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
|
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
(480) 221-1989
|
(Registrant’s
Telephone Number, Including Area
Code)
|
(Former
Name, Former Address and Former Fiscal Year, if changed since last
report)
|
Large
accelerated filer
¨
|
Accelerated
filer
¨
|
|
Non-accelerated
filer
¨
|
Smaller
reporting company
x
|
Page
|
|
Part
I. Financial Information
|
3
|
Item
1. Financial Statements.
|
3
|
Consolidated
Balance Sheets as of June 30, 2009 and as of December 31, 2008
(unaudited)
|
4
|
Consolidated
Statements of Operations for the Six and Three Months Ended June 30, 2009
and 2008 (unaudited)
|
5
|
Consolidated
Statements of Stockholders’ Equity (Deficiency) as of June 30, 2009
(unaudited)
|
6-7
|
Consolidated
Statements of Cash Flows for the Six Months Ended June 30, 2009 and 2008
(unaudited)
|
8-9
|
Notes
to Unaudited Consolidated Financial Statements
|
10
|
Item
2. Management's Discussion and Analysis of Financial Condition and
Results
of Operations.
|
27
|
Item
3. Quantitative and Qualitative Disclosures About Market
Risk.
|
31
|
Item
4T.Controls and Procedures.
|
31
|
Part
II. Other Information
|
31
|
Item
1. Legal Proceedings.
|
31
|
Item
4. Submission of Matters to a Vote of Security
Holders.
|
32
|
Item
6. Exhibits.
|
33
|
Signatures
|
33
|
June
30,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
ASSETS
|
||||||||
Current
Assets:
|
||||||||
Cash
|
$ | 3,826 | $ | 13,957 | ||||
Property
and equipment - net
|
465 | 804 | ||||||
Investments
in non-consolidated affiliates
|
2,044,024 | 1,780,024 | ||||||
Other
assets
|
6,368 | 650 | ||||||
TOTAL
ASSETS
|
$ | 2,054,683 | $ | 1,795,435 | ||||
LIABILITIES
AND DEFICIENCY
|
||||||||
Current
Liabilities:
|
||||||||
Accounts
payable
|
$ | 454,792 | $ | 363,004 | ||||
Accrued
expenses
|
1,469,141 | 1,363,395 | ||||||
Convertible
debt
|
253,740 | 253,740 | ||||||
Notes
payable
|
762,569 | 461,208 | ||||||
Total
Current Liabilities
|
2,940,242 | 2,441,347 | ||||||
Deficiency
|
||||||||
Delta
Mutual Inc. and Subsidiaries Stockholders' Deficiency:
|
||||||||
Preferred
stock $0.0001 par value-authorized 10,000,000 shares; no shares issued and
outstanding at June 30, 2009 and December 31, 2008,
respectively
|
- | - | ||||||
Common
stock $0.0001 par value - authorized 250,000,000 shares; 22,384,916 and
22,184,916 shares issued and outstanding at June 30, 2009 and December 31,
2008, respectively
|
2,239 | 2,219 | ||||||
Additional
paid-in-capital
|
4,295,267 | 3,782,797 | ||||||
Deferred
stock purchase
|
10,000 | - | ||||||
Deficit
|
(5,193,065 | ) | (4,430,928 | ) | ||||
Total
Delta Mutual Inc. and Subsidiaries Stockholders'
Deficiency:
|
(885,559 | ) | (645,912 | ) | ||||
Noncontrolling
interest
|
- | - | ||||||
Total
Deficiency
|
(885,559 | ) | (645,912 | ) | ||||
TOTAL
LIABILITIES AND DEFICIENCY
|
$ | 2,054,683 | $ | 1,795,435 |
Six Months Ended June 30,
|
Three Months Ended June 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Revenue:
|
$ | - | $ | - | $ | - | $ | - | ||||||||
Costs
and expenses:
|
||||||||||||||||
General
and administrative expenses
|
734,943 | 998,132 | 444,803 | 396,454 | ||||||||||||
Loss
on intellectual property
|
- | 122,742 | - | 122,742 | ||||||||||||
734,943 | 1,120,874 | 444,803 | 519,196 | |||||||||||||
Loss
from continuing operations
|
(734,943 | ) | (1,120,874 | ) | (444,803 | ) | (519,196 | ) | ||||||||
Interest
expense
|
(20,742 | ) | 24,260 | (10,771 | ) | (7,949 | ) | |||||||||
Loss
from continuing operations before provision for income
taxes
|
(755,685 | ) | (1,096,614 | ) | (455,574 | ) | (527,145 | ) | ||||||||
Provision
for income taxes
|
- | - | - | - | ||||||||||||
Net
loss from continuing operations
|
(755,685 | ) | (1,096,614 | ) | (455,574 | ) | (527,145 | ) | ||||||||
Discontinued
operations
|
||||||||||||||||
Gain
