UNITED
STATES





SECURITIES
AND EXCHANGE COMMISSION





WASHINGTON,
D.C.







FORM
10-Q





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





For the
quarterly period ended March 31, 2009





OR





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





For the
transition period from ____________ to  ____________





Commission
File Number 000-30563





DELTA
MUTUAL, INC.





(Exact
name of registrant as specified in its charter)


DELAWARE
              14-1818394(State
      or other jurisdiction of
              (I.R.S.
      Employerincorporation
      or organization)
              Identification
      No.)14301
      North 87th
      Street, #130, Scottsdale, AZ
              85260(Address of Principal Executive Offices)
              (Zip
      Code)




(480)
221-1989


(Registrant’s
Telephone Number, Including Area Code)


_________________________________________________________________


(Former
Name, Former Address and Former Fiscal Year, if changed since last
report)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.  YES xNO o





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


Yes oNo o





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





Large
accelerated filer  o                                                                                                Accelerated
filer  o





Non-accelerated
filer    o                                                                                               
Smaller reporting company  x


(Do not
check if a smaller reporting company)




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


o Yes   
x No




The
number of shares outstanding the issuer's common stock, par value $.0001 per
share, was 223,849,158 as of May 15, 2009.









DELTA
MUTUAL, INC.





INDEX


PagePart
      I. Financial
      Information
              1Item
      1.
              Financial
      Statements
              1Consolidated
      Balance Sheets as of March 31, 2009 and as ofDecember
      31, 2008 (unaudited)
              2Consolidated
      Statements of Operations for the Three Months EndedMarch
      31, 2009 and 2008 (unaudited)
              3Consolidated
      Statements of Stockholders’ Equity (Deficiency) as ofMarch
      31, 2009 (unaudited)
              4-5Consolidated
      Statements of Cash Flows for the Three Months EndedMarch
      31, 2009 and 2008 (unaudited)
              6-7Notes
      to Unaudited Consolidated Financial Statements
              8Item
      2.
              Management's
      Discussion and Analysis of Financial Condition andResults
      of Operations
              24Item
      3.
              Quantitative
      and Qualitative Disclosures About Market Risk
              28Item
      4T.
              Controls
      and Procedures.
              28Part
      II. Other
      Information
              28Item
      1.
              Legal
      Proceedings
              28Item
      5.
              Other
      Information.
              29Item
      6.
              Exhibits.
              29Signatures
              
              30





PART I.
FINANCIAL INFORMATION




Item 1.
Financial Statements





Certain
information and footnote disclosures required under accounting principles
generally accepted in the United States of America have been condensed or
omitted from the following consolidated financial statements pursuant to the
rules and regulations of the Securities and Exchange Commission. It is suggested
that the following consolidated financial statements be read
in  conjunction with the year-end consolidated financial statements
and notes thereto included


in the
Company's Annual Report on Form 10-K for the year ended December 31,
2008.





The
results of operations for the three months ended March 31, 2009 and 2008 are not
necessarily indicative of the results for the entire fiscal year or for any
other period.




1





DELTA
MUTUAL, INC. AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEETS (UNAUDITED)




March
      31,
            
            
            December
      31,2009
            
            
            2008ASSETSCurrent
      Assets:Cash
            
            $
            4,801
            
            
            $
            13,957Property
      and equipment - net
            
            
            634
            
            
            
            804Investments
      in non-consolidated affiliates
            
            
            1,973,524
            
            
            
            1,780,024Other
      assets
            
            
            7,083
            
            
            
            650TOTAL
      ASSETS
            
            $
            1,986,042
            
            
            $
            1,795,435LIABILITIES
      AND DEFICIENCYCurrent
      Liabilities:Accounts
      payable
            
            $
            354,565
            
            
            $
            363,004Accrued
      expenses
            
            
            1,406,557
            
            
            
            1,363,395Convertible
      debt
            
            
            253,740
            
            
            
            253,740Notes
      payable
            
            
            727,971
            
            
            
            461,208Total
      current liabilities
            
            
            2,742,833
            
            
            
            2,441,347DeficiencyDelta
      Mutual Inc. and Subsidiaries Stockholders' Deficiency:Common
      stock $0.0001 par value - authorized250,000,000
      shares; 221,849,158 shares issuedand
      outstanding at March 31, 2009 andDecember
      31, 2008, respectively
            
            
            22,185
            
            
            
            22,185Additional
      paid-in-capital
            
            
            3,958,576
            
            
            
            3,762,831Deficit
            
            
            (4,737,552
            )
            
            
            (4,430,928
            )Total
      Delta Mutual Inc. and Subsidiaries Stockholders'
    Deficiency:
            
            
            (756,791
            )
            
            
            (645,912
            )Noncontrolling
      interest
            
            
            -
            
            
            
            -Total
      Deficiency
            
            
            (756,791
            )
            
            
            (645,912
            )TOTAL
      LIABILITIES AND DEFICIENCY
            
            $
            1,986,042
            
            
            $
            1,795,435




See Notes
to Unaudited Consolidated Financial Statements




2


DELTA
MUTUAL INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED)


Three
      Months Ended March 31,2009
              
              
              2008Revenue:
              
              $
              -
              
              
              $
              -Costs
      and expenses:General
      and administrative expenses
              
              
              290,140
              
              
              
              601,678Loss
      from continuing operations
              
              
              (290,140
              )
              
              
              (601,678
              )-Interest
      expense
              
              
              (9,971
              )
              
              
              32,209Loss
      from continuing operations before provisionfor
      income taxes
              
              
              (300,111
              )
              
              
              (569,469
              )Provision
      for income taxes
              
              
              -
              
              
              
              -Net
      loss from continuing operations
              
              
              (300,111
              )
              
              
              (569,469
              )Discontinued
      operations:Gain
      (loss) of disposal of Far East operationsand
      South American Hedge Fund operations,and
      United States construction technologyactivities
              
              
              (6,513
              )
              
              
              (2,053,680
              )Net
      loss
              
              
              (306,624
              )
              
              
              (2,623,149
              )Less:
      Net loss attributable to noncontrollinginterest
              
              
              -
              
              
              
              -Net
      loss attributable to Delta Mutual Inc.and
      Subsidiaries
              
              $
              (306,624
              )
              
              $
              (2,623,149
              )Loss
      per common share - basic and diluted:Loss
      from continuing operations attributable toDelta
      Mutual Inc. and Subsidiariescommon
      shareholders
              
              $
              -
              
              
              $
              -Discontinued
      operations attributable toDelta
      Mutual Inc. and Subsidiariescommon
      shareholders
              
              
              -
              
              
              
              (0.02
              )Net
      loss attributable to Delta Mutual Inc. andSubsidiaries
      common shareholders$
              -
              
