SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-K





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


For the
fiscal year ended: December 31, 2009


OR





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





For the
transition period from __________ to __________





Commission
File No. 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.)





14362
      N. Frank Lloyd Wright Blvd., Suite 1103, Scottsdale, AZ
                
                85260(Address
      of principal executive offices)
                
                (Zip
      Code)




Registrant’s
Telephone Number, Including Area Code:  (480)
477-5808





Securities
registered pursuant to Section 12(b) of the Act:  None





Securities
registered pursuant to Section 12(g) of the Act:  Common Stock, $.0001
par value per share





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities
Act.                                             
                                                                                       
            
               
Yes   ̈   No
x





Indicate
by checkmark if the registrant is not required to file reports to Section 13 or
15(d)Of the
Act.               ̈
Yes  x
No





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.               x  Yes     ̈  No





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.       ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).            Yes
 ̈    No  ̈





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




Large
      accelerated filer   ̈
                  
                  Accelerated
      filer   ̈Non-accelerated
      filer  ̈
                  
                  Smaller
      reporting company  x(Do
      not check if a smaller reporting company)




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange
Act).                                                                                                                                                     
 ̈  Yes                x  No





The
aggregate market value of the voting and non-voting common equity held by
non-affiliates  as of the last business day of the registrant’s most
recently completed second fiscal quarter was $3,393,966.





Number of
shares of Common Stock outstanding as of March 31, 2010:
26,772,623.


_______________.


Documents
incorporated by reference:  None









TABLE
OF CONTENTS




PART
      I
                                                                  3Item
      1. Business.
                                                                  3Item
      1A. Risk Factors.
                                                                  11Item
      1B. Unresolved Staff Comments.
                                                                  14Item
      2. Properties.
                                                                  14Item
      3. Legal Proceedings.
                                                                  15Item
      4. Reserved.
                                                                  15PART
      II
                                                                  16Item
      5. Market for Registrant's Common Equity, Related Shareholder Matters and
      Issuer Purchases of Equity Securities.
                                                                  16Item
      6. Selected Financial Data.
                                                                  17Item
      7. Management's Discussion and Analysis of Financial Condition and Results
      of Operations.
                                                                  17Item
      7A. Quantitative and Qualitative Disclosures About Market
      Risk.
                                                                  21Item
      8. Financial Statements and Supplementary Data.
                                                                  22Item
      9. Changes In and Disagreements With Accountants on Accounting and
      Financial Disclosure.
                                                                  49Item
      9A (T). Controls and Procedures.
                                                                  49Item
      9B. Other Information.
                                                                  49PART
      III
                                                                  50Item
      10. Directors, Executive Officers, and Corporate
    Governance.
                                                                  50Item
      11. Executive Compensation.
                                                                  51Item
      12. Security Ownership of Certain Beneficial Owners and Management and
      Related Stockholder Matters.
                                                                  53Item
      13. Certain Relationships and Related Transactions, and Director
      Independence.
                                                                  53Item
      14. Principal Accountant Fees and Services
                                                                  55Item
      15. Exhibits and Financial Statement Schedules.
                                                                  55


ii


PART
I





NOTE
REGARDING FORWARD LOOKING STATEMENTS


CAUTIONARY
STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS


OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995





This
Annual Report contains historical information as well as forward- looking
statements. Statements looking forward in time are included in this Annual
Report pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Such statements involve known and unknown risks
and uncertainties that may cause our actual results in future periods to be
materially different from any future performance suggested herein. We wish to
caution readers that in addition to the important factors described elsewhere in
this Form 10-K, the following forward-looking statements, among others,
sometimes have affected, and in the future could affect, our actual results and
could cause our actual consolidated results during 2009, and beyond, to differ
materially from those expressed in any forward-looking statements made by or on
our behalf.





Forward-looking
statements include, but are not limited to, statements under the following
headings; (i) "Business Plan," about the development of certain projects and
business opportunities and the Company's attempts to convert these plans and
opportunities into operating businesses that generate revenues and profits; (ii)
"Business Plan," about the intentions of the Company to fund its businesses and
operations by borrowings and the successful placement of debt and equity
financings; (iii) "Results of Operations"; (iv) "Liquidity and Capital
Resources," about the Company's plan to raise additional capital; and (v)
"Liquidity and Capital Resources," about the contingent nature of the
consummation of any agreements with its contracting and joint venture
parties.





Item
1. Business.





Unless
the context otherwise requires, the terms "the Company," "we," "our" and "us"
refers to Delta Mutual, Inc., and, as the context requires, its consolidated
subsidiaries.





Background





We were
incorporated under the name Delta Mutual, Inc. on November 17, 1999, in the
State of Delaware with the purpose of providing mortgage services through the
Internet. In 2003, we established business operations focused on providing
environmental and construction technologies and services to specific geographic
reporting segments in the Far East, the Middle East, and the United States.
During the year ended December 31, 2008, the Company discontinued all of its
operations in the Far East (Indonesia) and its construction technology
activities that were conducted through its wholly owned U.S. subsidiary, Delta
Technologies, Inc. The Company’s construction operations in Puerto Rico were
discontinued in 2008, which included.





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





The
principal business of Altony SA is the ownership and management of South
American Hedge Fund, which maintains its business office in Uruguay and has
investments in oil and gas concessions in Argentina and intends to focus its
investment activities in the energy sector. We have also signed a purchase
option agreement related to the acquisition of approximate 150,000 hectares in
forty mines located in the Northwest part of Argentina, south of the border with
Bolivia, with high lithium and borates brines concentration. As of December 30,
2009, Altony SA closed its business operations and is currently under a process
of dissolution.




3




Our
principal offices are located at 14362 N. Frank Lloyd Wright Blvd. #2105,
Scottsdale, AZ 85260. Our telephone number is
(480)  480-477-5807. Our common stock is quoted on the
Over-the-Counter Electronic Bulletin Board under the symbol
"DLTZ.OB".




General





The
primary focus of the Company’s business at this time is the SAHF subsidiary,
South American Hedge Fund, which has investments in oil and gas concessions in
Argentina and will continue its focus on the energy sector, including the
development and supply of energy and alternative energy sources in Latin America
and North America. As of December 31, 2008, we terminated all of the
construction technology activities that were carried out by Delta Technologies,
Inc. (a wholly owned subsidiary). Also as of December 31, 2008 the securities
trading activities of South American Hedge Fund were accounted for as a
discontinued operation. As of December 31, 2009, we terminated the operation of
oil sludge processing facilities in Bahrein and Kuwait and the manufacture of
insulating concrete from ICF products in Saudi Arabia, which are accounted for
as  discontinued operations.





As of
December 31, 2009, the Company holds 45% ownership interest in Delta
–Envirotech, Inc. which is engaged  in select business opportunities
in the Middle East related to environmental remediation and other projects.
These activities are managed and carried out by majority
stockholders  of Delta-Envirotech, Inc., (“Envirotech”) a joint
venture company incorporated in the state of Delaware with headquarters in
Virginia and formed in January 2004. The Company’s majority stockholders
are  Hi-Tech Consulting and Construction, Inc. and an unrelated
individual.  We hold a 45% interest in Envirotech, which has entered
into strategic alliance agreements with several United States-based entities
with technologies and products in the environmental field to support its
activities. As of December 2009, management has determined that Envirotech, Inc.
is not considered the variable interest entity for the year ending December 31,
2009 and accordingly has been deconsolidated from the consolidated financial
statements effective December 31, 2009 (see “Management Discussion and Analysis
of Financial Condition and Results of Operations”, as well as our Consolidated
Financial Statements included in this Annual Report for further
information).





Our goal
is to generate meaningful growth in our net asset value per share for proved
reserves by acquisition, exploitation and exploration of oil and gas projects
with attractive rates of return on capital
employed.   Specifically, we have focused, and plan to continue
to focus, on the following investments in South America.





Our
Oil and Gas Investments





Our main
source of revenue will derive from the sale of the crude oil and natural gas
produced from the oil and gas concessions in which we have made investments. In
August 2007, SAHF signed agreements to purchase partial ownership interests in
four in oil and gas concessions in Northern Argentina. The joint venture owning
these concessions then started the process to obtain the necessary government
and environmental operating permits for the commercial exploitation of these
concessions. While we are not the operators of these concessions, we expect to
have representation on the operating committees that are responsible for
managing the business affairs of these concessions.





On
September 25, 2009 SAHF was approved to be registered in Salta, Argentina as a
branch of SAHF LLC. In March 19, 2010 a tax ID number was granted to SAHF as the
last requisite needed to be included in the nine exploration/exploitation joint
ventures for oil-gas blocks. Formal approval of the Secretary of Energy
authorities is expected in second quarter 2010 .Until the approval, SAHF
interest are protected with the Escrow Agreement with the joint venture
members.





As per
December 2009 the SAHF participation in the Argentina concessions are as
follows:





Blocks with current Delta
Mutual participation (through SAHF):





Block
                            
                            #Wells
                            
                            Status
                            
                            Delta
      %
                            
                            
                            Partners
                            
                            JV
      InvestmentJollin
                            
                            
                            3
                            
                            Testing
                            
                            10
                            %
      CO*
                            
                            JHP(China)Maxi
                            
                            2.7
      MMTonono
                            
                            
                            10
                            
                            Product
                            
                            10
                            %
      CO*
                            
                            JHP(China)Maxi
                            
                            1.7
      MMTartagal
                            
                            
                            21
                            
                            Seismic
                            
                            9
                            %
      CO*
                            
                            New
      Energy (HK)M
                            
                            30
      MMMorillo
                            
                            
                            1
                            
                            Seismic
                            
                            9
                            %
      CO *
                            
                            New
      Energy(HK) M
                            
                            5
      MMGuemes**
                            
                            
                            2
                            
                            Drilling
                            
                            
                            20
                            %
                            
                            Ketsal
                            
                            1
      MMLa
      Union**
                            
                            
                            2
                            
                            Geodesic
                            
                            
                            20
                            %
                            
                            Ketsal
                            
                            .5
      MMCobres**
                            
                            
                            0
                            
                            Geodesic
                            
                            
                            20
                            %
                            
                            Ketsal
                            
                            .5
      MMValles**
                            
                            
                            0
                            
                            Geodesic
                            
                            
                            20
                            %
                            
                            Ketsal
                            
                            .5
      MMRosario**
                            
                            
                            4
                            
                            Geodesic
                            
                            
                            20
                            %
                            
                            Ketsal
                            
                            .5 MM




4





*CO means
a carried interest in the project.


** Of
these five properties, the Company and its joint venture partner have made
initial investments in Guemes. As of March 31, 2010, our joint venture partner
has made the initial payments to the government, for our share of which we will
be responsible when SAHF is accepted as a qualified company in
Argintina.  This is expected to occur in the second quarter of
2010.











Jollin
and Tonono Concessions





The
Company has a 10% ownership interest in the Jollin and Tonono oil and gas
concessions located in Salta Province, Argentina. During 2007, SAHF purchased
47% of these concessions and paid the purchase price by issuing a non-interest
bearing note in the principal amount of $1,820,000 to Oxipetrol-Petroleros
de Occidente S.A. (“Oxipetrol”), one of the other owners, with a maturity date
of July 2008. The purchase price was subsequently reduced to
$1,270,000 by mutual agreement among the parties, prior to the maturity
date. During 2008, the Company exchanged 50% of its ownership in this investment
with a third party for no cash consideration, however, the acquirer
contractually agreed to assume 50% of the Company’s obligations with respect to
future development expenses.





In
December 2008, a reentry workover was made in the Jollin 2 well for 23 days
until gas presence was detected in January 3, 2009 with a 170psi associated with
the burning test. After several hours of test a strong presence of sand stopped
the test. After 10 weeks of workover with two different rigs without a
satisfactory performance of the well, a technical decision was taken to perform
a 3D seismic job around the Jollin Block including the Jollin 2. After the
conclusion of the 3D, estimated for second quarter 2010 a side track will be
performed in the J2 or a bypass in the trouble stage in the
vicinity  of 2270 mt of the tubing.





5




We also
expect to complete a 3D total research in the Tonono Block to identify the
potential reserves in the second quarter 2010.In 2008, the well Tonono 6 was
declared commercially viable by the authorities with a daily production around
90/obd. The produce was sold to the Grasta refinery. In the second semester 2009
the daily average was reduced and technical decision was taken to work over the
well after the seismic conclusion is received.





Tartagal
and Morillo Concessions





The
Company has 9% ownership of the Tartagal and Morillo oil and gas concessions
located in Salta Province, Argentina. During 2007, SAHF purchased 18% ownership
of these concessions and paid the purchase price by issuing a non-interest
bearing note in the principal amount of $480,000 to Oxipetrol-Petroleros de
Occidente S.A. (“Oxipetrol”), one of the other owners, with a maturity date of
July 2008. The purchase price was subsequently reduced to $450,000, by mutual
agreement among the parties, prior to the maturity date. During 2008, the
Company exchanged 50% of its ownership in this investment with a third party for
no cash consideration, however, the acquirer contractually agreed to assume 50%
of the Company’s obligations with respect to future development
expenses.





In December 15, 2009 a
services contract was signed between the Joint Venture of Tartagal & Morillo
and Wiccap, a local company using the equipment, technical assistance and data
processing of Westerngeco Clean and Cut(Completion, opening, leveling and
topographic calculations for source and reception of seismic lines) of the work
areas and the performance of 3-D seismic work in the Tartagal Oriental Area and
2-D seismic work in Morillo Area. Wiccap has the option to accept the data
interpretation of Schlumberger. Conclusion of this services are expected to be
delivered to the Tartagal and Morillo JV in second quarter 2010.The total amount
of seismic investment is over $25 MM.





Exploration
Rights (Guemes Block)





On
February 6, 2008, SAHF purchased 40% of the oil and gas exploration rights to
five geographically defined areas in the Salta Province of Northern Argentina
for $697,000. Provided certain development activities are undertaken by owners,
these exploration rights will remain in effect until the year 2010. The initial
development costs and fees were paid by the majority owner and the Company
incurred no additional expenses related to this investment in 2008.





As of
March 12, 2010, we had completed analysis of 25 microbial and 8 sorbed gas
samples along a single traverse over the seismic line 33115 and across the
Cuchuma prospect of the Guemes area in the Northwest Basin, Salta Province,
Argentina. The study area is located approximately 75 kilometers from the
capital city of Salta by Province Route No 9/34. Samples were collected at
100-150 meter intervals.





With this
confirmation, the drilling plan on the K-K Salta CuN x-2001 was approved to
start on April 1, 2010. The main objective is the Yacoraite formation ceiling
and the Maiz Gordo formation bottom. The drilling rig to be utilized is an Oil
Well 66 Britain with Perterser operators. Well completion is expected in May
2010.





Development Schedule for Our Oil and
Gas Investments




In
December 2008, a well located in the Tonono Concession received government
approval to begin commercial production of oil. When the test re-entry well at
this location was completed in the fourth quarter of 2008, it initially produced
between 10-15 cubic meters of oil per day, the equivalent of 90-101 barrels of
oil.




The same
well also contains natural gas. A natural gas pipeline connecting the Jollin
Concession to a nearby refinery is in the pre-construction phase. It is expected
to become operational in during the third quarter of 20 10. Upon completion, it
will permit the joint venture to commence deriving additional revenue from
natural gas sales. The gas pipeline construction is delayed until the 3-D
seismic conclusion will be delivered to substantiate critical design factors as
the total expected delivery volume.




Deliveries
of crude oil are expected to commence from the Tartagal and Morillo concessions
during the third quarter of 2010.  Deliveries of crude oil are
expected in the second quarter of 2010 from the Guemes Block.




6




The main
costs associated with our oil and gas investments are related to oil and gas
property acquisition, drilling costs, initial well revitalization, gas pipeline
construction and ongoing operating expenses. The revitalization of wells allows
short-term cash increases while holding the lease for additional future
development.




Commitment to
Technology





In each
of our core operating areas, we have accumulated detailed geologic and
geophysical knowledge and have developed significant technical and operational
expertise.  This data is analyzed with advanced geophysical and
geological computer resources dedicated to the accurate and efficient
characterization of the subsurface oil and gas reservoirs that comprise our
asset base.    This commitment to technology has increased
the productivity and efficiency of our field operations and development
activities.





Lithium
Project





On March
1, 2010, we signed a purchase option agreement with Minera Jujuy from the Jujuy
Province, Argentina related to the acquisition of approximate 143,000 hectares
with 29 mines located in the Northwest part of Argentina, south of the border
with Bolivia, with high lithium and borates brines concentration. Currently, we
are performing sampling and geological conclusions with a local geological
company in order to determine value to the property.





The
Central Andes has the main concentrations of lithium brines in South America.
World Class deposits are: “Uyuni” in Bolivia, “Atacama” in Chile and “Hombre
Muerto” and “Rincon” in Argentina. The Argentina Puna is very rich in salt pan
deposits, locally called "salares". The biggest one is Salar Arizaro, located in
the western side of the Salta Puna region.





The salt
pan of the Puna has different compositions, one to the east and another to the
west. The eastern salars are rich in borate deposits (ulexite, 30%
boric oxide), meanwhile the western salars contain sulphates (sodium sulphate,
mirabilite-thenardite) as their main economic minerals. Likewise, all the salars
has sodium chloride (halite) followed by calcium sulphate (gypsum) and scarce
carbonate (mainly travertines from thermal springs). Currently, the main mining
activity related to salars are borates, represented by ulexite (calcium-sodium
borate) and borax (sodium borate)  which are exploited for use in the
boric acid industry. Common salt is mined from the upper crust and sold for use
in paper, leather, table salt and other minor uses.





Moreover,
salars contain rich brinesmineralized by different chemical elements. The most important among them
is lithium, followed
byboron, magnesium, potash,
cesium and strontium.  A 150 million dollar to obtain lithium
from brines (600 ppm) was carried out by Minera del Altiplano, a subsidiary
of  FMC (an American company), in the salar del Hombre Muerto
(Salta-Catamarca boundary). A $30 million project is carried out in Salar del
Rincón by Ady Resources Ltd., from Australia.(Excerpts from a Geological Report
by Geol G.Horacio)





A
confidentiality agreement was signed by Delta  with a European joint
venture on March 12th, 2010
for thirty days to perform samples procedures regarding the 150,000 hectares in
the Jujuy prospect.


7





Each of
the black dots represents a mine location.





Development
Activities




Development
projects on the concessions in which we have investments include accessing
additional productive formations in existing well bores, formation stimulation,
infill drilling on closer well spacing, and retrofitting or reworking existing
wells.





Business Strategy





The key
elements of our business strategy are to:





·
            Make
      accretive acquisitions of producing properties generally characterized by
      long-lived reserves with stable production and reserve development
      potential;





·
            Add
      proved reserves and maximize cash flow and production through development
      projects and operational efficiencies;
and


8





·
            Engage
      in adjacent exploration drilling where evaluation of the property is
      positive.





Our investments have focused on
concessions where there are shut-in, plugged and abandoned wells that have, in
our assessment, a high probability of additional recovery of reserves through
our revitalization process. The revitalization process is directed toward
bringing wells back into production, or to enhance production through ordinary
practices used in the oil and gas industry.





In
addition, we will continue to evaluate newly developed alternative energy
technologies for possible investment and development.





