SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

☒  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended: December 31, 2016

 

OR

 

☐  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________ to __________

 

Commission File No. 000-30563

 

DELTA INTERNATIONAL OIL & GAS INC.

(Exact name of Registrant as Specified in Its Charter)

 

Delaware		14-1818394
(State or other jurisdiction of		(I.R.S. Employer
Incorporation or organization)		Identification No.)

 

7272 E Indian School Rd., Ste. 540, Scottsdale, AZ		85251
(Address of principal executive offices)		(Zip Code)

 

Registrant’s Telephone Number, Including Area Code: (480) 483-0420

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.0001 par value per share

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes ☐    No ☒

 

Indicate by checkmark if the registrant is not required to file reports to Section 13 or 15(d) of the Act.    ☐ Yes     ☒ No

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     ☒ Yes    ☐ No

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes ☐    No ☒

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a smaller reporting company. (Check One):

 

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
(Do not check if a smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐ Yes    ☒ No

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates as of the last business day of the registrant’s most recently completed second fiscal quarter was $1,545,998.

 

Number of shares of Common Stock outstanding as of March 31, 2017: 32,338,826.

 

 

 

TABLE OF CONTENTS

 

PART I	1
Item 1. Business.	1
Item 1A. Risk Factors.	8
Item 1B. Unresolved Staff Comments.	12
Item 2. Properties.	12
Item 3. Legal Proceedings.	12
Item 4. Mine Safety Disclosures.	12
PART II	13
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities.	13
Item 6. Selected Financial Data.	13
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	14
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.	18
Item 8. Financial Statements and Supplementary Data.	19
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.	20
Item 9A. Controls and Procedures.	20
Item 9B. Other Information.	20
PART III	21
Item 10. Directors, Executive Officers, and Corporate Governance.	21
Item 11. Executive Compensation.	22
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	23
Item 13. Certain Relationships and Related Transactions, and Director Independence.	24
Item 14. Principal Accountant Fees and Services	24
PART IV	25
Item 15. Exhibits and Financial Statement Schedules.	25

 

 

PART I

 

NOTE REGARDING FORWARD LOOKING STATEMENTS

CAUTIONARY STATEMENT FOR PURPOSES OF THE “SAFE HARBOR” PROVISIONS

OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

 

This Annual Report contains historical information as well as forward-looking statements. Statements looking forward in time are included in this Annual Report pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks and uncertainties that may cause our actual results in future periods to be materially different from any future performance suggested herein. We wish to caution readers that in addition to the important factors described elsewhere in this Form 10-K, the following forward-looking statements, among others, sometimes have affected, and in the future could affect, our actual results and could cause our actual consolidated results during 2017, and beyond, to differ materially from those expressed in any forward-looking statements made by or on our behalf.

 

Item 1. Business.

 

Unless the context otherwise requires, the terms the “Company”, “Delta”, “we,” “our” and “us” refers to Delta International Oil & Gas Inc. and, as the context requires, its consolidated subsidiaries.

 

Background

 

Delta was incorporated in Delaware on November 17, 1999. Our name was changed from Delta Mutual Inc. to our present name on October 29, 2013.

 

The primary focus of the Company’s business since 2008 has been its South American Hedge Fund, LLC (“SAHF”) subsidiary, which holds investments in oil and gas concessions in Argentina. Effective March 4, 2008, we acquired 100% of the issued and outstanding membership interests in SAHF, and interests in four oil and gas investment operated by other firms were contributed to the Company as part of the acquisition. Under the terms of the operating agreements for these properties, SAHF has carried interests and was not required to make further investments in the development or operation of the properties. For accounting purposes, the transaction was treated as a recapitalization of the Company, as of March 4, 2008, with the parent of SAHF as the acquirer. SAHF maintains a branch office in Argentina, where it has conducted oil and gas exploration and development activities. Over the course of 2008 through 2013, six additional properties were acquired, all but one of which has been divested.

 

As a result of the review by our management team and our board of directors of oil and gas exploration and production operations in Argentina, and evaluation of a number of oil and gas properties over a period of several years, Delta did not find a suitable, economically viable oil and gas producing project in Argentina to acquire. The Company has shifted the focus of its efforts away from oil and gas investments and exploration in Argentina, plans to dispose of its Argentina properties, and has begun its entry into the technology sector. We have entered into an agreement as of January 3, 2017 to dispose of our investments in two oil and gas concessions (Tartagal and Morillo) in Argentina, as well as to transfer SAHF and the Valle de Lerma operating concession to third parties.

 

 

Our principal offices are located at 7272 E. Indian School Rd., Suite 540, Scottsdale, AZ 85251. Our telephone number is (480)483-0420. Our common stock is quoted on the Over-the-Counter Electronic Bulletin Board under the symbol “DLTZ”.

 

General

 

Our current operations are that of an independent oil and gas company engaged in oil and gas concession investments in Argentina discussed below.

 

We are in the process of transitioning to technology oriented business operations; we have made an initial investment in a company involved in the development of a technology for the transportation and desalination of water, using a specific propulsion technology that had been deemed uneconomic until present-day. Our investment was made in the first quarter of 2016.

 

Additionally, we are looking to make acquisitions of other technology-based companies with a long history of revenues and yielding positive operational cash flow. The first and second new acquisition candidates are under letters of intent as of the date of this filing.

 

Business Strategy

 

During 2014, we looked for other producing opportunities in Argentina, and expanded our search to the United States. During the first half of the year, Argentina’s economic and political situation deteriorated. During the second half of the year, the oil price had dropped by about 50% and the natural gas price was already low. As the oil prices began dropping, our management team then decided that it would be in the best interest of the shareholders to explore options in other industries.

 

During 2015, Delta discussed with several potential buyers the sale of its stake in its subsidiary, SAHF., as well as evaluated over 30 opportunities involving projects, company acquisitions, and reverse mergers to propel the company into its next stage. By the end of 2015, Argentina’s political landscape had changed dramatically to a more market-friendly government and its consequences will take years to unfold. Simultaneously, Delta had been in negotiations with a potential buyer to purchase the oil and gas properties held by SAHF.

 

During 2016, Delta negotiated with High Luck Group for the sale of SAHF’s stake in the Tartagal Oriental and Morillo concessions. Delta also invested in a water transportation technology company and helped it finish its simulations and prototype. Additionally, Delta evaluated potential reverse merger candidates and acquisition partners to solidify the future of the Company.

 

As of January 3, 2017, we have entered into a definitive agreement with High Luck Group Limited for the potential sale of our stake in our remaining investment properties in Argentina (the Tartagal Oriental and Morillo concessions). In the transaction, Delta would, following the sale of these properties, dispose of SAHF, which holds the Valle de Lerma concession, to a third party. Closing under the High Luck Group agreement is subject to various closing conditions, and no assurances can be provided that this transaction will be completed. As of March 31, 2017, the agreement to transfer SAHF to an undisclosed buyer was signed along with the release of 1/4^th of the funds relating to the sale of Tartagal Oriental and Morillo.

 

 

On February 15, 2017, the Company signed a letter of intent for the acquisition of Naptech Test Equipment, Inc. This Letter of Intent also serves the purpose of bringing two corporate acquisitions experts along with several advisors into the Company so that it can adequately execute on its technology acquisition strategy. On March 22, 2017, the Company signed a letter of intent for the acquisition of Cardinal Electronics, Inc. to complement the Naptech acquisition. Both of these acquisitions are subject to due diligence by the parties and the execution of definitive agreements.

 

Our Oil and Gas Investments

 

SAHF has held interests in a total of ten oil and gas concessions in northern Argentina acquired in 2006, 2007, 2008, and 2011. Currently, SAHF holds an interest in three concessions. The concession joint venture operators (of which SAHF is the operator of only the Valle de Lerma concession) have undergone all the required processes to obtain the necessary government and environmental operating permits for the commercial exploitation of the concessions. While we are not the operator of two of these concessions, we have representation on the operating committees that are responsible for managing the business affairs of the concessions.

 

At December 31, 2016 the SAHF participations in the Argentina concessions are as follows:

 

Block		Province		Status		Delta [SAHF] %		Partner(s)
Tartagal		Salta		2 Work over wells drilled; 2 exploratory wells to be drilled		18% CO		New Times Energy (HK), Maxipetrol, JHP
Morillo		Salta		3D seismic interpretation; 2 exploratory wells to be drilled		18% CO		New Times Energy (HK), Maxipetrol, JHP
Valle de Lerma		Salta		Workover deemed undrillable		30.6%		Remsa, PetroNexus, Grasta, New Times Energy (HK)

 

*CO means a carryover interest in the project.

** In the Tartagal and Morillo concessions the carry over mode relieved SAHF from the payment of canons, landlord fees of any kind or any other expense until production is realized. In the exploratory area Valle de Lerma, proportional exploratory canons were paid as explained in the financials included in this report.

 

 

Tartagal and Morillo Concessions

 

Tartagal Oriental - The Tartagal Oriental (“Tartagal”) exploration license area, extended to March 2016, covers 7,065 square kilometers in Salta Province, located in the northern part of Argentina. Exploration dates back into the mid-20th century, and 22 wells, some oil producers, have been drilled in Tartagal Oriental since the 1960s. Of the 22 wells that have been drilled in Tartagal Oriental in the past decades, several were judged to be workover candidates by High Luck Group, the operator and majority owner. High Luck has invested approximately $60 million to date on: 1) geological studies, 2) 2D and 3D seismic surveys on both blocks, 3) two work-over drills, and 4)an exploratory well drill in Tartagal. Production from the two Campo Alcoba test wells commenced in 2011, continued into 2012, and then shut down due to large quantities of water in the oil. One more exploratory well is planned by the major partner.

 

Morillo - The Morillo exploration license area covers 3,518 square kilometers in Salta Province, contiguous with and south of the Tartagal Oriental license. Granted at the same time as Tartagal Oriental, the Morillo license was also extended to February 2016. In 2011, High Luck ordered a 274 square kilometer 3D seismic to be shot in the southwestern corner of the property because of a recent discovery made by Petrobras in an adjacent block. Once the data is processed, a decision will be made as to further drilling.

 

SAHF had 9% ownership of the Tartagal and Morillo oil and gas concessions located in Salta Province, Argentina, at December 31, 2010. Subsequent to year end, our ownership interest was increased to 18% in March 2011, and we sold 50% of that interest to PPL in 2012. Because of PPL’s default on payments, SAHF has retained its full 18% interest, to which it has clear title, in Tartagal and Morillo. In early 2016, SAHF and PPL cancelled all of their agreements with no further obligations to either side.

 

Terms of Carryover Arrangements- The Tartagal and Morillo interest was a carry-over interest from inception, May 15, 2007. The carrying party for Tartagal and Morillo concessions is currently High Luck Group Limited.

 

Under the terms of the carry over, 50% of the production profits will be applied to the investment payment. The balance of the production profits (50%) will be distributed proportionally according to the respective interests of the JV members. These terms only apply to the Tartagal and Morillo concessions. Once the exploration term is over, then the respective UTE members are subject to capital calls in the production term of the concession.

 

Current Status- As of March, 2016, the Tartagal and Morillo UTE was granted an exploration term extension of 18 months with around 6,000 work unit commitments, most of which are in the exploratory drilling category. The UTE has committed to drill four exploratory wells by September, 2017. It is expected to drill two of the committed wells by summer of 2017, and subsequently, the UTE will apply for another extension.

 

As of January 3, 2017, Delta signed an agreement with High Luck Group, the Tartagal Oriental and Morillo UTE operators, for the sale of 100% of SAHF’s interest in the Tartagal Oriental and Morillo concessions.

 

 

Valle de Lerma Concession

 

On August 10, 2011, SAHF and its partners, Remsa, PetroNexus, and Grasta SA, won the bid to explore and produce hydrocarbons in the block known as “Valle de Lerma” in the province of Salta, Argentina.

 

The Valle de Lerma block is located in the province of Salta in the northwestern region of Argentina and has an area of 5259 km². SAHF has done the measurement and survey study and filed an environmental impact study, which was approved. Upon completion of the study, it was determined that the actual well site was within the boundaries of the City of Salta, where government restrictions do not allow oil to be produced. There is an additional commitment of 231 work units in Valle de Lerma outstanding.

 

SAHF is the responsible operator. The exploration terms are four years for the first period, three years for the second and two years for the last period.

