CannAwake 10Q 2010 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.

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, 2010

¨ 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		(I.R.S. Employer
incorporation or organization)		Identification No.)

14362 N. Frank Lloyd Wright Blvd., Suite 1103, Scottsdale, AZ		85260
(Address of Principal Executive Offices)		(Zip Code)

(480) 477-5808

(Registrant’s Telephone Number, Including Area Code)

(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 ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ¨ No ¨

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

Large accelerated filer ¨		Accelerated filer ¨

Non-accelerated filer ¨		Smaller reporting company 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).

¨ Yes x No

The number of shares outstanding the issuer's common stock, par value $.0001 per share, was 27,699,580 as of August 13, 2010.

DELTA MUTUAL, INC.

INDEX

		Page

Part I. Financial Information		3

Item 1. Financial Statements.		3

Consolidated Balance Sheets as of June 30, 2010 and as of December 31, 2009 (Restated) (unaudited)		4

Consolidated Statements of Operations for the Six and Three Months Ended June 30, 2010 and 2009 (unaudited)		5

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2010 and 2009 (unaudited)		6-7

Notes to Unaudited Consolidated Financial Statements		8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.		17

Item 3. Quantitative and Qualitative Disclosures About Market Risk.		20

Item 4T.Controls and Procedures.		21

Part II. Other Information		21

Item 1. Legal Proceedings.		21

Item 6. Exhibits.		22

Signatures		22

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, 2009.

The results of operations for the six and three months ended June 30, 2010 and 2009 are not necessarily indicative of the results for the entire fiscal year or for any other period.

DELTA MUTUAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	June 30,			December 31,
	2010			2009
				(Restated)
ASSETS

Current Assets:
Cash	$	296,549		$	102,008
Advances and other receivables		7,926			137,776
Total current assets		304,475			239,784

Property and equipment:
Oil and gas properties, full cost method of accounting:
Proved undeveloped		688,475			-
Unproved		876,806			-
Lithium production properties		30,000			-
Furniture and equipment		-			14,084
		1,595,281			14,084
Less accumulated depreciation, depletion and amortization		-			(14,084	)
		1,595,281			-
Investments in non-consolidating entities		225,000			1,470,714
Other assets		6,368			39,508

TOTAL ASSETS	$	2,131,124		$	1,750,005

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY)

Current Liabilities:
Accounts payable	$	124,198		$	134,192
Accrued expenses		297,692			267,029
Notes payable		805,605			805,605
Total Current Liabilities		1,227,495			1,206,826

Stockholders’ Equity:
Preferred stock $0.0001 par value-authorized 10,000,000 shares; no shares issued and outstanding at June 30, 2010 and December 31, 2009, respectively		-			-
Common stock $0.0001 par value - authorized 250,000,000 shares; 27,436,663 and 24,211,275 shares issued and outstanding at June 30, 2010 and December 31, 2009, respectively		2,743			2,421
Additional paid-in-capital		4,981,440			4,137,095
Accumulated Deficit		(4,080,554	)		(3,596,337	)
Total Stockholders' Equity		903,629			543,179	)

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY)	$	2,131,124		$	1,750,005

See Notes to Unaudited Consolidated Financial Statements

DELTA MUTUAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Six Months Ended June 30,						Three Months Ended June 30,
	2010			2009			2010			2009

Revenue:	$	-		$	-		$	-		$	-

Costs and expenses:
General and administrative expenses		456,240			734,943			180,846			444,803

Loss from continuing operations		(456,240	)		(734,943	)		(180,846	)		(444,803	)

Foreign exchange gain (loss)		(4,813	)					(4,813	)
Interest expense, net		(23,163	)		(20,742			(12,296	)		(10,771	)

Loss from continuing operations before provision for income taxes		(484,217	)		(755,685	)		(197,956	)		(455,574	)

Provision for income taxes		-			-			-			-

Net loss from continuing operations		(484,217	)		(755,685	)		(197,956	)		(455,574	)

Discontinued operations
Gain (loss) of disposal of Far East operations and South American Hedge Fund operations, and United States construction technology activities		-			(6,452	)		-			61

Net loss	$	(484,217	)	$	(762,137	)	$	(197,956	)	$	(455,513	)

Loss per common share - basic and diluted:

Loss from continuing operations	$	(0.02	)	$	(0.03	)	$	(0.01	)	$	(0.02	)

Discontinued operations	$	-		$	(0.03	)	$	-	)	$	(0.02	)

Weighted average common shares - basic and diluted		26,081,117			22,576,986			27,233,293			22,659,106

Amounts attributable to common shareholders:
Net loss	$	(0.02	)	$	(762,137	)	$	(0.01	)	$	(455,513	)

See Notes to Unaudited Consolidated Financial Statements

DELTA MUTUAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six Months Ended June 30,
	2010			2009
Cash flows from operating activities:

Net loss	$	(484,217	)	$	(762,137	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, depletion and amortization		-			339
Issuance of common stock for services		75,000			120,000	)
Compensatory element of option issuance		-			393,490
Changes in operating assets and liabilities		183,159			(72,184	)

Net cash used in operating activities		(225,558	)		(320,492	)

Cash flows from investing activities:
Oil and gas properties exploration and development costs		(319,568	)		-
Investment in lithium production properties		(30,000	)
Net cash used in investing activities		(349,568	)		-

Cash flows from financing activities:
Proceeds from loans		-			311,361
Proceeds from sale of common stock		769,667			-
Contribution from stockholder		-			(1,000	)

Net cash provided by financing activities		769,667			310,361

Net increase (decrease) in cash		194,541			(10,131	)
Cash - Beginning of period		102,008			13,957
Cash - End of period	$	296,549		$	3,826

