FORM
      10-QSB




SECURITIES
      AND EXCHANGE COMMISSION




WASHINGTON,
      D.C.




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




For
      the
      quarterly period ended June 30, 2007




OR




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




For
      the
      transition period from ____________ to _________________




Commission
      File Number 000-30563




DELTA
      MUTUAL, INC.


(Exact
      name of registrant as specified in its charter)


DELAWARE
              
              14-1818394(State
                  or other jurisdiction of
              
              (I.R.S.
                  Employerincorporation
                  or organization)
              
              Identification
                  No.)




111
      NORTH
      BRANCH STREET, SELLERSVILLE, PA 18960




(215)
      258-2800




(Address
      and telephone number, including area code, of


registrant's
      principal executive office)




(Former
      name, former address and former fiscal year, if changed since
      last report)




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




YES
x
      NO o




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


o
      Yes x No





Indicate
      the number of shares outstanding of each of the issuer's classes of common
      stock, as of the latest practicable date.




At
      August  8 **,** 2007,
      there were 62,272,286 shares of Common Stock, $.0001 par value, outstanding.









DELTA
      MUTUAL, INC.




INDEX




PagePart
                  I. Financial Information
              
              3Item
                  1. Financial Statements
              
              3Consolidated
                  Balance Sheet as of June 30, 2007 (unaudited)
              
              3Consolidated
                    Statements of Operations for the Three and Six Months EndedJune
                    30, 2007 and 2006 (unaudited)
              
              4Consolidated
                    Statements of Cash Flows for the Six Months Ended June 30, 2007and
                    2006
                    (unaudited)
              
              5-6Notes
                  to Unaudited Consolidated Financial Statements
              
              7Item
                  2. Management's Discussion and Analysis or Plan of
                  Operation
              
              12Item
                  3. Controls and Procedures
              
              16Part
                  II. Other Information
              
              16Item
                  4. Submission of Matters to Vote of Security Holders
              
              16Item
                  5. Other Information
              
              17Item
                  6. Exhibits
              
              17Signatures
              
              17


1


PART
          I.
          FINANCIAL INFORMATION




Item
      1.
      Financial Statements




Certain
      information and footnote disclosures required under accounting principles
      generally accepted in the United States of America have been condensed
      or omitted from the following consolidated financial
      statements pursuant
      to the rules and regulations of the Securities and Exchange Commission. It
      is
      suggested that the following consolidated financial statements be read in conjunction
      with the year-end consolidated financial statements and notes thereto
      included in the Company's Annual Report on Form 10-KSB for the year


ended
      December 31, 2006.




The
      results of operations for the three and six months ended June 30, 2007 and
      2006
      are not necessarily indicative of the results for the entire fiscal year
      or
      for any other period.




2


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




June
                  30,2007ASSETSCurrent
                  Assets:Cash
              
              $
              66,849Prepaid
                  expenses
              
              
              1,954Total
                  Current Assets
              
              
              68,803Property
                  and equipment - net
              
              
              415,540Intangible
                  asset
              
              
              129,892Other
                  assets
              
              
              1,400TOTAL
                  ASSETS
              
              $
              615,635LIABILITIES
                  AND STOCKHOLDERS' DEFICIENCYCurrent
                  Liabilities:Accounts
                  payable
              
              $
              234,326Accrued
                  expenses
              
              
              983,042Convertible
                  debt
              
              
              929,340Notes
                  payable
              
              
              240,655TOTAL
                  LIABILITIES
              
              
              2,387,363Minority
                  interest in consolidated subsidiaries
              
              
              292,818Stockholders'
                  Deficiency:Common
                  stock $0.0001 par value - authorized 250,000,000shares; 62,272,286outstanding
              
              
              6,227Additional
                  paid-in-capital
              
              
              8,141,497Accumulated
                  deficit
              
              
              (10,212,270
              )Total
                  Stockholders' Deficiency
              
              
              (2,064,546
              )TOTAL
                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY
              
              $
              615,635
  See
        Notes
        to Unaudited Consolidated Financial Statements


3


**DELTA
        MUTUAL, INC. AND SUBSIDIARIES**


**CONSOLIDATED
        STATEMENTS OF OPERATIONS**
 **(UNAUDITED)**
  Six
                  Months Ended June 30,
              
              Three
                  Months Ended June 30,2007
              
              2006
              
              2007
              
              2006Revenue
              
              $
              -
              
              $
              260,704
              
              $
              -
              
              $
              99,982Costs
                  and ExpensesCost
                  of Sales
              
              
              -
              
              
              79,432
              
              
              -
              
              
              29,694General
                    and administrativeexpenses
              
              
              1,275,477
              
              
              1,363,702
              
              
              733,542
              
              
              620,2881,275,477
              
              
              1,443,134
              
              
              733,542
              
              
              649,982Loss
                  from operations
              
              
              (1,275,477
              )
              
              (1,182,430
              )
              
              (733,542
              )
              
              (550,000
              )Accretion
                  of convertible debt
              
              
              -
              
              
              (146,751
              )
              
              -
              
              
              (58,798
              )Interest
                  expense
              
              
              (26,464
              )
              
              (23,543
              )
              
              (19,481
              )
              
              (11,604
              )Loss
                  before minority interest
              
              
              (1,301,941
              )
              
              (1,352,724
              )
              
              (753,023
              )
              
              (620,402
              )Minority
                  interest share of (income)loss
                  of consolidated subsidiaries
              
              
              (47,825
              )
              
              (92,059
              )
              
              (10,772
              )
              
              (21,680
              )Loss
                  before benefit from income taxes
              
              
              (1,349,766
              )
              
              (1,444,783
              )
              
              (763,795
              )
              
              (642,082
              )Benefit
                  from income taxes
              
              
              -
              
              
              -
              
              
              -
              
              
              -Net
                  loss
              
              $
              (1,349,766
              )
              $
              (1,444,783
              )
              $
              (763,795
              )
              $
              (642,082
              )Loss
                    per common share-basic
                    and diluted
              
              $
              (0.02
              )
              $
              (0.04
              )
              $
              (0.01
              )
              $
              (0.02
              )Weighted
                      average number ofcommon
                      shares outstanding-basic and diluted
              
              
              62,229,342
              
              
              41,030,224
              
              
              62,272,286
              
              
              41,865,537


See
        Notes
        to Unaudited Consolidated Financial Statements


4


**DELTA
        MUTUAL, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **(UNAUDITED)**
  Six
                  Months Ended June 30,2007
              
              2006Cash
                  flows from operating activities:Net
                  loss
              
              $
              (1,349,766
              )
              $
              (1,444,783
              )Adjustments
                  to reconcile net loss tonet
                  cash used in operating activities:Depreciation
                  and amortization
              
