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| DLTM.OB > SEC Filings for DLTM.OB > Form 8-K/A on 20-Aug-2008 | All Recent SEC Filings |
20-Aug-2008
Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired.
Filed herewith are the following financial statements of Altony, SA from which we acquired all of the issued and outstanding membership interests on March 4, 2008.
Report of Independent Registered Public Accounting Firm
Financial Statements:
Consolidated Balance Sheet at December 31, 2007
Consolidated Statement of Operations for the year ended December 31, 2007
Consolidated Statement of Stockholders' Equity as of December 31, 2007
Consolidated Statement of Cash Flows for the year ended December 31, 2007
Notes to Consolidated Financial Statements
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
To the Board of Directors and Stockholders of Delta Mutual Inc.
We have audited the accompanying consolidated balance sheet of Delta Mutual Inc. and Subsidiaries ("Delta" or the "Company") as of December 31, 2007 and the related consolidated statements of operations, stockholders' equity and cash flows for the year then ended. These financial statements are the responsibilities of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We did not examine the financial statements of Altony S.A., a consolidated subsidiary, whose statements reflect total assets and revenues constituting 93% and 100%, respectively, of the related consolidated totals. These statements were audited by other auditors whose report has been furnished to us, and our opinion in so far as it relates to the amounts included for Altony S.A., is based solely on the report of other auditors.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a text basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit and the report of other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audit and the report of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Delta Mutual Inc. and Subsidiaries as of December 31, 2007, and the results of operations and its cash flows for the year ended in conformity with accounting principles generally accepted in the United States of America.
Wiener, Goodman & Company, P.C.
July 21, 2008
DELTA MUTUAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 2007
ASSETS
Current Assets:
Cash $ 57,633
Investments 4,709,020
Prepaid expenses 1,914
Total Current Assets 4,768,567
Property and equipment - net 368,123
Intangible asset 126,317
Investments in oil and gas concessions 2,300,000
Other assets 650
TOTAL ASSETS $ 7,563,657
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 412,922
Accrued expenses 1,225,674
Convertible debt 397,340
Notes payable 2,540,655
Total Current Liabilities 4,576,591
Minority interest in consolidated subsidiaries 225,797
Stockholders' Equity:
Common stock $0.0001 par value - authorized 250,000,000:
208,882,953 outstanding 20,888
Additional paid-in-capital 11,953,766
Accumulated deficit (9,213,385 )
Total Stockholders' Equity 2,761,269
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 7,563,657
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See Notes to Consolidated Financial Statements
Delta Mutual, Inc. and Subsidiaries
Consolidated Statement of Operations
Year Ended December 31, 2007
Investment results $ 352,135
Costs and expenses:
General and administrative expenses 970,363
Valuation results 491,403
1,461,766
Loss from operations (1,109,631 )
Interest expense -
Loss before benefit from income taxes (1,109,631 )
Benefit from income taxes -
Net loss $ (1,109,631 )
Loss per common share $ (0.01 )
Weighted average number of common
shares outstanding - basic and diluted 192,185,922
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See Notes to Consolidated Financial Statements
DELTA MUTUAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
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 $ 11,108,118 $ (8,103,754 ) $ (10,000 ) $ 266,000 $ 3,279,580
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
Net (loss) - - - (1,109,631 ) - - (1,109,631 )
Balance, December 31,
2007 208,882,953 20,888 $ 11,953,766 $ (9,213,385 ) $ - $ - $ 2,761,269
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See Notes to Consolidated Financial Statements
Delta Mutual Inc. and Subsidiaries
Consolidated Statement of Cash Flows
For the Year Ended
December 31, 2007
Cash flows from operating activities:
Net loss $ (1,109,631 )
Adjustments to reconcile net
loss to net cash used in operating
activities:
Changes in operating assets
and liabilities 242,740
Net cash used in operating activities (866,891 )
Cash flows from investing activities:
Purchase of investments (2,300,000 )
Proceeds from sale of investments 866,891
Cash received upon acquisition 47,633
Net cash used in investing activities (1,385,476 )
Cash flows from financing activities:
Proceeds from borrowings 2,300,000
Proceeds from deferred stock purchase 10,000
Net cash provided by financing activities 2,310,000
Net increase in cash 57,633
Cash - beginning of year -
Cash - end of year $ 57,633
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Delta Mutual Inc. and Subsidiaries
Consolidated Statement of Cash Flows
(Continued)
For the Year Ended
December 31, 2007
Supplementary Information:
Cash paid during year for
Interest $ -
Income taxes $ -
Non-cash financing activities:
Issuance of common stock
for debt $ 847,320
Issuance of convertible notes
for stock purchases $ 266,000
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1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Delta Mutual, Inc. and subsidiaries ("Delta" or the "Company") was incorporated in Delaware on November 17, 1999. Since 2003, its principal business activities have focused on providing environmental and construction technologies and services to certain geographic reporting segments in the Far East, Middle East and the United States.