See Notes to Unaudited Consolidated Financial Statements

DELTA MUTUAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(Continued)

	Six Months Ended June 30,
	2010		2009
Supplementary information:
Changes in operating assets and liabilities consists of:
(Increase) decrease in other prepaid expenses	$	-	$	(5,718
(Increase) decrease in advances and other receivables		129,850
(Increase) decrease in other assets		33,140
Increase (decrease) in accounts payable and accrued expenses		20,669		(66,466	)
	$	183,159	$	(72,184	)

Supplementary disclosure of cash flow information:
Cash paid for interest	$	-	$	-
Cash paid for income taxes	$	-	$	-

Supplementary disclosure of non-cash investing and financing activities:
Issuance of common stock for services	$	75,000	$	120,000

See Notes to Unaudited Consolidated Financial Statements

DELTA MUTUAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months Ended June 30, 2010 and 2009

1. BASIS OF PRESENTATION

The accounting policies followed by Delta Mutual, Inc. and its subsidiaries (“Delta” or the “Company”) are set forth in the notes to the Company’s audited consolidated financial statements in the Annual Report on Form 10-K filed for the year ended December 31, 2009. Such policies have been continued without change and all material items included in those notes have not changed except as a result of normal transactions in the interim, or as disclosed within this report. Although management believes the unaudited interim related disclosures in these consolidated financial statements are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in annual audited consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The condensed consolidated financial statements included herein should be read in conjunction with the consolidated audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

In the opinion of management, all adjustments, including normal recurring adjustments necessary to present fairly the financial position of the Company with respect to the interim financial statements and the results of operations for the interim period ended June 30, 2010, have been included.

The results of operations and the cash flows for the periods ended June 30, 2010 are not necessarily indicative of the results to be expected for the full year.

PRINCIPLES OF CONSOLIDATION

The Company's financial statements include the accounts of all majority-owned subsidiaries where its ownership is more than 50 percent of the common stock. All significant intercompany amounts have been eliminated.

As of June 30, 2010, the Company also held a 45% ownership interest in Delta–Envirotech, Inc., which is engaged in certain business opportunities in the Middle East related to environmental remediation and other related projects. These activities are managed and carried out by the majority stockholders of Delta-Envirotech, Inc., (“Envirotech”), Hi-Tech Consulting and Construction, Inc. and an unrelated individual. 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. Envirotech was consolidated as the variable interest entity (VIE) up until September 30, 2009. As of December 31, 2009 management determined that Delta-Envirotech, Inc. does not meet the criteria to be considered a VIE for the year ending December 31, 2009 as the Company does not exercise significant influence over the operations or financial results of Envirotech. Accordingly, the results of operations and of financial data have been deconsolidated from the consolidated financial statements of the Company effective December 31, 2009.

GOING CONCERN

The consolidated financial statements for the period ended June 30, 2010 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. The Company has a past history of recurring losses from operations and has an accumulated deficit of $4,080,554 and working capital deficiency of $923,021 as of June 30, 2010. Additionally, the Company will require additional funding to execute its future strategic business plan. Successful business operations and its transition to attaining profitability is dependent upon obtaining additional financing and achieving a level of revenue adequate to support its cost structure.

The Company's business is subject to the risks of its oil and gas investments in South America. 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 the oil and gas concession in Argentina. There is no assurance that the Company will ultimately achieve a profitable level of operations.

DELTA MUTUAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

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 year:

Proved oil and gas reserves;

Expected future cash flow from proved oil and gas properties;

Future exploration and development costs; and

Future dismantlement and restoration costs.

REVENUE RECOGNITION

Revenues are recognized in accordance with SEC staff accounting bulletin, Topic 13, Revenue Recognition, which specifies that only when persuasive evidence for an arrangement exists; the fee is fixed or determinable; and collection is reasonably assured can revenue be recognized.

OIL AND GAS PROPERTIES

The Company follows the full cost method of accounting for oil and gas properties. Under this method, all direct costs and certain indirect costs associated with acquisition of properties and successful as well as unsuccessful exploration and development activities are capitalized. Depreciation, depletion, and amortization of capitalized oil and gas properties and estimated future development costs, excluding unproved properties, are based on the unit-of-production method based on proved reserves. Net capitalized costs of oil and gas properties, less related deferred taxes, are limited to the lower of unamortized cost or the cost ceiling, defined as the sum of the present value of estimated future net revenues from proved reserves based on un-escalated prices discounted at 10 percent, plus the cost of properties not being amortized, if any, plus the lower of cost or estimated fair value of unproved properties included in the costs being amortized, if any, less related income taxes. Costs in excess of the present value of estimated future net revenues as discussed above are charged to proved property impairment expense. No gain or loss is recognized upon sale or disposition of oil and gas properties, except in unusual circumstances. We apply the full cost ceiling test on a quarterly basis on the date of the latest balance sheet presented.

As of June 30, 2010, the Company has not recorded any depletion and impairment, if any, of its oil and gas properties, as well as, as accrual of assets retirement obligations pending a complete report on reserve studies and analysis of proved and unproved oil and gas reserves.

DISCONTINUED OPERATIONS

During the quarter ended June 30, 2008, the Company discontinued all its operations in the Far East (Indonesia). During the quarter ended December 31, 2008, the Company discontinued all of its construction technology activities that were carried out by its wholly owned subsidiary, Delta Technologies, Inc. and the trading of securities by its South American Hedge Fund subsidiary. These discontinued operations resulted in a loss of $0 and $(6,452) for the six months ending June 30, 2010 and 2009, respectively and $0 and $61 for the three months ending June 30, 2010 and 2009, respectively.

