UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

         [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
             EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2004

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

                        Commission file number: 000-30563
                               DELTA MUTUAL, INC.
                 (Name of small business issuer in its charter)

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

          111 North Branch Street, Sellersville, Pennsylvania    18960
               (Address of principal executive offices) (Zip Code)
                 ---------------------------------------------
                                (Former Address)

                                 (215) 258-2800
                        (Registrant's telephone number)

       Securities registered under Section 12(b) of the Exchange Act: NONE

         Securities registered under Section 12(g) of the Exchange Act:

                   COMMON STOCK (par value $0.0001 per share)

      Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to the filing requirements for the past 90 days. Yes |X| No |_|

      Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will 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-KSB or any
amendment to this Form 10-KSB. |_|

      Issuer's revenues for its fiscal year ended December 31, 2004: $-0-

      Aggregate market value of the voting and non-voting  common shares held by
non-affiliates of the registrant as of April 12, 2005: $9,863,574 (See Item 5)

      Number of shares outstanding of registrant's Common Stock, par value
$.0001, as of April 12, 2005: 20,849,113 shares of Common Stock (See Item 11)

      Documents incorporated by reference: NONE

      Transitional Small Business  Disclosure Format (check one): Yes |_| No |X|

<PAGE>

                                     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-KSB, 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 2004, 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;
(v) "Liquidity and Capital Resources," about the contingent nature of the
consummation of any agreements with its contracting, joint venture and
partnership parties.

ITEM 1. DESCRIPTION OF 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.

GENERAL

         We were incorporated under the name Delta Mutual, Inc. on November 17,
1999, in the State of Delaware. We have established business operations focused
on providing construction and environmental technologies and services to
specific geographic areas in Puerto Rico, the Middle East, and the Far East.

<PAGE>

         Our offices are located at 111 North Branch Street, Sellersville, PA
18960. Our telephone number is (215) 258-2800. Our common stock is quoted on the
Over-the-Counter Electronic Bulletin Board under the symbol "DLTM".

Prior Operations

         At the time of the Company's formation, prior Company management
intended to provide mortgage services through the Internet to borrowers with
substandard credit. In 2000, however, the market for the stock of Internet-based
businesses deteriorated substantially and many such companies went out of
business because they were unable to generate sufficient revenue and were unable
to raise additional capital. From inception through December 31, 2002, prior to
initiating our current plan of operations, we raised a limited amount of capital
through the sale of our common stock. These funds were not sufficient to
capitalize any of our planned business activities in that period.

         In April 2001, Kelcon, Inc. ("Kelcon"), a company newly organized for
the purpose by Kenneth A. Martin, acquired a controlling interest in us with a
view to acquiring the assets of Enterprises Solutions, Inc. ("Enterprises")
pursuant to an Agreement of Sale in exchange for shares of our common stock. Due
to the death of Enterprises' president, the Agreement of Sale with Enterprises
was terminated. In November 2002, Kelcon contracted for the sale of its 450,000
shares of our common stock to Mr. Gary T. Robinson, a New York businessman,
pursuant to an agreement providing for a total purchase price of $275,000 in a
private transaction. Mr. Robinson paid $50,000 of the purchase price in
connection with the execution of the purchase agreement. We have viewed this
transaction as representing a change in control of the Company. On June 11,
2003, Mr. Robinson resigned as Chief Executive Officer and Mr. Peter F. Russo
was appointed to that office. On November 28, 2003, Mr. Robinson resigned as a
director.

Business Plan

         Since the change in control, new Company management has embarked upon a
new mission and strategic direction, through the establishment of joint ventures
and two limited partnerships. This structure is primarily for the establishment
of business operations focused on providing construction and environmental
technologies and services to specific geographic areas in Puerto Rico, the
Middle East and the Far East. The Company, simultaneously, made a strategic
decision to minimize its activities in Eastern Europe and to maintain a small
passive investment in the area that can be expanded in the future should
circumstances change.

         Access to technologies for our proposed environmental remediation and
housing construction activities has been secured primarily through strategic
alliance agreements with the manufacturers and/or patent license holders. These
agreements enable the Company, in most cases, to utilize the technology holder
as the sub-contractor for the projects thereby minimizing the need for Company
trained employees.

         We have entered into strategic alliance agreements with several United
States-based entities with technologies in the environmental technology field to
support our activities in the Middle East and Far East.

         On March 18, 2003 we entered into a Letter Of Intent with Hi Tech
Consulting and Construction, Inc. to form a joint venture to provide
environmental technology services for certain business sectors located in the
Middle East and Africa. The joint venture agreement was concluded January 14,
2004, and the joint venture company, Delta-Envirotech, Inc., is based in the
Commonwealth of Virginia and incorporated in the State of Delaware.
<PAGE>

Middle East

         On January 22, 2004, the Company announced the conclusion of a
strategic alliance agreement between Delta-Envirotech, Inc. and ZAFF
International, Ltd., an advanced technology company located in Saudi Arabia. The
strategic alliance states that the two companies will jointly pursue projects
related to soil and water reclamation requirements in the Middle East. Under the
terms of the agreement, the strategic alliance is to transition to a joint
venture as soon as possible within the formation and registration process of
Saudi Arabia. On December 1, 2004, the Company announced that ZAFF
International, Ltd., Delta's strategic partner, received its operating license
from the Saudi Arabia environmental authorities to employ all soil, refinery
waste and waste water technologies held by Delta for environmental recovery
projects. ZAFF International, Ltd. is one of the first companies to be granted a
multi-technology environmental license in Saudi Arabia. The technologies that
will be deployed are related centrifugal recovery of oil from shorelines, sludge
pools and other collection areas, thermal removal of non-hydrocarbon
contamination from soil and water and oxygenation wastewater recovery systems.
We believe that the potential in the Middle East is significant for energy and
water recovery projects.

