FORM
        10-Q
  SECURITIES
        AND EXCHANGE COMMISSION
  WASHINGTON,
        D.C.
  xQUARTERLY
        REPORT
        PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
        OF
        1934
  For
        the
        quarterly period ended June 30, 2008
  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
                incorporation
                  or organization)
              (I.R.S.
                  Employer
                Identification
                  No.)
 
 111
        NORTH
        BRANCH STREET, SELLERSVILLE, PA 18960
  (215)
        258-2800
  (Address
        and telephone number, including area code, of
 registrant's
        principal executive office)
  (Former
        name, former address and former fiscal year, if changed
 since
        last report)
 Indicate
          by check mark whether the registrant (1) has filed all reports required
          to be
          filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
          the
          preceding 12 months (or for such shorter period that the Registrant was
          required
          to file such reports), and (2) has been subject to such filing requirements
          for
          the past 90 days. YES  x  NO o
  Indicate
          by check mark whether the registrant is a large accelerated filer, an
          accelerated filer, or a smaller reporting company. (Check
          One):
 
 Large
                  accelerated filer
              o
              Accelerated
                  filer
              oNon-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 221,849,158 as of September 15, 2008.
  
  DELTA
        MUTUAL, INC.
  INDEX
  PagePart
                  I. Financial Information
              3Item
                  1. Financial Statements
              3Consolidated
                  Balance Sheet as of June 30, 2008 and as of December 31, 2007
                  (unaudited)
              4Consolidated
                  Statements of Operations for the Three and Six Months Ended June
                  30, 2008
                  and 2007 (unaudited)
              5Consolidated
                  Statement of Stockholders Equity (unaudited)
              6-7Consolidated
                  Statements of Cash Flows for the Six Months Ended June 30, 2008
                  and 2007
                  (unaudited)
              8-9Notes
                  to Unaudited Consolidated Financial Statements
              10Item
                  2. Management's Discussion and Analysis of Financial Condition
                  and Results
                  of Operations
              25Item
                  3. Quantitative and Qualitative Disclosures About Market
                  Risk
              28Item
                  4T.Controls and Procedures
              28Part
                  II. Other Information
              28Item
                  1A. Risk Factors
              28Item
                  5. Other Information
              28Item
                  6. Exhibits
              28Signatures
              30
  Page
            2
  PART
        I.
        FINANCIAL INFORMATION
 
 Item
        1.
        Financial Statements
 Certain
          information and footnote disclosures required under accounting principles
          generally accepted in the United States of America have been condensed
          or
          omitted from the following consolidated financial statements pursuant to
          the
          rules and regulations of the Securities and Exchange Commission. It is
          suggested
          that the following consolidated financial statements be read in conjunction
          with
          the year-end consolidated financial statements and notes thereto included
          in the
          Company's Annual Report on Form 10-KSB for the year ended December 31,
          2007.
  The
          results of operations for the six and three months ended June 30, 2008
          and 2007
          are not necessarily indicative of the results for the entire fiscal year
          or for
          any other period.
  Page
            3
 **DELTA
            MUTUAL, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
            BALANCE SHEET**
 **(UNAUDITED)**
 
 June
                      30,
                  
                  December
                      31,2008
                  
                  2007ASSETSCurrent
                      Assets:Cash
                  
                  $
                  5,220
                  
                  $
                  57,633Investments
                  
                  
                  4,137,538
                  
                  
                  5,879,020Prepaid
                      expenses
                  
                  
                  -
                  
                  
                  1,914Total
                      Current Assets
                  
                  
                  4,142,758
                  
                  
                  5,938,567Property
                      and equipment - net
                  
                  
                  346,586
                  
                  
                  368,123Intangible
                      asset
                  
                  
                  -
                  
                  
                  126,317Investments
                  
                  
                  -
                  
                  
                  1,130,000Other
                      assets
                  
                  
                  650
                  
                  
                  650TOTAL
                      ASSETS
                  
                  $
                  4,489,994
                  
                  $
                  7,563,657LIABILITIES
                      AND STOCKHOLDERS' EQUITYCurrent
                      Liabilities:Accounts
                      payable
                  
                  $
                  161,668
                  
                  $
                  412,922Accrued
                      expenses
                  
                  
                  1,346,918
                  
                  
                  1,225,674Convertible
                      debt
                  
                  
                  253,740
                  
                  
                  397,340Notes
                      payable
                  
                  
                  2,087,605
                  
                  
                  2,540,655Total
                      Current Liabilities
                  
                  
                  3,849,931
                  
                  
                  4,576,591Minority
                      interest in consolidated subsidiaries
                  
                  
                  226,988
                  
                  
                  225,797Stockholders'
                      Equity:Common
                      stock $0.0001 par value - authorized250,000,000
                      shares; 221,849,158 and 208,882,953shares
                      issued and outstanding at June 30, 2008and
                      December 31, 2007 respectively
                  
                  
                  22,185
                  
                  
                  20,888Additional
                      paid-in-captial
                  
                  
                  12,735,107
                  
                  
                  11,953,766Accumulated
                      deficit
                  
                  
                  (12,344,217
                  )
                  
                  (9,213,385
                  )Total
                      Stockholders' Equity
                  
                  
                  413,075
                  
                  
                  2,761,269TOTAL
                        LIABILITIES AND STOCKHOLDERS' EQUITY
                  
                  $
                  4,489,994
                  
                  $
                  7,563,657
  See
            Notes
            to Unaudited Consolidated Financial Statements
  Page
                4
  **DELTA
            MUTUAL INC. AND SUBSIDIARIES**
 **CONSOLIDATED
            STATEMENTS OF OPERATIONS**
 **(UNAUDITED)**
 
 Six
                      Months Ended June 30,
                  
                  Three
                      Months Ended June 30,2008
                  
                  2007
                  
                  2008
                  
                  2007Investment
                      results
                  
                  $
                  (2,053,011
                  )
                  $
                  (967,045
                  )
                  $
                  7,942
                  
                  $
                  (483,522
                  )Revenue
                  
                  
                  (2,053,011
                  )
                  
                  (967,045
                  )
                  
                  7,942
                  
                  
                  (483,522
                  )General
                      and administrativeexpenses
                  
                  
                  998,132
                  
                  
                  399
                  
                  
                  396,454
                  
                  
                  199Loss
                      on intellectual property
                  
                  
                  122,742
                  
                  
                  -
                  
                  
                  122,742
                  
                  
                  -Valuation
                      results
                  
                  
                  22
                  
                  
                  (3,623
                  )
                  
                  -
                  
                  
                  (1,811
                  )1,120,896
                  
                  
                  (3,224
                  )
                  
                  519,196
                  
                  
                  (1,612
                  )Loss
                      from operations
                  
                  
                  (3,173,907
                  )
                  
                  (963,821
                  )
                  
                  (511,254
                  )
                  
                  (481,910
                  )Interest
                      expense
                  
                  
                  24,260
                  
                  
                  -
                  
                  
                  (7,949
                  )
                  
                  -Loss
                      before minority interest
                  
                  
                  (3,149,647
                  )
                  
                  (963,821
                  )
                  
                  (519,203
                  )
                  
                  (481,910
                  )Minority
                      interest share of (income)loss
                      of consolidated subsidiaries
                  
                  
                  18,815
                  
                  
                  -
                  
                  
                  11,520
                  
                  
                  -Loss
                      before benefit from income taxes
                  
                  
                  (3,130,832
                  )
                  
                  (963,821
                  )
                  
                  (507,683
                  )
                  
                  (481,910
                  )Benefit
                      from income taxes
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Net
                      loss
                  
                  $
                  (3,130,832
                  )
                  $
                  (963,821
                  )
                  $
                  (507,683
                  )
                  $
                  (481,910
                  )Loss
                      per common share-basic
                      and diluted
                  
                  $
                  (0.01
                  )
                  $
                  (0.01
                  )
                  $
                  (0.00
                  )
                  $
                  (0.00
                  )Weighted
                      average number ofcommon
                      shares outstanding-basic
                      and diluted
                  
                  
                  220,106,481
                  
                  
                  192,161,246
                  
                  
                  221,316,564
                  
                  
                  192,161,246
  See
            Notes
            to Unaudited Consolidated Financial Statements
  Page
                  5
  **DELTA
              MUTUAL, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
              STATEMENTS OF STOCKHOLDERS' EQUITY**
 
 Number
                        of
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    DeferredCommon
                    