              
              26,116
              
              
              22,896Non-cash
                  compensation
              
              
              13,880
              
              
              168,432Accretion
                  of convertible debt
              
              
              -
              
              
              146,751Compensatory
                    element of optionissuance
              
              
              393,490
              
              
              447,435Minority
                    interest in income (losses) ofconsolidated
                    subsidiaries
              
              
              47,825
              
              
              92,059Changes
                    in operating assets and liabilities
              
              
              433,214
              
              
              103,250Net
                  cash used in operating activities
              
              
              (435,241
              )
              
              (463,960
              )Cash
                  flows from investing activities:Deposit
                  on land
              
              
              (25,000
              )
              
              -Refund
                  of land deposit
              
              
              35,500
              
              
              -Net
                  cash provided byinvesting
                  activities
              
              
              10,500
              
              
              -Cash
                  flows from financing activities:Proceeds
                    from sale of common stockand
                    deferred stock purchase
              
              
              10,000
              
              
              333,000Proceeds
                  from exercise of warrants
              
              
              -
              
              
              73,000Proceeds
                  from loans
              
              
              -
              
              
              30,000Proceeds
                  from borrowings
              
              
              -
              
              
              16,000Proceeds
                    from convertible debtfinancing
              
              
              267,000
              
              
              -Repayment
                  of loan
              
              
              -
              
              
              (23,910
              )Payments
                  to minority interests
              
              
              (47,375
              )
              
              (6,514
              )Proceeds
                  from minority interest
              
              
              50,818
              
              
              79,941Net
                    cash provided byfinancing
                    activities
              
              
              280,443
              
              
              501,517Net
                  increase (decrease) in cash
              
              
              (144,298
              )
              
              37,557Cash
                  - Beginning of period
              
              
              211,147
              
              
              67,042Cash
                  - End of period
              
              $
              66,849
              
              $
              104,599


See
        Notes
        to Unaudited Consolidated Financial Statements




5


**DELTA
        MUTUAL, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 (Continued)
 (UNAUDITED)
  Six
                  Months Ended June 30,2007
              
              2006Supplementary
                  information:Cash
                  paid during year for:Interest
              
              $
              -
              
              $
              1,564Income
                  taxes
              
              $
              -
              
              $
              -Changes
                  in operating assets andliabilities
                  consists of:(Increase)
                  in accounts receivable
              
              
              -
              
              
              (257,674
              )(Increase)
                  decrease in prepaid expenses
              
              
              248,000
              
              
              17,809(Increase)
                  decrease in deposits
              
              
              -
              
              
              (49,000
              )Increase
                  in accounts payable and accrued expenses
              
              
              185,214
              
              
              392,115$
              433,214
              
              $
              103,250Non-cash
                  financing activities:Issuance
                  of common stock for debt
              
              $
              -
              
              $
              292,634Issuance
                    of convertible notes fordeferred
                    stock purchase
              
              $
              266,000
              
              $
              -Issuance
                    of convertible note in lieu ofpayment
                    of commission
              
              $
              26,600
              
              $
              -Issuance
                    of common stock in lieu ofpayment
                    of accured expenses
              