Customers




Crude oil
production from the Guemes and Tonono Concessions would be sold to nearby
refineries, and is transported by truck. The natural gas production of the
Jollin concession will be transported by a pipeline to be constructed to the
Refinor oil company refinery also located in the Salta Province in Northern
Argentina. Sales are made based on spot market price postings, and vary month to
month. These prices typically are tied to domestic market crude and natural gas
prices.




Title to
Properties





We
believe that we have satisfactory title to or rights in all of our producing
properties.  As is customary in the oil and gas industry, minimal
investigation of title is made at the time of acquisition of undeveloped
properties.  In most cases, we investigate title and obtain title
opinions from counsel only when we acquire producing properties or before
commencement of drilling operations.





Competition





We
operate in a highly competitive environment for acquiring properties, marketing
oil and natural gas and securing trained personnel.  Many of our
competitors possess and employ financial, technical and personnel resources
substantially greater than ours, which can be particularly important in the
areas in which we operate.  Those companies may be able to pay more
for productive oil and gas properties and exploratory prospects and to evaluate,
bid for and purchase a greater number of properties and prospects than our
financial or personnel resources permit.  Our ability to acquire
additional prospects and to find and develop reserves in the future will depend
on our ability to evaluate and select suitable properties and to consummate
transactions in a highly competitive environment.  Also, there is
substantial competition for capital available for investment in the oil and gas
industry.





Middle
East





Envirotech
holds the exclusive Middle East distribution rights to a gas-imaging product,
which detects and visualizes harmful gasses produced by oilfield and refinery
operations. This product was field tested by ARAMCO, the Saudi government oil
company, during the third quarter of 2009. ARAMCO is currently evaluating
whether or not to purchase this technology and may elect to purchase it from a
competitor.





During
the second half of 2007, Envirotech, as a distributor, introduced an organic
supplement, designed to increase crop yield, to one of the major farming
operators in Saudi Arabia. During the third and fourth quarters of 2008, the
farm operator purchased sample quantities of the organic supplement for crop
testing. Envirotech received commission revenue of $43,000 associated with these
purchases. Subsequent purchases in commercial quantities will depend upon the
evaluation of the crop yield during the second quarter of 2010.





Governmental
Regulation





The key
points of the statutory and regulatory regime in respect of oil and gas
operations in Argentina are as follows:


9





Statutory
royalties on hydrocarbon production are payable to the Province of Salta. These
royalties are monthly levies collected by the provincial government, based on
hydrocarbon production lifted within their territories under an exploration
permit or exploitation concession. The applicable royalty rate is 12% for
exploitation concessions. The royalty is calculated from the well head value of
the hydrocarbon production, less certain allowable deductions. Royalties are, in
principle, paid in cash, although in certain cases royalties may be paid, or may
be required to be paid, in kind. Concession holders responsible for the payment
of royalties are required to report to the Secretary of Energy in a royalty
return, the volumes of natural gas and oil actually produced for the purpose of
determining the computable production and the statutory royalty payments due of
12%.





A surface
canon is a statutory, yearly fee payable in advance to the federal government on
each anniversary of the grant of the relevant concession and is calculated using
the acreage of the relevant concession. Surface canon payments are required in
order to maintain a concession in good-standing. The actual surface canon
payable under a particular block depends on the nature of the title over the
relevant block. The concession joint ventures in which the Company is a member
pay to the Secretary of Energy the highest retention option canon for the
current period.





The
holder of an exploration permit or exploitation concession must compensate
surface owners for any damage caused by hydrocarbon activities to their
properties. Such compensation may be established by: (i) a court in a lawsuit
for damages filed by the surface owner; (ii) mutual agreement of the parties; or
(iii) the surface owner’s acceptance of the tariffed compensation amounts
established by the government from time to time. Tariffed compensation charts
for each of the main oil and gas basins are issued from time to time, taking
into account the agricultural activities generally carried out in each such
zone.





The
concession joint ventures in which the Company is a member have executed written
agreements with the owners of the surface corresponding to its four exploitation
concessions in Argentina under which the joint ventures have agreed to
compensate them following the applicable tariffed compensation
charts.





There are
minimum work commitments and minimum investment commitments under statute in the
concession documents. However, the Federal Hydrocarbons Law 17,319 provides that
the “holder of an exploitation concession shall make such investments as may be
necessary, within reasonable periods of time, for the execution of the works
required for the development of the entire acreage comprised in the area of his
concession ... in such a manner as to ensure the maximum production of
hydrocarbons”. To such end, the holders of exploration permits and exploitation
concessions must file each year with the Secretary of Energy a “Form of
Investments”, reporting the investments made during the preceding year and the
projected investments for the then current year.





All
imports and exports of foreign currency into the domestic exchange market must
be registered with the Central Bank of Argentina; imports of foreign currency
(except foreign direct investment, foreign trade financing and initial public
offerings) may not be repaid or remitted abroad earlier than 365 days, from the
date the Central Bank recorded their entrance; importers of foreign currency
(except for foreign direct investment, foreign trade financing and initial
public offerings) must deposit 30 per cent. of their foreign currency imports
into Argentina with a local financial institution for a minimum 365 day term.
Said deposit shall be non transferable and “non remunerative” (without
interest). The remittance abroad of interests on financial obligations payable
by local residents to foreign creditors is allowed, subject to the minimum 365
day stay described above. Furthermore, the relevant financial obligations must
be registered with the Central Bank. Remittance of dividends approved in closed
and audited financial statements is allowed, and therefore dividends can be
remitted abroad.





Research
and Development





We do not
anticipate performing any significant product research and development under our
plan of operation.





Employees





Currently,  we  have
two employees: Dr. Daniel R. Peralta, President and CEO, and Malcolm W. Sherman,
Executive Vice President.


10





Available
Information





We
maintain a website at the address www.deltamutual.com.  We
are not including the information contained on our website as part of, or
incorporating it by reference into, this report.  We make available
free of charge (other than an investor’s own Internet access charges) through
our website our Annual Report on Form 10-K, quarterly reports on Form 10-Q and
current reports on Form 8-K, and amendments to these reports, as soon as
reasonably practicable after we electronically file such material with, or
furnish such material to, the Securities and Exchange Commission.





Item
1A. Risk Factors.





Our
oil and gas investments made by our subsidiary South American Hedge Fund may not
be profitable.





The
success of our investments in Argentina will depend to a great extent on the
operations, financial condition and management of the oil and gas concession and
exploration rights in which we have investments. Their success may depend upon
management of the operations in which the investments were made and numerous
other factors beyond our control.





Drilling
for and producing oil and natural gas are high risk activities with many
uncertainties.





Our
future success will depend on the success of our development, exploitation,
production and exploration activities.  Our oil and natural gas
exploration and production activities are subject to numerous risks beyond our
control, including the risk that drilling will not result in commercially viable
oil or natural gas production.  Our decisions to purchase, explore,
develop or otherwise exploit prospects or properties will depend in part on the
evaluation of data obtained through geophysical and geological analyses,
production data and engineering studies, the results of which are often
inconclusive or subject to varying interpretations.  Our cost of
drilling, completing and operating wells is often uncertain before drilling
commences.  Overruns in budgeted expenditures are common risks that
can make a particular project uneconomical.  Further, many factors may
curtail, delay or cancel drilling, including the following:





·
            delays
      imposed by or resulting from compliance with regulatory
      requirements;





·
            pressure
      or irregularities in geological
formations;





·
            shortages
      of or delays in obtaining qualified personnel or equipment, including
      drilling rigs and CO2;





·
            equipment
      failures or accidents; and





·
            adverse
      weather conditions, such as freezing temperatures, hurricanes and
      storms.





The
presence of one or a combination of these factors at our properties could
adversely affect our business, financial condition or results of
operations.





Prospects
that we decide to drill may not yield oil or gas in commercially viable
quantities.





A
prospect is a property on which we have identified what our geoscientists
believe, based on available seismic and geological information, to be
indications of oil or gas.  Our prospects are in various stages of
evaluation, ranging from a prospect which is ready to drill to a prospect that
will require substantial additional seismic data processing and
interpretation.  There is no way to predict in advance of drilling and
testing whether any particular prospect will yield oil or gas in sufficient
quantities to recover drilling or completion costs or to be economically
viable.  The use of seismic data and other technologies and the study
of producing fields in the same area will not enable us to know conclusively
prior to drilling whether oil or gas will be present or, if present, whether oil
or gas will be present in commercial quantities.  In addition, because
of the wide variance that results from different equipment used to test the
wells, initial flowrates may not be indicative of sufficient oil or gas
quantities in a particular field.  The analogies we draw from
available data from other wells, from more fully explored prospects, or from
producing fields may not be applicable to our drilling prospects.  We
may terminate our drilling program for a prospect if results do not merit
further investment.




11




The
global recession and tight financial markets may have impacts on our business
and financial condition that we currently cannot predict.





The
current global recession and tight credit financial markets may have an impact
on our business and our financial condition, and we may face challenges if
conditions in the financial markets do not improve.  Our ability to
access the capital markets may be restricted at a time when we would like, or
need, to raise financing, which could have an impact on our flexibility to react
to changing economic and business conditions.  The economic situation
could have an impact on our lenders or customers, causing them to fail to meet
their obligations to us.  Additionally, market conditions could have
an impact on our commodity hedging arrangements if our counterparties are unable
to perform their obligations or seek bankruptcy protection.





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





Exploration,
development, production and sale of oil and natural gas are subject to extensive
federal, state, local and international regulation.  We may be
required to make large expenditures to comply with governmental
regulations.  Matters subject to regulation include:





·
            discharge
      permits for drilling operations;


·
            drilling
      bonds;


·
            reports
      concerning operations;


·
            the
      spacing of wells;


·
            unitization
      and pooling of properties; and


·
            taxation.





Under
these laws, we could be liable for personal injuries, property damage and other
damages.  Failure to comply with these laws also may result in the
suspension or termination of our operations and subject us to administrative,
civil and criminal penalties.  Moreover, these laws could change in
ways that could substantially increase our costs.  Any such
liabilities, penalties, suspensions, terminations or regulatory changes could
materially adversely affect our financial condition and results of
operations.





Our
operations may incur substantial liabilities to comply with environmental laws
and regulations.





Our oil
and gas operations are subject to stringent federal and state laws and
regulations relating to the release or disposal of materials into the
environment or otherwise relating to environmental protection.  These
laws and regulations may require the acquisition of a permit before drilling
commences; restrict the types, quantities, and concentration of materials that
can be released into the environment in connection with drilling and production
activities; limit or prohibit drilling activities on certain lands lying within
wilderness, wetlands, and other protected areas; and impose substantial
liabilities for pollution resulting from our operations.  Failure to
comply with these laws and regulations may result in the assessment of
administrative, civil, and criminal penalties, incurrence of investigatory or
remedial obligations, or the imposition of injunctive relief.





Market
conditions or operational impediments may hinder our access to oil and gas
markets or delay our production.





In
connection with our continued development of oil and gas properties, we may be
disproportionately exposed to the impact of delays or interruptions of
production from wells in these properties, caused by transportation capacity
constraints, curtailment of production or the interruption of transporting oil
and gas volumes produced.  In addition, market conditions or a lack of
satisfactory oil and gas transportation arrangements may hinder our access to
oil and gas markets or delay our production.  The availability of a
ready market for our oil and natural gas production depends on a number of
factors, including the demand for and supply of oil and natural gas and the
proximity of reserves to pipelines and terminal facilities.  Our
ability to market our production depends substantially on the availability and
capacity of gathering systems, pipelines and processing facilities owned and
operated by third-parties.  Additionally, entering into arrangements
for these services exposes us to the risk that third parties will default on
their obligations under such arrangements.  Our failure to obtain such
services on acceptable terms or the default by a third party on their obligation
to provide such services could materially harm our business.  We may
be required to shut in wells for a lack of a market or because access to gas
pipelines, gathering systems or processing facilities may be limited or
unavailable.  If that were to occur, then we would be unable to
realize revenue from those wells until production arrangements were made to
deliver the production to market.





12




Crude
oil and natural gas prices are volatile and a substantial reduction in these
prices could adversely affect our results and the price of our common
stock.





Our
revenues, operating results and future rate of growth depend highly upon the
prices we receive from crude oil and natural gas produced by the concession in
which we have investments. Historically, the markets for crude oil and natural
gas have been volatile and are likely to continue to be volatile in the future.
The markets and prices for crude oil and natural gas depend on factors beyond
our control. These factors include demand for crude oil and natural gas, which
fluctuates with changes in market and economic conditions, and other factors,
including:





·
            worldwide
      and domestic supplies of crude oil and natural
  gas;


·
            actions
      taken by foreign oil and gas producing
nations;


·
            political
      conditions and events (including instability or armed conflict) in crude
      oil or natural gas producing
regions;


·
            the
      level of global crude oil and natural gas
  inventories;


·
            the
      price and level of foreign imports;


·
            the
      price and availability of alternative
fuels;


·
            the
      availability of pipeline capacity and
  infrastructure;


·
            the
      availability of crude oil transportation and refining
      capacity;


·
            weather
      conditions;


·
            domestic
      and foreign governmental regulations and taxes;
  and


·
            the
      overall economic environment.




Significant
declines in crude oil and natural gas prices for an extended period may have the
following effects on our business:





·
            limiting
      our financial condition, liquidity, and ability to finance planned capital
      expenditures and results of
operations;


·
            reducing
      the amount of crude oil and natural gas that can be produced
      economically;


·
            causing
      us to delay or postpone some of our capital
  projects;


·
            reducing
      our revenues, operating income and cash
flows;


·
            reducing
      the carrying value of our investments in crude oil and natural gas
      properties; or


·
            limiting
      our access to sources of capital, such as equity and long-term
      debt.





The
current recession could have a material adverse impact on our financial
position, results of operations and cash flows.





The oil
and gas industry is cyclical in nature and tends to reflect general economic
conditions. The U.S. and other world economies are in a recession, which could
last well into 2010 and beyond. The recession may lead to significant
fluctuations in demand and pricing for crude oil and natural gas production,
such as the decline in commodity prices which occurred during 2008 and into
2009. If commodity prices decline, there could be additional impairments of our
investment assets or an impairment of goodwill.





Our
business involves many operating risks that may result in substantial losses for
which insurance may be unavailable or inadequate.





Our oil
and gas investments are subject to hazards and risks inherent in operating and
restoring oil and gas wells, such as fires, natural disasters, explosions,
casing collapses, surface cratering, pipeline ruptures or cement failures, and
environmental hazards such as natural gas leaks, oil spills and discharges of
toxic gases. Any of these risks can cause substantial losses resulting from
injury or loss of life, damage to or destruction of property, natural resources
and equipment, pollution and other environmental damages, regulatory
investigations and penalties, suspension of our operations and repair and
remediation costs. In addition, our liability for environmental hazards may
include conditions created by the previous owners of properties in which we have
investments or purchase or lease.





We do not
believe that insurance coverage for all environmental damages that could occur
is available at a reasonable cost. Losses could occur for uninsurable or
uninsured risks. The occurrence of an event that is not fully covered by
insurance could harm our financial condition and results of
operations.





13




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





We have
investments in the competitive area of oil and gas exploration and production.
Many competitors are large, well-established companies that have larger
operating staffs and significantly greater capital resources.





Competition
for experienced personnel may negatively impact our operations.





Our
future profitability will depend on our ability to attract and retain qualified
personnel. The loss of any key executives or other key personnel could have a
material adverse effect on investments results and revenues. In particular, the
loss of the services of our President, Dr. Daniel Peralta, could adversely
affect our South American oil and gas investment results.





International operations expose us
to political, economic and currency risks.





With
regard to our investments in oil and gas concessions located outside of the
United States, we are subject to the risks of doing business abroad,
including,





·
            Currency
      fluctuations;


·
            Changes
      in tariffs and taxes; and


·
            Political
      and economic instability.





Changes
in currency exchange rates may affect the relative costs of operations in
Argentina, and may affect the cost of certain items required in oil and gas
processing, thus possibly adversely affecting our profitability.





There are
inherent risks for the foreseeable future of conducting business
internationally. Language barriers, foreign laws and tariff and taxation issues
all have a potential negative effect on our ability to transact business.
Changes in tariffs or taxes applicable to our investments in foreign operations
may adversely affect our profitability. Political instability may increase the
difficulties and costs of doing business. We may be subject to the jurisdiction
of the government and/or private litigants in foreign countries where we
transact business, and may be forced to expend funds to contest legal matters in
those countries in disputes with those governments or with customers or
suppliers.





We do not expect to pay
dividends.





We have never paid dividends on our
common stock. Management anticipates that any earnings generated will be used to
finance our current and planned business operations. For the foreseeable future,
we do not expect to pay cash dividends to holders of our common
stock.




Item
1B. Unresolved Staff Comments.





Not
applicable.





Item
2. Properties.





As of
December 31, 2009, our principal assets included Partial Rights Ownership in
nine oil and gas properties.





Developed
and Undeveloped Acreage





The
following table summarizes our estimated gross and net developed and undeveloped
acreage by concession at December 31, 2009.   Net acreage
represents our percentage ownership of gross acreage.  The following
table does not include acreage in which our interest is limited to royalty and
overriding royalty interests.


14





Block Name
                                            
                                            Developed Acreage
                                            
                                            
                                            Undeveloped AcreageGross
                                            
                                            
                                            Net
                                            
                                            
                                            Gross
                                            
                                            
                                            NetTartagal
      Oriental
                                            
                                            
                                            0
                                            
                                            
                                            
                                            
                                            
                                            
                                            7065
                                            Km2
                                            
                                            
                                            635.85
                                            Km2Morillo
                                            
                                            
                                            0
                                            
                                            
                                            
                                            
                                            
                                            
                                            3518
                                            Km2
                                            
                                            
                                            316.62
                                            Km2Tonono
                                            
                                            
                                            66
                                            Km2
                                            
                                            
                                            6.6
                                            Km2Jollin
                                            
                                            
                                            32
                                            Km2
                                            
                                            
                                            3.2
                                            Km2Guemes
                                            
                                            
                                            0
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            8971
                                            Km2
                                            
                                            
                                            1794
                                            Km2Rosario
                                            
                                            
                                            0
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            4510
                                            Km2
                                            
                                            
                                            902
                                            Km2Union
                                            
                                            
                                            0
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            2467
                                            Km2
                                            
                                            
                                            493
                                            Km2Valles
                                            
                                            
                                            0
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            5756
                                            Km2
                                            
                                            
                                            1115
                                            Km2Cobres
                                            
                                            
                                            0
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            2558
                                            Km2
                                            
                                            
                                            511
                                            Km2





Reserves





We expect
to have completed our reservoir engineering analysis as of July 31,
2010.





Executive
Offices





In
November 2009, we entered into a one-year lease for our principal office in
Scottsdale, Arizona, at a monthly rental of $1276.88. We anticipate that our
current office space will accommodate our operations for the foreseeable
future.





Item
3. Legal Proceedings.