Far East

         In April 2004, Delta-Envirotech, Inc. executed an agreement with the
Indonesian government's technology authority, LIPI. The agreement outlines a
joint cooperation between Delta-Envirotech, Inc. and a local Indonesian
technology company to commence energy recovery and waste processing operations
in Indonesia. The initial technology will be for separation of water and
hydrocarbons through centrifuges, water cleaning using a reverse osmosis system,
and removal of the remaining waste. Subsequent technology will be for the
further centrifugal treatment of the recovered hydrocarbons to yield heavy
pipeline grade crude oil. A local joint venture is being established to conduct
the actual recovery and processing activities. The Company estimates a large
market for environmental remediation in Indonesia, Malaysia, Singapore and the
Philippines. Today, according to our estimates more than seven million tons of
oil sludge are located in refineries, collection areas and storage pools in
Indonesia.

Puerto Rico

         On January 20, 2004, the Company announced the formation of a joint
venture project to develop government sponsored, Section 124 low income housing
in the Commonwealth of Puerto Rico. The development, Brisas Del Atlantico, has
been approved for development under Section 124 of the Puerto Rico Housing
Authority (Vivendes), which provides for government subsidized low-income
housing. The Company is the General Partner and majority owner of a limited
partnership that is the majority shareholder of Delta Developers Corp., a Puerto
Rico corporation, formed to manage the construction and related activities
required to build approximately 270 low income homes under Section 124. The
Company will use insulated concrete form technology (ICF) to construct the
houses. This technology allows for stronger and less expensive construction than
conventional concrete block. ICF also incorporates insulation in its basic
design that must be added with conventional construction. The necessary building
permits have been submitted for approval and a real estate agency has been hired
to sell the homes planned for construction. Due to events related to the ballot
recount in the Puerto Rico gubernatorial election held November 2, 2004, the
election of a new governor was not certified until late December 2004. These
events have delayed the Company's permit approval process. Currently, we expect
the building permits to be approved and presale of the homes to begin in the
third quarter of 2005.
<PAGE>

         On December 9, 2004, the Company announced the formation of a second
joint venture project to develop government sponsored, Section 124 low income
housing in the Commonwealth of Puerto Rico. Using the same ownership structure
as the first project, Delta Mutual, Inc. is the majority owner of Delta
Developers Guayanilla Corp., a Puerto Rico corporation. The Company plans to
build approximately 300 low income houses under Section 124. Demand for Section
124 low income housing exceeded 60,000 units, based on a 2000 study conducted
for the Puerto Rico Bankers Association, which projected the shortage would
continue to increase. The Company currently estimates the Section 124 low income
housing market to be in excess of $6 billion.

COMPETITION

         Until we have successfully obtained the full amount of debt or equity
financing required to fund our projected business operations, it is difficult to
compete with large, well-capitalized companies for environmental remediation
governmental or private sector contracts. Many of these contracts require
significant up-front expenditures on behalf of the firm awarded the contract.

There are many established environmental remediation companies that have
significantly greater financial and personnel resources and technical expertise
than we do. There are well-capitalized environmental services and technology
companies as well as highly capitalized housing development companies in our
target marketplaces that will continue to retain their dominance and competitive
advantages over us.

Our planned housing construction activities in Puerto Rico also face intense
competition from larger, better-financed developers and construction companies.

EMPLOYEES

         Currently, we have five employees: Peter F. Russo, President and Chief
Executive Officer; Martin G. Chilek, Vice President and Chief Financial Officer;
Jerome Kindrachuk, Vice President--International; John Latza, Vice
President-Puerto Rico Operations and Judith Dallas, Director, Administration.
Assuming that we obtain the necessary funding to operate our planned businesses,
we will hire several additional personnel to support our projected business
operations.

RISK FACTORS

Our business is subject to numerous risk factors, including the following:

NO REVENUE AND MINIMAL ASSETS.

We have no revenues. The Company's ability to continue as a going concern is
dependent upon its ability to obtain funds to meet its obligations on a timely
basis, obtain additional financing or refinancing as may be required, and
ultimately to attain profitability. There are no assurances that the Company
will be able to obtain any additional financing or, if it is able to obtain
additional financing, that such financing will be on favorable terms. The
inability to obtain additional financing when needed would have a material
adverse effect on operating results.

<PAGE>

WE HAVE NOT OPERATED PROFITABLY SINCE INCEPTION, AND WE EXPECT TO INCUR LOSSES
IN THE FUTURE. WE WILL BE REQUIRED TO RAISE SUBSTANTIAL AMOUNTS OF CAPITAL.

Our operations have not generated any revenue nor are they profitable. We have
incurred net operating losses from the formation of our company through December
31, 2004, of $5,710,099 and expect that we will continue to incur operating
losses in the future. In 2004, we generated no revenue, incurred operating
expenses of $1,848,078 and had a net loss of $3,920,699. As of April 12, 2005,
we had approximately $7,500 of cash on hand to fund operations. There is no
assurance that we will operate profitably in the future. Failure to achieve or
maintain profitability may materially and adversely affect the future value of
our common stock.

         We will have to obtain significant additional capital to continue
development of our proposed business. There is no assurance that we will be able
to obtain sufficient capital to develop our proposed environmental remediation
and housing businesses and market our services successfully.


WE HAVE BEEN THE SUBJECT OF A GOING CONCERN OPINION FROM OUR INDEPENDENT
AUDITORS, WHICH MEANS THAT WE MAY NOT BE ABLE TO CONTINUE OPERATIONS UNLESS WE
OBTAIN ADDITIONAL FUNDING.

         Our independent auditors have added an explanatory paragraph to their
audit opinions, issued in connection with our financial statements, which states
that our ability to continue as a going concern is uncertain due to our
continued operating losses, the excess of our liabilities over our assets and
uncertain conditions we face in our day-to-day operations. Our financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

WE ARE SUBJECT TO EXTENSIVE GOVERNMENTAL REGULATION FOR OUR PROPOSED
ENVIRONMENTAL REMEDIATION OPERATIONS.