              $
              13,880
              
              $
              -Issuance
                  of common stock for services
              
              $
              -
              
              $
              307,841Issuance
                    of common stockforsettlement
              
              $
              -
              
              $
              42,750


See
        Notes
        to Unaudited Consolidated Financial Statements




6


DELTA
        MUTUAL INC. AND SUBSIDIARIES
 NOTES
        TO
        UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 June
        30,
        2007
  1.
              DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
                  ACCOUNTING POLICIES
  Organization
  Delta Mutual, Inc. and
        subsidiaries ("Delta" or the "Company") are engaged in providing environmental
        and construction technologies and services to certain geographic reporting
        segments in the Far East, the Middle East, the United States and Puerto
        Rico.
  The Company’s environmental
        activities are conducted by its joint venture subsidiary Delta-Envirotech,
        Inc.
        (“Envirotech”) headquartered in Virginia. Envirotech has established a strategic
        alliance with ZAFF International, Ltd., a technology company in Saudi Arabia,
        to
        pursue environmental and other projects in Saudi Arabia and other areas of
        the
        Middle East. Envirotech also formed a local joint venture company in Indonesia,
        PT Triyudha-Envirotech, to perform energy and waste recovery operations in
        that
        country.
  The Company’s construction
        technology activities are conducted through its wholly owned U.S., subsidiary,
        Delta Technologies, Inc (“Technologies”). Technologies acquired the intellectual
        property rights and filed a patent for a new insulating concrete wall forming
        (ICF) system known as Delta Wall.
  BASIS OF PRESENTATION
  The consolidated balance
        sheet as
        of June 30, 2007, and the consolidated statements of operations and cash
        flows
        for the periods presented herein have been prepared by the Company and are
        unaudited. In the opinion of management, all adjustments (consisting solely
        of
        normal recurring adjustments) necessary to present fairly, the financial
        position, results of operations and cash flows for all periods presented
        have
        been made.
  The consolidated financial
        statements for the period ended June 30, 2007 have been prepared on a going
        concern basis, which contemplates the realization of assets and settlement
        of
        liabilities and commitments in the normal course of business. Management
        recognizes that the Company's continued existence is dependent upon its ability
        to obtain needed working capital through additional equity and/or debt financing
        and revenue to cover expenses as the Company continues to incur
        losses.
  The Company's business is
        subject
        to most of the risks inherent in the establishment of a new business enterprise.
        The likelihood of success of the Company must be considered in light of the
        expenses, difficulties, delays and unanticipated challenges encountered in
        connection with the formation of a new business, raising operating and
        development capital, and the marketing of a new product. There is no assurance
        the Company will ultimately achieve a profitable level of
        operations.
  The Company presently does
        not
        have sufficient liquid assets to finance its anticipated funding needs and
        obligations. The Company's continued existence is dependent upon its ability
        to
        obtain needed working capital through additional equity and/or debt financing
        and achieve a level of sales adequate to support its cost structure. Management
        is actively seeking additional capital to ensure the continuation of its
        development activities and complete the proposed joint ventures. However,
        there
        is no assurance that additional capital will be obtained or that the joint
        ventures will be profitable. These uncertainties raise substantial doubt
        about
        the ability of the Company to continue as a going concern. The accompanying
        financial statements do not include any adjustments that might result from
        the
        outcome of these uncertainties should the Company be unable to continue as
        a
        going concern.
  7
  SIGNIFICANT ACCOUNTING
        POLICIES
  PRINCIPLES OF
        CONSOLIDATION
  The Company's consolidated
        financial statements include the accounts of all majority-owned subsidiaries
        where its ownership is more than 50 percent of common stock. The consolidated
        statements also include the accounts of any Variable Interest Entities ("VIEs")
        where the Company is deemed to be the primary beneficiary, regardless of
        its
        ownership percentage. All significant intercompany balances and transactions
        with consolidated subsidiaries are eliminated in the consolidated financial
        statements. Where the Company's ownership interest is less than 100 percent,
        the
        outside stockholders’ interest are shown as minority interest. The minority
        ownership interest of the Company's earnings or loss, net of tax, is classified
        as "Minority interest in earnings of consolidated subsidiaries" in the
        consolidated statements of operations.
  USE OF ESTIMATES
  The preparation of consolidated
        financial statements in conformity with accounting principles generally accepted
        in the United States of America requires management to make estimates and
        assumptions that affect the reported amounts of assets and liabilities, and
        disclosure of contingent assets and liabilities at the date of the financial
        statements and the reported amounts of revenues and expenses during the period.
        Actual results could differ from those estimates.
  CONCENTRATION OF CREDIT
        RISK
  Financial instruments which
        potentially subject the Company to concentration of credit risk consist
        principally of accounts receivable. The Company grants credit to customers
        based
        on the customer’s financial condition, without requiring collateral. Exposure to
        losses on the receivables is principally dependent on each customer’s financial
        condition. The Company controls its exposure to credit risk through credit
        approvals.
  LOSS PER SHARE
  Basic and diluted loss per
        common
        share is computed by dividing net loss by the weighted average number of
        common
        shares outstanding during the year. Potential common shares are excluded
        from
        the loss per share calculation because the effect would be antidilutive.
        Potential common shares relate to the convertible debt, stock options and
        common
        stock purchase warrants. As of June 30, 2007, there were 15,008,587 potential
        common shares related to convertible debt and 7,978,000 potential common
        shares
        related to stock options. As of June 30, 2006, there were 5,679,867 potential
        common shares related to convertible debt and 8,778,000 potential common
        shares
        related to stock options.
  REVENUE RECOGNITION
  The Company recognizes revenue
        in
        accordance with the guidance contained in SEC Staff Accounting Bulletin No.
        104
        "Revenue Recognition Financial Statements" (SAB No. 104). Revenue is recognized
        from the Company's environmental remediation operation as the services are
        performed over the life of the remediation contracts.
  PREACQUISITION COSTS
  The
          Company accounts for costs incurred prior to the date of acquisition of
          a parcel
          of real property as preacquisition costs. Preacquisition costs are capitalized
          if the property was acquired or the acquisition of the property is probable.
          Capitalized preacquisition costs in excess of recoverable amounts are charged
          to
          expense.
  EVALUATION OF LONG-LIVED
        ASSETS
  The Company reviews property
        and
        equipment and finite-lived intangible assets for impairment whenever events
        or
        changes in circumstances indicate the carrying value may not be recoverable
        in
        accordance with guidance in Statement of Financial Accounting Standards (SFAS)
        No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets."
        If the
        carrying value of the long-lived asset exceeds the undiscounted amount of
        the
        related estimated future cash flows, the asset would be adjusted to its fair
        value and an impairment loss would be charged to operations in the period
        identified.
  8
  DEPRECIATION AND
        AMORTIZATION
  Property and equipment are
        stated
        at cost. Depreciation is provided for by the straight-line method over the
        estimated useful lives of the related assets.
  STOCK-BASED COMPENSATION
  The Company has a stock-based
        compensation plan under which stock options and stock awards are granted
        to
        employees. Effective January 1, 2006, the Company accounts for stock based
        compensation under Statement of Financial Accounting Standards ("SFAS") No.
        123(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
        Accumulated Other Comprehensive Income. The translation gains or losses were
        not
        material for the six and three months ended June 30, 2007 and 2006.
  INTANGIBLES
  In June 2001, the FASB issued
        SFAS
        No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 specifies the
        financial accounting and reporting for acquired goodwill and other intangible
        assets. Goodwill and intangible assets that have indefinite useful lives
        are not
        amortized but rather they are tested at least annually for impairment unless
        certain impairment indications are identified.
  FAIR VALUE OF FINANCIAL
        INSTRUMENTS
  For financial instruments
        including cash, accounts payable, accrued expenses, and convertible debt,
        it was
        assumed that the carrying amount approximated fair value because of the short
        maturities of such instruments.
  9
  RECLASSIFICATIONS
  Certain reclassifications
        have
        been made to prior period amounts to conform to the current year
        presentation.
  NEW FINANCIAL ACCOUNTING
        STANDARDS
  In September 2006, the FASB
        issued
        SFAS No. 157, "Fair Value Measurements," which enhances existing guidance
        for
        measuring assets and liabilities using fair value. This Statement provides
        a
        single definition of fair value, together with a framework for measuring
        it, and
        requires additional disclosure about the use of fair value to measure assets
        and
        liabilities. SFAS No. 157 is effective for financial statements issued for
        fiscal years beginning after November 15, 2007, and interim periods within
        those
        fiscal years. The Company does not believe that SFAS No. 157 will have a
        material impact on its consolidated financial statements.
  In February 2007, the FASB
        issued
        SFAS No. 159 (“SFAS No. 159”) “The Fair Value Option for
        Financial Assets and Financial Liabilities," providing companies with an
        option
        to report selected financial assets and liabilities at fair value. The
        Standard’s objective is to reduce both complexity in accounting for financial
        instruments and the volatility in earnings caused by measuring related assets
        and liabilities differently. It also requires entities to display the fair
        value
        of those assets and liabilities for which the company has chosen to use fair
        value on the face of the balance sheet. SFAS 159 is effective for fiscal
        years
        beginning after November 15, 2007. The Company is currently evaluating the
        impact of the adoption of this Statement on its consolidated financial
        statements.
  2.
              PROPERTY AND
                  EQUIPMENT
  June
                    30, 2007Equipment
                
                $
                480,035Leasehold
                    improvements
                
                
                7,807487,842Less
                    accumulatedDepreciation
                
                
                72,302$
                415,540
  Depreciation expense for
        the six
        and three months ended June 30, 2007 and 2006, amounted to $22,541 and $11,208;
        and $19,321 and $9,661, respectively.
  3.
              INTANGIBLE ASSETS
  Intellectual property costs
        are
        intellectual property included in a patent application. If the patent is
        not
        issued, the Company will write-off the unamortized amounts immediately. Other
        intangibles are being amortized over 20 years. Amortization expense was $3,575
        and $1,787; and $3,575 and $1,788 for the six and three months ended June
        30,
        2007 and 2006, respectively.
  Other intangible assets consist
        of
        the following:
  June
                      30, 2007Gross
                      Carrying
                  
                  AccumulatedAmount
                  
                  AmortizationIntellectual
                      property costs
                  
                  $
                  143,000
                  
                  $
                  13,108$
                  143,000
                  
                  $
                  13,108
 
 10
  Estimated amortization expense
        for
        intangible assets for the next five years is as follows:
  EstimatedAmortizationYear
                      EndingDecember
                      31,
                