Summarized statement of loss for discontinued operations is as follows:

	Six Months Ended June 30,						Three Months Ended June 30,
	2010			2009			2010		2009

Net sales	$	—		$	—		$	—	$	—

Impairment		—			—			—		—

Provision for income taxes		—			—			—		—

Loss from operations, net of taxes		—			(6,452	)		—		61

Gain on disposition of minority interest		—			—			—		—

Provision for income taxes		—			—			—		—

Loss from discontinued operations, net of taxes	$	(6,452	)	$	(6,452	)	$	61	$	61

DELTA MUTUAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

RECENT ACCOUNTING PRONOUNCEMENTS

In January 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-06 which is intended to improve disclosures about fair value measurements. The guidance requires entities to disclose significant transfers in and out of fair value hierarchy levels, the reasons for the transfers and to present information about purchases, sales, issuances and settlements separately in the reconciliation of fair value measurements using significant unobservable inputs (Level 3). Additionally, the guidance clarifies that a reporting entity should provide fair value measurements for each class of assets and liabilities and disclose the inputs and valuation techniques used for fair value measurements using significant other observable inputs (Level 2) and significant unobservable inputs (Level 3). The Company has applied the new disclosure requirements as of January 1, 2010, except for the disclosures about purchases, sales, issuances and settlements in the Level 3 reconciliation, which will be effective for interim and annual periods beginning after December 15, 2010. The adoption of this guidance has not had and is not expected to have a material impact on the Company’s consolidated financial statements.

In February 2010, the FASB issued ASU 2010-09, which requires that an SEC filer, as defined, evaluate subsequent events through the date that the financial statements are issued. The update also removed the requirement for an SEC filer to disclose the date through which subsequent events have been evaluated in originally issued and revised financial statements. The adoption of this guidance on January 1, 2010 did not have a material effect on the Company’s consolidated financial statements.

In April 2010, the Financial Accounting Standards Board’s (“FASB”) Emerging Issues Task Force (“EITF”) issued an amendment to previously issued guidance regarding the classification of a share-based payment award as either equity or a liability. The amendments clarify that a share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades should not be considered to contain a condition that is not a market, performance or service condition. Therefore, such an award should not be classified as a liability if it otherwise qualifies as equity. This guidance is effective for fiscal years and interim periods within those fiscal years beginning on or after December 15, 2010. Earlier application is permitted. This guidance should be applied by recording a cumulative-effect adjustment to the opening balance of retained earnings and the cumulative-effect adjustment should be calculated for all awards outstanding as of the beginning of the fiscal year in which it is initially applied, as if the guidance had been applied consistently since the inception of the award. The cumulative-effect adjustment should be presented separately. The Company is currently evaluating the impact of this guidance on its operating results, financial position and cash flows.

In January 2009, the SEC issued revisions to the natural gas and oil reporting disclosures, “Modernization of Oil and Gas Reporting, Final Rule” (the “Final Rule”). In addition to changing the definition and disclosure requirements for natural gas and oil reserves, the Final Rule changed the requirements for determining quantities of natural gas and oil reserves. The Final Rule also changed certain accounting requirements under the full cost method of accounting for natural gas and oil activities. The amendments are designed to modernize the requirements for the determination of natural gas and oil reserves, aligning them with current practices and updating them for changes in technology. The Final Rule was effective for annual reports on Form10-K for fiscal years ending on or after December 31, 2009. In addition, in January 2010, the FASB issued an accounting standards update relating to standards for extractive oil and gas activities. The accounting standards update amends existing standards to align the proved reserves calculation and disclosure requirements under US GAAP with the requirements in the SEC rules. The new standards were to be applied prospectively as a change in estimate. In April 2010, the FASB issued a further accounting standards update regarding extractive oil and gas industries to incorporate in accounting standards the revisions to Rule 4-10 of the SEC’s Regulation S-X. The amendment primarily consists of the addition and deletion of definitions of terms related to fossil fuel exploration and production arising from technology changes over the past several decades. The accounting guidance in Rule 4-10 did not change. The Company is in the process of determining the impact of this buidance on its consolidated financial position and results of operations.

Other ASU’s that are effective after June 30, 2010, are not expected to have a significant effect on the Company’s consolidated financial position or results of operations.

DELTA MUTUAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

2. VARIABLE INTEREST ENTITY

FASB ASC 810 “Consolidation” required the consolidation of a variable interest entity (VIE) if the Company is deemed to be the primary beneficiary of the VIE. FASB ASC 810 requires an entity to assess its equity investments and certain other contractual interests to determine whether they are VIEs. As defined in FASB ASC 810, variable interests are contractual, ownership or other interests in an entity that change with changes in entity’s net asset value. Variable interests in an entity may arise from financial instruments, service contracts, guarantees, leases or other arrangements with the VIE. An entity that will absorb a majority of the VIE’s expected losses or expected residual returns, as defined in FASB ASC 810, is considered the primary beneficiary of the VIE. The primary beneficiary should include the VIE’s assets, liabilities and results of operations in its consolidated financial statements until a reconsideration event, as defined in FASB ASC 810, occurs to require deconsolidation of the VIE. At the deconsolidation date, the assets and liabilities of the VIE were removed from the consolidated financial statements and any assets and liabilities of the Company that were eliminated in consolidation were restored. The gain recognized from deconsolidating VIE was recorded in the consolidated statements of operations as gain on deconsolidation of the VIE.

As of December 31, 2009, management determined that Delta-Envirotech, Inc. was no longer considered a variable interest entity (VIE) for the year ending December 31, 2009 and, accordingly, Envirotech has been deconsolidated from the accompanying consolidated financial statements effective December 31, 2009. As of December 31, 2009, the majority stockholders of Envirotech are exercising significant influence over operating and financing policies of Envirotech, as well as, managing its business activities and therefore it is not considered a VIE of the Company. As a result of this deconsolidation, the Company removed the assets and liabilities of the VIE from the consolidated financial statements and any assets and liabilities of Envirotech that were eliminated in consolidation were restored at fair value.