                    Common
                    
                    Paid
                        in
                    
                    Accumulated
                    
                    Subscription
                    
                    StockShares
                    
                    Stock
                    
                    Capital
                    
                    Deficit
                    
                    Receivable
                    
                    Purchase
                    
                    TotalBalance,
                        January 1, 2007
                    
                    
                    192,161,246
                    
                    $
                    19,216
                    
                    $
                    10,321,138
                    
                    $
                    (5,883,087
                    )
                    $
                    (10,000
                    )
                    $
                    266,000
                    
                    $
                    4,713,267Issuance
                            of common stock for interest expense
                            (valued at $0.06 - $0.125 per share)
                    
                    
                    135,040
                    
                    
                    13
                    
                    
                    15,307
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    15,320Issuance
                            of common stock for
                            convertible debt (valued at $0.06 - $0.125 per
                            share)
                    
                    
                    16,586,667
                    
                    
                    1,659
                    
                    
                    830,341
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    832,000Conversion
                        to convertible notes
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (266,000
                    )
                    
                    (266,000
                    )Receipt
                        of subscribed stock
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    10,000
                    
                    
                    
                    
                    
                    10,000Stock
                        based coompensation expense
                    
                    
                    -
                    
                    
                    -
                    
                    
                    786,980
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    786,980Net
                        (loss)
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (3,330,298
                    )
                    
                    -
                    
                    
                    -
                    
                    
                    (3,330,298
                    )Balance,
                        December 31, 2007
                    
                    
                    208,882,953
                    
                    
                    20,888
                    
                    
                    11,953,766
                    
                    
                    (9,213,385
                    )
                    
                    -
                    
                    
                    -
                    
                    
                    2,761,269
  See
              Notes
              to Unaudited Consolidated Financial Statements
  Page
                    6
 **DELTA
              MUTUAL, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
              STATEMENTS OF STOCKHOLDERS' EQUITY**
 **(CONTINUED)**
 
 Number
                        ofCommon
                    
                    Common
                    
                    Paid
                        in
                    
                    AccumulatedShares
                    
                    Stock
                    
                    Capital
                    
                    Deficit
                    
                    TotalIssuance
                        of common stock for services(valued
                        at $0.02 - $0.07 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 - $0.07 per share)Issuance
                        of common stock for interest
                    
                    
                    115,634
                    
                    
                    12
                    
                    
                    7,036
                    
                    
                    -
                    
                    
                    7,048(valued
                        at $0.05 - $0.07 per share)Stock
                        based compensation expense
                    
                    
                    -
                    
                    
                    -
                    
                    
                    393,490
                    
                    
                    -
                    
                    
                    393,490Net
                        (loss)
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (3,130,832
                    )
                    
                    (3,130,832
                    )Balance,
                        June 30, 2008
                    
                    
                    221,849,158
                    
                    $
                    22,185
                    
                    $
                    12,735,107
                    
                    $
                    (12,344,217
                    )
                    $
                    413,075
  See
              Notes
              to Unaudited Consolidated Financial Statements
  Page
                    7
 
 **DELTA
            MUTUAL INC. AND SUBSIDIARIES**
 **CONSOLIDATED
            STATEMENTS OF CASH FLOWS**
 **(UNAUDITED)**
 
 Six
                      Months Ended June 30,2008
                  
                  2007Cash
                      flows from operating activities:Net
                      loss
                  
                  $
                  (3,130,832
                  )
                  $
                  (963,821
                  )Adjustments
                      to reconcile net loss tonet
                      cash used in operating activities:Depreciation
                      and amortization
                  
                  
                  25,112
                  
                  
                  -Non-cash
                      compensation
                  
                  
                  245,548
                  
                  
                  -Loss
                      on intellectual property
                  
                  
                  122,742Compensatory
                        element of option issuance
                  
                  
                  393,490
                  
                  
                  -Minority
                      interest in income (losses) ofconsolidated
                      subsidiaries
                  
                  
                  (18,815
                  )
                  
                  -Changes
                      in operating assetsand
                      liabilities
                  
                  
                  (128,096
                  )
                  
                  -Net
                      cash used in operating activities
                  
                  
                  (2,490,851
                  )
                  
                  (963,821
                  )Cash
                      flows from investing activities:Deposit
                      on land
                  
                  
                  -
                  
                  
                  -Decrease
                      in investments
                  
                  
                  2,871,482
                  
                  
                  963,821Refund
                      of land deposit
                  
                  
                  -
                  
                  
                  -Net
                      cash provided byinvesting
                      activities
                  
                  
                  2,871,482
                  
                  
                  963,821Cash
                      flows from financing activities:Proceeds
                      from loans
                  
                  
                  186,950
                  
                  
                  -Proceeds
                      from convertible debtfinancing
                  
                  
                  -
                  
                  
                  -Repayment
                      of loans
                  
                  
                  (640,000
                  )
                  
                  -Payments
                      to minority interests
                  
                  
                  -
                  
                  
                  -Proceeds
                      from minority interest
                  
                  
                  20,006
                  
                  
                  -Net
                      cash provided by (used in)financing
                      activities
                  
                  
                  (433,044
                  )
                  
                  -Net
                      increase (decrease) in cash
                  
                  
                  (52,413
                  )
                  
                  -Cash
                      - Beginning of period
                  
                  
                  57,633
                  
                  
                  -Cash
                      - End of period
                  
                  $
                  5,220
                  
                  $
                  -
  See
            Notes
            to Unaudited Consolidated Financial Statements
  Page
                8
 
 **DELTA
            MUTUAL, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
            STATEMENTS OF CASH FLOWS**
 **(Continued)**
 **(UNAUDITED)**
 
 Six
                      Months Ended June 30,2008
                  
                  2007Supplementary
                      information:Changes
                      in operating assets andliabilities
                      consists of:(Increase)
                      in accounts receivable
                  
                  $
                  -
                  
                  $
                  -(Increase)
                      decrease in prepaid expenses
                  
                  
                  1,914
                  
                  
                  -(Increase)
                      decrease in deposits
                  
                  
                  -
                  
                  
                  -(Increase)
                      decrease in other assets
                  
                  
                  -
                  
                  
                  -Increase
                      in accounts payableand
                      accrued expenses
                  
                  
                  (130,010
                  )
                  
                  -$
                  (128,096
                  )
                  $
                  -Non-cash
                      financing activities:Issuance
                      of common stock for debt
                  
                  $
                  143,600
                  
                  $
                  -Issuance
                      of common stock in lieu ofpayment
                      of accured expenses
                  
                  $
                  7,048
                  
                  $
                  -Issuance
                      of common stock for services
                  
                  $
                  238,500
                  
                  $
                  -
 
 See
            Notes
            to Unaudited Consolidated Financial Statements
  Page
                9
 DELTA
          MUTUAL, INC. AND SUBSIDIARIES
 NOTES
          TO
          UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 For
          the
          Six Months Ended June 30, 2008 and 2007
 
 1.
          DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
          POLICIES
 
 Organization
 
 Delta
          Mutual, Inc. and subsidiaries (“Delta” or the “Company”) was incorporated in
          Delaware on November 17, 1999. Since 2003, the principal business activities
          of
          the Company were focused on providing environmental and construction
          technologies and services to certain geographic reporting segments in the
          Far
          East, Middle East and the United States.
 
 On
          March
          4, 2008, the Company entered into a Membership Interest Purchase Agreement
          (the
“Agreement”) with Egani, Inc., an Arizona corporation (“Egani”). Pursuant to the
          Agreement, the Company acquired from Egani 100% of the issued and outstanding
          membership interests held by Egani in Altony S.A., an Uruguay Sociedad
          Anonima
          (“Altony”), which owns 100% of the issued and outstanding membership interests
          in South American Hedge Fund LLC, a Delaware limited liability company
          (“SAHF”).
          At the closing of the Agreement, the Company issued 130,000,000 shares
          of its
          common stock to Egani, for the purchase of all of the outstanding membership
          interests in Altony which constituted, following such issuance, a majority
          of
          the outstanding shares of the Company’s common stock.
 
 Immediately
          following the closing of the Agreement, Altony became a wholly owned subsidiary
          of the Company. For accounting purposes only, the transaction was treated
          as a
          recapitalization of the Company with Altony as the acquirer. The financial
          statements prior to March 4, 2008 are those of Altony and reflect the assets
          and
          liabilities of Altony at historical carrying amounts. The financial statements
          show a retroactive restatement of Altony’s historical stockholders’ equity to
          reflect the equivalent number of shares issued to the subsidiary.
 
 The
          principal business activity of Altony is the ownership and management of
          its
          SAHF subsidiary. SAHF has initially focused on oil and gas investments
          in
          Argentina and intends to continue its focus on the energy sector, including
          the
          development and supply of energy and alternate energy sources in Latin
          America
          and the United States.
 