                Expense2007
                
                $
                3,5752008
                
                
                7,1502009
                
                
                7,1502010
                
                
                7,1502011
                
                
                7,150
  2007 represents amortization
        from
        July 1, through December 31, 2007.
  4.
              INVESTMENT IN JOINT
                  VENTURES
  a.
                In
                    December 2003, the Company formed a joint venture project to
                    develop
                    Section 124, low income housing in the Commonwealth of Puerto
                    Rico. The
                    Company became the general partner and majority owner of a limited
                    partnership, Delta Development Partners, LP, that holds the 85%
                    majority
                    share of Delta Developers Corp., a Puerto Rico corporation, formed
                    to
                    manage the construction and related activities required to build
                    approximately 270 low income homes under Section 124. During
                    the year
                    ended December 31, 2006, the activities associated with this
                    joint venture
                    were discontinued. The operations of the joint venture have been
                    consolidated with the Company for the six and three months ended
                    June 30,
                    2007 and 2006, respectively.
  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
          holds 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 low income homes under Section 124. During the
          first
          quarter of 2007, the activities associated with this joint venture were
          discontinued and the land option deposit was returned to the Company. The
          operations of the joint venture have been consolidated with the Company
          for the
          six and three months ended June 30, 2007 and 2006, respectively.
 
 In
          November 2006, The Company formed a new joint venture to develop Section
          124
          housing in Puerto Rico. The Company became the general partner and minority
          owner of a limited partnership, Delta TA, LP, formed to manage the construction
          and related activities to build approximately 330 residential units under
          section 124. The operations of this partnership have been consolidated
          with the
          Company since November 2006.
  b.
              In January 2004, the Company entered into a
                  joint
                  venture agreement with Hi Tech Consulting and Construction, Inc.
                  (”Hi
                  Tech”) forming Delta- Envirotech, Inc. for the purpose of providing
                  environmental technologies and services to markets in the Middle
                  East. The
                  joint venture company is based in Virginia and focuses on participating
                  in
                  foreign government sponsored pollution remediation and other
                  projects.
  In
          July
          2004, the Company and Hi Tech, pursuant to an agreement to purchase stock
          dated
          January 14, 2004, each sold 75 shares of the joint venture to a third party,
          representing a ten percent (10%) interest.  The Company and Hi-Tech each
          own forty-five percent (45%) of the joint venture.
  11
  The
          operations of the joint venture have been consolidated with the Company
          for the
          six and three months ended June 30, 2007 and 2006. 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 ownership
                  interest in Delta Development Partners, LP; Delta Development Partners
                  II,
                  LP; 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 consolidated statements
          of operations for the six and three months ended June 30, 2007 and 2006.
          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, 2007.
  The
          following represents a schedule of minority interests as of June
          30,
  2007Delta
                      Development Partners LP
                  
                  $
                  144,757Delta
                      Development Partners II, LP
                  
                  
                  39,634Delta
                      TA, LP
                  
                  
                  108,427Delta
                      Developers Corp.
                  
                  
                  —Delta
                      Developers Guayanilla Corp.
                  
                  
                  —Delta-Envirotech,
                      Inc.
                  
                  
                  —PT
                      Triyudha - Envirotech
                  
                  
                  —$
                  292,818
 5.
              NOTES PAYABLE
  In April 2005, the Company
        issued
        8% term notes to private investors in the amount of $210,655, with the principal
        and interest due at maturity on October 2, 2005. Pursuant to note modification
        agreements, the maturity dates of these notes were extended and in June 2006,
        became payable on written demand by the lenders. Interest expense for the
        six
        and three months ended June 30, 2007 and 2006 amounted to $8,426 and $4,213;
        and
        $8,246 and $4,213, respectively. As of June 30, 2007 accrued interest of
        $29,434
        is included in accrued interest expense on the Company's consolidated balance
        sheet.
  6.
              CONVERTIBLE
                  DEBT
 In
        September 2004, the Company issued a 6% convertible note to an investor in
        the
        principal amount of $60,000, convertible into common stock at $0.05 per share.
        In September 2006, this note became payable upon written demand by the lender.
 12
  In
          May
          2004, The Company issued to two related parties, two 4% convertible notes,
          in
          the aggregate principal amount of $322,900, convertible into common stock
          at
          $0.125 per share. By subsequent amendments, the maturity dates of these
          notes
          have been extended until September 10, 2007 and February 28, 2008. In 2006,
          one
          of the noteholders converted $29,160 of the principal amount into shares
          of
          common stock. At June 30, 2007, the principal amount of these two notes
          was
          $293,740.
  On
          May 3,
          2006, the Company issued a convertible note to a related party in the principal
          amount of $16,000. The note bears interest at 6% per annum and matures
          on
          November 3, 2007. The note is convertible into common stock at a conversion
          price of $0.06 per share, the fair value at the date of issuance.
  During
          the 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 an initial conversion price
          of
          $0.05 per share, the fair at the date of issuance. The notes mature in
          April
          2008. In conjunction with the issuance of these two notes, the Company
          reclassified $266,000 recorded as deferred stock purchase, on its consolidated
          balance sheet as of December 31, 2006, to convertible notes at March 31,
          2007.
  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 initial conversion price of $0.05 per share, the fair value
          at the
          date of issuance. The note matures in April 2008.
  In
          May
          2007, the Company borrowed $250,000 from an investor pursuant to the terms
          of a
          convertible promissory note in the aggregate principal amount of $550,000.
          The
          note bears interest of 10% per annum and is convertible into common stock
          at an
          initial conversion price of $0.05 per share, the fair value at the date
          of
          issuance. The maturity date for the amount borrowed is May
          2008.
  The following table shows
        the
        maturities by year of total face amount of the long-term convertible debt
        obligations at June 30, 2007:
  2007
                
                $
                269,7402008
                
                
                659,600929,340
  For the six and three months
        ended
        June 30, 2007 and 2006, the Company recorded interest expense of $26,464
        and
        $19,481; and $23,543 and $11,604, respectively. In March 2007, the Company
        paid
        $13,880 of accrued interest to a convertible noteholder by issuing 111,040
        shares of common stock. As of June 30, 2007, accrued interest of $75,862
        is
        included in accrued expenses on the Company's consolidated balance sheet.
 