              
              $
              (0.02
              )Weighted
      average common shares - basicand
      diluted
              
              
              221,849,158
              
              
              
              157,652,474Amounts
      attributable to Delta Mutual Inc. andsubsidiaries
      common shareholders:Net
      loss
              
              $
              (306,624
              )
              
              $
              (2,623,149
              )




See Notes
to Unaudited Consolidated Financial Statements
  3


DELTA
MUTUAL, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' DEFICIENCY (Unaudited)


Number
      of
              
              
              
              
              
              
              
              
              RetainedCommon
              
              
              Common
              
              
              Paid
      in
              
              
              Earnings
              
              
              NoncontrollingShares
              
              
              Stock
              
              
              Capital
              
              
              (Deficit)
              
              
              Interest
              
              
              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 - $0.05 per share)
              
              
              10,550,000
              
              
              
              1,055
              
              
              
              237,445
              
              
              
              -
              
              
              
              
              
              
              
              238,500Issuance
      of common stock for debt
              
              
              2,300,571
              
              
              
              230
              
              
              
              143,370
              
              
              
              -
              
              
              
              
              
              
              
              143,600(valued
      at $0.05 - $0.07per share)Issuance
      of common stock for interest
              
              
              115,634
              
              
              
              12
              
              
              
              7,036
              
              
              
              -
              
              
              
              
              
              
              
              7,048(valued
      at $0.05- $0.07 per share)Contribution
      from stockholder
              
              
              -
              
              
              
              -
              
              
              
              1,000
              
              
              
              -
              
              
              
              
              
              
              
              1,000Stock
      based compensation expense
              
              
              -
              
              
              
              -
              
              
              
              786,980
              
              
              
              -
              
              
              
              
              
              
              
              786,980Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (4,584,309
              )
              
              
              -
              
              
              
              (4,584,309
              )Balance,
      December 31, 2008
              
              
              221,849,158
              
              
              
              22,185
              
              
              
              3,762,831
              
              
              
              (4,430,928
              )
              
              
              -
              
              
              
              (645,912
              )




See Notes
to Unaudited Consolidated Financial Statements
  4


DELTA
MUTUAL, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' DEFICIENCY (Unaudited)


Number
      of
              
              
              
              
              
              
              
              
              RetainedCommon
              
              
              Common
              
              
              Paid
      in
              
              
              Earnings
              
              
              NoncontrollingShares
              
              
              Stock
              
              
              Capital
              
              
              (Deficit)
              
              
              Interest
              
              
              TotalBalance,
      January 1, 2009
              
              
              221,849,158
              
              
              
              22,185
              
              
              
              3,762,831
              
              
              
              (4,430,928
              )
              
              
              -
              
              
              
              (645,912
              )Contribution
      from stockholder
              
              
              -
              
              
              
              -
              
              
              
              (1,000
              )
              
              
              -
              
              
              
              
              
              
              
              (1,000
              )Stock
      based compensation expense
              
              
              -
              
              
              
              -
              
              
              
              196,745
              
              
              
              -
              
              
              
              
              
              
              
              196,745Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (306,624
              )
              
              
              -
              
              
              
              (306,624
              )Balance,
      March 31, 2009
              
              
              221,849,158
              
              
              $
              22,185
              
              
              $
              3,958,576
              
              
              $
              (4,737,552
              )
              
              $
              -
              
              
              $
              (756,791
              )




See Notes
to Unaudited Consolidated Financial Statements
  5


DELTA
MUTUAL, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED)


Three
      Months Ended March 31,2009
              
              
              2008Cash
      flows from operatingactivities:Net
      loss
              
              $
              (306,624
              )
              
              $
              (2,623,149
              )Adjustments
      to reconcile net loss tonet
      cash used in operating activities:Depreciation
      and amortization
              
              
              170
              
              
              
              12,996Non-cash
      compensation
              
              
              -
              
              
              
              200,000Noncontrolling
      interest in income (loss) ofconsolidated
      subsidiaries
              
              
              -
              
              
              
              (7,295
              )Compensatory
      element of optionissuance
              
              
              196,745
              
              
              
              196,745Changes
      in operating assetsand
      liabilities
              
              
              28,290
              
              
              
              (191,730
              )Net
      cash used in operating activities
              
              
              (81,419
              )
              
              
              (2,412,433
              )Cash
      flows from investing activities:Increase
      in investments
              
              
              (193,500
              )
              
              
              -Proceeds
      from sale of investments
              
              
              -
              
              
              
              2,299,424Net
      cash provided by (used in)investing
      activities
              
              
              (193,500
              )
              
              
              2,299,424Cash
      flows from financing activities:Proceeds
      from loans
              
              
              266,763
              
              
              
              121,000Repayment
      of loan
              
              
              -
              
              
              
              (60,000
              )Contribution
      from stockholder
              
              
              (1,000
              )
              
              
              -Proceeds
      from minority interest
              
              
              -
              
              
              
              7,073Net
      cash provided byfinancing
      activities
              
              
              265,763
              
              
              
              68,073Net
      decrease in cash
              
              
              (9,156
              )
              
              
              (44,936
              )Cash
      - Beginning of period
              
              
              13,957
              
              
              
              57,633Cash
      - End of period
              
              $
              4,801
              
              
              $
              12,697




See Notes
to Unaudited Consolidated Financial Statements
  6
 DELTA
MUTUAL, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED) (Continued)
 Three
      Months Ended March 31,2009
                
                
                2008Supplementary
      information:Changes
      in operating assets andliabilities
      consists of:Decrease
      in other assets
                
                $
                (6,433
                )
                
                $
                -Increase
      in accounts payableand
      accrued expenses
                
                
                34,723
                
                
                
                (191,730
                )$
                28,290
                
                
                $
                (191,730
                )Issuance
      of common stock for services
                
                $
                -
                
                
                $
                200,000




See Notes
to Unaudited Consolidated Financial Statements
  7


DELTA
MUTUAL, INC. AND SUBSIDIARIES


NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


For the
Three Months Ended March 31, 2009 and 2008





1.
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES





The
consolidated balance sheets as of March 31, 2009 and the consolidated statements
of operations, stockholders’ deficiency and cash flows for the periods presented
herein have been prepared by Delta Mutual, Inc. and Subsidiaries (the “Company”
or “Delta”) 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, changes in stockholders’
deficiency and cash flows for all periods presented have been made. The
information for the consolidated balance sheet as of December 31, 2008 was
derived from audited financial statements.





