(240,655 | ) | ||
Minority
interests
|
(225,797 | ) | ||
Common
stock
|
(7,888 | ) | ||
Deficit
|
1,716,087 | |||
$ | -0- |
March
31,
2009
|
December
31,
2008
|
|||||||
Public
securities
|
$ | — | $ | — | ||||
Private
securities
|
— | — | ||||||
$ | — | $ | — |
March
31,
2009
|
December
31,
2008
|
|||||||
Equipment
|
$ | 6,277 | $ | 6,277 | ||||
Leasehold
improvements
|
7,807 | 7,807 | ||||||
14,084 | 14,084 | |||||||
Less
accumulated depreciation
|
13,450 | 13,280 | ||||||
$ | 634 | $ | 804 |
March
31,
2009
|
December
31,
2008
|
|||||||
Gross
Carrying Amount
|
$ | — | $ | — | ||||
Accumulated
Amortization
|
— | — | ||||||
Intellectual
property costs
|
$ | — | $ | — |
Concession
Investments
|
Exploration
Rights
|
Total
|
||||||||||
At
December 31, 2007
|
$ | 2,300,000 | $ | — | $ | 2,300,000 | ||||||
Adjustment
of purchase price
|
(580,000 | ) | — | (580,000 | ) | |||||||
Disposition
of investment, net
|
(860,000 | ) | — | (860,000 | ) | |||||||
Additional
investment in 2008
|
223,024 | 697,000 | 920,024 | |||||||||
Equity
in net earnings (loss)
|
— | — | — | |||||||||
At
December 31, 2008
|
1,083,024 | 697,000 | 1,780,024 | |||||||||
Additional
investments in 2009
|
193,500 | — | 193,500 | |||||||||
At
March 31, 2009
|
$ | 1,276,524 | $ | 697,000 | $ | 1,973,524 |
March
31,
2009
|
December
31,
2008
|
|||||||
Notes
payable to three investors, interest at 8%, due November 6, 2008
(1)
|
$ | 150,655 | $ | 150,655 | ||||
Note
payable to third party, interest at 6%, due April 2009
|
30,000 | 30,000 | ||||||
Notes
payable to stockholders and related parties, interest at 6%, due on
demand
|
347,316 | 280,553 | ||||||
Note
payable to Ambika, S.A.,
Non-interest
bearing, payable on demand
|
200,000 | — | ||||||
$ | 727,971 | $ | 461,208 |
2009
|
$ | 253,740 | ||
$ | 253,740 |
March
31,
2009
|
December
31,
2008
|
|||||||
Professional
fees
|
$ | 23,000 | $ | 33,000 | ||||
Interest
expense
|
76,614 | 66,664 | ||||||
Payroll
expense
|
647,508 | 644,508 | ||||||
Payroll
expense-officers
|
59,471 | 50,296 | ||||||
Payroll
tax expense
|
49,497 | 45,481 | ||||||
Accrued
consulting fees
|
419,877 | 419,877 | ||||||
Other
accrued expenses
|
103,589 | 103,589 | ||||||
$ | 1,406,557 | $ | 1,363,395 |
Three
Months Ended March 31,
|
||||||||
2009
|
2008
|
|||||||
Total
Revenue:
|
||||||||
United
States
|
$ | — | $ | — | ||||
South
America
|
— | — | ||||||
$ | — | $ | — | |||||
Income
(Loss) from Continuing Operations:
|
||||||||
United
Sates
|
$ | (290,140 | ) | $ | — | |||
South
America
|
— | — | ||||||
$ | (290,140 | ) | $ | — |
Options
|
Shares
|
Weighted-Average
Exercise Share Price
|
Weighted-
Average Remaining Contractual Term
|
Aggregate
Intrinsic
Value
|
||||||||||||
Outstanding
at
January 1,
2009
|
6,500,000 | $ | 0.11 | |||||||||||||
Options
granted
|
- | $ | - | |||||||||||||
Options
exercised
|
- | $ | - | |||||||||||||
Options
cancelled/expired
|
- | $ | - | |||||||||||||
Outstanding
at
March 31,
2009
|
6,500,000 | $ | 0.11 | 2.2 | $ | (175,000 | ) | |||||||||
|
||||||||||||||||
Exercisable
at
March 31,
2009
|
6,500,000 | $ | 0.11 | 2.2 | — |
10.48a
|
Second
Amendment dated as of April 16, 2009 to 6% promissory notes issued
to
Egani,
Inc. in the aggregate principal amount of
$43,900.
|
10.49a
|
Second
Amendment dated as of April 16, 2009 to 6% promissory notes issued
to
Security
Systems International, Inc. in the aggregate principal amount
of
$136,900.
|
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 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 Oxley Act of
2002.
|
10.48a
|
Second
Amendment dated as of April 16, 2009 to 6% promissory notes issued to
Egani,
Inc. in the aggregate principal amount of $43,900, filed
herewith.
|
10.49a
|
Second
Amendment dated as of April 16, 2009 to 6% promissory notes issued to
Security
Systems International, Inc. in the aggregate principal amount of
$136,900,
filed herewith.
|
31.1
|
Certification
of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley
Act of 2002, filed herewith.
|
31.2
|
Certification
of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley
Act of 2002, filed herewith.
|
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,
filed herewith.
|
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,
filed herewith.
|
DELTA MUTUAL, INC. | EGANI, INC. | |||
(
COMPANY)
|
(LENDER)
|
|||
By:
|
/s/ Martin G. Chilek |
By:
|
/s/ Daniel R. Peralta | |
|
Martin G. Chilek |
|
Daniel R. Peralta | |
|
Sr. Vice President |
|
President |
DELTA MUTUAL, INC. | SECURITY SYSTEMS INTERNATIONAL, INC. | |||
(COMPANY)
|
(LENDER)
|
|||
By:
|
/s/ Martin G. Chilek |
By:
|
/s/ Malcolm W. Sherman | |
|
Martin G. Chilek |
|
Malcolm W. Sherman | |
|
Sr. Vice President |
|
President |
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
registrant's most recent fiscal quarter (the registrant’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
|
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: May
20, 2009
|
|
/s/ Daniel R. Peralta | ||
|
|
Daniel R. Peralta, | ||
|
|
President and Chief Executive Officer |
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
|
e.
|
disclosed
in this report any change in the registrant's
internal
control
over financial reporting that occurred during
the
registrant's most recent fiscal quarter (the registrant'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
|
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:
May 20, 2009
|
|
/s/ Martin G. Chilek | ||
|
|
Martin G. Chilek, | ||
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|
Chief Financial Officer |
May
20, 2009
|
|
/s/ Daniel R. Peralta | ||
|
|
Daniel R. Peralta | ||
|
|
Chief Executive Officer |
May
20, 2009
|
|
/s/ Martin G. Chilek | ||
|
|
Martin G. Chilek | ||
|
|
Chief Financial Officer |