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EX-32 - CERTIFICATION - CannAwake Corp | f10q0317ex32_delta.htm |
EX-31 - CERTIFICATION - CannAwake Corp | f10q0317ex31_delta.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2017
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to _______________
Commission file number 000-30563
DELTA INTERNATIONAL OIL & GAS INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware | 14-1818394 | |
(State
or Other Jurisdiction of Incorporation or Organization) |
(I.R.S.
Employer Identification No.) |
7272 E Indian School Rd STE 540, Scottsdale, AZ | 85251 | |
(Address of principal executive offices) | (Zip Code) |
(480) 483-0420
(Registrant’s Telephone Number, Including Area Code)
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 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, a non-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 number of shares outstanding of the issuer’s common stock, $0.0001 par value per share, was 32,338,826 as of May 15, 2017.
DELTA INTERNATIONAL OIL & GAS INC.
INDEX
Page | |
Part I. Financial Information | 1 |
Item 1. Financial Statements. | 1 |
Consolidated Balance Sheets as of March 31, 2017 (unaudited) and December 31, 2016 | 2 |
Consolidated Statements of Operations for the three months ended March 31, 2017 and 2016 (unaudited) | 3 |
Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2017 and 2016 (unaudited) | 4 |
Consolidated Statements of Cash Flows for the three months ended March 31, 2017 and 2016 (unaudited) | 5 |
Notes to Unaudited Consolidated Financial Statements | 6 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. | 7 |
Item 3. Quantitative and Qualitative Disclosures About Market Risk. | 11 |
Item 4. Controls and Procedures. | 11 |
Part II. Other Information | 12 |
Item 6. Exhibits. | 12 |
Signatures | 13 |
PART I. FINANCIAL INFORMATION
Item 1. | Financial Statements |
Certain information and footnote disclosures required under accounting principles generally accepted in the United States of America have been condensed or omitted from the following consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, all material adjustments that are necessary for a fair presentation for the periods presented have been reflected. It is suggested that the following consolidated financial statements be read in conjunction with the year-end consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.
The results of operations for the three months ended March 31, 2017 and 2016 are not necessarily indicative of the results for the entire fiscal year or for any other period.
1 |
DELTA INTERNATIONAL OIL & GAS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
31-Mar-17 | 31-Dec-16 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash | $ | 160,651 | $ | 239,627 | ||||
Total current assets | 160,651 | 239,627 | ||||||
Investment in MHD Technologies | 125,000 | 125,000 | ||||||
TOTAL ASSETS | $ | 285,651 | $ | 364,627 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 16,055 | $ | 4,945 | ||||
Accrued expenses | 6,140 | 6,140 | ||||||
Notes payable | 15,000 | 15,000 | ||||||
Total current liabilities | 37,195 | 26,085 | ||||||
Total liabilities | 37,195 | 26,085 | ||||||
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 | (6,921,794 | ) | (6,831,708 | ) | ||||
Accumulated other comprehensive income | 15,535 | 15,535 | ||||||
Total stockholders’ equity | 248,456 | 338,542 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 285,651 | $ | 364,627 |
The accompanying notes are an integral part of the unaudited consolidated financial statements
2 |
DELTA INTERNATIONAL OIL & GAS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31, |
||||||||
2017 | 2016 | |||||||
Sales | $ | - | $ | - | ||||
Costs and Expenses: | ||||||||
General and administrative | $ | (90,151 | ) | $ | (81,980 | ) | ||
$ | (90,151 | ) | $ | (81,980 | ) | |||
Loss from operations | $ | (90,151 | ) | $ | (81,980 | ) | ||
Other Income (Expense): | 65 | - | ||||||
Loss before income taxes | $ | (90,086 | ) | $ | (81,980 | ) | ||
Provision (benefit) for income taxes | $ | - | $ | - | ||||
Net Loss | $ | (90,086 | ) | $ | (81,980 | ) | ||
Net loss per common share: | ||||||||
Basic and Diluted | $ | (0 | ) | $ | (0 | ) | ||
Weighted average common shares - Basic and Diluted | 32,338,826 | 32,338,826 |
The accompanying notes are an integral part of the unaudited consolidated financial statements
3 |
DELTA INTERNATIONAL OIL & GAS INC. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS |
(Unaudited) |
Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||
Net loss | $ | (90,086 | ) | $ | (81,980 | ) | ||
Other comprehensive loss: | ||||||||
Foreign currency translation adjustment | - | (25,575 | ) | |||||
Net change in other comprehensive loss | - | (25,575 | ) | |||||
Comprehensive loss | $ | (90,086 | ) | $ | (107,555 | ) |
The accompanying notes are an integral part of the unaudited consolidated financial statements
4 |
DELTA INTERNATIONAL OIL & GAS INC. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
(Unaudited) |
Three Months Ended March 31, |
||||||||
2017 | 2016 | |||||||
Cash flows from Operating Activities: | ||||||||
Net loss | $ | (90,086 | ) | $ | (81,980 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Changes in operating assets and liabilities | ||||||||
Increase in accounts payable and accrued expenses | 11,110 | 5,038 | ||||||
Net cash used in operating activities | (78,976 | ) | (76,942 | ) | ||||
Cash flows from investing activities: | ||||||||
Investment in Neptune Industries | - | (125,000 | ) | |||||
Net cash used in investing activities | - | (125,000 | ) | |||||
Cash flows from financing activities: | ||||||||
Net cash provided by financing activities | - | - | ||||||
Effect of Exchange Rates on Cash | - | - | ||||||
Net decrease in cash | (78,976 | ) | (201,942 | ) | ||||
Cash - Beginning of period | 239,627 | 717,085 | ||||||
Cash - End of period | $ | 160,651 | $ | 515,143 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for interest | $ | - | $ | - | ||||
Cash paid for income taxes | $ | - | $ | - |
The accompanying notes are an integral part of the unaudited consolidated financial statements.