 

SAHF currently owns 30.6% of the rights to explore Valle de Lerma; Grasta owns 5%; PetroNEXUS owns 30%; and Remsa owns 5%. 29.4% of the rights were sold to PPL under the PPL Agreement and High Luck Group was included in the UTE as 29.4% owners and 50% liable for all expenses as requested by PPL. However, the official government decree acknowledging High Luck Group as an owner has not yet been made.

 

Delta has spent about $500,000 and complied with about $800,000 of work unit commitments in relation to Valle de Lerma for which High Luck Group is liable for 50%. Additionally, the end of the first period for Valle de Lerma is in March 2016- which the UTE is not looking to extend.

 

Once the contract with High Luck Group is completed, SAHF will be transferred with Valle de Lerma to a third party that is interested in purchasing the company and concession. As of March 31, 2017, Delta signed a sale of SAHF agreement with Enrique Vidal representing an undisclosed buyer which is expected to close within 10 days of the issuance of the government decree accepting the transfer of the Tartagal Oriental and Morillo concessions.

 

Agreement with High Luck Group

 

On May 12, 2016, Delta and New Times Energy reached an agreement in principle for the sale of Delta’s 18% interest in the Tartagal Oriental and Morillo concessions.

 

The parties agreed to a total consideration of $US4,000,000 for the 18% interest in Tartagal Oriental and Morillo. The initial payment of US$2,000,000 will be placed in escrow at the signing and will be released when the official transfer of the interest in the properties is completed. Additionally, Delta would receive 3% of gross revenues of production of both oil and gas in the two concessions until an additional US$2 million is paid. New Times has committed to drill 4 exploratory wells in the next nine months in the Tartagal and Morillo concessions.

 

On January 3, 2017, a final agreement was signed between SAHF and High Luck. There is no assurance that the sale of the two concessions to High Luck Group, and the disposal of SAHF and the Valle de Lerma property to third parties, will be completed, given the closing conditions precedent and necessity of certain governmental actions in Argentina.

 

As of March 31, 2017, High Luck requested the release of $500,000 from the Escrow Agent in favor of Delta for the sale of Tartagal Oriental and Morillo. Most of the closing conditions have been completed, and the rest are currently being addressed. High Luck and SAHF formally applied for the decree allowing the transfer of Tartagal Oriental and Morillo on March 24, 2017. The decree is expected to be published in April, 2017.

 

 

Title to Properties

 

We believe we have satisfactory title in all of our properties; and we investigate title and title opinions from counsel only when we acquire properties or before commencement of drilling operations. All of our current properties have been acquired directly from the government. As all of our current property titles are issued by the Argentine government (Department of Energy), we believe that we are in full compliance with the title requirements for each of our properties.

 

Governmental Regulation

 

The Company’s operations in Argentina are subject to various laws, taxes and regulations governing the oil and gas industry. SAHF is registered in the Public Registry of Commerce, and the conduct and dealing of SAHF are governed by the commercial code and supplementary laws and regulations. Taxes generally include income taxes, value added taxes, export taxes, and other production taxes such as provincial production taxes and turnover taxes. Labor laws and provincial environmental regulations are also in place.

 

Exchange Controls

 

As a result of the devaluation of the Argentine peso at the beginning of 2002, several foreign exchange regulations were issued to limit the transfer of money abroad.

 

On October 13, 2011, the Argentine government launched a series of regulations to control the sale of foreign currency. The measures were aimed at slowing the rise in value of the North American dollar, of which the Argentine Central Bank has had to reduce its reserves in order to avoid the continuing devaluation of the Argentine peso against the dollar.

 

In January 2014, the government devalued the Argentine peso to the greatest extent since 2002, the year the government abandoned a one-to-one peg with the U.S. dollar following a record $95 billion default. Exchange control restrictions were eased following the January 2014 devaluation.

 

Since Mauricio Macri was sworn in as president on December 10, 2015, the country has been going through an aggressive reform agenda. On December 14, 2015, the government removed taxes on agricultural products such as wheat, beef and corn and reduced them on soybeans. On December 16, the new finance minister, Alfonso Prat-Gay, lifted currency controls on the Argentinean peso letting it float freely, as well as lifting the dollar purchasing restriction to $2,000,000 a month for corporations and individuals.  The reforms continued in January 2016 when Macri removed most utility subsidies and raised tariffs on wholesale energy prices, which had been stagnant for more than 10 years. Argentina also got a $5 billion loan to refill the central bank’s vault with international reserves and negotiated an agreement with U.S. hedge funds to settle the long-standing default legal conflict.

 

In the oil and energy sector, the President has focused on replacing key officials in the Energy Department across the country. He is also in the process of replacing part of the top management and board of directors at the national oil company – YPF. Currently, the oil and natural gas prices applicable domestically are artificially set at $63.00/bbl and up to $7.50/MCF, respectively, in order to keep exploration attractive and to meet domestic energy needs. The oil price is expected to be lowered by about $8.00/bbl by July, 2017.

 

 

On February 29, 2016, the government reached a settlement with four of its largest external creditors. Currently, the deal is being presented to Congress for final approval.

 

There are no restrictions for the payment abroad of interest, dividends or profits, royalties and other commercial payments duly supported by the corresponding documentation. There are presently no restrictions on foreign investment in the capital of local corporations.

 

Research and Development

 

We over the past several years we have not performed, and do not anticipate performing, any significant product research and development.

 

Investment in MHD Technology

 

The investment that Delta made into MHD Tech was primarily for research and development purposes. MHD Tech is a technology company that is focusing on the application of Magnetohydrodynamic (MHD) forces on various industries. The current focus of the company is a product that applies an electric field and a perpendicular magnetic field to a pipeline in order to have salt water run through it. The objective would be to desalinate closer to the point of delivery, rather than the point of origin.

 

Delta observed that MHD Tech spent a large portion of its investment in overhead expenses. This, along with delays of the simulation, has caused MHD to need to raise additional capital to continue its research and development.

 

During 2016, MHD tech focused on developing a proof-of-concept prototype; running simulations; developing client and supplier relationships; and raising capital. After reprioritizing their original plans, MHD Tech completed its first project in October- developing a simulation video. This video, which is targeted towards potential customers, explains how the technology would theoretically work and discusses potential flow rates.

 

As of March 6, 2017, MHD Technology produced a demonstration video of its “proof-of-concept” prototype. This prototype demonstrated water being moved through a small pipeline using MHD propulsion, getting desalinated, and going into a different reservoir. The desalination was measured by a change in the pH balance of the water.

 

The working prototype is expected to serve various functions: gather more information regarding the technical specifications of the unit, raising additional capital for the first full-scale prototype development, forge partnerships to help develop the full-scale prototype, and increase interest in product licensing.

 

Employees

 

Currently, we have two management employees in Delta: Santiago L. Peralta, Interim President and Chief Executive Officer, and Pablo D. Peralta, Director of Operations. In Delta’s subsidiary, SAHF, Alberto MacMullen is the manager of the SAHF’s Argentina branch. In the past, we have used temporary independent contractors while in oil drilling operations.

 

 

Available Information

 

We maintain a website at the address www.deltaoilngas.com. We are not including the information contained on our website as part of, or incorporating it by reference into, this report. We make available free of charge (other than an investor’s own Internet access charges) through our website our Annual Report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to these reports, as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the Securities and Exchange Commission.

 

Item 1A. Risk Factors.

 

General

 

Although we have made a minority investment in MHD Technology and have entered into letters of intent with two other technology companies, and our Board has determined to evaluate the acquisition of a public or private entity that operates outside of the oil and gas industry or to transition the Company’s operations to another business sector, we have no final arrangements or understandings with respect to any such acquisition at this time.

 

We have no arrangement, agreement or understanding with respect to engaging in a merger with, joint venture with or acquisition of, a private or public entity outside the oil and gas industry, but have made an initial investment in a desalinization technology company and are evaluating the potential for entry into that sector. There can be no assurance that we will be successful in identifying and evaluating suitable business opportunities in another sector or in concluding a business combination. We cannot provide assurances that we will be able to negotiate such a business combination on terms favorable to us.

 

Risks Related to Our Oil and Gas Business

 

Our oil and gas investments made by our subsidiary SAHF may not be profitable.

 

The success of our investments in Argentina will depend to a great extent on the operations, financial condition and management of the oil and gas concession and exploration rights in which we have investments. Their success may depend upon management of the operations in which the investments were made and numerous other factors beyond our control.

 

The sale of our oil and gas properties may not materialize.

 

For the past two years, the Company has been working on selling its Argentine concessions to one of its partners and has entered into a definitive agreement for the sale. While the Company believes that the sale will happen, there are several factors that the Company cannot control and could affect the sale adversely. If the sale does not go through, then the Company will continue to be involved in oil and gas exploration efforts in Argentina from a non-operative level. In that case, the region and industry risks remain relevant.

 

 

This will also limit the number of investments that the Company will be able to make in other projects or it will cause the Company to raise funds in the capital markets to make further investments. Currently, the Company has no commitments that depend on the closing of this transaction.

 

International operations, and in particular in Argentina, expose us to political, economic and currency risks.

 

With regard to our investments in oil and gas concessions located in Argentina, we are subject to the risks of doing business abroad, including,

 

●

Currency fluctuations;

●

Changes in tariffs and taxes; and

●

Political and economic instability.

 

Changes in currency exchange rates may affect the relative costs of operations in Argentina, and may affect the cost of certain items required in oil and gas processing, thus possibly adversely affecting our profitability.

 

Argentina has devalued its currency, the peso, in 2002, 2014, and 2015. We believe that the effect on oil and gas production operations will be basically to increase an operator’s costs and thereby lower its profitability.

 

In addition, there are inherent risks for the foreseeable future of conducting business internationally. Changes in tariffs or taxes applicable to investments in foreign operations may adversely affect our profitability. Political instability may increase the difficulties and costs of doing business. We may be subject to the jurisdiction of the government and/or private litigants in foreign countries where we transact business, and may be forced to expend funds to contest legal matters in those countries in disputes with those governments or with customers or suppliers.

 

Drilling for and producing oil and natural gas are high risk activities with many uncertainties.

 

Our oil and natural gas investments are subject to numerous risks beyond our control, including the risk that drilling will not result in commercially viable oil or natural gas production. Decisions to purchase, explore, develop or otherwise exploit prospects or properties in which we have invested will depend in part on the evaluation of data obtained through geophysical and geological analyses, production data and engineering studies, the results of which are often inconclusive or subject to varying interpretations. The cost of drilling, completing and operating wells is often uncertain before drilling commences. Overruns in budgeted expenditures are common risks that can make a particular project uneconomical. Further, many factors may curtail, delay or cancel drilling, including the following:

 

	●	delays imposed by or resulting from compliance with regulatory requirements;
	●	pressure or irregularities in geological formations;
	●	shortages of or delays in obtaining qualified personnel or equipment, including drilling rigs and CO2;
	●	equipment failures or accidents; and
	●	adverse weather conditions, such as freezing temperatures, hurricanes and storms.

 

 

The presence of one or a combination of these factors at our properties could adversely affect our business, financial condition or results of operations.

 

We are subject to complex laws that can affect the cost, manner or feasibility of doing business.

 

Exploration, development, production and sale of oil and natural gas are subject to extensive federal and provincial regulation in Argentina. We may be required to make large expenditures to comply with governmental regulations. Matters subject to regulation include:  

 

	●	the exploitation of our oil and gas concessions as governed by the terms of the concession agreements;
	●	royalties, canons and landlord fees;
	●	production permits;
	●	discharge permits for drilling operations;
	●	drilling bonds;
	●	reports concerning operations;
	●	the spacing of wells;
	●	unitization and pooling of properties; and
	●	taxation.

 

Under these laws, we could be liable for personal injuries, property damage and other damages. Failure to comply with these laws also may result in the suspension or termination of our operations and subject us to administrative, civil and criminal penalties. Moreover, these laws could change in ways that could substantially increase our costs. Any such liabilities, penalties, suspensions, terminations or regulatory changes could materially adversely affect our financial condition and results of operations.

 

Operations of properties in which we have investments may incur substantial liabilities to comply with environmental laws and regulations.

 

The oil and gas operations in which we have invested are subject to stringent federal and provincial laws and regulations relating to the release or disposal of materials into the environment or otherwise relating to environmental protection. These laws and regulations require an environmental impact study before drilling commences; and impose substantial liabilities for pollution resulting from our operations. Failure to comply with these laws and regulations may result in the assessment of penalties or the incurrence of investigatory or remedial obligations.

 

 

Our business involves many operating risks that may result in substantial losses for which insurance may be unavailable or inadequate.

