FORM
10-Q/A





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 March 31, 2008





OR





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





For the
transition period from ____________ to _________________





Commission
File 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.  YESxNO ̈





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
xNo





The
number of shares outstanding the issuer's common stock, par value $.0001 per
share, was 221,849,158 as of June 30, 2008.







AS PART
OF THE REVIEW BY THE SECURITIES AND EXCHANGE COMMISSION OF THE COMPANY’S PAST
FILINGS UNDER THE SECURITIES AND EXCHANGE ACT OF 1934, WE ARE FILING THIS
AMENDMENT NO. 1 TO OUR FORM10-Q FOR THE THREE-MONTH PERIOD ENDED MARCH
31, 2008 (THE ”MARCH 31, 2008 FORM 10-Q”). THIS AMENDMENT NO. 1 AMENDS THE
FINANCIAL STATEMENTS AND THE INFORMATION UNDER THE CAPTION “MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.” THE
COMPANY’S REVERSE ACQUISITION WITH ALTONY S.A. BECAME EFECTIVE ON MARCH 4. 2008,
AND OUR FINANCIAL STATEMENTS AS OF DECEMBER 31, 2007 FILED IN THE MARCH 31, 2008
FORM 10-Q ARE RESTATED IN THIS AMENDMENT NO. 1 TO REFLECT MARCH 4, 2008 AS THE
EFFECTIVE DATE OF THE REVERSE ACQUISITION. IN ORDER TO PRESERVE THE NATURE AND
CHARACTER OF THE DISCLOSURES SET FORTH IN THE MARCH 31, 2008 FORM 10-Q AS OF
JULY 3, 2008, THE DATE ON WHICH THE MARCH 31, 2008 FORM 10-Q WAS FILED, NO
ATTEMPT HAS BEEN MADE IN THIS AMENDMENT NO. 1 TO MODIFY OR UPDATE DISCLOSURES
EXCEPT AS DESCRIBED ABOVE AND, IN THE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS AND MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, ADDITIONAL DISCLOSURES AS TO AN EXCHANGE OF DEVELOPMENT
RIGHTS RELATING TO THE COMPANY’S OIL AND GAS CONCESSIONS.





DELTA
MUTUAL, INC.





INDEX





PagePart
      I.  Financial Information
                3Item
      1.
                Financial
      Statements
                3Consolidated
      Balance Sheet as of March 31, 2008 and as of December 31, 2007
      (unaudited)
                4Consolidated
      Statements of Operations for the Three Months Ended March 31, 2008 and
      2007 (unaudited)
                5Consolidated
      Statement of Stockholders’ Equity (unaudited)
                6-7Consolidated
      Statements of Cash Flows for the Three Months Ended March 31, 2008 and
      2007 (unaudited)
                8-9Notes
      to Unaudited Consolidated Financial Statements
                10Item
      2.
                Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
                27Item
      3.
                Quantitative
      and Qualitative Disclosures About Market Risk
                30Item
      4T.
                Controls
      and Procedures.
                30Part
      II. Other Information
                30Item
      1A.
                Risk
      Factors.
                30Item
      5.
                Other
      Information.
                32Item
      6.
                Exhibits.
                33Signatures
                34




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 three months ended March 31, 2008and 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)





March 31,
                
                
                December 31,2008
                
                
                2007ASSETSCurrent
      Assets:Cash
                
                $
                12,697
                
                
                $
                -Investments
                
                
                2,409,596
                
                
                
                5,879,020Prepaid
      expenses
                
                
                1,914
                
                
                
                -Total
      Current Assets
                
                
                2,424,207
                
                
                
                5,879,020Property
      and equipment - net
                
                
                356,915
                
                
                
                -Intangible
      asset
                
                
                124,529
                
                
                
                -Investments
      in oil and gas concessions
                
                
                2,300,000
                
                
                
                1,130,000Other
      assets
                
                
                650
                
                
                
                -TOTAL
      ASSETS
                
                $
                5,206,301
                
                
                $
                7,009,020LIABILITIES
      AND STOCKHOLDERS'  EQUITYCurrent
      Liabilities:Accounts
      payable
                
                $
                163,184
                
                
                $
                239,552Accrued
      expenses
                
                
                1,283,682
                
                
                
                -Convertible
      debt
                
                
                397,340
                
                
                
                -Notes
      payable
                
                
                2,601,655
                
                
                
                2,300,000Total
      Current Liabilities
                
                
                4,445,861
                
                
                
                2,539,552Minority
      interest in consolidated subsidiaries
                
                
                225,576
                
                
                
                -Stockholders'
      Equity:Common
      stock $0.0001 par value - authorized 250,000,000
      shares;  218,882,953 and 130,000,000 outstanding,
      respectively
                
                
                21,888
                
                
                
                13,000Additional
      paid-in-capital
                
                
                2,982,745
                
                
                
                2,587,000Retained
      earnings (deficit)
                
                
                (2,469,768
                )
                
                
                1,869,468Total
      Stockholders' Equity
                
                
                534,865
                
                
                
                4,469,468TOTAL
      LIABILITIES AND   STOCKHOLDERS' EQUITY
                
                $
                5,206,301
                
                
                $
                7,009,020





See Notes
to Unaudited Consolidated Financial Statements




Page
4





DELTA
MUTUAL, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF OPERATIONS


(UNAUDITED)