Former
Employee Wage Claims


On
September 16, 2008, the Company was notified of a complaint filed with the
Pennsylvania Department of Labor & Industry by its former President and CEO
alleging non-payment of wages in the amount of $53,271. The Company also
received notice of a similar complaint filed by a former employee alleging
non-payment of wages in the amount of $17,782. In October 2008, the Company
entered into repayment agreements with both of the former employees. As of the
date of this report, the Company has not made any payments to these two former
employees pursuant to these agreements. In addition, the employee that alleged
non-payment of wages in the amount of $17,782 has obtained a default judgment
against the Company, entered on January 8, 2010 in the Court of Common Pleas of
Bucks County, Pennsylvania, Civil Division, in the amount of $29,625.94 as to
this wage claim. As of December 31, 2009, the Company has recorded an accrued
liability of $17,782 in the accompanying consolidated financial statements. We
believe that a portion of the claim is without merit and are vigorously
contesting the claim as of the date of this filing.





The
Company has been notified by letter dated October 9, 2009 of a complaint filed
with the Pennsylvania Department of Labor & Industry by its former Chief
Financial Officer alleging non-payment of wages in the amount of $131,250. The
Company has responded to the Department of Labor & Industry that the wages
owed this former officer are substantially less than alleged in this
claim and are vigorously contesting the claim as of the date of this
filing. As of the date of filing, the Company is awaiting a response from the
Department of Labor and Industry and this matter is disclosed in the contingent
liabilities footnote to the consolidated financial statements.





Legal Fee Collection
Claim


Delta
Technologies, Inc., a wholly-owned subsidiary of the Company and a discontinued
operation (“Delta Technologies”), has been notified by a collection agency on
behalf of Wolf Block LLP (“Wolf Block”), a law firm that had provided
intellectually property legal services to Delta Technologies, that it had been
retained in an attempt to collect a past due amount of approximately
$41,000          reduce as per
letter. The Company is in discussions with the collection agency and believes
that the resolution of this matter will have no material effect on the Company
or its operations.





Item 4. Reserved.




15




PART
II





Item
5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer
Purchases of Equity Securities.





Our
common stock has been quoted on the Over-the-Counter Bulletin Board operated by
the National Association of Securities Dealers, since approximately February 1,
2001.





Our
shares are listed under the symbol "DLTM”. The quotations in the table below
reflect inter-dealer prices, without retail mark-up, mark-down, or commission
and may not represent actual transactions. Prices commencing January 1, 2009
reflect the 1-for-10 reverse stock split effective July 6, 2009.





High
                            
                            
                            Low2008:
                            1st
      Quarter
                            
                            
                            0.07
                            
                            
                            
                            0.012nd
      Quarter
                            
                            
                            0.07
                            
                            
                            
                            0.043rd
      Quarter
                            
                            
                            0.08
                            
                            
                            
                            0.044th
      Quarter
                            
                            
                            0.08
                            
                            
                            
                            0.032009:
                            1st
      Quarter
                            
                            
                            0.60
                            
                            
                            
                            0.302nd
      Quarter
                            
                            
                            0.90
                            
                            
                            
                            0.213rd
      Quarter
                            
                            
                            0.39
                            
                            
                            
                            0.054th
      Quarter
                            
                            
                            0.52
                            
                            
                            
                            0.062010:
                            1st
      Quarter
                            
                            
                            0.50
                            
                            
                            
                            0.15





During
the last two fiscal years, no cash dividends have been declared on Delta's
common stock and Company management does not anticipate that dividends will be
paid in the foreseeable future. The payment of dividends is within the
discretion of the board of directors and will depend on the Company's earnings,
capital requirements, financial condition, and other relevant factors. There are
no restrictions that currently limit the Company's ability to pay dividends on
its common stock other than those generally imposed by applicable state
law.





As of
April 13, 2010, there were approximately 100 record holders of our common
stock.





Unregistered
Sales of Equity Securities





The
following table sets forth the sales of unregistered securities by the Company
in the year ended December 31, 2009.





Date
                                        
                                        Title and Amount(1)
                                        
                                        Purchaser
                                        
                                        Principal
                                          Underwriter
                                        
                                        Total Offering Price/
                                          Underwriting DiscountsApril
      27, 2009
                                        
                                        200,000
      shares of common stock.
                                        
                                        Consultant
                                        
                                        NA
                                        
                                        $0.60
      per share/NAOctober
      27, 2009
                                        
                                        130,000
      shares of common stock.
                                        
                                        Private
      Investor.
                                        
                                        NA
                                        
                                        $$0.173
      per share/NAOctober
      28, 2009
                                        
                                        31,250
      shares of common stock.
                                        
                                        Private
      Investor.
                                        
                                        NA
                                        
                                        $0.08
      per share/NADecember
      1, 2009
                                        
                                        50,000
      shares of common stock.
                                        
                                        Private
      Investor.
                                        
                                        NA
                                        
                                        $0.15
      per share/NADecember
      4, 2009
                                        
                                        60,000
      shares of common stock issued in conversion of $36,000 principal amount
      note.
                                        
                                        Private
      Investor.
                                        
                                        NA
                                        
                                        $0.60
      per share/NADecember
      22, 2009
                                        
                                        50,000
      shares of common stock.
                                        
                                        Private
      Investor.
                                        
                                        NA
                                        
                                        $0.15
      per share/NADecember
      23, 2009
                                        
                                        333,333
      shares of common stock.
                                        
                                        Private
      Investor.
                                        
                                        NA
                                        
                                        $0.1499
      per share/NADecember
      26, 2009
                                        
                                        133,334
      shares of common stock.
                                        
                                        Private
      Investor.
                                        
                                        NA
                                        
                                        $0.1499
      per
share/NA


(1) The
issuances to lenders, consultants and investors are viewed by the Company as
exempt from registration under the Securities Act of 1933, as amended
(“Securities Act”), alternatively, as transactions either not involving any
public offering, or as exempt under the provisions of Regulation D, Regulation S
or Rule 701 promulgated by the SEC under the Securities Act.




16




The
Company has no equity compensation plans in effect, or any securities
outstanding under equity compensation plans, as of the date of this
report.





Item
6. Selected Financial Data.





Not
applicable.





Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations.





The
following discussion of our consolidated financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and notes thereto and the 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





On March
4, 2008, we entered into a Membership Interest Purchase Agreement (the
“Agreement”) with Egani, Inc., an Arizona corporation (“Egani”). Pursuant to the
Agreement, we acquired from Egani 100% of the shares of stock held by Egani in
Altony S.A., an Uruguay Sociedad Anonima, (“Altony”) which owns 100% of the
issued and outstanding membership interests in South American Hedge Fund LLC, a
Delaware limited liability company (sometimes herein referred to as “SAHF”). At
the closing of the Agreement, we issued 13,000,000 shares of our Common stock to
Egani for the purchase of Altony which constituted, following such issuance, a
majority of the outstanding shares of our common stock. Immediately following
the closing of the Agreement, Altony became a wholly owned subsidiary of the
Company. For accounting purposes, the transaction was treated as a
recapitalization of the Company with Altony as the acquirer.





The
Company’s principal business at this time is conducted by our subsidiary, South
American Hedge Fund, which has investments in oil and gas concessions in
Argentina and intends to focus its investments in the energy sector, including
development of energy producing investments and alternative energy production in
Latin America and North America. Following the acquisition of SAHF, management
has continued to pursue selected business opportunities in the Middle East and
has also signed a purchase option agreement related to the acquisition of
approximate 143,000 hectares with 29 mines located in the Northwest part of
Argentina, south of the border with Bolivia, with high lithium and borates
brines concentration.





DECONSOLIDATION OF VARIABLE
INTEREST ENTITY





As
described in Part I of this report, as of December 31, 2009, the Company holds
45% ownership interest in Delta –Envirotech, Inc. which is engaged  in
activities related to environmental remediation and other projects. These
activities are managed and carried out by majority stockholders  of
Delta-Envirotech, Inc., (“Envirotech”), a joint venture company incorporated in
the state of Delaware with headquarters in Virginia and formed in January 2004.
The Company’s majority stockholders are Hi-Tech Consulting and Construction,
Inc. and an unrelated individual.  The Company holds 45% interest in
Envirotech, which has entered into strategic alliance agreements with several
United States-based entities with technologies and products in the environmental
field to support its activities.


17




FASB ASC
810 “Consolidation” required the consolidation of a variable interest entity
(VIE) if the Company is deemed to be the primary beneficiary of the VIE. FASB
ASC 810 requires an entity to assess its equity investments and certain other
contractual interests to determine whether they are VIEs. As defined in FASB ASC
810, variable interests are contractual, ownership or other interests in an
entity that change with changes in entity’s net asset value. Variable interests
in an entity may arise from financial instruments, service contracts,
guarantees, leases or other arrangements with the VIE. An entity that will
absorb a majority of the VIE’s expected losses orexpected residual returns, as
defined in FASB ASC 810, is considered the primary beneficiary of the VIE. The
primary beneficiary should include the VIE’s assets, liabilities and results of
operations in its consolidated financial statements until a reconsideration
event, as defined in FASB ASC 810, occurs to require deconsolidation of the VIE.
At the deconsolidation date, the assets and liabilities of the VIE are removed
from the consolidated financial statements and any assets and liabilities of the
Company that were eliminated in consolidation are restored. The gain recognized
from deconsolidating VIE is recorded in the consolidated statements of
operations as gain on deconsolidation of the VIE.





As of
December 2009, management has determined that Envirotech is not considered a VIE
for the year ending December 31, 2009, and accordingly Envirotech has been
deconsolidated from the accompanying consolidated financial statements effective
December 31, 2009. As of December 31, 2009, the Company is not exercising
significant influence over operating and financing policies of Envirotech and
therefore Envirotech is not considered a VIE. As a result of this
deconsolidation, the Company has removed the assets and liabilities of the VIE
from the consolidated financial statements and any assets and liabilities of
Envirotech that were eliminated in consolidation are restored at fair
value.





Prior to
December 31, 2009, the Company was deemed to be the primary beneficiary of the
Envirotech due to relatively significant financial support provided to this
entity in terms of investment of $375,000 (which represents 45% ownership of the
Company) and notes receivable of $810,867. However, due to significant losses of
Envirotech and its deconsolidation as of December 31, 2009, the Company’s entire
investment and notes receivable in the aggregate of approximately $1,186,000 as
of December 31, 2009 has been reduced to zero in order to account for restored
assets at fair value. On the other hand, as of December 31, 2009, the Company
was not liable for Envirotech’s liabilities and losses totaling approximately
$2,068,000 which were included in the consolidated financial statements of the
Company prior to deconsolidation per agreed terms with Envirotech and which
resulted in a net gain on deconsolidation of approximately $882,000 recorded as
a separate line item in the accompanying consolidated financial
statements.





As of
December 30, 2009, the Company closed business operations of Altony SA and this
company is currently under a process of dissolution.





Reverse
Stock Split





Effective
July 6, 2009, we effected a 1:10 reverse split (the “Reverse Split”) of our
outstanding common stock, pursuant to a definitive information statement filed
with the Securities and Exchange Commission. Following effectiveness of the
Reverse Split, each ten (10) shares of our common stock outstanding immediately
prior to the effective date was automatically converted into one (1) share of
our common stock. By reason of the Reverse Split, the number of outstanding
shares of our common stock was reduced from 223,849,158 shares to 22,384,916
shares.





RESULTS
OF OPERATIONS





During
the fiscal year ended December 31, 2009, we had a gain from continuing
operations of approximately $850,000. The Company has an accumulated deficit of
approximately $3,580,837 and working capital deficiency of approximately
$967,042 as of December 31, 2009.  Additionally, the Company may
require additional funding to execute its strategic business plan for 2010.
These factors raise substantial doubt about the Company’s ability to continue as
a going concern. Successful business operations and its transition to attaining
profitability is dependent upon obtaining additional financing and achieving a
level of revenue adequate to support its cost structure. There can be no
assurances that there will be adequate financing available to the Company, if
the Company requires financing. The accompanying consolidated financial
statements have been prepared assuming that the Company will continue as a going
concern. This basis of accounting contemplates the recovery of the Company’s
assets and the satisfaction of liabilities in the normal course of business. The
consolidated financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the outcome
of this uncertainty.





18




The
Independent Auditors' Report and Note 1 of the Notes to Consolidated Financial
Statementsaccompanying
this report state that substantial doubt has been raised about our ability to
continue as a going concern.





2009
COMPARED TO 2008





For
accounting and financial reporting purposes only, our acquisition of Altony on
March 4, 2008 was treated as a reverse merger, with Altony as the acquirer. Our
consolidated financial statements for the twelve months ended December 31, 2007
are those of Altony (including its SAHF subsidiary on a consolidated basis). In
2009, we had a gain from continuing operations of approximately $850,000,
primarily as a result of an approximate $882,268 gain on the deconsolidation of
Envirotech, compared to a net loss from continuing operations of approximately
$2,270,000 in the twelve months ended December 31, 2008. Our general and
administrative expenses decreased in the twelve months ended December 31, 2009,
to approximately $636,000, from general and administrative expenses of
approximately $1,490,000 in 2008.  In 2008, we also had a loss on the
sale of investments of $860,000, as compared with approximately $158,000 in
2009.  In the twelve months ended December 31, 2009, we also had other
income of approximately $582,000, consisting of write-down of payroll and
consulting accruals and settled accounts payable originating more than two years
ago and considered no longer payable..





PLAN OF
OPERATION





The
primary focus of the Company’s business is its South American Hedge Fund
subsidiary that has investments in oil and gas exploration and production in
Argentina and will continue to focus on the energy sector, including the
development of a property for the production of lithium in Argentina, and
development and supply of energy and alternative energy sources in Latin America
and North America. As of December 31, 2008, the securities trading activities of
South American Hedge Fund were accounted for as discontinued
operations.





Oil and
Gas Investments





Our main
source of revenue will derive from the sale of crude oil and natural gas
produced from the oil and gas concessions and exploration properties in which we
have made investments. While we are not the operators of these properties, we
expect to have representation on the operating committees that are responsible
for managing the business affairs of these concessions. Our ownership interests
in these concessions range from 9% to 10%, and we have a 20% interest in the
blocks in which we have exploration rights.





Jollin
and Tonono Concessions





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





A well
located in the Tonono Concession became operational for the commercial
production of oil in the first quarter of 2009. Delivery of the commercial
production is currently expected by the end of the fourth quarter.  A
well located in the Jollin Concession contains commercial quantities of natural
gas. A natural gas pipeline connecting the Jollin Concession to a major
distribution pipeline is in the pre-construction phase. The connecting pipeline
when completed will be owned by the joint venture. It is expected to be
completed during the second quarter of 2010. Upon completion, it will permit the
joint venture to commence deriving additional revenue from the sale of natural
gas.





Tartagal
and Morillo Concessions





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





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




19




Exploration
Rights





SAHF
holds a 20% interest in the oil and gas exploration rights to five
geographically defined areas in the Salta Province of Northern Argentina.
Provided certain development activities are under taken by the majority owner,
these exploration rights will remain in effect until the year 2010.





Middle
East





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





FUNDING





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





LIQUIDITY





At
December 31, 2009, we had a working capital deficit of approximately $967,042,
compared with a working capital deficit of approximately $2,427,390 million at
December 31, 2008. The decrease as of December 31, 2009 was due primarily to
deconsolidation of Envirotech.





At
December 31, 2009, we had total assets of approximately $1,750,000 compared to
total assets of approximately $1,795,000 at December 31, 2008. Cash increased
approximately $90,000 for the year ended December 31, 2009. Net cash used
in operating activities in 2009 was approximately $318,000, as compared with
approximately $2.5 million in 2008; net cash provided by investing activities
was approximately $150,000 in 2009, as compared with approximately $2,285,000 in
2008, which latter period reflected the sales of assets and investments in our
oil and gas concessions in 2008. Cash used in operations
activities  was offset by net cash provided in investing activities of
approximately $150,000, and by net cash from financing activities of
approximately $255,000.




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.





NEW
FINANCIAL ACCOUNTING STANDARDS





For a
summary of new financial accounting standards applicable to the Company, please
refer to the accompanying notes to the financial statements.


20





Critical
Accounting Policies





The
Securities and Exchange Commission recently issued “Financial Reporting Release
No. 60 Cautionary Advice About Critical Accounting Policies” (“FRR 60”),
suggesting companies provide additional disclosures, discussion and commentary
on their accounting policies considered most critical to its business and
financial reporting requirements. FRR 60 considers an accounting policy to be
critical if it is important to the Company’s financial condition and results of
operations, and requires significant judgment and estimates on the part of
management in the application of the policy. For a summary of the Company’s
significant accounting policies, including the critical accounting policies
discussed below, please refer to the accompanying notes to the financial
statements. Foreign currency risk - The functional currency for some foreign
operations is the local currency. Assets and liabilities of foreign operations
are translated at balance sheet date rates of exchange and income, expense and
cash flow items are translated at the average exchange rate for the period. The
functional currency in South America is the U.S. dollar. Translation adjustments
are recorded in Cumulative Other Comprehensive Income.





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





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





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





Item
7A. Quantitative and Qualitative Disclosures About Market Risk.





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. Our interest income is sensitive to changes in the general level
of U.S. interest rates.





We do not
have significant short-term investments, and due to their short-term nature, we
believe that there is not a material risk exposure.





Credit
Risk - Our accounts receivable are subject, in the normal course of business, to
collection risks. We regularly assess these risks and have established policies
and business practices to protect against the adverse effects of collection
risks. As a result we do not anticipate any material losses in this
area.





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





The
prices of the commodities that the Company produces are unsettled at this
time.  At times the prices seem to be drift down and then either
increase or stabilize for a few days.  Current price movement seems to
be slightly up but with the prices of the traditionally marketed products
(gasoline, diesel, and natural gas as feed stocks for various industries, power
generation, and heating) are not showing material increases.  Although
prices are difficult to predict in the current environment, the Company
maintains the expectation that demand for crude oil and natural gas will
continue to increase for the foreseeable future due to the underling factors
that oil and natural gas based commodities are both sources of raw energy and
are fuels that are easily portable.





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.


21


Item
8. Financial Statements and Supplementary Data.


22





DELTA
MUTUAL, INC. AND SUBSIDIARIES




INDEX
TO FINANCIAL STATEMENTS





PageReports
      of Independent Registered Public Accounting Firms
                              24-25Consolidated
      balance sheets as of December 31, 2009 and 2008
                              26Consolidated
      statements of operations for the years ended December 31, 2009 and
      2008
                              27Consolidated
      statements of stockholders’ equity (deficiency) as of December 31, 2009
      and 2008
                              28-29Consolidated
      statements of cash flows for the years ended December 31, 2009 and
      2008
                              30-31Notes
      to consolidated financial statements
                              32-49




23




REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To the
Stockholders and Board of Directors of Delta Mutual, Inc. and
Subsidiaries:
  We have
audited the accompanying consolidated balance sheet of Delta Mutual, Inc. and
Subsidiaries (the “Company”), as of December 31, 2009, and the related
consolidated statement of operations, changes in consolidated stockholders’
equity (deficit) and consolidated cash flows for the year then ended. These
consolidated financial statements are the responsibility of the Company’s
management.  Our responsibility is to express an opinion on these
financial statements based on our audit. The consolidated financial statements
of Delta Mutual, Inc. and Subsidiaries for the year ended December 31, 2008,
were audited by other auditors whose report thereon, dated April 13, 2009,
expressed an unqualified opinion with an emphasis of matter as to going
concern.
  We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audit provided a reasonable basis
for our opinion.
  In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Delta Mutual, Inc. and
Subsidiaries as of December 31, 2009, and the results of its operations and its
cash flows for the year ended December 31, 2009 in conformity with accounting
principles generally accepted in the United States.
  The
accompanying consolidated financial statements referred to above have been
prepared assuming that the Company will continue as a going
concern.  As more fully described in Note 1, the Company has an
accumulated deficit of $3,580,837 and working capital deficiency of $967,042 as
of December 31, 2009. Additionally, the Company is not generating sufficient
cash flows to meet its regular working capital requirements. These conditions
raise substantial doubt about the Company’s ability to continue as a going
concern.  Management’s plans as to these matters are also described in
Note 1.  The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
  /s/Jewett,
Schwartz, Wolfe & Associates
  Hollywood,
Florida
  April 15,
2010
  200 South
Park Road, Suite 150 • Hollywood, Florida 33021 • Main 954.922.5885 • Fax
954.922.5957 • www.jsw-cpa.com
 Member -
American Institute of Certified Public Accountants • Florida Institute of
Certified Public Accountants
 Private
Companies Practice Section of the AICPA • Registered with the Public Company
Accounting Oversight Board of the SEC
 24




[LETTERHEAD
OF WIENER, GOODMAN & COMPANY, P.C.]
 
 REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Board of Directors and Stockholders of
 Delta
Mutual, Inc. and Subsidiaries
 
 We have
audited the accompanying consolidated balance sheet of Delta Mutual, Inc. and
subsidiaries (“Delta” or the “Company”) as of December 31, 2008 and the related
consolidated statement of operations, stockholders’ deficiency and cash flows
for the year then ended.  These financial statements are the
responsibility of the Company’s management.  Our responsibility is to
express an opinion on these financial statements based on our
audit.  The financial statements of Delta Mutual, Inc. and
Subsidiaries, for the year ended December 31, 2007, were audited by other
auditors whose report dated June 20, 2008, expressed an unqualified opinion on
those statements.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.
 
 In our
opinion, the 2008 financial statements present fairly, in all material respects,
the financial position of Delta Mutual, Inc. and subsidiaries as of December 31,
2008 and the results of their operations and their cash flows for the year then
ended, in conformity with accounting principles generally accepted in the United
States of America.
 
 The
accompanying consolidated financial statements have been prepared assuming the
Company will continue as a going concern.  Company management has
embarked upon a new mission and strategic direction, by establishing a series of
subsidiaries and joint ventures, primarily engaged in providing environmental
and construction technologies and services to certain geographic reporting
segments.  During 2008, the Company has again changed direction and
has invested in oil and gas concessions in South America.  As more
fully explained in Note 1 to the financial statements, the Company has a
deficiency in working capital at December 31, 2008, incurred losses from
operations, needs to obtain additional financing to meet its obligations on a
timely basis and to fulfill its proposed activities and ultimately achieve a
level of sales adequate to support its cost structure.
 
 These
uncertainties raise substantial doubt about the Company’s ability to continue as
a going concern. Management’s plans are also described in Note 1.  The
accompanying consolidated 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.
 
 /s/
Wiener, Goodman & Company, P.C.
 
 Eatontown,
New Jersey
 April 13,
2009


25


DELTA
MUTUAL, INC. AND SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS
 
 December
      31,
                          
                          
                          December
      31,2009
                          
                          
                          2008ASSETSCurrent
      Assets:Cash
                          
                          $
                          102,008
                          
                          
                          $
                          13,957Advances
      and other receivables
                          
                          
                          137,776
                          
                          
                          
                          -Total
      current assets
                          
                          
                          239,784
                          
                          
                          
                          13,957Property
      and equipment - net
                          
                          
                          -
                          
                          
                          
                          804Investments
      in non-consolidated affiliates
                          
                          
                          1,470,713
                          
                          
                          
                          1,780,024Other
      assets
                          
                          
                          39,508
                          
                          
                          
                          650TOTAL
      ASSETS
                          
                          $
                          1,750,005
                          
                          
                          $
                          1,795,435LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIT)Current
      Liabilities:Accounts
      payable
                          
                          $
                          134,192
                          
                          
                          $
                          363,004Accrued
      expenses
                          
                          
                          267,029
                          
                          
                          
                          1,363,395Convertible
      debt
                          
                          
                          -
                          
                          
                          
                          253,740Notes
      payable
                          
                          
                          805,605
                          
                          
                          
                          461,208Total
      current liabilities
                          
                          
                          1,206,826
                          
                          
                          
                          2,441,347Commitments
      and ContingenciesStockholders'
      Equity (Deficit):Preferred
      stock $0.0001 par value-authorized 10,000,000 shares; no shares issued and
      outstanding at December 31, 2009 and December 31, 2008,
      respectively
                          
                          
                          -
                          
                          
                          
                          -Common
      stock $0.0001 par value - authorized 250,000,000 shares; 23,836,163 and
      22,184,915 shares issued and outstanding at December 31, 2009 and
      December 31, 2008, respectively
                          
                          
                          2,384
                          
                          
                          
                          2,219Additional
      paid-in capital
                          
                          
                          4,121,632
                          
                          
                          
                          3,782,797Accumulated
      deficit
                          
                          
                          (3,580,837
                          )
                          
                          
                          (4,430,928
                          )543,179
                          
                          
                          
                          (645,912
                          )Noncontrolling
      interest
                          
                          
                          -
                          
                          
                          
                          -Total
      stockholders' equity (deficit)
                          
                          
                          543,179
                          
                          
                          
                          (645,912
                          )TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                          
                          $
                          1,750,005
                          
                          
                          $
                          1,795,435
 
 The
accompanying notes are an integral part of the consolidated financial
statements
  26
  DELTA
MUTUAL INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 
 Years Ended December 31,2009
                    
                    
                    2008Revenue:Sales
      commissions
                    
                    $
                    -
                    
                    
                    $
                    43,365Costs
      and expenses:General
      and administrative expenses
                    
                    
                    636,343
                    
                    
                    
                    1,490,333Loss
      on sale of investments
                    
                    
                    -
                    
                    
                    
                    860,000636,343
                    
                    
                    
                    2,350,333Loss
      from continuing operations
                    
                    
                    (636,343
                    )
                    
                    
                    (2,306,968
                    )Interest
      income
                    
                    
                    37,696
                    
                    
                    
                    26,386Interest
      expense
                    
                    
                    (15,971
                    )
                    
                    
                    6,746Other
      income
                    
                    
                    582,441
                    
                    
                    
                    -Gain
      on deconsolidation of variable interest entity
                    
                    
                    882,268
                    
                    
                    
                    -Loss
      from continuing operations before provision for income
    taxes
                    
                    
                    850,091
                    
                    
                    
                    (2,273,836
                    )Provision
      for income taxes
                    
                    
                    -
                    
                    
                    
                    -Net
      income (loss) from continuing operations
                    
                    
                    850,091
                    
                    
                    
                    (2,273,836
                    )Discontinued
      operationsLoss
      on disposal of Far East operations and South American Hedge Fund
      operations, and United States construction technology
      activities
                    
                    
                    -
                    
                    
                    
                    (2,310,473
                    )Net
      income (loss)
                    
                    $
                    850,091
                    
                    
                    $
                    (4,584,309
                    )Net
      income (loss) per common share:Basic
      and dilutedNet
      income (loss) from continuing operations
                    
                    $
                    0.04
                    
                    
                    $
                    (0.11
                    )Net
      loss from discontinued operations
                    
                    $
                    -
                    
                    
                    $
                    (0.11
                    )Net
      income (loss) per common share
                    
                    $
                    0.04
                    
                    
                    $
                    (0.22
                    )Weighted
      average common shares - basic and diluted
                    
                    
                    23,107,329
                    
                    
                    
                    20,589,518
 
 The
accompanying notes are an integral part of the consolidated financial
statements
  27
  DELTA
MUTUAL, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS'  EQUITY (DEFICIT)
 DECEMBER
31, 2009 and 2008
 
 TotalNumber
      of
                  
                  
                  (see
      note 12)
                  
                  
                  
                  
                  
                  
                  
                  
                  Stockholders'Common
                  
                  
                  Common
                  
                  
                  Paid
      in
                  
                  
                  Retained Earnings
                  
                  
                  EquityShares
                  
                  
                  Stock
                  
                  
                  Capital
                  
                  
                  (Deficit)
                  
                  
                  (Deficit)Balance,
      January 1, 2008
                  
                  
                  13,000,000
                  
                  
                  $
                  1,300
                  
                  
                  $
                  2,598,700
                  
                  
                  $
                  1,869,468
                  
                  
                  
                  4,469,468Effect
      of reverse acquisition
                  
                  
                  7,888,295
                  
                  
                  
                  789
                  
                  
                  
                  7,099
                  
                  
                  
                  (1,716,087
                  )
                  
                  
                  (1,708,199
                  )Issuance
      of common stock for services (valued at $0.20 - $0.50 per
      share)
                  
                  
                  1,055,000
                  
                  
                  
                  106
                  
                  
                  
                  238,394
                  
                  
                  
                  -
                  
                  
                  
                  238,500Issuance
      of common stock for debt (valued at $0.50 - $0.70 per
    share)
                  
                  
                  230,057
                  
                  
                  
                  23
                  
                  
                  
                  143,577
                  
                  
                  
                  -
                  
                  
                  
                  143,600Issuance
      of common stock for interest (valued at $0.50 - $0.70 per
      share)
                  
                  
                  11,563
                  
                  
                  
                  1
                  
                  
                  
                  7,047
                  
                  
                  
                  -
                  
                  
                  
                  7,048Contribution
      from stockholder
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,000
                  
                  
                  
                  -
                  
                  
                  
                  1,000Stock
      based compensation expense
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  786,980
                  
                  
                  
                  -
                  
                  
                  
                  786,980Net
      loss
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (4,584,309
                  )
                  
                  
                  (4,584,309
                  )Balance,
      December 31, 2008
                  
                  
                  22,184,915
                  
                  
                  
                  2,219
                  
                  
                  
                  3,782,797
                  
                  
                  
                  (4,430,928
                  )
                  
                  
                  (645,912
                  )
 
 The
accompanying notes are an integral part of the consolidated financial
statements
  28
  DELTA
MUTUAL, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
 DECEMBER
31, 2009 and 2008
 
 Number
      of
                  
                  
                  (see
      note 12)Common
                  
                  
                  Common
                  
                  
                  Paid
      in
                  
                  
                  AccumulatedShares
                  
                  
                  Stock
                  
                  
                  Capital
                  
                  
                  Deficit
                  
                  
                  TotalBalance,
      January 1, 2009
                  
                  
                  22,184,915
                  
                  
                  
                  2,219
                  
                  
                  
                  3,782,797
                  
                  
                  
                  (4,430,928
                  )
                  
                  
                  (645,912
                  )Issuance
      of common stock for services (valued at $0.60 per share)
                  
                  
                  200,000
                  
                  
                  
                  20
                  
                  
                  
                  119,980
                  
                  
                  
                  -
                  
                  
                  
                  120,000Issuance
      of common stock toward deft conversion (valued at $0.60 per
      share)
                  
                  
                  60,000
                  
                  
                  
                  6
                  
                  
                  
                  34,994
                  
                  
                  
                  -
                  
                  
                  
                  35,000Sale
      of common stock (valued at $0.29 - $0.30 per share)
                  
                  
                  33,334
                  
                  
                  
                  3
                  
                  
                  
                  9,997
                  
                  
                  
                  -
                  
                  
                  
                  10,000Sale
      of common stock (valued at $0.149 per share)
                  
                  
                  900,002
                  
                  
                  
                  90
                  
                  
                  
                  134,410
                  
                  
                  
                  -
                  
                  
                  
                  134,500Sale
      of common stock (valued at $0.16125 per share)
                  
                  
                  161,250
                  
                  
                  
                  16
                  
                  
                  
                  9,984
                  
                  
                  
                  -
                  
                  
                  
                  10,000Issuance
      of common stock for services (valued at $0.15 per share)
                  
                  
                  130,000
                  
                  
                  
                  13
                  
                  
                  
                  19,487
                  
                  
                  
                  -
                  
                  
                  
                  19,500Sale
      of common stock (valued at $0.06 per share)
                  
                  
                  166,662
                  
                  
                  
                  17
                  
                  
                  
                  9,983
                  
                  
                  
                  -
                  
                  
                  
                  10,000Stock
      based compensation expense
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  590,235
                  
                  
                  
                  -
                  
                  
                  
                  590,235Stock
      based compensation expense reversal
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (590,235
                  )
                  
                  
                  -
                  
                  
                  
                  (590,235
                  )Net
      Income
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  850,091
                  
                  
                  
                  850,091Balance,
      December 31, 2009
                  
                  
                  23,836,163
                  
                  
                  
                  2,384
                  
                  
                  
                  4,121,632
                  
                  
                  
                  (3,580,837
                  )
                  
                  
                  543,179
 
 The
accompanying notes are an integral part of the consolidated financial
statements
  29
  DELTA
MUTUAL, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 
 Years
      Ended December 31,2009
                  
                  
                  2008Cash
      flows from operating activities:Net
      income (Loss)
                  
                  $
                  850,091
                  
                  
                  $
                  (4,584,309
                  )Adjustments
      to reconcile net income (loss) to net cash used in operating
      activities:Depreciation
      and amortization
                  
                  
                  804
                  
                  
                  
                  25,641Non-cash
      compensation
                  
                  
                  -
                  
                  
                  
                  238,500Impairment
      charge
                  
                  
                  -
                  
                  
                  
                  467,995Loss
      on sale of investments
                  
                  
                  157,939
                  
                  
                  
                  860,000Gain
      on disposal of operations
                  
                  
                  -
                  
                  
                  
                  (230,057
                  )Issuance
      of common stock for services and deft
      conversion
                  
                  
                  174,500
                  
                  
                  
                  238,500Stock
      based compensation expense
                  
                  
                  -
                  
                  
                  
                  786,980Changes
      in operating assets and liabilities
                  
                  
                  (1,501,812
                  )
                  
                  
                  (62,560
                  )Net
      cash used in operating activities
                  
                  
                  (318,478
                  )
                  
                  
                  (2,497,810
                  )Cash
      flows from investing activities:Net
      cash acquired upon effect of reverse acquisition
                  
                  
                  -
                  
                  
                  
                  57,633Proceeds
      from sale of investments
                  
                  
                  206,832
                  
                  
                  
                  7,263,823Purchase
      of investments
                  
                  
                  (55,460
                  )
                  
                  
                  (2,618,502
                  )Purchase
      of exploration rights
                  
                  
                  -
                  
                  
                  
                  (697,000
                  )Purchase
      of concession investments
                  
                  
                  -
                  
                  
                  
                  (1,720,000
                  )Net
      cash provided by investing activities
                  
                  
                  151,372
                  
                  
                  
                  2,285,954Cash
      flows from financing activities:Net
      proceeds from notes payable
                  
                  
                  90,657
                  
                  
                  
                  280,553Proceeds
      from issuances of common stock
                  
                  
                  164,500
                  
                  
                  
                  -Repayment
      of loan
                  
                  
                  -
                  
                  
                  
                  (60,000
                  )Contribution
      from stockholder
                  
                  
                  -
                  
                  
                  
                  1,000Other
      proceeds
                  
                  
                  -
                  
                  
                  
                  4,260Net
      cash provided by  financing activities
                  
                  
                  255,157
                  
                  
                  
                  225,813Net
      increase in cash
                  
                  
                  88,051
                  
                  
                  
                  13,957Cash
      - Beginning of period
                  
                  
                  13,957
                  
                  
                  
                  -Cash
      - End of period
                  
                  $
                  102,008
                  
                  
                  $
                  13,957
 
 The
accompanying notes are an integral part of the consolidated financial
statements
  30
  DELTA
MUTUAL, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (Continued)
 
 Years Ended December 31,2009
                              
                              
                              2008Changes
      in operating assets and liabilities consists of:(Increase)
      decrease in advances and other assets
                              
                              $
                              (176,634
                              )
                              
                              $
                              1,914Decrease
      in accounts payable and accrued expenses
                              
                              
                              (1,325,178
                              )
                              
                              
                              (64,474
                              )$
                              (1,501,812
                              )
                              
                              $
                              (62,560
                              )Supplemental
      disclosure of cash flow information:Cash
      paid for interest
                              
                              $
                              -
                              
                              
                              $
                              -Cash
      paid for income taxes
                              
                              $
                              -
                              
                              
                              $
                              -Supplementary
      information:Non-cash
      financing and investing activitiesIssuance
      of common stock for debt
                              
                              $
                              -
                              
                              
                              $
                              143,600Issuance
      of common stock for in lieu of payment of accrued expenses
                              
                              $
                              -
                              
                              
                              $
                              7,048Issuance
      of common stock for services and deft
      conversion
                              
                              $
                              174,500
                              
                              
                              $
                              238,500Adjustment
      of purchase price of investments and related debt
                              
                              $
                              -
                              
                              
                              $
                              580,000
  The
accompanying notes are an integral part of the consolidated financial
statements
 31




DELTA
MUTUAL, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 For the
Years Ended December 31, 2009 and 2008
 
 1.
DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
 
 ORGANIZATION
 
 Delta
Mutual, Inc.  was incorporated in Delaware on November 17,
1999.  In 2003, the Company established business operations focused on
providing environmental and construction technologies and services to specific
geographic reporting segments in the Far East, the Middle East, and the United
States. During the year ended December 31, 2008, the Company discontinued all of
its operations in the Far East (Indonesia) and its construction technology
activities that were conducted through its wholly owned U.S. subsidiary, Delta
Technologies, Inc. The Company’s construction operations in Puerto Rico were
discontinued in 2008.
 
 Effective
March 4, 2008, Delta entered into a Membership Interest Purchase Agreement,
pursuant to which Delta acquired from  Egani, Inc. shares of Altony
SA, an Uruguayan Sociedad Anonima (“Altony”), which owns 100% of the issued and
outstanding membership interests in South American Hedge Fund LLC, a Delaware
limited liability company (sometimes herein referred to as
“SAHF”).  At the closing of the Agreement, Delta issued 130,000,000
shares of our common stock to Egani, Inc. which constituted, following such
issuance, a majority of the outstanding shares of our common stock. Immediately
following the closing of the Agreement, Altony became a wholly-owned subsidiary
of the Company. For accounting purposes, the transaction was treated as a
recapitalization of the Company, as of March 4, 2008, with Altony as the
acquirer.
 
 The
principal business of Altony SA is the ownership and management of South
American Hedge Fund, which maintains its business office in Uruguay and has
investments in oil and gas concessions in Argentina and intends to focus its
investment activities in the energy sector. Delta has also signed a purchase
option agreement related to the acquisition of approximate 150,000 hectares in
forty mines located in the Northwest part of Argentina, south of the border with
Bolivia, with high lithium and borates brines concentration. As of December 30,
2009, Altony SA closed its business operations and is currently under a process
of dissolution.
 
 During
2009, the Company discontinued operations, and commenced dissolution of the
following inactive wholly-owned and majority-owned subsidiaries: Delta
Development Partners, L.P., Delta Development Partners II LP, Guayanilla and
Developers Corp., Delta TA LP and Delta Technologies Inc.
 
