UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________
Form 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2015
o 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.) |
8655 East
Via de Ventura, Suite F127, Scottsdale, AZ |
|
85258 |
(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 August 13th, 2015.
DELTA
INTERNATIONAL OIL & GAS INC.
INDEX
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Page |
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Part I. Financial Information |
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Item 1. |
Financial Statements. |
1 |
|
|
|
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Consolidated Balance
Sheets as of June 30, 2015 (unaudited) and December 31, 2014 |
2 |
|
|
|
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Consolidated Statements
of Operations for the three and six months ended June 30, 2015 and 2014 (unaudited) |
3 |
|
|
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Consolidated Statements
of Comprehensive Income (Loss) for the three and six months ended June 30, 2015 and 2014 (unaudited) |
4 |
|
|
|
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Consolidated Statements
of Cash Flows for the six months ended June 30, 2015 and 2014 (unaudited) |
5 |
|
|
|
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Notes to Unaudited Consolidated
Financial Statements |
6 |
|
|
|
Item 2. |
Management’s
Discussion and Analysis of Financial Condition and Results of Operations. |
7 |
|
|
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Item 3. |
Quantitative and Qualitative
Disclosures About Market Risk. |
11 |
|
|
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Item 4. |
Controls and Procedures. |
11 |
|
|
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Part II. Other Information |
|
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Item 6. |
Exhibits. |
11 |
|
|
|
Signatures |
12 |
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. 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, 2014.
The
results of operations for the six and three months ended June 30, 2015 and 2014 are not necessarily indicative of the results
for the entire fiscal year or for any other period.
DELTA
INTERNATIONAL OIL & GAS INC. AND SUBSIDIARIES |
CONSOLIDATED
BALANCE SHEETS |
(Unaudited) |
| |
June
30,
2015 | | |
December
31,
2014 | |
ASSETS | |
| | |
| |
| |
| | |
| |
Current
Assets: | |
| | |
| |
Cash | |
$ | 949,463 | | |
$ | 1,206,177 | |
Receivable
from sale of bidding rights and oil and gas properties (net of allowance for doubtful accounts of $3,200,069 as
of March 31, 2015 and December 31, 2014, respectively) | |
| - | | |
| - | |
Total
current assets | |
| 949,463 | | |
| 1,206,177 | |
| |
| | | |
| | |
Investment
in mineral properties | |
| 51,706 | | |
| 55,023 | |
Investments
in unproved oil and gas properties | |
| 316,103 | | |
| 336,383 | |
Other
assets | |
| 6,368 | | |
| 6,368 | |
| |
| | | |
| | |
TOTAL
ASSETS | |
$ | 1,323,640 | | |
$ | 1,603,951 | |
| |
| | | |
| | |
LIABILITIES
AND STOCKHOLDERS' EQUITY | |
| | | |
| | |
| |
| | | |
| | |
Current
Liabilities: | |
| | | |
| | |
Accounts
payable | |
$ | 18,373 | | |
$ | 13,679 | |
Accrued
expenses | |
| 50,575 | | |
| 57,614 | |
Note payable | |
| 15,000 | | |
| 15,000 | |
Liabilities
for uncertain tax positions | |
| 25,888 | | |
| 27,549 | |
Total
current liabilities | |
| 109,836 | | |
| 113,842 | |
Total
liabilities | |
| 109,836 | | |
| 113,842 | |
| |
| | | |
| | |
Commitments
and Contingencies | |
| | | |
| | |
| |
| | | |
| | |
Stockholders'
Equity: | |
| | | |
| | |
Preferred
stock $0.0001 par value-authorized 10,000,000 shares; no shares issued and outstanding at June 30, 2015 and December 31, 2014,
respectively | |
| - | | |
| - | |
Common
stock $0.0001 par value - authorized 250,000,000 shares; 32,338,826 shares issued and outstanding at June 30, 2015 and December
31, 2014, respectively | |
| 3,233 | | |
| 3,233 | |
Additional
paid-in capital | |
| 7,151,482 | | |
| 7,118,982 | |
Accumulated
deficit | |
| (5,393,273 | ) | |
| (5,100,542 | ) |
Accumulated
other comprehensive loss | |
| (547,638 | ) | |
| (531,564 | ) |
Total
stockholders' equity | |
| 1,213,804 | | |
| 1,490,109 | |
| |
| | | |
| | |