 7.
              ACCRUED
                  EXPENSES
  Accrued
        expenses consist of the
        following:
  June
                    302007Professional
                    fees
                
                $
                8,105Interest
                    expense
                
                
                75,862Payroll
                    Expense
                
                
                407,320Payroll
                    expense officers
                
                
                121,499Payroll
                    tax expense
                
                
                36,147Other
                    accrued expenses
                
                
                334,109$
                983,042
  13
  8.
              LOANS FROM RELATED
                  PARTIES
  In
        March
        2005, the Company borrowed $71,731 from a shareholder of the Company, with
        interest at 6% per annum and the principal and interest due in three equal
        installments in 2005. The note was amended in December 2005 extending the
        final
        installment payment to February 20, 2006. On February 3, 2006, the Company
        made
        the final payment consisting of $23,910 of principal and$1,563 of accrued
        interest. Interest expense for the six and three months ended June 30, 2007
        and
        2006 amounted to $-0- and $-0-; and $-0- and $287, respectively.
  On
        May 17,
        2006, the Company borrowed $30,000 from a shareholder of the Company, at
        interest of 6% per annum with the principal and interest due on May 17, 2008.
        Interest expense for the six and three months ended June 30, 2007 and 2006
        amounted to $900 and $450; and $222 and $222, respectively. The balance due
        to
        the shareholder is included in Notes Payable on the Company's consolidated
        balance sheet at June 30, 2007. Accrued interest of $2,022 in included in
        accrued expenses on the Company’s consolidated balance sheet at June 30,
        2007.
  9.
              OTHER RELATED PARTY
                  TRANSACTIONS
  The
        Company's Envirotech subsidiary pays monthly office rent to David
        Razmara, the president of Envirotech and a shareholder of the Company, in
        the
        amount of $1,000. The rent expense for the six and three months ended June
        30,
        2007 and 2006 amounted to $6,000 and $3,000,
        respectively.
 
 10.
              STOCKHOLDERS'
                  DEFICIENCY
  The
        Company
        issues shares of common stock for services and repayment of debt and interest
        at
        fair market value at time of
        issuance.
  For
        the six
        months ended June 30, 2007, the Company issued 111,040 shares of common stock
        in
        payment of accrued interest valued at $0.125 per share.
  11.
              BUSINESS SEGMENT
                  INFORMATION
  The
        Company
        operates in four reportable segments. The segments are geographic and include
        the Far East (Indonesia), the Middle East, North America (United States)
        and
        Puerto Rico. The primary criteria by which financial performance is evaluated
        and resources allocated are revenue and operating income.
  The
        following is a summary of key financial data:
  Six
                        Monthsended
                        June 30
                  
                  Three
                      Monthsended
                      June 30,2007
                  
                  2006
                  
                  2007
                  
                  2006Total
                      Revenue:North
                      America
                  
                  $
                  —
                  
                  
                  —
                  
                  $
                  —
                  
                  $
                  —Indonesia
                  
                  
                  —
                  
                  $
                  260,704
                  
                  
                  —
                  
                  
                  99,982Middle
                      East
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —Puerto
                      Rico
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —
                  
                  
                  —$
                  —
                  
                  $
                  260,704
                  
                  $
                  —
                  
                  $
                  99,982Operating
                      Loss:North
                      America
                  
                  $
                  (1,221,001
                  )
                  $
                  (1,077,311
                  )
                  $
                  (705,324
                  )
                  $
                  (540,283
                  )Indonesia
                  
                  
                  (18,975
                  )
                  
                  75,319
                  
                  
                  (9,987
                  )
                  
                  25,705Middle
                      East
                  
                  
                  (10,000
                  )
                  
                  (29,400
                  )
                  
                  (5,000
                  )
                  
                  (14,700
                  )Puerto
                      Rico
                  
                  
                  (25,501
                  )
                  
                  (151,038
                  )
                  
                  (13,231
                  )
                  
                  (20,722
                  )$
                  (1,275,477
                  )
                  $
                  (1,182,430
                  )
                  $
                  (733,542
                  )
                  $
                  (550,000
                  )
  14
  12.
              SHARE BASED
                  COMPENSATION
  On January 1, 2006, the Company
        adopted SFAS No. 123(R) "Share-Based Payment," requiring the recognition
        of
        compensation expense in the Consolidated Statements of Operations related
        to the
        fair value of its employee share-based options and awards. SFAS No. 123(R)
        revised SFAS No. 123 "Accounting for Stock-Based Compensation" and supercedes
        APB Opinion No. 25 "Accounting for Stock Issued to Employees." SFAS No. 123(R)
        is supplemented by SEC Staff Accounting Bulletin ("SAB") No. 107 "Share-Based
        Payment." SAB No. 107 expresses the SEC staff's views regarding the interaction
        between SFAS No. 123(R) and certain SEC rules and regulations including the
        valuation of share-based payment arrangements.
  The Company recognizes the
        cost of
        all employee stock options on a straight-line attribution basis over their
        respective vesting periods, net of estimated forfeitures. The Company has
        selected the modified prospective method of transition; accordingly, prior
        periods have not been vested. Prior to adopting SFAS No. 123(R), the Company
        applied APB Opinion No. 25, and related interpretation in accounting for
        its
        stock-based compensation plans. All employee stock options were granted at
        or
        above the grant date market price. Accordingly, no compensation cost was
        recognized for fixed stock option grants.
  At June 30, 2007, the Company
        had
        one share-based compensation plan, which is described below. During the six
        and
        three months ended June 30, 2007 and 2006, the adoption of SFAS No.123(R)
        resulted in incremental stock-based compensation expense of $393,490 and
        $196,745; and $292,500 and $146,250, respectively. The incremental stock-based
        compensation expense caused earnings before provision for income taxes and
        net
        earnings to decrease by $393,490 and $196,745; and $295,500 and $146,250,
        respectively, and basic and diluted earnings per common share to decrease
        by
        $0.01 per share.
  The
          Company also issues shares of its common stock to non-employees as stock
          based
          compensation. The Company accounts for the services using the fair market
          value
          of the services rendered. For the six and three months ended June 30, 2007,
          the
          Company did not issue any shares of common stock to non-employees for services
          rendered. During the six and three months ended June 30, 2006, the Company
          issued 1,490,152 shares, and recorded expense of $307,841 in conjunction
          with
          the issuance of those shares, of which $250,000 was included in prepaid
          expenses
          on the consolidated balance sheet at June 30, 2006.
  Stock Option Plan
  In December 2001, the Company's
        stockholders approved a stock option plan entitled the 2001 Employee Stock
        Option Plan (the "2001 Plan"), pursuant to which 2,000,000 shares of common
        stock were reserved for issuance. In August 2004, the Company's stockholders
        approved the 2004 Stock Option Plan (the "2004 Plan"), pursuant to which
        10,000,000 shares of common stock were reserved for issuance. As of June
        30,
        2007, all shares under the 2001 Plan had been issued, and 2,022,000 shares
        of
        common stock remained available for issuance under the 2004 Plan.
  The fair value of each option
        grant is estimated on the date of the grant using the Black-Scholes
        option-pricing model with the following weighted-average assumptions used
        for
        grants in 2006: dividends yield of 0%, expected volatility of 116% and expected
        life of 5 years.
  During
            the six and three months ended June 30, 2007, the Company did not issue
            any
            stock options. During the six and three months ended June 30, 2006, the
            Company
            issued 778,000 stock options to five employees and recorded an expense
            of
            $64,145.
 15
  A summary of option activity
        under
        the 2004 Plan as of December 31, 2006 and changes during the six months ended
        June 30, 2007 is presented below:
  WeightedAverageWeighted
                