Each aspect of our proposed environmental remediation business is subject to
significant international governmental and U.S. federal, state and local
environmental regulations. No assurances can be given that such environmental
laws or regulations, or that future changes in environmental laws, regulations,
or interpretations currently applicable to the Company or changes in the nature
of the Company's operations, will not adversely impact our proposed operations
or have a material adverse effect on the financial condition, operations and
liquidity of the Company.

AS A HOUSING DEVELOPER WE FACE ECONOMIC AND MARKET RISKS.

Many factors which are beyond our control will affect our proposed business as a
developer of housing, including, among others, general economic and real estate
market conditions, competitive factors, the availability and cost of borrowed
funds, real estate tax rates, federal and state income tax laws, operating
expenses (including maintenance and insurance), energy costs, government
regulations, including delays in acquiring or our inability to acquire required
permits, and potential liability under and changes in environmental and other
laws, as well as the successful management of the properties.
<PAGE>

Our success as a developer of housing will also be subject to certain
additional risks including, but not limited to, (i) competition for existing and
future projects from other developers in the areas of our developed properties,
(ii) adverse changes in mortgage interest or terms of governmental financing,
(iii) possible adverse changes in general economic conditions and adverse local
conditions, such as competitive over-bidding, a decrease in employment or
adverse changes in real estate zoning laws, and (iv) other circumstances over
which we may have little or no control.

OUR MARKETS ARE VERY COMPETITIVE.

Virtually all of our current and potential competitors have significantly
greater financial, marketing and technical resources than we have. As a result,
they may be able to leverage a customer base, adapt more quickly to new
technologies and changes in customer requirements, or devote greater resources
to the promotion and sale of their services and products than we can.

WE DO NOT EXPECT TO PAY DIVIDENDS.

We have never paid dividends on our common stock. Current Company management
anticipates that any earnings generated from our operations will be used to
finance our working capital requirements, to develop services and products and
for marketing. For the foreseeable future, cash dividends will not be paid to
holders of our common stock.

VOLATILITY OF STOCK PRICE.

The market price of our common stock, as is the case for companies without
established operations, is extremely volatile due to our uncertain future
prospects and general market and economic conditions. During the fifteen month
period ended April 12, 2005, the closing per share price of our common stock has
fluctuated from $1.09 to $0.16 per share. Our common stock currently trades in
the OTC Bulletin Board market.

"PENNY" STOCK REGULATION OF BROKER-DEALER SALES OF OUR SECURITIES.

The SEC has adopted rules that regulate broker-dealer practices in connection
with transactions in "penny stocks." Generally, penny stocks are equity
securities with a price of less than $5.00 (other than securities registered on
certain national securities exchanges or quoted on the NASDAQ system). If our
shares are traded for less than $5.00 per share, as they currently are, the
shares will be subject to the SEC's penny stock rules unless: (1) our net
tangible assets exceed $5,000,000 during our first three years of continuous
operations or $2,000,000 after our first three years of continuous operations;
or (2) we have had average revenue of at least $6,000,000 for the last three
years. The penny stock rules require a broker-dealer, prior to a transaction in
a penny stock not otherwise exempt from the rules, to deliver a standardized
risk disclosure document prescribed by the SEC that provides information about
penny stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction and monthly account statements showing the market
value of each penny stock held in the customer's account. In addition, the penny
stock rules require that prior to a transaction in a penny stock not otherwise
exempt from those rules, the broker-dealer must make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser's written agreement to the transaction. These
requirements may have the effect of reducing the level of trading activity in
the secondary market for a stock that becomes subject to the penny stock rules.
As long as our common stock is subject to the penny stock rules, the holders of
the common stock may find it difficult to sell our common stock.
<PAGE>

ITEM 2. DESCRIPTION OF PROPERTY.

We currently lease office space consisting of approximately 1,700 square feet in
an office building located in Sellersville, Pennsylvania. We are obligated to
pay a monthly rent of $650 as well as pay for the utilities serving the
premises. Our lease is for a period of three years from March 1, 2003 to
February 28, 2006. We anticipate that our current office space will accommodate
our operations for the foreseeable future. We also rent, commencing in November
2004, an office located in McLean, Virginia consisting of approximately 150
square feet. We are obligated to pay a monthly rental of $1,100 under a
month-to-month arrangement.

ITEM 3. LEGAL PROCEEDINGS.

We have no pending legal proceedings and are not aware of any threatened legal
proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
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.


                                          High                          Low
                                         -----                         -----
2003:    1st Quarter                     2.80                          2.10
         2nd Quarter                     2.00                           .65
         3rd Quarter                     1.35                           .63
         4th Quarter                      .95                           .17

2004:    1st Quarter                     1.09                          0.49
         2nd Quarter                     0.79                          0.16
         3rd Quarter                     0.35                          0.17
         4th Quarter                     0.48                          0.17

2005:    1st Quarter                     0.69                          0.28


During the last two fiscal years, no cash dividends have been declared on
Delta's common stock and current Company management does not anticipate that
dividends will be paid in the foreseeable future. As of April 12, 2005, there
were 77 record holders of our common stock.