5
DELTA INTERNATIONAL OIL & GAS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
Delta International Oil & Gas Inc. (“Delta” or “the Company”) was incorporated in Delaware on November 17, 1999.
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.
The accompanying unaudited interim consolidated financial statements of Delta International Oil & Gas Inc. (“Delta” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year end December 31, 2016 as reported on Form 10-K, have been omitted.
2. INVESTMENT IN UNPROVED OIL AND GAS PROPERTIES
On January 3, 2017, the Company received the acceptance of its offer for the sale of SAHF’s 18% 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 April 3, 2017, the Escrow Agent released $500,000 to Delta towards the initial $2,000,000 payment.
On April 21, 2017, the official government decree for the transfer of Tartagal and Morillo was issued, and the companies are expected to execute the final transfer in late May. The transaction is expected to close in the second quarter of 2017. Upon closing, the Company is expected to pay commissions and bonuses to a consultant and SAHF’s general manager totaling to approximately $200,000.
3. SAHF INTEREST PURCHASE AGREEMENT
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 May 2017 since the transfer decree for Tartagal and Morillo has been published. The undisclosed buyer will receive 25% of all proceeds the Company will receive from the sale of its 18% interest in the Tartagal and Morillo concessions (see Note 2) in exchange for the buyer’s assumptions of all potential liabilities related to the Company’s Valle de Lerma concession.
4. SUBSEQUENT EVENTS
On April 3, 2017, the Company received a payment of US$500,000 from High Luck Group Limited for the sale of the Tartagal Oriental and Morillo properties.
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ITEM 2. | 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 of oil and gas exploration and production operations in Argentina, the Company has decided to sell its Argentine oil and gas concessions. Throughout 2016 and the first quarter of 2017, the Company has been evaluating its entrance into different geographic regions within the energy sector, as well as the water purification and telecommunications sectors. 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 SAHF and the Valle de Lerma operating concession to a third party. The first payment for the sale of Tartagal and Oriental and Morillo was received in early April.
During the first quarter of 2017, the Company had signed two letters of intent (“LOI”) to acquire test equipment technology companies, but after a dissatisfaction with the due diligence results, the Company decided to terminate the LOIs.
The Company is currently evaluating companies in the tech and energy sectors as potential acquisition or merger candidates.
7
Investment in MHD Technology Corporation
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 another $300,000 from investors (new Delta ownership- 5.5%).
As of March 6, 2017, MHD Technology had 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. A CGI video of the working prototype was also developed as well as an introductory video into a unit made for the automobile industry.
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.
Termination of Proposed Acquisitions
On April 18, 2017, we terminated two letters of intent to which we were party, a February 15, 2017 letter of intent with Bayberry Capital for the acquisition of 100% of the outstanding shares in Naptech Test Equipment, Inc., and a March 22, 2017 letter of intent for the acquisition of Cardinal Electronics, Inc. The Company is currently evaluating other prospects for acquisitions.
Sale of Argentina Oil Properties
On May 12, 2016, Delta and New Times Energy Corporation Limited 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 has been placed in escrow on February 10, 2017, and a deposit on the purchase price of $500,000 was received by Delta on April 3 2017. There are various conditions for the full release of the funds including the successful transfer of the properties to High Luck Group Ltd, a subsidiary of New Times Energy. Each condition satisfied will trigger an equal percentage of the funds being released. On April 21, 2017, the transfer decree for Tartagal and Morillo was issued by the Province of Salta.