 As of
December 31, 2009, Delta terminated the operation of oil sludge processing
facilities in Bahrain and Kuwait and the manufacture of insulating concrete from
ICF products in Saudi Arabia, which are accounted for as discontinued
operations. As of December 31, 2008, Delta terminated all of the construction
technology activities that were carried out by Delta Technologies, Inc. (a
wholly owned subsidiary). Also as of December 31, 2008 the securities trading
activities of South American Hedge Fund were accounted for as a discontinued
operation.
  32
  DELTA
MUTUAL, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 For the
Years Ended December 31, 2009 and 2008
 
 Delta
Mutual, Inc. and the above subsidiaries are collectively referred to as “the
Company”.  All significant intercompany balances and transactions have
been eliminated in consolidation.
 
 GENERAL
 
 The
primary focus of the Company’s business is its SAHF, LLC subsidiary (also
referred to as “South American Hedge Fund”), which has investments in oil and
gas concessions in Argentina with focus on the energy sector, including the
development and supply of energy and alternative energy sources in Latin America
and North America.
 
 As of
December 31, 2009, the Company holds 45% ownership interest in Delta–Envirotech,
Inc., which is engaged in select business opportunities in the Middle East
related to environmental remediation and other projects. These activities are
managed and carried out by majority stockholders of Delta-Envirotech, Inc.,
(“Envirotech”) a company incorporated in the state of Delaware with headquarters
in Virginia and formed in January 2004. The Company’s majority stockholders are
Hi-Tech Consulting and Construction, Inc. and an unrelated
individual.  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. Envirotech was consolidated as
the variable interest entity (VIE) up until September 30, 2009.
 
 As of
December 31, 2009 management has determined that Delta-Envirotech, Inc. is not
considered the VIE for the year ending December 31, 2009 and accordingly has
been deconsolidated from the consolidated financial statements effective
December 31, 2009 (see also note 3).
 
 On April
22, 2009, the Company's Board of Directors declared a one-for-ten reverse stock
split of its common stock.  All share and per share amounts have been
restated to reflect the reverse stock split except for stockholders' equity
(deficit).  See Note  12, "Stockholders' Equity (Deficit)",
for further information.
 
 GOING
CONCERN
 
 The
consolidated financial statements for the period ended December 31, 2009 have
been prepared on a going concern basis which contemplates the realization of
assets and settlement of liabilities and commitments in the normal course of
business. The Company has a past history of recurring losses from operations and
has an accumulated deficit of approximately $3,581,000 and working capital
deficiency of approximately $967,000 as of December 31,
2009.  Additionally, the Company will require additional funding to
execute its future strategic business plan. Successful business operations and
its transition to attaining profitability is dependent upon obtaining additional
financing and achieving a level of revenue adequate to support its cost
structure.
 
 The
Company's business is subject to the risks of its oil and gas investments in
South America. The likelihood of success of the Company must be considered in
light of the expenses, difficulties, delays and unanticipated challenges
encountered in connection with the operations of the oil and gas concession in
Argentina. There is no assurance that the Company will ultimately achieve a
profitable level of operations.
  33
  DELTA
MUTUAL, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 For the
Years Ended December 31, 2009 and 2008
 
 PRINCIPLES OF
CONSOLIDATION
 
 The
Company's financial statements include the accounts of all majority-owned
subsidiaries where its ownership is more than 50 percent of the common
stock.
  USE OF
ESTIMATES
  The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States requires the use of estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities known to exist as
of  the date of the consolidated financial statements and the reported
amounts of revenues and expenses during the reporting period. Uncertainties with
respect to such estimates and assumptions are inherent in the preparation of the
Company’s consolidated financial statements; accordingly, it is possible that
the actual results could differ from these estimates and assumptions and could
have a material effect on the reported amounts of the Company’s consolidated
financial position and results of operations.
  REVENUE
RECOGNITION
  Revenues
are recognized in accordance with SEC staff accounting bulletin, Topic 13,
Revenue Recognition, which specifies that only when persuasive evidence for an
arrangement exists; the fee is fixed or determinable; and collection is
reasonably assured can revenue be recognized.
  FAIR VALUE OF FINANCIAL
INSTRUMENTS
  Cash,
advances and other receivables, investments in non-consolidated affiliates,
accounts payable and accrued expenses, and notes payable as reflected in the
consolidated financial statements, approximates fair value.  Fair
value estimates are made at a specific point in time, based on relevant market
information and information about the financial instrument. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment and therefore cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
  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 Financial Accounting Standards Board ("FASB") Accounting Standards
Codification ("ASC") 360-15-35, "Impairment or Disposal of Long-Lived Assets"
("ASC 360-15-35"). 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. Because the Company discontinued its operations in the
Far East (Indonesia) as of the quarter ended June 30, 2008 and discontinued its
construction technology activities as of the quarter ended December 31, 2008,
the property and equipment and intangible assets related to these operations
were evaluated for impairment. Based on the results of that analysis, the
Company recorded an impairment charge of $467,995 during the year ended December
31, 2008.
  34
  DELTA
MUTUAL, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 For the
Years Ended December 31, 2009 and 2008
 
 DEPRECIATION AND
AMORTIZATION
 
 Property
and equipment are stated at cost. Depreciation is provided for by the
straight-line method over the estimated useful lives of the related
assets.
 
 INVESTMENTS
 
 The
Company accounts for non-marketable investments using the equity method of
accounting if the investment gives it the ability to exercise significant
influence over, but not control of, an investee. Significant influence generally
exists if there is an ownership interest representing between 20% and 50% of the
voting stock of the investee. Under the equity method of accounting, investments
are stated at initial cost and are adjusted for additional investments and their
proportionate share of earnings or losses and distributions. The Company records
its share of the investee’s earnings or losses in earnings (losses) from
unconsolidated entities, net of income taxes, in its consolidated statements of
operations. Equity investments of less than 20% are stated at cost. The cost is
not adjusted for its proportionate share of earnings or losses. The Company
evaluates its equity method investments for impairment when events or changes in
circumstances indicate, in management’s judgment, that the carrying value of
such investments may have experienced an other-than-temporary decline in value.
When evidence of loss in value has occurred, the Company compares fair value of
the investment to its carrying value to determine whether impairment has
occurred. If the estimated fair value is less than the carrying value and
management considers the decline to be other than temporary, the excess of the
carrying value over the estimated fair value is recognized as impairment in the
consolidated financial statements.
 
 Investments
in non-consolidated affiliates consist of the Company’s ownership interests in
oil and gas development and exploration rights in Argentina, net of impairment
losses if any.
 
 The
Company evaluates these investments for impairment when indicators of potential
impairment are present. Indicators of impairment include, but are not limited
to, levels of oil and gas reserves, availability of pipeline (or other
transportation) capacity and infrastructure and management of the operations in
which the investments were made.
  STOCK BASED
COMPENSATION
  The
Company has  a stock-based compensation plan under which stock options
are granted to employees. The Company accounts for the measurement and
recognition of compensation expense for all share-based payment awards made to
employees and directors, including employee stock options, based on estimated
fair values.  Under authoritative guidance issued by the Financial
Accounting Standards Board (FASB), companies are required to estimate the fair
value or calculated value of share-based payment awards on the date of grant
using an option-pricing model.  The value of awards that are
ultimately expected to vest is recognized as expense over the requisite service
periods in the Company’s statements of income.  The Company uses the
Black-Scholes Option Pricing Model to determine the fair-value of stock-based
awards. The Company recognized stock based compensation expense of $786,980 in
2008 (none in 2009).
  35
  DELTA
MUTUAL, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 For the
Years Ended December 31, 2009 and 2008
  INCOME
TAXES
  The
Company accounts for income taxes in accordance with the liability method. Under
the liability method, deferred assets and liabilities are recognized based upon
anticipated future tax consequences attributable to differences between
financial statement carrying amounts of assets and liabilities and their
respective tax bases. The Company establishes a valuation allowance to the
extent that it is more likely than not that deferred tax assets will not be
utilized against future taxable income.
  UNCERTAIN TAX
POSITIONS
  In July
2006, the Financial Accounting Standards Board (“FASB”) issued guidance codified
in Accounting Standards Codification (“ASC”) Topic 740-10-25 “Accounting for
Uncertainty in Income Taxes”. ASC Topic 740-10-25 supersedes guidance codified
in ASC Topic 450, “Accounting for Contingencies”, as it relates to income tax
liabilities and lowers the minimum threshold a tax position is required to meet
before being recognized in the financial statements from “probable” to “more
likely than not” (i.e., a likelihood of occurrence greater than fifty percent).
Under ASC Topic 740-10-25, the recognition threshold is met when an entity
concludes that a tax position, based solely on its technical merits, is more
likely than not to be sustained upon examination by the relevant taxing
authority. Those tax positions failing to qualify for initial recognition are
recognized in the first interim period in which they meet the more likely than
not standard, or are resolved through negotiation or litigation with the taxing
authority, or upon expiration of the statute of limitations. De-recognition of a
tax position that was previously recognized occurs when an entity subsequently
determines that a tax position no longer meets the more likely than not
threshold of being sustained.
  The
Company is subject to ongoing tax exposures, examinations and assessments in
various jurisdictions. Accordingly, the Company may incur additional tax expense
based upon the outcomes of such matters. In addition, when applicable, the
Company will adjust tax expense to reflect the Company’s ongoing assessments of
such matters which require judgment and can materially increase or decrease its
effective rate as well as impact operating results.
  Under ASC
Topic 740-10-25, only the portion of the liability that is expected to be paid
within one year is classified as a current liability. As a result, liabilities
expected to be resolved without the payment of cash (e.g. resolution due to the
expiration of the statute of limitations) or are not expected to be paid within
one year are not classified as current. The Company has recently adopted a
policy of recording estimated interest and penalties as income tax expense and
tax credits as a reduction in income tax expense.
  Management
believes that the Company does not have any significant uncertain tax positions
exist for the year ended December 31, 2009 and 2008, respectively and
considering its loss making history since inception. The Company has not made
any provision for federal and state income tax liabilities that may result from
this uncertainty as of December 31, 2009 and 2008, respectively. Management
believes that this will not have a material adverse impact on the Company’s
consolidated financial position, its results of operations and its cash
flows.
  36
  DELTA
MUTUAL, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 For the
Years Ended December 31, 2009 and 2008
 
 The
number of years with open tax audits varies depending on the tax jurisdiction.
The Company’s major taxing jurisdictions include the United States (including
applicable states).
 
 LEGAL COSTS AND
CONTINGENCIES
 
 In the
normal course of business, the Company incurs costs to hire and retain external
legal counsel to advise it on regulatory, litigation and other matters. The
Company expenses these costs as the related services are received.
 If a loss
is considered probable and the amount can be reasonably estimated, the Company
recognizes an expense for the estimated loss. If the Company has the potential
to recover a portion of the estimated loss from a third party, the Company makes
a separate assessment of recoverability and reduces the estimated loss if
recovery is also deemed probable.
 
 NET INCOME (LOSS) PER
SHARE
 
 Basic and
diluted net income (loss) per common share are presented in accordance with
Accounting Standard Codifications (ASC) Topic 260, “Earning per Share”, for all
periods presented. Stock subscriptions, options and warrants have been excluded
from the calculation of the diluted income (loss) per share for the periods
presented in the statements of operations, because all such securities were
anti-dilutive. The net income (loss) per share is calculated by dividing the net
income (loss) by the weighted average number of shares outstanding during the
periods.
 
 FOREIGN CURRENCY
TRANSLATION
 
 The
functional currency for some foreign operations is the local currency. Assets
and liabilities of foreign operations are translated at balance sheet date rates
of exchange and income, expense and cash flow items are translated at the
average exchange rate for the period. The functional currency in South America
is the U.S. dollar. Translation adjustments are recorded in Cumulative Other
Comprehensive Income. The translation gains or losses were not material for the
years ended December 31, 2009 and 2008, respectively. Therefore, there were
no adjustments as to Other Comprehensive Income (Loss).
 
 DISCONTINUED
OPERATIONS
 
 During
the quarter ended June 30, 2008, the Company discontinued all its
operations in the Far East (Indonesia). During the quarter ended December 31,
2008, the Company discontinued all of its construction technology activities
that were carried out by its wholly owned subsidiary, Delta Technologies, Inc.
and the trading of securities by its South American Hedge Fund subsidiary. These
discontinued operations resulted in a loss of $0 and $(2,310,473), respectively,
for the years ended December 31, 2009 and 2008, respectively.
  37
  DELTA
MUTUAL, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 For the
Years Ended December 31, 2009 and 2008
 
 Summarized
statement of loss for discontinued operations is as follows:
 
 Year
      Ended Dec. 31,2009
                      
                      
                      2008Net
      sales
                      
                      $
                      —
                      
                      
                      $
                      (2,077,576
                      )Impairment
                      
                      
                      —
                      
                      
                      
                      (467,994
                      )Provision
      for income taxes
                      
                      
                      —
                      
                      
                      
                      —Loss
      from operations, net of taxes
                      
                      
                      —
                      
                      
                      
                      —Gain
      on disposition of minority interest
                      
                      
                      —
                      
                      
                      
                      —Provision
      for income taxes
                      
                      
                      —
                      
                      
                      
                      230,057Loss
      from discontinued operations, net of taxes
                      
                      $
                      -0-
                      
                      
                      $
                      (2,310,473
                      )
 
 RECLASSIFICATION
 
 Certain
reclassifications have been made to conform with prior period’s financial
information to the current presentation.
 
 OTHER CRITICAL ACCOUNTING
POLICIES
 
 The
Securities and Exchange Commission recently issued “Financial Reporting Release
No. 60 Cautionary Advice About Critical Accounting Policies” (“FRR 60”),
suggesting companies provide additional disclosures, discussion and commentary
on their accounting policies considered most critical to its business and
financial reporting requirements. FRR 60 considers an accounting policy to be
critical if it is important to the Company’s financial condition and results of
operations, and requires significant judgment and estimates on the part of
management in the application of the policy. For a summary of the Company’s
significant accounting policies, including the critical accounting policies
discussed below, please refer to the accompanying notes to the financial
statements. Foreign currency risk - The functional currency for some foreign
operations is the local currency. Assets and liabilities of foreign operations
are translated at balance sheet date rates of exchange and income, expense and
cash flow items are translated at the average exchange rate for the period. The
functional currency in South America is the U.S. dollar. Translation adjustments
are recorded in Cumulative Other Comprehensive Income.
 
 RECENT ACCOUNTING
PRONOUNCEMENTS
  During
the second quarter of 2009, the Company implemented additional interim
disclosures about fair value of financial instruments, as required by FASB ASC
Paragraph 825-10-65-1. Prior to implementation, disclosures about fair values of
financial instruments were only required to be disclosed annually. As the
required modifications only related to additional disclosures of fair values of
financial instruments in interim financial statements, the adoption did not
affect the Company’s consolidated financial position or results of
operations.
  38
  DELTA
MUTUAL, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 For the
Years Ended December 31, 2009 and 2008
  Beginning
in the second quarter of 2009, the Company must disclose the date through which
subsequent events have been evaluated, in accordance with the requirements in
FASB ASC Paragraph 855-10-50-1. With regards to the condensed consolidated
financial statements and notes to those financial statements contained in this
Form 10-Q, the Company has evaluated all subsequent events through April 15,
2010 (the date the Company’s financial statement are issued).
  In
September 2009, the FASB implemented certain modifications to FASB ASC Topic
860, Transfers and Servicing, as a means to improve the relevance,
representational faithfulness, and comparability of the information that a
reporting entity provides in its financial statements about a transfer of
financial assets, the effects of a transfer on its financial position, financial
performance, and cash flows, and a transferor’s continuing involvement, if any,
in transferred financial assets. These modifications must be applied as of the
beginning of each reporting entity’s first annual reporting period that begins
after November 15, 2009. The Company does not expect the adoption of this
standard to have an impact on the Company’s consolidated results of operations,
financial condition or cash flows.
 
 During
the third quarter of 2009, the Company adopted the FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles in
accordance with FASB ASC Topic 105, “Generally Accepted Accounting Principles”
(the “Codification”).  The Codification has become the source of
authoritative U.S. generally accepted accounting principles (GAAP) recognized by
the FASB to be applied by nongovernmental entities. Rules and interpretive
releases of the Securities and Exchange Commission (SEC) under authority of
federal securities laws are also sources of authoritative GAAP for SEC
registrants. Effective with the Company’s adoption on July 1, 2009, the
Codification has superseded all prior non-SEC accounting and reporting
standards. All other non-grandfathered non-SEC accounting literature not
included in the Codification has become non-authoritative. As the adoption of
the Codification only affected how specific references to GAAP literature have
been disclosed in the notes to the Company’s condensed consolidated financial
statements, it did not result in any impact on the Company’s consolidated
results of operations, financial condition or cash flows.
  The FASB
has published FASB Accounting Standards Update No. 2009-12, Fair Value Measurements and
Disclosures (Topic 820)—Investments in Certain Entities That Calculate Net Asset
Value per Share (or Its Equivalent). This Update amends Subtopic 820-10,
Fair Value Measurements and
Disclosures—Overall, to permit a reporting entity to measure the fair
value of certain investments on the basis of the net asset value per share of
the investment (or its equivalent). This Update also requires new disclosures,
by major category of investments, about the attributes of investments included
within the scope of this amendment to the Codification. The guidance in this
Update is effective for interim and annual periods ending after December 15,
2009. The Company does not expect the adoption of this standard to have an
impact on the Company’s consolidated results of operations, financial condition
or cash flows.
 