Three Months Ended March 31,2008
                        
                        
                        2007Investment
      results
                        
                        $
                        (2,060,953
                        )
                        
                        $
                        (483,523
                        )General
      and administrative expenses
                        
                        
                        601,678
                        
                        
                        
                        (1,612
                        )Valuation
      results
                        
                        
                        22
                        
                        
                        
                        -601,700
                        
                        
                        
                        (1,612
                        )Loss
      from operations
                        
                        
                        (2,662,653
                        )
                        
                        
                        (481,911
                        )Interest
      expense
                        
                        
                        32,209
                        
                        
                        
                        -Loss
      before minority interest
                        
                        
                        (2,630,444
                        )
                        
                        
                        (481,911
                        )Minority
      interest share of (income) loss of consolidated
    subsidiaries
                        
                        
                        7,295
                        
                        
                        
                        -Loss
      before benefit from income taxes
                        
                        
                        (2,623,149
                        )
                        
                        
                        (481,911
                        )Benefit
      from income taxes
                        
                        
                        -
                        
                        
                        
                        -Net
      loss
                        
                        $
                        (2,623,149
                        )
                        
                        $
                        (481,911
                        )Loss
      per common share- basic and diluted
                        
                        $
                        (0.02
                        )
                        
                        $
                        (0.00
                        )Weighted
      average number of common shares outstanding- basic and
      diluted
                        
                        
                        157,652,474
                        
                        
                        
                        130,000,000




See Notes
to Unaudited Consolidated Financial Statements




Page
5





DELTA
MUTUAL, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY


(Unaudited)





Number
      ofCommon
                
                
                Common
                
                
                Paid
      inShares
                
                
                Stock
                
                
                Capital
                
                
                RetainedEarnings
                
                
                TotalBalance,
      January 1, 2007
                
                
                130,000,000
                
                
                $
                13,000
                
                
                $
                2,587,000
                
                
                $
                1,527,912
                
                
                $
                4,127,912Net
      income
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                341,556
                
                
                
                341,556Balance,
      December 31, 2007
                
                
                130,000,000
                
                
                $
                13,000
                
                
                $
                2,587,000
                
                
                $
                1,869,468
                
                
                $
                4,469,468




See Notes
to Unaudited Consolidated Financial Statements




Page
6





DELTA
MUTUAL, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY


(Unaudited)





Number
      ofCommon
                  
                  
                  Common
                  
                  
                  Paid
      in
                  
                  
                  Retained EarningsShares
                  
                  
                  Stock
                  
                  
                  Capital
                  
                  
                  (Deficit)
                  
                  
                  TotalBalance,
      January 1, 2008
                  
                  
                  130,000,000
                  
                  
                  $
                  13,000
                  
                  
                  $
                  2,587,000
                  
                  
                  $
                  1,869,468
                  
                  
                  $
                  4,469,468Effect
      of reverse acquisition
                  
                  
                  78,882,953
                  
                  
                  
                  7,888
                  
                  
                  
                  -
                  
                  
                  
                  (1,716,087
                  )
                  
                  
                  (1,708,199
                  )Issuance
      of common stock for services (valued at $0.02 per share)
                  
                  
                  10,000,000
                  
                  
                  
                  1,000
                  
                  
                  
                  199,000
                  
                  
                  
                  
                  
                  
                  
                  200,000Stock
      based compensation expense
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  196,745
                  
                  
                  
                  -
                  
                  
                  
                  196,745Net
      (loss)
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (2,623,149
                  )
                  
                  
                  (2,623,149
                  )Balance,
      March 31, 2008
                  
                  
                  218,882,953
                  
                  
                  $
                  21,888
                  
                  
                  $
                  2,982,745
                  
                  
                  $
                  (2,469,768
                  )
                  
                  $
                  534,865




See Notes
to Unaudited Consolidated Financial Statements




Page
7





DELTA
MUTUAL, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(UNAUDITED)




Three Months Ended March 31,2008
                      
                      
                      2007Cash
      flows from operating activities:Net
      loss
                      
                      $
                      (2,623,149
                      )
                      
                      $
                      (481,911
                      )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      and amortization
                      
                      
                      12,996
                      
                      
                      
                      -Non-cash
      compensation
                      
                      
                      200,000
                      
                      
                      
                      -Compensatory
      element of option issuance
                      
                      
                      196,745
                      
                      
                      
                      -Minority
      interest in income (losses) of  consolidated
      subsidiaries
                      
                      
                      (7,295
                      )
                      
                      
                      -Changes
      in operating assets and liabilities
                      
                      
                      (191,730
                      )
                      
                      
                      -Net
      cash used in operating activities
                      
                      
                      (2,412,433
                      )
                      
                      
                      (481,911
                      )Cash
      flows from investing activities:Decrease
      in investments
                      
                      
                      2,299,424Net
      cash provided by investing activities
                      
                      
                      2,299,424
                      
                      
                      
                      -Cash
      flows from financing activities:Proceeds
      from loans
                      
                      
                      121,000
                      
                      
                      
                      -Repayment
      of loan
                      
                      
                      (60,000
                      )
                      
                      
                      -Proceeds
      from minority interest
                      
                      
                      7,073
                      
                      
                      
                      -Net
      cash provided by financing activities
                      
                      
                      68,073
                      
                      
                      
                      -Net
      decrease in cash
                      
                      
                      (44,936
                      )
                      
                      
                      -Cash
      - Beginning of period
                      
                      
                      57,633
                      
                      
                      