RECENT SALES OF UNREGISTERED SECURITIES

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
       Date              Title and Amount            Purchasers          Principal             Total Offering
                                                                         Underwriter         Price/Underwriting
                                                                                                  Discounts
---------------------------------------------------------------------------------------------------------------------
<S>                  <C>                        <C>                          <C>         <C>
May 23, 2003         100,000 shares of common   Private Investor             NA          $.50 per share/NA
                     stock
---------------------------------------------------------------------------------------------------------------------
May 23, 2003         20,000 shares of common    Consultant                   NA          Consulting Services valued
                     stock issued for                                                    at $.50 per share/NA
                     consulting services
---------------------------------------------------------------------------------------------------------------------
May 23, 2003         240,000 shares of common   Consultant                   NA          Consulting Services valued
                     stock issued for                                                    at $.1667 per share/NA
                     consulting services
---------------------------------------------------------------------------------------------------------------------
May 23, 2003         100,000 shares of common   Consultant                   NA          Consulting Services valued
                     stock issued for                                                    at $.25 per share/NA
                     consulting services
---------------------------------------------------------------------------------------------------------------------
May 23, 2003         100,000 shares of common   Consultant                   NA          Consulting Services valued
                     stock issued for                                                    at $.25 per share/NA
                     consulting services
---------------------------------------------------------------------------------------------------------------------
May 23, 2003         288,638 shares of common   Licensee                     NA          Services under License
                     stock issued for                                                    Agreement valued at $.139
                     consulting services                                                 per share/NA
---------------------------------------------------------------------------------------------------------------------
May 23 and           800,000 shares of common   Private Investors            NA          Purchase of $250,000
September 5, 2003    stock                                                               principal amount note,
                                                                                         valued at $.3125 per
                                                                                         share/NA
---------------------------------------------------------------------------------------------------------------------
May 23, 2003         50,000 shares of common    Private Investor             NA          Interest on loan valued at
                     stock, issued as payment                                            $.275 per share/NA
                     of interest on
                     outstanding debt
---------------------------------------------------------------------------------------------------------------------
May 23, 2003         37,000 shares of common    Consultant                   NA          Consulting Services valued
                     stock issued for                                                    at $.405 per share/NA
                     consulting services
---------------------------------------------------------------------------------------------------------------------
May 23, 2003         3,000 shares of common     Consultant                   NA          Consulting Services valued
                     stock issued for                                                    at $.50 per share/NA
                     consulting services
---------------------------------------------------------------------------------------------------------------------
May 23, 2003         50,000 shares of common    Private Investor             NA          Interest on loan valued at
                     stock, issued as payment                                            $.333 per share/NA
                     of interest on
                     outstanding debt
---------------------------------------------------------------------------------------------------------------------
July 23, 2003        37,000 shares of common    Consultant                   NA          Consulting Services valued
                     stock issued for                                                    at $.405 per share/NA
                     consulting services
---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>

<TABLE>
---------------------------------------------------------------------------------------------------------------------
       Date            Title and Amount         Purchasers                Principal             Total Offering
                                                                         Underwriter         Price/Underwriting
                                                                                                  Discounts
---------------------------------------------------------------------------------------------------------------------
<S>                  <C>                        <C>                          <C>         <C>
July 23, 2003        3,000 shares of common     Consultant                   NA          Consulting Services valued
                     stock issued for                                                    at $.50 per share/NA
                     consulting services
---------------------------------------------------------------------------------------------------------------------
August 1, 2003       200,000 shares of common   Consultant                   NA          Consulting Services valued
                     stock issued for                                                    at $.20 per share/NA
                     consulting services
---------------------------------------------------------------------------------------------------------------------
August 8, 2003       100,000 shares of common   Private Investor             NA          $.50 per share/NA
                     stock
---------------------------------------------------------------------------------------------------------------------
August 11, 2003      50,000 shares of common    Consultant                   NA          Consulting Services valued
                     stock issued for                                                    at $.4375 per share/NA
                     consulting services
---------------------------------------------------------------------------------------------------------------------
August 11, 2003      25,000 shares of common    Consultant                   NA          Consulting Services valued
                     stock issued for                                                    at $.4375 per share/NA
                     consulting services
---------------------------------------------------------------------------------------------------------------------
August 11, 2003      15,000 shares of common    Consultant                   NA          Consulting Services valued
                     stock issued for                                                    at $.4375 per share/NA
                     consulting services
---------------------------------------------------------------------------------------------------------------------
August 11, 2003      10,000 shares of common    Consultant                   NA          Consulting Services valued
                     stock issued for                                                    at $.4375 per share/NA
                     consulting services
---------------------------------------------------------------------------------------------------------------------
August 22, 2003      250,000 shares of common   Private Investor             NA          $.20 per share/NA
                     stock
---------------------------------------------------------------------------------------------------------------------
November 15, 2003    100,000 shares of common   Private Investor             NA          $.125 per share/NA
                     stock
---------------------------------------------------------------------------------------------------------------------
November 15, 2003    100,000 shares of common   Consultant                   NA          Consulting Services valued
                     stock issued for                                                    at $.085 per share/NA
                     consulting services
---------------------------------------------------------------------------------------------------------------------
November 21, 2003    50,000 shares of common    Consultant                   NA          Consulting Services valued
                     stock issued for                                                    at $.035 per share/NA
                     consulting services
---------------------------------------------------------------------------------------------------------------------
November 21, 2003    50,000 shares of common    Consultant                   NA          Consulting Services valued
                     stock issued for                                                    at $.035 per share/NA
                     consulting services
---------------------------------------------------------------------------------------------------------------------
December 15, 2003    10,000 shares of common    Consultant                   NA          Consulting Services valued
                     stock issued for                                                    at $.085 per share/NA
                     consulting services
---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>