                Remaining
                
                AggregateAverage
                
                Contractual
                
                IntrinsicOptions
                
                Shares
                
                Exercise
                    Price
                
                Term
                
                ValueOutstanding
                    at January 1, 2007:
                
                
                7,978,000
                
                $
                0.11Granted
                
                
                —
                
                
                —Exercised
                
                
                —
                
                
                —Forfeited,
                    expired or cancelled:
                
                
                —
                
                
                —Outstanding
                    at June 30, 2007
                
                
                7,978,000
                
                $
                0.11
                
                
                4.0
                
                $
                (319,120
                )Exercisable
                    at June 30, 2007
                
                
                3,908,940
                
                $
                0.11
                
                
                4.0
                
                $
                (156,358
                )
 A summary of the status of
        the
        Company's non vested options as of December 31, 2006 and changes during the
        six
        months ended June 30, 2007 is presented below:
  Weighted-AverageGrant-DateNonvested
                    Options
                
                Options
                
                Fair
                    ValueNonvested
                    at January 1, 2007:
                
                
                4,069,060
                
                $
                0.11Granted
                
                
                —
                
                
                —Vested
                
                
                —
                
                
                —Forfeited,
                    expired or cancelled:
                
                
                —
                
                
                —Nonvested
                    at June 30, 2007
                
                
                4,069,060
                
                $
                0.11
  At June 30, 2007, there was
        $1,802,760 of total unrecognized compensation cost related to non vested
        share-based compensation arrangements granted under the 2004 Plan. The cost
        is
        expected to be recognized over a weighted average period of 4.0 years.
  13.
              COMMITMENTS AND
                  CONTINGENCIES
  Consulting
          Agreements
 
 In
          August
          2005, the Company entered into a consulting agreement with Juan B. Rodriguez
          Pagan ("Rodriguez") to provide certain services and assistance to the Company
          in
          developing its construction and building materials businesses.
 
 For
          the
          six months ended June 30, 2007, consulting fees of $62,720 are included
          in
          accrued expenses on the Company's consolidated balance sheet. For the six
          and
          three months ended June 30, 2007 and 2006, the Company expensed $94,500
          and
          $47,250; and $94,500 and $47,250, respectively, in consulting fees in
          conjunction with the issuance of common stock to Rodriguez.
 
 By
          written notice, the Company terminated this agreement effective June 2,
          2007,
          and informed Rodriguez that the reason for termination was because he had
          violated certain provisions of the agreement. In conjunction with the
          termination, the Company recorded a one-time charge of $248,000.
  16
  In
          August
          2005, Delta Technologies, Inc., a wholly-owned subsidiary of the Company
          ,
          entered into a consulting agreement with Richard F. Straub, Jr. ("Straub")
          for a
          period of three years, to provide ongoing technical assistance and support
          in
          the production of insulating concrete wall forming products.
 
 For
          the
          six and three months ended June 30, 2007 and 2006, consulting fees of $26,400
          and $13,200; and $26,400 and $13,200, respectively have been expensed.
          For the
          six months ended June 30, 2007, $41,667 of the stock value associated with
          the
          issuance of shares to Straub, is included in accrued expenses on the Company's
          consolidated statements of operations and consolidated balance sheet,
          respectively.
 
 14.
              INCOME TAXES
  The
          Company adopted the provisions of Financial Accounting Standards Board
          Interpretation No. 48 “Accounting for Uncertainties in Income Taxes,” (“FIN 48”)
          on January 1, 2007. As a result of the implementation of FIN 48, the Company
          recognized no adjustments in the net liability for unrecognized income
          tax
          benefits.
  15.
              SUBSEQUENT EVENTS
  a.
                    In
                        July 2007, the Company received $150,000 from an investor pursuant to
                        the terms of a convertible promissory note in the aggregate
                        principal
                        amount of $550,000 dated May 1, 2007 (the
                        “Note”). TheCompany
                        has not received the balance of $150,000 due from the investor
                        pursuant to
                        the Note.
  17




ITEM
      2.
      MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION




The
      following discussion of our financial condition and results of operations should
      be
      read in conjunction with the financial statements and notes thereto and
      other
      financial information included elsewhere in this report.




Certain
      statements contained in this report, including, without limitation, statements
      containing the words "believes," "anticipates," "expects" and words of
      similar import, constitute "forward looking statements" within the meaning
      of the
      Private Securities Litigation Reform Act of 1995. Such forward-looking statements
      involve known and unknown risks and uncertainties. Our actual results may
      differ materially from those anticipated in these forward-looking statements as
      a
      result of certain factors, including our ability to create, sustain, manage or
      forecast our growth; our ability to attract and retain key personnel; changes in
      our
      business strategy or development plans; competition; business disruptions;
      adverse publicity; and international, national and local general economic
      and market conditions.




GENERAL




We
      were
      incorporated in the State of Delaware on November 17, 1999 and will require additional
      capital to execute our current and planned business operations.





RESULTS
      OF OPERATIONS




During
      the six months ended June 30, 2007, we incurred a net loss of $1,349,766,
      because we
      had no
      revenue to offset operating expenses. Our ability to continue as a going concern
      is dependent upon our ability to obtain funds to meet our obligations on a
      timely basis, obtain additional financing or refinancing as may be required,
      and
      ultimately to attain profitability. There are no assurances that we will be
      able
      to obtain any additional financing or, if we are able
      to
      obtain additional financing, that such financing will be on terms favorable
      to
      us. The inability to obtain additional financing when needed would have a
      material adverse effect on our
      operating results.




18





THREE
      MONTHS ENDED JUNE 30, 2007 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
      2006.




The
      net
      loss increased by approximately $122,000 from $642,082 for the three months
      ended June 30, 2006 to approximately $764,000 for the three months ended June
      30, 2007.





General
      and administrative expenses for the three months ended June 30, 2007 increased
      approximately $113,000 over the comparable period in the prior year. However,
      ongoing general and administrative expenses decreased by approximately $161,000
      from the prior year period, which was offset by a one-time, non-cash charge
      of
      $248,000 associated with the termination of a consulting agreement.





SIX
      MONTHS ENDED JUNE 30, 2007 COMPARED TO THE SIX MONTHS ENDED JUNE 30,
      2006.





The
      net
      loss decreased by approximately $95,000 from $1,444,783 for the six months
      ended
      June 30, 2006 to $1,349,766 for the six months ended June 30, 2007.





