CannAwake 10-Q 2008 Q2 Quarterly report

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.

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

For the quarterly period ended June 30, 2008

OR

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 MUTUAL, 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.)

111 NORTH BRANCH STREET, SELLERSVILLE, PA 18960

(215) 258-2800

(Address and telephone number, including area code, of

registrant's principal executive office)

(Former name, former address and former fiscal year, if changed

since last report)

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  x  NO o

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	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	x

(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). o Yesx No

The number of shares outstanding the issuer's common stock, par value $.0001 per share, was 221,849,158 as of September 15, 2008.

DELTA MUTUAL, INC.

INDEX

	Page
Part I. Financial Information	3
Item 1. Financial Statements	3
Consolidated Balance Sheet as of June 30, 2008 and as of December 31, 2007 (unaudited)	4
Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2008 and 2007 (unaudited)	5
Consolidated Statement of Stockholders Equity (unaudited)	6-7
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2008 and 2007 (unaudited)	8-9
Notes to Unaudited Consolidated Financial Statements	10
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3. Quantitative and Qualitative Disclosures About Market Risk	28
Item 4T.Controls and Procedures	28
Part II. Other Information	28
Item 1A. Risk Factors	28
Item 5. Other Information	28
Item 6. Exhibits	28
Signatures	30

Page 2

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-KSB for the year ended December 31, 2007.

The results of operations for the six and three months ended June 30, 2008 and 2007 are not necessarily indicative of the results for the entire fiscal year or for any other period.

Page 3

DELTA MUTUAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

	June 30,			December 31,
	2008			2007
ASSETS
Current Assets:
Cash	$	5,220		$	57,633
Investments		4,137,538			5,879,020
Prepaid expenses		-			1,914
Total Current Assets		4,142,758			5,938,567
Property and equipment - net		346,586			368,123
Intangible asset		-			126,317
Investments		-			1,130,000
Other assets		650			650
TOTAL ASSETS	$	4,489,994		$	7,563,657
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	161,668		$	412,922
Accrued expenses		1,346,918			1,225,674
Convertible debt		253,740			397,340
Notes payable		2,087,605			2,540,655
Total Current Liabilities		3,849,931			4,576,591
Minority interest in consolidated subsidiaries		226,988			225,797
Stockholders' Equity:
Common stock $0.0001 par value - authorized
250,000,000 shares; 221,849,158 and 208,882,953
shares issued and outstanding at June 30, 2008
and December 31, 2007 respectively		22,185			20,888
Additional paid-in-captial		12,735,107			11,953,766
Accumulated deficit		(12,344,217	)		(9,213,385	)
Total Stockholders' Equity		413,075			2,761,269
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	4,489,994		$	7,563,657

See Notes to Unaudited Consolidated Financial Statements

Page 4

DELTA MUTUAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Six Months Ended June 30,						Three Months Ended June 30,
	2008			2007			2008			2007
Investment results	$	(2,053,011	)	$	(967,045	)	$	7,942		$	(483,522	)
Revenue		(2,053,011	)		(967,045	)		7,942			(483,522	)
General and administrative
expenses		998,132			399			396,454			199
Loss on intellectual property		122,742			-			122,742			-
Valuation results		22			(3,623	)		-			(1,811	)
		1,120,896			(3,224	)		519,196			(1,612	)
Loss from operations		(3,173,907	)		(963,821	)		(511,254	)		(481,910	)
Interest expense		24,260			-			(7,949	)		-
Loss before minority interest		(3,149,647	)		(963,821	)		(519,203	)		(481,910	)
Minority interest share of (income)
loss of consolidated subsidiaries		18,815			-			11,520			-
Loss before benefit from income taxes		(3,130,832	)		(963,821	)		(507,683	)		(481,910	)
Benefit from income taxes		-			-			-			-
Net loss	$	(3,130,832	)	$	(963,821	)	$	(507,683	)	$	(481,910	)
Loss per common share-
basic and diluted	$	(0.01	)	$	(0.01	)	$	(0.00	)	$	(0.00	)
Weighted average number of
common shares outstanding-
basic and diluted		220,106,481			192,161,246			221,316,564			192,161,246

See Notes to Unaudited Consolidated Financial Statements

Page 5

DELTA MUTUAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

	Number of												Deferred
	Common		Common		Paid in		Accumulated			Subscription			Stock
	Shares		Stock		Capital		Deficit			Receivable			Purchase			Total
Balance, January 1, 2007		192,161,246	$	19,216	$	10,321,138	$	(5,883,087	)	$	(10,000	)	$	266,000		$	4,713,267
Issuance of common stock for interest expense (valued at $0.06 - $0.125 per share)		135,040		13		15,307		-			-			-			15,320
Issuance of common stock for convertible debt (valued at $0.06 - $0.125 per share)		16,586,667		1,659		830,341		-			-			-			832,000
Conversion to convertible notes		-		-		-		-			-			(266,000	)		(266,000	)
Receipt of subscribed stock											10,000						10,000
Stock based coompensation expense		-		-		786,980		-			-			-			786,980
Net (loss)		-		-		-		(3,330,298	)		-			-			(3,330,298	)
Balance, December 31, 2007		208,882,953		20,888		11,953,766		(9,213,385	)		-			-			2,761,269

See Notes to Unaudited Consolidated Financial Statements

Page 6

DELTA MUTUAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(CONTINUED)

	Number of
	Common		Common		Paid in		Accumulated
	Shares		Stock		Capital		Deficit			Total
Issuance of common stock for services
(valued at $0.02 - $0.07 per share)		10,550,000		1,055		237,445		-			238,500
Issuance of common stock for debt		2,300,571		230		143,370		-			143,600
(valued at $0.05 - $0.07 per share)
Issuance of common stock for interest		115,634		12		7,036		-			7,048
(valued at $0.05 - $0.07 per share)
Stock based compensation expense		-		-		393,490		-			393,490
Net (loss)		-		-		-		(3,130,832	)		(3,130,832	)
Balance, June 30, 2008		221,849,158	$	22,185	$	12,735,107	$	(12,344,217	)	$	413,075