<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
        Date             Title and Amount           Purchaser            Principal        Total Offering
                                                                        Underwriter      Price/Underwriting
                                                                                            Discounts
---------------------------------------------------------------------------------------------------------------------
<S>                     <C>                     <C>                         <C>        <C>
                        50,000 shares of
January 14, 2004        common stock            Consultant                  NA         $.0825 per share/NA
---------------------------------------------------------------------------------------------------------------------
                        400,000 shares of
January 24, 2004        common stock            Private Investor            NA         $.125 per share/NA
---------------------------------------------------------------------------------------------------------------------
February 11, 2004       400,000 shares of       Private Investor            NA         $.125 per share/NA
                        common stock
---------------------------------------------------------------------------------------------------------------------
                        200,000 shares of       Private Investor
February 18, 2004       common stock                                        NA         $.125 per share/NA
---------------------------------------------------------------------------------------------------------------------
                        155,000 shares of       Consultant
February 25, 2004       common stock                                        NA         $.16 per share/NA
---------------------------------------------------------------------------------------------------------------------
                        200,000 shares of       Consultant
February 25, 2004       common stock                                        NA         $.10 per share/NA
---------------------------------------------------------------------------------------------------------------------
                        100,000 shares of       Private Investor
February 26, 2004       common stock                                        NA         $.125 per share/NA
---------------------------------------------------------------------------------------------------------------------
                        140,000 shares of       Private Investor
February 27, 2004       common stock                                        NA         $.137 per share/NA
---------------------------------------------------------------------------------------------------------------------
March 2, 2004           200,000 shares of       Consultant                  NA         $.25 per share/NA
                        common stock
---------------------------------------------------------------------------------------------------------------------
                        30,000 shares of
March 31, 2004          common stock            Vendor                      NA         $.30 per share/NA
---------------------------------------------------------------------------------------------------------------------
                        50,000 shares of
March 31, 2004          common stock            Consultant                  NA         $.0825 per share/NA
---------------------------------------------------------------------------------------------------------------------
                        200,000 shares of
April 14, 2004          common stock            Private Investor            NA         $.125/NA
---------------------------------------------------------------------------------------------------------------------
                        400,000 shares of
April 16, 2004          common stock            Consultant                  NA         $.18/NA
---------------------------------------------------------------------------------------------------------------------
                        200,000 shares of
April 16, 2004          common stock            Consultant                  NA         $.18/NA
---------------------------------------------------------------------------------------------------------------------
                        100,000 shares of
May 5, 2004             common stock            Employee                    NA         $.14/NA
---------------------------------------------------------------------------------------------------------------------
                        60,000 shares of
May 5, 2004             common stock            Employee                    NA         $.14/NA
---------------------------------------------------------------------------------------------------------------------
                        25,000 shares of
May 5, 2004             common stock            Employee                    NA         $.14/NA
---------------------------------------------------------------------------------------------------------------------
                        35,000 shares of
May 5, 2004             common stock            Private Investor            NA         $.125/NA
---------------------------------------------------------------------------------------------------------------------
                        35,000 shares of
May 5, 2004             common stock            Private Investor            NA         $.125/NA
---------------------------------------------------------------------------------------------------------------------
                        200,00 shares of
May 6, 2004             common stock            Private Investor            NA         $.125/NA
---------------------------------------------------------------------------------------------------------------------
                        100,000 shares of
May 6, 2004             common stock            Consultant                  NA         $.125/NA
---------------------------------------------------------------------------------------------------------------------
                        100,000 shares of
May 11, 2004            common stock            Private Investor            NA         $.125/NA
---------------------------------------------------------------------------------------------------------------------
                        $193,740 principal      Private Investor            NA         $193,740/NA
                        amount of 4%
May 12, 2004            convertible note due
                        May 12, 2006
                        convertible into
                        1,549,920 shares of
                        common stock
---------------------------------------------------------------------------------------------------------------------
May 12, 2004            $129,160 principal      Private Investor            NA         $129,160/NA
                        amount of 4%
                        convertible note due
                        May 12, 2006
                        convertible into
                        1,033,280 shares of
                        common stock
---------------------------------------------------------------------------------------------------------------------
May 25, 2004            60,000 shares of        Private Investor            NA         $.125/NA
                        common stock
---------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
        Date             Title and Amount           Purchaser            Principal        Total Offering
                                                                        Underwriter      Price/Underwriting
                                                                                            Discounts
---------------------------------------------------------------------------------------------------------------------
<S>                     <C>                     <C>                         <C>        <C>
June 8, 2004            50,000 shares of        Private Investor            NA         $.125/NA
                        common stock
---------------------------------------------------------------------------------------------------------------------
                        50,000 shares of
June 10, 2004           common stock            Private Investor            NA         $.125/NA
---------------------------------------------------------------------------------------------------------------------
                        50,000 shares of
June 10,2004            common stock            Private Investor            NA         $.125/NA
---------------------------------------------------------------------------------------------------------------------
                        30,000 shares of
June 10,2004            common stock            Private Investor            NA         $.125/NA
---------------------------------------------------------------------------------------------------------------------
                        15,000 shares of
June 10,2004            common stock            Private Investor            NA         $.125/NA
---------------------------------------------------------------------------------------------------------------------
                        15,000 shares of
June 10,2004            common stock            Private Investor            NA         $.125/NA
---------------------------------------------------------------------------------------------------------------------
                        400,000 shares of
June 14, 2004           common stock            Private Investor            NA         $.18/NA
---------------------------------------------------------------------------------------------------------------------
July 1, 2004            $157,000  principal     Private Investor            NA         $157,000/NA
                        amount of 4%
                        convertible
                        promissory note due
                        December 31, 2006
                        convertible into
                        3,140,000 shares of
                        common stock
---------------------------------------------------------------------------------------------------------------------
July 16, 2004           $37,500 principal       Private Investor            NA         $37,500/NA
                        amount of 4%
                        convertible
                        promissory note due
                        January 16, 2007
                        convertible into
                        750,000 shares of
                        common stock
---------------------------------------------------------------------------------------------------------------------
August 18, 2004         50,000 shares of        Private Investor            NA         $.125/NA
                        common stock
---------------------------------------------------------------------------------------------------------------------
August 18, 2004         250,000 shares of       Consultant                  NA         $.125/NA
                        common stock
---------------------------------------------------------------------------------------------------------------------
AUGUST 30, 2004         100,000 shares of       Private Investor            NA         $.125/NA
                        common stock
---------------------------------------------------------------------------------------------------------------------
August 31, 2004         200,000 shares of       Private Investor            NA         $.125/NA
                        common stock
---------------------------------------------------------------------------------------------------------------------
September 7, 2004       100,000 shares of       Consultant                  NA         $.12/NA
                        common stock
---------------------------------------------------------------------------------------------------------------------
September 10, 2004      300,000 shares of       Consultant                  NA         $.12/NA
                        common stock
---------------------------------------------------------------------------------------------------------------------
September 16, 2004      125,000 shares of        Consultant                 NA         $.05/NA
                        common stock
---------------------------------------------------------------------------------------------------------------------
September 20, 2004      100,000 shares of        Consultant                 NA         $.12/NA
                        common stock
---------------------------------------------------------------------------------------------------------------------
September 20, 2004      $301,500 principal       Private Investors          NA         $301,500/NA
                        amount of 6%
                        convertible
                        promissory notes due
                        September 16, 2006,
                        convertible into an
                        aggregate of
                        6,030,000 shares of
                        common stock
---------------------------------------------------------------------------------------------------------------------
September 20, 2004      Warrants to purchase     Private Investors          NA         NA/NA
                        an aggregate of
                        6,030,000 shares of
                        common stock issued
                        in connection with
                        the sale of the 6%
                        convertible
                        promissory notes
---------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
---------------------------------------------------------------------------------------------------------------------
<S>                     <C>                      <C>                        <C>        <C>
September 23, 2004      $10,000 principal        Private Investor           NA         $10,000/NA
                        amount of 6%
                        convertible
                        promissory note due
                        September 22, 2006,
                        convertible into an
                        aggregate of 200,000
                        shares of common stock
---------------------------------------------------------------------------------------------------------------------
September 23, 2004      Warrants to purchase     Private Investor           NA         NA/NA
                        an aggregate of
                        200,000 share of
                        common stock issued
                        in connection with
                        the sale of the 6%
                        convertible
                        promissory note
---------------------------------------------------------------------------------------------------------------------
September 27, 2004      $20,000 principal        Private Investor           NA         $20,000/NA
                        amount of 6%
                        convertible
                        promissory note due
                        September 26, 2006,
                        convertible into an
                        aggregate of 400,000
                        shares of common stock
---------------------------------------------------------------------------------------------------------------------
September 27, 2004      Warrants to purchase     Private Investor           NA         NA/NA
                        an aggregate of
                        400,000 shares of
                        common stock issued
                        in connection with
                        the sale of the 6%
                        convertible
                        promissory note
---------------------------------------------------------------------------------------------------------------------
October 4,  2004        750,000 shares of        Consultant                 NA         $0.05/NA
                        common stock
---------------------------------------------------------------------------------------------------------------------
October 19, 2004        $25,000 principal        Private Investor           NA         $25,000/NA
                        amount of 6%
                        convertible promissory
                        note due October 18,
                        2006, convertible into
                        an aggregate of
                        500,000 shares of
                        common stock
---------------------------------------------------------------------------------------------------------------------
October 19, 2004        Warrants to purchase     Private investor           NA         NA/NA
                        an aggregate of
                        500,000 shares of
                        common stock issued in
                        connection with the
                        sale of the 6%
                        convertible promissory
                        note
---------------------------------------------------------------------------------------------------------------------
October 22, 2004        250,000 shares of        Consultant                 NA         $0.1415/NA
                        common stock