Organization





Delta
Mutual, Inc. and subsidiaries (“Delta” or the “Company”) was incorporated in
Delaware on November 17, 1999. Since 2003, the principal business activities of
the Company were focused on providing environmental and construction
technologies and services to certain geographic reporting segments in the Far
East, Middle East and the United States. During the year ended December 31,
2008, the Company discontinued all its operations in the Far East
(Indonesia) and discontinued its construction technology activities that
were conducted through its wholly owned U.S. subsidiary, Delta
Technologies, Inc. See Notes 1, 4, 5 and 7 for further information
regarding these discontinued operations.





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 Uruguay Sociedad Anonima (“Altony”), which
owns 100% of the issued and outstanding membership interests in South American
Hedge Fund LLC, a Delaware limited liability company (“SAHF”). At the closing of
the Agreement, the Company issued 130,000,000 shares of its common stock to
Egani for the purchase of all of the outstanding 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. For accounting purposes only, the transaction was treated as a
recapitalization of the Company, as of March 4, 208, with Altony as the
acquirer. The financial statements prior to March 4, 2008 are those of Altony
and reflect the assets and liabilities of Altony at historical carrying amounts.
The financial statements show a retroactive restatement of Altony’s historical
stockholders’ equity to reflect the equivalent number of shares issued to
Egani.





The
principal business activity of Altony is the ownership and management of its
SAHF subsidiary. During the year ended December 31, 2008, SAHF shifted its focus
from investments in securities of Latin American entities to investments in oil
and gas concessions and exploration rights 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 North America.





In 2007,
SAHF acquired ownership interests in four oil and gas concessions in
Argentina. The majority owners of these concessions have established joint
ventures, registered in Argentina, that are in the process of obtaining the
necessary government and environmental permits to begin operations at these
concessions. SAHF will become a member of the joint ventures in 2009, when it
receives its foreign registration in Argentina. In the first quarter of 2008,
SAHF agreed to exchange half of the ownership interests it held in the
concessions to a third party, that agreed to assume 50% of the SHAF’s subsequent
development costs related to these four concessions. As of December 31, 2008,
the Company’s ownership interests in these concessions ranged from nine to 23.5
percent.




8





In 2008,
SAHF acquired 40% of the rights to explore for oil and gas in five geographic
areas located in Northern Argentina.





Following
the acquisition of Altony, the Company continued to pursue selected business
opportunities in the Middle East that are conducted by its joint venture
subsidiary Delta-Envirotech, Inc. (“Envirotech”), headquartered in
Virginia.





BASIS OF
PRESENTATION





The
consolidated financial statements for the period ended March 31, 2009 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 the risks of its oil and gas investments in
South America. The likelihood of success of the Company must be considered in
light of the expenses, difficulties, delays and unanticipated challenges
encountered in connection with the operations of the oil and gas concession in
Argentina. There is no assurance 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 oil and gas revenue 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 investments 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.




9





PRINCIPLES
OF CONSOLIDATION




The
Company's financial statements include the accounts of all majority-owned
subsidiaries where its ownership is more than 50 percent of the common
stock. 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.





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.





EARNINGS
(LOSS) PER SHARE





Basic
earnings (loss) per common share are computed by dividing net earnings by the
weighted average number of common shares outstanding during the year. Diluted
earnings (loss) per share are computed by dividing net earnings (loss) by the
weighted average number of common shares and potential common shares outstanding
during the period. As the Company experienced a loss during the three months
ended March 31, 2009, 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 and stock options. As of March 31, 2009
and 2008, there were 2,749,920 and 4,421,920 potential common shares,
respectively, related to convertible debt and 3,500,000 and 6,998,000 common
shares, respectively, related to stock options.





REVENUE
RECOGNITION





The
Company recognized 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. The Company was in the business of trading securities and gains
and losses from the sale of securities are included in the Company’s
consolidated statements of operations.





EVALUATION
OF LONG-LIVED ASSETS





The
Company reviews property and equipment, finite-lived intangible assets and
investments in non-consolidated affiliates 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.





10




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.





INVESTMENTS





At
acquisition, marketable debt and equity securities are designated as trading
securities which are carried at estimated fair value with unrealized gains and
losses reflected in results of operations.





EQUITY
METHOD INVESTMENTS





The
Company accounts for non-marketable investments using the equity method of
accounting if the investment gives it the ability to exercise significant
influence over, but not control of, an investee. Significant influence generally
exists if there is an ownership interest representing between 20% and 50% of the
voting stock of the investee. Under the equity method of accounting, investments
are stated at initial cost and are adjusted for additional investments and their
proportionate share of earnings or losses and distributions. The Company records
its share of the investee’s earnings or losses in earnings (losses) from
unconsolidated entities, net of income taxes, in its consolidated statement of
operations. Equity investments of less than 20% are stated at cost. The cost is
not adjusted for its proportionate share of earnings or losses. The Company
evaluates its equity method investments for impairment when events or changes in
circumstances indicate, in management’s judgment, that the carrying value of
such investments may have experienced an other-than-temporary decline in value.
When evidence of loss in value has occurred, the Company compares fair value of
the investment to its carrying value to determine whether impairment has
occurred. If the estimated fair value is less than the carrying value and
management considers the decline to be other than temporary, the excess of the
carrying value over the estimated fair value is recognized as impairment in the
consolidated financial statements.





STOCK-BASED
COMPENSATION





The
Company has a stock-based compensation plan under which stock options are
granted to employees. The Company accounts for stock-based compensation under
Statement of Financial Accounting Standards ("SFAS") No. 123(R), "Share-Based
Payment."





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.





11




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. The functional currency in South America
is the U.S. dollar. Translation adjustments are recorded in Cumulative Other
Comprehensive Income. The translation gains or losses were not material for the
three months ended March 31, 2009 and 2008, and there were no adjustments to
Cumulative Other Comprehensive Income.





POLITICAL
RISK





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





DISCONTINUED
OPERATIONS





During
the quarter ended June 30, 2008, the Company discontinued all its
operations in the Far East (Indonesia). During the quarter ended December 31,
2008, the Company discontinued all of its construction technology activities
that were carried out by its wholly owned subsidiary, Delta Technologies, Inc.
and the trading of securities by its South American Hedge Fund subsidiary. These
discontinued operations resulted in a gain (loss) of $(6,513) and $(2,053,680)
for the three months ended March 31, 2009 and 2008, respectively.