On March 4, 2008, the Company entered into a Membership Interest Purchase Agreement (the "Agreement") with Egani, Inc., an Arizona corporation ("Egani"). Pursuant to the Agreement, the Company acquired from Egani 100% of the issued and outstanding membership interests held by Egani in Altony S.A., an Uruguay Sociedad Anonima ("Altony"), which owns 100% of the issued and outstanding membership interests in South American Hedge Fund LLC, a Delaware limited liability company ("SAHF"). At the closing of the Agreement, the Company issued 130,000,000 shares of its common stock to Egani, for the purchase of all of the outstanding membership interests in Altony which constituted, following such issuance, a majority of the outstanding shares of the Company's common stock.
Immediately following the closing of the Agreement, Altony became a wholly owned subsidiary of the Company. For accounting purposes only, the transaction was treated as a recapitalization of the Company with Altony as the acquirer. The financial statements prior to March 4, 2008 are those of Altony and reflect the assets and liabilities of Altony at historical carrying amounts. The financial statements show a retroactive restatement of Altony's historical stockholders' equity to reflect the equivalent number of shares issued to the subsidiary.
The principal business activity of Altony is the ownership and management of its SAHF subsidiary. SAHF is a hedge fund that maintains its business office in Uruguay and invests in public and private securities of the United States and Latin American countries. SAHF has oil and gas investments in Argentina and intends to continue its focus on the energy sector, including the development and supply of energy and alternate energy sources in Latin America and the United States.
In August 2007, SAHF signed a purchase option for a partial interest in three oil and gas concessions in Argentina. SAHF is in the process of obtaining the necessary government and environmental permits to operate these concessions.
The Company intends to continue its environmental and construction technology and service activities. Its environmental activities are conducted by its joint venture subsidiary Delta-Envirotech, Inc. ("Envirotech"), headquartered in Virginia. The construction technology activities are conducted by the Company's wholly owned subsidiary Delta Technologies, Inc. ("Technologies") that holds intellectual property rights and has filed a patent for a new insulating concrete wall forming (ICF) system now known as Delta Wall.
BASIS OF PRESENTATION
The Company's financial statements include the accounts of its wholly-owned subsidiaries. All significant intercompany balances and transactions with its subsidiaries have been eliminated in the consolidated financial statements.
SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The Company's financial statements include the accounts of all majority-owned subsidiaries where its ownership is more than 50 percent of common stock. The consolidated financial statements also include the accounts of any Variable Interest Entities ("VIEs") where the Company is deemed to be the primary beneficiary, regardless of its ownership percentage. All significant intercompany balances and transactions with consolidated subsidiaries are eliminated in the consolidated financial statements. Where the Company's ownership interest is less than 100 percent, the minority ownership interests are reported in the consolidated balance sheet as a liability. The minority ownership interest of the Company's earnings or loss, net of tax, is classified as "Minority interest share of earnings (loss) of consolidated subsidiaries" in the consolidated statements of operations.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.
LOSS PER SHARE
Basic and diluted loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the year. Potential common shares are excluded from the loss per share calculation because the effect would be antidilutive. Potential common shares relate to the convertible debt, stock options and common stock purchase warrants. As of December 31, 2007, there were 4,421,920 potential common shares related to convertible debt and 7,978,000 potential common shares related to stock options.
REVENUE RECOGNITION
The Company recognizes revenue from the results of its investment portfolio as the difference between proceeds from the sale of securities and their acquisition cost, less commissions paid to the firm that conducts the securities transactions.
EVALUATION OF LONG-LIVED ASSETS
The Company reviews property and equipment and finite-lived intangible assets for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable in accordance with guidance in Statement of Financial Accounting Standards (SFAS) No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets." If the carrying value of the long-lived asset exceeds the present value of the related estimated future cash flows, the asset would be adjusted to its fair value and an impairment loss would be charged to operations in the period identified.
DEPRECIATION AND AMORTIZATION
Property and equipment are stated at cost. Depreciation is provided for by the straight-line method over the estimated useful lives of the related assets.
STOCK-BASED COMPENSATION
The Company has a stock-based compensation plan under which stock options are granted to employees. Effective January 1, 2006, the Company accounts for stock based compensation under Statement of Financial Accounting Standards ("SFAS") No. 123(R), "Share-Based Payment." The Company adopted SFAS 123(R) using the modified prospective method. Under modified prospective application, this SFAS applies to new awards and to awards for which the requisite service has not been rendered that are outstanding as of the required effective date shall be recognized as the requisite service is rendered on or after the required effective date. The compensation cost for the portion of awards shall be based on the grant-date fair value of those awards as calculated for either recognition or pro forma disclosures under SFAS 123. Changes to the grant-date fair value of equity awards granted before the required effective date of this Statement are precluded. The compensation cost for those earlier awards shall be attributed to periods beginning on or after the required effective date of this SFAS using the attribution method that was used under SFAS 123, except that the method of recognizing forfeitures only as they occur shall not be continued.