See Notes to Unaudited Consolidated Financial Statements

Page 7

DELTA MUTUAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six Months Ended June 30,
	2008			2007
Cash flows from operating activities:
Net loss	$	(3,130,832	)	$	(963,821	)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization		25,112			-
Non-cash compensation		245,548			-
Loss on intellectual property		122,742
Compensatory element of option issuance		393,490			-
Minority interest in income (losses) of
consolidated subsidiaries		(18,815	)		-
Changes in operating assets
and liabilities		(128,096	)		-
Net cash used in operating activities		(2,490,851	)		(963,821	)
Cash flows from investing activities:
Deposit on land		-			-
Decrease in investments		2,871,482			963,821
Refund of land deposit		-			-
Net cash provided by
investing activities		2,871,482			963,821
Cash flows from financing activities:
Proceeds from loans		186,950			-
Proceeds from convertible debt
financing		-			-
Repayment of loans		(640,000	)		-
Payments to minority interests		-			-
Proceeds from minority interest		20,006			-
Net cash provided by (used in)
financing activities		(433,044	)		-
Net increase (decrease) in cash		(52,413	)		-
Cash - Beginning of period		57,633			-
Cash - End of period	$	5,220		$	-

See Notes to Unaudited Consolidated Financial Statements

Page 8

DELTA MUTUAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Continued)

(UNAUDITED)

	Six Months Ended June 30,
	2008			2007
Supplementary information:
Changes in operating assets and
liabilities consists of:
(Increase) in accounts receivable	$	-		$	-
(Increase) decrease in prepaid expenses		1,914			-
(Increase) decrease in deposits		-			-
(Increase) decrease in other assets		-			-
Increase in accounts payable
and accrued expenses		(130,010	)		-
	$	(128,096	)	$	-
Non-cash financing activities:
Issuance of common stock for debt	$	143,600		$	-
Issuance of common stock in lieu of
payment of accured expenses	$	7,048		$	-
Issuance of common stock for services	$	238,500		$	-

See Notes to Unaudited Consolidated Financial Statements

Page 9

DELTA MUTUAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2008 and 2007

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Delta Mutual, Inc. and subsidiaries (“Delta” or the “Company”) was incorporated in Delaware on November 17, 1999. Since 2003, the principal business activities of the Company were focused on providing environmental and construction technologies and services to certain geographic reporting segments in the Far East, Middle East and the United States.

On March 4, 2008, the Company entered into a Membership Interest Purchase Agreement (the “Agreement”) with Egani, Inc., an Arizona corporation (“Egani”). Pursuant to the Agreement, the Company acquired from Egani 100% of the issued and outstanding membership interests held by Egani in Altony S.A., an Uruguay Sociedad Anonima (“Altony”), which owns 100% of the issued and outstanding membership interests in South American Hedge Fund LLC, a Delaware limited liability company (“SAHF”). At the closing of the Agreement, the Company issued 130,000,000 shares of its common stock to Egani, for the purchase of all of the outstanding membership interests in Altony which constituted, following such issuance, a majority of the outstanding shares of the Company’s common stock.

Immediately following the closing of the Agreement, Altony became a wholly owned subsidiary of the Company. For accounting purposes only, the transaction was treated as a recapitalization of the Company with Altony as the acquirer. The financial statements prior to March 4, 2008 are those of Altony and reflect the assets and liabilities of Altony at historical carrying amounts. The financial statements show a retroactive restatement of Altony’s historical stockholders’ equity to reflect the equivalent number of shares issued to the subsidiary.

The principal business activity of Altony is the ownership and management of its SAHF subsidiary. SAHF has initially focused on oil and gas investments in Argentina and intends to continue its focus on the energy sector, including the development and supply of energy and alternate energy sources in Latin America and the United States.

In August 2007, SAHF signed a purchase option for a partial interest in three oil and gas concessions in Argentina. SAHF is in the process of obtaining the necessary government and environmental permits to operate these concessions.

The Company intends to continue its environmental technology and service activities in the Middle East that are conducted by its joint venture subsidiary Delta-Envirotech, Inc. (“Envirotech”), headquartered in Virginia. The construction technology activities that were conducted by the Company’s wholly owned subsidiary Delta Technologies, Inc. (“Technologies”) are being phased out because the Company has elected not to pursue its patent for the insulating concrete wall forming (ICF) system known as Delta Wall.

Page 10

BASIS OF PRESENTATION

The consolidated balance sheet as of June 30, 2008, and the consolidated statements of operations and cash flows for the periods presented herein have been prepared by the Company and are unaudited. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly, the financial position, results of operations and cash flows for all periods presented have been made. The information for the consolidated balance sheet as of December 31, 2007 was derived from audited financial statements.

The consolidated financial statements for the period ended June 30, 2008 have been prepared on a going concern basis which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business. Management recognizes that the Company's continued existence is dependent upon its ability to obtain needed working capital through additional equity and/or debt financing and revenue to cover expenses as the Company continues to incur losses.

The Company's business is subject to most of the risks inherent in the establishment of a new business enterprise. 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 formation of a new business, raising operating and development capital, and the marketing of a new product. There is no assurance the Company will ultimately achieve a profitable level of operations.

The Company presently does not have sufficient liquid assets to finance its anticipated funding needs and obligations. The Company's continued existence is dependent upon its ability to obtain needed working capital through additional equity and/or debt financing and achieve a level of sales adequate to support its cost structure. Management is actively seeking additional capital to ensure the continuation of its current activities and complete its proposed activities. However, there is no assurance that additional capital will be obtained or that the Company’s subsidiaries will be profitable. These uncertainties raise substantial doubt about the ability of the Company to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties should the Company be unable to continue as a going concern.

SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The Company's financial statements include the accounts of all majority-owned subsidiaries where its ownership is more than 50 percent of common stock. The consolidated financial statements also include the accounts of any Variable Interest Entities ("VIEs") where the Company is deemed to be the primary beneficiary, regardless of its ownership percentage. All significant intercompany balances and transactions with consolidated subsidiaries are eliminated in the consolidated financial statements. Where the Company's ownership interest is less than 100 percent, the minority ownership interests are reported in the consolidated balance sheet as a liability. The minority ownership interest of the Company's earnings or loss, net of tax, is classified as "Minority interest share of earnings (loss) of consolidated subsidiaries" in the consolidated statements of operations.

Page 11

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.

LOSS PER SHARE

Basic and diluted loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the year. Potential common shares are excluded from the loss per share calculation because the effect would be antidilutive. Potential common shares relate to the convertible debt, stock options and common stock purchase warrants. As of June 30, 2008 and 2007, there were 2,749,920 and 15,008,587 potential common shares related to convertible debt, respectively, and 6,998,000 and 7,978,000 potential common shares related to stock options, respectively.

REVENUE RECOGNITION

The Company recognizes revenue from the results of its investment portfolio as the difference between proceeds from the sale of securities and their acquisition cost, less commissions paid to the firm that conducts the securities transactions.

EVALUATION OF LONG-LIVED ASSETS

The Company reviews property and equipment and finite-lived intangible assets for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable in accordance with guidance in Statement of Financial Accounting Standards (SFAS) No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets." If the carrying value of the long-lived asset exceeds the present value of the related estimated future cash flows, the asset would be adjusted to its fair value and an impairment loss would be charged to operations in the period identified.

DEPRECIATION AND AMORTIZATION

Property and equipment are stated at cost. Depreciation is provided for by the straight-line method over the estimated useful lives of the related assets.

Page 12

STOCK-BASED COMPENSATION

The Company has a stock-based compensation plan under which stock options are granted to employees. Effective January 1, 2006, the Company accounts for stock based compensation under Statement of Financial Accounting Standards ("SFAS") No. 123(R), "Share-Based Payment." The Company adopted SFAS 123(R) using the modified prospective method. Under modified prospective application, this SFAS applies to new awards and to awards for which the requisite service has not been rendered that are outstanding as of the required effective date shall be recognized as the requisite service is rendered on or after the required effective date. The compensation cost for the portion of awards shall be based on the grant-date fair value of those awards as calculated for either recognition or pro forma disclosures under SFAS 123. Changes to the grant-date fair value of equity awards granted before the required effective date of this Statement are precluded. The compensation cost for those earlier awards shall be attributed to periods beginning on or after the required effective date of this SFAS using the attribution method that was used under SFAS 123, except that the method of recognizing forfeitures only as they occur shall not be continued.

INCOME TAXES

The Company accounts for income taxes using an asset and liability approach under which deferred taxes are recognized by applying enacted tax rates applicable to future years to the differences between financial statement carrying amounts and the tax basis of reported assets and liabilities. The principal item giving rise to deferred taxes are future tax benefits of certain net operating loss carryforwards.

FOREIGN CURRENCY TRANSLATION

The functional currency for some 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. Translation adjustments in future periods will be recorded in Cumulative Other Comprehensive Income. The translation gains or losses were not material for the six and three months ended June 30, 2008 and 2007.

INTANGIBLES

Effective January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 specifies the financial accounting and reporting for acquired goodwill and other intangible assets. Goodwill and intangible assets deemed to have indefinite useful lives are not amortized but are subject to, at a minimum, an annual impairment test. If the carrying value of goodwill or intangible assets exceeds its fair market value, an impairment loss would be recorded.

FAIR VALUE OF FINANCIAL INSTRUMENTS

For financial instruments including cash, investments, accounts payable, accrued expenses, notes payable and convertible debt, it was assumed that the carrying amount approximated fair value because of the short maturities of such instruments.

Page 13

NEW FINANCIAL ACCOUNTING STANDARDS

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities,” an amendment of FASB Statement No. 133 (“SFAS No. 161”). The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company does not believe that SFAS No. 161 will have a material impact on its financial statements.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS No. 162”). SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States. This Statement is effective sixty days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” The Company is currently evaluating the potential impact, if any, of the adoption of SFAS No. 162 on its financial statements.

2. INVESTMENTS

The Company invests in public and private securities of the United States and Latin American countries as well as long-term investments in oil and gas concessions. The fair market value of these investments at June 30, 2008 and December 31, 2007 is indicated below.

	June 30,		December 31,
	2008		2007
Public securities	$	—	$	322,300
Private securities		4,137,538		5,556,720
Current investments		4,137,538		5,879,020
Oil and gas concessions		—		1,130,000
	$	4,137,536	$	7,009,020

Page 14

3. PROPERTY AND EQUIPMENT

	June 30,		December 31,
	2008		2007
Equipment	$	455,035	$	455,035
Deposits on land		—		—
Leasehold improvements		7,807		7,807
		462,842		462,842
Less accumulated
depreciation		116,256		94,719
	$	346,586	$	368,123

Depreciation expense for the six and three months ended June 30, 2008, amounted to $21,537 and $10,329, respectively.

4. INTANGIBLE ASSETS

Intangible assets are intellectual property included in a patent application. The Company has elected not to pursue the patent application and has written-off $122,742 of the unamortized amounts effective as ofthe quarter ended June 30, 2008. Amortization expense was $3,575 and $1,787 for the six and three months ended June 30, 2008, respectively. Other intangible assets consisted of the following:

	June 30,		December 31,
	2008		2007
Gross Carrying Amount	$	143,000	$	143,000
Accumulated Amortization		143,000		16,683
Intellectual property costs	$	—	$	126,317

5. INVESTMENT IN JOINT VENTURES

a. In December 2003, the Company formed a joint venture to develop Section 124, low income housing in the Commonwealth of Puerto Rico. The Company became the general partner and 75% majority owner of a limited partnership, Delta Development Partners, LP that owns the 85% majority share of Delta Developers Corp., a Puerto Rico corporation, formed to manage the construction and related activities required to build approximately 270 homes under Section 124. During the year ended December 31, 2006, the activities associated with this joint venture were discontinued.