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY | |
$ | 1,323,640 | | |
$ | 1,603,951 | |
The accompanying
notes are an integral part of the unaudited consolidated financial statements
DELTA
INTERNATIONAL OIL & GAS INC. AND SUBSIDIARIES |
CONSOLIDATED
STATEMENTS OF OPERATIONS |
(Unaudited) |
| |
Three
months ending June 30, | | |
Six
months ending June 30, | |
| |
2015
| | |
2014
| | |
2015
| | |
2014
| |
Costs and Expenses: | |
| | |
| | |
| | |
| |
General
and administrative | |
$ | 115,556 | | |
$ | 199,096 | | |
$ | 285,286 | | |
$ | 440,931 | |
| |
| 115,556 | | |
| 199,096 | | |
| 285,286 | | |
| 440,931 | |
Loss
from operations | |
$ | (115,556 | ) | |
$ | (199,096 | ) | |
$ | (285,286 | ) | |
$ | (440,931 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other
Income (Expense): | |
| | | |
| | | |
| | | |
| | |
Foreign
exchange gain (loss) | |
| (36,547 | ) | |
| (29,451 | ) | |
| (7,445 | ) | |
| (258,540 | ) |
Interest
expense | |
| - | | |
| (3,238 | ) | |
| - | | |
| (6,476 | ) |
Other
Income (expense) | |
| (36,547 | ) | |
| (32,689 | ) | |
| (7,445 | ) | |
| (265,016 | ) |
Loss
before income taxes | |
| (152,103 | ) | |
| (231,785 | ) | |
| (292,731 | ) | |
| (705,947 | ) |
| |
| | | |
| | | |
| | | |
| | |
Provision
(benefit) for income taxes | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Net
Loss | |
$ | (152,103 | ) | |
$ | (231,785 | ) | |
$ | (292,731 | ) | |
$ | (705,947 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net
income (loss) per common share: | |
| | | |
| | | |
| | | |
| | |
Basic
and Diluted | |
$ | (0.01 | ) | |
$ | (0.01 | ) | |
$ | (0.01 | ) | |
$ | (0.02 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average common
shares –
Basic and Diluted | |
| 32,338,826 | | |
| 32,338,826 | | |
| 32,338,826 | | |
| 32,338,826 | |
The accompanying
notes are an integral part of the unaudited consolidated financial statements
DELTA
INTERNATIONAL OIL & GAS INC. AND SUBSIDIARIES |
|
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (LOSS) |
|
(Unaudited)
| |
Three
months ending
June 30, | | |
Six
months ending
June 30, | |
| |
2015
| | |
2014
| | |
2015
| | |
2014
| |
| |
| | |
| | |
| | |
| |
Net
earnings (loss) | |
$ | (152,103 | ) | |
$ | (231,785 | ) | |
$ | (292,731 | ) | |
$ | (705,947 | ) |
Other
comprehensive income (loss): | |
| | | |
| | | |
| | | |
| | |
Foreign
currency translation adjustment | |
| 25,725 | | |
| (4,337 | ) | |
| (16,074 | ) | |
| (96,644 | ) |
Net
change in other comprehensive income (loss) | |
| 25,725 | | |
| (4,337 | ) | |
| (16,074 | ) | |
| (96,644 | ) |
Comprehensive
income (loss) | |
$ | (126,378 | ) | |
$ | (236,122 | ) | |
$ | (308,805 | ) | |
$ | (802,591 | ) |
The
accompanying notes are an integral part of the unaudited consolidated financial statements
DELTA
INTERNATIONAL OIL & GAS INC. AND SUBSIDIARIES |
CONSOLIDATED
STATEMENTS OF CASH FLOWS |
(Unaudited) |
| |
Six
months ending
June 30, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
Cash flows from Operating Activities: | |
| | |
| |
Net
income (loss) | |
$ | (292,731 | ) | |
$ | (705,947 | ) |
Warrants
issued for services | |
| 32,500 | | |
| 48,750 | |
Adjustments
to reconcile net earnings (loss) to net cash used in operating activities: | |
| | | |
| | |
Changes
in operating assets and liabilities | |
| (2,345 | ) | |
| 53,339 | |
Net
cash used in operating activities | |
| (262,576 | ) | |
| (603,858 | ) |
Cash
flows from investing activities: | |
| | | |
| | |
Effect
of Exchange Rates on Cash | |
| 5,862 | | |
| 256,503 | |
Net
increase (decrease) in cash | |
| (256,714 | ) | |
| (347,355 | ) |
Cash
- Beginning of period | |
| 1,206,177 | | |
| 1,833,407 | |
Cash
- End of period | |
$ | 949,463 | | |
$ | 1,486,052 | |
| |
| | | |
| | |
Changes
in operating assets and liabilities consists of: | |
| | | |
| | |
Increase
(decrease) in accounts payable and accrued expenses | |
$ | (2,345 | ) | |
$ | 53,339 | |
Increase
(decrease) in liabilities for uncertain tax positions | |
| - | | |
| - | |
Changes
in assets and liabilities | |
$ | (2,345 | ) | |
$ | 53,339 | |
| |
| | | |
| | |
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
DELTA
INTERNATIONAL OIL & GAS INC. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1.