(loss) of disposal of Far East operations and South American Hedge
Fund operations, and United States construction technology
activities
|
(6,452 | ) | (2,034,218 | ) | 61 | 19,462 | ||||||||||
Net
loss
|
(762,137 | ) | (3,130,832 | ) | (455,513 | ) | (507,683 | ) | ||||||||
Less:
Net loss attributable to noncontrolling interest
|
- | - | - | - | ||||||||||||
Net
loss attributable to Delta Mutual Inc. and Subsidiaries
|
$ | (762,137 | ) | $ | (3,130,832 | ) | $ | (455,513 | ) | $ | (507,683 | ) | ||||
Loss
per common share - basic and diluted:
|
||||||||||||||||
Loss
from continuing operations attributable to Delta Mutual Inc. and
Subsidiaries common shareholders
|
$ | (0.03 | ) | $ | (0.17 | ) | $ | (0.02 | ) | $ | (0.02 | ) | ||||
Discontinued
operations
attributable
to Delta Mutual Inc. and Subsidiaries common shareholders
|
$ | (0.03 | ) | $ | (0.17 | ) | $ | (0.02 | ) | $ | (0.02 | ) | ||||
Weighted
average common shares - basic and diluted
|
22,256,739 | 18,966,039 | 22,327,773 | 22,131,657 | ||||||||||||
Amounts
attributable to Delta Mutual Inc. and Subsidiaries common
shareholders:
|
||||||||||||||||
Net
loss
|
$ | (762,137 | ) | $ | (3,130,832 | ) | $ | (455,513 | ) | $ | (507,683 | ) |
Number
of
|
||||||||||||||||||||||||
Common
|
Common
|
Paid
in
|
Retained
Earnings
|
Noncontrolling
|
||||||||||||||||||||
Shares
|
Stock
|
Capital
|
(Deficit)
|
Interest
|
Total
|
|||||||||||||||||||
Balance,
January 1, 2008
|
13,000,000 | $ | 1,300 | $ | 2,598,700 | $ | 1,869,468 | $ | - | 4,469,468 | ||||||||||||||
Effect
of reverse acquisition
|
7,888,295 | 789 | 7,099 | (1,716,087 | ) | (1,708,199 | ) | |||||||||||||||||
Issuance
of common stock for services (valued at $0.20 - $0.50 per
share)
|
1,055,000 | 106 | 238,394 | - | 238,500 | |||||||||||||||||||
Issuance
of common stock for debt (valued at $0.50 - $0.70 per
share)
|
230,057 | 23 | 143,577 | - | 143,600 | |||||||||||||||||||
Issuance
of common stock for interest (valued at $0.50- $0.70 per
share)
|
11,563 | 1 | 7,047 | - | 7,048 | |||||||||||||||||||
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
|
22,184,916 | 2,219 | 3,782,797 | (4,430,928 | ) | - | (645,912 | ) |
Number
of
|
Deferred
|
|||||||||||||||||||||||||||
Common
|
Common
|
Paid
in
|
Retained Earnings
|
Stock
|
Noncontrolling
|
|||||||||||||||||||||||
Shares
|
Stock
|
Capital
|
(Deficit)
|
Purchase
|
Interest
|
Total
|
||||||||||||||||||||||
Balance,
January 1, 2009
|
22,184,916 | 2,219 | 3,782,797 | (4,430,928 | ) | - | (645,912 | ) | ||||||||||||||||||||
Contribution
from stockholder
|
- | - | (1,000 | ) | - | (1,000 | ) | |||||||||||||||||||||
Issuance
of common stock for services (valued at $0.60 per share)
|
200,000 | 20 | 119,980 | 120,000 | ||||||||||||||||||||||||
Deposit
on stock not yet issued
|
10,000 | 10,000 | ||||||||||||||||||||||||||
Stock
based compensation expense
|
- | - | 394,490 | - | 394,490 | |||||||||||||||||||||||
Net
loss
|
- | - | - | (762,137 | ) | - | - | (762,137 | ) | |||||||||||||||||||
Balance,
June 30, 2009
|
22,384,916 | $ | 2,239 | $ | 4,296,267 | $ | (5,193,065 | ) | $ | 10,000 | $ | - | $ | (884,559 | ) |
Six
Months Ended June 30,
|
||||||||
2009
|
2008
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
|
$ | (762,137 | ) | $ | (3,130,832 | ) | ||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
Depreciation
and amortization
|
339 | 25,112 | ||||||
Non-cash
compensation
|
120,000 | 245,548 | ||||||
Loss
on intellectual property
|
122,742 | |||||||
Noncontrolling
interest in income (loss) of consolidated subsidiaries
|
- | (18,815 | ) | |||||
Compensatory
element of option issuance
|
393,490 | 393,490 | ||||||
Changes
in operating assets and liabilities
|
(72,184 | ) | (128,096 | ) | ||||
Net
cash used in operating activities
|
(320,492 | ) | (2,490,851 | ) | ||||
Cash
flows from investing activities:
|
||||||||
Proceeds