 

Our oil and gas investments are subject to hazards and risks inherent in operating and restoring oil and gas wells, such as fires, natural disasters, explosions, casing collapses, surface cratering, pipeline ruptures or cement failures, and environmental hazards such as natural gas leaks, oil spills and discharges of toxic gases. Any of these risks can cause substantial losses resulting from injury or loss of life, damage to or destruction of property, natural resources and equipment, pollution and other environmental damages, regulatory investigations and penalties, suspension of our operations and repair and remediation costs. In addition, our liability for environmental hazards may include conditions created by the previous owners of properties in which we have investments or purchase or lease.

 

We do not believe that insurance coverage for all environmental damages that could occur is available at a reasonable cost. Losses could occur for uninsurable or uninsured risks. The occurrence of an event that is not fully covered by insurance could harm our financial condition and results of operations.

 

Competition in our industry is intense and many of our competitors have greater financial and technological resources.

 

We have investments in the competitive area of oil and gas exploration and production. Many competitors are large, well-established companies that have larger operating staffs and significantly greater capital resources.

 

Competition for experienced personnel may negatively impact our operations.

 

Our future profitability will depend on our ability to attract and retain qualified personnel. The loss of any key executives or other key personnel could have a material adverse effect on investments results and revenues. In particular, the loss of the services of our President, Dr. Daniel Peralta, has adversely affected our South American oil and gas investment results.

 

We are subject to changing governmental regulations concerning our oil and gas properties and with respect to investments.

 

Provincial governments in Argentina have established production floors and conditions for producing concessions that are required to be met by the companies holding the concessions. Our operations in Argentina may in the future be adversely impacted by these measures currently being taken by provincial governments.

 

Although, there are no restrictions for the payment abroad of interest, dividends or profits, royalties and other commercial payments duly supported by the corresponding documentation, exchange control regulations could be implemented to restrict transfers of funds from SAHF to the Company, which would limit our ability to pay dividends.

 

 

Historically we have not paid dividends.

 

We have never paid dividends on our common stock, and management does not anticipate payment of dividends until such time as our Board of Directors determines that our profitability warrants payment of dividends.

 

Risks Related to our Water Transportation Investment

 

The investment is in a startup company that cannot guarantee that they will continue as a going concern because they have not yet been successful in establishing profitable operations. The commercial success of the company that we invested in will depend on the company’s ability, as well as Delta’s ability, to develop the desalinization products and later marketing the technology to governmental and non-governmental customers, where the clients, in most cases, have already spent between $100 million and $1 billion in current facilities and would change their propulsion systems to the ones this company provides. The water industry is heavily regulated and the company’s success will depend on the ability to navigate government channels and regulations while maintaining a margin on the licenses sold.

 

The commercial success of the company that we invested in will depend, in part, on the company’s ability, and the ability of the Company’s licensors, to obtain and maintain patent protection. The company’s patent pending technology has not been tested and, until successful third party simulations have been performed, it remains uncertain that it will show the results for which it is intended to be utilized.

 

An investment in the company is highly illiquid and there is no assurance that their common stock will become liquid and that we will be able to sell their stock.

 

Item 1B. Unresolved Staff Comments.

 

Not applicable.

 

Item 2. Properties.

 

As of December 31, 2016, our principal assets included Partial Rights Ownership in three oil and gas properties.

 

Block		Province		Status		Delta %		Partner(s)
Tartagal		Salta		Drilling		18% CO		New Times Energy (HK), Maxipetrol
Morillo		Salta		Seismic		18% CO		New Times Energy (HK), Maxipetrol
Valle de Lerma		Salta		Seismic		30.6%		Remsa, PetroNexus, Grasta, New Times Energy (HK)

 

*CO means a carryover interest in the project.

** In the Tartagal and Morillo concessions the carry over mode relieved SAHF from the payment of canons, landlord fees of any kind or any other expense until production is realized. In the exploratory area Valle de Lerma, proportional exploratory canons were paid as explained in the financials.

 

Executive Offices

 

We lease our executive offices, located at 7272 E Indian School Rd., Ste. 540, Scottsdale, AZ 85251, at a net monthly rental of $853. The office is leased month-to-month with no long-term lease or other obligation.

 

Item 3. Legal Proceedings.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

 

PART II

 

Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities.

 

Our common stock has been quoted on the Over-the-Counter Bulletin Board operated by FINRA, and the OTCQB, since approximately February 1, 2001.

 

Our shares are listed under the symbol “DLTZ”. The quotations in the table below reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not represent actual transactions.

 

				High				Low
2015		1st Quarter			0.25				0.06
		2nd Quarter			0.16				0.08
		3rd Quarter			0.16				0.06
		4th Quarter			0.09				0.04
2016		1st Quarter			0.09				0.02
		2nd Quarter			0.12				0.02
		3rd Quarter			0.06				0.01
		4th Quarter			0.11				0.01
2017		1st Quarter			0.15				0.08

 

During the last two fiscal years, no cash dividends have been declared on Delta’s common stock and Company management does not anticipate that dividends will be paid in the foreseeable future. The payment of dividends is within the discretion of the board of directors and will depend on the Company’s earnings, capital requirements, financial condition, and other relevant factors. There are no restrictions that currently limit the Company’s ability to pay dividends on its common stock other than those generally imposed by applicable state law.

  

As of March 31, 2017, there were approximately 94 record holders of our common stock.

 

The Company has no equity compensation plans in effect, or any securities outstanding under equity compensation plans, as of the date of this report.

 

Item 6. Selected Financial Data.

 

Disclosure under Item 7A is not required of smaller reporting companies.

 

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The following discussion of our consolidated financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes thereto and the other financial information included elsewhere in this report.

 

Certain statements contained in this report, including, without limitation, statements containing the words “believes,” “anticipates,” “expects” and words of similar import, constitute “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including our ability to create, sustain, manage or forecast our growth; our ability to attract and retain key personnel; changes in our business strategy or development plans; competition; business disruptions; adverse publicity; and international, national and local general economic and market conditions.

 

GENERAL

 

Delta International Oil & Gas Inc. (“Delta” or “the Company”) was incorporated in Delaware on November 17, 1999. Our name was changed from Delta Mutual Inc. to our present name on October 29, 2013. In 2003, we established business operations focused on providing environmental and construction technologies and services. Our operations in the Far East (Indonesia) and our construction operations in Puerto Rico were discontinued in 2008.

 

Effective March 4, 2008, we acquired 100% of the issued and outstanding membership interests in the parent of South American Hedge Fund LLC, a Delaware limited liability company (sometimes herein referred to as “SAHF”). For accounting purposes, the transaction was treated as a recapitalization of the Company, as of March 4, 2008, with the parent of SAHF as the acquirer. SAHF maintains a branch office in Argentina, where it is engaged in oil and gas exploration and development activities.

 

Overview

 

We are an independent oil and gas company, with the SIC Code classification 1311 (oil and gas production) for SEC filing purposes, engaged in oil and gas acquisition and exploration activities in Argentina.

 

As a result of the review by our management team and our board of directors of oil and gas exploration and production operations in Argentina, the Company has shifted its attention away from oil and gas investments and exploration in Argentina, plans to dispose of its Argentina properties, and is in the process of entering the technology sector. We have entered into an agreement as of January 3, 2017 to dispose of our investments in two oil and gas concessions (Tartagal Oriental and Morillo) in Argentina, as well as to transfer to third parties SAHF and the Valle de Lerma operating concession.

 

 

We have made an investment of $125,000 in MHD Technology Corporation, a Delaware corporation (“MHD Tech”), for an equity position of 1,343,750 shares of common stock of MHD Tech (approximately 6.25% of the outstanding shares in the company); this investment was made through a separate limited liability company owned by Delta and set up specifically for this investment. In connection with the investment, Santiago Peralta, our Interim Chief Executive Officer and sole director, has joined the Board of Directors. The investment that Delta made into MHD Tech will be primarily for research and development purposes. On November 9, 2016 MHD Tech received the simulation showcasing how the pump works and has raised additional capital from investors (new Delta ownership- 5.5%). Currently, MHD Tech is teaming up with a PR firm to sign up distributors and working with one of the world’s leading authorities in fluid dynamics to produce an initial prototype.

 

As of March 6, 2017, MHD Technology produced a video of its “proof-of-concept” prototype. This prototype demonstrated water getting pushed through a small pipeline using MHD propulsion, getting desalinated, and going into a different reservoir. The desalination was measured by a change in the pH balance of the water. The video made is not of quality production and is just intended to serve as a demonstration of the unit working.

 

The working prototype is expected to serve various functions: gather more information regarding the technical specifications of the unit, raising additional capital for the first full-scale prototype development, forge partnerships to help in developing the full-scale prototype, and increase interest in product licensing.

 

The company is currently evaluating other prospects for acquisitions. The Company is under a letter of intent with its first acquisition candidate, Naptech Test Equipment, Inc, and its second acquisition candidate, Cardinal Electronics, Inc. These are expected to be the first of three to five acquisitions that happen in 2017. The Company is already valuating nine other prospects for acquisitions.

 

Our Oil and Gas Investments

 

As of December 31, 2016, the Company, through SAHF, retained 18% of the total concession in the carryover mode (“no cost obligations to SAHF”) in the Tartagal and Morillo oil and gas concessions located in Northern Argentina. We do not operate the Tartagal and Morillo concession, and have a minority position in the joint venture. 9% of Tartagal and Morillo had been sold to PPL in March 2012, but due to payment defaults, the 9% were not transferred. Tartagal and Morillo have a carrying value of $0 because 50% of its interest was sold for higher than the carrying cost in 2012. The properties have subsequently been sold to High Luck Group Limited. The companies have presented to the Secretary of Energy the necessary paperwork for the Province of Salta to issue an official decree approving the transfer to High Luck. The decree is expected to be published in April, 2017.

 

 

We hold a 30.6% interest in the Valle de Lerma concession in Northern Argentina, where the joint venture partners are Grasta SA, PetroNEXUS, High Luck Group, and REMSA. Valle de Lerma has a carrying value of $0. 29.4% of the rights were sold to PPL under the PPL Agreement and High Luck Group was included in the UTE as 29.4% owners and 50% liable for all expenses as requested by PPL. However, the official government decree acknowledging High Luck Group as an owner has not yet been made. Delta has spent about $500,000 and complied with about $800,000 of work unit commitments in relation to Valle de Lerma of which High Luck Group is liable for 50%. Additionally, the end of the first period for Valle de Lerma is in March 2016- which the UTE is not looking to extend.

 

The exploration terms are four years for the first period, three years for the second, and two years for the last period. Currently our ability to reopen the existing well site is constrained by law, since the location of the well was within the city limits of Salta. Requests made for government approval to override the existing restrictions of the current policy have been rejected. As per the agreement signed with Enrique, the company is expected to transfer SAHF to a third party with Valle de Lerma included upon the completion of the sale of the Tartagal and Morillo properties.

 

Sale of Argentina Oil Properties

 

On May 12, 2016, Delta and New Times Energy reached an agreement in principle for the sale of 18% of Tartagal Oriental and Morillo, which was followed by a definitive agreement on January 3, 2017, among High Luck Group Limited, a subsidiary of New Times Energy, and Delta and SAHF, for a total consideration for the 18% of Tartagal Oriental and Morillo of US$4,000,000. The initial payment of US$2,000,000 was placed in escrow on February 10, 2017. There are various conditions for the release of the funds including the successful transfer of the properties to High Luck Group. Each condition satisfied will trigger an equal percentage of the funds being released.

 

Additionally, Delta would receive 3% of gross revenues of production of both oil and gas in the properties until an additional US$2 million is paid. New Times has committed to drill four exploratory wells in the next nine months in Tartagal and Morillo concession areas. Although we expect this transaction to close in the first quarter of 2017, there is no assurance that the sale of these concessions to High Luck Group, and the disposal of SAHF and the Valle de Lerma property to third parties will be completed, given the closing conditions precedent and necessity of certain governmental actions in Argentina.

 

On March 31, 2017, High Luck requested for the release of $500,000 from the Escrow Agent in favor of Delta.

 

Lithium Mining Property

 

On March 1, 2010, SAHF purchased control of 51% of the Guayatayoc project via a partnership agreement with Oscar Chedrese and Servicios Mineros SA. The project holds the concession for a period of 20 years for the mineral rights to 143,000 hectares with 29 mines located in the Northwest part of Argentina, south of the border with Bolivia, with high lithium and borates brines concentration. We have performed sampling in the property to determine the value of the property, but the results have been inconclusive. We are seeking a purchaser for our concession interest in this property. Delta is not expecting a sale of the lithium property within the next year due to 1) the current price of lithium, 2) lithium’s abundance in the surrounding area, and 3) Delta’s primary focus on other projects. The concession was completely impaired and has a carrying value of $0 as of December 31, 2016.