 In
          August
          2007, SAHF signed a purchase option for a partial interest in three oil
          and gas
          concessions in Argentina. SAHF is in the process of obtaining the necessary
          government and environmental permits to operate these concessions.
 
 The
          Company intends to continue its environmental technology and service activities
          in the Middle East that are conducted by its joint venture subsidiary
          Delta-Envirotech, Inc. (“Envirotech”), headquartered in Virginia. The
          construction technology activities that were conducted by the Company’s wholly
          owned subsidiary Delta Technologies, Inc. (“Technologies”) are being phased out
          because the Company has elected not to pursue its patent for the insulating
          concrete wall forming (ICF) system known as *Delta
          Wall* .
  Page
              10
  BASIS
          OF
          PRESENTATION
 
 The
          consolidated balance sheet as of June 30, 2008, and the consolidated statements
          of operations and cash flows for the periods presented herein have been
          prepared
          by the Company and are unaudited. In the opinion of management, all adjustments
          (consisting solely of normal recurring adjustments) necessary to present
          fairly,
          the financial position, results of operations and cash flows for all periods
          presented have been made. The information for the consolidated balance
          sheet as
          of December 31, 2007 was derived from audited financial statements.
 
 The
          consolidated financial statements for the period ended June 30, 2008 have
          been
          prepared on a going concern basis which contemplates the realization of
          assets
          and settlement of liabilities and commitments in the normal course of business.
          Management recognizes that the Company's continued existence is dependent
          upon
          its ability to obtain needed working capital through additional equity
          and/or
          debt financing and revenue to cover expenses as the Company continues to
          incur
          losses.
 
 The
          Company's business is subject to most of the risks inherent in the establishment
          of a new business enterprise. The likelihood of success of the Company
          must be
          considered in light of the expenses, difficulties, delays and unanticipated
          challenges encountered in connection with the formation of a new business,
          raising operating and development capital, and the marketing of a new product.
          There is no assurance the Company will ultimately achieve a profitable
          level of
          operations.
 
 The
          Company presently does not have sufficient liquid assets to finance its
          anticipated funding needs and obligations. The Company's continued existence
          is
          dependent upon its ability to obtain needed working capital through additional
          equity and/or debt financing and achieve a level of sales adequate to support
          its cost structure. Management is actively seeking additional capital to
          ensure
          the continuation of its current activities and complete its proposed activities.
          However, there is no assurance that additional capital will be obtained
          or that
          the Company’s subsidiaries will be profitable. These uncertainties raise
          substantial doubt about the ability of the Company to continue as a going
          concern. The accompanying financial statements do not include any adjustments
          that might result from the outcome of these uncertainties should the Company
          be
          unable to continue as a going concern.
 
 SIGNIFICANT
          ACCOUNTING POLICIES
 
 PRINCIPLES
          OF CONSOLIDATION
  The
          Company's financial statements include the accounts of all majority-owned
          subsidiaries where its ownership is more than 50 percent of common stock.
          The
          consolidated financial statements also include the accounts of any Variable
          Interest Entities ("VIEs") where the Company is deemed to be the primary
          beneficiary, regardless of its ownership percentage. All significant
          intercompany balances and transactions with consolidated subsidiaries are
          eliminated in the consolidated financial statements. Where the Company's
          ownership interest is less than 100 percent, the minority ownership interests
          are reported in the consolidated balance sheet as a liability. The minority
          ownership interest of the Company's earnings or loss, net of tax, is classified as
          "Minority interest share of earnings (loss) of consolidated subsidiaries"
          in the
          consolidated statements of operations.
  Page
              11
  USE
          OF
          ESTIMATES
 
 The
          preparation of consolidated financial statements in conformity with accounting
          principles generally accepted in the United States of America requires
          management to make estimates and assumptions that affect the reported amounts
          of
          assets and liabilities, and disclosure of contingent assets and liabilities
          at
          the date of the financial statements and the reported amounts of revenues
          and
          expenses during the period. Actual results could differ from those
          estimates.
 
 LOSS
          PER
          SHARE
 
 Basic
          and
          diluted loss per common share is computed by dividing net loss by the weighted
          average number of common shares outstanding during the year. Potential
          common
          shares are excluded from the loss per share calculation because the effect
          would
          be antidilutive. Potential common shares relate to the convertible debt,
          stock
          options and common stock purchase warrants. As of June 30, 2008 and 2007,
          there
          were 2,749,920 and 15,008,587 potential common shares related to convertible
          debt, respectively, and 6,998,000 and 7,978,000 potential common shares
          related to stock options, respectively.
 
 REVENUE
          RECOGNITION
 
 The
          Company recognizes revenue from the results of its investment portfolio
          as the
          difference between proceeds from the sale of securities and their acquisition
          cost, less commissions paid to the firm that conducts the securities
          transactions.
  EVALUATION
          OF LONG-LIVED ASSETS
 
 The
          Company reviews property and equipment and finite-lived intangible assets
          for
          impairment whenever events or changes in circumstances indicate the carrying
          value may not be recoverable in accordance with guidance in Statement of
          Financial Accounting Standards (SFAS) No. 144 "Accounting for the Impairment
          or
          Disposal of Long-Lived Assets." If the carrying value of the long-lived
          asset
          exceeds the present value of the related estimated future cash flows, the
          asset
          would be adjusted to its fair value and an impairment loss would be charged
          to
          operations in the period identified.
 
 DEPRECIATION
          AND AMORTIZATION
 
 Property
          and equipment are stated at cost. Depreciation is provided for by the
          straight-line method over the estimated useful lives of the related
          assets.
  Page
              12
  STOCK-BASED
          COMPENSATION
 
 The
          Company has a stock-based compensation plan under which stock options are
          granted to employees. Effective January 1, 2006, the Company accounts for
          stock
          based compensation under Statement of Financial Accounting Standards ("SFAS")
          No. 123(R), "Share-Based Payment." The Company adopted SFAS 123(R) using
          the
          modified prospective method. Under modified prospective application, this
          SFAS
          applies to new awards and to awards for which the requisite service has
          not been
          rendered that are outstanding as of the required effective date shall be
          recognized as the requisite service is rendered on or after
          the
          required effective date. The compensation cost for the portion of awards
          shall
          be based on the grant-date fair value of those awards as calculated for
          either
          recognition or pro forma disclosures under SFAS 123. Changes to the grant-date
          fair value of equity awards granted before the required effective date
          of this
          Statement are precluded. The compensation cost for those earlier awards
          shall be
          attributed to periods beginning on or after the required effective date
          of this
          SFAS using the attribution method that was used under SFAS 123, except
          that the
          method of recognizing forfeitures only as they occur shall not be continued.
 
 INCOME
          TAXES
 
 The
          Company accounts for income taxes using an asset and liability approach
          under
          which deferred taxes are recognized by applying enacted tax rates applicable
          to
          future years to the differences between financial statement carrying amounts
          and
          the tax basis of reported assets and liabilities. The principal item giving
          rise
          to deferred taxes are future tax benefits of certain net operating loss
          carryforwards.
 
 FOREIGN
          CURRENCY TRANSLATION
 
 The
          functional currency for some foreign operations is the local currency.
          Assets
          and liabilities of foreign operations are translated at balance sheet date
          rates
          of exchange and income, expense and cash flow items are translated at the
          average exchange rate for the period. Translation adjustments in future
          periods
          will be recorded in Cumulative Other Comprehensive Income. The translation
          gains
          or losses were not material for the six and three months ended June 30,
          2008 and
          2007.
 
 INTANGIBLES
 
 Effective
          January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and Other
          Intangible Assets." SFAS No. 142 specifies the financial accounting and
          reporting for acquired goodwill and other intangible assets. Goodwill and
          intangible assets deemed to have indefinite useful lives are not amortized
          but
          are subject to, at a minimum, an annual impairment test. If the carrying
          value
          of goodwill or intangible assets exceeds its fair market value, an impairment
          loss would be recorded.
 
 FAIR
          VALUE OF FINANCIAL INSTRUMENTS
 
 For
          financial instruments including cash, investments, accounts payable, accrued
          expenses, notes payable and convertible debt, it was assumed that the carrying
          amount approximated fair value because of the short maturities of such
          instruments.
 
 Page
              13
 
 NEW
          FINANCIAL ACCOUNTING STANDARDS
 
 In
          March
          2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
          and Hedging Activities,” an amendment of FASB Statement No. 133 (“SFAS No.
          161”). The new standard is intended to improve financial reporting about
          derivative instruments and hedging activities by requiring enhanced disclosures
          to enable investors to better understand their effects on an entity’s financial
          position, financial performance and cash flows. It is effective for financial
          statements issued for fiscal years and interim periods beginning after
          November
          15, 2008. The Company does not believe that SFAS No. 161 will have a material
          impact on its financial statements.
 