BASIS OF PRESENTATION
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, 2014. 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, 2014 as reported on Form 10-K, have been omitted.
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 March 31, 2015, the Company had received deposits in the amount of $4,299,891 from PPL on account of remainder of the proceeds
was recorded as a $3,200,069 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 the Company is in discussions with PPL to ensure that all payments provided for under the Cooperation
Agreement are made. Because of PPL’s payment default, the Company has not transferred the Valle de Lerma, Tartagal, and
Morillo interests.
As
of August 13, 2015, the Company was working on an understanding of sale and settlement terms with PPL and a third party. The settlement
terms would apply to all previous agreements signed with PPL. The timeline for the completion of this agreement remains uncertain.
3. RELATED
PARTY TRANSACTIONS
In
the second quarter of 2015, the Company started to award performance bonuses to its non-executive employees. Pablo Peralta, a
major shareholder of the Company and the SAHF Coordinator, was awarded a $1,036 bonus for his first quarter performance. These
quarterly performance bonuses can be expected every quarter.
4.
SUBSEQUENT EVENTS
On
July 16, 2015, the Company, through SAHF, LLC, made a commitment to give a bonus to Alberto Mac Mullen of up to US$500,000 in
the event of the completion of a sale of Tartagal, Morillo, and Valle de Lerma. The final amount of the bonus will be determined
by the selling price of the properties.
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, by the merger with a wholly-owned
Delaware subsidiary, where the sole change resulting from the merger was the change of the Company’s name to Delta International
Oil & Gas Inc. 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 has made investments 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. Our operating policies have been to secure oil and
gas properties and concessions which are either producing economical quantities of oil and gas or which demonstrate favorable
characteristics for well “workovers” with a history of excellent production.
The
Company's business is subject to the risks of its oil and gas investments in South America. Our investments at this time are in
the oil and gas sector in Argentina, where recently proposed legislation would change the respective roles of the federal and
provincial governments in the award of and participation in oil and gas concessions. If enacted these changes could necessitate
renegotiation of certain of the concessions in which we have interests, and affect the value of our investments. As of the close
of 2014, Argentina was in technical default on its external debt and, although negotiations to remedy this default are in process,
it is likely that this situation, however resolved, will lead the government to impose further restrictions on exports of capital
from Argentina.
The
likelihood of success of the Company must be considered in light of the expenses, difficulties, delays and unanticipated challenges
encountered in connection with the operations of oil and gas concessions in Argentina.
Our
Oil and Gas Investments
As
of June 30, 2015, 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.
We
hold a 60% 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, but due to payment defaults, the Company
has not transferred the 29.4% interest. 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 sell its full stake in Valle de Lerma. Currently, the Company
is finalizing the terms of the sale; however, there is uncertainty regarding the time frame given the past experience with selling
properties.
Even
though the Company is not currently pursuing any of its own operating activities on its oil and gas properties that are not in
a carry-over mode, it is still evaluating all options to assure the most optimal scenario regarding the concession known as Valle
de Lerma.
Pending negotiations with PPL discussed below, we
are currently working on potential contracts with other buyers. In July, 2015, a limited power of attorney was signed to initiate
this process. Agreements forming new partnerships, and partial sales, are expected to happen in the third quarter of 2015.
Lithium
and Coltan Mining 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. 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
Company does not currently hold any interest in any other mining concession.
RESULTS
OF OPERATIONS
SIX
MONTHS ENDED JUNE 30, 2015 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2014
During
the six months ended June 30, 2015, we incurred a net loss of approximately $293,000, as compared to net loss of approximately
$706,000 for the six months ended June 30, 2014. The decrease in the net loss for the six months ended June 30, 2015 compared
to the six months ended June 30, 2014 is primarily due to lower general and administrative expense of approximately $441,000 in
2014, compared to approximately $285,000 in 2015, and a foreign exchange loss of approximately $258,500 in 2014 versus a foreign
exchange loss of approximately $7,000 in 2015.