 

RESULTS OF OPERATIONS

 

YEAR ENDED DECEMBER 31, 2016 COMPARED TO THE YEAR ENDED DECEMBER 31, 2015

 

During the year ended December 31, 2016, we had a net loss of approximately $551,000, as compared to a net loss of $1,180,000 for the year ended December 31, 2015.

 

 

During the year ended December 31, 2016 our loss from operations was approximately $550,000 compared to a net loss from operations of approximately $495,000 in 2015, due to an impairment charge of $191,236 in 2016. General and administrative expense was $459,204 in 2015, as compared to $358,882 in 2016.

 

LIQUIDITY

 

At December 31, 2016, we had a working capital surplus of approximately $214,000, compared with a working capital surplus of approximately $697,000 at December 31, 2015.

 

At December 31, 2016, we had total assets of approximately $365,000 compared to total assets of approximately $945,000 at December 31, 2015. Net cash used in operating activities in the year ended December 31, 2016 was $352,323, as compared with $444,726 in 2015; and net cash used in investing activities was approximately $127,000 in 2016, as compared with cash generated of nil in 2015. Net cash used by financing activities was approximately nil in the year ended December 31, 2016, compared to approximately nil in 2015.

 

In 2012, SAHF, Delta, and PPL entered into agreements for the sale of Tartagal, Morillo, Valle de Lerma and bidding rights in three other concessions. As part of PPL’s obligations under the Cooperation Agreement, PPL made partial payments of $4,299,931. The interests in the Tartagal and Morillo were not transferred to PPL due to PPL’s payment defaults in all agreements. High Luck Group was entered into the Valle de Lerma UTE as PPL requested for 29.4% of the ownership and 50% of all liabilities, but the official government decree accepting High Luck Group as an owner of the Valle de Lerma concession has not been issued. In July 2016, all contracts between SAHF and PPL were cancelled with no further obligations on either side as part of the agreement with High Luck Group.

 

Estimated 2017 Capital Requirements

 

In the case of the Tartagal and Morillo oil and gas properties, we have carried interests; therefore, no further capital expenditures are required on our part.

 

Valle de Lerma’s target well, “La Troja,” has been deemed inside the city limits, and, therefore, unable to be drilled. Given the concession’s limited number of other potential “workover” drills, and the Company’s strategy to not engage in any exploratory drilling, the cost of Valle de Lerma for 2016 is expected to be US$100,000 in canons and other obligations. If the UTE does not extend its Valle de Lerma concession term, then there is also a potential 200 work units that will have to be fulfilled by the term’s end- of which SAHF is liable for 50%. SAHF, with the Valle de Lerma concession, is expected to be transferred to a third party upon the closing of the agreement with High Luck Group.

 

In the case that the purchases of Naptech and Cardinal close in 2017, we expect to increase the working capital of the companies by around $100,000 to have a higher annual turnover of inventory. However, this capital expenditure is not necessary.

 

USE OF ESTIMATES

 

The preparation of the financial statements requires the Company to make estimates and judgments that affect the reported amount of assets, liabilities, and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to oil and gas properties, intangible assets, income taxes and contingencies and litigation. The Company bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included in these financial statements. Certain amounts for prior periods have been reclassified to conform to the current presentation.

 

 

Although management believes that the sale of its Argentine concessions will materialize, in the case that the sale does not happen, it is possible that the following material estimates affecting the financial statements could occur in the coming two years:

 

	●	The receipt of updated reserve reports in two of the properties;
	●	Generation of cash flow from exploratory drilling in two of the properties; and

●

Incurrence of future exploration and development costs that are carried.

 

NEW FINANCIAL ACCOUNTING STANDARDS

 

For a summary of new financial accounting standards applicable to the Company, please refer to the accompanying notes to the financial statements.

 

Critical Accounting Policies

 

The Securities and Exchange Commission recently issued “Financial Reporting Release No. 60 Cautionary Advice About Critical Accounting Policies” (“FRR 60”), suggesting companies provide additional disclosures, discussion and commentary on their accounting policies considered most critical to its business and financial reporting requirements. FRR 60 considers an accounting policy to be critical if it is important to the Company’s financial condition and results of operations, and requires significant judgment and estimates on the part of management in the application of the policy.

 

The Company assesses potential impairment of its long-lived assets, which include its property and equipment, investments, and its identifiable intangibles such as deferred charges under the guidance of SFAS 144 “Accounting for the Impairment or Disposal of Long-Lived Assets.” The Company must continually determine if a permanent impairment of its long-lived assets has occurred and write down the assets to their fair values and charge current operations for the measured impairment.

 

Investments in non-consolidated affiliates – These investments consist of the Company’s ownership interests in oil and gas development and exploration rights in Argentina, net of impairment losses if any. As of 2016, these investments also consist of minority stake positions in other companies.

 

We evaluate the oil and gas investments for impairment when indicators of potential impairment are present. Indicators of impairment include, but are not limited to, levels of oil and gas reserves, availability of pipeline (or other transportation) capacity and infrastructure and management of the operations in which the investments were made.

 

We evaluate the minority stake investments for impairment when indicators of potential impairment are present. Indicators of impairment include, but are not limited to, lack of: progress of product development, availability of capital to fund research and development, management experience, and client interest. These investments are carried at cost.

 

The Company accounts for stock-based compensation to non-employees under ASC 718, “Compensation-Stock Compensation” (“ASC 718”). The compensation cost of the awards is based on the grant date fair-value of these awards and recognized over the requisite service period, which is typically the vesting period. The Company uses the Black-Scholes Option Pricing Model to determine the fair-value of stock options issued for compensation.

 

The Company accounts for non-employee share-based awards based upon ASC 505-50, “Equity-Based Payments to Non-Employees.” ASC 505-50 requires the costs of goods and services received in exchange for an award of equity instruments to be recognized using the fair value of the goods and services or the fair value of the equity award, whichever is more reliably measurable. The fair value of the equity award is determined on the measurement date, which is the earlier of the date that a performance commitment is reached or the date that performance is complete. Generally, our awards do not entail performance commitments. When an award vests over time such that performance occurs over multiple reporting periods, we estimate the fair value of the award as of the end of each reporting period and recognize an appropriate portion of the cost based on the fair value on that date. When the award vests, we adjust the cost previously recognized so that the cost ultimately recognized is equivalent to the fair value on the date the performance is complete.

 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

 

Disclosure under Item 7A is not required of smaller reporting companies.

 

 

Item 8. Financial Statements and Supplementary Data.

 

DELTA INTERNATIONAL OIL AND GAS, INC. AND SUBSIDIARIES

 

INDEX TO FINANCIAL STATEMENTS

 

	Page
Reports of Independent Registered Public Accounting Firms	F-1
Consolidated Balance Sheets as of December 31, 2016 and 2015	F-2
Consolidated Statements of Operations for the Years Ended December 31, 2016 and 2015	F-3
Consolidated Statement of Comprehensive Income (Loss) for the Years Ended December 31, 2016 and 2015	F-4
Consolidated Statement of Stockholders’ Equity to December 31, 2016	F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2016 and 2015	F-6
Notes to Consolidated Financial Statements	F-7

 

 

Report of Independent Registered Public Accounting Firm

 

To the Board of Directors and Stockholders of

Delta International Oil & Gas, Inc.

Scottsdale, Arizona

 

We have audited the accompanying consolidated balance sheets of Delta International Oil & Gas, Inc. and its subsidiaries (collectively the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test 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 audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Delta International Oil & Gas, Inc. and its subsidiaries as of December 31, 2016 and 2015 and the results of their operations and their cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

/s/ MaloneBailey, LLP

www.malonebailey.com

Houston, Texas

 

March 31, 2017

 

 

DELTA INTERNATIONAL OIL & GAS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

		As of December 31,
		2016				2015
ASSETS
Current Assets:
Cash		$	239,627			$	717,085
Receivable from sale of bidding rights and oil and gas properties (net of allowance for doubtful accounts of $0 and $3,200,069 as of December 31, 2016 and 2015, respectively)			-				-
Total current assets			239,627				717,085
Property and equipment (net of accumulated depreciation of $0 and $16,386 as of December 31, 2016 and 2015, respectively)			-				-
Investment in MHD Technologies			125,000				-
Investments in unproved oil and gas properties			-				221,880
Other assets			-				6,368
TOTAL ASSETS		$	364,627			$	945,333
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable		$	4,945			$	560
Accrued expenses			6,140				4,705
Notes payable			15,000				15,000
Total current liabilities			26,085				20,265
Total liabilities			26,085				20,265
Commitments and Contingencies
Stockholders’ Equity:
Preferred stock $0.0001 par value-authorized 10,000,000 shares; no shares issued and outstanding at December 31, 2016 and 2015, respectively			-				-
Common stock $0.0001 par value - authorized 250,000,000 shares; 32,338,826 shares issued and outstanding at December 31, 2016 and 2015, respectively			3,233				3,233
Additional paid-in capital			7,151,482				7,151,482
Accumulated deficit			(6,831,708	)			(6,280,417	)
Accumulated other comprehensive gain			15,535				50,771
Total stockholders’ equity			338,542				925,068
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	364,627			$	945,333

 

The accompanying notes are an integral part of the consolidated financial statements

 

 

DELTA INTERNATIONAL OIL & GAS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

 

		Years Ending December 31,
		2016				2015
Costs and Expenses:
Impairment charge		$	191,236			$	36,294
General and administrative			358,882				459,204
			550,118				495,498
Loss from operations			(550,118	)			(495,498	)
Other Income (Expense):
Foreign exchange gain (loss)			-				(756,521	)
Other income			80				72,144
Other Income (expense)			80				(684,377	)
Loss before income taxes			(550,038	)			(1,179,875	)
Provision (benefit) for income taxes			1,253				-
Net Loss		$	(551,291	)		$	(1,179,875	)
Net income (loss) per common share:
Basic and Diluted		$	(0.02	)		$	(0.04	)
Weighted average common shares - Basic and Diluted			32,338,826				32,338,826

 

The accompanying notes are an integral part of the consolidated financial statements

 

 

DELTA INTERNATIONAL OIL & GAS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

 

		Years ending December 31,
		2016				2015
Net earnings (loss)		$	(551,291	)		$	(1,179,875	)
Other comprehensive income (loss):
Foreign currency translation adjustment			(35,235	)			582,334
Net change in other comprehensive income (loss)			(35,235	)			582,334
Comprehensive income (loss)		$	(586,526	)		$	(597,541	)

 

The accompanying notes are an integral part of the consolidated financial statements

 

 

DELTA INTERNATIONAL OIL AND GAS, INC. AND SUBSIDIARIES 

(FORMERLY DELTA MUTUAL INC. AND SUBSIDIARIES) 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

From January 1, 2015 to December 31, 2016

 

		Number of Common Shares				Common Stock				Paid in Capital				Accumulated Deficit				Accumulated Other Comprehensive Income				Total
Balance January 1, 2014			32,338,826			$	3,233			$	7,118,982			$	(5,100,542	)		$	(531,564	)		$	1,490,109
Amortization of warrants for 1,000,000 at $.20 issued to Chairman of the Board											32,500												32,500
Net loss															(1,179,875	)							(1,179,875	)
Foreign Currency Adjustment																			582,334				582,334
Balance December 31, 2015			32,338,826			$	3,233			$	7,151,482			$	(6,280,417	)		$	50,771			$	925,068
Net loss															(551,291	)							(551,291	)
Foreign Currency Adjustment																			(35,235	)			(35,235	)
Balance December 31, 2015			32,338,826			$	3,233			$	7,151,482			$	(6,831,708	)		$	15,535			$	338,542

 

The accompanying notes are an integral part of the consolidated financial statements

 

 

DELTA INTERNATIONAL OIL & GAS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		Years Ending December 31,
		2016				2015
Cash flows from Operating Activities:
Net loss		$	(551,291	)		$	(1,179,875	)
Impairment charge			191,236				36,294
Warrants issued for services			-				32,500
Foreign currency transaction loss			-				756,521
Depreciation			1,912				-
Adjustments to reconcile net earnings (loss) to net cash used in operating activities:
Changes in operating assets and liabilities			5,820				(90,166	)
Net cash used in operating activities			(352,323	)			(444,726	)
Cash flows from investing activities:
Purchases of furniture and equipment			(1,912	)			-
Investment in Neptune Industries			(125,000	)			-
Net cash used in investing activities			(126,912	)			-
Cash flows from financing activities:
Proceeds from loans			-				12,000
Payment of loans			-				(12,000	)
Net cash provided by financing activities			-				-
Effect of Exchange Rates on Cash			1,777				(44,366	)
Net increase (decrease) in cash			(477,457	)			(489,092	)
Cash - Beginning of period			717,085				1,206,177
Cash - End of period		$	239,627			$	717,085
Changes in operating assets and liabilities consists of:
Increase (decrease) in accounts payable and accrued expenses		$	5,820			$	(90,166	)
Changes in assets and liabilities		$	5,820			$	(90,166	)
Supplemental disclosure of cash flow information:
Cash paid for interest		$	-			$	-
Cash paid for income taxes		$	-			$	-

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

DELTA INTERNATIONAL OIL & GAS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

 

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

ORGANIZATION

 

Delta International Oil & Gas Inc. (“Delta” or “the Company”) was incorporated in Delaware on November 17, 1999. Our name was changed from Delta Mutual, Inc. to our present name on October 29, 2013, by filing by the Company in Delaware of a Certificate of Ownership, providing for the merger of the Company’s wholly-owned subsidiary, Delta International Oil and Gas Inc., into the Company, and in the merger, changing the Company’s name to Delta International Oil & Gas Inc.