 In
          May
          2008, t he
          FASB
          issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”
(“SFAS No. 162”). SFAS No. 162 identifies the sources of accounting principles
          and the framework for selecting the principles to be used in the preparation
          of
          financial statements of nongovernmental entities that are presented in
          conformity with generally accepted accounting principles (GAAP) in the
          United
          States. This Statement is effective sixty days following the SEC’s approval of
          the Public Company Accounting Oversight Board amendments to AU Section
          411, “The
          Meaning of Present Fairly in Conformity With Generally Accepted Accounting
          Principles.” The Company is currently evaluating the potential impact, if any,
          of the adoption of SFAS No. 162 on its financial statements.
 
 2.
          INVESTMENTS
 
 The
          Company invests in public and private securities of the United States and
          Latin
          American countries as well as long-term investments in oil and gas concessions.
          The fair market value of these investments at June 30, 2008 and December
          31,
          2007 is indicated below.
  June
                    30,
                
                December
                    31,2008
                
                2007Public
                    securities
                
                $
                —
                
                $
                322,300Private
                    securities
                
                
                4,137,538
                
                
                5,556,720Current
                    investments
                
                
                4,137,538
                
                
                5,879,020Oil
                    and gas concessions
                
                
                —
                
                
                1,130,000$
                4,137,536
                
                $
                7,009,020
  Page
              14
  3.
          PROPERTY AND EQUIPMENT
 
 June
                    30,
                
                December
                    31,2008
                
                2007Equipment
                
                $
                455,035
                
                $
                455,035Deposits
                    on land
                
                
                —
                
                
                —Leasehold
                    improvements
                
                
                7,807
                
                
                7,807462,842
                
                
                462,842Less
                    accumulateddepreciation
                
                
                116,256
                
                
                94,719$
                346,586
                
                $
                368,123
 
 Depreciation
          expense for the six and three months ended June 30, 2008, amounted to $21,537
          and $10,329, respectively.
 
 4.
          INTANGIBLE ASSETS
 
 Intangible
          assets are intellectual property included in a patent application. The
          Company
          has elected not to pursue the patent application and has written-off $122,742
          of
          the unamortized amounts effective as of **** the
          quarter ended June 30, 2008. Amortization expense was $3,575 and $1,787
          for the
          six and three months ended June 30, 2008, respectively. Other intangible
          assets
          consisted of the following:
  June
                    30,
                
                December
                    31,2008
                
                2007Gross
                    Carrying Amount
                
                $
                143,000
                
                $
                143,000Accumulated
                    Amortization
                
                
                143,000
                
                
                16,683Intellectual
                    property costs
                
                $
                —
                
                $
                126,317
  5.
                INVESTMENT
                    IN JOINT VENTURES
 
 a.
                In
                    December 2003, the Company formed a joint venture to develop
                    Section 124,
                    low income housing in the Commonwealth of Puerto Rico. The Company
                    became
                    the general partner and 75% majority owner of a limited partnership,
                    Delta
                    Development Partners, LP that owns the 85% majority share of
                    Delta
                    Developers Corp., a Puerto Rico corporation, formed to manage
                    the
                    construction and related activities required to build approximately
                    270
                    homes under Section 124. During the year ended December 31, 2006,
                    the
                    activities associated with this joint venture were discontinued.
  Page
              15
  In
          October 2004, the Company formed a second joint venture to develop Section
          124
          low income housing in Puerto Rico. The Company became the general partner
          and
          majority owner of a limited partnership, Delta Development Partners II,
          LP that
          owns the 85% majority share of Delta Developers Guayanilla Corp., a Puerto
          Rico
          corporation formed to manage the construction and related activities required to
          build approximately 300 homes under Section 124. During the first quarter
          of
          2007, the activities associated with this joint venture were discontinued
          and
          the land deposit was returned to the joint venture.
 
 In
          November 2006, the Company entered into a new joint venture to develop
          Section
          124 housing in Puerto Rico. The Company became the general partner and
          35%
          minority owner of limited partnership, Delta TA, LP formed to manage the
          construction and related activities to build approximately 338 residential
          units
          under the Section 124 program. As of the quarter ended September 30, 2007,
          the
          Puerto Rico housing development activities associated with this partnership
          were
          discontinued.
 
 b.
                On
                    January 14, 2004, the Company entered into a joint venture agreement
                    with
                    Hi tech Consulting and Construction, Inc. (“Hi Tech”) forming
                    Delta-Envirotech, Inc. for the purpose of providing environmental
                    technologies and services to markets in the Middle East. The
                    joint venture
                    company is based in Virginia and focuses on participating in
                    foreign
                    government sponsored pollution remediation and other projects.
 
 In
          July
          2004, the Company and Hi-Tech, pursuant to an agreement to purchase stock
          dated
          January 14, 2004, each sold 75 shares of the joint venture to a third party,
          representing a ten percent (10%) interest for $2. The Company and Hi-Tech
          each
          own forty-five percent (45%) of the joint venture.
  Delta-Envirotech,
          Inc. meets the definition of a Variable Interest Entity as defined in Financial
          Accounting Standards Board Interpretation No. 46 (FIN 46),"Consolidation
          of
          Variable Interest Entities" requiring the primary beneficiaries of a variable
          interest entity to consolidate that entity. The primary beneficiary of
          a
          variable interest entity is the party that absorbs the majority of the
          expected
          losses of the entity or receives a majority of the entity's expected residual
          return, or both, as a result of ownership, contractual or other financial
          interest in the entity.
 
 c.
                Minority
                    interests primarily consist of outside investors ownership interest
                    in
                    Delta Development Partners, L.P.; Delta Development Partners
                    II, L.P.;
                    Delta TA, LP; Delta Developers Corp.; Delta Developers Guayanilla
                    Corp.;
                    Delta-Envirotech, Inc. and PT Triyudha-
                    Envirotech.
  The
          income and losses from operations of these entities and their respective
          minority interests have been reflected in the Company's statement of operations
          for the six and three months ended June 30, 2008. There are excess losses
          not
          absorbed by the minority interests due to limitations of their capital
          contributions. In future periods, the profits first attributable to the
          minority
          interests will be first absorbed against any unused losses until the losses
          are
          fully absorbed. The amount on the Company's consolidated balance sheet
          represents the minority interests as of June 30, 2008 and December 31,
          2007.
  Page
              16
 
 The
          following represents a schedule of minority interests as of:
 
 June
                    30,
                
                December
                    31,2008
                
                2007Delta
                    Development Partners L.P.
                
                $
                83,790
                
                $
                82,087Delta
                    Development Partners II, L.P.
                
                
                37,718
                
                
                36,808Delta
                    TA L.P.
                
                
                105,480
                
                
                106,902Delta
                    Developers Corp.
                
                
                —
                
                
                —Delta
                    Developers Guayanilla Corp.
                
                
                —
                
                
                —Delta-Envirotech,
                    Inc.
                
                
                —
                
                
                —PT
                    Triyudha - Envirotech
                
                
                —
                
                
                —$
                226,988
                
                $
                225,797
 
 6.
          NOTES
          PAYABLE
 
 In
          April
          2005, the Company issued three 8% term notes to private investors in the
          amount
          of $210,655, with the principal and interest due at maturity on October
          2, 2005.
          Pursuant to note modification agreements, the maturity dates of these notes
          were
          extended and in June 2006 these notes became payable on written demand
          by the
          lenders. In March 2008, the Company paid $60,000 of the principal amount
          of the
          original notes and each of the three notes was amended and restated. By
          amendment, the noteholders waived all of the accrued and unpaid interest
          on the
          original notes and the aggregate principal amount was reduced to $150,655.
          The
          amended and restated notes bear interest of 8% and mature in November 2008.
          Interest expense for the six and three months ended June 30, 2008 amounted
          to
          $(33,843) and $3,013, respectively. As of June 30, 2008 and December 31,
          2007,
          accrued interest of $4,017 and $37,860, respectively, is included in accrued
          expenses on the Company's consolidated balance sheet.
 