Prior to December 31, 2009, the Company was deemed to be the primary beneficiary of the Envirotech because of the relatively significant financial support provided to Envirotech in the form of an investment of $375,000 and notes receivable from Envirotech of $810,867. Due to the significant operating losses of Envirotech, and the resulting deconsolidation as of December 31, 2009, the Company’s entire investment and the note receivable which aggregated approximately $1,186,000 as of December 31, 2009 were reduced to zero in order to account for the restored assets at fair value. Furthermore, since the Company is not liable for Envirotech’s liabilities or operating losses per the agreed terms with Envirotech, the Company’s historical portion of Envirotech’s operating losses were reversed and recorded as a net gain on deconsolidation of approximately $882,000 that was recorded as a separate line item in the accompanying consolidated financial statements in the fourth quarter of 2009.

3. PROPERTY AND EQUIPMENT

Oil and Gas Properties

Jollin and Tonono Oil and Gas Concessions

The Company, through SAHF, has a 10% interest concession in the carryover mode ("no cost obligations to SAHF") in the Jollin and Tonono oil and gas concessions located in Northern Argentina.

During the year ended December 31, 2008, the third party owners of the Jollin and Tonono concessions formed an Argentine-registered joint venture and paid, in the aggregate, approximately $848,000 of development costs, all of which were capitalized. Since the Company was not registered as a foreign company in Argentina, it could not become a member of the joint venture in 2008. The third party owners of these concessions have agreed that, upon admission of the Company as a member of the joint venture, the Company will retain its ownership. However, in exchange for this agreement, the Company’s weighted average pro-rata portion of the 2008 aggregate development cost, of approximately $223,024, all of which was included in accounts payable in the Company’s consolidated balance sheet at December 31, 2008, was to be repaid to the other members from its pro-rata share of the future earnings of the concession. On September 25, 2009, the Company sold 13.5% of its ownership interest in the Jollin and Tonono oil and gas concession to Maxi-Petroleros De Occidente S.A. ("Maxipetrol") for $206,832. Maxipetrol, prior to the sale, owned 48% of the Jollin and Tonono oil and gas concession. In connection with the sale, Maxipetrol assumed full responsibility to develop the oil and gas concession until production is achieved in the blocks. This obligation includes all future and former costs incurred for the Jollin and Tonono oil and gas concession, until such time as the well is producing. All prior unpaid costs accrued by the Company, were assumed by Maxipetrol. The Company recorded a $157,939 loss on the disposition of its 13.5% investment to Maxipetrol and the loss is included in its statement of operations for the year ended December 31, 2009. In addition, as of December 31, 2009, the Company recorded a reversal of $223,024 to adjust balances in investments and accounts payable as a result of the forgiveness of the aggregate development cost payable. During the three months ending June 30, 2010 the Company paid $139,762 in additional canons to maintain its ownership interest in the concession.

The Company received its foreign registration in Argentina and was admitted as a member of the joint venture on July 2, 2010. Accordingly, the Company has reclassified its concession costs in the amount of $688,475 associated with this property to proved oil and gas properties as of June 30, 2010 based upon the reserve report received from the third party working interest owner of the joint venture. The Company will begin receiving revenue from the Jollin and Tonono blocks when the first well is approved for commercial production. The Company has not recorded impairment and depletion charges for the six months ended June 30, 2010, as the Company did not arrange a complete report on reserve studies and analysis from its joint venture operating member of the concessions to determine whether oil and gas properties were considered unproved and depleted.

DELTA MUTUAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

Salta Province Exploration Rights

During 2008, the Company purchased 40% of the oil and gas exploration rights to five geographically defined areas in the Salta Province of Northern Argentina from Ketsal, SA (“Ketstal”) for $697,000 cash. In 2009, SAHF assigned 50% of its rights to a third party. As of June 30, 2010, SAHF owns 20% of the rights to this oil and gas concession. The Company expects that in 2010, substantially all of the exploration costs required to retain the exploration rights will be borne by Ketstal, the majority owner.

The Company is responsible for managing the drilling activities in the Salta Province and bears its pro-rata share of the costs. Exploratory drilling activities commenced in April 2010 on the Guemes Block and the first well was spud in June 2010. The Company paid $106,672 for additional concession fees to become an exploration company in Argentina and incurred $179,806 in exploratory drilling costs during the three months ended June 30, 2010 that were capitalized as work-in-progress under the full cost method of accounting. In July 2010, the Company found positive traces of the presence of natural gas and hydrocarbons of low-density quality through its analysis of core samples. Well logging while drilling also confirmed the potential existence of formations with sufficient hydrocarbons to make the well economically productive. Production testing to verify the commercial sustainability of the well will commence upon the receipt of the oil production license from the government during the third quarter, subject to the weather conditions during the wintertime in Argentina. The Company has not recorded impairment and depletion charges for the six months ended June 30, 2010, as the Company has not arranged for a complete report on reserve studies and analysis to determine whether proved reserves exist.

Lithium Production Properties

On April 29, 2010, the Company acquired certain properties from Minera Jujuy from the Jujuy Province, Argentina located in the Northwest part of Argentina, south of the border with Bolivia, for $30,000. Management believes that these properties have high concentrations of lithium and borates brines. The Company now owns 51% and controls 100% (through an agreement between the parties) of an area of approximately 147,000 hectares (approximately 350,000 acres) in an area of North Guayatayoc, Argentina. As these properties are in the initial stage of development, management did not consider it necessary to assess impairment or depletion for the six months ended June 30, 2010.