Summarized
statement of loss for discontinued operations is as follows:




Three
      Months Ended March 31,2009
              
              
              2008Net
      sales
              
              $
              —
              
              
              $
              —Impairment
              
              
              —
              
              
              
              —Provision
      for income taxes
              
              
              —
              
              
              
              —Loss
      from operations,net of tax
              
              
              (6,513
              )
              
              
              (2,053,680
              )Gain
      on disposition of minority interests
              
              
              —
              
              
              
              —Provision
      for income taxes
              
              
              —
              
              
              
              —Loss
      from discontinued operations, net of tax
              
              $
              (6,513
              )
              
              $
              (2,053,680
              )




12




FAIR
VALUE OF FINANCIAL INSTRUMENTS





For
financial instruments including cash, 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
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which
enhances existing guidance for measuring assets and liabilities using fair
value.  This Standard provides a single definition of fair value,
together with a framework for measuring it, and requires additional disclosure
about the use of fair value to measure assets and liabilities. In February 2008,
the FASB issued FASB Staff Position SFAS 157-1, “Application of SFAS No. 157 to
SFAS No. 13 and its “Related Interpretive Accounting Pronouncements that Address
Leasing Transactions,” (“FSP SFAS 157-1”) and FASB Staff Position SFAS 157-2,
“Effective Date of SFAS No. 157” (“FSP SFAS 157-2”). FSP SFAS 157-1 excludes
SFAS No. 13 and its related interpretive accounting pronouncements that address
leasing transactions from the requirements of SFAS No. 157, with the exception
of fair value measurements of assets and liabilities recorded as a result of a
lease transaction but measured pursuant to other pronouncements within the scope
of SFAS No. 157. FSP SFAS 157-2 delays the effective date of SFAS No. 157 for
all nonfinancial assets and nonfinancial liabilities, except those that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually). FSP SFAS 157-1 and FSP SFAS 157-2 became effective
for the Company upon adoption of SFAS No. 157 on January 1, 2008. See Note 4 of
Notes to Consolidated Financial Statements for disclosures related to the
Company’s financial assets accounted for at fair value on a recurring or
nonrecurring basis. The Company completed its implementation of SFAS no. 157
effective January 1, 2009 and it did not have a material impact on its 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 has adopted SFAS No. 141(R) effective January 1,
2009 and it did not have a material impact on its financial
statements.





13




In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (“SFAS No. 162”). SFAS No. 62 identifies the sources of
accounting principles and the framework for selecting the principles to be used
in the preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (GAAP) in
the United States. The Company has adopted SFAS No. 162 effective January 1,
2009 and it did not have a material impact on its financial
statements.





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 establishes 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 interest) 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 No.
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 of the deconsolidation date. SFAS No. 160 also
includes expanded disclosure requirements regarding the interest of the parent
and its non-controlling interest. SFAS No. 160 is effective for fiscal years,
and interim periods other than fiscal years, beginning on or after December 15,
2008. The Company has adopted SFAS No. 160 effective January 1, 2009 and it did
not have a material impact on its financial statements.





2.
ACQUISITION





Effective
March 4, 2008, the Company entered into a Membership Interest Purchase
Agreement, pursuant to which the Company acquired from Egani, Inc. all the
shares of stock of Altony SA, 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 (sometimes referred to as
“SAHF”). At the closing of the Agreement, the Company issued 130,000,000 shares
of its common stock to Egani, Inc. which constituted, following such issuance, a
majority of the outstanding shares of its 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.





14




The
acquired assets and liabilities assumed of Delta Mutual from the reverse
acquisition are as follows:




Cash
              
              $
              57,623Prepaid
      expenses
              
              
              1,914Property
      and equipment
              
              
              462,842Accumulated
      depreciation
              
              
              (94,719
              )Intangible
      asset-net
              
              
              126,317Other
      assets
              
              
              650Accounts
      payable
              
              
              (173,370
              )Accrued
      expenses
              
              
              (1,225,674
              )Convertible
      debt
              
              
              (397,340
              )Notes
      payable
              
              
              (240,655
              )Minority
      interests
              
              
              (225,797
              )Common
      stock
              
              
              (7,888
              )Deficit
              
              
              1,716,087$
              -0-




3.
INVESTMENTS





Trading
securities are comprised of public and private securities of Latin American
entities. For the three months ended March 31, 2009 and 2008, the Company
incurred realized gains (losses) of $-0- and $(2,072,536), respectively. The
fair market value of these investments as of March 31, 2009 and December 31,
2008 is indicated below:




March
      31,
                2009
              
              
              December
      31,
                2008Public
      securities
              
              $
              —
              
              
              $
              —Private
      securities
              
              
              —
              
              
              
              —$
              —
              
              
              $
              —




4.
PROPERTY AND EQUIPMENT





March
      31,
                2009
              
              
              December
      31,
                2008Equipment
              
              $
              6,277
              
              
              $
              6,277Leasehold
      improvements
              
              
              7,807
              
              
              
              7,80714,084
              
              
              
              14,084Less
      accumulated depreciation
              
              
              13,450
              
              
              
              13,280$
              634
              
              
              $
              804




15




During
2008, the Company discontinued its operations in the Far East (Indonesia) and
discontinued its construction technology activities. During the third and fourth
quarters of 2008, the Company wrote off $268,127, the value of the equipment
that was used in its Indonesian operations. During the fourth quarter of 2008,
the Company wrote off $77,125, the value of the manufacturing equipment that was
used to produce its insulating concrete form (ICF) building
product.





Depreciation
expense for the three months ended March 31, 2009 and 2008 amounted to $170 and
$11,208, respectively.





5.
INTANGIBLE ASSETS





Intangible
assets consisted of intellectual property from a patent application. The Company
elected not to pursue the patent application and recorded an impairment charge
of $122,742 of the unamortized amounts during the quarter ended June 30, 2008.
Amortization expense was $-0- and $1,788 for the three months ended March 31,
2009 and 2008, respectively. Intangible assets consisted of the
following:




March
      31,
                2009
              
              
              December
      31,
                2008Gross
      Carrying Amount
              
              $
              —
              
              
              $
              —Accumulated
      Amortization
              
              
              —
              
              
              
              —Intellectual
      property costs
              
              $
              —
              
              
              $
              —




6.
INVESTMENT IN NONCONSOLIDATED AFFILIATES





The
Company has a 23.5% ownership interest in the Jollin and Tonono oil and gas
concessions located in Northern Argentina. During 2007, the Company purchased a
47% ownership of these concessions and paid the purchase price by issuing a
non-interest bearing note in the principal amount of $1,820,000 to
Oxipetrol-Petroleros de Occidente S.A. (Oxipetrol), one of the other owners,
with a maturity date of July 2008. The Company’s purchase price was based upon
the price tendered by the original purchasers of the concessions that was and
accepted by the Argentine government, who formerly owned these properties.
The government uses a number of factors In determining the selling prices
for oil and gas concession in Argentina, including the location and size of the
concession and the current market prices of crude oil and natural gas. Prior to
the maturity date, the Company and Oxipetrol mutually agreed to reduce the
principal amount of the Company’s note primarily because of changes in oil and
gas prices. Based upon the purchase price reduction, the Company repaid
Oxipetrol $1,270,000 at the maturity date. Based on these circumstances, the
Company recorded a one time, retroactive adjustment, reducing the value of this
investment by $550,000 at December 31, 2008.