General
      and admistrative expenses for the six months ended June 30, 2007 decreased
      approximately $88,000 from the comperable period in 2006. Ongoing
      general and administrative expenses decreased approximately $336,000 from the
      prior year period, offset by a one-time, non-cash charge of
      $248,000.The other items of significant decrease in the six months
      ended June 30, 2007 over the comparable period of the prior year were a decrease
      in accretion of convertible debt of approximately $147,000 and a decrease in
      our
      share of the losses of our consolidated subsidiaries of approximately $44,000.




PLAN
      OF
      OPERATION





The
      Company has established a wholly-owned subsidiary, a joint venture subsidiary
      and a limited partnership, primarily to establish business operations focused
      on
      providing environmental and construction technologies and services in the Far
      East, the Middle East, the United States and Puerto Rico.





Our
      environmental remediation operations are carried out through Delta-Envirotech,
      Inc., a joint venture company formed in January 2004, with Hi Tech Consulting
      and Construction, Inc., to provide environmental technology and other services
      for certain business segments located in the Far East and the Middle East.
      We
      have operating control of, and a forty-five percent ownership interest in,
      Delta-Envirotech. We have entered into strategic alliance agreements with
      several United States-based entities with technologies and products in the
      environmental field to support the Company's
      worldwide activities.





Our
      construction technology activities are carried out by Delta Technologies, Inc.
      (our wholly owned subsidiary) and focused on the United States construction
      industry but are equally well suited for use in Puerto Rico and
      internationally.





Far
      East
      (Indonesia)





In
      Indonesia, we formed a local joint venture company to commence energy and waste
      recovery operations. The joint venture company, PT Triyudha-Envirotech, began
      operations in December 2005, pursuant to a contract with Pertamina, the
      government owned oil company. The initial contract that required us to process
      3,000 metric tons of oil sludge was successfully completed in October 2006. In
      January 2007, we began negotiating a second contract to process an unlimited
      amount of oil sludge over a 12-month period at the same refinery. We have
      experienced unexpected delays in the negotiations and now expect them to be
      concluded during the third quarter.





Middle
      East





In
      2004,
      we entered into a strategic alliance agreement between our environmental remediation
      joint venture, Delta-Envirotech, Inc. ("Envirotech"), and ZAFF International, Ltd.,
      to
      jointly pursue environmental and other projects in the Middle East.





In
      August
      2005, we reached a working agreement to provide equipment to manufacture
      insulating concrete form (ICF) products for the building industry in Saudi
      Arabia. In September 2006, Envirotech received a letter of intent from a purchaser.





On
      March
      8, 2007, Envirotech received the purchase agreement to supply the equipment
      and services for the factory in Saudi Arabia. This is our first contract
      in Saudi Arabia and our largest to date, valued at $3,369,000.




19





The
      equipment specified in the agreement consists of several ICF technologies
      including the
      machinery that produces our *Delta
      Wall* system.
      The agreement requires payment by letter
      of
      credit in four installments. We currently anticipate that the letter of credit will
      be
      opened during the third quarter of 2007 and that the final payment will be
      received in
      the
      second quarter of 2008.





During
      July and August 2006, we announced that Envirotech expanded its product line
      by
      securing the master distribution rights for the Middle East for environmentally
      friendly organic emulsifiers used to clean oil wells and oil storage
      tanks, as well as a gas-imaging product used in oilfield and refining operations.
      The organic emulsifiers are used in combination with a centrifuge.
      A demonstration
      centrifuge has been fabricated in the US and is scheduled to be shipped to
      Saudi
      Arabia in August. Once the demonstration unit is in place, testing of these
      products will be conducted for ARAMCO, the Saudi government oil company. The
      gas-imaging product is still under evaluation by ARAMCO.





Over
      the
      past nine months, Envirotech has been working with the operators of oil
      sludge processing
      facilities in Bahrain and Kuwait to improve the processing technology currently in
      use.
      The operators have agreed to evaluate new processing equipment provided through
      Envirotech. We expect to ship the demonstration unit, that will be evaluated
      on
      site by the respective operators, during the third quarter.





United
      States





In
      August
      2005, Delta Technologies, Inc. acquired certain intellectual property and
      filed
      a patent application for a new insulating concrete wall forming (ICF) system,
      now know as *Delta
      Wall* .





Production
      of the *Delta
      Wall* blocks
      began in September 2006. An independent testing laboratory
      was hired in January 2007 to evaluate the blocks for the purpose of applying
      for International
      Commercial Code (ICC) approval. We still require independent structural
      engineering evaluations
      to complete the testing and evaluation necessary for ICC approval.





Puerto
      Rico





In
      November 2006, we formed a new limited partnership to acquire a suitable parcel
      of
      land for a new housing development approved for Section 124 housing and
      zoned
      for residential construction. In January 2007, we secured an option on a
      13-acre
      tract in Toa Alta that met these requirements. During the subsequent discussions
      with our bank to obtain  financing
      to acquire the property and begin construction of the first phase of the
      project, the bank informed us that it will not provide financing for a Section
      124 project on the proposed site. However, the bank has indicated that it will
      consider financing a moderate income development with fewer and larger housing
      units. Since this would require substantial changes to the project as originally
      conceived, we are in discussions with our limited partner regarding whether
      or
      not to proceed with a redesigned project.




FUNDING





We
      are
      currently dependent on equity investments or borrowing from private investors
      to pay our operating expenses. There are no assurances that such investors
      will continue to advance funds or invest in the Company's securities. In
      the
      event we are unable to obtain additional capital or funding we may be unable
      to
      pursue our business plans. We anticipate that we will be required to raise
      capital in an amount up to $450,000 during the remaining two quarters of this
      fiscal year in order to continue to fund our current activities and to finance
      our planned business operations.




LIQUIDITY





We
      have
      generated limited revenue from our current operations. We must rely primarily
      on private placements of Company stock or debt to pay operating expenses.





At
      June
      30, 2007 we had a working capital deficit of $2,318,560, an increase of
      $1,003,342 in
      our
      working capital deficit compared with the close of the second quarter of 2006.
      This increase for the period ended June 30, 2007 is a result of a decrease
      in
      accounts receivable and
      prepaid expenses and an increase in accrued expenses and convertible
      debt,


partially
      offset by a decrease in accounts payable. Since we have limited sources of
      revenue, we
      expect
      a working capital deficit until our revenue is sufficient to cover our operating
      expenses.




20





In
      the
      six months ended June 30, 2007, we reclassified $266,000 of stock purchase
      deposits to
      convertible debt, borrowed $43,600 from a stockholder of the Company and
      borrowed $250,000 from
      an
      investor. In July 2007, we borrowed an additional $150,000 from an investor,
      pursuant to the
      terms
      of a convertible promissory note dated May 1, 2007.