5. INVESTMENTS IN NON-CONSOLIDATING AFFILIATES

As of June 30, 2010, the Company, through SAHF, retains 9% 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. In March 2009, a Hong Kong public company purchased 60% of the ownership in the Tartagal and Morillo oil and gas concessions, from the other majority owners, for total consideration of approximately $270 million. To date, the working interest owners have expended approximately $27 million on 2D and 3D seismic surveys and other geological studies. The Company expects to begin receiving revenue from the Tartagal and Morillo blocks when the first well is approved for commercial production.

The Company has applied for its foreign registration in Argentina to be formally admitted as a member of the joint venture. When this registration in received, the Company will reclassify the $225,000 concession costs associated with this property to proved oil and gas properties based upon the reserve report received from the third party working interest owner of the joint venture. The Company has not recorded any impairment and depletion charges for this concession as the Company is in the process of obtaining a reserve report from the operating member of the joint venture.

6. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company adopted FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) on January 1, 2008, for all financial assets and liabilities that are recognized or disclosed at fair value in the condensed consolidated financial statements on a recurring basis or on a nonrecurring basis during the reporting period. While the Company adopted the provisions of ASC 820 for non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis, no such assets or liabilities existed at the balance sheet date. As permitted by ASC 820, the Company delayed implementation of this standard for all non-financial assets and liabilities recognized or disclosed at fair value in the financial statements on a nonrecurring basis and adopted these provisions effective January 1, 2009.

The fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability. ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted market prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs about which little or no market data exists, therefore requiring an entity to develop its own assumptions.

DELTA MUTUAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

As of June 30, 2010, the Company held certain financial assets that are measured at fair value on a recurring basis. These consisted of cash and cash equivalents and investments in non-consolidated affiliates. The fair value of the cash and cash equivalents is determined based on quoted market prices in public markets and is categorized as Level 1. The fair value of investments in non-consolidated affiliates is developed by the Company based upon its own assumptions and is categorized as Level 3. The Company does not have any financial assets measured at fair value on a recurring basis as Level 2 and there were no transfers in or out of Level 2 or Level 3 during the three months ended June 30, 2010.

The following table sets forth by level, within the fair value hierarchy, the Company’s financial assets accounted for at fair value on a recurring basis as of June 30, 2010.

	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Cash and cash equivalents	$	296,549	$	296,549	$	-	$
Oil and gas properties:
Proved		688,475				688,475
Unproved		876,806						876,806
Lithium production properties		30,000				-		30,000
Investments in non-consolidating affiliates		225,000				225,000
Total	$	2,116,830	$	296,549	$	913,475	$	906,806

The Company had no financial assets accounted for on a non-recurring basis as of June 30, 2010.

There were no changes to the Company’s valuation techniques used to measure asset fair values on a recurring or nonrecurring basis during the six months ended June 30, 2010, and the Company did not have any financial liabilities as of June 30, 2010. The Company has other financial instruments, such as advances and other receivables, accounts payable and other liabilities, notes payable and other assets, which have been excluded from the tables above. Due to the short-term nature of these instruments, the carrying value of advances and other receivables, accounts payable and other liabilities, notes payable and other assets approximate their fair values.

7. NOTES PAYABLE

	June 30,		December 31,
	2010		2009
Notes payable to three investors, interest at 8%, due August 10, 2011	$	150,655	$	150,655

Notes payable to stockholders and related parties, interest at 6%, due June 20, 2012		401,210		401,210

Notes payable to third parties, interest at rates of 4% to 6%, due August 10, 2011		253,740		253,740
	$	805,605	$	805,605

For the three and six months ended June 30, 2010 and June 30, 2009, the Company recorded interest expense of $12,296, $10,771, $23,163 and $20,742, respectively.

8. INCOME TAXES

The Company has not made provision for income taxes in the three or six month periods ended June 30, 2010 and 2009 since the Company has the benefit of net operating losses carried forward in these periods.

DELTA MUTUAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

Due to uncertainties surrounding the Company’s ability to generate future taxable income to realize deferred income tax assets arising as a result of net operating losses carried forward, the Company has not recorded any deferred income tax asset as of June 30, 2010 or December 31, 2009. The net operating losses carry forwards will begin to expire in varying amounts from year 2019 to 2029, subject to its eligibility as determined by the respective tax regulatory authorities.

The Company is subject to taxation in the United States and certain state jurisdictions. The Company’s tax years for 2002 and forward are subject to examination by the United States and applicable state tax authorities due to the carry forward of unutilized net operating losses.

9. ACCRUED EXPENSES

Accrued expenses consist of the following:

	June 30, 2010		December 31, 2009
Professional fees	$	41,523	$	34,023
Interest expense		23,163		-
Payroll expense		131,806		131,806
Other accrued expenses		101,200		101,200
Total	$	297,692	$	267,029

10. LOSS PER COMMON SHARE

The following table sets forth the reconciliation and diluted net loss per common share computation for the three and six months ended June 30, 2010.

	Six Months Ending		Three Months Ending
	June 30, 2010		June 30, 2010
Basic and diluted EPS:
Net loss ascribed to common shareholders - basic and diluted	$	484,217	$	197,956
Weighted shares outstanding - basic and diluted		26,081,117		27,233,293
Basic and diluted net loss per common share	$	0.02	$	0.01

11. STOCK-BASED COMPENSATION

The Company issued shares of its common stock to non-employees as stock-based compensation. The Company recorded compensation expense of $0 and $393,490, respectively, in conjunction with the issuance of these shares.

As of June 30, 2010, the Company did not have any outstanding employee stock options.

