FORM
        10-QSB
 
 SECURITIES
        AND EXCHANGE COMMISSION
 WASHINGTON,
        D.C.
 
 x QUARTERLY
        REPORT
        PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
 ACT
        OF
        1934
 
 For
        the
        quarterly period ended March 31, 2007
 
 OR
 
 o TRANSITION
        REPORT
        PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
 ACT
        OF
        1934
 
 For
        the
        transition period from ____________ to _________________
 
 Commission
        File Number 000-30563
 
 DELTA
        MUTUAL, INC.
 
 (Exact
        name of registrant as specified in its charter)
  DELAWARE
                
                14-1818394(State
                    or other jurisdiction of
                
                (I.R.S.
                    Employerincorporation
                    or organization)
                
                Identification
                    No.)
 111
        NORTH
        BRANCH STREET, SELLERSVILLE, PA 18960
 
 (215)
        258-2800
 
 (Address
        and telephone number, including area code, of
 registrant's
        principal executive office)
 
 (Former
        name, former address and former fiscal year, if changed
 since
        last report)
 
 Indicate
        by check mark whether the registrant (1) has filed all reports required to
        be
        filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
        preceding 12 months (or for such shorter period that the Registrant was required
        to file such reports), and (2) has been subject to such filing requirements
        for the past 90 days.
 
 YES x
        NO o
  Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act).
 o
        Yes x No
 
 Indicate
        the number of shares outstanding of each of the issuer's classes of common
        stock, as of the latest practicable date.
 
 At
        May
        17, 2007, there were 62,272,286 shares of Common Stock, $.0001 par value, outstanding.




DELTA
        MUTUAL, INC.
 
 INDEX
  PagePart
                  I. Financial Information
              1Item
                  1. Financial Statements
              1Consolidated
                  Balance Sheet as of March 31, 2007 (unaudited)
              2Consolidated
                  Statements of Operations for the Three Months Ended March 31, 2007and
                  2006
                  (unaudited)
              3Consolidated
                  Statements of Cash Flows for the Three Months Ended March 31, 2007
                  and
                  2006 (unaudited)
              4-5Notes
                  to Unaudited Consolidated Financial Statements
              6-15Item
                  2. Management's Discussion and Analysis or Plan of
                  Operation
              16Item
                  3. Controls and Procedures
              20Part
                  II. Other Information
              20Item
                  5. Other Information
              20Item
                  6. Exhibits
              20Signatures
              21




PART
        I.
        FINANCIAL INFORMATION
 
 Item
        1.
        Financial Statements
  Certain
        information and footnote disclosures required under accounting
        principles generally accepted in the United States of America have been
        condensed or omitted from the following consolidated financial statements pursuant
        to the rules and regulations of the Securities and Exchange Commission. It
        is
        suggested that the following consolidated financial statements be read in conjunction
        with the year-end consolidated financial statements and notes thereto
        included in the Company's Annual Report on Form 10-KSB for the year ended
        December 31, 2006.
  The
        results of operations for the three months ended March 31, 2007 and
        2006
        are not necessarily indicative of the results for the entire fiscal year
        or
        for any other period.
  Page
            1
 **DELTA
                    MUTUAL, INC. AND SUBSIDIARIES****CONSOLIDATED
                    BALANCE SHEET****(UNAUDITED)**
  March
                    31,2007ASSETSCurrent
                    Assets:Cash
                
                $
                34,774Prepaid
                    expenses
                
                
                202,704Total
                    Current Assets
                
                
                237,478Property
                    and equipment - net
                
                
                426,748Intangible
                    asset
                
                
                131,679Other
                    assets
                
                
                1,400TOTAL
                    ASSETS
                
                $
                797,305LIABILITIES
                    AND STOCKHOLDERS' DEFICIENCYCurrent
                    Liabilities:Accounts
                    payable
                
                $
                184,226Accrued
                    expenses
                
                
                932,697Convertible
                    debt
                
                
                652,740Notes
                    payable
                
                
                240,655TOTAL
                    LIABILITIES
                
                
                2,010,318Minority
                    interest in consolidated subsidiaries
                
                
                294,483Stockholders'
                    Deficiency:Common
                    stock $0.0001 par value - authorized100,000,000
                    shares; 62,272,286outstanding
                
                
                6,227Additional
                    paid-in-capital
                
                
                7,944,752Accumulated
                    deficit
                
                
                (9,448,475
                )Subscription
                    receivable
                
                
                (10,000
                )Total
                    Stockholders' Deficiency
                
                
                (1,507,496
                )TOTAL
                    LIABILITIES ANDSTOCKHOLDERS'
                    DEFICIENCY
                
                $
                797,305
  See
                    Notes to Unaudited Consolidated Financial
                    Statements






Page
          2




**DELTA
                  MUTUAL, INC. AND SUBSIDIARIES****CONSOLIDATED
                  STATEMENTS OF OPERATIONS****(UNAUDITED)**
  Three
                  MonthsEnded March 31,2007
              
              2006Revenue
              
              $
              -
              
              $
              160,722Costs
                  and ExpensesCost
                  of Sales
              
              
              -
              
              
              49,738General
                  and administrativeexpenses
              
              
              541,935
              
              
              743,414Impairment
                  of long term asset
              
              
              -
              
              
              -541,935
              
              
              793,152Loss
                  from operations
              
              
              (541,935
              )
              
              (632,430
              )Accretion
                  of convertible debt
              
              
              -
              
              
              (87,952
              )Interest
                  expense
              
              
              (6,983
              )
              
              (11,939
              )Loss
                  before minority interest
              
              
              (548,918
              )
              
              (732,321
              )Minority
                  interest share of (income)loss
                  of consolidated subsidiaries
              
              
              (37,053
              )
              
              (70,379
              )Loss
                  before benefit from income taxes
              
              
              (585,971
              )
              
              (802,700
              )Benefit
                  from income taxes
              
              
              -
              
              
              -Net
                  loss
              
              $
              (585,971
              )
              $
              (802,700
              )Loss
                  per common share-basic
                  and diluted
              
              $
              (0.01
              )
              $
              (0.02
              )Weighted
                  average number ofcommon
                  shares outstanding-basic
                  and diluted
              
              
              62,185,922
              
              
              38,630,794
  See
                  Notes to Unaudited Consolidated Financial
                  Statements