                      -Cash
      - End of period
                      
                      $
                      12,697
                      
                      
                      $
                      -




See Notes
to Unaudited Consolidated Financial Statements




Page
8





DELTA
MUTUAL, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(Continued)


(UNAUDITED)




Three Months Ended March 31,2008
                        
                        
                        2007Supplementary
      information:Changes
      in operating assets and   liabilities consists
      of:Increase
      in accrued expenses
                        
                        
                        (191,730
                        )
                        
                        
                        -$
                        (191,730
                        )
                        
                        $
                        -Cash
      paid during the year for:Interest
                        
                        $
                        -
                        
                        
                        $
                        -Income
      taxes
                        
                        $
                        -
                        
                        
                        $
                        -Non-cash
      financing activities:Issuance
      of common stock for services
                        
                        $
                        200,000
                        
                        
                        $
                        -




See Notes
to Unaudited Consolidated Financial Statements




Page
9




DELTA
MUTUAL, INC. AND SUBSIDIARIES
 NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 For the
Three Months Ended March 31, 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, its principal business activities
have 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 all of the issued and outstanding
shares of stock of Altony S.A., an Uruguayan 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, from Egani, of all of the outstanding shares of stock 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. As originally filed, the shell public company was consolidated
with the acquirer as of January 1, 2007. For accounting purposes only, the
transaction was treated as a recapitalization of the Company as of March 4,
2008, with Altony as the acquirer, when the consolidation of the two entities
became effective. 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 owner of 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. In the third
quarter of 2008, SAHF agreed to exchange certain development rights it held in
these concessions for ownership interests in the oil and gas production from
these concessions ranging from nine to 23.5 percent.
  Page
10
 
 The
Company intends to continue its environmental and construction technology and
service activities. Its environmental activities are conducted by its joint
venture subsidiary Delta-Envirotech, Inc. (“Envirotech”), headquartered in
Virginia. The construction technology activities are conducted by the Company’s
wholly owned subsidiary Delta Technologies, Inc. (“Technologies”) that holds
intellectual property rights and has filed a patent for a new insulating
concrete wall forming (ICF) system now known as Delta Wall.
 
 BASIS OF
PRESENTATION
 
 The
consolidated balance sheet as of March 31, 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 the audited financial statements of Altony
S.A. and its wholly-owned subsidiary.
 
 The
consolidated financial statements for the period ended March 31, 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.
  Page
11
 
 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 income (loss) of consolidated subsidiaries" in the
consolidated statements of operations.
 
 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 March 31, 2008 there were
4,421,920 potential common shares related to convertible debt and 6,998,000
potential common shares related to stock options.
 
 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 three months ended March 31, 2008 and
2007.
 
 INTANGIBLES
 
 SFAS No.
142, "Goodwill and Other Intangible Assets" 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.
  Page
13
 
 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.
 
 NEW
FINANCIAL ACCOUNTING STANDARDS
 
 In
February 2007, the FASB issued SFAS No. 159 ("SFAS 159") "The Fair Value Option
for Financial Assets and Financial Liabilities," providing companies with an
option to report selected financial assets and liabilities at fair value. The
Standard's objective is to reduce both complexity in accounting for financial
instruments and the volatility in earnings caused by measuring related assets
and liabilities differently. It also requires entities to display the fair value
of those assets and liabilities for which the Company has chosen to use fair
value on the face of the balance sheet. The adoption of SFAS 159 on January 1,
2008 did not impact the Company’s consolidated financial
statements.
 
 In
December 2007, the FASB issued SFAS No. 141 (revised 2007) (“SFAS 141(R)”)
“Business Combinations,” which replaces SFAS 141 “Business Combinations.” This
Statement improves the relevance, completeness and representational faithfulness
of the information provided in financial reports about the assets acquired and
liabilities assumed in a business combination. This Statement requires an
acquirer to recognize the assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree at the acquisition date, measured at
their fair values as of that date, with limited exceptions specified in the
Statement. Under SFAS 141 (R), the acquisition-related costs, including
restructuring costs, must be recognized separately from the acquisition and will
generally be expensed as incurred. That replaces SFAS 141’s cost-allocation
process, which required the cost of an acquisition to be allocated to the
individual assets acquired and liabilities assumed based on their estimated fair
values. SFAS 141(R) shall be applied prospectively to business combinations for
which the acquisition date is on or after the beginning of the first annual
report period beginning on or after December 15, 2008. The Company will
implement this Statement in 2009.
 
 In
December 2007, the FASB issued SFAS No.160 “Non-Controlling Interests in
Consolidated Financial Statements – An Amendment of ARB No. 151” (“SFAS 160”).
SFAS 160 established new accounting and reporting standards for the
non-controlling interest in a subsidiary and for the deconsolidation of a
subsidiary. Specifically, this Statement requires the recognition of
non-controlling interests (minority interests) as equity in the consolidated
financial statements and separate from parent’s equity. The amount of net income
attributable to the non-controlling interest will be included in consolidated
net income on the face of the income statement. SFAS 160 clarifies that changes
in a parent’s ownership in a subsidiary that does not result in deconsolidation,
are equity transactions if the parent retains its controlling financial
interest. In addition, this Statement requires that a parent recognize a gain or
loss in net income when a subsidiary is deconsolidated. Such gain or loss will
be measured using the fair value of the non-controlling equity investment as of
the deconsolidation date. SFAS 160 also includes expanded disclosure
requirements regarding the interest of the parent and its non-controlling
interest. SFAS 160 is effective for fiscal years, and interim periods other than
fiscal years, beginning on or after December 2008. The Company is currently
evaluating the impact of the adoption of this Statement on its financial
statements.
  Page
14
 
 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.
 