12. STOCKHOLDERS' EQUITY

On April 22, 2009, the Company’s board of directors approved amendments to the Certificate of Incorporation to: (1) effect a 1 for 10 reverse split of all the outstanding common stock; and (2) authorize a new class of 10,000,000 shares of preferred stock, par value $0.0001 per share, and to authorize the board of directors to issue one or more series of the preferred stock with such designations, rights, preferences and restrictions as determined by majority vote of the directors. Thereafter on April 23, 2009, the Company received written consent from stockholders of the Company holding a majority of the outstanding shares of common stock approving the Amendments. The effective date of the Amendments was July 6, 2009, the date the reverse stock split was made effective for trading purposes by the Financial Industry Regulatory Authority. All share and per share data (except par value) have been adjusted to reflect the effect of the stock split for all periods presented.

As of June 30, 2010, the board of directors had not authorized the issuance of any series of preferred stock.

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

DELTA MUTUAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

For the six months ended June 30, 2010 and 2009 the Company issued 534,555, and 200,000 shares of common stock, respectively, valued at $0.14 and $0.60 per share, respectively, for services valued at $75,000 and $120,000, respectively.

During six months ended June 30, 2010 and 2009, the Company received $969,667 and $10,000, respectively, from various unrelated individuals to purchase 2,690,833 and 28,572 shares of common stock, respectively.

13. COMMITMENTS AND CONTINGENCIES

POLITICAL RISK

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

OPERATING LEASES

The Company’s lease for its principal office space in Arizona became effective December 1, 2009 for a period of 13 months. Future minimum lease payment under operating leases for the year ending December 31, 2010 will approximate $16,000. The Company recorded lease rental expenses for the three and six months ended June 30, 2010, and June 30, 2009, of $4,157, $9,927, $9,093 and $14,536 respectively, in the accompanying unaudited consolidated statements of operations.

LEGAL PROCEEDINGS

Former Employee Wage Claims

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. In October 2008, the Company entered into repayment agreements with both of the former employees. As of the date of this report, the Company has not made any payments to these two former employees pursuant to these agreements. In addition, the employee that alleged non-payment of wages in the amount of $17,782 has obtained a default judgment against the Company entered on January 8, 2010 in the Court of Common Pleas of Bucks County, Pennsylvania, Civil Division, in the amount of $29,625.94 as to this wage claim. As of December 31, 2009, the Company has recorded an accrued liability of $17,782 in the accompanying consolidated financial statements. Delta believes that a portion of the claim is without merit, and is vigorously contesting the claim as of the date of this filing.

The Company has been notified by letter dated October 9, 2009 of a complaint filed with the Pennsylvania Department of Labor & Industry by its former Chief Financial Officer alleging non-payment of wages in the amount of $131,250. The Company has responded to the Department of Labor & Industry that the wages owed this former officer are substantially less than alleged in this claim and is vigorously contesting the claim as of the date of this filing. As of the date of filing, the Company is awaiting a response from the Department of Labor and Industry and this matter is disclosed in the contingent liabilities footnote to the consolidated financial statements.

Legal Fee Collection Claim

Delta Technologies, Inc., a wholly-owned subsidiary of the Company and a discontinued operation (“Delta Technologies”), has been notified by a collection agency on behalf of Wolf Block LLP, a law firm that had provided intellectually property legal services to Delta Technologies, that it had been retained in an attempt to collect a past due amount of approximately $41,000. The Company is in discussions with the collection agency and believes that the resolution of this matter will have no material effect on the Company or its operations.

Former Interim Chief Financial Officer

On April 20, 2010, the Company gave notice of termination, effective April 30, 2010, of its agreement with ValuCorp, dated as of November 1, 2009, pursuant to which ValuCorp had provided Michael Gilburd as the Company’s Interim Chief Financial Officer. Mr. Gilburd asserted that ValuCorp is entitled to be issued an unspecified number of shares of common stock in connection with this agreement. The Company does not believe there is any agreement with ValuCorp regarding the issuance of stock to ValuCorp.

DELTA MUTUAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

EMPLOYMENT AGREEMENTS

On April 26, 2010, the Company’s Board of Directors approved five-year term executive employment agreements (“Employment Agreements”) between the Company and Dr. Daniel R. Peralta, the Company’s Chairman and Chief Executive Officer, and Malcolm W. Sherman, the Company’s Executive Vice President, effective March 22, 2010 and March 23, 2010, respectively. Dr. Peralta’s Employment Agreement provides for a fixed annual salary of $500,000; Mr. Sherman’s Employment Agreement provides for a fixed annual salary of $350,000. Under the Employment Agreements, both executives are eligible for participation in a bonus pool with other senior executives, the quarterly bonus amounts being based on financial performance comparisons with prior fiscal quarters, beginning with the quarterly reports of the Company for the year 2006 and each subsequent year during the respective terms of each of the Employment Agreements. Such bonuses will be pooled with those of other senior executives and be computed based on a total bonus pool equal to 15% of the net profits of the Company as set forth in the Company’s SEC filings.

The Company’s Board of Directors, with the agreement of the two executives, conditioned approval of the Employment Agreements on limitation of the salary of Dr. Peralta to $200,000, and the salary of Mr. Sherman to $150,000, until the cash flow of the Company was sufficient to pay the salaries specified in the Employment Agreements and meet other operating obligations of the Company. Further, there would be no accruals of unpaid salaries under this agreement with the two executives.

14. SUBSEQUENT EVENTS

Management evaluated all activities of the Company through the issuance of the Company’s consolidated financial statements and concluded that no subsequent events have occurred that would require adjustments or disclosures in the consolidated financial statements.