INCOME TAXES
The Company accounts for income taxes using an asset and liability approach under which deferred taxes are recognized by applying enacted tax rates applicable to future years to the differences between financial statement carrying amounts and the tax basis of reported assets and liabilities. The principal item giving rise to deferred taxes are future tax benefits of certain net operating loss carryforwards.
FOREIGN CURRENCY TRANSLATION
At the time of each investment transaction the related income or expense was translated into United States dollars based on the exchange rate in effect on the transaction date.
The translation gains or losses were not material for the year ended December 31, 2007.
INTANGIBLES
Effective January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 specifies the financial accounting and reporting for acquired goodwill and other intangible assets. Goodwill and intangible assets deemed to have indefinite useful lives are not amortized but are subject to, at a minimum, an annual impairment test. If the carrying value of goodwill or intangible assets exceeds its fair market value, an impairment loss would be recorded.
FAIR VALUE OF FINANCIAL INSTRUMENTS
For financial instruments including cash, investments, accounts payable, and notes payable, it was assumed that the carrying amount approximated fair value because of the short maturities of such instruments.
NEW FINANCIAL ACCOUNTING STANDARDS
In February 2007, the FASB issued SFAS No. 159 ("SFAS 159") "The Fair Value Option for Financial Assets and Financial Liabilities," providing companies with an option to report selected financial assets and liabilities at fair value. The Standard's objective is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. It also requires entities to display the fair value of those assets and liabilities for which the Company has chosen to use fair value on the face of the balance sheet. The adoption of SFAS 159 on January 1, 2008 did not impact the Company's consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141 (revised 2007) ("SFAS 141(R)") "Business Combinations," which replaces SFAS 141 "Business Combinations." This Statement improves the relevance, completeness and representational faithfulness of the information provided in financial reports about the assets acquired and liabilities assumed in a business combination. This Statement requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions specified in the Statement. Under SFAS 141 (R), the acquisition-related costs, including restructuring costs, must be recognized separately from the acquisition and will generally be expensed as incurred. That replaces SFAS 141's cost-allocation process, which required the cost of an acquisition to be allocated to the individual assets acquired and liabilities assumed based on their estimated fair values. SFAS 141(R) shall be applied prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual report period beginning on or after December 15, 2008. The Company will implement this Statement in 2009.
In December 2007, the FASB issued SFAS No.160 "Non-Controlling Interests in Consolidated Financial Statements - An Amendment of ARB No. 151" ("SFAS 160"). SFAS 160 established new accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. Specifically, this Statement requires the recognition of non-controlling interests (minority interests) as equity in the consolidated financial statements and separate from parent's equity. The amount of net income attributable to the non-controlling interest will be included in consolidated net income on the face of the income statement. SFAS 160 clarifies that changes in a parent's ownership in a subsidiary that does not result in deconsolidation, are equity transactions if the parent retains its controlling financial interest. In addition, this Statement requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated. Such gain or loss will be measured using the fair value of the non-controlling equity investment as of the deconsolidation date. SFAS 160 also includes expanded disclosure requirements regarding the interest of the parent and its non-controlling interest. SFAS 160 is effective for fiscal years, and interim periods other than fiscal years, beginning on or after December 2008. The Company is currently evaluating the impact of the adoption of this Statement on its financial statements.
In March 2008, the FASB issued SFAS No. 161,"Disclosures about Derivative Instruments and Hedging Activities," an amendment of FASB Statement No. 133 ("SFAS No. 161"). The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company does not believe that SFAS No. 161 will have a material impact on its financial statements.
2. INVESTMENTS
The Company has investments in public and private securities of the United
States and Latin American countries as well as long-term investments in oil and
gas concessions. The fair market value of these investments at December 31, 2007
is indicated below.
December 31,
2007
Public securities $ 322,300
Private securities 4,386,720
Current investments 4,709,020
Oil and gas concessions 2,300,000
$ 7,009,020
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3. PROPERTY AND EQUIPMENT
December 31,
2007
Equipment $ 455,035
Deposits on land --
Leasehold improvements 7,807
462,842
Less accumulated
depreciation 94,719
$ 368,123
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4. INTANGIBLE ASSETS
Intangible assets are intellectual property included in a patent application. If
the patent is not issued, the Company will write-off the unamortized amounts
immediately. Intangible assets consist of the following:
December 31,
2007
Gross Carrying Amount $ 143,000
Accumulated Amortization 16,683
Intellectual property costs $ 126,317
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Estimated amortization expense for intangible assets for the next five years is as follows:
Estimated
Year Ending Amortization
December 31, Expense
2008 $ 7,150
2009 7,150
2010 7,150
2011 7,150
2012 7,150
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5. INVESTMENT IN JOINT VENTURES
a. In December 2003, the Company formed a joint venture to develop Section 124, . . .
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