 

The primary focus of the Company’s business is its South America Hedge Fund LLC (“SAHF”) subsidiary, which has investments in oil and gas concessions in Argentina and focuses on the energy sector, including the development and supply of energy in Latin America. Currently, Delta is under contract to sell its oil and gas concessions in Argentina and transfer its subsidiary, SAHF, LLC out of the Company.

 

Delta has commenced to devote business efforts to a future business expected to be in the transportation and desalination of water using a specific propulsion technology that had been deemed uneconomic until present-day. Delta made the initial investment into a company that holds the patents for this technology in the first quarter of 2016.

 

Delta’s strategy for 2017 is to acquire tech-based companies (telecommunications or software-focused are primary targets) that have a long history of revenues with positive operating cash flow. The next two acquisitions are already under a letter of intent and are expected to close in the second quarter of 2017.

 

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 the common stock. All material intercompany transactions and balances have been eliminated.

 

USE OF ESTIMATES

 

The preparation of the consolidated financial statements in conformity with accepted accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates including, but not limited to, those related to such items as impairments of oil and gas properties, income tax exposures, accruals, depreciable/useful lives, allowance for doubtful accounts, and valuation allowances. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

 

EVALUATION OF LONG-LIVED ASSETS

 

Oil and gas and mineral properties represent an important component of the Company’s total assets. Management reviews long-lived assets for potential impairment whenever significant events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment exists when the carrying amount of the long-lived asset is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the estimated undiscounted cash flows expected to result from the use and eventual disposition of the asset. If, impairment exists, the resulting write-down would be the difference between fair market value of the long-lived asset and the related net book value.

 

 

DELTA INTERNATIONAL OIL & GAS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

 

INVESTMENTS

 

Investments in non-consolidated affiliates consist of the Company’s ownership interests in oil and gas development and exploration rights in Argentina, net of impairment losses if any. These investments were reclassified to unproved oil and gas properties after the Company was officially admitted into the joint ventures for each of the properties.

 

The Company evaluates these investments for impairment when indicators of potential impairment are present. Indicators of impairment include, but are not limited to, levels of oil and gas reserves, availability of pipeline (or other transportation) capacity and infrastructure and management of the operations in which the investments were made. The Company evaluates its equity method investments for impairment when events or changes in circumstances indicate, in management’s judgment, that the carrying value of such investments may have experienced an other-than-temporary decline in value. When evidence of loss in value has occurred, the Company compares fair value of the investment to its carrying value to determine whether impairment has occurred. If the estimated fair value is less than the carrying value and management considers the decline to be other than temporary, the excess of the carrying value over the estimated fair value is recognized as impairment in the consolidated financial statements.

 

OIL AND GAS PROPERTIES

 

The Company accounts for our oil and natural gas producing activities using the full cost method of accounting as prescribed by the United States Securities and Exchange Commission (SEC). Under this method, subject to a limitation based on estimated value, all costs incurred in the acquisition, exploration, and development of proved oil and natural gas properties, including internal costs directly associated with acquisition, exploration, and development activities, the costs of abandoned properties, dry holes, geophysical costs, and annual lease rentals are capitalized within a cost center. Costs of production and general and administrative corporate costs unrelated to acquisition, exploration, and development activities are expensed as incurred.

 

Costs associated with unevaluated properties are capitalized as oil and natural gas properties but are excluded from the amortization base during the evaluation period. When we determine whether the property has proved recoverable reserves or not, or if there is an impairment, the costs are transferred into the amortization base and thereby become subject to amortization.

 

The Company assesses all items classified as unevaluated property on at least an annual basis for inclusion in the amortization base. The Company assesses properties on an individual basis or as a group if properties are individually insignificant. The assessment includes consideration of the following factors, among others: intent to drill; remaining lease term; geological and geophysical evaluations; drilling results and activity; the assignment of proved reserves; and the economic viability of development if proved reserves are assigned. During any period in which these factors indicate that there would be impairment, or if proved reserves are assigned to a property, the cumulative costs incurred to date for such property are transferred to the amortizable base and are then subject to amortization.

 

Capitalized costs included in the amortization base are depleted using the unit of production method based on proved reserves. Depletion is calculated using the capitalized costs included in the amortization base, including estimated asset retirement costs, plus the estimated future expenditures to be incurred in developing proved reserves, net of estimated salvage values.

 

Beginning December 31, 2009, full cost companies use the un-weighted arithmetic average first day of the month price for oil and natural gas for the 12-month period preceding the calculation date. Prior to December 31, 2009, companies used the price in effect at the end of each accounting period and had the option, under certain circumstances, to elect to use subsequent commodity prices if they increased after the end of the accounting quarter.

 

Sales or other dispositions of oil and natural gas properties are accounted for as adjustments to capitalized costs, with no gain or loss recorded unless the ratio of cost to proved reserves would significantly change.

 

 

DELTA INTERNATIONAL OIL & GAS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

 

IMPAIRMENT

 

The net book value of all capitalized oil and natural gas properties within a cost center, less related deferred income taxes, is subject to a full cost ceiling limitation which is calculated quarterly. Under the ceiling limitation, costs may not exceed an aggregate of the present value of future net revenues attributable to proved oil and natural gas reserves discounted at 10 percent using current prices, plus the lower of cost or market value of unproved properties included in the amortization base, plus the cost of unevaluated properties, less any associated tax effects. Any excess of the net book value, less related deferred tax benefits, over the ceiling is written off as expense. Impairment expense recorded in one period may not be reversed in a subsequent period even though higher oil and gas prices may have increased the ceiling applicable to the subsequent period.

 

As of December 31, 2016, the Valle de Lerma concession had an impairment of $191,236, bringing the book value to $0.

 

PROPERTY AND EQUIPMENT

 

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.

 

INCOME TAXES

 

The Company accounts for income taxes in accordance with the liability method. Under the liability method, deferred assets and liabilities are recognized based upon anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases. The Company establishes a valuation allowance to the extent that it is more likely than not that deferred tax assets will not be utilized against future taxable income.

 

UNCERTAIN TAX POSITIONS

 

The Company evaluates uncertain tax positions pursuant to ASC Topic 740-10-25 “Accounting for Uncertainty in Income Taxes,” which allows companies to recognize a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. Those tax positions failing to qualify for initial recognition are recognized in the first interim period in which they meet the more likely than not standard, or are resolved through negotiation or litigation with the taxing authority, or upon expiration of the statute of limitations. De-recognition of a tax position that was previously recognized occurs when an entity subsequently determines that a tax position no longer meets the more likely than not threshold of being sustained.

 

At December 31, 2016 and 2015, the Company has approximately $0 and $0, respectively, of liabilities for uncertain tax positions. Interpretation of taxation rules relating to investments in Argentina concessions may give rise to uncertain positions. In connection with the uncertain tax position, there was no interest or penalties recorded.

 

 The Company is subject to ongoing tax exposures, examinations and assessments in various jurisdictions. Accordingly, the Company may incur additional tax expense based upon the outcomes of such matters. In addition, when applicable, the Company will adjust tax expense to reflect the Company’s ongoing assessments of such matters, which require judgment and can materially increase or decrease its effective rate as well as impact operating results.

 

The number of years with open tax audits varies depending on the tax jurisdiction. The Company’s major taxing jurisdictions include the United States (including applicable states).

 

EARNINGS (LOSS) PER SHARE

 

Basic earnings per share are computed by dividing net earnings by the weighted average number of common shares outstanding during the period. Diluted earnings per common share are computed by dividing net earnings by the weighted average number of common share and potential common share outstanding during the period. Potential common shares consist of outstanding common stock purchase warrants. For the year ended December 31, 2016 and 2015, there were 9,211,517 and 9,211,517, respectively of potentially dilutive common shares outstanding. These potentially dilutive common shares are anti-dilutive in the years ended December 31, 2016 and 2015, due to our operating losses, and therefore, have not been included in the calculation of earnings per share.

 

 

DELTA INTERNATIONAL OIL & GAS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

 

FOREIGN CURRENCY TRANSLATION

 

In 2016 and 2015, the functional currency for the Company’s primary foreign operations is the local currency. Assets and liabilities of foreign operations are translated at balance sheet date rates of exchange and income, expense and cash flow items are translated at the average exchange rate for the period. The functional currency in Argentina is the Argentine Peso. Translation adjustments are recorded in Accumulated Other Comprehensive Loss. The Company’s subsidiary in Argentina also has certain U.S. dollar denominated intercompany receivables and payables, which generate foreign currency gains and losses in other income (expense) when translated at the end of each period using the current exchange rates.

 

STOCK-BASED COMPENSATION

 

The Company accounts for non-employee share-based awards based upon ASC 505-50, “Equity-Based Payments to Non-Employees.” ASC 505-50 requires the costs of goods and services received in exchange for an award of equity instruments to be recognized using the fair value of the goods and services or the fair value of the equity award, whichever is more reliably measurable. The fair value of the equity award is determined on the measurement date, which is the earlier of the date that a performance commitment is reached or the date that performance is complete. Generally, our awards do not entail performance commitments. When an award vests over time such that performance occurs over multiple reporting periods, we estimate the fair value of the award as of the end of each reporting period and recognize an appropriate portion of the cost based on the fair value on that date. When the award vests, we adjust the cost previously recognized so that the cost ultimately recognized is equivalent to the fair value on the date the performance is complete.

 

FAIR VALUE OF FINANCIAL MEASUREMENTS

 

FASB ASC 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. FASB ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. FASB ASC 820 describes three levels of inputs that may be used to measure fair value:

 

The Company utilizes the accounting guidance for fair value measurements and discloses for all financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis during the reporting period.

 

The fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability. ASC 820, “Fair Value Measurements and Disclosures”, establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers are defined as follows:

 

Level 1 - Observable inputs such as quoted market prices in active markets.

Level 2 - Inputs other than quoted prices in active markets that are either directly or indirectly observable.

Level 3 - Unobservable inputs about which little or no market data exists, therefore requiring an entity to develop its own assumptions.

 

As of December 31, 2016 and 2015, there were no financial assets or liabilities that required disclosure.

 

 

DELTA INTERNATIONAL OIL & GAS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

 

2. RECEIVABLE FROM SALE OF BIDDING RIGHTS AND OIL AND GAS PROPERTIES

 

On March 30, 2012 the Company entered into the Cooperation Agreement with PPL. Under the Cooperation Agreement, PPL agreed to pay us $7,000,000 for certain exploration and exploitation rights to oil and gas deposits and certain bidding rights held by Delta on the following areas: Valle de Lerma in the province of Salta; San Salvador de Jujuy; Libertador General San Martin in the province of Jujuy; and Selva Maria in the province of Formosa. Pursuant to a separate Agreement dated March 31, 2012, the Company agreed with PPL to assign and transfer 50% of SAHF’s current ownership of the Tartagal and Morillo (i.e., a 9% interest in the concession) to PPL for a purchase price of $500,000. PPL has also agreed in an Undertaking to provide funds to the operating entities of Valle de Lerma (the San Salvador, Libertador, and Selva Maria concessions were awarded to another party, whose bid exceeded that of the Company for these concessions), in the aggregate amount of up to $10,000,000.