---------------------------------------------------------------------------------------------------------------------
November 2, 2004        $12,500 principal        Private investor           NA         $12,500/NA
                        amount of 6%
                        convertible promissory
                        note due November 1,
                        2006, convertible into
                        an aggregate of
                        250,000 shares of
                        common stock
---------------------------------------------------------------------------------------------------------------------
November 1, 2004        250,000 shares of        Consultant                 NA         $0.125/NA
                        common stock
---------------------------------------------------------------------------------------------------------------------
November 2, 2004        Warrants to purchase     Private investor           NA         NA/NA
                        an aggregate of
                        250,000 shares of
                        common stock issued in
                        connection with the
                        sale of the 6%
                        convertible promissory
                        note
---------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
---------------------------------------------------------------------------------------------------------------------
<S>                     <C>                      <C>                        <C>        <C>
November 5, 2004        $25,000 principal        Private investor           NA         $25,000/NA
                        amount of 6%
                        convertible promissory
                        note due November 4,
                        2006, convertible into
                        an aggregate of
                        500,000 shares of
                        common
                        stock
---------------------------------------------------------------------------------------------------------------------
November 5, 2004        Warrants to purchase     Private investor           NA         NA/NA
                        an aggregate of
                        500,000 shares of
                        common stock issued in
                        connection with the
                        sale of the 6%
                        convertible promissory
                        note
---------------------------------------------------------------------------------------------------------------------
November 8, 2004        500,000 shares of
                        Common Stock issued      Private investor           NA         $25,000/NA
                        upon conversion of a
                        promissory note in the
                        principal amount of
                        $25,000
---------------------------------------------------------------------------------------------------------------------
November 9,2004         250,000 shares of        Consultant                 NA         $0.10/NA
                        common stock
---------------------------------------------------------------------------------------------------------------------
November 15, 2004       45,000 shares of         Consultant                 NA         $0.12/NA
                        common stock
---------------------------------------------------------------------------------------------------------------------
November 16, 2004       250,000 shares of        Consultant                 NA         $0.15/NA
                        common stock
---------------------------------------------------------------------------------------------------------------------
November 19, 2004       403,951 shares of        Private Investor           NA         $20,000/NA
                        common stock issued
                        upon conversion of a
                        promissory note in the
                        principal amount of
                        $20,000 (including
                        accrued interest)
---------------------------------------------------------------------------------------------------------------------
November 23, 2004       502,887 shares of        Private Investor           NA         $25,000/NA
                        common stock issued
                        upon conversion of a
                        promissory note in the
                        principal amount of
                        $25,000 (including
                        accrued interest)
---------------------------------------------------------------------------------------------------------------------
November 25, 2004       $50,000 principal        Private Investor           NA         $50,000/NA
                        amount of 6%             (settlement)
                        convertible promissory
                        notes due November 24,
                        2006, convertible into
                        an aggregate of 1,00000
                        shares of common stock
---------------------------------------------------------------------------------------------------------------------

November 25, 2004       Warrants to purchase an  Private Investor           NA         NA/NA
                        aggregate of 1,000,000   (settlement)
                        shares of common stock
                        issued in connection
                        with the sale of the 6%
                        convertible promissory
                        notes