ASSETS





At
      June
      30, 2007, we had total assets of $615,635, compared to total assets of $1,329,134
      at June 30, 2006. The decrease in total assets as of June 30, 2007 was due to
      a
      decrease in all classes of current assets, particularly accounts receivable
      and
      prepaid expenses and a modest decrease in fixed assets.




CRITICAL
      ACCOUNTING ISSUES





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





Other
      Matters





Accounting
      Pronouncements





In
      September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements," which
      enhances existing guidance for measuring assets and liabilities using fair value.
      This Standard provides a single definition of fair value, together with a framework
      for measuring it, and requires additional disclosure about the use of fair
      value to measure assets and liabilities. SFAS No. 157 is effective for financial
      statements issued for fiscal years beginning after November 15, 2007, and
      interim periods within those fiscal years. The Company does not believe that SFAS
      No.
      157 will have a material impact on its consolidated financial statements.





In
      February 2007, the FASB issued SFAS No. 159 "The Fair Value Option for Financial
      Assets and Financial Liabilities," providing companies with an option to
      report
      selected financial assets and liabilities at fair value. The Standard's
      objective is to reduce both complexity in accounting for financial instruments
      and the volatility in earnings caused by measuring related assets and
      liabilities differently. It also requires entities to display the fair value of
      those
      assets and liabilities for which the Company has chosen to use fair value
      on
      the face of the balance sheet. SFAS 159 is effective for fiscal years beginning
      after November 15, 2007. The Company is currently evaluating the impact
      of
      the adoption of this Statement on its consolidated financial statements.





FOREIGN
      CURRENCY TRANSLATION





The
      functional currency for some foreign operations is the local currency. Assets
      and liabilities of foreign operations are translated at balance sheet date
      rates of exchange and income, expense and cash flow items are translated at the
      average exchange rate for the period. Translation adjustments in future periods
      will be recorded in Other Comprehensive Income. The translation gains or losses
      were not material for the year ended December 31, 2006.




21





GOODWILL
      AND OTHER INTANGIBLES





In
      June
      2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets."
      SFAS No. 142 specifies the financial accounting and reporting for acquired
      goodwill and other intangible assets. Goodwill and intangible assets that
      have
      indefinite useful lives are not amortized but rather they are tested at
      least
      annually for impairment unless certain impairment indications are identified.





Quantitative
      and Qualitative Disclosures About Market Risk





Fair
      Value of Financial Instruments - The following disclosure of the estimated fair
      value of financial instruments is made in accordance with the requirements of
      Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value
      of
      Financial Instruments". The estimated fair values of financial instruments
      have been determined by the Company using available market information
      and appropriate valuation methodologies.





However,
      considerable judgment is required in interpreting market data to develop
      the estimates of fair value. Accordingly, the estimates presented herein are
      not
      necessarily indicative of the amounts that the Company could realize in a
      current
      market exchange.





The
      Company has not entered into, and does not expect to enter into, financial instruments
      for trading or hedging purposes. The Company does not currently anticipate
      entering into interest rate swaps and/or similar instruments.





The
      Company's carrying values of cash, marketable securities, accounts receivable,
      accounts payable and accrued expenses are a reasonable approximation of
      their
      fair value.




ITEM
      3.
      CONTROLS AND PROCEEDURES




a.
            Disclosure
                controls and procedures.





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




b.
            Changes
                in internal controls over financial
                reporting.





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




PART
      II -
      OTHER INFORMATION




ITEM
      4.
      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS




(a)  On
      April
      16, 2007, our board of directors approved an amendment to our Certificate of
      Incorporation to
      provide for an increase of the number of shares of Common Stock that the Company
      is authorized to issue from 100,000,000 to 250,000,000 .
      Stockholder  approval
      for the amendment to our Certificate of Incorporation was obtained by written
      consent on May 15, 2007, from stockholders holding a majority of the issued
      and
      outstanding shares.




22




(b)  Stockholders
      holding 32,965,811 shares of our common stock, or 52.94%, of the 62,272,286
      then
      issued and outstanding shares of our common stock approved the proposal to
      amend
      the Certificate of Incorporation to increase the number of authorized shares
      of
      common stock:


Abstentions/Proposal
              
              Shares
                  in Favor
              
              Shares
                  Against
              
              Broker
                  NonvotesIncrease
                  authorized common stock
              
              
              32,965,811
              
              
              —
              
              
              —




ITEM
      5.
      OTHER INFORMATION





As
      of
      August 26, 2005, we entered into a consulting services agreement with Juan
      Bautista Rodriguez Pagan, to assist us in developing our construction and
      construction materials businesses. We have terminated this agreement by notice
      dated May 3, 2007. Under the consulting agreement, which was originally for
      a
      term of four years, Mr. Rodriguez was to receive monthly payments of $6,000
      each; shares of restricted common stock upon entering into the agreement and
      at
      defined intervals thereafter; and commissions based on the gross sales of Delta
      Technologies, Inc., our subsidiary that conducts our construction materials
      business. Mr. Rodriguez was issued 1,851,092 restricted shares our common stock,
      and was to be issued certain additional restricted shares of our common stock.
      We have made monthly cash payments of approximately $30,000 to Mr. Rodriguez
      under this agreement and no commission payments. We have advised Mr. Rodriguez
      that the reason for termination was because he has been in violation of certain
      provisions of the agreement.




ITEM
      6.
      EXHIBITS


3.1c
              
              Certificate
                  of Amendment to Certificate of Incorporation, filed June 26,
                  2007.3.1d
              
              Form
                  of Restatement of Certificate of Incorporation of Delta Mutual,
                  Inc., as
                  amended.4.6e
              
              Amendment,
                  dated April 4, 2007, to 4% Convertible Promissory Note in the principal
                  amount of $193,740.31.1
              
              Certification
                  of Chief 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 Chief Executive Officer Pursuant to 18 U.S.C. Section 1350,
                  as Adopted
                  Pursuant to Section 906 of the Sarbanes-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 Act of
                  2002.
  SIGNATURES




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




DELTA MUTUAL, INC.BY:
            /s/
              Peter F. RussoPeter
              F. RussoPresident
                and Chief
              Executive
                Officer




Dated:
      August 10, 2007 ****




23




EXHIBIT
      INDEX


3.1c
              
              Certificate
                  of Amendment to Certificate of Incorporation, filed June 26,
                  2007.3.1d
              
              Form
                  of Restatement of Certificate of Incorporation of Delta Mutual,
                  Inc., as
                  amended.4.6e
              
              Amendment,
                  dated April 4, 2007, to Convertible Promissory Note in the principal
                  amount of $193,740.31.1
              
              Certification
                  of Chief 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 Chief Executive Officer Pursuant to 18 U.S.C. Section 1350,
                  as Adopted
                  Pursuant to Section 906 of the Sarbanes-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 Act of
                  2002.




24