Page 15

In October 2004, the Company formed a second joint venture to develop Section 124 low income housing in Puerto Rico. The Company became the general partner and majority owner of a limited partnership, Delta Development Partners II, LP that owns the 85% majority share of Delta Developers Guayanilla Corp., a Puerto Rico corporation formed to manage the construction and related activities required to build approximately 300 homes under Section 124. During the first quarter of 2007, the activities associated with this joint venture were discontinued and the land deposit was returned to the joint venture.

In November 2006, the Company entered into a new joint venture to develop Section 124 housing in Puerto Rico. The Company became the general partner and 35% minority owner of limited partnership, Delta TA, LP formed to manage the construction and related activities to build approximately 338 residential units under the Section 124 program. As of the quarter ended September 30, 2007, the Puerto Rico housing development activities associated with this partnership were discontinued.

b. On January 14, 2004, the Company entered into a joint venture agreement with Hi tech Consulting and Construction, Inc. (“Hi Tech”) forming Delta-Envirotech, Inc. for the purpose of providing environmental technologies and services to markets in the Middle East. The joint venture company is based in Virginia and focuses on participating in foreign government sponsored pollution remediation and other projects.

In July 2004, the Company and Hi-Tech, pursuant to an agreement to purchase stock dated January 14, 2004, each sold 75 shares of the joint venture to a third party, representing a ten percent (10%) interest for $2. The Company and Hi-Tech each own forty-five percent (45%) of the joint venture.

Delta-Envirotech, Inc. meets the definition of a Variable Interest Entity as defined in Financial Accounting Standards Board Interpretation No. 46 (FIN 46),"Consolidation of Variable Interest Entities" requiring the primary beneficiaries of a variable interest entity to consolidate that entity. The primary beneficiary of a variable interest entity is the party that absorbs the majority of the expected losses of the entity or receives a majority of the entity's expected residual return, or both, as a result of ownership, contractual or other financial interest in the entity.

c. Minority interests primarily consist of outside investors ownership interest in Delta Development Partners, L.P.; Delta Development Partners II, L.P.; Delta TA, LP; Delta Developers Corp.; Delta Developers Guayanilla Corp.; Delta-Envirotech, Inc. and PT Triyudha- Envirotech.

The income and losses from operations of these entities and their respective minority interests have been reflected in the Company's statement of operations for the six and three months ended June 30, 2008. There are excess losses not absorbed by the minority interests due to limitations of their capital contributions. In future periods, the profits first attributable to the minority interests will be first absorbed against any unused losses until the losses are fully absorbed. The amount on the Company's consolidated balance sheet represents the minority interests as of June 30, 2008 and December 31, 2007.

Page 16

The following represents a schedule of minority interests as of:

	June 30,		December 31,
	2008		2007
Delta Development Partners L.P.	$	83,790	$	82,087
Delta Development Partners II, L.P.		37,718		36,808
Delta TA L.P.		105,480		106,902
Delta Developers Corp.		—		—
Delta Developers Guayanilla Corp.		—		—
Delta-Envirotech, Inc.		—		—
PT Triyudha - Envirotech		—		—
	$	226,988	$	225,797

6. NOTES PAYABLE

In April 2005, the Company issued three 8% term notes to private investors in the amount of $210,655, with the principal and interest due at maturity on October 2, 2005. Pursuant to note modification agreements, the maturity dates of these notes were extended and in June 2006 these notes became payable on written demand by the lenders. In March 2008, the Company paid $60,000 of the principal amount of the original notes and each of the three notes was amended and restated. By amendment, the noteholders waived all of the accrued and unpaid interest on the original notes and the aggregate principal amount was reduced to $150,655. The amended and restated notes bear interest of 8% and mature in November 2008. Interest expense for the six and three months ended June 30, 2008 amounted to $(33,843) and $3,013, respectively. As of June 30, 2008 and December 31, 2007, accrued interest of $4,017 and $37,860, respectively, is included in accrued expenses on the Company's consolidated balance sheet.

In May 2006, the Company borrowed $30,000 from an investor (formerly a related party) at interest of 6% per annum with the principal and interest due on May 17, 2008. In May 2008, the note was amended extending the maturity date to August 15, 2008. The Company did not repay the note on the maturity date but the noteholder has verbally agreed not to make written demand for payment. The Company is currently negotiating amended terms with the noteholder. If the Company and the noteholder can not agree upon an amendment to the note, including an extension of the maturity date, the Company may receive a notice of default. Interest expense for the six and three months ended June 30, 2008 amounted to $900 and $450, respectively. As of June 30, 2008 and December 31, 2007 accrued interest of $3,822 and $2,922, respectively, is included in accrued expenses on the Company's consolidated balance sheet.

Page 17

In August 2007, the SAHF borrowed $2,300,000 from Oxipetrol-Petroleros de Ocidente, S.A. in conjunction with its investment in oil and gas concessions. This is a non interest-bearing loan with a maturity date of July 15, 2008. During the second quarter of 2008, $580,00 of the principal amount was repaid. The principal amount of $1,720,000 is included in notes payable on the Company’s consolidate balance sheet at June 30, 2008 and December 31, 2007. The remaining principal amount of this note was repaid in July 2008.