 2.
INVESTMENTS
 
 The
Company has investments 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 March 31,
2008 and December 31, 2007 is indicated below.
 
 March 31,
                        
                        
                        December 31,2008
                        
                        
                        2007Public
      securities
                        
                        $
                        —
                        
                        
                        $
                        322,300Private
      securities
                        
                        
                        2,409,596
                        
                        
                        
                        5,556,720Current
      investments
                        
                        
                        2,409,596
                        
                        
                        
                        5,879,020Oil
      and gas concessions
                        
                        
                        2,300,000
                        
                        
                        
                        1,130,000$
                        4,709,596
                        
                        
                        $
                        7,009,020
 
 3.
PROPERTY AND EQUIPMENT
 
 March 31,
                                            
                                            
                                            December 31,2008
                                            
                                            
                                            2007Equipment
                                            
                                            $
                                            455,035
                                            
                                            
                                            $
                                            —Deposits
      on land
                                            
                                            
                                            —
                                            
                                            
                                            
                                            —Leasehold
      improvements
                                            
                                            
                                            7,807
                                            
                                            
                                            
                                            —462,842
                                            
                                            
                                            
                                            —Less
      accumulated depreciation
                                            
                                            
                                            105,927
                                            
                                            
                                            
                                            —$
                                            356,915
                                            
                                            
                                            $
                                            —
  Page
15
 
 Depreciation
expense for the three months ended March 31, 2008 amounted to
$11,208.
 
 4.
INTANGIBLE ASSETS
 
 Intangible
assets are intellectual property included in a patent application. If the patent
is not issued, the Company will write-off the unamortized amounts immediately.
Amortization expense was $1,788 for the three months ended March 31, 2008. Other
intangible assets consist of the following:
 
 March 31,
                      
                      
                      December 31,2008
                      
                      
                      2007Gross
      Carrying Amount
                      
                      $
                      143,000
                      
                      
                      $
                      —Accumulated
      Amortization
                      
                      
                      18,471
                      
                      
                      
                      —Intellectual
      property costs
                      
                      $
                      124,529
                      
                      
                      $
                      —
 
 Estimated
amortization expense for intangible assets for the next five years is as
follows:
 
 EstimatedYear Ending
                              
                              AmortizationDecember 31,
                              
                              Expense2008
                              
                              
                              5,3642009
                              
                              
                              7,1502010
                              
                              
                              7,1502011
                              
                              
                              7,1502012
                              
                              
                              7,150
 
 2008
represents amortization from April 1, through December 31, 2008.
 
 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 owned 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.
  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 owned   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.
 Page
16
  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 three months ended March 31, 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 March 31, 2008.
  Page
17
 
 The
following represents a schedule of minority interests as of:
 
 March 31,
                                  
                                  
                                  December 31,2008
                                  
                                  
                                  2007Delta
      Development Partners L.P.
                                  
                                  $
                                  81,966
                                  
                                  
                                  $
                                  —Delta
      Development Partners II, L.P.
                                  
                                  
                                  36,739
                                  
                                  
                                  
                                  —Delta
      TA L.P.
                                  
                                  
                                  106,871
                                  
                                  
                                  
                                  —Delta
      Developers Corp.
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —Delta
      Developers Guayanilla Corp.
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —Delta-Envirotech,
      Inc.
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —PT
      Triyudha - Envirotech
                                  
                                  
                                  —
                                  
                                  
                                  
                                  —$
                                  225,576
                                  
                                  
                                  $
                                  —
 
 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 three months ended March 31, 2008
amounted to $(36,856). As of March 31, 2008, accrued interest of $1,004 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 2008.
Interest expense for the three months ended March 31, 2008 amounted to $450. As
of March 31, 2008 accrued interest of $3,372 is included in accrued expenses on
the Company's consolidated balance sheet.
 
 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 that matures on July 15, 2008. The principal amount of
$2,300,000 is included in Notes payable on the Company’s consolidate balance
sheet at March 31, 2008 and December 31, 2007.
  Page
18
  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
March 31, 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.
 
 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.
  Page
19
 
 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 March
31, 2008, the Company's outstanding convertible notes were convertible into
4,421,920 shares of common stock.
 
 The
following table shows the maturities by year of total face amount of the
convertible debt obligations at March 31, 2008:
 
 2008
                        
                        $
                        397,340$
                        397,340
 
 For the
three months ended March 31, 2008, the Company recorded interest expense of
$3,591. As of March 31, 2008, accrued interest of $43,249 is included in accrued
expenses on the Company's consolidated balance sheet.
 