Page
          3




**DELTA
                  MUTUAL, INC. AND SUBSIDIARIES****CONSOLIDATED
                  STATEMENTS OF CASH FLOWS****(UNAUDITED)**
  Three
                  Months Ended March 31,2007
              
              2006Cash
                  flows from operatingactivities:Net
                  loss
              
              $
              (585,971
              )
              $
              (802,700
              )Adjustments
                  to reconcile net loss tonet
                  cash used in operating activities:Depreciation
                  and amortization
              
              
              13,121
              
              
              11,449Non-cash
                  compensation
              
              
              13,880
              
              
              184,790Accretion
                  of convertible debt
              
              
              -
              
              
              87,952Compensatory
                  element of optionissuance
              
              
              196,745
              
              
              64,145Minority
                  interest in income (losses) ofconsolidated
                  subsidiaries
              
              
              37,053
              
              
              70,379Changes
                  in operating assetsand
                  liabilities
              
              
              105,419
              
              
              91,969Net
                  cash used in operating activities
              
              
              (219,753
              )
              
              (292,016
              )Cash
                  flows from investing activities:Deposit
                  on land
              
              
              (25,000
              )
              
              -Refund
                  of land deposit
              
              
              35,500
              
              
              -Net
                  cash provided byinvesting
                  activities
              
              
              10,500
              
              
              -Cash
                  flows from financing activities:Proceeds
                  from sale of common stockand
                  deferred stock purchase
              
              
              -
              
              
              144,000Proceeds
                  from exercise of warrants
              
              
              -
              
              
              73,000Proceeds
                  from convertible debtfinancing
              
              
              17,000
              
              
              -Repayment
                  of loan
              
              
              -
              
              
              (23,910
              )Payments
                  to minority interests
              
              
              (5,000
              )
              
              -Proceeds
                  from minority interest
              
              
              20,880
              
              
              42,315Net
                  cash provided byfinancing
                  activities
              
              
              32,880
              
              
              235,405Net
                  increase (decrease) in cash
              
              
              (176,373
              )
              
              (56,611
              )Cash
                  - Beginning of period
              
              
              211,147
              
              
              67,042Cash
                  - End of period
              
              $
              34,774
              
              $
              10,431
  See
                  Notes to Unaudited Consolidated Financial
                  Statements




Page
          4




**DELTA
                  MUTUAL, INC. AND SUBSIDIARIES****CONSOLIDATED
                  STATEMENTS OF CASH FLOWS**(Continued)**(UNAUDITED)**
  Three
                  Months Ended March 31,2007
              
              2006Supplementary
                  information:Cash
                  paid during year for:Interest
              
              $
              -
              
              $
              1,564Income
                  taxes
              
              $
              -
              
              $
              -Changes
                  in operating assets andliabilities
                  consists of:(Increase)
                  in accounts receivable
              
              
              -
              
              
              (165,082
              )(Increase)
                  decrease in prepaid expenses
              
              
              47,250
              
              
              65,059(Increase)
                  decrease in deposits
              
              
              -
              
              
              (24,500
              )Increase
                  in accounts payableand
                  accrued expenses
              
              
              58,169
              
              
              216,492$
              105,419
              
              $
              91,969Non-cash
                  financing activities:Issuance
                  of common stock for debt
              
              $
              -
              
              $
              15,000Issuance
                  of convertible notes fordeferred
                  stock purchase
              
              $
              283,000
              
              $
              -Issuance
                  of common stock in lieu ofpayment
                  of accured expenses
              
              $
              13,880
              
              $
              15,000Issuance
                  of common stock for services
              
              $
              -
              
              $
              288,542




See
                  Notes to Unaudited Consolidated Financial
                  Statements