 2.  ACQUISITION
 
 Effective
March 4, 2008, the Company entered into a Membership Interest Purchase
Agreement, pursuant to which the Company acquired from Egani, Inc. all the
shares of stock of Altony SA, an Uruguayan Sociedad Anonima (“Altony”), which
owns 100% of the issued and outstanding membership interests in South American
Hedge Fund LLC, a Delaware limited liability company (sometimes referred to as
“SAHF”). At the closing of the Agreement, the Company issued 13,000,000 shares
of its common stock to Egani, Inc. which constituted, following such issuance, a
majority of the outstanding shares of its common stock. Immediately following
the closing of the Agreement, Altony became a wholly owned subsidiary of the
Company. For accounting purposes, the transaction was treated as a
recapitalization of the Company, as of March 4, 2008, with Altony as the
acquirer.
  39
  DELTA
MUTUAL, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 For the
Years Ended December 31, 2009 and 2008
 
 The
acquired assets and liabilities assumed of Delta Mutual from the reverse
acquisition are as follows:
 
 Cash
                      
                      $
                      57,623Prepaid
      expenses
                      
                      
                      1,914Property
      and equipment
                      
                      
                      462,842Accumulated
      depreciation
                      
                      
                      (94,719
                      )Intangible
      asset-net
                      
                      
                      126,317Other
      assets
                      
                      
                      650Accounts
      payable
                      
                      
                      (173,370
                      )Accrued
      expenses
                      
                      
                      (1,225,674
                      )Convertible
      debt
                      
                      
                      (397,340
                      )Notes
      payable
                      
                      
                      (240,655
                      )Minority
      interests
                      
                      
                      (225,797
                      )Common
      stock
                      
                      
                      (7,888
                      )Deficit
                      
                      
                      1,716,087$
                      -0-
 
 3.  VARIABLE
INTEREST ENTITY
  FASB ASC
810 “Consolidation” required the consolidation of a variable interest entity
(VIE) if the Company is deemed to be the primary beneficiary of the VIE. FASB
ASC 810 requires an entityto assess its equity investments and certain other
contractual interests to determine whether they are VIEs. As defined in FASB ASC
810, variable interests are contractual, ownership or other interests in an
entity that change with changes in entity’s net asset value. Variable interests
in an entity may arise from financial instruments, service contracts,
guarantees, leases or other arrangements with the VIE. An entity that will
absorb a majority of the VIE’s expected losses orexpected residual returns, as
defined in FASB ASC 810, is considered the primary beneficiary of the VIE. The
primary beneficiary should include the VIE’s assets, liabilities and results of
operations in its consolidated financial statements until a reconsideration
event, as defined in FASB ASC 810, occurs to require deconsolidation of the VIE.
At the deconsolidation date, the assets and liabilities of the VIE are removed
from the consolidated financial statements and any assets and liabilities of the
Company that were eliminated in consolidation are restored. The gain recognized
from deconsolidating VIE is recorded in the consolidated statements of
operations as gain on deconsolidation of the VIE.
  As
of December 31, 2009, management determined that Delta-Envirotech,
Inc. is not considered a variable interest entity (VIE) for the year ending
December 31, 2009 and accordingly has been deconsolidated from the accompanying
consolidated financial statements effective December 31, 2009. As of December
31, 2009, majority stockholders of Envirotech are exercising significant
influence over operating and financing policies of Envirotech, as well as,
managing its business activities  and therefore is not considered the VIE.
As a result of this deconsolidation, the Company has removed the assets and
liabilities of the VIE from the consolidated financial statements and any assets
and liabilities of Envirotech that were eliminated in consolidation are restored
at fair value.
  40
  DELTA
MUTUAL, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 For the
Years Ended December 31, 2009 and 2008
  Prior to
December 31, 2009, the Company was deemed to be the primary beneficiary of the
Envirotech due to relatively significant financial support provided to this
entity in terms of investment of $375,000 (which represents 45% ownership of the
Company) and notes receivable of $810,867. However, due to significant losses of
Envirotech and its deconsolidation as of December 31, 2009, the Company’s entire
investment and notes receivable in the aggregate of approximately $1,186,000 as
of December 31,  2009  had been reduced to zero in order to account
for restored assets at fair value. On the other hand, as of December 31, 2009,
the Company was not liable for Envirotech’s liabilities and losses totaling
approximately $2,068,000 which were included in the consolidated financial
statements of the Company prior to deconsolidation per agreed terms with
Envirotech and which resulted in a net gain on deconsolidation of approximately
$882,000 recorded as a separate line item in the accompanying consolidated
financial statements.
  4.
PROPERTY AND EQUIPMENT
 
 December 31,
                    
                    
                    December 31,2009
                    
                    
                    2008Equipment
                    
                    $
                    6,277
                    
                    
                    $
                    6,277Leasehold
      improvements
                    
                    
                    7,807
                    
                    
                    
                    7,80714,084
                    
                    
                    
                    14,084Less
      accumulated depreciation
                    
                    
                    (14,084
                    )
                    
                    
                    (13,280
                    )$
                    0
                    
                    
                    $
                    804
 
 During
2008, the Company discontinued its operations in the Far East (Indonesia) and
discontinued its construction technology activities. During the third and fourth
quarters of 2008, the Company wrote off $268,127, the value of the equipment
that was used in its Indonesian operations. During the fourth quarter of 2008,
the Company wrote off $77,125, the value of the manufacturing equipment that was
used to produce its insulating concrete form (ICF) building
product.
  Depreciation
expense for the years ended December 31, 2009 and 2008 amounted to $804 and $0,
respectively.
  41
  DELTA
MUTUAL, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 For the
Years Ended December 31, 2009 and 2008
  5.
INVESTMENT IN NONCONSOLIDATED AFFILIATES
  As of
December 31, 2009 the Company has a 10% ownership interest in the Jollin and
Tonono oil and gas concessions located in Northern Argentina. During 2007, SAHF
purchased a 47% ownership of these concessions and paid the purchase price by
issuing a non-interest bearing note in the principal amount of $1,820,000 to
Oxipetrol-Petroleros de Occidente S.A. (Oxipetrol), one of the other owners,
with a maturity date of July 2008. The Company’s purchase price was based upon
the price tendered by the original purchasers of the concessions that was and
accepted by the Argentine government, who formerly owned these properties. The
government uses a number of factors In determining the selling prices for oil
and gas concession in Argentina, including the location and size of the
concession and the current market prices of crude oil and natural gas. Prior to
the maturity date, the Company and Oxipetrol mutually agreed to reduce the
principal amount of the Company’s note primarily because of changes in oil and
gas prices. Based upon the purchase price reduction, the Company repaid
Oxipetrol $1,270,000 at the maturity date. Based on these circumstances, the
Company recorded a one time, retroactive adjustment, reducing the value of this
investment by $550,000 at December 31, 2008.
 
 During
2008, SAHF exchanged 50% of its ownership in this investment with a third party
for no cash consideration, however, the acquirer contractually agreed to assume
50% of the Company’s obligations with respect to future development expenses.
The Company recorded a $635,000 loss on disposition of this investment in its
consolidated statement of operations.
 
 During
the year ended December 31, 2008, majority owners of the Jollin and Tonono
concessions formed an Argentine-registered joint venture and paid, in the
aggregate, approximately $848,000 of development costs, all of which were
capitalized. Since the Company was not registered as a foreign company in
Argentina, it could not become a member of the joint venture in 2008. The other
owners of these concessions have agreed that, upon admission of the Company as a
member of the joint venture, the Company will retain its 23.5% ownership.
However, the Company’s weighted average pro-rata portion of the 2008 aggregate
development cost, of approximately $223,024, all of which is included in
accounts payable in the Company’s consolidated balance sheet at December 31,
2008, will be repaid to the other members from its pro-rata share of the future
earnings. The Company has applied for foreign registration in Argentina and
should be admitted as a member of the joint venture in the second quarter of
2010.
 
 On
September 25, 2009, the Company sold 13.5% of its ownership interest in Jollin
and Tonono to Maxi-Petroleros De Occidente S.A. ("Maxipetrol") for
$206,832.  Maxipetrol, prior to the sale, owned 48% of the Jollin and
Tonono oil and gas concession.  In connection with the sale,
Maxipetrol will assume full responsibility to develop the oil and gas concession
until production is achieved in the blocks.  This obligation includes
all costs of the full amount attached to the concession contract with the
government.  Any prior unpaid costs accrued by the Company, will also
be assumed by Maxipetrol.  The Company through SAHF will retain 10% of
the total concession in the carryover mode ("no cost obligations to SAHF") and
will begin receiving revenue from Jollin and Tonono blocks when the first well
will be approved for commercial exploration.  The Company recorded a
$157,939 loss on the disposition of its 13.5% investment to Maxipetrol and the
loss is included in its statement of operations for the year ended December 31,
2009.
  During
2008, the Company purchased 40% of the oil and gas exploration rights to five
geographically defined areas in the Salta Province of Northern Argentina from
Kestal, SA, a company that acquired 100% of these explorations rights from the
government of Argentina in 2007. Kestal retained a 60% interest. The price
Kestal paid to acquire these rights from the government was determined by the
process described above.  In 2009, SAHF assigned 50% of its rights to
a third party.  As of December 31, 2009, SAHF owns 20% of the rights
to this oil and gas concession.  The Company paid the $697,000
purchase price in cash and incurred no additional costs or expenses related to
this investment in 2008. The Company expects that in 2010, substantially all of
the exploration costs required to retain the exploration rights will be borne by
the majority owner.
  42
  DELTA
MUTUAL, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 For the
Years Ended December 31, 2009 and 2008
 
 The
Company has 9% ownership of the Tartagal and Morillo oil and gas
concessions located in Northern Argentina. During 2007, the Company purchased an
18% ownership of these concessions and paid the purchase price by issuing a
non-interest bearing note in the principal amount of $480,000 to Oxipetrol, one
of the other owners, with a maturity date of July 2008. The purchase price for
this investment was based on the original price paid to the Argentine government
to acquire these concessions, following the process described above. Prior to
the maturity date, the Company and Oxipetrol mutually agreed to reduce the
principal amount of the Company’s note primarily because of changes in oil and
gas prices. Based upon the purchase price reduction, the Company repaid
Oxipetrol $450,000 at the maturity date. Based on these circumstances, the
Company recorded a one time, retroactive adjustment reducing the value of this
investment by $30,000 at December 31, 2008.
 
 During
2008, SAHF exchanged 50% of its ownership in this investment with a third
party for no cash consideration, however, the acquirer contractually agreed to
assume 50% of the Company’s obligations with respect to future development
expenses. The Company recorded a $225,000 loss on disposition of this investment
in its consolidated financial statements.
 
 In March
2009, a Hong Kong public company purchased 60% of the ownership in the Tartagal
and Morillo Concessions, from the other majority owners, for total consideration
of approximately $270 million. These funds will be used for development and
operating expenses in 2009 and beyond.  The Company through SAHF will
retain 9% of the total concession in the carryover mode ("no cost obligations to
SAHF") and will begin receiving revenue from Tartagal and Morillo blocks when
the first well will be approved for commercial exploration.
 
 The
Company evaluated these investments for impairment and concluded that, except as
described above, no loss in value occurred as of December 31, 2009. The
following table summarizes the Company’s investments in these nonconsolidated
affiliates.
  43
  DELTA
MUTUAL, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 For the
Years Ended December 31, 2009 and 2008
 
 Concession
                  
                  
                  ExplorationInvestments
                  
                  
                  Rights
                  
                  
                  TotalAt
      December 31, 2007
                  
                  $
                  2,300,000
                  
                  
                  $
                  —
                  
                  
                  $
                  2,300,000Adjustment
      of purchase price
                  
                  
                  (580,000
                  )
                  
                  
                  —
                  
                  
                  
                  (580,000
                  )Disposition
      of investment, net
                  
                  
                  (860,000
                  )
                  
                  
                  —
                  
                  
                  
                  (860,000
                  )Additional
      investment in 2008
                  
                  
                  223,024
                  
                  
                  
                  697,000
                  
                  
                  
                  920,024Equity
      in net earnings (loss)
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  -At
      December 31, 2008
                  
                  
                  1,083,024
                  
                  
                  
                  697,000
                  
                  
                  
                  1,780,024Additional
      investments in 2009
                  
                  
                  349,000
                  
                  
                  
                  —
                  
                  
                  
                  349,000Adjustment
      of additional investment during 2009 and 2008
                  
                  
                  (293,524
                  )
                  
                  
                  —
                  
                  
                  
                  (293,524
                  )Disposition
      of investment, net
                  
                  
                  (364,787
                  )
                  
                  
                  —
                  
                  
                  
                  (364,787
                  )At
      December 31, 2009
                  
                  $
                  773,713
                  
                  
                  $
                  697,000
                  
                  
                  $
                  1,470,713
 
 6.  FAIR
VALUE OF FINANCIAL INSTRUMENTS
 
 The
Company adopted FASB ASC 820, Fair Value Measurements and Disclosures (“ASC
820”) on January 1, 2008, for all financial assets and liabilities that are
recognized or disclosed at fair value in the condensed consolidated financial
statements on a recurring basis or on a nonrecurring basis during the reporting
period. While the Company adopted the provisions of ASC 820 for nonfinancial
assets and liabilities that are recognized or disclosed at fair value in the
financial statements on a recurring basis, no such assets or liabilities existed
at the balance sheet date. As permitted by ASC 820, the Company delayed
implementation of this standard for all nonfinancial assets and liabilities
recognized or disclosed at fair value in the financial statements on a
nonrecurring basis and adopted these provisions effective January 1,
2009.
 
 The fair
value is an exit price, representing the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date.  The Company utilizes market
data or assumptions that market participants would use in pricing the asset or
liability.  ASC 820 establishes a three-tier fair value hierarchy,
which prioritizes the inputs used in measuring fair value.  These
tiers include:  Level 1, defined as observable inputs such as quoted
market prices in active markets; Level 2, defined as inputs other than quoted
prices in active markets that are either directly or indirectly observable; and
Level 3, defined as unobservable inputs about which little or no market data
exists, therefore requiring an entity to develop its own
assumptions.
 
 As of
December 31, 2009, the Company held certain financial assets that are measured
at fair value on a recurring basis.  These consisted of cash and cash
equivalents and investments in non-consolidated affiliates.  The fair
value of the cash and cash equivalents is determined based on quoted market
prices in public markets and is categorized as Level 1.  The
investment in non-consolidated affiliates is determined by the Company to
develop its own assumptions and is categorized as Level 3.  The
Company does not have any financial assets measured at fair value on a recurring
basis as Level 2 and there were no transfers in or out of Level 2 or Level 3
during the year ended December 31, 2009.
  44
  DELTA
MUTUAL, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 For the
Years Ended December 31, 2009 and 2008
 
 The
following table sets forth by level, within the fair value hierarchy, the
Company’s financial assets accounted for at fair value on a recurring basis as
of December 31, 2009.
 
 Total
                  
                  
                  Quoted Prices in
                    Active Markets for
                    Identical Assets
                    (Level 1)
                  
                  
                  Significant Other
                    Observable Inputs
                    (Level 2)
                  
                  
                  Significant
                    Unobservable
                    Inputs (Level 3)Cash
      and cash equivalents
                  
                  $
                  102,008
                  
                  
                  $
                  102,008
                  
                  
                  $
                  -
                  
                  
                  $
                  -Non-consolidated
      affiliates
                  
                  
                  1,470,713
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,470,713Total
                  
                  $
                  1,572,721
                  
                  
                  $
                  102,008
                  
                  
                  $
                  -
                  
                  
                  $
                  1,470,713
 
 The
Company had no financial assets accounted for on a non-recurring basis as of
December 31, 2009.
 
 There
were no changes to the Company’s valuation techniques used to measure asset fair
values on a recurring or nonrecurring basis during the year December 31, 2009
and the Company did not have any financial liabilities as of December 31, 2009.
The Company has other financial instruments, such as advances and other
receivables, accounts payable and other liabilities, notes payable and other
assets, which have been excluded from the tables above. Due to the short-term
nature of these instruments, the carrying value of advances and other
receivables, accounts payable and other liabilities, notes payable and other
assets approximate their fair values.
 
 7. NOTES
PAYABLE
 
 December
      31,
                        
                        
                        December 31,2009
                        
                        
                        2008Notes
      payable to three investors, interest at 8%, due August 10,
      2011
                        
                        $
                        150,655
                        
                        
                        $
                        150,655Note
      payable to third party, interest at 6%, due April 2009 (1)
                        
                        
                        -
                        
                        
                        
                        30,000Notes
      payable to stockholders and related parties, interest at 6%, due June 20,
      2012
                        
                        
                        402,702
                        
                        
                        
                        280,553Notes
      payable to stockholders and related parties, interest at 6%, due August
      10, 2011
                        
                        
                        253,740
                        
                        
                        
                        -$
                        805,605
                        
                        
                        $
                        461,208
 
 (1)
During 2009, the Company converted this note including interest
payable  in to equity by issuing common stock.
 
 The
Company included accrued interest payable on the aforesaid notes in accrued
expenses for the years ending December 31, 2009 and 2008,
respectively.
  45
  DELTA
MUTUAL, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 For the
Years Ended December 31, 2009 and 2008
 
 8.
CONVERTIBLE DEBT
 
 In
connection with the March 4, 2008 merger, the Company assumed convertible debt
obligations of $397,340. A note in the principal amount of $193,740 was not
repaid at its maturity date. The Company is currently negotiating amended terms
with the noteholder. If the Company and the noteholder can not agree upon an
amendment to the note, including an extension of the maturity date, the Company
may receive a notice of default. If the Company receives a notice of default and
fails to repay the note, the lender could initiate legal proceedings and obtain
a judgment against the Company.
 
 In April
2008, the Company issued 230,057 shares of common stock in payment of the
aggregate principal amount of $143,600 of convertible notes and issued 11,563
shares of common stock in payment of the accrued interest of
$7,048.
 
 At
December 31, 2009, the Company reclassified convertible debt of $253,740 into
notes payable based on an arrangement with respective noteholders.
 
 For
the years ended December 31, 2009 and 2008, the Company included unpaid interest
expense in accrued expenses on the Company's consolidated financial
statements.
 
 9. INCOME
TAXES
  The
Company has not made provision for income taxes in the years ended December 31,
2009 and 2008, respectively, since the Company has the benefit of net operating
losses carried forward in these periods.
  Deferred
income tax assets consist of:
 December
                      31, 2009
                    
                    
                    December
                      31,2008Net
      operating loss carryforwards
                    
                    $
                    1,397,000
                    
                    
                    $
                    1,728,000Less
      valuation allowance
                    
                    
                    (1,397,000
                    )
                    
                    
                    (1,728,000
                    )Deferred
      income tax assets, net
                    
                    $
                    -
                    
                    
                    $
                    -
  Due to
uncertainties surrounding the Company’s ability to generate future taxable
income to realize these assets, a full valuation has been established to offset
the net deferred income tax asset. Based on management’s assessment, utilizing
an effective combined tax rate for federal and state taxes of approximately 39%,
the Company has determined it to be more likely than not that a deferred income
tax asset of approximately $1,397,000 and $1,728,000 attributable to the future
utilization of the approximately $3,581,000 and $4,431,000 in eligible net
operating loss carryforwards as of December 31, 2009 and 2008, respectively,
will not be realized. The Company will continue to review this valuation
allowance and make adjustments as appropriate. The net operating loss
carryforwards will begin to expire in varying amounts from year 2019 to
2029.
  46
  DELTA
MUTUAL, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 For the
Years Ended December 31, 2009 and 2008
  The
Company is subject to taxation in the United States and certain state
jurisdictions. The Company’s tax years for 2002 and forward are subject to
examination by the United States and applicable state tax authorities due to the
carry forward of unutilized net operating losses.
 
 10. OTHER
INCOME
  During
the year ended December 31, 2009, the Company determined and analyzed that
certain balances in accounts payable and accrued expenses were very old and no
longer considered payable under any contractual obligations amounted to
approximately $582,000. For the year ended December 31, 2009, the Company had
included $582,000 as other income in the accompanying statements of operations
through a resolution of the board of directors.
  11.   STOCK-BASED
COMPENSATION
 
 The
Company 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 years ended December 31, 2009 and 2008, the
Company issued and 200,000 and 1,055,000 shares, respectively, and recorded
compensation expense of $120,000 and $238,500, respectively, in conjunction with
the issuance of these shares.
 
 The
Company had outstanding employee stock options of 350,000 that were exercisable
as of January 1, 2009.  As of December 31, 2009, none of the eligible
employees exercised such options and therefore either cancelled or expired at
that date.
 