 8.
ACCRUED EXPENSES
 
 Accrued
expenses consists of the following:
 
 March 31,
                          
                          
                          December 31,2008
                          
                          
                          2007Professional
      fees
                          
                          $
                          49,257
                          
                          
                          $
                          —Interest
      expense
                          
                          
                          48,230
                          
                          
                          
                          —Payroll
      expense
                          
                          
                          494,661
                          
                          
                          
                          —Payroll
      expense-officers
                          
                          
                          126,061
                          
                          
                          
                          —Payroll
      tax expense
                          
                          
                          38,614
                          
                          
                          
                          —Accrued
      consulting fees
                          
                          
                          144,000
                          
                          
                          
                          —Other
      accrued expenses
                          
                          
                          382,859
                          
                          
                          
                          —$
                          1,283,682
                          
                          
                          $
                          —
  Page
20
 
 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 balance due to the stockholders is included in Notes
Payable on the Company’s consolidated balance sheet at March 31, 2008. Accrued
interest of $605 is included in accrued expenses on the Company’s consolidated
balance sheet at March 31, 2008.
 
 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 three months ended March 31, 2008 amounted to
$6,000.
 
 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 issuance.
 
 a. For
the three months ended March 31, 2008, the Company issued 10,000,000 shares of
common stock for services valued at $200,000, valued at $0.02 per
share.
 
 b. For
the three months ended March 31, 2008, the Company did not issue any shares of
common stock for payment of debt or accrued interest.
 
 12.
DISCONTINUED OPERATIONS
 
 As of
September 30, 2007, the Company adopted a formal plan to discontinue all its
operations in Puerto Rico. As a result of the Company’s decision, the operations
of Delta Development Partners, LP; Delta Developers Corp.; Delta Development
Partners II, LP; Delta Developers Guayanilla Corp., and Delta TA, LP 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 due
to the immaterial nature of the transactions.
  Page
21
 
 13.
BUSINESS SEGMENT INFORMATION
 
 The
Company’s reporting business segments are geographic and include  the
Far East (Indonesia), the Middle East, North America (United States) and South
America. 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:
 
 Three Months EndedMarch 31,2008
                        
                        
                        2007Total
      Revenue:North
      America
                        
                        $
                        —
                        
                        
                        $
                        —Indonesia
                        
                        
                        —
                        
                        
                        
                        —Middle
      East
                        
                        
                        —
                        
                        
                        
                        —Puerto
      Rico
                        
                        
                        —
                        
                        
                        
                        —South
      America
                        
                        
                        (2,060,953
                        )
                        
                        
                        (483,523
                        )$
                        (2,060,953
                        )
                        
                        $
                        (483,523
                        )Loss from Operations:North
      America
                        
                        $
                        (554,371
                        )
                        
                        $
                        —Indonesia
                        
                        
                        (8,988
                        )
                        
                        
                        —Middle
      East
                        
                        
                        (38,006
                        )
                        
                        
                        —Puerto
      Rico
                        
                        
                        (313
                        )
                        
                        
                        —South
      America
                        
                        
                        (2,060,975
                        )
                        
                        
                        (481,911
                        )$
                        (2,662,653
                        )
                        
                        $
                        (481,894
                        )
 
 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.
  Page
22
 
 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 March
31, 2008, the Company had one share-based compensation plan, which is described
below. During the three months ended March 31, 2008,  the adoption of
SFAS No.123(R) resulted in an aggregate pretax compensation expense recognized
in net loss for stock based compensation of $196,745. For the three months ended
March 31, 2008, the aggregate pretax compensation expense caused basic and
diluted earnings per common share to decrease by $-0- per share.
 
 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 three months ended March 31, 2008, the Company
issued 10,000,000 shares and recorded compensation expense of $200,000 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 March 31,
2008, there were 3,002,000 shares of common stock available for issuance under
the 2004 Plan.
 
 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 three months
ended March 31, 2008.
 
 A summary
of the option activity under the 2004 Plan as of December 31, 2007 and changes
during the three months ended March 31, 2008, is presented
below.
  Page
23
  Options
                          
                          Shares
                          
                          
                          Weighted-Average
                            Exercise Share Price
                          
                          
                          Weighted-
                            Average
                            Remaining
                            Contractual
                            Term
                          
                          
                          Aggregate
                            Intrinsic
                            ValueOutstanding
      at January 1, 2008
                          
                          
                          7,978,000
                          
                          
                          $
                          0.11Options
      granted
                          
                          
                          -
                          
                          
                          $
                          -Options
      exercised
                          
                          
                          -
                          
                          
                          $
                          -Options
      cancelled/expired
                          
                          
                          (980,000
                          )
                          
                          $
                          0.11Outstanding
      at March 31, 2008
                          
                          
                          6,998,000
                          
                          
                          $
                          0.11
                          
                          
                          
                          3.2
                          
                          
                          $
                          (419,880
                          )Exercisable
      at March 31, 2008
                          
                          
                          6,998,000
                          
                          
                          $
                          0.11
                          
                          
                          
                          3.2
                          
                          
                          
                          —
 
 Stock
compensation expense applicable to stock options for the three months ended
March 31, 2008 was approximately $196,745. The aggregate intrinsic value of
options outstanding as of March 31, 2008 and December 31, 2007 was $(419,880)
and $(718,020), respectively.
 
 At March
31, 2008, there was $1,212,525 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 3.2
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
three months ended March 31, 2008, consulting fees of $13,200 have been expensed
and $79,167 of the stock value associated with the issuance of shares to Straub
is included in accrued expenses on the Company's consolidated balance
sheet.
  Page
24
 
 17.  SUBSEQUENT
EVENTS
 
 a.
                In
      April 2008, the Company issued 924,320 shares of common stock as payment
      of $43,600 principal amount and accrued interest, pursuant to two
      convertible notes issued by the Company in April 2007. Also in April 2008,
      the Company issued 1,491,885 shares of common stock as payment of $100,000
      principal amount and accrued interest pursuant to a convertible note
      issued by the Company in May 2004.
 
 b.
                In
      April 2008, the Company issued 550,000 shares of common stock to a
      consultant for services valued at $38,500, at a price per share of
      $0.07.
 
 c.
                During
      the second quarter of 2008, the Company borrowed
      $46,450,    in the aggregate, from two stockholders of
      the Company pursuant   to 6% promissory notes maturing in
      October and November 2008.
 