Page
          5


**DELTA
        MUTUAL INC. AND SUBSIDIARIES**
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 March
        31,
        2007
  **1.** **DESCRIPTION
        OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
  **Organization**
  Delta
        Mutual, Inc. and subsidiaries (“Delta” or the “Company”) are engaged in
        providing environmental and construction technologies and services to certain
        geographic reporting segments in the Far East, the Middle East, the United
        States and Puerto Rico.
  The
        Company’s environmental activities are conducted by its joint venture subsidiary
        Delta-Envirotech, Inc. (“Envirotech”) headquartered in Virginia. Envirotech
        has established a strategic alliance with ZAFF International, Ltd., a technology
        company in Saudi Arabia, to pursue environmental and other projects in Saudi
        Arabia and other areas of the Middle East. Envirotech also formed a local
        joint
        venture company in Indonesia, PT Triyudha-Envirotech, to perform energy and
        waste recovery operations in that country.
  The
        Company’s construction technology activities are conducted through its wholly
        owned U.S., subsidiary, Delta Technologies, Inc (“Technologies”). Technologies
        acquired the intellectual property rights and filed a patent for a
        new
        insulating concrete wall forming (ICF) system known as *Delta
        Wall* .
  **BASIS
        OF PRESENTATION**
  The
        consolidated balance sheet as of March 31, 2007, and the consolidated statements
        of operations and cash flows for the periods presented herein have been prepared
        by the Company and are unaudited. In the opinion of management, all
        adjustments(consisting solely of normal recurring adjustments) necessary
        to
        present fairly, the financial position, results of operations and cash flows
        for
        all periods presented have been made.
  The
        consolidated financial statements for the period ended March 31, 2007 have
        been
        prepared on a going concern basis, which contemplates the realization of
        assets
        and settlement of liabilities and commitments in the normal course of business.
        Management recognizes that the Company’s continued existence is dependent upon
        its ability to obtain needed working capital through additional equity and/or
        debt financing and revenue to cover expenses as the Company continues to
        incur
        losses.
  The
        Company’s business is subject to most of the risks inherent in the establishment
        of a new business enterprise. The likelihood of success of the Company must
        be
        considered in light of the expenses, difficulties, delays and unanticipated
        challenges encountered in connection with the formation of a new business,
        raising operating and development capital, and the marketing of a new product.
        There is no assurance the Company will ultimately achieve a profitable level
        of
        operations.
  The
        Company presently does not have sufficient liquid assets to finance its anticipated
        funding needs and obligations. The Company’s continued existence is dependent
        upon its ability to obtain needed working capital through additional equity
        and/or debt financing and achieve a level of sales adequate to support its
        cost
        structure. Management is actively seeking additional capital to ensure the
        continuation of its development activities and complete the proposed
        joint ventures.
        However, there is no assurance that additional capital will be obtained
        or that the joint ventures will be profitable. These uncertainties raise
        substantial doubt about the ability of the Company to continue as a going
        concern. The accompanying financial statements do not include any adjustments
        that might result from the outcome of these uncertainties should the Company
        be
        unable to continue as a going concern.
  Page
            6
  **SIGNIFICANT
        ACCOUNTING POLICIES**
  **PRINCIPLES
        OF CONSOLIDATION**
  The
        Company’s consolidated financial statements include the accounts of all
        majority-owned subsidiaries where its ownership is more than 50 percent of
        common stock. The consolidated statements also include the accounts of any
        Variable Interest Entities (“VIEs”) where the Company is deemed to be the
        primary beneficiary, regardless of its ownership percentage. All significant
        intercompany balances and transactions with consolidated subsidiaries are
        eliminated in the consolidated financial statements. Where the Company’s
        ownership interest is less than 100 percent, the minority ownership interests
        are reported in the consolidated balance sheet as a liability. The minority
        ownership interest of the Company’s earnings or loss, net of tax, is classified
        as “Minority interest in earnings of consolidated subsidiaries” in the
        consolidated statements of operations.
  **USE
        OF ESTIMATES**
  The
        preparation of consolidated financial statements in conformity with accounting
        principles generally accepted in the United States of America requires
        management to make estimates and assumptions that affect the reported amounts
        of
        assets and liabilities, and disclosure of contingent assets and liabilities
        at
        the date of the financial statements and the reported amounts of revenues
        and
        expenses during the period. Actual results could differ from those
        estimates.
  **CONCENTRATION
        OF CREDIT RISK**
  Financial
        instruments which potentially subject the Company to concentration of credit
        risk consist principally of accounts receivable. The Company grants credit
        to
        customers based on  the
        customer’s financial condition, without requiring collateral. Exposure to losses
        on the receivables is principally dependent on each customer’s financial
        condition. The Company controls its exposure to credit risk through credit
        approvals.
  **LOSS
        PER SHARE**
  Basic
        and
        diluted loss per common share is computed by dividing net loss by the weighted
        average number of common shares outstanding during the year.
        Potential common
        shares are excluded from the loss per share calculation because the effect
        would be antidilutive. Potential common shares relate to the
        convertible debt,
        stock options and common stock purchase warrants. As of March 31, 2007,
        there were 9,476,587 potential common shares related to convertible debt
        and
        7,978,000 potential common shares related to stock options. As of March
        31, 2006,
        there were 9,003,200 potential common shares related to convertible
        debt; 8,778,000
        potential common shares related to stock options and 6,850,000 potential
        common
        shares related to common stock purchase warrants.
  **REVENUE
        RECOGNITION**
  The
        Company recognizes revenue in accordance with the guidance contained in SEC
        Staff Accounting Bulletin No. 104 “Revenue Recognition Financial Statements”
(SAB No. 104). Revenue is recognized from the Company’s environmental
        remediation operation as the services are performed over the life of the
        remediation contracts.
  **PREACQUISITION
        COSTS******
  The
        Company accounts for costs incurred prior to the date of acquisition of a
        parcel
        of real property as preacquisition costs. Preacquisition costs are capitalized
        if the property was acquired or the acquisition of the property is probable.
        Capitalized preacquisition costs in excess of recoverable amounts are charged
        to
        expense.
  **EVALUATION
        OF LONG-LIVED ASSETS**
  Page
            7
  The
        Company reviews property and equipment and finite-lived intangible assets
        for
        impairment whenever events or changes in circumstances indicate the carrying
        value may not be recoverable in accordance with guidance in Statement of
        Financial Accounting Standards (SFAS) No. 144 “Accounting for the Impairment or
        Disposal of Long-Lived Assets.” If the carrying value of the long-lived asset
        exceeds the undiscounted amount of the related estimated future cash flows,
        the
        asset would be adjusted to its fair value and an impairment loss would be
        charged to operations in the period identified.
  **DEPRECIATION
        AND AMORTIZATION**
  Property
        and equipment are stated at cost. Depreciation is provided for by the
        straight-line method over the estimated useful lives of the related
        assets.
  **STOCK-BASED
        COMPENSATION**
  The
        Company has a stock-based compensation plan under which stock options and
        stock
        awards are granted to employees. Effective January 1, 2006, the Company accounts
        for stock based compensation under Statement of Financial Accounting Standards
        (“SFAS”) No. 123®, “Share-Based Payment.” The Company adopted SFAS 123® using
        the modified prospective method. Under modified prospective application,
        this
        SFAS applies to new awards and to awards for which the requisite service
        has not
        been rendered that are outstanding as of the required effective date shall
        be
        recognized as the requisite service is rendered on or after the required
        effective date. The compensation cost for the portion of awards shall be
        based
        on the grant-date fair value of those awards as calculated for either
        recognition or pro forma disclosures under SFAS 123. Changes to the grant-date
        fair value of equity awards granted before the required effective date of
        this
        Statement are precluded. The compensation cost for those earlier awards shall
        be
        attributed to periods beginning on or after the required effective date of
        this
        SFAS using the attribution method that was used under SFAS 123, except that
        the
        method of recognizing forfeitures only as they occur shall not be
        continued.
  **INCOME
        TAXES**
  The
        Company accounts for income taxes using an asset and liability approach under
        which deferred taxes are recognized by applying enacted tax rates applicable
        to
        future years to the differences between financial statement carrying amounts
        and
        the tax basis of reported assets and liabilities. The principal item giving
        rise
        to deferred taxes are future tax benefits of certain net operating loss
        carryforwards.
  **FOREIGN
        CURRENCY TRANSLATION**
  The
        functional currency for some foreign operations is the local currency. Assets
        and liabilities of foreign operations are translated at balance sheet date
        rates
        of exchange and income, expense and cash flow items are translated at the
        average exchange rate for the period. Translation adjustments in future periods
        will be recorded in Accumulated Other Comprehensive Income. The translation
        gains or losses were not material for the three months ended March 31, 2007
        and
        2006.
  **INTANGIBLES**
  In
        June
        2001, the FASB issued SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS
        No. 142 specifies the financial accounting and reporting for acquired goodwill
        and other intangible assets. Goodwill and intangible assets that have indefinite
        useful lives are not amortized but rather they are tested at least annually
        for
        impairment unless certain impairment indications are identified.
  **FAIR
        VALUE OF FINANCIAL INSTRUMENTS**
  For
        financial instruments including cash, accounts payable, accrued expenses,
        and
        convertible debt, it was assumed that the carrying amount approximated fair
        value because of the short maturities of such instruments.
  Page
            8
  **RECLASSIFICATIONS**
  Certain
        reclassifications have been made to prior period amounts to conform to the
        current year presentation.
  **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 Statement 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. SFAS No. 157 is
        effective for
        financial statements issued for fiscal years beginning after November 15,
        2007,
        and interim periods within those fiscal years. The Company does not believe
        that
        SFAS No. 157 will have a material impact on its  consolidated financial
        statements.
  In
        February 2007, the FASB issued SFAS No. 159 (“SFAS No. 159”) “The Fair Value
        Option for Financial Assets and Financial Liabilities,” providing companies with
        an option to report selected financial assets and liabilities at fair value.
        The
        Standard’s objective is to reduce both complexity in accounting for financial
        instruments and the volatility in earnings caused by measuring related assets
        and liabilities differently. It also requires entities to display the fair
        value
        of those assets and liabilities for which the company has chosen to use fair
        value on the face of the balance sheet. SFAS 159 is effective for fiscal
        years
        beginning after November 15, 2007. The Company is currently evaluating the
        impact of the adoption of this Statement on its consolidated financial
        statements.
 