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion of our financial condition, results of operations, liquidity and capital resources. This discussion should be read in conjunction with our consolidated financial statements and the notes thereto, included in our Annual Report on Form 10-K filed for the year ended December 31, 2009 filed with the Securities and Exchange Commission on March 17, 2010. The terms “Delta” and the terms “we”, “us”, “our” or the “Company” refer to Delta Mutual, Inc. and all of its consolidated subsidiaries.

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 are an independent energy company primarily engaged in the development and production of oil and gas through our South American Hedge Fund subsidiary, which has investments in oil and gas exploration and production in Argentina and a property for the production of lithium in Argentina. We plan to grow through the acquisition and subsequent development and exploitation of producing properties, principally through the identification and development of fields utilizing new technologies such as modern log analysis and reservoir modeling techniques, as well as 3-D seismic surveys and horizontal drilling. As a result of these activities, we believe that we have a number of development opportunities on our properties. In addition, we intend to expand upon our development activities with complementary exploration projects in our core areas of operation. Success in our development and exploration activities is critical in the maintenance and growth of our current production levels and associated reserves.

Our main source of revenue will be derived from the sale of crude oil and natural gas produced from the oil and gas concessions and exploration properties in which we have made investments. While we are not the operators of these properties, we expect to have representation on the operating committees that are responsible for managing the business affairs of these concessions. Our ownership interests in these concessions range from 9% to 10%, and we have a 20% interest in the blocks in which we have exploration rights.

Our current business plan for 2010 and beyond anticipates a substantial increase in revenue primarily from our investments in oil and gas concessions in Argentina. If we do not achieve the expected levels of revenue, we may be required to raise additional capital through equity and/or debt financing.

GOING CONCERN

During the six months ended June 30, 2010, we had a net loss of $484,217. The Company has an accumulated deficit of $4,080,554 and working capital deficiency of $923,021 as of June 30, 2010. Additionally, the Company may require additional funding to execute its strategic business plan for 2010. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Successful business operations and its transition to attaining profitability is dependent upon obtaining additional financing and achieving a level of revenue adequate to support its cost structure. There can be no assurances that there will be adequate financing available to the Company, if the Company requires financing. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

Additionally, the Company will require additional funding to execute its future strategic business plan. Successful business operations and its transition to attaining profitability is dependent upon obtaining additional financing and achieving a level of revenue adequate to support its cost structure.

EXPLORATION AND DEVELOPMENT ACTIVITY

Our future oil and gas production, and therefore our success, is highly dependent upon our ability to find, acquire and develop additional reserves that are profitable to produce. The rate of production from our oil and gas properties and our proved reserves will decline as our reserves are produced unless we acquire additional properties containing proved reserves, conduct successful development and exploration activities or, through engineering studies, identify additional behind-pipe zones or secondary recovery reserves. We cannot assure you that our exploration and development activities will result in increases in our proved reserves. If our proved reserves decline in the future, our production may also decline and, consequently, our cash flow from operations and the amount that we are able to borrow under our credit facility will also decline. In addition, the vast majority of our estimated proved reserves at June 30, 2010 were undeveloped. By their nature, estimates of undeveloped reserves are less certain. Recovery of such reserves will require significant capital expenditures and successful drilling operations. We may be unable to acquire or develop additional reserves, in which case our results of operations and financial condition could be adversely affected.

Jollin and Tonono Oil and Gas Concessions

The Company, through SAHF, has a 10% interest concession in the carryover mode ("no cost obligations to SAHF") in the Jollin and Tonono oil and gas concessions located in Northern Argentina.

Salta Province Exploration Rights

During 2008, the Company purchased 40% of the oil and gas exploration rights to five geographically defined areas in the Salta Province of Northern Argentina from Ketsal, SA (“Ketsal”) for $697,000 cash. In 2009, SAHF assigned 50% of its rights to a third party. As of June 30, 2010, SAHF owns 20% of the rights to this oil and gas concession. The Company expects that in 2010, substantially all of the exploration costs required to retain the exploration rights will be borne by Ketsal, the majority owner.

Tartagal and Morillo

Lithium Production Properties

RESULTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 2010 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2009

During the six months ended June 30, 2010, we incurred a net loss from continuing operations of $484,217 compared to a loss of $755,685 for the six months ended June 30, 2009. The decrease in our loss from continuing operations for the six months ended June 30, 2010 over the comparable period of the prior year is primarily due to a decrease in general and administrative expenses associated with the discontinuance of the Company’s equity compensation programs.

Our net loss for the six months ended June 30, 2010 was approximately $484,217 compared to a net loss of $762,137 for the comparable prior year period, which included $6,452 of loss from discontinued operations.

THREE MONTHS ENDED JUNE 30, 2010 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2009

During the three months ended June 30, 2010, we incurred a net loss from continuing operations of $197,956 compared to $455,574 for the three months ended June 30, 2009. The decrease in our loss from continuing operations for the three months ended June 30, 2010 over the comparable period of the prior year is primarily due to a decrease in general and administrative expenses associated with the discontinuance of the Company’s equity compensation programs.

Our net loss for the three months ended June 30, 2010 was $197,956 compared to a net loss of $455,513 for the comparable prior year period, which included $61 of income from discontinued operations.

LIQUIDITY

At June 30, 2010 and December 31, 2009, we had working capital deficits of $923,021 and $967,042, respectively.

At June 30, 2010, we had total assets of $2,131,124 compared to total assets of $1,750,005 at December 31, 2009. Cash increased $194,541 for the six months ending June 30, 2010 compared to year-end 2009 due primarily to the issuance of common stock. Net cash used in operating activities in the six months ending June 30, 2010, was $225,558, as compared with $320,492 in the comparable period in 2009; net cash used in investing activities in the six months ending June 30, 2010 was $349,568 in 2010, as compared with $-0- in the comparable period in 2009. Cash used in operating and investing activities during the six months ending June 30, 2010 and 2009, was offset by net cash from financing activities of $769,667 and $310,361, respectively.