 18.  RESTATEMENT
 
 The
balance sheet as of December 31, 2007 has been restated to reflect the reverse
merger as of March 4, 2008. The following table reflects the historical balance
sheet of the acquired company in the reverse acquisition.
  Page
25
  Balance Sheet
                          
                          
                          
                          
                          
                          
                          
                          AdjustedAs filed
                          
                          
                          
                          
                          
                          
                          
                          Balance SheetDecember 31, 2007
                          
                          
                          
                          
                          Adjustments (1)
                          
                          
                          December 31, 2007ASSETSCurrent
      Assets:Cash
                          
                          $
                          57,633
                          
                          
                          
                          (57,633
                          )
                          
                          $
                          -Investments
                          
                          
                          4,709,020
                          
                          
                          
                          1,170,000
                          
                          
                          
                          5,879,020Prepaid
      expenses
                          
                          
                          1,914
                          
                          
                          
                          (1,914
                          )
                          
                          
                          -Total
      Current Assets
                          
                          
                          4,768,567
                          
                          
                          
                          
                          
                          
                          
                          5,879,020Property
      and equipment -net
                          
                          
                          368,123
                          
                          
                          
                          (368,123
                          )Intangible
      asset
                          
                          
                          126,317
                          
                          
                          
                          (126,317
                          )Investments
      in oil and gas concessions
                          
                          
                          2,300,000
                          
                          
                          
                          (1,170,000
                          )
                          
                          
                          1,130,000Other
      assets
                          
                          
                          650
                          
                          
                          
                          (650
                          )
                          
                          
                          -TOTAL
      ASSETS
                          
                          $
                          7,563,657
                          
                          
                          
                          
                          
                          
                          $
                          7,009,020LIABILITIES
      AND STOCKHOLDER'S EQUITYCurrent
      Liabilities:Accounts
      payable
                          
                          $
                          412,922
                          
                          
                          
                          (173,370
                          )
                          
                          $
                          239,552Accrued
      expenses
                          
                          
                          1,225,674
                          
                          
                          
                          (1,225,674
                          )
                          
                          
                          -Convertible
      debt
                          
                          
                          397,340
                          
                          
                          
                          (397,340
                          )
                          
                          
                          -Notes
      payable
                          
                          
                          2,540,655
                          
                          
                          
                          (240,655
                          )
                          
                          
                          2,300,000Total
      Current Liabilities
                          
                          
                          4,576,591
                          
                          
                          
                          
                          
                          
                          
                          2,539,552Minority
      interests in consolidated subsidiaries
                          
                          
                          225,797
                          
                          
                          
                          (225,797
                          )
                          
                          
                          -Stockholders'
      Equity:Common
      stock $0.0001 par value - authorized 250,000,000 shares; 218,882,953 and
      208,882,953 outstanding, respectively
                          
                          
                          20,888
                          
                          
                          
                          (7,888
                          )
                          
                          
                          13,000Additional
      paid-in capital
                          
                          
                          11,953,766
                          
                          
                          
                          (9,366,766
                          )
                          
                          
                          2,587,000Accumulated
      deficit
                          
                          
                          (9,213,385
                          )
                          
                          
                          11,082,853
                          
                          
                          
                          1,869,468Total
      Stockholders' Equity
                          
                          
                          2,761,269
                          
                          
                          
                          
                          
                          
                          
                          4,469,468TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                          
                          $
                          7,563,657
                          
                          
                          
                          
                          
                          
                          $
                          7,009,020
  (1)
                To
      reflect the elimination of the parent company at December 31, 2007 as themerger
      was not consumated until March 4,
2008.
  Page
26




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 current management joined the
Company in 2003, our principal business activities 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 all of the issued and outstanding shares of
stock in Altony S.A., an Uruguayan 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 from Egani, of all of the outstanding shares of stock 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, as of March 4,
2008, 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 three months ended March 31, 2008, we incurred a net loss of $2,623,149
primarily attributable to the investment results of 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 MARCH 31, 2008 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
2007.




During
the three months ended March 31, 2008, we incurred a net loss of approximately
$2,600,000 compared to a net loss of approximately $485,000 for the three months
ended March 31, 2007.





The
increase in our operating loss for the three months ended March 31, 2008 over
the comparable period of the prior year was due to a loss of approximately
$1,577,000 related the to investment portfiolio; an increse in general and
administrative expenses of approximately $600,000, and an increase in interest
expense of approximately $32,000.


Page
27





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. In the third
quarter of 2008, South American Hedge Fund agreed to exchange certain
development rights it held in these concessions for ownership interests in the
oil and gas production from these concessions ranging from nine to 23.5
percent.




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 and Far
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 the
Middle East, we reached a working agreement to provide equipment to manufacture
insulating concrete form (ICF) products for the building industry in Saudi
Arabia. 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
in August 2008.