7. CONVERTIBLE DEBT

During the year ended December 31, 2004, the Company issued convertible notes in the principal amounts of $961,400. The convertible notes had interest rates from 4% to 6% and matured at various dates between May 12, 2006 and January 16, 2007. These notes are convertible into common stock at a conversion price of $0.05 to $0.125 per share. One note, in the original principal amount of $129,160 that originally matured in May 2006 was amended during 2006 and 2007 extending the maturity date until June 2008. After partial conversion of the principal amount of this note in July 2006, and the payment of accrued interest in March 2007, the remaining principal amount and all accrued interest was converted into 1,491,886 shares of common stock in April 2008. Another note, in the principal amount of $193,740 that originally matured in May 2006 was amended during 2006 and 2007 extending the maturity date to December 1, 2007. The Company did not repay the note on the maturity date but the holder of this note has verbally agreed not to make written demand for payment. The Company is currently negotiating amended terms with the noteholder. If the Company and the noteholder can not agree upon an amendment to the note, including an extension of the maturity date, the Company may receive a notice of default. One note issued by the Company in the principal amount of $60,000, became payable upon written demand by the lender in September 2006. The balance of the convertible notes issued in 2004 was converted into 12,923,280 shares of common stock through June 30, 2008.

In connection with the issuance of the convertible notes, the Company issued 8,880,000 common stock purchase warrants at an exercise price of $0.10 per share. The warrants expired March 31, 2006.

The Company accounted for the warrants and the convertible debt with detachable warrants in accordance with Emerging Issues Task Force 00-27 and 00-19 and SFAS No. 33. The Company performed calculations allocating the proceeds of convertible debt with detachable warrants to each respective security at their fair values. The Company used the conversion value of the convertible debt and calculated fair value of the warrants using the Black-Scholes valuation model for its estimate of fair value. The Company compared the allocated proceeds of the convertible debt to the difference between its conversion value and face amount. The calculated fair value of the convertible debt of $722,855 was recorded as the value of the Beneficial Conversion Feature and accordingly credited to Additional Paid-in Capital. The value of the warrants of $235,545 was recorded as a reduction of the convertible debt. The convertible debt was recorded at zero. The convertible debt was accreted to its face value after 2004, 2005 and 2006 conversions, under the interest method per APB 21, until it either converted or matured.

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In May 2006, the Company issued a convertible note to a related party in the principal amount of $16,000, bearing interest at 6% per annum. The note was convertible into common stock at a conversion price of $0.06 per share, the fair value at the date of issuance. The note matured on November 3, 2007 and upon maturity the Company issued 266,667 shares of common stock in payment of the principal amount and 24,000 shares of common stock in payment of $1,440 of accrued interest.

During the first quarter of 2007, the Company issued a convertible note to a related party in the principal amount of $17,000, and a convertible note to an investor in the principal amount of $266,000. Both notes bear interest of 6% per annum and are convertible into common stock at a conversion price of $0.05 per share, the fair value at the date of issuance. Both notes matured in April 2008. In conjunction with the issuance of these two notes, the Company reclassified $266,000 recorded as deferred stock purchase, on its consolidated balance sheet as of December 31, 2006, to convertible notes at March 31, 2007. On October 30, 2007, the holder of the $266,000 note converted the principal amount of the note into 5,320,000 shares of common stock and waived all accrued interest. In April 2008, the Company issued 340,000 shares of common stock in payment of the principal amount of the $17,000 note and issued 20,400 shares of common stock in payment of the accrued interest of $1,020.

In April 2007, the Company issued a convertible note to a related party in the principal amount of $26,600 bearing interest of 6% per annum and convertible into common stock at the conversion price of $0.05 per share, the fair value at the date of issuance, with a maturity date of April 9, 2008. On the maturity date, the Company issued 532,000 shares of common stock in payment of the principal amount and 31,920 shares of common stock in payment of the accrued interest of $1,596.

During the second and third quarters of 2007, the Company borrowed $550,000 from an investor pursuant to the terms of a convertible promissory note with a maturity date of May 2008; interest of 10% per annum; and convertible into common stock at the conversion price of $0.05 per share, the fair value at the date of issuance. In September 2007, the investor converted the principal amount of the note into 11,000,000 shares of common stock and waived all accrued interest.

At June 30, 2008, the Company's outstanding convertible notes were convertible into 2,749,920 shares of common stock.

The following table shows the maturities by year of total face amount of the convertible debt obligations at June 30, 2008:

2008
	$	253,740
	$	253,740

For the six and three months ended June 30, 2008, the Company recorded interest expense of $5,791 and $2,199, respectively. As of June 30, 2008 and December 31, 2007, accrued interest of $38,400 and $22,931, respectively, is included in accrued expenses on the Company's consolidated balance sheet.

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8. ACCRUED EXPENSES

Accrued expenses consists of the following:

	June 30,		December 31,
	2008		2007
Professional fees	$	34,000	$	34,703
Interest expense		49,132		80,439
Payroll expense		553,126		462,195
Payroll expense-officers		158,061		117,436
Payroll tax expense		46,264		34,742
Accrued consulting fees		144,000		144,000
Other accrued expenses		362,334		352,159
	$	1,346,917	$	1,225,674

9. LOANS FROM RELATED PARTIES

In March 2008, the Company borrowed $121,000, in the aggregate, from two stockholders of the Company, with interest of 6% per annum and the principal and interest due on September 6, 2008. The Company did not repay the two loans on the maturity date but both lenders verbally agreed to extend the maturity dates and further agreed not to make written demand for payment. The balance due to the stockholders is included in Notes Payable on the Company’s consolidated balance sheet at June 30, 2008. Accrued interest of $2,420 is included in accrued expenses on the Company’s consolidated balance sheet at June 30, 2008. The Company recorded interest expense of $2,420 and $1,815 for the six and three months ended June 20, 2008, respectively.

During April and May 2008, the Company borrowed $20,000, $9,550 and $16,900, respectively, from two stockholders of the Company. Each note bears interest of 6% per annum with the principal and accrued interest due on October 15, October 25, and November 14, 2008, the respective maturity dates. On June 27, 2008 the Company borrowed $19,500 from a stockholder and issued a 6% promissory note with principal and accrued interest due upon written demand by the lender. Accrued interest of $377 is included in accrued expenses on the Company’s consolidated balance sheet at June 30, 2008. The Company recorded interest expense of $377 and $377 for the six and three months ended June 20, 2008, respectively.