 

As of December 31, 2016, the Company had received deposits in the amount of $4,299,891 from PPL on account of remainder of the proceeds was initially recorded as a $3,200,109 receivable from the sale of bidding rights and oil and gas properties. As of December 31, 2014, the Company provided a reserve for doubtful accounts of $3,200,069. PPL is not current with the payment schedule set forth in the Cooperation Agreement, and while, the Company is in discussions with PPL to ensure that all payments provided for under the Cooperation Agreement are made within the time frame as required for concession financial commitments.

 

In July 2016, PPL, Delta, and SAHF cancelled all of their agreements with no further obligation on either side as a condition for an agreement that was signed between SAHF, Delta, and High Luck Group.

 

3. INVESTMENT IN MINERAL PROPERTIES

 

On March 1, 2010, SAHF purchased control of 51% of the Guayatayoc project via a partnership agreement with Oscar Chedrese and Servicios Mineros SA. The project holds the concession for a period of 20 years for the mineral rights to 143,000 hectares with 29 mines located in the Northwest part of Argentina, south of the border with Bolivia, with high lithium and borates brines concentration. We have performed sampling in the property to determine the value of the property, but the results have been inconclusive. We are seeking a purchaser for our concession interest in this property, but we expect a transfer to happen for little or no value. Accordingly, as of December 31, 2015 we recorded a reserve for impairment of $36,294 on this property to write it down to $0. This property is expected to remain in SAHF when it transfers out of Delta to a third party.

 

4. INVESTMENT IN UNPROVED OIL AND GAS PROPERTIES

 

As of December 31, 2016, the Company, through SAHF, retained 18% of the total concession in the carryover mode (“no cost obligations to SAHF”) in the Tartagal and Morillo oil and gas concessions located in Northern Argentina. We do not operate the Tartagal and Morillo concession, and have a minority position in the joint venture. 9% of Tartagal and Morillo had been sold to PPL in March 2012, but due to payment defaults, the 9% were not transferred. Subsequently, all contracts with PPL were cancelled and SAHF retained an 18% interest in the Tartagal and Morillo concessions.

 

We hold a 30.6% interest in the Valle de Lerma concession in Northern Argentina, where the joint venture partners are Grasta SA, PetroNEXUS and REMSA. 29.4% of Valle de Lerma had been sold to PPL via an agreement dating March 2012. High Luck Group, as per request from PPL, was included in the UTE agreement for Valle de Lerma as 29.4% owner of the concession and bearer of 50% of all incurred costs. Thus far, Delta, via SAHF, has paid for all expenses related to Valle de Lerma to ensure that the concession remained in good standing, and PPL has defaulted in all of its payments in its agreement with SAHF. The official government decree issuing High Luck Group 29.4% of the concession has not yet been issued.. The exploration terms are four years for the first period, three years for the second and two years for the last period. Currently our ability to reopen the existing well site is constrained by law, since the location of the well was within the city limits of Salta. Requests made for government approval to override the existing restrictions of the current policy have been rejected. During 2016, the oil concession known as Valle de Lerma was completely impaired and as of December 31, 2016, it had a carrying value of $0. The concession is expected to transfer out of Delta along with SAHF in April of 2017.

 

 

DELTA INTERNATIONAL OIL & GAS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

 

The Company no longer intends to pursue any of its own operating activities on its oil and gas properties that are not in a carry-over mode.

 

As of January 3, 2017, High Luck Group Limited had accepted an offer from the Company for the sale of 18% of the Tartagal and Morillo concessions.

 

		Concession Investments				Exploration Rights				Total
At January 1, 2015		$	0			$	336,383			$	336,383
Translation gain (loss)			0				(114,503	)			(114,503	)
At December 31, 2015		$	--			$	221,880			$	221,880
Reserve for Impairment			0				(191,236	)			(191,236	)
Translation gain (loss)			0				(30,644	)			(30,644	)
At December 31, 2016		$	--			$	0			$	0

 

5. PROPERTY AND EQUIPMENT

 

Property and equipment consists of:

 

		December 31,
		2016				2015
Oilfield equipment		$	---			$	---
Furniture and equipment			1,912				16,386
Less accumulated depreciation			(1,912	)			(16,386	)
Total property and equipment		$	---			$	---

 

The Company no longer intends to pursue any of its own operating activities on its current oil and gas properties that are not in a carry-over mode. All fully depreciated furniture was donated during 2016 when Delta moved to fully-furnished executive offices. The only equipment that is left is fully depreciated computers.

 

6. DEBT

 

		December 31,
Short – term debt		2016				2015
Note payable to third party, interest at 6%, due August 10, 2011			15,000				15,000
Total		$	15,000			$	15,000

 

During the year 2016, the Company did not pay off any debt and did not raise any more capital via debt instruments.

 

 

DELTA INTERNATIONAL OIL & GAS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

 

7. INCOME TAXES

 

The Company has not made provision for income taxes in the years ended December 31, 2016 and 2015, respectively, since the Company has the benefit of net operating losses carried forward in these periods.

 

Deferred income tax assets consist of:

 

		December 31,
		2016				2015
Net operating loss carry-forwards		$	2,013,467			$	1,862,771
Less valuation allowance			(2,013,467	)			(1,862,771	)
Deferred income tax assets, net		$	--			$	--

 

Due to uncertainties surrounding the Company’s ability to generate future taxable income to realize these assets, a full valuation has been established to offset the net deferred income tax asset. Based on management’s assessment, utilizing an effective combined tax rate for federal and state taxes of approximately 42%, the Company has determined it to be more likely than not that a deferred income tax asset of approximately $2,013,467 and $1,862,771 attributable to the future utilization of the approximately $4,793,970 and $4,435,168 in eligible net operating loss carry-forwards as of December 31, 2016 and 2015, respectively, will not be realized. The Company will continue to review this valuation allowance and make adjustments as appropriate. The net operating loss carryforwards will begin to expire in varying amounts from year 2021 to 2035.

 

The Company is subject to taxation in the United States and certain state jurisdictions as well as in Argentina. The Company’s net operating loss carry forwards are subject to examination by the United States and applicable state tax authorities in the year of its utilization. There are currently no tax returns being examined by the IRS. The tax return filings for years 2013 through 2015 are still open for examination.

 

8. STOCKHOLDERS’ EQUITY

 

Preferred Stock

 

As of December 31, 2016 the board of directors had not authorized the issuance of any series of preferred stock.

 

Common Stock

 

For the years ended December 31, 2016 and 2015, the Company did not issue and new shares.

 

The company recorded compensation expense of for the year ended December 31, 2016 and 2015 of $0 and $32,499, respectively. In 2015, the compensation expense was in the form of warrants for Dr. Phillips Smith for his service as Chairman of the Board for the years 2013-2015.

 

 

DELTA INTERNATIONAL OIL & GAS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

 

A summary of warrant activity is detailed below:

 

						Weighted				Weighted
						Average				Average				Aggregated
		Warrants				Exercise Price				Contractual Term				Intrinsic Value
Outstanding, December 31, 2014			9,211,517			$	0.21				3.65 years			$	691,052
Granted			-				-				-				-
Exercised			-				-				-				-
Outstanding, December 31, 2015			9,211,517			$	0.21				2.65 years			$	-
Granted			-				-				-				-
Exercised			-				-				-				-
Outstanding, December 31, 2016			9,211,517			$	0.21				1.65 years			$	-
Vested, December 31, 2016			9,211,517			$	0.21				1.65 years			$	-

 

9. COMMITMENTS AND CONTINGENCIES

 

ECONOMIC AND POLITICAL RISK

 

The Company is exposed in the inherent risks for the foreseeable future of conducting business internationally. Language barriers, foreign laws and tariffs and taxation issues all have a potential effect on the Company’s ability to transact business. Political instability may increase the difficulties and costs of doing business. Accordingly, events resulting from changes in the economic and political climate could have a material effect on the Company.

 

OPERATING LEASES

 

Rent expense was $14,311 under a month-to-month office lease and $25,483 for the years ended December 31, 2016 and 2015, respectively.

 

EMPLOYMENT AGREEMENTS

 

The only current Executive Employment Agreement is with Mr. Santiago Peralta dated February 6, 2015 as an Interim CEO, President, and Director for a one (1) year term and an annual salary of $80,000 plus a $5,000 quarterly bonus. Mr. Peralta has given up his quarterly bonus for the calendar year 2017 in order to reduce administrative expenses. The contract has an automatic one (1) year renewal, which was renewed originally in 2016, and, again, in 2017. Additionally, Mr. Peralta, alongside other company management, is eligible for participation of a bonus pool of up to 15% of net profits difference between the current quarter and the same quarter five years in the past. This bonus pool has been company standard since 2010 when the original executive employment agreements were signed.

 

COUNTRY RISK

 

The Company has significant operations in the Argentina. The operating results of the Company may be adversely affected by changes in the political and social conditions in Argentina and by changes in Argentinean government policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things. The Company can give no assurance that those changes in political and other conditions will not result in have a material adverse effect upon the Company’s business and financial condition.

 

 

DELTA INTERNATIONAL OIL & GAS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

 

EXCHANGE RISK

 

The Company cannot guarantee the Argentinean Peso and US dollar exchange rate will remain steady, therefore the Company could post the same profit for two comparable periods and post higher or lower profit depending on exchange rate of Peso and US dollar. The exchange rate could fluctuate depending on changes in the political and economic environments without notice.

 

CONTINGENT BONUSES

 

The Company has commitments to one SAHF employee and one ex-SAHF contractor if the sale of Tartagal and Morillo to High Luck materializes. Upon receipt of the initial payment, Alberto Mac Mullen is expected to be paid $200,000 for his services over the past ten years to the Company. Enrique Vidal is expected to be paid 3% of the total purchase price of the sale for his crucial role negotiating the contract with High Luck.

 

10. INVESTMENT IN MHD TECHNOILOGY

 

We have made an investment of $125,000 in MHD Technology Corporation, a Delaware corporation (“MHD Tech”), for an equity position of 1,343,750 shares of common stock of MHD Tech (currently, approximately 5.5% of the outstanding shares in the company); this investment was made through a separate limited liability company owned by Delta and set up specifically for this investment. In connection with the investment, Santiago Peralta, our Interim Chief Executive Officer and sole director, has joined the Board of Directors of MHD Tech. The investment that Delta made into MHD Tech will be primarily for research and development purposes. In November 2016, a simulation company from Florida finished a simulation of the unit for MHD Tech to start selling licenses. In February 2017, the company finished the first working prototype to demonstrate the technology to potential investors and licensees.

 

This investment is accounted for using the cost accounting method. The value of the investment on the balance sheet will be shown at historical cost and will not be adjusted according to fair market value. If there is evidence that suggests that the fair market value of the investment is lower than the historical cost, then the investment will be written down to its new fair market value.

 

11. SUBSEQUENT EVENTS

 

On January 3, 2017, the Company received the acceptance of its offer for the sale of SAHF’s interest in the Tartagal and Morillo concessions from High Luck Group. The consideration for 18% of Tartagal and Morillo will be US$2,000,000 upon the transfer of the concessions, and 3% of gross revenues from the production of oil or gas of either concession up to an additional US$2,000,000. Once the transfer occurs, the companies will sign a mutual release. The release of funds is also contingent on other external factors. On February 10, 2017, High Luck Group deposited the initial US$2,000,000 in an Escrow account.

 

On February 15, 2017, the Company signed a letter of intent with Bayberry Capital for the acquisition of 100% of the outstanding shares in Naptech Test Equipment, Inc. On March 22, 2017, the Company signed a letter of intent with Cardinal Electronics, Inc. The transaction with Naptech is expected to have a final agreement before the end of the first quarter and to close in the second quarter, meanwhile the transaction with Cardinal is expected to have a final agreement and its closing in the second quarter.

 

On March 22, 2017, Delta signed an agreement with Enrique Vidal acting as an agent to an undisclosed buyer for the transfer of SAHF. The transaction is expected to close in April, 2017, after the decree approving the Tartagal and Morillo transfer to High Luck is published. On March 23, 2017, the Company presented the necessary documentation to the Secretary of Energy to transfer the Tartagal and Morillo concessions to High Luck. The Secretary of Energy will review the paperwork and upon its approval, it will send its decision to the executive branch of the Province of Salta, which has the power to issue the transfer decree.

 

On March 31, 2017, High Luck requested the release of $500,000 from the Escrow Agent to Delta. Even though the decree approving the transfer has not been published, the companies recognized that many of the closing conditions have been completed and that the presentation to the Secretary of Energy for the transfer of the properties had been made.

 

 

Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.