We have
decided not to pursue a second contract in Indonesia and withdraw from this
market. Our decision was based on the additional expenses we would incur to met
the new requirement of 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 are 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 intend to
license the Delta Wall
technology and seek other cooperative arrangements with respect to this
technology.





LIQUIDITY





At March
31, 2008 we had a working capital deficit of $2,021,654, compared with a surplus
of $3,339,468 at December 31, 2007. This decrease at March 31, 2008 is a result
of a decrease in current investments of approximately $3,470,000 and an increase
in current liabilities of approximately $1,906,000.





ASSETS





At March
31, 2008, we had total assets of $5,206,301, compared to total assets
of$7,009,020 at December 31, 2007. The decrease in total assets was primarily
due to the decrease in current investments of approximately $3,470,000 off set
by a net increase in non-current assets of approximately
$1,652,000.





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.


Page
28





Other
Matters





Accounting
Pronouncements




In
February 2007, the FASB issued SFAS No. 159 (“SFAS 159”) “The Fair Value Option
for Financial Assets and Financial Liabilities,” providing companies with an
option to report selected financial assets and liabilities at fair
value.  The Standard’s objective is to reduce both complexity in
accounting for financial instruments and the volatility in earnings caused by
measuring related assets and liabilities differently.  It also
requires entities to display the fair value of those assets and liabilities for
which the Company has chosen to use fair value on the face of the balance
sheet.  The adoption of SFAS 159 on January 1, 2008 did not impact the
Company’s consolidated financial statements.





In
December 2007, the FASB issued SFAS 141(R), which replaces SFAS 141 “Business
Combinations.”  This Statement is intended to improve the relevance,
completeness and representational faithfulness of the information provided in
financial reports about the assets acquired and the liabilities assumed in a
business combination.  This Statement requires an acquirer to
recognize the assets acquired, the liabilities assumed, and any noncontrolling
interest in the acquiree at the acquisition date, measured at their fair values
as of that date, with limited exceptions specified in the
Statement.  Under SFAS 141(R), acquisition-related costs, including
restructuring costs, must be recognized separately from the acquisition and will
generally be expensed as incurred.  That replaces SFAS 141’s
cost-allocation process, which required the cost of an acquisition to be
allocated to the individual assets acquired and liabilities assumed based on
their estimated fair values.  SFAS 141(R) shall be applied
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual report period beginning on or after
December 15, 2008.  The Company will implement this Statement in
2009.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51” (“SFAS No.
160”).  SFAS No. 160 amends Accounting Research Bulletin (“ARB”) No.
51 to establish accounting and reporting standards for the noncontrolling
(minority) interest in a subsidiary and for the deconsolidation of a
subsidiary.  It clarifies that a noncontrolling interest in a
subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the Consolidated Financial Statements.  SFAS No.
160 also requires consolidated net income to be reported at amounts that include
the amounts attributable to both the parent and the noncontrolling interest on
the face of the consolidated statement of income.  Under SFAS No. 160,
the accounting for changes in a parent’s ownership interest in a subsidiary that
do not result in deconsolidation must be accounted for as equity transactions
for the difference between the parent’s carrying value and the cash exchanged in
the transaction.  In addition, SFAS No. 160 also requires that a
parent recognize a gain or loss in net income when a subsidiary is
deconsolidated (except in the case of a spin-off), and requires expanded
disclosure in the Consolidated Financial Statements that clearly identify and
distinguish between the interests of the parent’s ownership interest and the
interests of the noncontrolling owners of a subsidiary.  This
Statement is effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2008.  The Company will
adopt SFAS No. 160 on January 1, 2009, as required, and is currently evaluating
the impact of such adoption on its financial statements.





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.


Page
29





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 March 31, 2008 and 2007.





GOODWILL
AND OTHER INTANGIBLES





SFAS No.
142, "Goodwill and Other Intangible Assets" 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.




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.





None.


Page
30





ITEM
1A.  RISK FACTORS.





There are
material changes in the risk factors previously disclosed in our 10-KSB for the
year ended December 31, 2007, which additional risk factors are relevant to and
should be considered in connection with an evaluation of our energy and
alternative energy businesses related to the acquisition of the South American
Hedge Fund.  These additional risks are as follows.





Volatile
global commodity pricing in the energy sector would strongly affect our results
of operations.





In our
investments in the energy sector, our financial results would be governed by the
volatile prices of energy commodities. Drilling and exploration activity levels,
inventory levels, production disruptions, the actions of OPEC, competing fuel
prices, prevailing currency exchange rates, price speculation, changes in
consumption patterns, weather and geophysical and technical limitations and
other matters affect the supply of oil and gas and contribute to price
volatility.





Our
investments in the energy sector could involve many operating risks that may
result in substantial losses for which insurance may be unavailable or
inadequate.





Operations
in the energy production sector are subject to hazards and risks inherent in
operational and environmental hazards. Any of these risks can cause substantial
losses resulting from injury or loss of life, damage to or destruction of
property, natural resources and equipment, pollution and other environmental
damages, regulatory investigations and penalties, suspension of our operations
and repair and remediation costs.





Our
oil and natural gas production investments depend on oil and natural gas
transportation facilities, most of which are owned by others.