10. OTHER RELATED PARTY TRANSACTION

The Company's subsidiary, Delta-Envirotech, Inc. ("Envirotech") pays monthly office rent to David Razmara, the president of Envirotech and a stockholder of the Company, in the current amount of $2,000.

The rent expense for the six and three months ended June 30, 2008 amounted to $12,000 and $6,000, respectively.

11. STOCKHOLDERS' EQUITY

The Company issues shares of common stock for services and repayment of debt and interest valued at fair market value at time of issue.

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a. For the six months ended June 30, 2008, the Company issued 2,300,571 shares of common stock upon the conversion of convertible notes in the principal amount of $143,600, valued at $0.05 - $0.07 per share; and 115,634 shares of common stock for payment of accrued interest in the amount of $7,048, valued at $0.05 - $0.07 per share.

b. For the six months ended June 30, 2008, the Company issued 10,550,000 shares of common stock for services valued at $238,500, valued at $0.02 - $0.07 per share.

12. DISCONTINUED OPERATIONS

As of June 30, 2008, the Company discontinued all its operations in Indonesia. The activities of PT Triyhuda-Envirotech have been classified as discontinued operations. The assets and liabilities, results of operations, and cash flows of these discontinued operations have been included with the operations of the Company in its consolidated financial statements for the six and three months ended June 30, 2008 due to the immaterial nature of the transactions.

13. BUSINESS SEGMENT INFORMATION

The Company’s reporting business segments are geographic and include North America (United States), South America, the Middle East and the Far East (Indonesia). The Company formerly operated in a fifth reporting segment, Puerto Rico. The primary criteria by which financial performance is evaluated and resources allocated are revenue and operating income.

The following is a summary of key financial data:

	Six Months Ended						Three months Ended
	June 30,						June 30,
	2008			2007			2008		2007
Total Revenue:
North America	$	—		$	—		$	—	$	—
South America		(2,053,011	)		(967,045	)		7,942		(483,522	)
Indonesia		—			—			—		—
Middle East		—			—			—		—
Puerto Rico		—			—			—		—
	$	(2,053,011	)	$	(967,045	)	$	7,942	$	(483,522	)

Loss from Operations:
North America	$	(1,065,037	)	$	—		$	(510,666	)	$	—
South America		(2,053,033	)		(963,821	)		7,942			(481,910	)
Indonesia		28,250			—			37,238			—
Middle East		(69,881	)		—			(31,875	)		—
Puerto Rico		(14,206	)		—			(13,893	)		—
	$	(3,173,907	)	$	(963,821	)	$	(511,524	)	$	(481,910	)

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14. INCOME TAXES

The Company adopted the provisions of Financial Accounting Standards Board Interpretation No. 48 “Accounting for Uncertainties in Income Taxes,” (“FIN 48”) on January 1, 2007. As a result of the implementation of FIN 48, the Company recognized no adjustment in the net liability for unrecognized income tax benefits.

15. SHARE BASED COMPENSATION

On January 1, 2006, the Company adopted SFAS No. 123(R) "Share-Based Payment," requiring the recognition of compensation expense in the Consolidated Statements of Operations related to the fair value of its employee share-based options and awards. SFAS No. 123(R) revises SFAS No. 123 "Accounting for Stock-Based Compensation" and supercedes APB Opinion No. 25 "Accounting for Stock Issued to Employees." SFAS No. 123(R) is supplemented by SEC Staff Accounting Bulletin ("SAB") No.107 "Share-Based Payment." SAB No.107 expresses the SEC staff's views regarding the interaction between SFAS No. 123(R) and certain SEC rules and regulations including the valuation of share-based payment arrangements.

The Company recognizes the cost of all employee stock options on a straight-line attribution basis over their respective contractual terms, net of estimated forfeitures. The Company has selected the modified prospective method of transition; accordingly, prior periods have not been restated. Prior to adopting SFAS No. 123(R), the Company applied APB Opinion No. 25, and related interpretation in accounting for its stock-based compensation plans. All employee stock options were granted at or above the grant date market price. Accordingly, no compensation cost was recognized for fixed stock option grants.

At June 30, 2008, the Company had one share-based compensation plan, which is described below. During the six and three months ended June 30, 2008, the adoption of SFAS No.123(R) resulted in an aggregate pretax compensation expense recognized in net loss for stock based compensation of $393,490 and $196,745, respectively. For the six and three months ended June 30, 2008, the aggregate pretax compensation expense caused basic and diluted earnings per common share to decrease by $-0- and $-0- per share, respectively.

The Company also issues shares of its common stock to non-employees as stock-based compensation. The Company accounts for the services using the fair market value of the services rendered. For the six months ended June 30, 2008, the Company issued 10,550,000 shares, and recorded compensation expense of $238,500 in conjunction with the issuance of these shares.

Stock Option Plan

In December 2001, the Company's stockholders approved the 2001 Employee Stock Option Plan (the "2001 Plan"), pursuant to which 2,000,000 shares of common stock were reserved for issuance. In August 2004, the Company's stockholders approved the 2004 Stock Option Plan (the "2004 Plan"), pursuant to which 10,000,000 shares of common stock were reserved for issuance. As of June 30, 2008, there were 3,002,000 shares of common stock available for issuance under the 2004 Plan.

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The Company was also authorized to issue shares of stock to its employees from its 2001 Plan. The Company expensed the issuance of stock awards in accordance with SFAS No. 123. Shares issued from the 2001 Plan were expensed at the time of issuance, as the stock issued had no restrictions to the employees.

The Company did not issue any stock options to its employees during the six months ended June 30, 2008.

A summary of the option activity under the 2004 Plan as of December 31, 2007 and changes during the six months ended June 30, 2008, is presented below.