from sales of investments
|
- | 2,871,482 | ||||||
Cash
flows from financing activities:
|
||||||||
Proceeds
from loans
|
311,361 | 186,950 | ||||||
Repayment
of loan
|
- | (640,000 | ) | |||||
Contribution
from stockholder
|
(1,000 | ) | - | |||||
Proceeds
from minority interest
|
- | 20,006 | ||||||
Net
cash provided by financing activities
|
310,361 | (433,044 | ) | |||||
Net
decrease in cash
|
(10,131 | ) | (52,413 | ) | ||||
Cash
- Beginning of period
|
13,957 | 57,633 | ||||||
Cash
- End of period
|
$ | 3,826 | $ | 5,220 |
Six
Months Ended June 30,
|
||||||||
2009
|
2008
|
|||||||
Supplementary
information:
|
||||||||
Changes
in operating assets and liabilities consists of:
|
||||||||
(Increase)
decrease in other prepaid expenses
|
$ | (5,718 | ) | $ | 1,914 | |||
Increase
(decrease) in accounts payable and accrued expenses
|
(66,466 | ) | (130,010 | ) | ||||
$ | (72,184 | ) | $ | (128,096 | ) | |||
Issuance
of common stock for debt
|
$ | - | $ | 143,600 | ||||
Issuance
of common stock for in lieu of
payment of accrued
expenses
|
$ | - | $ | 7,048 | ||||
Issuance
of common stock for services
|
$ | 120,000 | $ | 238,500 |
Six Months Ended June 30,
|
Three Months Ended June 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Net
sales
|
$ | — | $ | — | $ | — | $ | — | ||||||||
Impairment
|
— | — | — | — | ||||||||||||
Provision
for income taxes
|
— | — | — | — | ||||||||||||
Loss
from operations, net of taxes
|
(6,452 | ) | (2,034,218 | ) | 61 | 19,462 | ||||||||||
Gain
on disposition of minority interest
|
— | — | — | — | ||||||||||||
Provision
for income taxes
|
— | — | — | — | ||||||||||||
Loss
from discontinued operations, net of taxes
|
$ | (6,452 | ) | $ | (2,034,218 | ) | $ | 61 | $ | 19,462 |
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- |
June 30,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
Equipment
|
$ | 6,277 | $ | 6,277 | ||||
Leasehold
improvements
|
7,807 | 7,807 | ||||||
14,084 | 14,084 | |||||||
Less
accumulated depreciation
|
13,619 | 13,280 | ||||||
$ | 465 | $ | 804 |
Concession
|
Exploration
|
|||||||||||
Investments
|
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
|
264,000 | — | 264,000 | |||||||||
At
June 30, 2009
|
$ | 1,347,024 | $ | 697,000 | $ | 2,044,024 |
June 30,
|
December 31,
|
|||||||
2009
|
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 (1)
|
30,000 | 30,000 | ||||||
Notes
payable to stockholders and related parties, interest at 6%, due on
demand
|
381,914 | 280,553 | ||||||
Note
payable to Ambika, S.A., non-interest bearing, payable on
demand
|
200,000 | — | ||||||
$ | 762,569 | $ | 461,208 |
2009
|
$ | 253,740 | ||
$ | 253,740 |
June 30,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
Professional
fees
|
$ | 12,000 | $ | 33,000 | ||||
Interest
expense
|
87,385 | 66,664 | ||||||
Payroll
expense
|
704,508 | 644,508 | ||||||
Payroll
expense-officers
|
78,613 | 50,296 | ||||||
Payroll
tax expense
|
53,513 | 45,481 | ||||||
Accrued
consulting fees
|
419,867 | 419,877 | ||||||
Other
accrued expenses
|
113,255 | 103,589 | ||||||
$ | 1,469,141 | $ | 1,363,395 |
Six
Months Ended
|
Three
months Ended
|
|||||||||||||||
June
30,
|
June 30, | |||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Total
Revenue:
|
||||||||||||||||
North
America
|
$ | — | $ | — | $ | — | $ | — | ||||||||
South
America
|
— | — | — | — | ||||||||||||
$ | — | $ | — | $ | — | $ | — | |||||||||
Income
(Loss) from Continuing Operations:
|
||||||||||||||||
North
America
|
$ | (755,685 | ) | $ | (1,096,614 | ) | $ | (455,574 | ) | $ | (527,145 | ) | ||||
South
America
|
— | — | — | — | ||||||||||||
$ | (755,685 | ) | $ | (1,096,614 | ) | $ | (455,574 | ) | $ | (527,145 | ) |
Options
|
Shares
|
Weighted-Average
Exercise Share
Price
|
Weighted-
Average
Remaining
Contractual
Term
|
Aggregate
Intrinsic
Value
|
||||||||||||
Outstanding
at January 1, 2009
|