16





During
2008, the Company exchanged 50% of its ownership in this investment with a third
party for no cash consideration, however, the acquirer contractually agreed to
assume 50% of the Company’s obligations with respect to future development
expenses. The Company recorded a $635,000 loss on disposition of this investment
in its consolidated statement of operations.





During
the year ended December 31, 2008, majority owners of the Jollin and Tonono
concessions formed an Argentine-registered joint venture and paid, in the
aggregate, approximately $848,00 of development costs, all of which were
capitalized. Since the Company is not currently registered as a foreign company
in Argentina, it could not become a member of the joint venture in 2008. The
other owners of these concessions have agreed that, upon admission of the
Company as a member of the joint venture, the Company will retain its 23.5%
ownership. However, the Company’s weighted average pro-rata portion of the 2008
aggregate development cost, of approximately $223,024, all of which is included
in accounts payable in the Company’s consolidated balance sheet at December 31,
2008, will be repaid to the other members from its pro-rata share of the future
earnings. The Company has applied for foreign registration in Argentina and
expects to be admitted as a member of the joint venture during
2009.





Currently,
there is an oil well certified for commercial operation at the Tonono
Concession. Delivery of the commercial production from this well is expected
during the second quarter. A well on the Jollin Concession contains natural gas
and can begin production upon completion of a connecting pipeline that will
connect this well to a major distribution pipeline. The connecting pipeline is
owned by the joint venture and is currently in the pre-construction phase.
If the anticipated oil and gas revenue does not offset the development costs for
these concession in 2009 and beyond, or is not sufficient to repay the Company’s
obligation to the other owners, the Company’s share of the development and
operating expenses will be borne by the other owners subject to the repayment
method described above. During the first quarter of 2009, the Company paid
approximately $193,500 for development expenses at the Jollin and Tonono
concessions, all of which was capitalized, and is included in the Company’s
consolidated financial statements.





During
2008, the Company purchased 40% of the oil and gas exploration rights to five
geographically defined areas in the Salta Province of Northern Argentina from
Kestal, SA, a company that acquired 100% of these explorations rights from the
government of Argentina in 2007. Kestal retained a 60% interest. The price
Kestal paid to acquire these rights from the government was determined by the
process described above. The Company paid the $697,000 purchase price in cash
and incurred no additional costs or expenses related to this investment in 2008.
The Company expects that in 2009 and 2010, substantially all of the exploration
costs required to retain these exploration rights will be borne by the majority
owner.





17




The
Company has 9% ownership of the Tartagal and Morillo oil and gas
concessions located in Northern Argentina. During 2007, the Company purchased an
18% ownership of these concessions and paid the purchase price by issuing a
non-interest bearing note in the principal amount of $480,000 to Oxipetrol, one
of the other owners, with a maturity date of July 2008. The purchase price for
this investment was based on the original price paid to the Argentine government
to acquire these concessions, following the process described above. Prior to
the maturity date, the Company and Oxipetrol mutually agreed to reduce the
principal amount of the Company’s note primarily because of changes in oil and
gas prices. Based upon the purchase price reduction, the Company repaid
Oxipetrol $450,000 at the maturity date. Based on these circumstances, the
Company recorded a one time, retroactive adjustment reducing the value of this
investment by $30,000 at December 31, 2008.





During
2008, the Company exchanged 50% of its ownership in this investment with a third
party for no cash consideration, however, the acquirer contractually agreed to
assume 50% of the Company’s obligations with respect to future development
expenses. The Company recorded a $225,000 loss on disposition of this investment
in its consolidated financial statements.





In March
2009, a Hong Kong public company purchased 60% of the ownership
in the Tartagal and Morillo Concessions, from the other majority owners, for
total consideration of approximately $270 million. These funds will be used for
development and operating expenses in 2009 and beyond.





The
Company evaluated these investments for impairment and concluded that, except as
described above, no loss in value occurred as of March 31, 2009. The following
table summarizes the Company’s investments in these nonconsolidated
affiliates.




Concession
      Investments
              
              
              Exploration
                Rights
              
              
              TotalAt
      December 31, 2007
              
              $
              2,300,000
              
              
              $
              —
              
              
              $
              2,300,000Adjustment
      of purchase price
              
              
              (580,000
              )
              
              
              —
              
              
              
              (580,000
              )Disposition
      of investment, net
              
              
              (860,000
              )
              
              
              —
              
              
              
              (860,000
              )Additional
      investment in 2008
              
              
              223,024
              
              
              
              697,000
              
              
              
              920,024Equity
      in net earnings (loss)
              
              
              —
              
              
              
              —
              
              
              
              —At
      December 31, 2008
              
              
              1,083,024
              
              
              
              697,000
              
              
              
              1,780,024Additional
      investments in 2009
              
              
              193,500
              
              
              
              —
              
              
              
              193,500At
      March 31, 2009
              
              $
              1,276,524
              
              
              $
              697,000
              
              
              $
              1,973,524




18




7.
NONCONTROLLING INTEREST





During
2008, the Company discontinued its operations in the Far East (Indonesia) and
the operations of its Puerto Rico real estate development partnerships. For the
year ended December 31, 2008, the Company wrote off all balances in connection
with these joint ventures and recorded a gain on the disposal of the
discontinued operations of approximately $230,057, which was included in
discontinued operations on the Company’s consolidated statements of operations
for the year ended December 31, 2008.





The
Company continues to maintain a 45% interest in Delta-Envirotech, Inc. which
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 beneficiaries of a variable interest
entity to consolidate the 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. Effective
January 1, 2009, the Company completed its implementation of SFAS No. 160,
“Noncontrolling Interests in Consolidated Financial Statements- An Amendment of
ARB No. 51.”




8.
SHORT-TERM DEBT




March
      31,
                2009
              
              
              December
      31,
                2008Notes
      payable to three investors, interest at 8%, due November 6, 2008
      (1)
              
              $
              150,655
              
              
              $
              150,655Note
      payable to third party, interest at 6%, due April 2009
              
              
              30,000
              
              
              
              30,000Notes
      payable to stockholders and related parties, interest at 6%, due on
      demand
              
              
              347,316
              
              
              
              280,553Note
      payable to Ambika, S.A.,Non-interest
      bearing, payable on demand
              
              
              200,000
              
              
              
              —$
              727,971
              
              
              $
              461,208




(1)The
Company did not repay the notes at the maturity date. The Company is currently
negotiating amended terms with the noteholders. If the Company and the
noteholders can not agree upon an amendment to the note, including an extension
of the maturity date, the Company may receive a notice of default. If the
Company receives a notice of default and fails to repay the notes, the lenders
could initiate legal proceedings and obtain a judgment against the
Company.