 In
          May
          2006, the Company borrowed $30,000 from an investor (formerly a related
          party)
          at interest of 6% per annum with the principal and interest due on May
          17, 2008.
          In May 2008, the note was amended extending the maturity date to August
          15,
          2008. The Company did not repay the note on the maturity date but the noteholder
          has verbally agreed not to make written demand for payment. The Company
          is
          currently negotiating amended terms with the noteholder. If the Company
          and the
          noteholder can not agree upon an amendment to the note, including an extension
          of the maturity date, the Company may receive a notice of default. Interest
          expense for the six and three months ended June 30, 2008 amounted to $900
          and
          $450, respectively. As of June 30, 2008 and December 31, 2007 accrued interest
          of $3,822 and $2,922, respectively, is included in accrued expenses on
          the
          Company's consolidated balance sheet.
 
 Page
              17
  In
          August
          2007, the SAHF borrowed $2,300,000 from Oxipetrol-Petroleros de Ocidente,
          S.A.
          in conjunction with its investment in oil and gas concessions. This is
          a non
          interest-bearing loan with a maturity date of July 15, 2008. During the
          second
          quarter of 2008, $580,00 of the principal amount was repaid. The principal
          amount of $1,720,000 is included in notes payable on the Company’s consolidate
          balance sheet at June 30, 2008 and December 31, 2007. The remaining principal
          amount of this note was repaid in July 2008.
  7.
          CONVERTIBLE DEBT
 
 During
          the year ended December 31, 2004, the Company issued convertible notes
          in the
          principal amounts of $961,400. The convertible notes had interest rates
          from 4%
          to 6% and matured at various dates between May 12, 2006 and January 16,
          2007.
          These notes are convertible into common stock at a conversion price of
          $0.05 to
          $0.125 per share. One note, in the original principal amount of $129,160
          that
          originally matured in May 2006 was amended during 2006 and 2007 extending
          the
          maturity date until June 2008. After partial conversion of the principal
          amount
          of this note in July 2006, and the payment of accrued interest in March
          2007,
          the remaining principal amount and all accrued interest was converted into
          1,491,886 shares of common stock in April 2008. Another note, in the principal
          amount of $193,740 that originally matured in May 2006 was amended during
          2006
          and 2007 extending the maturity date to December 1, 2007. The Company did
          not
          repay the note on the maturity date but the holder of this note has verbally
          agreed not to make written demand for payment. The Company is currently
          negotiating amended terms with the noteholder. If the Company and the noteholder
          can not agree upon an amendment to the note, including an extension of
          the
          maturity date, the Company may receive a notice of default. One note issued
          by
          the Company in the principal amount of $60,000, became payable upon written
          demand by the lender in September 2006. The balance of the convertible
          notes
          issued in 2004 was converted into 12,923,280 shares of common stock through
          June
          30, 2008.
 
 In
          connection with the issuance of the convertible notes, the Company issued
          8,880,000 common stock purchase warrants at an exercise price of $0.10
          per
          share. The warrants expired March 31, 2006.
 
 The
          Company accounted for the warrants and the convertible debt with detachable
          warrants in accordance with Emerging Issues Task Force 00-27 and 00-19
          and SFAS
          No. 33. The Company performed calculations allocating the proceeds of
          convertible debt with detachable warrants to each respective security at
          their
          fair values. The Company used the conversion value of the convertible debt
          and
          calculated fair value of the warrants using the Black-Scholes valuation
          model
          for its estimate of fair value. The Company compared the allocated proceeds
          of
          the convertible debt to the difference between its conversion value and
          face
          amount. The calculated fair value of the convertible debt of $722,855 was
          recorded as the value of the Beneficial Conversion Feature and accordingly
          credited to Additional Paid-in Capital. The value of the warrants of $235,545
          was recorded as a reduction of the convertible debt. The convertible debt
          was
          recorded at zero. The convertible debt was accreted to its face value after
          2004, 2005 and 2006 conversions, under the interest method per APB 21,
          until it
          either converted or matured.
  Page
              18
  In
          May
          2006, the Company issued a convertible note to a related party in the principal
          amount of $16,000, bearing interest at 6% per annum. The note was convertible
          into common stock at a conversion price of $0.06 per share, the fair value
          at
          the date of issuance. The note matured on November 3, 2007 and upon maturity
          the
          Company issued 266,667 shares of common stock in payment of the principal
          amount
          and 24,000 shares of common stock in payment of $1,440 of accrued interest.
 
 During
          the first quarter of 2007, the Company issued a convertible note to a related
          party in the principal amount of $17,000, and a convertible note to an
          investor
          in the principal amount of $266,000. Both notes bear interest of 6% per
          annum
          and are convertible into common stock at a conversion price of $0.05 per
          share,
          the fair value at the date of issuance. Both notes matured in April 2008.
          In
          conjunction with the issuance of these two notes, the Company reclassified
          $266,000 recorded as deferred stock purchase, on its consolidated balance
          sheet
          as of December 31, 2006, to convertible notes at March 31, 2007. On October
          30,
          2007, the holder of the $266,000 note converted the principal amount of
          the note
          into 5,320,000 shares of common stock and waived all accrued interest.
          In April
          2008, the Company issued 340,000 shares of common stock in payment of the
          principal amount of the $17,000 note and issued 20,400 shares of common
          stock in
          payment of the accrued interest of $1,020.
 
 In
          April
          2007, the Company issued a convertible note to a related party in the principal
          amount of $26,600 bearing interest of 6% per annum and convertible into
          common
          stock at the conversion price of $0.05 per share, the fair value at the
          date of
          issuance, with a maturity date of April 9, 2008. On the maturity date,
          the
          Company issued 532,000 shares of common stock in payment of the principal
          amount
          and 31,920 shares of common stock in payment of the accrued interest of
          $1,596.
 
 During
          the second and third quarters of 2007, the Company borrowed $550,000 from
          an
          investor pursuant to the terms of a convertible promissory note with a
          maturity
          date of May 2008; interest of 10% per annum; and convertible into common
          stock
          at the conversion price of $0.05 per share, the fair value at the date
          of
          issuance. In September 2007, the investor converted the principal amount
          of the
          note into 11,000,000 shares of common stock and waived all accrued interest.
 
 At
          June
          30, 2008, the Company's outstanding convertible notes were convertible
          into
          2,749,920 shares of common stock.
 
 The
          following table shows the maturities by year of total face amount of the
          convertible debt obligations at June 30, 2008:
 
 2008$
                253,740$
                253,740
 
 For
          the
          six and three months ended June 30, 2008, the Company recorded interest
          expense
          of $5,791 and $2,199, respectively. As of June 30, 2008 and December 31,
          2007,
          accrued interest of $38,400 and $22,931, respectively, is included in accrued
          expenses on the Company's consolidated balance sheet.
  Page
              19
  8.
          ACCRUED EXPENSES
 
 Accrued
          expenses consists of the following:
 
 June
                    30,
                
                December
                    31,2008
                
                2007Professional
                    fees
                
                $
                34,000
                
                $
                34,703Interest
                    expense
                
                
                49,132
                
                
                80,439Payroll
                    expense
                
                
                553,126
                
                
                462,195Payroll
                    expense-officers
                
                
                158,061
                
                
                117,436Payroll
                    tax expense
                
                
                46,264
                
                
                34,742Accrued
                    consulting fees
                
                
                144,000
                
                
                144,000Other
                    accrued expenses
                
                
                362,334
                
                
                352,159$
                1,346,917
                
                $
                1,225,674
 
 9.
          LOANS
          FROM RELATED PARTIES
 
 In
          March
          2008, the Company borrowed $121,000, in the aggregate, from two stockholders
          of
          the Company, with interest of 6% per annum and the principal and interest
          due on
          September 6, 2008. The Company did not repay the two loans on the maturity
          date but both lenders verbally agreed to extend the maturity dates and
          further
          agreed not to make written demand for payment. The balance due to the
          stockholders is included in Notes Payable on the Company’s consolidated balance
          sheet at June 30, 2008. Accrued interest of $2,420 is included in accrued
          expenses on the Company’s consolidated balance sheet at June 30, 2008. The
          Company recorded interest expense of $2,420 and $1,815 for the six and
          three
          months ended June 20, 2008, respectively.
  During
          April and May 2008, the Company borrowed $20,000, $9,550 and $16,900,
          respectively, from two stockholders of the Company. Each note bears interest
          of
          6% per annum with the principal and accrued interest due on October 15,
          October
          25, and November 14, 2008, the respective maturity dates. On June 27, 2008
          the
          Company borrowed $19,500 from a stockholder and issued a 6% promissory
          note with
          principal and accrued interest due upon written demand by the lender. Accrued
          interest of $377 is included in accrued expenses on the Company’s consolidated
          balance sheet at June 30, 2008. The Company recorded interest expense of
          $377
          and $377 for the six and three months ended June 20, 2008, respectively.
 