---------------------------------------------------------------------------------------------------------------------
November 26, 2004       412,000 shares of        Private Investor           NA         $0.17/NA
                        common stock             (settlement)
---------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
---------------------------------------------------------------------------------------------------------------------
<S>                     <C>                     <C>                         <C>        <C>
December 6, 2004        150,000 shares of         Private Investor          NA         $.10 per share/NA
                        common stock issued
                        upon exercise of
                        outstanding common
                        stock purchase warrant
---------------------------------------------------------------------------------------------------------------------
December 7, 2004        200,000 shares of         Private Investor          NA         $.10 per share/NA
                        common stock issued
                        upon exercise of
                        outstanding common
                        stock purchase warrant
---------------------------------------------------------------------------------------------------------------------
December 13, 2004       150,000 shares of         Private Investor          NA         $.10 per share/NA
                        common stock issued
                        upon exercise of
                        outstanding common
                        stock purchase warrant
---------------------------------------------------------------------------------------------------------------------
December 15, 2004       54,055 shares of          Private Investor          NA         $.185 per share/NA
                        common stock



---------------------------------------------------------------------------------------------------------------------
December 22, 2004       300,000 shares of         Private Investor          NA         $.10 per share/NA
                        common stock issued
                        upon exercise of
                        outstanding common
                        stock purchase warrant
---------------------------------------------------------------------------------------------------------------------
</TABLE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

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

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

<PAGE>

RESULTS OF OPERATIONS

During the fiscal year ended December 31, 2004 we incurred a net loss of
$3,920,699, because we had no revenue to offset operating expenses. The loss in
fiscal 2004 was primarily attributable to general and administrative expenses of
approximately $1,848,000 including professional fees in the approximate amount
of $366,100, gain on minority interest share of consolidated losses of $101,644,
write down of joint venture of $33,799, interest element of warrant issue of
$2,112,500 and interest expense of about $28,000. From inception (November 17,
1999) to December 31, 2004, we had a net loss of $5,710,099.

The Independent Auditors' Report and Note 1 of the Notes to Financial Statements
accompanying this report state that substantial doubt has been raised about our
ability to continue as a going concern. Our present business operations do not
generate any revenue with which to cover our expenses. We will have to raise
capital through the placement of our securities in order to remain viable. We
are continuing to incur management and administrative costs, professional fees
and other expenses. If we are unable to raise capital we will be unable to fund
our plan of operations. Because we will continue to incur net losses, we may
have to cease operations entirely. This factor, among others, raises substantial
doubt about our ability to continue as a going concern.

Our ability to continue as a going concern is dependent upon our ability to
obtain funds to meet our obligations on a timely basis, obtain additional
financing or refinancing as may be required, and ultimately to attain
profitability. There are no assurances that we will be able to obtain any
additional financing or, if we are able to obtain additional financing, that
such financing will be on terms favorable to us. The inability to obtain
additional financing when needed would have a material adverse effect on our
operating results.

2004 COMPARED TO 2003

The net loss increased from approximately $1,250,000 in 2003 to approximately
$3,921,000 for the twelve months ended December 31, 2004.

The items of significant increase or decrease in the twelve months ended
December 31, 2004 over the comparable period of the prior year were an increase
in general and administrative expense from approximately $1,210,000 in 2003 to
approximately $1,848,000, gain on minority share of consolidated losses of
$101,644, write down of joint venture of $33,799, for the twelve months ended
December 31, 2004, interest element of warrant issue of $2,112,500 and a
decrease in interest expense from approximately $40,000 in 2003 to approximately
$28,000 for the twelve months ended December 31, 2004.

PLAN OF OPERATION

We have established joint venture subsidiaries and two limited partnerships,
primarily to establish business operations focused on providing construction and
environmental technologies and services in Puerto Rico, the Middle East and the
Far East.
<PAGE>

Puerto Rico

The Company formed majority owned joint ventures in Puerto Rico to manage the
construction and related activities required to build low income homes in Puerto
Rico under the Federal Government's Section 124 low income housing program. In
December 2003, the Company secured the purchase rights to 36 acres that are
designated Section 124 eligible. Approximately 270 low income homes are planned
for construction on this property. The necessary building permits have been
submitted for approval and a real estate agency has been hired to sell the homes
planned for construction. Due to events related to the ballot recount in the
Puerto Rico gubernatorial election held November 2, 2004, the election of a new
governor was not certified until late December 2004. These events have delayed
the Company's permit approval process. Currently, we expect the building permits
to be approved and presale of the homes to begin in the third quarter of 2005.

The Company formed a second majority owned joint venture in Puerto Rico in
December 2004, to manage construction and related activities required to build
approximately 300 additional homes under the Section 124 low income housing
program. We secured the rights to an additional 40 acre tract for the second
project in December, 2004.

Middle East and Far East

The Company intends to establish local operating joint ventures in specific
countries in the Middle East and the Far East primarily aimed at soil and water
reclamation primarily related to oil contamination recovery. The initial step of
forming strategic alliances leading to joint ventures, has been established with
local organizations in Saudi Arabia and Indonesia.

Central and Eastern Europe

The Company has made a strategic decision to minimize its activities in Eastern
Europe and to maintain a small passive investment in the area that can be
expanded in the future should circumstances change.

FUNDING

We are currently dependent on equity investments or borrowing from private
investors to pay our operating expenses. There are no assurances that such
investors will continue to advance funds or invest in the Company's securities.
In the event we are unable to obtain additional capital or funding we may be
unable to pursue our business plans. We anticipate that we will be required to
raise capital in the approximate amount of $3,000,000 in the next 12 months in
order to continue to fund our limited operations and to finance our planned
business operations.

LIQUIDITY

We have no current operations that have generated any revenue. We must rely
entirely on private placements of Company stock or debt to pay operating
expenses.

<PAGE>

At December 31, 2004 and 2003, we had working  capital  deficits of $370,546 and
$623,423,  respectively. The decrease in our working capital deficit is a result
of the net loss  incurred  during the year ended  December 31,  2004,  partially
offset by the increase in cash and refundable deposits.  Since we have no source
of revenue,  our working  capital  deficit will continue to increase as we incur
additional  operating expenses.  Presently,  we have no external sources of cash
and we are dependent upon loans from private investors and private placements of
our stock for funding.