 **2.** **PROPERTY
        AND EQUIPMENT**
 March
                    31, 2007Equipment
                
                $
                480,035Leasehold
                    improvements
                
                
                7,807487,842Less
                    accumulatedDepreciation
                
                
                61,094$
                426,748
 
 Depreciation
        expense for the three months ended March 31, 2007 and 2006,
        amounted to $11,333 and $9,660, respectively.
  **3.**  **INTANGIBLE
        ASSETS**
 
 Intellectual
        property costs are intellectual property included in a patent application.
        If the patent is not issued, the Company will write-off the unamortized
        amounts immediately. Other intangibles are being amortized over 20 years.
        Amortization expense was $1,788 and $1,787 for the three months
        ended March
        31, 2007 and 2006, respectively.
  Other
        intangible assets consist of the following:
 March
                    31, 2007Gross
                    Carrying
                
                AccumulatedAmount
                
                AmortizationIntellectual
                    property costs
                
                $
                143,000
                
                $
                11,321$
                143,000
                
                $
                11,321
  Page
            9
  Estimated
        amortization expense for intangible assets for the next five years is as
        follows:
 EstimatedYear
                    Ending
                
                AmortizationDecember
                    31,
                
                Expense2007
                
                $
                5,3642008
                
                
                7,1502009
                
                
                7,1502010
                
                
                7,1502011
                
                
                7,150
  2007
        represents amortization from April 1, through December 31, 2007.
 
 **4.**  **INVESTMENT
        IN JOINT VENTURES**
 
 a.
              In
                December 2003, the Company formed a joint venture project to develop
                Section 124, low income housing in the Commonwealth of Puerto Rico.
                The
                Company became the general partner and majority owner of a limited
                partnership, Delta Development Partners, LP, that holds the 85% majority
                share of Delta Developers Corp., a Puerto Rico corporation, formed
                to
                manage the construction and related activities required to build
                approximately 270 low income homes under Section 124. During the
                year
                ended December 31, 2006, the activities associated with this joint
                venture
                were discontinued. The operations of the joint venture have been
                consolidated with the Company for the three months ended March 31,
                2007
                and 2006, respectively.In
                October 2004, the Company formed a second joint venture to developSection
                124 low income housing in Puerto Rico. The Company became thegeneral
                partner and majority owner of a limited partnership, DeltaDevelopment
                Partners II, LP, that holds the 85% majority share of DeltaDevelopers
                Guayanilla Corp., a Puerto Rico corporation formed tomanage
                the construction and related activities required to buildapproximately
                300 low income homes under Section 124. During the first quarter
                of 2007, the activities associated with this joint venture werediscontinued
                and the land option deposit was returned to the Company.The
                operations of the joint venture have been consolidated with
                theCompany
                for the three months ended March 31, 2007 and 2006,
                respectively.In November 2006, The Company formed
                a new
                joint venture to develop Section 124 housing in Puerto Rico. The
                Company
                became the general partner and minority owner of a limited partnership,
                Delta TA, LP, formed to manage the construction and related activities
                to
                build approximately 330 residential units under section 124. The
                operations of this partnership have been consolidated with the Company
                since November 2006.b.
              In January 2004, the Company entered
                into a
                joint venture agreement with Hi Tech Consulting and Construction,
                Inc.
                (”Hi Tech”) forming Delta- Envirotech, Inc. for the purpose of providing
                environmental technologies and services to markets in the Middle
                East. The
                joint venture company is based in Virginia and focuses on participating
                in
                foreign government sponsored pollution remediation and other
                projects.In July 2004, the Company and Hi Tech,
                pursuant to an agreement to purchase
                stock dated January 14, 2004, each sold 75 shares of the jointventure
                to a third party, representing a ten percent (10%) interest.The
                Company and Hi-Tech each own forty-five percent (45%) of the jointventure.
  Page
            10
  The operations of the joint venture
                have been
                consolidated with the Company for the three months ended March 31,
                2007
                and 2006. Delta-Envirotech,
                Inc. meets the definition of a Variable Interest Entityas
                defined in Financial Accounting Standards Board Interpretation No.
                46(“FIN
                46”), “Consolidation of Variable Interest Entities” requiring theprimary
                beneficiaries of a variable interest entity to consolidate thatentity.
                The primary beneficiary of a variable interest entity is the partythat
                absorbs the majority of the expected losses of the entity or receivesa
                majority of the entity’s expected residual return, or both, as a resultof
                ownership, contractual or other financial interest in the
                entity.c.
              Minority interests primarily consist
                of
                ownership interest in Delta-Envirotech,
                Inc.; Delta Development Partners, LP; DeltaDevelopment
                Partners II, LP; Delta TA, LP; PT Triyudha-Envirotech;
                DeltaDevelopers
                Corp. and Delta Developers Guayanilla Corp. The
                income and losses from operations of these entities and theirrespective
                minority interests have been reflected in the Company’sconsolidated
                statements of operations for the three months ended March 31,2007
                and 2006. There are excess losses not absorbed by the minorityinterests
                due to limitations of their capital contributions. In futureperiods,
                the profits first attributable to the minority interestswill
                be first absorbed against any unused losses until the losses arefully
                absorbed. The amount on the Company’s consolidated balance
                sheetrepresents
                the minority interests as of March 31, 2007.The
                following represents a schedule of minority interests as of March31,