 10.
          OTHER
          RELATED PARTY TRANSACTION
 
 The
          Company's subsidiary, Delta-Envirotech, Inc. ("Envirotech") pays monthly
          office
          rent to David Razmara, the president of Envirotech and
          a
          stockholder of the Company, in the current amount of $2,000.
  The
          rent
          expense for the six and three months ended June 30, 2008 amounted to $12,000
          and
          $6,000, respectively.
 
 11.
          STOCKHOLDERS' EQUITY
 
 The
          Company issues shares of common stock for services and repayment of debt
          and
          interest valued at fair market value at time of issue.
 
 Page
              20
  a.
          For
          the six months ended June 30, 2008, the Company issued 2,300,571 shares
          of
          common stock upon the conversion of convertible notes in the principal
          amount of
          $143,600, valued at $0.05 - $0.07 per share; and 115,634 shares of common
          stock
          for payment of accrued interest in the amount of $7,048, valued at $0.05
          - $0.07
          per share.
 
 b.
          For
          the six months ended June 30, 2008, the Company issued 10,550,000 shares
          of
          common stock for services valued at $238,500, valued at $0.02 - $0.07 per
          share.
  12.
          DISCONTINUED OPERATIONS
 
 As
          of
          June 30, 2008, the Company discontinued all its operations in Indonesia.
          The
          activities of PT Triyhuda-Envirotech have been classified as discontinued
          operations. The assets and liabilities, results of operations, and cash
          flows of
          these discontinued operations have been included with the operations of
          the
          Company in its consolidated financial statements for the six and three
          months
          ended June 30, 2008 due to the immaterial nature of the
          transactions.
 
 13.
          BUSINESS SEGMENT INFORMATION
 
 The
          Company’s reporting business segments are geographic and include North America
          (United States), South America, the Middle East and the Far East (Indonesia).
          The Company formerly operated in a fifth reporting segment, Puerto Rico.
          The
          primary criteria by which financial performance is evaluated and resources
          allocated are revenue and operating income.
 
 The
          following is a summary of key financial data:
 
 Six
                    Months Ended
                
                Three
                    months EndedJune
                    30,
                
                June
                    30,2008
                
                2007
                
                2008
                
                2007Total
                    Revenue:North
                    America
                
                $
                —
                
                $
                —
                
                $
                —
                
                $
                —South
                    America
                
                
                (2,053,011
                )
                
                (967,045
                )
                
                7,942
                
                
                (483,522
                )Indonesia
                
                
                —
                
                
                —
                
                
                —
                
                
                —Middle
                    East
                
                
                —
                
                
                —
                
                
                —
                
                
                —Puerto
                    Rico
                
                
                —
                
                
                —
                
                
                —
                
                
                —$
                (2,053,011
                )
                $
                (967,045
                )
                $
                7,942
                
                $
                (483,522
                )
 
 Loss
                    from Operations:North
                    America
                
                $
                (1,065,037
                )
                $
                —
                
                $
                (510,666
                )
                $
                —South
                    America
                
                
                (2,053,033
                )
                
                (963,821
                )
                
                7,942
                
                
                (481,910
                )Indonesia
                
                
                28,250
                
                
                —
                
                
                37,238
                
                
                —Middle
                    East
                
                
                (69,881
                )
                
                —
                
                
                (31,875
                )
                
                —Puerto
                    Rico
                
                
                (14,206
                )
                
                —
                
                
                (13,893
                )
                
                —$
                (3,173,907
                )
                $
                (963,821
                )
                $
                (511,524
                )
                $
                (481,910
                )
  Page
              21
 
 14.
          INCOME TAXES
 
 The
          Company adopted the provisions of Financial Accounting Standards Board
          Interpretation No. 48 “Accounting for Uncertainties in Income Taxes,” (“FIN 48”)
          on January 1, 2007. As a result of the implementation of FIN 48, the Company
          recognized no adjustment in the net liability for unrecognized income tax
          benefits.
  15.
          SHARE
          BASED COMPENSATION
 
 On
          January 1, 2006, the Company adopted SFAS No. 123(R) "Share-Based Payment,"
          requiring the recognition of compensation expense in the Consolidated Statements
          of Operations related to the fair value of its employee share-based options
          and
          awards. SFAS No. 123(R) revises SFAS No. 123 "Accounting for Stock-Based
          Compensation" and supercedes APB Opinion No. 25 "Accounting for Stock Issued
          to
          Employees." SFAS No. 123(R) is supplemented by SEC Staff Accounting Bulletin
          ("SAB") No.107 "Share-Based Payment." SAB No.107 expresses the SEC staff's
          views
          regarding the interaction between SFAS No. 123(R) and certain SEC rules and
          regulations including the valuation of share-based payment
          arrangements.
 
 The
          Company recognizes the cost of all employee stock options on a straight-line
          attribution basis over their respective contractual terms, net of estimated
          forfeitures. The Company has selected the modified prospective method of
          transition; accordingly, prior periods have not been restated. Prior to
          adopting
          SFAS No. 123(R), the Company applied APB Opinion No. 25, and related
          interpretation in accounting for its stock-based compensation plans. All
          employee stock options were granted at or above the grant date market price.
          Accordingly, no compensation cost was recognized for fixed stock option
          grants.
 
 At
          June
          30, 2008, the Company had one share-based compensation plan, which is described
          below. During the six and three months ended June 30, 2008, the adoption
          of SFAS
          No.123(R) resulted in an aggregate pretax compensation expense recognized
          in net
          loss for stock based compensation of $393,490 and $196,745, respectively.
          For
          the six and three months ended June 30, 2008, the aggregate pretax compensation
          expense caused basic and diluted earnings per common share to decrease
          by $-0-
          and $-0- per share, respectively.
 
 The
          Company also issues shares of its common stock to non-employees as stock-based
          compensation. The Company accounts for the services using the fair market
          value
          of the services rendered. For the six months ended June 30, 2008, the Company
          issued 10,550,000 shares, and recorded compensation expense of $238,500
          in
          conjunction with the issuance of these shares.
 
 Stock
          Option Plan
 
 In
          December 2001, the Company's stockholders approved the 2001 Employee Stock
          Option Plan (the "2001 Plan"), pursuant to which 2,000,000 shares of common
          stock were reserved for issuance. In August 2004, the Company's stockholders
          approved the 2004 Stock Option Plan (the "2004 Plan"), pursuant to which
          10,000,000 shares of common stock were reserved for issuance. As of June
          30,
          2008, there were 3,002,000 shares of common stock available for issuance
          under
          the 2004 Plan.
  Page
              22
 
 The
          Company was also authorized to issue shares of stock to its employees from
          its
          2001 Plan. The Company expensed the issuance of stock awards in accordance
          with
          SFAS No. 123. Shares issued from the 2001 Plan were expensed at the time
          of
          issuance, as the stock issued had no restrictions to the employees.
 
 The
          Company did not issue any stock options to its employees during the six
          months
          ended June 30, 2008.
 
 A
          summary
          of the option activity under the 2004 Plan as of December 31, 2007 and
          changes
          during the six months ended June 30, 2008, is presented below.
  Options
                
                Shares
                
                Weighted-Average
                  Exercise
                    Share
                  Price
                
                Weighted-Average
                    Remaining Contractual Term
                
                Aggregate
                  Intrinsic
                  ValueOutstanding
                    at January 1, 2008
                
                
                7,978,000
                
                $
                0.11Options
                    granted
                
                
                -
                
                $
                -Options
                    exercised
                
                
                -
                
                $
                -Options
                    cancelled/expired
                
                
                (980,000
                )
                $
                0.11Outstanding
                    at June 30, 2008
                
                
                6,998,000
                
                $
                0.11
                
                
                2.9
                
                $
                (279,920
                )Exercisable
                    at June 30, 2008
                
                
                6,998,000
                
                $
                0.11
                
                
                2.9
                
                
                —
  Stock
          compensation expense applicable to stock options for the six and three
          months
          ended June 30, 2008 was approximately $393,490 and $196,745, respectively.
          The
          aggregate intrinsic value of options outstanding as of June 30, 2008 and
          December 31, 2007 was $(279,920) and $(398,900), respectively.
  Page
              23
  At
          June
          30, 2008, there was $1,015,780 of total unrecognized compensation cost
          related
          to share-based compensation arrangements granted under the 2004 Plan. The
          cost
          is expected to be recognized over a weighted average period of 2.9
          years.
  16.
          COMMITMENTS AND CONTINGENCIES
  Consulting
          Agreements
 
 In
          August
          2005, Delta Technologies, Inc. entered into a consulting agreement with
          Richard
          F. Straub, Jr. ("Straub") for a period of three years, to provide ongoing
          technical assistance and support in the production of Technologies' insulating
          concrete wall forming products.
 