Interest
expense for the three months ended March 31, 2009 and 2008 amounted to $8,033
and $(36,856), respectively. Accrued interest at March 31, 2009 and December 31,
2008 amounted to $29,402 and $24,370, respectively and is included in accrued
expenses on the Company’s consolidated balance sheets.





19





9.
CONVERTIBLE DEBT





In
connection with the March 4, 2008 merger, the Company assumed convertible debt
obligations of $397,340. A note in the principal amount of $193,740 was not
repaid at its maturity date. 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. If the Company receives a notice of default and
fails to repay the note, the lender could initiate legal proceedings and obtain
a judgment against the Company.





In April
2008, the Company issued 2,300,571 shares of common stock in payment of the
aggregate principal amount of $143,600 of convertible notes and issued 115,634
shares of common stock in payment of the accrued interest of
$7,048.





At March
31, 2009, the Company's outstanding convertible notes were convertible into
2,749,920 shares of common stock.





The
following table shows the maturities by year of total face amount of the
convertible debt obligations at March 31, 2009:




2009
              
              $
              253,740$
              253,740





For the
three months ended March 31, 2009 and 2008, the Company recorded interest
expense of $1,937 and $1,937, respectively. As of March 31, 2009 and December
31, 2008, accrued interest of $47,212 and $42,275, respectively, is included in
accrued expenses on the Company's consolidated balance sheets.




10.
ACCRUED EXPENSES





Accrued
expenses consist of the following:





March
      31,
                2009
              
              
              December
      31,
                2008Professional
      fees
              
              $
              23,000
              
              
              $
              33,000Interest
      expense
              
              
              76,614
              
              
              
              66,664Payroll
      expense
              
              
              647,508
              
              
              
              644,508Payroll
      expense-officers
              
              
              59,471
              
              
              
              50,296Payroll
      tax expense
              
              
              49,497
              
              
              
              45,481Accrued
      consulting fees
              
              
              419,877
              
              
              
              419,877Other
      accrued expenses
              
              
              103,589
              
              
              
              103,589$
              1,406,557
              
              
              $
              1,363,395




20




During
the year ended December 31, 2008, pursuant to a written agreement with the
former president of the Company, $117,436 of his accrued salary was
eliminated.





Accrued
consulting fees as of March 31, 2009 and December 31, 2008 include $318,667
pursuant to a consulting agreement that had been terminated for cause by the
Company.




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.





For the
three months ended March 31, 2009 and 2008, the Company issued –0- and
10,000,000 shares of common stock, respectively, for services valued at $-0- and
$200,000, valued at $0.02 per share.




12.   BUSINESS
SEGMENT INFORMATION





The
Company’s reporting business segments are geographic and
include   North America (United States) and South America. 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 Ended March 31,2009
              
              
              2008Total
      Revenue:United
      States
              
              $
              —
              
              
              $
              —South
      America
              
              
              —
              
              
              
              —$
              —
              
              
              $
              —Income
      (Loss) from Continuing Operations:United
      Sates
              
              $
              (290,140
              )
              
              $
              —South
      America
              
              
              —
              
              
              
              —$
              (290,140
              )
              
              $
              —




13.   INCOME
TAXES





The
Company adopted the provisions of 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.





21





14. SHARE
BASED COMPENSATION





The
Company records compensation expense in its consolidated statement of operations
related to employee stock-based options and awards in accordance with SFAS No.
123(R) "Share-Based Payment."





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.





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, 2009 and 2008,
the Company issued and –0- and 10,000,000 shares, respectively, and recorded
compensation expense of $-0- and $200,000, respectively, in conjunction with the
issuance of these shares.





Stock
Option Plan





In
conjunction with the March 4, 2008 merger, the Company assumed the obligation of
7,978,000 outstanding stock options at their fair value. As of March 31, 2009,
6,500,000 shares of common stock remain available for issuance under the stock
option plan.





22




A summary
of the option activity under the Company’s stock option plan as of December 31,
2008 and changes during the three months ended March 31, 2009, is presented
below.





Options
              
              Shares
              
              
              Weighted-Average
      Exercise Share Price
              
              
              Weighted-
      Average Remaining Contractual Term
              
              
              Aggregate
                Intrinsic
                ValueOutstanding
      atJanuary 1,
      2009
              
              
              6,500,000
              
              
              $
              0.11Options
      granted
              
              
              -
              
              
              $
              -Options
      exercised
              
              
              -
              
              
              $
              -Options
      cancelled/expired
              
              
              -
              
              
              $
              -Outstanding
      atMarch 31,
      2009
              
              
              6,500,000
              
              
              $
              0.11
              
              
              
              2.2
              
              
              $
              (175,000
              )Exercisable
      atMarch 31,
      2009
              
              
              6,500,000
              
              
              $
              0.11
              
              
              
              2.2
              
              
              
              —





Stock
compensation expense applicable to stock options for the three months ended
March 31, 2009 was approximately $196,745. The aggregate intrinsic value of
options outstanding as of March 31, 2009 was $(175,000).





All of
the Company’s outstanding options were exercisable as of March 31,
2009.





At March
31, 2009, there was $425,545 of total unrecognized compensation cost related to
share-based compensation arrangements granted under the stock option plan. The
cost is expected to be recognized over a weighted average period of 2.2
years.





15.
COMMITMENTS AND CONTINGENCIES





Consulting
Agreements





The
Company had a consulting agreement that expired during the year ended December
31, 2008. As of March 31, 2009 and December 31, 2008, consulting fees of
$201,200 associated with this agreement are included in accrued expenses on the
Company's consolidated balance sheets.




16. LEGAL
PROCEEDINGS





On
September 16, 2008, the Company was notified of a complaint filed with the
Pennsylvania Department of Labor & Industry by its former President and CEO
alleging non-payment of wages in the amount of $53,271. The Company also
received notice of a similar complaint filed by a former employee alleging
non-payment of wages in the amount of $17,782. In October 2008, the Company
entered into repayment agreements with both of the former employees. The Company
has not made any payments to these two former employees pursuant to the
agreements. The Company believes the resolution of this matter will not have a
material effect on the Company or its operations.





On
February 5, 2009, the Company was notified that it was named as a co-defendant
in a citation corporate filed in the District Court in Harris County, Texas in
November 2007, by Equisource Ventures. The suit alleges breach of contract and
unjust enrichment, and the plaintiff seeks actual and exemplary damages for
unpaid consulting fees, attorneys’ fees, other costs and interest. The Company
denies any wrongdoing and will contest vigorously the claims asserted against
it. The Company also believes that the resolution of this matter will have no
material effect upon the Company or its operations.