Options	Shares			Weighted-Average Exercise Share Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2008		7,978,000		$	0.11
Options granted		-		$	-
Options exercised		-		$	-
Options cancelled/expired		(980,000	)	$	0.11
Outstanding at June 30, 2008		6,998,000		$	0.11		2.9	$	(279,920	)
Exercisable at June 30, 2008		6,998,000		$	0.11		2.9		—

Stock compensation expense applicable to stock options for the six and three months ended June 30, 2008 was approximately $393,490 and $196,745, respectively. The aggregate intrinsic value of options outstanding as of June 30, 2008 and December 31, 2007 was $(279,920) and $(398,900), respectively.

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At June 30, 2008, there was $1,015,780 of total unrecognized compensation cost related to share-based compensation arrangements granted under the 2004 Plan. The cost is expected to be recognized over a weighted average period of 2.9 years.

16. COMMITMENTS AND CONTINGENCIES

Consulting Agreements

In August 2005, Delta Technologies, Inc. entered into a consulting agreement with Richard F. Straub, Jr. ("Straub") for a period of three years, to provide ongoing technical assistance and support in the production of Technologies' insulating concrete wall forming products.

For the six and three moths ended June 30, 2008, consulting fees of $26,400 and $13,200, respectively, have been expensed and; $91,667 and $66,667, respectively, of the stock value associated with the issuance of shares to Straub is included in accrued expenses on the Company's consolidated balance sheets as of June 30, 2008 and December 31, 2007.

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ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and notes thereto and 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

We were incorporated in the State of Delaware on November 17, 1999. Since 2003, our principal business activities were focused on providing environmental and construction technologies and services in the Far East, the Middle East, and the United States.

On March 4, 2008, we entered into a Membership Interest Purchase Agreement (the “Agreement”) with Egani, Inc., an Arizona corporation (“Egani”). Pursuant to the Agreement, we acquired from Egani 100% of the issued and outstanding membership interests held by Egani in Altony S.A., an Uruguay Sociedad Anonima, (“Altony”) which owns 100% of the issued and outstanding membership interests in South American Hedge Fund LLC, a Delaware limited liability company (“South American Hedge Fund”). At the closing of the Agreement, we issued 130,000,000 shares of our Common stock to Egani for the purchase of all of its interest in Altony which constituted, following such issuance, a majority of the outstanding shares of our common stock. Immediately following the closing of the Agreement, Altony became a wholly owned subsidiary of the Company. For accounting purposes, the transaction was treated as a recapitalization of the Company with Altony as the acquirer.

The principal business of Altony is the ownership and management of South American Hedge Fund, a hedge fund that maintains its business office in Uruguay and invests in public and private securities of the United States and Latin American countries. South American Hedge Fund also plans to proceed with investments in oil and gas concessions in Argentina and intends to focus its investments in the energy sector, including development of energy producing investments and alternative energy production in Latin America and the United States.

RESULTS OF OPERATIONS

During the six months ended June 30, 2008, we incurred a net loss of $3,130,832 primarily attributable to investment results and operating expenses related to the South American Hedge Fund. Our ability to continue as a going concern is dependent upon our ability to obtain funds to meet our obligations on a timely basis, obtain additional financing or refinancing as may be required, and ultimately to attain profitability. There are no assurances that we will be able to obtain additional financing or that such financing will be on terms favorable to us. The inability to obtain additional financing when needed would have a material adverse effect on our operating results.

THREE MONTHS ENDED JUNE 30, 2008 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2007.

During the three months ended June 30, 2008, we incurred a net loss of approximately $508,000 compared to a net loss of approximately $482,000 for the three months ended June 30, 2007.

The increase of $24,344 in our operating loss for the three months ended June 30, 2008 over the comparable period of the prior year was primarily due to a net increase in revenue of approximately $491,000, offset by an increase in general and administrative expenses of approximately $396,000 and a loss on intellectual property of approximately $123,000. .

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SIX MONTHS ENDED JUNE 30, 2008 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2007.

During the six months ended June 30, 2008, we incurred a net loss of approximately $3,131,000 compared to a net loss of approximately $964,000 for the six months ended June 30, 2007.

The increase in our operating loss for the six months ended June 30, 2008 over the comparable period of the prior year was due to an decrease of approximately $1,860,000 in invetment results combined with an increase of approximately $997,000 in general and administrative expenses.

PLAN OF OPERATION

Energy Sector

The Company’s newly acquired South American Hedge Fund subsidiary has oil and gas investments in Argentina and will continue to focus on the energy sector, including the development and supply of energy and alternative energy sources in Latin America and the United States.

In August 2007, South American Hedge Fund signed a purchase option for three interests in oil and gas concessions in Argentina. We are in the process of obtaining the necessary government and environmental operating permits for our operation of these concessions. Our primary focus will be, upon receipt of the governmental approvals relative to our investment in these concessions, to develop two wells per month.

To supplement our growth, we may also consider mergers and acquisitions, although we have no acquisitions contemplated or under discussion at this time.

In addition, we are currently evaluating newly developed alternative energy technologies for possible investment and development.

Environmental and Construction Technologies and Services

Following the acquisition of Altony and South America Hedge Fund, we have continued to pursue environmental remediation and other projects in the Middle East. These activities are conducted by our joint venture subsidiary, Delta-Envirotech, Inc. (“Envirotech”). We have operating control of Envirotech and hold a 45% percent ownership interest. Envirotech has  entered into strategic alliance agreements with several United States-based entities with technologies and products in the environmental field to support its activities.

In March 2007, we reached a working agreement to provide equipment to manufacture insulating concrete form (ICF) products for the building industry in Saudi Arabia. Because of lengthy and unexpected delays by the potential purchaser, we are currently evaluating whether or not it is in the Company’s best interests to continue with this agreement or seek other purchasers of the equipment. Envirotech expanded its product line by securing the master distribution rights for the Middle East for a gas-imaging product used in oilfield and refining operations that has been approved for testing by ARAMCO, the Saudi government oil company. ARAMCO has scheduled field trials to test this equipment that we expect will be completed by the end of September 2008.