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. High Luck has committed to drill four exploratory wells in the next four months in Tartagal and Morillo concession areas; however, it is likely that the UTE will receive an extension after drilling the first well. Although we had expected this transaction to close in the first quarter of 2017, and are now expecting a closing in the second quarter, 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.
Our Oil and Gas Investments
As of March 31, 2017, 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.
On May 5, 2017, the Company signed a Letter of Intent for an Asset Purchase through Preferred Convertible Stock with Breitling Energy Corp. The 2014 10K of Breitling reports reserves of around $20,000,000. Bayberry Capital will also be involved in the transaction as Breitling’s offer was brought forth by them.
8
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 and the Operation Agreement 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 was 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. The Company is looking to transfer its full stake in Valle de Lerma.
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 March 31, 2017.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2017 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2016
During the three months ended March 31, 2017, we incurred a net loss of approximately $90,000, compared to net loss of approximately $82,000 for the three months ended March 31, 2016. The increase in the net loss for the three months ended March 31, 2017 compared to the three months ended March 31, 2016 is primarily due to: administrative expenses in Argentina in 2017 that are usually not incurred until the third quarter.
LIQUIDITY AND CAPITAL REQUIREMENTS
At March 31, 2017, we had a working capital surplus of approximately $123,000 compared with a working capital surplus of approximately $214,000 at December 31, 2016.
At March 31, 2017, we had total assets of approximately $286,000 compared to total assets of approximately $365,000 at December 31, 2016. Net cash used in operating activities in the three months ended March 31, 2017 was approximately $79,000, as compared with net cash used in operating activities of $77,000 in 2016; net cash used in investing activities was $0 in the first quarter of 2017 and $125,000 in the first quarter of 2016; and net cash generated from financing activities was $-0- in the first quarters of both years.
Effective March 30, 2012, we entered into an Asset Purchase and Cooperation Agreement (the “Cooperation Agreement”) with Principle Petroleum Limited (“PPL”), headquartered in the British Virgin Islands. Under the Cooperation Agreement, we agreed to sell to PPL, for a price of $7,000,000 certain exploration and exploitation rights to oil and gas deposits and certain bidding rights held by SAHF. The Company received a total of $4,300,000 in payments, but PPL defaulted on the rest of its payments. Therefore, the agreements with PPL have been terminated.
9
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- which is still being determined by the Province of Salta. The Company is currently under contract to transfer the property out along with the sale of its subsidiary, SAHF.
SAHF also has “minimum expected income” tax in Argentina. In the third quarter of 2016, SAHF spent about US$2,000 in minimum expected income tax in Argentina. During the first quarter of 2017, around US$150 was paid in minimum expected income tax in Argentina. In 2018, the Company is expecting to pay taxes of approximately $300,000 on the sale of its oil and gas concessions.
In 2016, Delta maintained its lowered operating expenses and SG&As to look for other opportunities for investment in the energy industry. In the oil and gas sector, the focus is upstream and service-related while in the alternative energies, the focus is in water propulsion systems and hydro-electric systems.
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.
Management believes that it is reasonably possible that the following material estimates affecting the financial statements could happen in the coming two years:
● | Reserve reports in two of the properties; | |
● | Cash flow from exploratory drilling in two of the properties; and | |
● | 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 notes to the financial statements set forth in our Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on March 31, 2017.
Critical Accounting Policies and Estimates
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.
10
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 ASC 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.
We evaluate 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 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 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
Not applicable to smaller reporting companies.
Item 4. | CONTROLS AND PROCEDURES |
Evaluation of Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive and financial officer, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost- benefit relationship of possible controls and procedures.
As of March 31, 2017, an evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our Chief Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were not effective.
Changes in Internal Controls
There have been no changes in the Company’s internal controls over financial reporting that occurred during the Company’s last fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Limitations on the Effectiveness of Controls
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. The Company’s disclosure controls and procedures are designed to provide reasonable assurance of achieving its objectives. The Company’s chief executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective at that reasonable assurance level.
11
PART II—OTHER INFORMATION
ITEM 6. | EXHIBITS. |
* | 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 Quarterly Report on Form 10-Q 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.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Company has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DELTA INTERNATIONAL OIL & GAS INC. | ||
Dated: May 15, 2017 | BY: | /s/ Santiago Peralta |
Santiago Peralta | ||
Interim President and Chief Executive Officer, and Principal Financial Officer |
13
EXHIBIT INDEX
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 |
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