THREE
MONTHS ENDED JUNE 30, 2015 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2014
During
the three months ended June 30, 2015, we incurred a net loss of approximately $152,000, as compared to net loss of approximately
$232,000 for the three months ended June 30, 2014. The decrease in the net loss for the three months ended June 30, 2015 compared
to the three months ended June 30, 2014 is primarily due to higher general and administrative expense.
LIQUIDITY
AND CAPITAL REQUIREMENTS
At
June 30, 2015, we had a working capital surplus of approximately $840,000 compared with a working capital surplus of approximately
$1.09 million at December 31, 2014.
At June 30, 2015, we had total assets of approximately
$1.30 million compared to total assets of approximately $1.60 million at December 31, 2014. Net cash used in operating activities
in the six months ended June 30, 2015 was $262,576, as compared with net cash used in operating activities of $603,858 in 2014;
net cash generated by investing activities was $-0- in 2014 and 2015; and net cash generated from financing activities was $-0-
in 2014 and 2015.
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 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. The San Salvador, Libertador, and Selva Maria
concessions have since been awarded by the government to another party. Pursuant to a separate Agreement dated March 31, 2012,
we 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 US$500,000. PPL had also agreed in an Undertaking to provide funds to the operating
entity of Valle de Lerma (and the other concessions, if our bid had been approved) in the aggregate amount of up to US $10,000,000.
As
part of PPL’s obligations under the Cooperation Agreement, PPL made partial payments of $2,000,000 in our 2012 first fiscal
quarter, $999,979 in the second quarter and $499,979 in the third quarter towards the full amount of $7,000,000 provided under
the Cooperation Agreement. Both parties are working to execute the full amount of PPL’s payment obligations as
agreed. Further payments of $500,000, $50,000, $150,000, and $99,973 were made in January 2013, July 2014, August 2014, and November
2014, respectively. The interests in the Tartagal, Morillo, and Valle de Lerma concessions have not yet been transferred to PPL
due to PPL’s payment defaults in all agreements.
For
the past year, we have been in talks with PPL and a third party to settle the Cooperation Agreement as well as potentially sell
a larger stake in our properties. As of the date of this report, we were in the process of formulating the final terms of the
contract.
Estimated
2015 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 2015 is expected to be US$100,000 in canons and other
obligations. The Company is currently looking for buyers for the property.
SAHF also has “minimum
expected income” tax in Argentina. This tax is expected to be around US$30,000 in the third quarter of 2015.
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, 2014, filed with the SEC on April 15, 2015.
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.
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 June 30, 2015, 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.
PART
II—OTHER INFORMATION
ITEM
6. EXHIBITS.
31 |
Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
|
|
32 |
Certification
of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.** |
* Filed herewith
** 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.
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:
August 14, 2015 |
BY: |
/s/
Santiago Peralta |
|
|
Santiago Peralta |
|
|
Interim President and Chief
Executive Officer, and
Principal Financial Officer |
EXHIBIT
INDEX
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. |
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 |
13
EXHIBIT 31
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION
302
OF THE SARBANES OXLEY ACT
OF 2002
I, Santiago Peralta, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q
of Delta International Oil & Gas Inc.;
2. Based on my knowledge, this report does not contain
any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements,
and other financial information included in this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. I am responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the
registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. designed such internal control
over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c. evaluated the effectiveness
of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. I have disclosed, based on my most recent evaluation
of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a. all significant deficiencies
and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. any fraud, whether or not material,
that involves management or other employees who have a significant role in the registrant's internal control over financial reporting;
DATE: August 14, 2015 |
/s/ Santiago Peralta |
|
Santiago Peralta,
Interim Chief Executive Officer and |
|
Principal Financial Officer |
EXHIBIT 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Delta International Oil &
Gas Inc. (the "Company") on Form 10-Q for the six months ended June 30, 2015 as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Santiago Peralta, Interim Chief Executive Officer and Principal Financial
Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act
of 2002, that to the best of my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the
financial condition and result of operations of the Company.
DATE: August 14, 2015 |
/s/ Santiago Peralta |
|
Santiago Peralta |
|
Interim Chief Executive Officer and |
|
Principal Financial Officer |
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