2007Delta
                  Development Partners LP
              
              $
              145,076Delta
                  Development Partners II, LP
              
              
              39,737Delta
                  TA, LP
              
              
              109,670Delta
                  Developers Guayanilla, Corp.
              
              
              -Delta-Envirotech,
                  Inc.
              
              
              -PT
                  Triyudha - Envirotech
              
              
              -Delta
                  Developers Corp.
              
              
              -$
              294,483




**5.**  **NOTES
      PAYABLE**





In
      April
      2005, the Company issued 8% term notes to private investors in the amount
      of $210,655, with the principal and interest due at maturity on
      October 2,
      2005. Pursuant to note modification agreements, the maturity dates of
      these notes
      were extend and in June 2006, became payable on written demand by the lenders.
      Interest expense for the three months ended March 31, 2007 and 2006 amounted
      to $4,213 and $4,213, respectively. As of March 31, 2007 accrued
      interest of $25,221 is included in accrued interest expense on
      the Company’s consolidated balance sheet.




**6.**  **CONVERTIBLE
      DEBT**


In
        September 2004, the Company issued a 6% convertible note to an investor in
        the
        principal amount of $60,000, convertible into common stock at $0.05 per share.
        In September 2006, this note became payable upon written demand by the
        lender.




In
      May
      2004, The Company issued to two related parties, two 4% convertible notes,
      in
      the aggregate principal amount of $322,900, convertible into common stock at
      $0.125 per share. By subsequent amendments, the maturity dates of these notes
      have been extended until July 10, 2007 and February 28, 2008. In 2006, one
      of
      the noteholders converted $29,160 of the principal amount into shares of common
      stock. At March 31, 2007, the principal amount of these two notes was
      $293,740.




Page
          11




On
      May 3,
      2006, the Company issued a convertible note to a related party in
      the principal amount of $16,000. The note bears interest at 6% per annum
      and matures on November 3, 2007. The note is convertible into common stock
      at a conversion price of $0.06 per share, the fair value at the date of
      issuance. During
      the three months ended March 31, 2007, the Company issued a convertible note
      to
      a related party in the principal amount of $17,000 and a convertible note to
      an
      investor in the principal amount of $266,000. Both notes bear interest of
      6% per annum and are convertible into common stock at an initial conversion
      price of $0.05 per share, the fair at the date of issuance. The notes mature
      in
      April 2008. In conjunction with the issuance of these two notes, the Company
      reclassified $266,000 recorded as deferred stock purchase, on its consolidated
      balance sheet as of December 31, 2006, to convertible notes at March 31,
      2007.




The
      following table shows the maturities by year of total face amount of the
      long-term convertible debt obligations at March 31, 2007:




2007
              
              $
              269,7402008
              
              
              383,000652,740





For
      the
      three months ended March 31, 2007 and 2006, the Company
      recorded interest
      expense of $3,219 and $10,484, respectively. On March 12, 2007, the
      Company paid $13,880 of accrued interest to a convertible noteholder by
      issuing 111,040 shares of common stock. As of March 31, 2007, accrued
      interest of $56,381 is included in accrued expenses on the Company’s
      consolidated balance sheet.





**7.**  **ACCRUED
      EXPENSES**





Accrued
      expenses consist of the following:


March
                  312007Professional
                  fees
              
              $
              61,301Interest
                  expense
              
              
              56,381Payroll
                  Expense
              
              
              380,320Payroll
                  expense officers
              
              
              125,561Payroll
                  tax expense
              
              
              34,392Other
                  accrued expenses
              
              
              274,742$
              932,697





**8.**  **LOANS
      FROM RELATED PARTIES**





In
      March
      2005, the Company borrowed $71,731 from a shareholder of the Company,
      with interest at 6% per annum and the principal and interest due in
      three
      equal installments in 2005. The note was amended in  December 2005
      extending the final installment payment to February 20, 2006. On February
      3, 2006, the Company made the final payment consisting of
      $23,910 of
      principal and$1,563 of accrued interest. Interest expense for the three
      months ended March 31, 2007 and 2006 amounted to $-0- and $287, respectively.




On
      May
      17, 2006, the Company borrowed $30,000 from a shareholder of the Company,
      at interest of 6% per annum with the principal and interest due on
      May
      17, 2008. Interest expense for the three months ended March 31, 2007
      amounted to $450. The balance due to the shareholder is included in Notes
      Payable on the Company’s consolidated balance sheet at March 31, 2007.
      Accrued interest of $1,572 in included in accrued expenses on the
      Company’s consolidated balance sheet at March 31, 2007.




Page
          12




**9.**  **OTHER
      RELATED PARTY TRANSACTIONS**




The
      Company’s Envirotech subsidiary pays monthly office rent to David Razmara,
      the president of Envirotech and a shareholder of the Company, in the
      amount of $1,000. The rent expense for the three months ended March 31,
      2007
      and 2006 amounted to $3,000 and $3,000, respectively.




**10.**  **STOCKHOLDERS’
      DEFICIENCY**





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




For
      the
      three months ended March 31, 2007, the Company issued 111,040 shares of common
      stock in payment of accrued interest valued at $0.125 per share.




**11.**  **BUSINESS
      SEGMENT INFORMATION**





The
      Company operates in four reportable segments. The segments are geographic
      and include the Far East (Indonesia), the Middle East, North America
      (United States) and Puerto Rico. The primary criteria by which financial
      performance is evaluated and resources allocated are revenue and operating
      income.