We have withdrawn from the Indonesia market. Our decision was based on the additional expenses we would incur to meet the new requirement of a second contract with Pertamina (the government-owned oil company), that our processing equipment be moved off the refinery property. We are currently evaluating whether to redeploy the processing equipment or sell it to a third party.

Our construction technology activities were conducted by our wholly owned subsidiary, Delta Technologies, Inc. (“Technologies”). In August 2005, Technologies acquired certain intellectual property and filed a patent application for a new insulating concrete wall forming (ICF) system, call Delta Wall. We have elected not to incur the additional expense required to pursue the Delta Wall patent application and are developing a strategy to exit this business segment.

LIQUIDITY

At June 30, 2008 we had a working capital surplus of $292,827, compared with a surplus of $1,361,976 at December 31, 2007. This decrease at June 30, 2008 is a result of a decrease in current investments of approximately $1,741,000.

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ASSETS

At June 30, 2008, we had total assets of $4,489,994, compared to total assets of $7,563,657 at December 31, 2007. The decrease in total assets was primarily due to the decrease in total investments of approximately $2,870,000 and a decrease in intangible assets of approximately $126,000.

CRITICAL ACCOUNTING ISSUES

The Company's discussion and analysis of its financial condition and results of operations are based upon the Company's financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. 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 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.

Other Matters

Accounting Pronouncements

In June 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities,” an amendment of FASB Statement No. 133 (“SFAS No. 161”). The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company does not believe that SFAS No. 161 will have a material impact on its financial statements.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS No. 162”). SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States. This Statement is effective sixty days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” The Company is currently evaluating the potential impact, if any, of the adoption of SFAS No. 162 on its financial statements.

FOREIGN CURRENCY TRANSLATION

The functional currency for some 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. Translation adjustments in future periods will be recorded in Other Comprehensive Income. The translation gains or losses were not material for the periods ended June 30, 2008 and 2007.

GOODWILL AND OTHER INTANGIBLES

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 specifies the financial accounting and reporting for acquired goodwill and other intangible assets. Goodwill and intangible assets

that have indefinite useful lives are not amortized but rather they are tested at least annually for impairment unless certain impairment indications are identified.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are primarily exposed to foreign currency risk, interest rate risk and commodity price risk.

Foreign Currency Risk – Our financial results could be affected by factors such as changes in foreign currency exchange rates or, weak economic conditions in foreign markets. Because our revenue is reported in U.S. dollars, fluctuating exchange rates of the local currency, when converted into U.S. dollars, may have an adverse impact on our revenue and income. We have not hedged foreign currency exposures related to transactions denominated in currencies other than U.S. dollars. We do not engage in financial transactions for trading or speculative purposes.

Interest Rate Risk – Interest rate risk refers to fluctuations in the value of a security resulting from changes in the general level of interest rates. Investments that are classified as cash and cash equivalents have original maturities of three months or less. Interest income is sensitive to changes in the general level of U.S. interest rates. Although we have significant short-term investments, due to the short-term nature of our investments, we believe that there is not a material risk exposure.

Commodity Price Risk – With operations in the energy sector, our results will be dependent on the pricing of energy commodities.

ITEM 4T. CONTROLS AND PROCEEDURES

a. Disclosure controls and procedures.

As of the end of the Company's most recently completed fiscal quarter (the fourth fiscal quarter in the case of an annual report) covered by this report, the Company carried out an evaluation, with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-15. Based upon that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms.

b. Changes in internal controls over financial reporting.

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.

PART II–OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS.

On September 16, 2008, the Company was notified of a complaint filed with the Pennsylvania Department of Labor & Industry by its former President and CEO alleging non-payment of wages in the amount of $53,271. The Company also received notice of a similar complaint filed by a former employee alleging non-payment of wages in the amount of $17,782.

ITEM 1A. RISK FACTORS.

Not applicable.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

The following table sets forth the sales of unregistered securities since the Company’s last report filed under this item.

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Date	Title and Amount	Purchaser	Principal Underwriter	Total Offering Price/ Underwriting Discounts
April 9, 2008	924,320 shares of common stock, issued upon conversion of principal and accrued interest of a promissory note in the principal amount of $43,600.	Private investor.	NA	$46,216/NA
April 16, 2008	550,000 shares of common stock.	Consultant.	NA	$38,500/NA
April 23, 2008	1,491,885 shares of common stock, issued upon conversion of principal and accrued interest of a promissory note in the principal amount of $100,000.	Private investor.	NA	$104,432/NA

ITEM 3.DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not applicable.

ITEM 5.OTHER INFORMATION.

Not applicable.

ITEM 6. EXHIBITS.

4.5g	Amendment dated as of April 21, 2008 to 4% convertible promissory note in the principal amount of $100,000.
10.41	6% promissory note issued June 27, 2008 by Delta Mutual, Inc. to Security Systems International, Inc. in the principal amount of $19,500.
31.1	Certification of Principal Executive Officer Pursuant to Section 302 of The Sarbanes Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of The Sarbanes Oxley Act of 2002.
32.1	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Oxley Act of 2002.
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Oxley Act of 2002.

Page 29

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 MUTUAL, INC.
BY:	/s/ Malcolm W. Sherman
	Malcolm W. Sherman
	Executive Vice President (Principal Executive Officer)

Dated: September 17, 2008

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EXHIBIT INDEX

4.5g	Amendment dated as of April 21, 2008 to 4% convertible promissory note in the principal amount of $100,000, filed herewith.
10.41	6% promissory note issued June 27, 2008 by Delta Mutual, Inc. to Security Systems International, Inc. in the principal amount of $19,500, filed herewith.
31.1	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
32.1	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.

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