CRITICAL ACCOUNTING POLICIES

There have been no changes from the Critical Accounting Policies described in our Annual Report on Form 10-K for the year ended December 31, 2009 except that the company adopted the full cost method of accounting for its exploration and development activities.

Under the full cost method, all direct costs and certain indirect costs associated with acquisition of properties and successful as well as unsuccessful exploration and development activities are capitalized. Depreciation, depletion, and amortization of capitalized oil and gas properties and estimated future development costs, excluding unproved properties, are based on the unit-of-production method based on proved reserves. Net capitalized costs of oil and gas properties, less related deferred taxes, are limited to the lower of unamortized cost or the cost ceiling, defined as the sum of the present value of estimated future net revenues from proved reserves based on unescalated prices discounted at 10 percent, plus the cost of properties not being amortized, if any, plus the lower of cost or estimated fair value of unproved properties included in the costs being amortized, if any, less related income taxes. Costs in excess of the present value of estimated future net revenues as discussed above are charged to proved property impairment expense. No gain or loss is recognized upon sale or disposition of oil and gas properties, except in unusual circumstances. We apply the full cost ceiling test on a quarterly basis on the date of the latest balance sheet presented.

USE OF ESTIMATES

Management believes that it is reasonably possible that the following material estimates affecting the financial statements could happen in the coming year:

Proved oil and gas reserves;

Expected future cash flow from proved oil and gas properties;

Future exploration and development costs; and

Future dismantlement and restoration costs.

NEW FINANCIAL ACCOUNTING STANDARDS

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

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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. Our interest income is sensitive to changes in the general level of U.S. interest rates.

We do not have significant short-term investments, and due to their short-term nature, we believe that there is not a material risk exposure.

Credit Risk - Our accounts receivable are subject, in the normal course of business, to collection risks. We regularly assess these risks and have established policies and business practices to protect against the adverse effects of collection risks. As a result we do not anticipate any material losses in this area.

Commodity Price Risk – We are exposed to market risks related to price volatility of crude oil and natural gas. The prices of crude oil and natural gas affect our revenues, since sales of crude oil and natural gas from our South American investments comprise nearly all of the components of our revenue. A decline in crude oil and natural gas prices will likely reduce our revenues, unless there are offsetting production increases. We do not use derivative commodity instruments for trading purposes.

The prices of the commodities that the Company produces are unsettled at this time. At times the prices seem to be drift down and then either increase or stabilize for a few days. Current price movement seems to be slightly up but with the prices of the traditionally marketed products (gasoline, diesel, and natural gas as feed stocks for various industries, power generation, and heating) are not showing material increases. Although prices are difficult to predict in the current environment, the Company maintains the expectation that demand for crude oil and natural gas will continue to increase for the foreseeable future due to the underling factors that oil and natural gas based commodities are both sources of raw energy and are fuels that are easily portable.

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.

Item 4T. – 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, 2010, an evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial Officerprincipal 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 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, except that the Company increased its internal controls around the issuance and recording of common stock sales.

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 1. LEGAL PROCEEDINGS.

Former Employee Wage Claims

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. In October 2008, the Company entered into repayment agreements with both of the former employees. As of the date of this report, the Company has not made any payments to these two former employees pursuant to these agreements. In addition, the employee that alleged non-payment of wages in the amount of $17,782 has obtained a default judgment against the Company entered on January 8, 2010 in the Court of Common Pleas of Bucks County, Pennsylvania, Civil Division, in the amount of $29,625.94 as to this wage claim. As of December 31, 2009, the Company has recorded an accrued liability of $17,782 in the accompanying consolidated financial statements. We believe that a portion of the claim is without merit and are vigorously contesting the claim as of the date of this filing.

The Company has been notified by letter dated October 9, 2009 of a complaint filed with the Pennsylvania Department of Labor & Industry by its former Chief Financial Officer alleging non-payment of wages in the amount of $131,250. The Company has responded to the Department of Labor & Industry that the wages owed this former officer are substantially less than alleged in this claim and are vigorously contesting the claim as of the date of this filing. As of the date of filing, the Company is awaiting a response from the Department of Labor and Industry and this matter is disclosed in the contingent liabilities footnote to the consolidated financial statements.

Legal Fee Collection Claim

Former Interim Chief Financial Officer

On April 20, 2010, the Company gave notice of termination, effective April 30, 2010, of its agreement with ValuCorp, dated as of November 1, 2009, pursuant to which ValuCorp had provided Michael Gilburd as the Company’s Interim Chief Financial Officer. Mr. Gilburd has asserted that ValuCorp is entitled to be issued an unspecified number of shares of common stock in connection with this agreement. The Company does not believe there is any agreement with ValuCorp regarding the issuance of stock to ValuCorp.

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.

			Principal	Total Offering Price/
Date	Title and Amount(1)	Purchaser	Underwriter	Underwriting Discounts

May 27, 2010	333,334 shares of common stock.	Private investor.	NA	$0.32 per share/NA
May 27, 2010	13,333 shares of common stock.	Private investor.	NA	$0.30 per share/NA

(1) The issuances to lenders, consultants and investors are viewed by the Company as exempt from registration under the Securities Act of 1933, as amended (“Securities Act”), alternatively, as transactions either not involving any public offering, or as exempt under the provisions of Regulation D, Regulation S or Rule 701 promulgated by the SEC under the Securities Act.

ITEM 6. EXHIBITS.

31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

32.1	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.

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/ Daniel R. Peralta
		Daniel R. Peralta
		President and Chief Executive Officer, Principal Financial Officer

Dated: August 23, 2010

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.

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