The
      following is a summary of key financial data:


Three
                  Monthsended
                  March 312007
              
              2006Total
                  Revenue:North
                  America
              
              $
              -
              
              
              -Indonesia
              
              
              -
              
              $
              160,722Middle
                  East
              
              
              -
              
              
              -Puerto
                  Rico
              
              
              -
              
              
              -$
              -
              
              $
              160,722


Operating
                  Loss:North
                  America
              
              $
              (515,677
              )
              $
              (599,521
              )Indonesia
              
              
              (8,988
              )
              
              130,057Middle
                  East
              
              
              (5,000
              )
              
              (84,484
              )Puerto
                  Rico
              
              
              (12,270
              )
              
              (78,482
              )$
              (541,935
              )
              $
              (632,430
              )




**12.**  **SHARE
      BASED COMPENSATION**





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




Page
          13




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




On
      March
      31, 2007, the Company had one share-based compensation plan, which is
      described below. During the three months ended March 31, 2007 and 2006, the
      adoption of SFAS No.123(r) resulted in incremental stock-based compensation
      expense of $196,745 and $64,145, respectively. The incremental stock-based compensation
      expense caused earnings before provision for income taxes and net earnings
      to
      decrease by $196,745 and $146,250, respectively, and basic and diluted earnings
      per common share to decrease by $0.01 per share.




The
      Company also issues shares of its common stock to non-employees as stock based
      compensation. The Company accounts for the services using the fair market value
      of the services rendered. For the three months ended March 31, 2007, the Company
      did not issue any shares of common stock to non-employees for services rendered.
      During the three months ended March 31, 2006, the Company issued 1,406,152
      shares, and recorded expense of $288,542 in conjunction with the issuance of
      those shares.




**Stock
      Option Plan**




In
      December 2001, the Company’s stockholders approved a stock option plan entitled
      the 2001 Employee Stock Option Plan (the “2001 Plan”), pursuant to which
      2,000,000 shares of common stock were reserved for issuance. In August 2004,
      the
      Company’s stockholders approved the 2004 Stock Option Plan (the “2004 Plan”),
      pursuant to which 10,000,000 shares of common stock were reserved for issuance.
      As of March 31, 2007, all shares under the 2001 Plan had been issued, and
      2,022,000 shares of common stock remained available for issuance under the
      2004
      Plan.




The
      fair
      value of each option grant is estimated on the date of the grant using the
      Black-Scholes option-pricing model with the following weighted-average
      assumptions used for grants in 2006: dividends yield of 0%, expected volatility
      of 116% and expected life of 5 years.




During
      the three months ended March 31, 2007, the Company did not issue any stock
      options. During the three months ended March 31, 2006, the Company issued
      778,000 stock options to five employees and recorded an expense of $64,145.




A
      summary
      of option activity under the 2004 Plan as of December 31, 2006 and changes
      during the three months ended March 31, 2007 is presented below:


WeightedAverageWeighted
              
              Remaining
              
              AggregateAverage
              
              Contractual
              
              IntrinsicOptions
              
              Shares
              
              Exercise
                  Price
              
              Term
              
              ValueOutstanding
                  at January 1, 2007:
              
              
              7,978,000
              
              $
              0.11Granted
              
              
              -
              
              
              -Exercised
              
              
              -
              
              
              -Forfeited,
                  expired or cancelled:
              
              
              -
              
              
              -Outstanding
                  at March 31, 2007
              
              
              7,978,000
              
              $
              0.11
              
              
              4.3
              
              $
              (398,900
              )Exercisable
                  at March 31, 2007
              
              
              3,908,940
              
              $
              0.11
              
              
              4.3
              
              $
              (195,447
              )




Page
          14





A
      summary
      of the status of the Company’s non vested options as of December 31, 2006
      and
      changes during the three months ended March 31, 2007 is presented below:




**Weighted-Average**Grant-DateNonvested
                  Options
              
              Options
              
              Fair
                  ValueNonvested
                  at January 1, 2007:
              
              
              4,069,060
              
              $
              0.11Granted
              
              
              -
              
              
              -Vested
              
              
              -
              
              
              -Forfeited,
                  expired or cancelled:
              
              
              -
              
              
              -Nonvested
                  at March 31, 2007
              
              
              4,069,060
              
              $
              0.11




At
      March
      31, 2007, there was $1,999,505 of total unrecognized compensation cost
      related to non vested share-based compensation arrangements granted under the
      2004
      Plan. The cost is expected to be recognized over a weighted average period
      of
      4.3 years.




**13.** **COMMITMENTS
      AND CONTINGENCIES**




**Consulting
      Agreements**




In
      August
      2005, the Company entered into a consulting agreement with Juan B. Rodriguez
      Pagan (“Rodriguez”) to provide certain services and assistance to the Company in
      developing its construction and building materials businesses.




For
      the
      three months ended March 31, 2007, consulting fees of $48,000 are included
      in
      accrued expenses on the Company’s consolidated statements of operations. For the
      three months ended March 31, 2007 and 2006, the Company expensed $47,250 and
      $47,250, respectively, in consulting fees in conjunction with the issuance
      of
      common stock to Rodriguez. The remainder of the stock value of $200,750 is
      included as a prepaid expense on the Company’s consolidated balance
      sheet.




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




For
      the
      three months ended March 31, 2007 and 2006, consulting fees of $13,200 have
      been
      expensed. For the three months ended March 31, 2007, $29,167 of the stock value
      associated with the issuance of shares to Straub, is included in accrued
      expenses on the Company’s consolidated statements of operations and consolidated
      balance sheet, respectively.




**14.** **INCOME
      TAXES**





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




**15.**  **SUBSEQUENT
      EVENTS**





a.
            In
                April 2007, the Company issued a convertible promissory notes to
                a related
                party in the principal amount of $26,600.


b.
            In May 2007, the Company issued a convertible promissory
              note to aninvestor
              in the principal amount of $250,000.




Page
          15


ITEM
        2.
        MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
  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 and will require
        additional capital to execute our current and planned business operations.
 