17.  SUBSEQUENT
EVENT





During
April 2009, the Company borrowed $14,987 from a related party pursuant to a 6%
promissory note, payable upon written demand by the lender.




23




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. In 2003, we
established business operations focused on providing environmental and
construction technologies and services
in the Far East, the Middle East, and the United States. As of December 31,
2008, we discontinued our construction technology activities and our business in
the Far East (Indonesia).





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





The
Company’s principal business at this time is conducted by our subsidiary, South
American Hedge Fund, which has 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 North America. Following the acquisition of
SAHF, management has continued to pursue selected business opportunities in the
Middle East These activities are conducted by our joint venture subsidiary,
Delta-Envirotech, Inc. (“Envirotech”). We have operating control of Envirotech
and hold a 45% percent ownership interest.





RESULTS
OF OPERATIONS





During
the three months ended March 31, 2009, we incurred a net loss of $306,624
primarily due to a loss from continuing operations of approximately $300,000.
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, 2009 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
2008





During
the three months ended March 31, 2009, we incurred a net loss from continuing
operations of
approximately $300,000 compared to approximately $569,000 for the three months
ended March 31, 2008. The decrease in our loss from continuing operations for
the three months ended March 31, 2009 over the comparable period of the prior
year was primarily due to a decrease in general and administrative expenses of
approximately $312,000.





Our net
loss for the three months ended March 31, 2009 was approximately $307,000
compared to a net loss of approximately $2,623,000 for the comparable prior year
period. The net loss for the three months ended March 31, 2008 included a loss
from discontinued operations of approximately $2,054,000 associated with the
liquidation of the investment portfolio.




24




PLAN OF
OPERATION





The
primary focus of the Company’s business is its South American Hedge Fund
subsidiary that has investments in oil and gas exploration and production 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 North America. As of December 31, 2008, the securities trading activities of
South American Hedge Fund were accounted for as discontinued
operations.





Oil and
Gas Investments





Our main
source of revenue will derive from the sale of crude oil and natural gas
produced form the four oil and gas concessions in which we have made
investments. While we are not the operators of these concessions, we expect to
have representation on the operating committees that are responsible for
managing the business affairs of these concessions. Our ownership interests in
these concessions range from nine to 23.5%.





Jollin
and Tonono Concessions





In 2008,
the majority owners of these concessions formed an Argentine-registered joint
venture to operate these concessions. Since SAHF is not currently registered in
Argentina, it could not become an official member of the joint venture. The
other owners of the joint venture have agreed that SAHF will be admitted as a
member of the joint venture, upon the registration of SAHF as a foreign company
in Argentina. SAHF has applied for foreign registration and expects to become a
member of the joint venture in 2009.





A well
located in the Tonono Concession became operational for the commercial
production of oil in the
first quarter of 2009. Delivery of the commercial production is expected in the
second quarter.  A well located in the Jollin Concession contains
commercial quantities of natural gas. A natural gas pipeline connecting the
Jollin Concession to a major distribution pipeline is in the pre-construction
phase. The connecting pipeline is being constructed and will be owned by the
joint venture. It is expected to be completed during the second quarter of 2009.
Upon completion, it will permit the joint venture to commence deriving
additional revenue from the sale of natural gas.





Tartagal
and Morillo Concessions





In 2008,
the majority owners of the Tartagal and Morillo Concessions agreed to form an
Argentine-registered joint venture and applied for government approval of the
license to operate the concessions. SAHF expects to receive its foreign
corporation registration in 2009 and join the joint venture when it formed and
is registered with the government.





In March
2009, a Hong Kong public company, following approval by its shareholders, agreed
to acquire a 60% participation interest in these concessions for approximately
$280 million. The Company expects that the funds from this acquisition will be
used for development and operating expenses in 2009 and beyond. Deliveries of
crude oil from these concession are expected to begin in 2009.





Exploration
Rights





SAHF
holds a 40% interest in the oil and gas exploration rights to five
geographically defined area in the Salta Province of Northern Argentina.
Provided certain development activities are under taken by the majority owner,
these exploration rights will remain in effect until the year 2010.





Middle
East





Envirotech
is the Middle East distributor of an organic supplement designed to increase
crop yield. During the second half of 2008, a Saudi Arabian farm operator
purchased sample quantities of the organic supplement for crop testing.
Subsequent purchases in commercial quantities will depend upon the evaluation of
the crop yield that will begin in the second quarter of 2009.




FUNDING





Our
current business plan for 2009 and beyond anticipates a substantial increase in
revenue primarily from our investments in oil and gas concessions in Argentina.
If we do not achieve the expected levels of revenue, we may be required to raise
additional capital through equity and/or debt financing.




25





LIQUIDITY





At March
31, 2009, we had a working capital deficit of approximately $2.7 million,
compared with a working capital deficit of approximately $2.4 million at
December 31, 2008. The increase as of March 31, 2009 was due primarily to
increases in accrued expenses of approximately $34,000 and increases in notes
payable of approximately $267,000.





At March
31, 2009, we had total assets of approximately $2.0 million compared to total
assets of approximately $1.8 million at December 31, 2008. The increase is
primarily attributable to additional investments in the amount of approximately
$193,000 made in our oil and gas concessions in Argentina.





Cash
decreased approximately $9,000 for the three months ended March 31, 2009. The
decrease is primarily attributable to additional investments in our oil and gas
concessions of approximately $193,000 and cash used in operations activities
(primarily a net loss of $306,624 offset by the non-cash option issuance of
$196,745) offset by proceeds from loans of approximately $267,000.





CRITICAL
ACCOUNTING ISSUES





The
Company's discussion and analysis of its financial condition and results of operations
are based upon the Company's financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United
States of America. The preparation of the financial statements requires the
Company to make estimates and judgments that affect the reported amount of assets,
liabilities, and expenses, and related disclosures of contingent assets and
liabilities. On an on-going basis, the Company evaluates its estimates, including
those related to intangible assets, income taxes and contingencies and litigation.
The Company bases its estimates on historical experience and on various
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about carrying values of assets
and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or conditions.