 

Item 9A. Controls and Procedures.

 

As supervised by our board of directors and our chief executive and principal financial officers, management has established a system of disclosure controls and procedures and has evaluated the effectiveness of that system. The system and its evaluation are reported on in the below Management’s Annual Report on Internal Control over Financial Reporting. Our chief executive and financial officer have concluded that our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 (“Exchange Act”) Rule 13a-15(e)) as of December 31, 2016, were not effective, based on the evaluation of these controls and procedures required by paragraph (b) of Rule 13a-15, based on a material weakness as of that date in our disclosure controls and procedures discussed below in Management’s Annual Report on Internal Control over Financial Reporting.

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

 

Management assessed the effectiveness of internal control over financial reporting as of December 31, 2016. We carried out this assessment using the criteria of the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Management concluded in this assessment that as of December 31, 2016, our internal control over financial reporting is not effective due to the following material weakness. Our accounting department does not have the sophistication to critically evaluate and implement accounting principles in certain cases, and at times transactions are recorded improperly, or not recorded contemporaneously and require additional procedures and adjustments to be made by our staff and our auditors. In addition, the size of our staff in our accounting department does not permit segregation of duties as required for our internal control over financial reporting to be effective. We have implemented certain procedures related to improving the ability of our staff to properly record accounting transactions to help minimize the risks associated with this significant deficiency. Given these reportable conditions and material weaknesses, management devoted additional resources to resolving questions that arose during the period covered by this report. As a result we are confident our financial statements as of December 31, 2016, and for the two years then ended, fairly present in all material respects our financial condition and results of operations.

 

There have been no significant changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the fourth quarter of 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9B. Other Information.

 

None.

 

 

PART III

 

Item 10. Directors, Executive Officers, and Corporate Governance.

 

DIRECTORS AND EXECUTIVE OFFICERS

 

As of the date of this report, the executive officers and directors of the Company were as follows:

 

NAME		AGE		TITLE(S)
Santiago Peralta		29		Interim President, CEO and Director

 

On January 6, 2015, the Board of Directors of the Company approved appointment of Santiago Peralta as the Interim President and CEO of the Company and the retirement of our Chief Executive Officer, Malcolm W. Sherman, his resignation as Chief Executive Officer, President and a director of the Company to be effective as of December 31, 2014. On April 30, 2015, the two-year term of Phillips W. Smith as a director was terminated under the agreement pursuant to which Mr. Smith was retained as a director of the Company. Considering Dr. Smith’s exceptional job, the Board of Directors approved a modification to the common stock purchase warrants held by Mr. Smith to fully vest as of May 6, 2015.

 

Santiago L. Peralta was appointed to the Board of Directors on November 8, 2012 and as Interim CEO and President on January 1, 2015. From 2012 through 2017, Mr. Peralta has focused on valuating projects and opportunities for Delta, incorporating analyses on financial projections, global and domestic strategy and expansion, and macro- and microeconomic factors. Prior to that, Mr. Peralta served as a Field Operations Manager for Delta and its subsidiary, SAHF, managing the entire company’s accounting and marketing; developing investor relations materials and presentations; directing the mud injection, water logistics team, and drilling contractors during operations; and negotiating and structuring local and foreign partnerships. Santiago graduated from Thunderbird School of Global Management with an international MBA with Distinction, the highest graduating GPA of his class, and recognition for exceptional leadership. Santiago also graduated from WP Carey School of Business with a BS in Business Management with Honors.

 

AUDIT COMMITTEE

 

Our board of directors currently serves as our audit committee. The audit committee is responsible for recommending independent auditors and reviewing management actions in matters relating to audit functions. The committee reviews, with independent auditors, the scope and results of its audit engagement, the system of internal controls and procedures and reviews the effectiveness of procedures intended to prevent violations of laws.

 

The audit committee, consistent with the Sarbanes-Oxley Act of 2002 and the rules adopted thereunder, meets with management and the auditors prior to filing of officers’ certifications with the SEC to receive information concerning, among other things, significant deficiencies in the design or operation of internal controls.

 

CODE OF CONDUCT

 

We have a corporate code of conduct and a corporate disclosure policy in place, which provide for internal procedures concerning the reporting and disclosure of corporate matters that are material to our business and to our stockholders. Our corporate code of conduct includes a code of ethics for our officers and employees as to workplace conduct, dealings with customers, compliance with laws, improper payments, conflicts of interest, insider trading, company confidential information, and behavior with honesty and integrity. Our corporate disclosure policy includes guidelines for publicly disseminating financial and other material developments to the investing public. A copy of this code of conduct is published on our website www.deltamutual.com. We intend to disclose any future amendments to, or waivers from, certain provisions of our Code of Conduct on this website within five business days following the date of such amendment or waiver.

 

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

 

We believe that during 2016 all of our current officers and directors complied with the reporting requirements of Section 16(a).

 

 

Item 11. Executive Compensation.

 

Compensation paid by the Company and its subsidiaries to the Company’s Executive Officers (the “Named Executives”) for the last three fiscal years is shown in the following table.

 

SUMMARY COMPENSATION TABLE

 

Name and Principal Position		Year		Salary ($)				Bonus ($)				Stock Awards ($)				Option Awards ($)				Non-Equity Incentive Plan Compensation ($)				Change in Pension Value and Nonquali- fied Deferred Compensation Earnings ($)				All Other Compen- sation				Total ($)
Santiago Peralta, appointed Interim Chief Executive Officer		2015		$	80,000			$	20,000																							$	100,000
on January 6, 20151		2016		$	80,000			$	20,000																							$	100,000

 

(1)

Mr. Sherman retired from his positions at the Company effective December 31, 2014, and Santiago Peralta was appointed Interim Chief Executive Officer on January 6, 2015.

 

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

 

Option Awards

Stock Awards

Name

Number of Securities Underlying Unexercised Options (#) Exercisable

Number of Securities Underlying Unexercised Options (#) Unexercisable

Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)

Option Exercise Price ($)

Option Expiration Date

Number of Shares or Units of Stock That Have Not Vested (#)

Market Value of Shares or Units of Stock That Have Not Vested ($)

Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)

Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)

(a)

(b)

(c)

(d)

(e)

(f)

(g)

(h)

(i)

(j)

Santiago Peralta

200,000

$

0.20

12/14/2018

 

 

DIRECTORS’ COMPENSATION IN FISCAL 2016

 

We compensate directors as per specific agreements with each director. Mr. Santiago L. Peralta has not been compensated as a director in fiscal year 2016. We do reimburse our officers and directors for reasonable expenses incurred in the performance of their duties.

 

DIRECTOR COMPENSATION

 

Name

Fees Earned or Paid in Cash ($)

Stock Awards ($)

Option Awards ($)

Non-Equity Incentive Plan Compensation ($)

Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)

All Other Compensation ($)

Total ($)

(a)

(b)

(c)

(d)

(e)

(f)

(g)

(h)

Santiago Peralta

$

0

$

0

 

STOCK INCENTIVE OR OPTION PLANS

 

We have no compensation, pension, profit sharing, stock option plan or programs for the benefit of our directors, officers or employees.

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

The following table sets forth information, as of March 31, 2017, with respect to the beneficial ownership of the Company’s Common Stock by each person known by the Company to be the beneficial owner of more than five percent (5%) of the outstanding Common Stock and by directors and officers of the Company, both individually and as a group:

 

		Number of Shares Owned
Name and Address of Beneficial Owner*		Beneficially				Percentage**
Santiago Peralta (1)			9,897,694				27.71	%
Pablo Peralta(1)			9,683,844				27.26	%
West Coast Enterprises Limited			2,116,717				6.55	%
Partnership
3225 McLead Dr. #110
Las Vegas, NV 89121-2257
All Officers and Directors as a Group (1 person)			9,897,694				27.71	%

 

*	Unless otherwise stated in the table, the address of each of the stockholders shown in the table is c/o Delta, 7272 E Indian School Rd., Ste. 540, Scottsdale, AZ 85251.

 

**	Based on 32,338,826 shares outstanding on March 31, 2017

 

(1)

Egani, Inc., of which Santiago Peralta, a director of the Company, and Pablo Peralta, his brother, each owns 50% of the outstanding stock, owns 13,000,001 shares directly. The address of Egani, Inc. is c/o Delta, 7272 E Indian School Rd., Ste. 540, Scottsdale, AZ 85251. Santiago Peralta owns 13,800 shares directly and holds a warrant, expiring December 14, 2018 to purchase 200,000 shares of common stock at an exercise price of $0.20 per share. Santiago Peralta and Pablo Peralta also each hold a 50% interest in a common stock purchase warrant to purchase 6,367,687 shares of common stock, at an exercise price of $0.20 per share, expiring December 14, 2018. The address of Santiago Peralta and Pablo Peralta is c/o Delta, 7272 E Indian School Rd., Ste. 540, Scottsdale, AZ 85251.

 

 

Item 13. Certain Relationships and Related Transactions, and Director Independence.

 

The Company did not in fiscal 2016 have any related party transactions to report under this Item.

 

Item 14. Principal Accountant Fees and Services

 

(1) Audit fees:
		2016				2015
		$	25,250			$	27,650
(2) Audit related fees:
		2016				2015
		$	-0-			$	-0-
(3) Tax fees:
		2016				2015
		$	-0-			$	-0-

 

(4) All other fees: NA

 

(5) Audit committee pre-approval processes, percentages of services approved by audit committee, percentage of hours spent on audit engagement by persons other than principal accountant’s full time employees: NA

 

 

PART IV

 

Item 15. Exhibits and Financial Statement Schedules.

 

(a)(3) Exhibits

 

Exhibit No.		Description of Exhibits
3.1		Articles of Incorporation of the Company, as currently in effect, incorporated herein by reference to Exhibit 3.1 to Amendment No. 1 to the Company’s Registration Statement on Form 10-SB filed with the Commission on June 15, 2000.
3.1a		Amendment to Certificate of Incorporation, filed September 1, 2004. Incorporated herein by reference to Exhibit 3.1a to the Company’s Current Report on Form 8-K, filed with the Commission on September 3, 2004.
3.1b		Form of Restatement of Certificate of Incorporation of Delta Mutual, Inc., as amended. Incorporated herein by reference to Exhibit 3.1b to the Company’s Quarterly Report on Form 10-QSB, filed with the Commission on November 15, 2004.
3.2		By-Laws of the Company. Incorporated herein by reference to Exhibit 3.2 to Amendment No. 1 to the Company’s Registration Statement on Form 10-SB filed with the Commission on June 15, 2000.
3.2a		Amendment to Article III, Section I of the By-Laws. Incorporated herein by reference to the Company’s quarterly report on Form 10-QSB, filed with the Commission on November 21, 2000.
3.2b		Amended and Restated By-Laws. Incorporated herein by reference to Exhibit 3.2b to the Company’s quarterly report on Form 10-Q, filed with the Commission on May 21, 2012.
3.1c		Certificate of Amendment to Certificate of Incorporation, filed June 26, 2007. Incorporated herein by reference to, Exhibit 3.1c to the Company’s quarterly report on Form 10-QSB, filed with the Commission on August 10, 2007.
3.1d		Form of Restatement of Certificate of Incorporation of Delta Mutual, Inc., as amended. Incorporated herein by reference to Exhibit 3.1d to the Company’s quarterly report on Form 10- QSB, filed with the Commission on August 10, 2007.
3.1e		Certificate of Amendment to Certificate of Incorporation, filed May 13, 2009. Incorporated herein by reference to Exhibit 3.1e to the Company’s Quarterly Report on Form 10-Q,filed with the Commission on August 6, 2009.
3.1f		Form of Restatement of Certificate of Incorporation of the Company, as amended. Incorporated herein by reference to Exhibit 3.1f to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on August 6, 2009.