The
marketability of our oil and natural gas production depends in large part on
receiving governmental approvals, the availability, proximity and capacity of
pipeline systems owned by third parties. The unavailability of or lack of
available capacity on these systems and facilities could result in the shut-in
of producing wells or the delay or discontinuance of development plans for
properties. The lack of availability of these facilities for an extended period
of time could negatively affect our revenues. Federal and state regulation of
oil and natural gas production and transportation, tax and energy policies,
changes in supply and demand, pipeline pressures, damage to or destruction of
pipelines and general economic conditions could adversely affect our ability to
produce, gather and transport oil and natural gas.





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





We
operate in the competitive area of energy and alternative energy production.
Many of our competitors are large, well-established companies that have larger
operating staffs and significantly greater capital resources than we
do.





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





Exploration,
development, production and sale of oil and gas are subject to extensive
governmental and provincial laws and regulations, including complex
environmental laws. We may be required to make large expenditures to comply with
environmental and other governmental regulations. Failure to comply with these
laws and regulations may result in the suspension or termination of our
operations and subject us to administrative, civil and criminal penalties.
Matters subject to regulation include discharge permits for drilling operations,
drilling bonds, spacing of wells, unitization and pooling of properties,
environmental protection, and taxation. Our operations create the risk of
environmental liabilities to the government or third parties for any unlawful
discharge of oil, gas or other pollutants into the air, soil or water. In the
event of environmental violations, we may be charged with remedial costs.
Pollution and similar environmental risks generally are not fully insurable.
Such liabilities and costs could have a material adverse effect on our financial
condition and results of operations.





Competition
for experienced, technical personnel may negatively impact our
operations.





Operations
in the energy sector entail significant complexities and utilize advanced
technologies requiring highly trained personnel. Our success will depend, in
part, on our ability to attract and retain experienced professional personnel to
manage our proposed alternative energy operations, as well as any direct energy
production investments.





Governmental
actions and political instability may affect our results of
operations.


Page
31





Our
investments in the energy sector internationally would be subject to the
regulatory authority of the U.S. and foreign governments and political
interests, as well as political instability in foreign countries in which we
invest. As a result, we would face risks of:





Ø
                changes
      in laws and regulations, import, export and use of products, environmental
      protection, climate change and energy security, all of which may increase
      costs or reduce the demand for our products;Ø
                expropriation
      of our assets and properties; andØ
                refusal
      to extend or grant, or delay in the extension or grant of, energy
      production or development
contracts.




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





Not
applicable





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.





DISCLOSURE
REGARDING FORWARD-LOOKING STATEMENTS





Throughout
this report, we make statements that may be deemed "forward-looking" statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements, other than statements of historical facts, that address
activities, events, outcomes and other matters that Chancellor plans, expects,
intends, assumes, believes, budgets, predicts, forecasts, projects, estimates or
anticipates (and other similar expressions) will, should or may occur in the
future are forward-looking statements. These forward-looking statements are
based on management's current belief, based on currently available information,
as to the outcome and timing of future events. When considering forward-looking
statements, you should keep in mind the risk factors and other cautionary
statements in this report.





We
caution you that these forward-looking statements are subject to all of the
risks and uncertainties, many of which are beyond our control, incident to the
exploration for and development, production and sale of oil and gas. These risks
include, but are not limited to, commodity price volatility, inflation, lack of
availability of goods and services, environmental risks, operating risks,
regulatory changes, the uncertainty inherent in estimating proved oil and
natural gas reserves and in projecting future rates of production and timing of
development expenditures and other risks described herein.





Through
South American Hedge Fund LLC, we plan to proceed with investments in oil and
gas concessions in Argentina and intend to focus our investments in the energy
sector, including  alternative energy producing investments in Latin
America and the United States. In August 2007, South American Hedge Fund signed
the purchase option for two 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 the two concessions. Our primary focus
will be, upon completion of governmental approvals relative to our investment in
these concessions, to develop two wells per month.





Industry
and economic factors





In
managing our business in the oil and gas production sector we must deal with
many factors inherent in our industry. First and foremost is wide fluctuation of
oil and gas prices. Oil and gas markets are cyclical and volatile, with future
price movements difficult to predict. While our revenues are a function of both
production and prices, wide swings in prices often have the greatest impact on
our results of operations.


Page
32





Our
operations entail significant complexities. Advanced technologies requiring
highly trained personnel are utilized in restoration of wells and production.
The oil and gas industry is highly competitive. We compete with major and
diversified energy companies, independent oil and gas companies, and individual
operators. In addition, the industry as a whole competes with other businesses
that supply energy to industrial, commercial, and residential end
users.





Approach
to Our business





Implementation
of our business approach relies on our ability to fund ongoing development
projects with cash flow provided by operating activities and external sources of
capital.





Critical
accounting policies and estimates





The
process of estimating quantities of oil and gas reserves is complex, requiring
significant decisions in the evaluation of all available geological,
geophysical, engineering and economic data. The data for a given field may also
change substantially over time as a result of numerous factors including, but
not limited to, additional development activity, evolving production history and
continual reassessment of the viability of production under varying economic
conditions. As a result, material revisions to existing reserve estimates may
occur from time to time. Although every reasonable effort is made to ensure that
reserve estimates reported represent the most accurate assessments possible, the
subjective decisions and variances in available data for various fields make
these estimates generally less precise than other estimates included in the
financial statement disclosures.





ITEM
6.  EXHIBITS.





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
33





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. ShermanMalcolm
      W. ShermanExecutive
      Vice President andPrincipal
      Executive Officer




Dated:
December 12, 2008




EXHIBIT
INDEX





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.




Page
34