Other
Matters





Accounting
Pronouncements





In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which
enhances existing guidance for measuring assets and liabilities using fair
value.  This Standard provides a single definition of fair value,
together with a framework for measuring it, and requires additional disclosure
about the use of fair value to measure assets and liabilities. In February 2008,
the FASB issued FASB Staff Position SFAS 157-1, “Application of SFAS No. 157 to
SFAS No. 13 and its “Related Interpretive Accounting Pronouncements that Address
Leasing Transactions,” (“FSP SFAS 157-1”) and FASB Staff Position SFAS 157-2,
“Effective Date of SFAS No. 157” (“FSP SFAS 157-2”). FSP SFAS 157-1 excludes
SFAS No. 13 and its related interpretive accounting pronouncements that address
leasing transactions from the requirements of SFAS No. 157, with the exception
of fair value measurements of assets and liabilities recorded as a result of a
lease transaction but measured pursuant to other pronouncements within the scope
of SFAS No. 157. FSP SFAS 157-2 delays the effective date of SFAS No. 157 for
all nonfinancial assets and nonfinancial liabilities, except those that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually). FSP SFAS 157-1 and FSP SFAS 157-2 became effective
for the Company upon adoption of SFAS No. 157 on January 1, 2008. See Note 4 of
Notes to Consolidated Financial Statements for disclosures related to the
Company’s financial assets accounted for at fair value on a recurring or
nonrecurring basis. The Company completed its implementation of SFAS no. 157
effective January 1, 2009 and it did not have a material impact on its 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 has adopted SFAS No. 141(R) effective January 1,
2009 and it did not have a material impact on its financial
statements.




26





In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (“SFAS No. 162”). SFAS No. 62 identifies the sources of
accounting principles and the framework for selecting the principles to be used
in the preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (GAAP) in
the United States. The Company has adopted SFAS No. 162 effective January 1,
2009 and it did not have a material impact on its financial
statements.





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 establishes 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 interest) 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 No.
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 of the deconsolidation date. SFAS No. 160 also
includes expanded disclosure requirements regarding the interest of the parent
and its non-controlling interest. SFAS No. 160 is effective for fiscal years,
and interim periods other than fiscal years, beginning on or after December 15,
2008. The Company has adopted SFAS No. 160 effective January 1, 2009 and it did
not have a material impact on its financial statements.





Critical
Accounting Policies





The
Securities and Exchange Commission recently issued “Financial Reporting Release
No. 60 Cautionary Advice About Critical Accounting Policies” (“FRR 60”),
suggesting companies provide additional disclosures, discussion and commentary
on their accounting policies considered most critical to its business and
financial reporting requirements. FRR 60 considers an accounting policy to be
critical if it is important to the Company’s financial condition and results of
operations, and requires significant judgment and estimates on the part of
management in the application of the policy. For a summary of the Company’s
significant accounting policies, including the critical accounting policies
discussed below, please refer to the accompanying notes to
the financial statements.





Foreign
currency risk - 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. The functional currency
in South America is the U.S. dollar. Translation adjustments are recorded in
Cumulative Other Comprehensive Income.





The
Company assesses potential impairment of its long-lived assets, which include
its property and
equipment, investments, and its identifiable intangibles such as deferred
charges under the guidance of SFAS 144 “Accounting for the Impairment or
Disposal of Long-Lived Assets.” The Company must continually determine if a
permanent impairment of its long-lived assets has occurred and write down the
assets to their fair values and charge current operations for the measured
impairment.





Investments
in non-consolidated affiliates – These investments consist of the Company’s
ownership interests in oil and gas development and exploration rights in
Argentina, net of impairment losses if any.





We
evaluate these investments for impairment when indicators of potential
impairment are present. Indicators of impairment include, but are not limited
to, levels of oil and gas reserves, availability of pipeline (or other
transportation) capacity and infrastructure and management of the operations in
which the investments were made.





27





ITEM
3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.





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




ITEM
4T. CONTROLS AND PROCEEDURES





a.
Disclosure controls and procedures.





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





b.
Changes in internal controls over financial reporting.





There
have been no changes in the Company's internal controls over financial reporting that
occurred during the Company's last fiscal quarter to which this report relates that have
materially affected, or are reasonably likely to materially affect, the Company's
internal control over financial reporting.





PART II—OTHER
INFORMATION





Item
1. LEGAL PROCEEDINGS.





On
September 16, 2008, the Company was notified of a complaint filed with the
Pennsylvania Department of Labor & Industry by its former President and CEO
alleging non-payment of wages in the
amount of $53,271. The Company also received notice of a similar complaint filed
by a former employee alleging non-payment of wages in the amount of $17,782. In
October 2008, the Company entered into repayment agreements with both of the
former employees. As of the date of this report, the Company has not made any
payments to these two former employees pursuant to these
agreements.





On
February 5, 2009, the Company was notified that it was named as a co-defendant
in a citation corporate filed in the District Court in Harris County, Texas in
November 2007, by Equisource Ventures. The suit alleges breach of contract and
unjust enrichment, and the plaintiff seeks actual and exemplary damages for
unpaid consulting fees, attorneys’ fees, other costs and interest. The Company
denies any wrongdoing and will contest vigorously the claims asserted against
it. The Company also believes that the resolution of this matter will have no
material effect upon the Company or its operations.





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.




28





ITEM
5. OTHER INFORMATION.




Not
applicable.





ITEM
6.  EXHIBITS.





10.48a
            Second
      Amendment dated as of April 16, 2009 to 6% promissory notes issued
      toEgani,
      Inc. in the aggregate principal amount of
  $43,900.





10.49a
            Second
      Amendment dated as of April 16, 2009 to 6% promissory notes issued
      toSecurity
      Systems International, Inc. in the aggregate principal amount
      of$136,900.





31.1
            Certification
      of Chief Executive Officer Pursuant to Section 302 of TheSarbanes
      Oxley Act of 2002.





31.2
            Certification
      of Chief Financial Officer Pursuant to Section 302 of TheSarbanes
      Oxley Act of 2002.





32.1
            Certification
      of Chief Executive Officer Pursuant to 18  U.S.C. Section 1350
      asadopted
      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
      asadopted
      pursuant to Section 906 of the Sarbanes-Oxley Oxley Act of
      2002.




29





SIGNATURES





In
accordance with the requirements of the Exchange Act, the Company has caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.




DELTA MUTUAL,
    INC.Dated:
      May 20, 2009
              BY:
              /s/
      Daniel R. PeraltaDaniel
      R. PeraltaPresident
      and Chief Executive Officer
  30





EXHIBIT
INDEX





10.48a
            Second
      Amendment dated as of April 16, 2009 to 6% promissory notes issued toEgani,
      Inc. in the aggregate principal amount of $43,900, filed
      herewith.





10.49a
            Second
      Amendment dated as of April 16, 2009 to 6% promissory notes issued toSecurity
      Systems International, Inc. in the aggregate principal amount of$136,900,
      filed herewith.





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





31.2
            Certification
      of Chief Financial Officer Pursuant to Section 302 of theSarbanes-Oxley
      Act of 2002, filed herewith.





32.1
            Certification
      of Chief Executive Officer Pursuant to 18 U.S.C. Section1350,
      as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of2002,
      filed herewith.





32.2
            Certification
      of Chief Financial Officer Pursuant to 18 U.S.C. Section1350,
      as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of2002,
      filed herewith.





31