350,000 | $ | 1.10 | |||||||||||||
Options
granted
|
- | $ | - | |||||||||||||
Options
exercised
|
- | $ | - | |||||||||||||
Options
cancelled/expired
|
- | $ | - | |||||||||||||
Outstanding
at June 30, 2009
|
350,000 | $ | 1.10 | 1.9 | $ | (245,000 | ) | |||||||||
Exercisable
at June 30, 2009
|
350,000 | $ | 1.10 | 1.9 | — |
ITEM 2.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS
OF OPERATIONS
|
Date
|
Title and Amount
|
Purchaser
|
Principal
Underwriter
|
Total Offering Price/ Underwriting Discounts | ||||||||||||
April
27, 2009
|
200,000
shares of common stock.
|
Consultant
|
NA
|
$ |
120,000/NA
|
|||||||||||
Abstentions/
|
||||||||||||
Proposal
|
Shares in Favor
|
Shares Against
|
Broker Nonvotes
|
|||||||||
1
for 10 reverse split of outstanding common stock
|
32,965,811 | — | — | |||||||||
Authorization
of new class of preferred stock
|
32,965,811 | — | — |
DELTA
MUTUAL, INC.
|
|
BY:
|
/s/ Daniel R. Peralta
|
Daniel
R. Peralta
|
|
President
and Chief Executive Officer
|
3.1e
|
Certificate
of Amendment to Certificate of Incorporation, filed May 13, 2009, filed
herewith.
|
3.1f
|
Form
of Restatement of Certificate of Incorporation of Delta Mutual, Inc., as
amended, filed herewith.
|
10.57a
|
Amended
and restated 6% Promissory Note dated as of April 15, 2009 to Security
Systems International, LLC in the principal amount of $15,487, 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.
|
|
By:
|
/s/ Daniel
Peralta
|
Chief
Executive Officer
|
MAILING
ADDRESS
|
|
4
Tower Place
|
|
Albany,
New York 12203
|
/S/
Charles G. Youngblood
|
|
Charles
G. Youngblood, Incorporator
|
$15,487
|
April
15,
2009
|
Scottsdale,
Arizona
|
|
1.3
|
"Lender"
shall mean the Person specified in the introductory paragraph of this
Note.
|
|
1.4
|
"Maturity
Date" shall mean the date on which the Company receives demand for
payment, in writing, from the Lender.
|
1.5 | "Obligations" shall mean all obligations, owed by the Company to the Lender, now existing or hereafter arising under or pursuant to the terms of this Note. | |
1.6 | "Person" shall mean and include an individual, a partnership, a corporation (including a business trust), a joint stock Company, a limited liability Company, an unincorporated association, a joint venture or other entity or a governmental authority. |
DELTA
MUTUAL, INC.
|
|
a
Delaware corporation
|
|
By:
|
/s/ Martin G. Chilek
|
Name:
|
Martin
G. Chilek
|
Title:
|
Sr.
Vice President & CFO
|
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:
August 6,
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;
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b.
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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;
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c.
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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
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e.
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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
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a.
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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
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b.
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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;
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DATE:
August 6,
2009
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/s/ Martin G. Chilek
|
Martin
G. Chilek, Chief Financial
Officer
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/s/ Daniel R. Peralta
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Daniel
R. Peralta
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Chief
Executive Officer
|
/s/ Martin G. Chilek
|
Martin
G. Chilek
|
Chief
Financial Officer
|