 12.   STOCKHOLDERS'
EQUITY
  On April
22, 2009, the Company’s board of directors approved amendments to the
Certificate of Incorporation to: (1) effect a 1 for 10 reverse split of all the
outstanding common stock; and (2) authorize a new class of 10,000,000 shares of
preferred stock, par value $0.0001 per share, and to authorize the board of
directors to issue one or more series of the preferred stock with such
designations, rights, preferences and restrictions as determined by majority
vote of the directors. Thereafter on April 23, 2009, the Company received
written consent from stockholders of the Company holding a majority of the
outstanding shares of common stock approving the Amendments. The effective date
of the Amendments is the date the reverse stock split is made effective for
trading purposes by the Financial Industry Regulatory Authority (FINRA). FINRA
approved the reverse split for trading purposes effective July 6, 2009. See Note
24, "Earnings (Loss) per Common Share", for the impact on the Company's loss per
share amounts as a result of the reverse stock split.  The reverse
stock split resulted in a reduction of 199,664,243 shares of common stock and
was accounted for by the transfer of $19,966 from common stock to additional
paid-in capital, which is the amount equal to the par value of the reduced
number of shares to effect the reverse stock split for all periods presented in
the accompanying consolidated financial statements.
  All share
and per share data (except par value) have been adjusted to reflect the effect
of the stock split for all periods presented except for stockholders' deficit.
As a result, there is no overall financial effect of the reverse split, however,
the number of outstanding employee stock options has been reduced from 3,500,000
to 350,000 and the exercise price for the respective options has increased by a
factor of 10 (see note 11).
  47
  DELTA
MUTUAL, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 For the
Years Ended December 31, 2009 and 2008
 
 As of
December 31, 2009, the board of directors had not authorized the issuance of any
series of preferred stock.
  The
Company issues shares of common stock for services and repayment of debt and
interest valued at fair market value at time of issuance. For the year ended
December 31, 2008, the Company issued 230,057 shares of common stock upon the
conversion of convertible notes in the principal amount of $143,600, valued at
$0.50 - $0.70 per share; and issued 11,563 shares of common stock for payment of
accrued interest in the amount of $7,048, valued at $0.50 - $0.70 per
share.
 
 For the
years ended December 31, 2009 and 2008, the Company issued 330,000 and 1,055,000
shares of common stock, respectively, valued at $0.15 - $0.60 and $0.20 - $0.70
per share, respectively, for services valued at $139,500 and $238,500,
respectively.
 
 For the
year ended December 31, 2009, the Company issued 60,000 shares to an unrelated
individual, valued at $0.60 per share towards conversion of notes payable and
accrued interest of $36,000 in common stock.
 
 During
the year 2009, the Company received $164,500 pursuant to subscription agreements
to purchase 1,261,248 shares of common stock from various unrelated individuals.
As of December 31, 2009, the Company issued shares to all these
individuals.
 
 13.
COMMITMENTS AND CONTINGENCIES
 
 POLITICAL
RISK
 
 The
Company is exposed in the inherent risks for the foreseeable future of
conducting business internationally. Language barriers, foreign laws and tariffs
and taxation issues all have a potential effect on the Company’s ability to
transact business. Political instability may increase the difficulties and costs
of doing business. Accordingly, events resulting from changes in the political
climate could have a material effect on the Company.
 
 OPERATING
LEASES
 
 The
Company’s lease for its principal office space in Arizona became effective
December 1, 2009 for a period of 13 months. Future minimum lease payment under
operating leases for the year ending December 31, 2010 approximate $16,000. The
Company recorded lease rental expenses for the years ending December 31, 2009
and 2008, respectively, in the accompanying consolidated statements of
operations.
  48
  DELTA
MUTUAL, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 For the
Years Ended December 31, 2009 and 2008
 
 LEGAL
PROCEEDINGS
 
 Former Employee Wage
Claims
 On
September 16, 2008, the Company was notified of a complaint filed with the
Pennsylvania Department of Labor & Industry by its former President and CEO
alleging non-payment of wages in the amount of $53,271. The Company also
received notice of a similar complaint filed by a former employee alleging
non-payment of wages in the amount of $17,782. In October 2008, the Company
entered into repayment agreements with both of the former employees. As of the
date of this report, the Company has not made any payments to these two former
employees pursuant to these agreements. In addition, the employee that alleged
non-payment of wages in the amount of $17,782 has obtained a default judgment
against the Company, entered on January 8, 2010 in the Court of Common Pleas of
Bucks County, Pennsylvania, Civil Division, in the amount of $29,625.94 as to
this wage claim. As of December 31, 2009, the Company has recorded an accrued
liability of $17,782 in the accompanying consolidated financial statements.
Delta believes that a portion of the claim is without merit, and is vigorously
contesting the claim as of the date of this filing.
 
 The
Company has been notified by letter dated October 9, 2009 of a complaint filed
with the Pennsylvania Department of Labor & Industry by its former Chief
Financial Officer alleging non-payment of wages in the amount of $131,250. The
Company has responded to the Department of Labor & Industry that the wages
owed this former officer are substantially less than alleged in this
claim and are vigorously contesting the claim as of the date of this
filing. As of the date of filing, the Company is awaiting a response from the
Department of Labor and Industry and this matter is disclosed in the contingent
liabilities footnote to the consolidated financial statements.
 
 Legal Fee Collection
Claim
 Delta
Technologies, Inc., a wholly-owned subsidiary of the Company and a discontinued
operation (“Delta Technologies”), has been notified by a collection agency on
behalf of Wolf Block LLP (“Wolf Block”), a law firm that had provided
intellectually property legal services to Delta Technologies, that it had been
retained in an attempt to collect a past due amount of approximately
$41,000  reduce as per letter. The Company is in discussions with the
collection agency and believes that the resolution of this matter will have no
material effect on the Company or its operations.
  49


Item
9. Changes In and Disagreements With Accountants on Accounting and Financial
Disclosure.


None.





Item
9A (T). Controls and Procedures.





As
supervised by our board of directors and our chief executive and principal
financial officers, management has established a system of disclosure controls
and procedures and has evaluated the effectiveness of that
system.  The system and its evaluation are reported on in the below
Management's Annual Report on Internal Control over Financial
Reporting.  Our chief executive and financial officer have concluded
that our disclosure controls and procedures (as defined in the 1934 Securities
Exchange Act Rule 13a-15(e)) as of December 31, 2009, are effective, based on
the evaluation of these controls and procedures required by paragraph (b) of
Rule 13a-15.





Management's
Annual Report on Internal Control over Financial Reporting





Management
is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Rule 13a-15(f) of the Securities
Exchange Act of 1934 (the "Exchange Act").  Internal control over
financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with U.S. generally
accepted accounting principles.





Management
assessed the effectiveness of internal control over financial reporting as of
December 31, 2009. We carried out this assessment using the criteria of the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in
Internal Control—Integrated Framework. Management concluded in this assessment
that as of December 31, 2009, our internal control over financial reporting is
effective.





This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial
reporting.  Management's report was not subject to attestation by our
registered public accounting firm, pursuant to temporary rules of the Securities
and Exchange Commission that permit us to provide only management's report in
this annual report.





There
have been no significant changes in our internal control over financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
during the fourth quarter of 2009 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.





Item
9B. Other Information.





None.


50


PART
III





Item
10. Directors, Executive Officers, and Corporate Governance.





DIRECTORS
AND EXECUTIVE OFFICERS





As of the
date of this report, the executive officers and director of Delta Mutual, Inc.
were as follows:





NAME
                      
                      AGE
                      
                      TITLE(S)Daniel
      R. Peralta
                      
                      56
                      
                      President,
      CEO and DirectorMalcolm
      W. Sherman
                      
                      74
                      
                      Executive
      Vice President and DirectorMichael
      Gilburd
                      
                      66
                      
                      Interim
      Chief Financial
Officer





Daniel R.
Peralta joined the Company on January 20, 2009 as President and CEO and a
director. Dr. Peralta is also President and a director of Egani, Inc., a
financial and international business consulting firm. He also serves as
President and a director of Egani S.A., an affiliated company. Since July of
2008, Dr. Peralta has served as an advisor to the Company’s wholly owned
subsidiary, South American Hedge Fund, for its oil and gas activities in
Argentina. He has also served in various advisory capacities to the Argentine
government and as a board member of the Central Bank of Argentina and Vaisala oy
Finland-Argentina. He is the author of several publications on finance and
economic development in South America. Dr. Peralta received a doctoral degree in
business administration from Belgrano University (Buenos Aires, Argentina) and a
bachelor’s degree in aeronautical engineering form the National Technical
University of Argentina.





Malcolm
W. Sherman was appointed to fill a vacancy on our board of directors on July 11,
2008. He was appointed Executive Vice President on July 28, 2008. Mr. Sherman
also serves as President and a director of Security Systems International, Inc.,
a company that provides security systems for government building, industrial
facilities, oil refineries and other facilities in the Middle East. From May
2000 to July 2005, Mr. Sherman served as director of marketing for ZAFF
International Ltd. a Saudi Arabian technology company. During his career, Mr.
Sherman also served as a director of two public companies. He was a member of
the founding team of Taser International, Inc. and served on its board from 1993
to 1999. He also served as executive vice president and director of Ronco, Inc.
from 1981 to 1989. Mr. Sherman received a B.S. degree in business administration
from the University of Miami.





Michael
Gilburd was appointed as Interim Chief Financial Officer, effective November 1,
2009, pursuant to the Company’s agreement with Valucorp, Phoenix, Arizona. Under
the Valucorp agreement, Valucorp has provided Mr. Gilburd, a principal of
Valucorp, as our Interim Chief Financial Officer. Mr. Gilburd has more than
thirty years experience in financial transaction services and corporate
development. Since 1999, his primary employment is as President of ValuCorp, a
national firm offering expert business valuation services and consulting on
creating, improving and preserving value, capital markets and corporate finance
advisory, transaction and fairness opinions, restructuring advisory, and
management consulting. From 1995 to 1999, his primary employment was as Managing
Director of Corporate Finance for two American Express (NYSE:AXP) companies and
for five previous years he was National Director of Corporate Finance and a
member of the International Corporate Finance Committee for BDO Seidman.
Mr. Gilburd is also a member of the Board of Directors of Associated Physicians
Group, O'Fallon, Illinois. He previously concurrently served as a Director of
Freedom Golf Corporation (FGLC: OTCBB), as Vice President - Corporate
Development of LJ International Inc. (NasdaqNM: JADE), and as the Managing
Director of Corporate Development of Arrowhead Health, Arizona's leading family
medicine and pain and rehabilitation facility. Mr. Gilburd received a Master of
Science in Taxation from Bentley College, Massachusetts, in 1972, and a Bachelor
of Science degree in Accounting from Long Island University, N.Y. in
1965.





AUDIT
COMMITTEE





Our board
of directors currently serves as our audit committee. The audit committee is
responsible for recommending independent auditors and reviewing management
actions in matters relating to audit functions. The committee reviews, with
independent auditors, the scope and results of its audit engagement, the system
of internal controls and procedures and reviews the effectiveness of procedures
intended to prevent violations of laws.


51





The audit
committee, consistent with the Sarbanes-Oxley Act of 2002 and the rules adopted
thereunder, meets with management and the auditors prior to filing of officers’
certifications with the SEC to receive information concerning, among other
things, significant deficiencies in the design or operation of internal
controls.





CODE OF
CONDUCT





We have a
corporate code of conduct and a corporate disclosure policy in place, which
provide for internal procedures concerning the reporting and disclosure of
corporate matters that are material to our business and to our stockholders. Our
corporate code of conduct includes a code of ethics for our officers and
employees as to workplace conduct, dealings with customers, compliance with
laws, improper payments, conflicts of interest, insider trading, company
confidential information, and behavior with honesty and integrity. Our corporate
disclosure policy includes guidelines for publicly disseminating financial and
other material developments to the investing public. A copy of this code of
conduct is published on our website www.deltamutual.com. We intend to disclose
any future amendments to, or waivers from, certain provisions of our Code of
Conduct on this website within five business days following the date of such
amendment or waiver.





COMPLIANCE
WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934





We
believe that during 2009, all of our officers and directors complied with the
reporting requirements of Section 16(a), except as follows.




In 2008,
prior to his being appointed an officer and director on January 20, 2009, Daniel
Peralta, who together with his wife Laura M. Gallo, controls Egani, Inc., the
owner of in excess of 10% of our common stock, failed to file Form 3 Initial
Statements of Beneficial Ownership within 10 days of acquisition of such shares
on March 4, 2008.  Such Form 3’s were filed on July 28, 2008 by Laura
M. Gallo and on July 29, 2008 by Daniel Peralta.




Item 11. Executive
Compensation.


Compensation
paid by the Company and its subsidiaries to the Company’s Executive Officers
(the “Named Executives”).





SUMMARY
COMPENSATION TABLE




Name and
                                                      Principal
                                                      Position
                                                    
                                                    Year
                                                    
                                                    Salary
                                                      ($)
                                                    
                                                    Bonus
                                                      ($)
                                                    
                                                    Stock
                                                      Awards
                                                      ($)
                                                    
                                                    Option
                                                      Awards
                                                      ($)
                                                    
                                                    Non-Equity
                                                      Incentive
                                                      Plan
                                                      Compensation
                                                      ($)
                                                    
                                                    Change in
                                                      Pension
                                                      Value and
                                                      Nonquali-
                                                      fied Deferred
                                                      Compensation
                                                      Earnings
                                                      ($)
                                                    
                                                    
                                                    All
                                                      Other
                                                      Compen-
                                                      sation
                                                    
                                                    Total
                                                      ($)DanielPeralta,
                                                      ChiefExecutiveOfficer
      (1)
                                                    
                                                    2009
                                                    
                                                    $
                                                    -0-
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    $
                                                    -0-Peter
      F. Russo,
                                                      President
      and CEO (2)
                                                    
                                                    2008
                                                    
                                                    $
                                                    8,125
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    $
                                                    8,125Peter
      F. Russo,
                                                      President
      and CEO
                                                    
                                                    2007
                                                    
                                                    $
                                                    97,500
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    $
                                                    97,500Martin
      G. Chilek,
                                                      Chief
      Financial Officer
                                                    
                                                    2008
                                                    
                                                    $
                                                    39,704
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    $
                                                    39,704Martin
      G. Chilek,
                                                    
                                                    2007
                                                    
                                                    $
                                                    91,000
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    $
                                                    91,000Chief
      Financial Officer (3)
                                                    
                                                    2009
                                                    
                                                    $
                                                    25,938
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    $
                                                    25,938Malcolm
      W. Sherman,
                                                    
                                                    2008
                                                    
                                                    $
                                                    -0-
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    $
                                                    -0-Executive
      Vice President (4)
                                                    
                                                    2009
                                                    
                                                    $
                                                    -0-
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    $
                                                    -0-Michael
      Gilburd,
                                                      Interim
      Chief Financial Officer (5)
                                                    
                                                    2009
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    $
                                                    10,000
                                                    
                                                    $
                                                    10,000




52


(1)
            Mr.
      Peralta was appointed Chief Executive Officer on January 20,
      2009.





(2)
            Mr.
      Russo resigned as President and a director effective July 25, 2008.While
      he served as a director of the Company he received no additional
      compensation for serving in that
capacity.





(3)
            Mr.
      Chilek resigned as Chief Financial Officer on August 12,
    2009.





(4)
            Mr.
      Sherman served without compensation as an executive officer and director
      of the Company in 2008.





(5)
            Pursuant
      to the Agreement between the Company and Valucorp, Mr. Gilburd was
      appointed Interim Chief Financial Officer, effective November 1,
      2009.





EXECUTIVE
COMPENSATION NARRATIVE





Any
compensation arrangements to which Dr. Peralta and Mr. Sherman may be parties in
their capacity as executive officers of the Company have not yet been
established by the Board of Directors.





OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END





There
were no outstanding option and stock awards at December 31, 2009 to the
Company’s Named Executives.





DIRECTORS'
COMPENSATION





We do not
compensate directors in their capacity as such nor do we compensate our
directors for attendance at meetings. We do reimburse our officers and directors
for reasonable expenses incurred in the performance of their
duties.


53


STOCK
INCENTIVE OR OPTION PLANS





In
October 2009, we terminated our 2004 Stock Option Plan, pursuant to which
900,000 shares remained available for the grant of options.





OTHER
PLANS





We have
not adopted any other deferred compensation, pension, profit sharing, stock
option plan or programs for the benefit of our officers or employees. During
2008, the Company suspended the health and dental insurance benefit plans that
were available to all full time employees.





Item
12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.





The
following table sets forth information, as of April 1, 2010, with respect to the
beneficial ownership of the Company's Common Stock by each person known by the
Company to be the beneficial owner of more than five percent (5%) of the
outstanding Common Stock and by directors and officers of the Company, both
individually and as a group:





Name and Address of Beneficial Owner
                        
                        Number of Shares Owned
                          Beneficially
                        
                        
                        Percentage**Daniel
      R. Peralta (1)
                        
                        
                        13,000,000
                        
                        
                        
                        48.55
                        %Malcolm
      W. Sherman (2)
                        
                        
                        1,000,000
                        
                        
                        
                        3.73
                        %All
      Officers and Directors as a Group (3 persons)
                        
                        
                        14,000,000
                        
                        
                        
                        52.29
                        %





** Based
on 26,772,623 shares outstanding on March 31, 2010.




(1Dr.
Peralta is the beneficial owner of 13,000,000 shares owned directly by Egani,
Inc., which is owned by Daniel R. Peralta and Laura Monica Gallo, husband and
wife, each of whom owns 50% of the outstanding equity interests of Egani, Inc.
Dr. Peralta is the President and controls the operations of Egani, Inc. The
address of Egani, Inc. is 8260 East Raintree Drive, Scottsdale, AZ 85206. 10,000
shares of common stock are owned directly by Dr. Peralta’s son, Santiago
Peralta. Dr. Peralta disclaims beneficial ownership of the shares held by his
son. Dr. Peralta’s address is c/o Delta Mutual, Inc., 14301 North 87th Street,
#310, Scottsdale, AZ 85260.





(2) Mr.
Sherman owns beneficially 1,000,000 shares owned by Security Systems
International, Inc. of which Mr. Sherman is the president and a director and the
majority stockholder. The address of Security Systems International, Inc. is
9034 East Caribbean Lane, Scottsdale, AZ 85260. Mr. Sherman’s address is c/o
Delta Mutual, Inc. 14301 North 87th Street,
#310, Scottsdale, AZ 85260.





Item 13. Certain Relationships and
Related Transactions, and DirectorIndependence.





Effective
March 4, 2008, we entered into a Membership Interest Purchase Agreement (the
“Agreement”) with Egani, Inc., an Arizona corporation, (“Egani”), providing for
the acquisition by the Company from Egani 100% of the shares of stock held by it
in Altony SA, 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”). In connection with the Agreement,
we issued 13,000,000 shares of our common stock to Egani, and also issued
1,000,000 shares to Security Systems International, Inc.(“SSI”), owned by
Malcolm Sherman, our Executive Vice President and director, pursuant to a
Consulting Services Agreement, dated September 10, 2007, between the Company and
SSI. At the Closing of the purchase of all of the shares of stock of
Altony on March 4, 2008, we issued to Egani 13,000,000 shares of our common
stock, which constitutes following such issuance a majority of our outstanding
shares of common stock. The stockholders of Egani are Daniel R. Peralta and
Monica Laura Gallo, husband and wife, each a beneficial owner of 6,500,000
million shares of our common stock. The consideration furnished by Egani was
comprised of all of the outstanding shares of stock of Altony SA and 100% of the
membership interests in South American Hedge Fund LLC, valued at $2,600,000
based on the market value of 13,000,000 shares of our common stock on March 4,
2008, that we issued to acquire these assets. The sources of funds used by the
beneficial owners of Egani to acquire control of the Company were personal
funds.