 For
          the
          six and three moths ended June 30, 2008, consulting fees of $26,400 and
          $13,200,
          respectively, have been expensed and; $91,667 and $66,667, respectively,
          of the
          stock value associated with the issuance of shares to Straub is included
          in
          accrued expenses on the Company's consolidated balance sheets as of June
          30,
          2008 and December 31, 2007.
  Page
              24
  **ITEM
                2.**
              **MANAGEMENT'S
                  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND****RESULTS OF OPERATIONS**
 The
          following discussion of our financial condition and results of operations
          should
          be read in conjunction with the financial statements and notes thereto
          and other
          financial information included elsewhere in this report.
 Certain
          statements contained in this report, including, without limitation, statements
          containing the words "believes," "anticipates," "expects" and words of
          similar
          import, constitute "forward looking statements" within the meaning of the
          Private Securities Litigation Reform Act of 1995. Such forward-looking
          statements involve known and unknown risks and uncertainties. Our actual
          results
          may differ materially from those anticipated in these forward-looking statements
          as a result of certain factors, including our ability to create, sustain,
          manage
          or forecast our growth; our ability to attract and retain key personnel;
          changes
          in our business strategy or development plans; competition; business
          disruptions; adverse publicity; and international, national and local general
          economic and market conditions.
  GENERAL
  We
        were
        incorporated in the State of Delaware on November 17, 1999. Since 2003, our
        principal business activities were focused on providing environmental and
        construction technologies and services in the Far East, the Middle East,
        and the
        United States.
 On
          March
          4, 2008, we entered into a Membership Interest Purchase Agreement (the
          “Agreement”) with Egani, Inc., an Arizona corporation (“Egani”). Pursuant to the
          Agreement, we acquired from Egani 100% of the issued and outstanding membership
          interests held by Egani in Altony S.A., an Uruguay Sociedad Anonima, (“Altony”)
          which owns 100% of the issued and outstanding membership interests in South
          American Hedge Fund LLC, a Delaware limited liability company (“South American
          Hedge Fund”). At the closing of the Agreement, we issued 130,000,000 shares of
          our Common stock to Egani for the purchase of all of its interest in Altony
          which constituted, following such issuance, a majority of the outstanding
          shares
          of our common stock. Immediately following the closing of the Agreement,
          Altony
          became a wholly owned subsidiary of the Company. For accounting purposes,
          the
          transaction was treated as a recapitalization of the Company with Altony
          as the
          acquirer.
 The
          principal business of Altony is the ownership and management of South American
          Hedge Fund, a hedge fund that maintains its business office in Uruguay
          and
          invests in public and private securities of the United States and Latin
          American
          countries. South American Hedge Fund also plans to proceed with investments
          in
          oil and gas concessions in Argentina and intends to focus its investments
          in the
          energy sector, including development of energy producing investments and
          alternative energy production in Latin America and the United States.
 
 RESULTS
        OF OPERATIONS
 
 During
        the six months ended June 30, 2008, we incurred a net loss of $3,130,832
        primarily attributable to investment results and operating expenses related
        to
        the South American Hedge Fund. Our ability to continue as a going concern
        is
        dependent upon our ability to obtain funds to
        meet
        our obligations on a timely basis, obtain additional financing or refinancing
        as
        may be required, and ultimately to attain profitability. There are no assurances
        that we will be able to obtain additional financing or that such financing
        will
        be on terms favorable to us. The inability to obtain additional financing
        when
        needed would have a material adverse effect on our operating
        results.
 
 THREE
        MONTHS ENDED JUNE 30, 2008 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
        2007.
 
 During
        the three months ended June 30, 2008, we incurred a net loss of approximately
        $508,000 compared to a net loss of approximately $482,000 for the three months
        ended June 30, 2007.
 
 The
        increase of $24,344 in our operating loss for the three months ended June
        30,
        2008 over the
        comparable period of the prior year was primarily due to a net increase in
        revenue of approximately $491,000, offset by an increase in general and
        administrative expenses of approximately $396,000 and a loss on intellectual
        property of approximately $123,000. .
  Page
            25
 
 SIX
        MONTHS ENDED JUNE 30, 2008 COMPARED TO THE SIX MONTHS ENDED JUNE 30,
        2007.
 
 During
        the six months ended June 30, 2008, we incurred a net loss of approximately
        $3,131,000 compared to a net loss of approximately $964,000 for the six months
        ended June 30, 2007.
 
 The
        increase in our operating loss for the six months ended June 30, 2008 over
        the
        comparable period of the prior year was due to an decrease of approximately
        $1,860,000 in invetment results
        combined with an increase of approximately $997,000 in general and
        administrative expenses.
 
 PLAN
        OF
        OPERATION
 
 *Energy
        Sector*
 
 The
        Company’s newly acquired South American Hedge Fund subsidiary has oil and gas
        investments in Argentina and will continue to focus on the energy sector,
        including the development and supply of
        energy
        and alternative energy sources in Latin America and the United States.
 
 In
        August
        2007, South American Hedge Fund signed a purchase option for three interests
        in
        oil and
        gas
        concessions in Argentina. We are in the process of obtaining the necessary
        government and environmental operating permits for our operation of these concessions. Our
        primary focus will be, upon receipt of the governmental approvals relative
        to
        our investment in these concessions, to
        develop two wells per month.
  To
        supplement our growth, we may also consider mergers and acquisitions, although
        we have no acquisitions contemplated or under discussion at this
        time.
  In
        addition, we are currently evaluating newly developed alternative energy
        technologies for possible investment and development.
 
 *Environmental
        and Construction Technologies and Services*
 
 Following
        the acquisition of Altony and South America Hedge Fund, we have continued
        to
        pursue environmental
        remediation and other projects in the Middle East. These activities are
        conducted by our joint venture subsidiary, Delta-Envirotech, Inc.
        (“Envirotech”). We have operating control of Envirotech and hold a 45% percent
        ownership interest. Envirotech has entered
        into strategic alliance agreements with several United States-based entities
        with technologies and products in the environmental field to support its
        activities.
  In
        March
        2007, we reached a working agreement to provide equipment to manufacture
        insulating concrete form (ICF) products for the building industry in Saudi
        Arabia. Because of lengthy and unexpected delays by the potential purchaser,
        we
        are currently evaluating whether or not it is in
        the
        Company’s best interests to continue with this agreement or seek other
        purchasers of the equipment. Envirotech expanded its product line by securing
        the master distribution rights for the
        Middle East for a gas-imaging product used in oilfield and refining operations
        that has been approved for testing by ARAMCO, the Saudi government oil company.
        ARAMCO has scheduled field trials to test this equipment that we expect will
        be
        completed by the end of September 2008.
 
 We
        have
        withdrawn from the Indonesia market. Our decision was based on the additional
        expenses we would incur to meet the new requirement of a second contract
        with
        Pertamina (the government-owned oil company), that our processing equipment
        be
        moved off the refinery property. We are currently evaluating whether to redeploy
        the processing equipment or sell it to a third party.
 
 Our
        construction technology activities were conducted by our wholly owned
        subsidiary, Delta Technologies, Inc. (“Technologies”). In August 2005,
        Technologies acquired certain intellectual property and filed a patent
        application for a new insulating concrete wall forming (ICF) system, call *Delta
        Wall* .
        We have
        elected not to incur the additional expense required to pursue the *Delta
        Wall* patent
        application and are developing a strategy to exit this business segment.
 
 LIQUIDITY
 
 At
        June
        30, 2008 we had a working capital surplus of $292,827, compared with a surplus of
        $1,361,976 at December 31, 2007. This decrease at June 30, 2008 is a result
        of a
        decrease in current investments of approximately $1,741,000.
  Page
            26
 
 ASSETS
 
 At
        June
        30, 2008, we had total assets of $4,489,994, compared to total assets of $7,563,657
        at December 31, 2007. The decrease in total assets was primarily due to the decrease
        in total investments of approximately $2,870,000 and a decrease in intangible assets
of
        approximately $126,000.
 