 

 

Exhibit No.		Description of Exhibits
4.2a		Delta Mutual, Inc. 2004 Stock Option Plan. Incorporated herein by reference to Exhibit B to the Company’s Definitive Proxy Statement, filed with the Commission on June 16, 2004.
4.6		4% Convertible Promissory Note of the Company due May 2006 issued in the principal amount of $193,740 on May 12, 2004. Incorporated herein by reference to Exhibit 4.6 to the Company’s Quarterly Report on Form 10-QSB, filed with the Commission on November 15, 2004.
4.6a		Amendment, dated as of May 2, 2006, to 4% Convertible Promissory Note in the principal amount of $193,740. Incorporated herein by reference to Exhibit 4.6a to the Company’s Annual Report on Form 10-KSB, filed with the Commission on April 2, 2007.
4.6b		Amendment, dated as of July 6, 2006, to 4% Convertible Promissory Note in the principal amount of $193,740. Incorporated herein by reference to Exhibit 4.6b to the Company’s Annual Report on Form 10-KSB, filed with the Commission on April 2, 2007.
4.6c		Amendment, dated as of September 8, 2006, to 4% Convertible Promissory Note in the principal amount of $193,740. Incorporated herein by reference to Exhibit 4.6c to the Company’s Annual Report on Form 10-KSB, filed with the Commission on April 2, 2007.
4.6d		Amendment, dated as of November 21, 2006, to 4% Convertible Promissory Note in the principal amount of $193,740. Incorporated herein by reference to Exhibit 4.6d to the Company’s Annual Report on Form 10-KSB, filed with the Commission on April 2, 2007.
4.6e		Amendment, dated April 4, 2007, to 4% Convertible Promissory Note in the Principal Amount of $193,740. Incorporated herein by reference to Exhibit 4.6e to the Company’s quarterly report on Form 10-QSB, filed with the Commission on August 10, 2007.
4.6f		Amendment, dated September 7, 2007 to Convertible Promissory Note in the principal amount of $193,740. Incorporated herein by reference to Exhibit 4.6f to the Company’s quarterly report on Form 10-QSB, filed with the Commission on November 9, 2007.
10.15		Strategic Alliance Agreement, dated September 10, 2003, between Delta-Envirotech, Inc. and ZAFF International Ltd. Incorporated herein by reference to Exhibit 99.2 to the Company’s current report on Form 8-K, filed with the Commission on January 22, 2004.
10.16		Agreement, dated January 14, 2004, by and between Delta Mutual, Inc. and Hi-Tech Consulting and Construction, Inc. Incorporated herein by reference to Exhibit 10.16 to the Company’s Annual Report on Form 10-KSB, filed with the Commission on April 6, 2004.
10.26		Executive Employment Agreement, dated May 23, 2005, between Delta Mutual, Inc. and Martin G. Chilek. Incorporated herein by reference to Exhibit 10.26 to the Company’s Current Report on Form 8-K, filed with the Commission on May 25, 2005.

 

 

Exhibit No.		Description of Exhibits
10.33e		Form of Amended and Restated 8% Term Notes issued March 6, 2008 by Delta Mutual, Inc. in the aggregate principal amount of $150,655. Incorporated herein by reference to Exhibit10.33e to the Company’s Annual Report on Form 10-KSB, filed with the Commission on April 15, 2008.
10.35		Membership Interest Purchase Agreement, dated March 4, 2008, between Delta Mutual, Inc. and Egani, Inc. Incorporated herein by reference to Exhibit 10.35 to the Company’s Current Report on Form 8-K, filed with the Commission on March 11, 2008.
10.36		Consulting Services Agreement, dated September 10, 2007, between Delta Mutual, Inc. and Security Systems International, Inc. Incorporated herein by reference to Exhibit 10.36 to the Company’s Current Report on Form 8-K, filed with the Commission on March 11, 2008.
10.37		Form of 6% promissory notes issued March 6, 2008 by the Company in the aggregate principal amount of $121,000. Incorporated herein by reference to Exhibit 10.37 to the Company’s Current Report on Form 8-K, filed with the Commission on March 11, 2008.
10.37a		Amendment, dated September 2, 2008, to 6% Promissory Note in the principal amount of $21,000. Incorporated herein by reference to Exhibit 10.37a to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on November 18, 2008.
10.37b		Amendment, dated as of September 18, 2008, to 6% Promissory Note in the principal amount of $100,000. Incorporated herein by reference to Exhibit 10.37b to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on November 18, 2008.
10.38		6% Promissory Note of the Company issued in the principal amount of $20,000 on April 15, 2008. Incorporated herein by reference to Exhibit 10.38 to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on July 3, 2008.
10.38a		Amendment, dated as of October 8, 2008, to 6% Promissory Note in the principal amount of $20,000. Incorporated herein by reference to Exhibit 10.38a to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on November 18, 2008.
10.39		6% Promissory Note of the Company issued in the principal amount of $9,550 on April 28, 2008. Incorporated herein by reference to Exhibit 10.39 to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on July 3, 2008.
10.39a		Amendment, dated as of October 10, 2008, to 6% Promissory Note in the principal amount of $9,550. Incorporated herein by reference to Exhibit 10.39a to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on November 18, 2008.
10.40		6 % Promissory Note of the Company issued in the principal amount of $16,900 on May 14, 2008. Incorporated herein by reference to Exhibit 10.40 to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on July 3, 2008.

 

 

Exhibit No.		Description of Exhibits
10.40a		Amendment, dated as of November 4, 2008, to 6% Promissory Note in the principal amount of $16,900. Incorporated herein by reference to Exhibit 10.40a to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on November 18, 2008.
10.42		6% Promissory Note of the Company issued in the principal amount of $22,413 on July 7, 2008. Incorporated herein by reference to Exhibit 10.42 to the Company’s Quarterly  Report on Form 10-Q, filed with the Commission on November 18, 2008.
10.43		6% Promissory Note of the Company issued in the principal amount of $13,350 on September 18, 2008. Incorporated herein by reference to Exhibit 10.43 to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on November 18, 2008.
10.44		6% Promissory Note of the Company issued in the principal amount of $16,650 on September 19, 2008. Incorporated herein by reference to Exhibit 10.44 to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on November 18, 2008.
10.45		6% Promissory Note of the Company issued in the principal amount of $10,000 on October 3, 2008. Incorporated herein by reference to Exhibit 10.45 to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on November 18, 2008.
10.46		6% Promissory Note of the Company issued in the principal amount of $28,500 on October 22, 2008. Incorporated herein by reference to Exhibit 10.46 to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on November 18, 2008.
10.47		6% Promissory Note dated as of November 20, 2008 by Delta Mutual, Inc. to Santiago Peralta in the principal amount of $14,000. Incorporated herein by reference to Exhibit 10.47 to the Company’s Annual Report on Form 10-K, filed with the Commission on April 14, 2009.
10.48		Amendment dated as of November 24, 2008 to 6% promissory notes issued to Egani, Inc. in the aggregate principal amount of $43,900. Incorporated herein by reference to Exhibit 10.48 to the Company’s Annual Report on Form 10-K, filed with the Commission on April 14, 2009.
10.48a		Second Amendment, dated as of April 16, 2009, to 6% promissory notes issued to Egani, Inc. Incorporated herein by reference to Exhibit 10.48a to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on May 20, 2009.
10.48.1		Amendment dated as of December 14, 2008 to 6% promissory notes issued to Security Systems International, Inc. in the aggregate principal amount of $136,900. Incorporated herein by reference to Exhibit 10.49 to the Company’s Annual Report on Form 10-K, filed with the Commission on April 14, 2009.

 

 

Exhibit No.		Description of Exhibits
10.49a		Second Amendment, dated as of April 16, 2009, to 6% promissory notes issued to Security Systems International, Inc. Incorporated herein by reference to Exhibit 10.49a to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on May 20, 2009.
10.49		6% Promissory Note dated as of December 15, 2008 to Security Systems International, Inc. in the principal amount of $8,190. Incorporated herein by reference to Exhibit 10.50 to the Company’s Annual Report on Form 10-K, filed with the Commission on April 14, 2009.
10.50		6% Promissory Note dated as of January 22, 2009 to Security Systems International, Inc. in the principal amount of $7,686. Incorporated herein by reference to Exhibit 10.51 to the Company’s Annual Report on Form 10-K, filed with the Commission on April 14, 2009.
10.51		6% Promissory Note dated as of February 10, 2009 to Security Systems International, Inc. in the principal amount of $15,950. Incorporated herein by reference to Exhibit 10.52 to the Company’s Annual Report on Form 10-K, filed with the Commission on April 14, 2009.
10.52		6% Promissory Note dated as of February 18, 2009 to Security Systems International, Inc. in the principal amount of $5,000. Incorporated herein by reference to Exhibit 10.53 to the Company’s Annual Report on Form 10-K, filed with the Commission on April 14, 2009.
10.53		6% Promissory Note dated as of February 19, 2009 to Malcolm W. Sherman in the principal amount of $5,000. Incorporated herein by reference to Exhibit 10.54 to the Company’s Annual Report on Form 10-K, filed with the Commission on April 14, 2009.
10.54		6% Promissory Note dated as of March 20, 2009 to Security Systems International, Inc. in the principal amount of $19,767. Incorporated herein by reference to Exhibit 10.55 to the Company’s Annual Report on Form 10-K, filed with the Commission on April 14, 2009.
10.55		6% Promissory Note dated as of March 25, 2009 to Security Systems International, LLC in the principal amount of $8,577. Incorporated herein by reference to Exhibit 10.56 to the Company’s Annual Report on Form 10-K, filed with the Commission on April 14, 2009.
10.56		6% Promissory Note dated as of April 2, 2009 to Security Systems International, LLC in the principal amount of $14,987. Incorporated herein by reference to Exhibit 10.57 to the Company’s Annual Report on Form 10-K, filed with the Commission on April 14, 2009.
10.57a		Amended and Restated 6% Promissory Noted dated as of April 15, 2009 to Security Systems International LLC. Incorporated herein by reference to Exhibit 10.57a to the Company’s Quarterly Report on Form 10-Q, filed with the Commission on August 6, 2009.
10.58		Agreement, dated as of November 1, 2009, between the Company and Valucorp. Incorporated herein by reference to Exhibit 10.58 to the Company’s Annual Report on Form 10-K, filed with the Commission on April 15, 2010.
10.59		Note Extension Agreement, dated December 31, 2009, between the Company and Neil Berman, the Anthony Panariello Trust, the Danielle Panariello Trust and the Michaela Panariello Trust. Incorporated herein by reference to Exhibit 10.59 to the Company’s Annual Report on Form 10-K, filed with the Commission on April 15, 2010.

 

 

Exhibit No.		Description of Exhibits
10.60		Partnership Agreement on Kaia Mining Properties, dated March 12, 2010, by and among Southamerican Hedge Fund, Oscar Daniel Chedrese and Servicios Mineros SA. Incorporated herein by reference to Exhibit 10.60 to the Company’s Annual Report on Form 10-K, filed with the Commission on May 16, 2011.
10.61		Form of Common Stock Purchase Warrant issued December 15, 2011. Incorporated by reference to Exhibit 10.61 to the Company’s Current Report on Form 8-K, filed with the Commission on December 28, 2011.
10.62		Form of Common Stock Warrant issued to Phillips W. Smith. Incorporated  herein by reference to Exhibit 10.62 to the Company’s Current Report on Form 8-K, filed with the Commission on May 14, 2014.
10.63		Executive Employment Agreement, dated March 23, 2010, between the Company and Malcolm W. Sherman. Incorporated herein by reference to Exhibit 10.63 to Amendment No. 1 to the Company’s Annual Report on Form 10-K, filed with the Commission on September 30, 2014.
10.64		Cooperation Agreement, dated December 20, 2011, between the Company and Principle Petroleum Limited. Incorporated herein by reference to Exhibit 10.64 to Amendment No. 1 to the Company’s Annual Report on Form 10-K, filed with the Commission on September 30, 2014.
10.65		Memorandum of Understanding, dated May 13, 2016, by and among New Times Energy Corporation Limited, South American Hedge Fund, LLC and the Company. Incorporated by reference to Exhibit 10.65 to the Company’s Quarterly Report on Form 10-Q, filed May 16, 2016.
14.		Delta Mutual, Inc. Code of Conduct and Business Ethics. Incorporated herein by reference to Exhibit 10.25 to the Company’s Annual Report on Form 10-KSB, filed with  the Commission on April 14, 2005.
31		Certification of Chief Executive Officer and Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32		Certification of Chief Executive Officer and Principal 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

** Furnished herewith

Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K. 

 

SEC Ref. No.		Title of Document
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Label Linkbase Document
101.PRE		XBRL Taxonomy Presentation Linkbase Document

 

The XBRL related information in Exhibits 101 to this Annual Report on Form 10-K shall not be deemed “filed” or a part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, and is not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of those sections.

 

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the Company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Dated:  March 31, 2017	DELTA INTERNATIONAL OIL & GAS INC.
	By:	/s/ Santiago Peralta
		Santiago Peralta, Interim President and Chief Executive Officer, and Principal Financial and Accounting Officer

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities indicated, on March 31, 2017.

 

/s/ Santiago Peralta
Santiago Peralta
Interim President and Chief Executive Officer, and Director

 

 

31