54




During
2008, Egani made loans to the Company as set forth below:





Date of Note
                                      
                                      Principal
                                        Amount
                                      
                                      
                                      Interest
                                        Rate
                                      
                                      Maturity DateMarch
      6, 2008
                                      
                                      $
                                      21,000
                                      
                                      
                                      
                                      6
                                      %
                                      June
      20, 2012April
      28, 2008
                                      
                                      
                                      9,550
                                      
                                      
                                      
                                      6
                                      %
                                      June
      20, 2012September
      18, 2008
                                      
                                      
                                      13,350
                                      
                                      
                                      
                                      6
                                      %
                                      June
      20, 2012Total
                                      
                                      $
                                      43,900




On
October 3 and November 20, 2008, the Company issued to Santiago Peralta, the son
of Daniel Peralta, demand 6% promissory notes in the respective principal
amounts of $10,000 and $14,000, representing amounts loaned to the Company by
Mr. Peralta on these dates.  Mr. Peralta has extended the maturity
date on this loan to June 20, 2012.





During
2008, SSI made loans to the Company as set forth in the table
below:





Date of Note
                                          
                                          Principal
                                            Amount
                                          
                                          
                                          Interest
                                            Rate
                                          
                                          Maturity DateMarch
      6, 2008
                                          
                                          $
                                          100,000
                                          
                                          
                                          
                                          6
                                          %
                                          June
      20, 2012April
      15, 2008
                                          
                                          
                                          20,000
                                          
                                          
                                          
                                          6
                                          %
                                          June
      20, 2012May
      14, 2008
                                          
                                          
                                          16,900
                                          
                                          
                                          
                                          6
                                          %
                                          June
      20, 2012July
      7, 2008
                                          
                                          
                                          22,413
                                          
                                          
                                          
                                          6
                                          %
                                          June
      20, 2012September
      19, 2008
                                          
                                          
                                          16,650
                                          
                                          
                                          
                                          6
                                          %
                                          June
      20, 2012October
      22, 2008
                                          
                                          
                                          28,500
                                          
                                          
                                          
                                          6
                                          %
                                          June
      20, 2012December
      15, 2008
                                          
                                          
                                          8,190
                                          
                                          
                                          
                                          6
                                          %
                                          June
      20, 2012Total
                                          
                                          $
                                          212,653





During
2009, SSI made loans to the Company as set forth in the table
below:





Date of Note
                    
                    Principal
                      Amount
                    
                    
                    Interest
                      Rate
                    
                    Maturity DateJanuary
      22, 2009
                    
                    $
                    7,686
                    
                    
                    
                    6
                    %
                    June
      20, 201215,950
                    
                    
                    
                    6
                    %
                    June
      20, 20125,000
                    
                    
                    
                    6
                    %
                    June
      20, 20125,000
                    
                    
                    
                    6
                    %
                    June
      20, 20128,577
                    
                    
                    
                    6
                    %
                    June
      20, 201219,767
                    
                    
                    
                    6
                    %
                    June
      20, 201215,487
                    
                    
                    
                    6
                    %
                    June
      20, 2012Total
                    
                    $
                    77,467




On
November 28, 2009, Daniel Peralta, Santiago Peralta and Malcolm Sherman extended
the due dates on all loans by them to the Company to June 20, 2012.




55




Item
14.  Principal Accountant Fees and Services




(1)
Aggregate fees for the last two years:




2008
                          
                          
                          2009$
                          37,240
                          
                          
                          $
                          24,000(2)
      Audit related fees:
                          
                          2008
                          
                          
                          2009$
                          37,240
                          
                          
                          $
                          24,000(3)
      Tax fees:2008
                          
                          
                          2007$
                          -0-
                          
                          
                          $




(4) All
other fees: NA




(5) Audit
committee pre-approval processes, percentages of services approved by audit
committee, percentage of hours spent on audit engagement by persons other than
principal accountant's full time employees: NA




Item
15. Exhibits and Financial Statement Schedules.




(a)(3)
Exhibits





Exhibit No.
                
                Description of Exhibits3.1
                
                Articles
      of Incorporation of the Company, as currently in effect, incorporated
      herein by reference to Exhibit 3.1 to Amendment No. 1 to the Company's
      Registration Statement on Form 10-SB filed with the Commission on June 15,
      2000.3.1a
                
                Amendment
      to Certificate of Incorporation, filed September 1, 2004. Incorporated
      herein by reference to Exhibit 3.1a to the Company's Current Report on
      Form 8-K, filed with the Commission on September 3,
  2004.3.1b
                
                Form
      of Restatement of Certificate of Incorporation of Delta Mutual, Inc., as
      amended. Incorporated herein by reference to Exhibit 3.1b to the Company's
      Quarterly Report on Form 10-QSB, filed with the Commission on November 15,
      2004.3.2
                
                By-Laws
      of the Company. Incorporated herein by reference to Exhibit 3.2 to
      Amendment No. 1 to the Company's Registration Statement on Form 10-SB
      filed with the Commission on June 15, 2000.3.2a
                
                Amendment
      to Article III, Section I of the By-Laws. Incorporated herein by reference
      to the Company's quarterly report on Form 10-QSB, filed with the
      Commission on November 21,
2000.


56





3.1c
              
              Certificate
      of Amendment to Certificate of Incorporation, filed June 26,2007.
      Incorporated herein by reference to, Exhibit 3.1c to the Company's
      quarterly report on Form 10-QSB, filed with the Commission on August 10,
      2007.3.1d
              
              Form
      of Restatement of Certificate of Incorporation of Delta Mutual, Inc., as
      amended. Incorporated herein by reference to Exhibit 3.1d to the Company's
      quarterly report on Form 10-QSB, filed with the Commission on August 10,
      2007.3.1e
              
              Certificate
      of Amendment to Certificate of Incorporation, filed May 13, 2009.
      Incorporated herein by reference to Exhibit 3.1e to the Company’s
      Quarterly Report on Form 10-Q, filed with the Commission on August 6,
      2009.3.1f
              
              Form
      of Restatement of Certificate of Incorporation of the Company, as amended.
      Incorporated herein by reference to Exhibit 3.1f to the Company’s
      Quarterly Report on Form 10-Q, filed with the Commission on August 6,
      2009.4.2a
              
              Delta
      Mutual, Inc. 2004 Stock Option Plan. Incorporated herein by reference to
      Exhibit B to the Company's Definitive Proxy Statement, filed with the
      Commission on June 16, 2004.4.6
              
              4%
      Convertible Promissory Note of the Company due May 2006 issued in the
      principal amount of $193,740 on May 12, 2004. Incorporated herein by
      reference to Exhibit 4.6 to the Company's Quarterly Report on Form 10-QSB,
      filed with the Commission on November 15, 2004.4.6a
              
              Amendment,
      dated as of May 2, 2006, to 4% Convertible Promissory Note in the
      principal amount of $193,740. Incorporated herein by reference to Exhibit
      4.6a to the Company’s Annual Report on Form 10-KSB, filed with the
      Commission on April 2, 2007.4.6b
              
              Amendment,
      dated as of July 6, 2006, to 4% Convertible Promissory Note in the
      principal amount of $193,740. Incorporated herein by reference to Exhibit
      4.6b to the Company’s Annual Report on Form 10-KSB, filed with the
      Commission on April 2, 2007.4.6c
              
              Amendment,
      dated as of September 8, 2006, to 4% Convertible Promissory Note in the
      principal amount of $193,740. Incorporated herein by reference to Exhibit
      4.6c to the Company’s Annual Report on Form 10-KSB, filed with the
      Commission on April 2, 2007.4.6d
              
              Amendment,
      dated as of November 21, 2006, to 4% Convertible Promissory Note in the
      principal amount of $193,740. Incorporated herein by reference to Exhibit
      4.6d to the Company’s Annual Report on Form 10-KSB, filed with the
      Commission on April 2, 2007.4.6e
              
              Amendment,
      dated April 4, 2007, to 4% Convertible Promissory Note in the Principal
      Amount of $193,740. Incorporated herein by reference to Exhibit 4.6e to
      the Company's quarterly report on Form 10-QSB, filed with the Commission
      on August 10, 2007.4.6f
              
              Amendment,
      dated September 7, 2007 to Convertible Promissory Note in the principal
      amount of $193,740. Incorporated herein by reference to Exhibit 4.6f to
      the Company's quarterly report on Form 10-QSB, filed with the Commission
      on November 9, 2007.10.15
              
              Strategic
      Alliance Agreement, dated September 10, 2003, between Delta-Envirotech,
      Inc. and ZAFF International Ltd. Incorporated herein by reference to
      Exhibit 99.2 to the Company's current report on Form 8-K, filed with the
      Commission on January 22, 2004.10.16
              
              Agreement,
      dated January 14, 2004, by and between Delta Mutual, Inc. and Hi-Tech
      Consulting and Construction, Inc. Incorporated herein by reference to
      Exhibit 10.16 to the Company's Annual Report on Form 10-KSB, filed with
      the Commission on April 6,
2004.


57





10.26
              
              Executive Employment
      Agreement, dated May 23, 2005, between Delta Mutual, Inc. and Martin G.
      Chilek. Incorporatedherein by reference to Exhibit 10.26 to the
      Company's Current Report on Form 8-K, filed with the Commission on May 25,
      2005.10.33e
              
              Form
      of Amended and Restated 8% Term Notes issued March 6, 2008 by Delta
      Mutual, Inc. in the aggregate principal amount of $150,655. Incorporated
      herein by reference to Exhibit 10.33e to the Company’s Annual Report on
      Form 10-KSB, filed with the Commission on April 15,
  2008.10.35
              
              Membership
      Interest Purchase Agreement, dated March 4, 2008, between Delta Mutual,
      Inc. and Egani, Inc. Incorporated hereinby reference to Exhibit 10.35 to
      the Company’s Current Report on Form 8-K, filed with the Commission on
      March 11, 2008.10.36
              
              Consulting Services
      Agreement, dated September 10, 2007, between Delta Mutual, Inc. and
      Security Systems International,Inc. Incorporated herein by
      reference to Exhibit 10.36 to the Company’s Current Report on Form 8-K,
      filed with the Commission on March 11, 2008.10.37
              
              Form
      of 6% promissory notes issued March 6, 2008 by the Company in the
      aggregate principal amount of $121,000. Incorporated herein by reference
      to Exhibit 10.37 to the Company’s Current Report on Form 8-K, filed with
      the Commission on March 11, 2008.10.37a
              
              Amendment,
      dated as of September 2, 2008, to 6% Promissory Note in the principal
      amount of $21,000. Incorporated herein by reference to Exhibit 10.37a to
      the Company’s Quarterly Report on Form 10-Q, filed with the Commission on
      November 18, 2008.10.37b
              
              Amendment,
      dated as of September 18, 2008, to 6% Promissory Note in the principal
      amount of $100,000. Incorporated herein by reference to Exhibit 10.37b to
      the Company’s Quarterly Report on Form 10-Q, filed with the Commission on
      November 18, 2008.10.38
              
              6%
      Promissory Note of the Company issued in the principal amount of $20,000
      on April 15, 2008. Incorporated herein by reference to Exhibit 10.38 to
      the Company’s Quarterly Report on Form 10-Q, filed with the Commission on
      July 3, 2008.10.38a
              
              Amendment,
      dated as of October 8, 2008, to 6% Promissory Note in the principal amount
      of $20,000. Incorporated herein by reference to Exhibit 10.38a to the
      Company’s Quarterly Report on Form 10-Q, filed with the Commission on
      November 18, 2008.10.39
              
              6%
      Promissory Note of the Company issued in the principal amount of $9,550 on
      April 28, 2008. Incorporated herein by reference to Exhibit 10.39 to the
      Company’s Quarterly Report on Form 10-Q, filed with the Commission on July
      3, 2008.10.39a
              
              Amendment,
      dated as of October 10, 2008, to 6% Promissory Note in the principal
      amount of $9,550. Incorporated herein by reference to Exhibit 10.39a to
      the Company’s Quarterly Report on Form 10-Q, filed with the Commission on
      November 18, 2008.10.40
              
              6 %
      Promissory Note of the Company issued in the principal amount of $16,900
      on May 14, 2008. Incorporated herein by reference to Exhibit 10.40 to the
      Company’s Quarterly Report on Form 10-Q, filed with the Commission on July
      3, 2008.10.40a
              
              Amendment,
      dated as of November 4, 2008, to 6% Promissory Note in the principal
      amount of $16,900. Incorporated herein by reference to Exhibit 10.40a to
      the Company’s Quarterly Report on Form 10-Q, filed with the Commission on
      November 18, 2008.




58




10.42
                
                6%
      Promissory Note of the Company issued in the principal amount of $22,413
      on July 7, 2008. Incorporated herein by reference to Exhibit 10.42 to the
      Company’s Quarterly Report on Form 10-Q, filed with the Commission on
      November 18, 2008.10.43
                
                6%
      Promissory Note of the Company issued in the principal amount of $13,350
      on September 18,2008. Incorporated herein by reference to Exhibit 10.43 to
      the Company’s Quarterly Report on Form 10-Q, filed with the Commission on
      November 18, 2008.10.44
                
                6%
      Promissory Note of the Company issued in the principal amount of $16,650
      on September 19,2008. Incorporated herein by reference to Exhibit 10.44 to
      the Company’s Quarterly Report on Form 10-Q, filed with the Commission on
      November 18, 2008.10.45
                
                6%
      Promissory Note of the Company issued in the principal amount of $10,000
      on October 3, 2008. Incorporated herein by reference to Exhibit 10.45 to
      the Company’s Quarterly Report on Form 10-Q, filed with the Commission on
      November 18, 2008.10.46
                
                6%
      Promissory Note of the Company issued in the principal amount of $28,500
      on October 22, 2008. Incorporated herein by reference to Exhibit 10.46 to
      the Company’s Quarterly Report on Form 10-Q, filed with the Commission on
      November 18, 2008.10.47
                
                6%
      Promissory Note dated as of November 20, 2008 by Delta Mutual, Inc. to
      Santiago Peralta in the principal amount of $14,000. Incorporated herein
      by reference to Exhibit 10.47 to the Company’s Annual Report on Form 10-K,
      filed with the Commission on April 14, 2009.10.48
                
                Amendment
      dated as of November 24, 2008 to 6% promissory notes issued to Egani, Inc.
      in the aggregate principal amount of $43,900. Incorporated herein by
      reference to Exhibit 10.48 to the Company’s Annual Report on Form 10-K,
      filed with the Commission on April 14, 2009.10.48a
                
                Second
      Amendment, dated as of April 16, 2009, to 6% promissory notes issued to
      Egani, Inc. Incorporated herein by reference to Exhibit 10.48a to the
      Company’s Quarterly Report on Form 10-Q, filed with the Commission on May
      20, 2009.10.49
                
                Amendment
      dated as of December 14, 2008 to 6% promissory notes issued to Security
      Systems International, Inc. in the aggregate principal amount of $136,900.
      Incorporated herein by reference to Exhibit 10.49 to the Company’s Annual
      Report on Form 10-K, filed with the Commission on April 14,
      2009.10.49a
                
                Second
      Amendment, dated as of April 16, 2009, to 6% promissory notes issued to
      Security Systems International, Inc. Incorporated herein by reference to
      Exhibit 10.49a to the Company’s Quarterly Report on Form 10-Q, filed with
      the Commission on May 20, 2009.10.50
                
                6%
      Promissory Note dated as of December 15, 2008 to Security Systems
      International, Inc. in the principal amount of $8,190. Incorporated herein
      by reference to Exhibit 10.50 to the Company’s Annual Report on Form 10-K,
      filed with the Commission on April 14, 2009.10.51
                
                6%
      Promissory Note dated as of January 22, 2009 to Security Systems
      International, Inc. in the principal amount of $7,686. Incorporated herein
      by reference to Exhibit 10.51 to the Company’s Annual Report on Form 10-K,
      filed with the Commission on April 14,
2009.




59





10.52
              
              6%
      Promissory Note dated as of February 10, 2009 to Security Systems
      International, Inc. in the principal amount of $15,950. Incorporated
      herein by reference to Exhibit 10.52 to the Company’s Annual Report on
      Form 10-K, filed with the Commission on April 14, 2009.10.53
              
              6%
      Promissory Note dated as of February 18, 2009 to Security Systems
      International, Inc. in the principal amount of $5,000. Incorporated herein
      by reference to Exhibit 10.53 to the Company’s Annual Report on Form 10-K,
      filed with the Commission on April 14, 2009.10.54
              
              6%
      Promissory Note dated as of February 19, 2009 to Malcolm W. Sherman in the
      principal amount of $5,000. Incorporated herein by reference to Exhibit
      10.54 to the Company’s Annual Report on Form 10-K, filed with the
      Commission on April 14, 2009.10.55
              
              6%
      Promissory Note dated as of March 20, 2009 to Security Systems
      International, Inc. in the principal amount of $19,767. Incorporated
      herein by reference to Exhibit 10.55 to the Company’s Annual Report on
      Form 10-K, filed with the Commission on April 14, 2009.10.56
              
              6%
      Promissory Note dated as of March 25, 2009 to Security Systems
      International, LLC in the principal amount of $8,577. Incorporated herein
      by reference to Exhibit 10.56 to the Company’s Annual Report on Form 10-K,
      filed with the Commission on April 14, 2009.10.57
              
              6%
      Promissory Note dated as of April 2, 2009 to Security Systems
      International, LLC in the principal amount of $14,987. Incorporated herein
      by reference to Exhibit 10.57 to the Company’s Annual Report on Form 10-K,
      filed with the Commission on April 14, 2009.10.57a
              
              Amended
      and Restated 6% Promissory Noted dated as of April 15, 2009 to Security
      Systems International LLC. Incorporated herein by reference to Exhibit
      10.57a to the Company’s Quarterly Report on Form 10-Q, filed with the
      Commission on August 6, 2009.10.58
              
              Agreement,
      dated as of November 1, 2009, between the Company and Valucorp, filed
      herewith.10.59
              
              Note
      Extension Agreement, dated December 31, 2009, between the Company and Neil
      Berman, the Anthony Panariello Trust, the Danielle Panariello Trust and
      the Michaela Panariello Trust, filed herewith.14.
              
              Delta
      Mutual, Inc. Code of Conduct and Business Ethics. Incorporated herein by
      reference to Exhibit 10.25 to the Company’s Annual Report on Form 10-KSB,
      filed with the Commission on April 14, 2005.31.1
              
              Certification
      of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002, filed herewith.31.2
              
              Certification
      of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002, filed herewith.32.1
              
              Certification
      of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
      Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed
      herewith.32.2
              
              Certification
      of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
      Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed
      herewith.




60




SIGNATURES




In
accordance with Section 13 or 15(d) of the Exchange Act, the Company caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.




DELTA
      MUTUAL, INC.Dated:  April
      15, 2010By:/s/
      Daniel R. PeraltaDr.
      Daniel R. PeraltaPresident,
      Chief Executive Officer,Principal
      Financial Officer and DirectorBy:
      /s/ Michael GilburdMichael
      GilburdInterim
      Chief Financial Officerand
      Principal Accounting
Officer




Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following person on behalf of the Registrant in the
capacities indicated, on April 15, 2010.




/s/
      Daniel R. PeraltaDr.
      Daniel R. Peralta, President, Chief Executive Officer and
      Director/s/
      Malcolm W. ShermanMalcolm
      W. Sherman
                          Executive
      Vice President and
Director




61