 RESULTS
        OF OPERATIONS
  During
        the three months ended March 31, 2007, we incurred a net loss of $585,971,
        because we had no revenue to offset operating expenses. 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 any additional financing or, if we are able
        to
        obtain additional financing, 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, 2007 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2006.
  Page
            16
 The
          net
          loss decreased by approximately $217,000 from $802,700 for the three months
          ended March 31, 2006 to approximately $586,000 for the three months ended
          March
          31, 2007.
 The
        items
        of significant decrease in the three months ended March 31, 2007 over the
        comparable period of the prior year were a decrease in general and
        administrative expense from approximately $743,000 in 2006 to approximately
        $542,000; a decrease in accretion of convertible debt of approximately $88,000;
        and a decrease in cost of sales of approximately $50,000.
 
 PLAN
        OF
        OPERATION
 
 The
        Company has established a wholly-owned subsidiary, a joint venture subsidiary
        and limited partnerships, primarily to establish business operations focused
        on
        providing environmental and construction technologies and services in the
        Far
        East, the Middle East, the United States and Puerto Rico.
 
 Our
        environmental remediation operations are carried out through Delta-Envirotech,
        Inc., a joint venture company formed in January 2004, with Hi Tech Consulting
        and Construction, Inc., to provide environmental technology and other services
        for certain business segments located in the Far East and the Middle East.
        We
        have operating control of, and a forty-five percent ownership interest in,
        Delta-Envirotech. We have entered into strategic alliance agreements with
        several United States-based entities with technologies and products in the
        environmental field to support the Company's worldwide activities.
 
 Our
        construction technology activities are carried out by Delta Technologies,
        Inc.
        (our wholly owned subsidiary) and focused on the United States construction
        industry but are equally well suited for use in Puerto Rico and internationally.
 
 Far
        East
        (Indonesia)
 
 In
        Indonesia, we formed a local joint venture company to commence energy and
        waste
        recovery operations. The joint venture company, PT Triyudha-Envirotech, began
        operations in December 2005, pursuant to a contract with Pertamina, the
        government owned oil company. The initial contract that required us to process
        3,000 metric tons of oil sludge was successfully completed in October 2006.
        We
        are currently negotiating a second contract to process an unlimited amount
        of
        oil sludge over a 12-month period at the same refinery and expect the
        negotiations to be concluded during the next several months.
 
 Middle
        East
 
 In
        2004,
        we entered into a strategic alliance agreement between our environmental
        remediation joint venture, Delta-Envirotech, Inc. ("Envirotech"), and ZAFF
        International, Ltd., to jointly pursue environmental and other projects in
        the
        Middle East.
 
 In
        August
        2005, we reached a working agreement to provide equipment to manufacture
        insulating concrete form (ICF) products for the building industry in Saudi
        Arabia. In September 2006, Envirotech received a letter of intent from a
        purchaser.
 
 On
        March
        8, 2007, Envirotech received the purchase agreement to supply the equipment
        and
        services for the factory in Saudi Arabia. This is our first contract in Saudi
        Arabia and our largest to date, valued at $3,369,000.
 
 The
        equipment specified in the agreement consists of several ICF technologies
        including our *Delta
        Wall* system.
        The agreement requires payment by letter of credit in four installments.
        We
        anticipate that the letter of credit will be opened before the end of the
        second
        quarter of 2007 and that the final payments will be received in the first
        quarter of 2008.
 
 During
        July and August 2006, we announced that Envirotech expanded its product line
        by
        securing the master distribution rights for the Middle East for environmentally
        friendly organic emulsifiers used to clean oil wells and oil storage tanks,
        as
        well as a gas-imaging product used in oilfield and refining operations. The
        organic emulsifiers are scheduled for additional testing during the second
        quarter of 2007. The gas-imaging product is under evaluation by ARAMCO, the
        Saudi government oil company.
  Page
            17
  United
        States
 
 In
        August
        2005, Delta Technologies, Inc. acquired certain intellectual property and
        filed
        a patent application for a new insulating concrete wall forming (ICF) system,
        now know as *Delta
        Wall* .
 
 Production
        of the *Delta
        Wall* blocks
        began in September 2006. An independent testing laboratory was hired to evaluate
        the blocks for the purpose of applying for International Commercial Code
        (ICC)
        approval. We are in the processing of selecting an engineering firm to perform
        the structural engineering evaluations necessary to complete the testing
        and
        evaluation for ICC approval.
 
 Puerto
        Rico
 
 In
        November 2006, we formed a new limited partnership to acquire a suitable
        parcel
        of land for a new housing development approved for Section 124 housing and
        zoned
        for residential construction. In January 2007, we secured an option on a
        13 acre
        tract in Toa Alta that met these requirements. Currently, we are in the process
        of obtaining bank financing to acquire the property and begin construction
        of
        the first phase of the project that will ultimately consist of approximately
        338
        residential housing units.
  FUNDING
 
 We
        are
        currently dependent on equity investments or borrowing from private investors
        to
        pay our operating expenses. There are no assurances that such investors will
        continue to advance funds or invest in the Company's securities. In the event
        we
        are unable to obtain additional capital or funding we may be unable to pursue
        our business plans. We anticipate that we will be required to raise capital
        in
        an amount up to $700,000 during the remaining three quarters of this fiscal
        year
        in order to continue to fund our current activities and to finance our planned
        business operations.
 
 LIQUIDITY
 
 We
        have
        generated limited revenue from our current operations. We must rely primarily
        on
        private placements of Company stock or debt to pay operating
        expenses.
 
 At
        March
        31, 2007 we had a working capital deficit of $1,772,840, an increase of $340,032
        in our working capital deficit compared with the first quarter of 2006. This
        increase for the period ended March 31, 2007 is a result of a decrease in
        accounts receivable and prepaid expenses and an increase in accrued expenses
        and
        convertible debt. Since we have limited sources of revenue, we expect a working
        capital deficit until our revenue is sufficient to cover our operating expenses.
 
 In
        the
        three months ended March 31, 2007, we reclassified $283,00 of stock purchase
        deposits to convertible debt. In April and May 2007, we borrowed $26,600
        from a
        stockholder of the Company and $250,000 from an investor, all pursuant to
        convertible promissory notes that are payable 12 months from the date of
        issuance.
 
 ASSETS
 
 At
        March
        31, 2007, we had total assets of $797,305, compared to total assets of
        $1,176,571 at March 31, 2006. The decrease in total assets as of March 31,
        2007
        was due to a decrease in accounts receivable, prepaid expenses and fixed
        assets,
        offset by a modest increase in cash.
 