 CRITICAL
        ACCOUNTING ISSUES
  The
          Company's discussion and analysis of its financial condition and results
          of
          operations are based upon the Company's financial statements, which have
          been
          prepared in accordance with accounting principles generally accepted in
          the
          United States of America. The preparation of the financial statements requires
          the Company to make estimates and judgments that affect the reported amount
          of
          assets, liabilities, and expenses, and related disclosures of contingent
          assets
          and liabilities. On an on-going basis, the Company evaluates its estimates,
          including those related to intangible assets, income taxes and contingencies
          and
          litigation. The Company bases its estimates on historical experience and
          on
          various assumptions that are believed to be reasonable under the circumstances,
          the results of which form the basis for making judgments about carrying
          values
          of assets and liabilities that are not readily apparent from other sources.
          Actual results may differ from these estimates under different assumptions
          or
          conditions.
  Other
        Matters
 
 Accounting
        Pronouncements
  In
        June
        2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
        and Hedging Activities,” an amendment of FASB Statement No. 133 (“SFAS No.
        161”). The new standard is intended to improve financial reporting about
        derivative instruments and hedging activities by requiring enhanced disclosures
        to enable investors to better understand their effects on an entity’s financial
        position, financial performance and cash flows. It is effective for financial
        statements issued for fiscal years and interim periods beginning after November
        15, 2008. The Company does not believe that SFAS No. 161 will have a material
        impact on its financial statements.
 
 In
        May
        2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
        Accounting Principles” (“SFAS No. 162”). SFAS No. 162 identifies the sources of
        accounting principles and the
        framework for selecting the principles used in the preparation of financial
        statements of nongovernmental entities that are presented in conformity with
        generally accepted accounting principles (GAAP) in the United States. This
        Statement is effective sixty days following the SEC’s approval of the Public
        Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of
        Present Fairly in Conformity With Generally Accepted Accounting Principles.” The
        Company is currently evaluating the potential impact, if any, of the adoption
        of
        SFAS No. 162 on
        its
        financial statements.
 
 FOREIGN
        CURRENCY TRANSLATION
 
 The
        functional currency for some foreign operations is the local currency. Assets
        and liabilities of foreign operations are translated at balance sheet date
        rates of exchange and income, expense and cash flow items are translated
        at
 the
        average exchange rate for the period. Translation adjustments in future periods
        will be recorded in Other Comprehensive Income. The translation gains or losses
        were not material for the periods ended June 30, 2008 and 2007.
 
 GOODWILL
        AND OTHER INTANGIBLES
 
 In
        June
        2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets."
        SFAS No. 142 specifies the financial accounting and reporting for acquired
        goodwill and other intangible assets. Goodwill and intangible
        assets
 that
        have
        indefinite useful lives are not amortized but rather they are tested at
        least
        annually for impairment unless certain impairment indications are identified.
  Page
            27
 
 **ITEM
        3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
        RISK.**
 
 We
        are
        primarily exposed to foreign currency risk, interest rate risk and commodity
        price risk.
 
 Foreign
        Currency Risk – Our financial results could be affected by factors such as
        changes in foreign currency exchange rates or, weak economic conditions in
        foreign markets. Because our revenue is reported in U.S. dollars, fluctuating
        exchange rates of the local currency, when converted into U.S. dollars, may
        have
        an adverse impact on our revenue and income. We have not hedged foreign
        currency exposures related to transactions denominated in currencies other
        than
        U.S. dollars. We do not engage in financial transactions for trading or
        speculative purposes.
 
 Interest
        Rate Risk – Interest rate risk refers to fluctuations in the value of a security
        resulting from changes in the general level of interest rates. Investments
        that
        are classified as
        cash
        and cash equivalents have original maturities of three months or less. Interest
        income is
        sensitive to changes in the general level of U.S. interest rates. Although
        we
        have significant short-term investments, due to the short-term nature of
        our
        investments, we believe that there is
        not a
        material risk exposure.
 
 Commodity
        Price Risk – With operations in the energy sector, our results will be dependent
        on the
        pricing of energy commodities.
 
 **ITEM
        4T. CONTROLS AND PROCEEDURES**
  a.
        Disclosure controls and procedures.
 As
          of the
          end of the Company's most recently completed fiscal quarter (the fourth
          fiscal
          quarter in the case of an annual report) covered by this report, the Company
          carried out an evaluation, with the participation of the Company's management,
          including the Company's Chief Executive Officer and Chief Financial Officer,
          of
          the effectiveness of the Company's disclosure controls and procedures pursuant
          to Securities Exchange Act Rule 13a-15. Based upon that evaluation, the
          Company's Chief Executive Officer and Chief Financial Officer concluded
          that the
          Company's disclosure controls and procedures are effective in ensuring
          that
          information required to be disclosed by the Company in the reports that
          it files
          or submits under the Securities Exchange Act is recorded, processed, summarized
          and reported, within the time periods specified in the SEC's rules and
          forms.
  b.
        Changes in internal controls over financial reporting.
 There
        have been no changes in the Company's internal controls over financial reporting that
        occurred during the Company's last fiscal quarter to which this report relates that
        have
        materially affected, or are reasonably likely to materially affect, the Company's
        internal control over financial reporting.
  **PART
        II–OTHER INFORMATION**
 
 **Item
        1.**  **LEGAL
        PROCEEDINGS.**
 
 On
        September 16, 2008, the Company was notified of a complaint filed with the
        Pennsylvania Department of Labor & Industry by its former President and CEO
        alleging non-payment of wages in the amount of $53,271. The Company also
        received notice of a similar complaint filed by a former employee alleging
        non-payment of wages in the amount of $17,782.
 
 **ITEM
        1A.**  **RISK
        FACTORS.**
 
 Not
        applicable.
 
 **ITEM
        2.**  **UNREGISTERED
        SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.**
 
 The
        following table sets forth the sales of unregistered securities since the
        Company’s last
        report filed under this item.
  Page
            28
  Date
              
              Title
                  and Amount
              
              Purchaser
              
              Principal
                Underwriter
              
              Total
                  Offering Price/
                Underwriting
                  DiscountsApril
                  9, 2008
              
              924,320
                  shares of common stock, issued upon conversion of principal and
                  accrued
                  interest of a promissory note in the principal amount of
                  $43,600.
              
              Private
                  investor.
              
              NA
              
              $46,216/NAApril
                  16, 2008
              
              550,000
                  shares of common stock.
              
              Consultant.
              
              NA
              
              $38,500/NAApril
                  23, 2008
              
              1,491,885
                  shares of common stock, issued upon conversion of principal and
                  accrued
                  interest of a promissory note in the principal amount of
                  $100,000.
              
              Private
                  investor.
              
              NA
              
              $104,432/NA
  **ITEM
        3.**  **DEFAULTS
        UPON SENIOR SECURITIES.**
 
 Not
        applicable.
 
 **ITEM
        4.**  **SUBMISSION
        OF MATTERS TO A VOTE OF SECURITY HOLDERS.**
 
 Not
        applicable.
 
 **ITEM
        5.**  **OTHER
        INFORMATION.**
 
 Not
        applicable.
 
 **ITEM
        6. EXHIBITS.**
 
 4.5g
              Amendment
                  dated as of April 21, 2008 to 4% convertible promissory note in
                  the
                  principal amount of $100,000.10.41
              6%
                  promissory note issued June 27, 2008 by Delta Mutual, Inc. to Security
                  Systems International, Inc. in the principal amount of
                  $19,500.31.1
              Certification
                  of Principal Executive Officer Pursuant to Section 302 of The
                  Sarbanes Oxley Act of 2002.31.2
              Certification
                  of Chief Financial Officer Pursuant to Section 302 of The Sarbanes
                  Oxley
                  Act of 2002.32.1
              Certification
                  of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350
                  as
                  adopted pursuant to Section 906 of the Sarbanes-Oxley Oxley Act
                  of
                  2002.32.2
              Certification
                  of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as
                  adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Oxley Act of
                  2002.
 
 Page
            29
  SIGNATURES
  In
        accordance with the requirements of the Exchange Act, the Company has
        caused this
        report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 DELTA
                  MUTUAL, INC.BY:
              /s/
                  Malcolm W. ShermanMalcolm
                  W. ShermanExecutive
                  Vice President
                (Principal
                  Executive
                  Officer)
  Dated: September
        17, 2008
  Page
            30
 
 EXHIBIT
        INDEX
 
 4.5g
              Amendment
                  dated as of April 21, 2008 to 4% convertible promissory note in
                  the
                  principal amount of $100,000, filed herewith.10.41
              6%
                  promissory note issued June 27, 2008 by Delta Mutual, Inc. to Security
                  Systems International, Inc. in the principal amount of $19,500,
                  filed
                  herewith.31.1
              Certification
                  of Principal Executive Officer Pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002, filed herewith.31.2
              Certification
                  of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002, filed herewith.32.1
              Certification
                  of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350,
                  as
                  Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
                  filed
                  herewith.32.2
              Certification
                  of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350,
                  as Adopted
                  Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed
                  herewith.
  Page
            31