 CRITICAL
        ACCOUNTING ISSUES
 
 The
        Company's discussion and analysis of its financial condition and results
        of
        operations are based upon the Company's financial statements, which have
        been
        prepared in accordance with accounting principles generally accepted in the
        United States of America. The preparation of the financial statements requires
        the Company to make estimates and judgments that affect the reported amount
        of
        assets, liabilities, and expenses, and related disclosures of contingent
        assets
        and liabilities. On an on-going basis, the Company evaluates its estimates,
        including those related to intangible assets, income taxes and contingencies
        and
        litigation. The Company bases its estimates on historical experience and
        on
        various assumptions that are believed to be reasonable under the circumstances,
        the results of which form the basis for making judgments about carrying values
        of assets and liabilities that are not readily apparent from other sources.
        Actual results may differ from these estimates under different assumptions
        or
        conditions.
  Page
            18
 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. SFAS No. 157 is effective for
        financial statements issued for fiscal years beginning after November 15,
        2007,
        and interim periods within those fiscal years. The Company does not believe
        that
        SFAS No. 157 will have a material impact on its consolidated financial
        statements.
 
 In
        February 2007, the FASB issued SFAS No. 159 "The Fair Value Option for Financial
        Assets and Financial Liabilities," providing companies with an option to
        report
        selected financial assets and liabilities at fair value. The Standard's
        objective is to reduce both complexity in accounting for financial instruments
        and the volatility in earnings caused by measuring related assets and
        liabilities differently. It also requires entities to display the fair value
        of
        those assets and liabilities for which the Company has chosen to use fair
        value
        on the face of the balance sheet. SFAS 159 is effective for fiscal years
        beginning after November 15, 2007. The Company is currently evaluating the
        impact of the adoption of this Statement on its consolidated financial
        statements.
 
 FOREIGN
        CURRENCY TRANSLATION
 
 The
        functional currency for some foreign operations is the local currency. Assets
        and liabilities of foreign operations are translated at balance sheet date
        rates
        of exchange and income, expense and cash flow items are translated at the
        average exchange rate for the period. Translation adjustments in future periods
        will be recorded in Other Comprehensive Income. The translation gains or
        losses
        were not material for the year ended December 31, 2006.
 
 GOODWILL
        AND OTHER INTANGIBLES
 
 In
        June
        2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets."
        SFAS
        No. 142 specifies the financial accounting and reporting for acquired goodwill
        and other intangible assets. Goodwill and intangible assets that have indefinite
        useful lives are not amortized but rather they are tested at least annually
        for
        impairment unless certain impairment indications are identified.
 
 Quantitative
        and Qualitative Disclosures About Market Risk
 
 Fair
        Value of Financial Instruments - The following disclosure of the estimated
        fair
        value of financial instruments is made in accordance with the requirements
        of
        Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
        Value of Financial Instruments". The estimated fair values of financial
        instruments have been determined by the Company using available market
        information and appropriate valuation methodologies.
 
 However,
        considerable judgment is required in interpreting market data to develop
        the
        estimates of fair value. Accordingly, the estimates presented herein are
        not
        necessarily indicative of the amounts that the Company could realize in a
        current market exchange.
 
 The
        Company has not entered into, and does not expect to enter into, financial
        instruments for trading or hedging purposes. The Company does not currently
        anticipate entering into interest rate swaps and/or similar
        instruments.
  Page
            19
 The
        Company's carrying values of cash, marketable securities, accounts receivable,
        accounts payable and accrued expenses are a reasonable approximation of their
        fair value.
 
 ITEM
        3.
        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
        5.
        OTHER INFORMATION
 
 On
        May
        16, 2007, we filed a Preliminary Information Statement with the Securities
        and
        Exchange Commission for an increase of our authorized common stock from
        100,000,000 to 250,000,000 shares of common stock, par value $.0001 per share.
        Our board of directors recommended the proposed increase in the authorized
        number of shares of common stock to insure that a sufficient number of
        authorized and unissued shares is available (i) for the conversion of
        outstanding convertible promissory notes, pursuant to which 21,008,587 shares
        are reserved; (ii) to raise additional capital for the operations of the
        Company; (iii) to make options and shares available to employees, future
        non-employee directors and consultants of the Company as incentive for services
        provide to the Company; and (iv) to have shares of common stock available
        for
        possible acquisitions. There are currently no set plans or arrangements relating
        to the issuance of any additional shares of common stock. We are not party
        to
        any agreements or understandings regarding any acquisitions, nor are any
        acquisitions under negotiation.
 
 We
        obtained stockholder approval for the amendment of our Certificate of
        Incorporation to increase the number of shares of our common stock that we
        are
        authorized to issue by written consent on May 15, 2007, from our stockholders
        holding 52.94% of the issued and outstanding shares of our common stock.
        The
        amendment authorizing the increase in our common stock will not become effective
        until (i) at least 20 days after we deliver the Definitive Information Statement
        to our stockholders of record; (ii) we file the Definitive Information Statement
        with the Securities and Exchange Commission; and (iii) the Certificate of
        Amendment for the increase in authorized shares has been accepted for filing
        by
        the Secretary of State of the State of Delaware.
 
 ITEM
        6.
        EXHIBITS
  31.1
              Certification
                  of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002, filed herewith.31.2
              Certification
                  of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002, filed herewith.32.1
              Certification
                  of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350,
                  as Adopted
                  Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed
                  herewith.32.2
              Certification
                  of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350,
                  as Adopted
                  Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed
                  herewith.
  Page
            20
 
 SIGNATURES
  In
        accordance with the requirements of the Exchange Act, the Company has caused this
        report to be signed on its behalf by the undersigned, thereunto duly authorized.
  DELTA
                  MUTUAL, INC.BY:
              /s/ Peter
                F.
                RussoPeter
                  F. Russo
                President
                  and ChiefExecutive
                  OfficerDated: May 18, 2007****
  EXHIBIT
        INDEX
  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 the Sarbanes-Oxley
                  Act of 2002, filed herewith.32.1
              Certification
                  of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350,
                  as Adopted
                  Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed
                  herewith.32.2
              Certification
                  of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350,
                  as Adopted
                  Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed
                  herewith.
 
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            21