In 2004, we raised $276,250 of equity capital, through the sale of 2,544,055
shares of common stock. In addition, we borrowed $961,400 from outside lenders
to provide financing for our activities.

ASSETS

At December 31, 2004, we had total assets of $441,444, compared to total assets
of $84,702 at December 31, 2003. The increase in assets as of December 31, 2004
was due to an increase in cash, an increase in deposits, an increase in fixed
assets and capitalized pre-construction cost payments.

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 effect the reported amount of
assets, liabilities, and expenses, and related disclosures of contingent assets
and liabilities. On an on-going basis, the Company evaluates its estimates,
including those related to intangible assets, income taxes and contingencies and
litigation. The Company bases its estimates on historical experience and on
various assumptions that are believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or
conditions.

Other Matters

Accounting Pronouncements

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." This Statement requires recording costs
associated with exit or disposal activities at their fair values when a
liability has been incurred. Under previous guidance, certain exit costs were
accrued upon management's commitment to an exit plan. The Company adopted SFAS
No. 146 on January 1, 2003. The adoption of SFAS No. 146 did not have a material
impact on the Company's result of operations or financial position.

In November 2002, the FASB issued FIN No. 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others", and interpretation of FASB Statements No. 5, 57 and 107
and Rescission of FASB Interpretation No. 34. FIN No. 45 clarifies the
requirements of SFAS No. 5, Accounting for Contingencies, relating to the
guarantor's accounting for, and disclosure of, the issuance of certain types of
guarantees. This interpretation clarifies that a guarantor is required to
recognize, at the inception of certain types of guarantees, a liability for the
fair value of the obligation undertaken in issuing the guarantee. The initial
recognition and initial measurement provisions of this Interpretation are
applicable on a prospective basis to guarantees issued or modified after
December 31, 2002, irrespective of the guarantor's fiscal year-end. The
disclosure requirements in this interpretation are effective for financial
statements of interim or annual periods ending after December 15, 2002. The
Company adopted FIN No. 45 on January 1, 2003. The adoption of FIN No. 45 did
not have a material impact on the Company's results of operations or financial
position.
<PAGE>

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure, an amendment of FASB Statement No. 123".
SFAS No. 148 provides alternative methods of transition for a voluntary change
to the fair value based method of accounting for stock-based employee
compensation. It also requires disclosure in both annual and interim financial
statements about the method of accounting for stock-based employee compensation
and the effect of the method used on reported results. SFAS No. 148 is effective
for annual and interim periods beginning after December 15, 2002. The Company
will continue to account for stock-based employee compensation under the
recognition and measurement principle of APB Opinion No. 25 and related
interpretations. The Company complied with the additional annual and interim
disclosure requirements effective December 31, 2002 and September 30, 2003.

In January 2003, the Financial Accounting Standards Board issued Interpretation
No. 46, "Consolidation of Variable Interest Entities," which addresses
consolidation by business enterprises of variable interest entities. In general,
a variable interest entity is a corporation, partnership, trust, or any other
legal structure used for business purposes that either (a) does not have equity
investors with voting rights or (b) has equity investors that do not provide
sufficient financial resources for the entity to support its activities. A
variable interest entity often holds financial assets, including loans or
receivables, real estate or other property. A variable interest entity may be
essentially passive or it may engage in research and development or other
activities on behalf of another company. The objective of Interpretation No. 46
is not to restrict the use of variable interest entities but to improve
financial reporting by companies involved with variable interest entities. Until
now, a company generally has included another entity in its consolidated
financial statements only if it controlled the entity through voting interests.
Interpretation No. 46 changes that by requiring a variable interest entity to be
consolidated by a company if that company is subject to a majority of the risk
of loss from the variable interest entity's activities or entitled to receive a
majority of the entity's residual returns or both. The consolidation
requirements of Interpretation No. 46 apply immediately to variable interest
entities created after January 31, 2003. The consolidation requirements apply to
older entities in the first fiscal year or interim period beginning after June
15, 2003. Certain of the disclosure requirements apply in all financial
statements issued after January 31, 2003, regardless of when the variable
interest entity was established. The Company does not have any variable interest
entities, and, accordingly, adoption is not expected to have a material effect
on the Company's results or operations or financial position.

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement No. 133 on
Derivative Instruments and Hedging Activities." This statement amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities under FASB Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This Statement is effective for contracts
entered into or modified after September 30, 2003, and for hedging relationships
designated after September 30, 2003. Adoption of this statement did not have a
material impact on the Company's results of operations or financial position.
<PAGE>

In May 2003, the FASB issued SFAS No. 150 "Accounting for Financial Instruments
with the Characteristics of Both Liabilities and Equities". SFAS No. 150
establishes standards regarding the manner in which an issuer classifies and
measures certain types of financial instruments having characteristics of both
liabilities and equity. Pursuant to SFAS No. 150, such freestanding financial
instruments (i.e. those entered into separately from an entity's other financial
instruments or equity transactions or that are legally detachable and separately
exercisable) must be classified as liabilities or, in some cases, assets. In
addition, SFAS No. 150 requires that financial instruments containing
obligations to repurchase the issuing entity's equity shares and, under certain
circumstances, obligations that are settled by delivery of the issuer's shares
be classified as liabilities. The Statement is effective for financial
instruments entered into or modified after May 31, 2003 and for other
instruments at the beginning of the first interim period after June 15, 2003.
Management believes adopting this statement will not have a material effect on
the statement of operations or financial position.

In December 2003, the FASB issued SFAS No. 132(R), "Employer's Disclosure about
Pensions and Other Postretirement Benefits" (revised). SFAS No. 132(R) retains
disclosure requirements of the original SFAS No. 132(R) and requires additional
disclosures relating to assets, obligations, cash flows, and net periodic
benefit cost. SFAS No. 132(R) is effective for fiscal years ending after
December 15, 2003, except that certain disclosures are effective for fiscal
years ending after June 15, 2004. Interim period disclosures are effective for
interim periods beginning after December 15, 2003. The adoption of SFAS No.
132(R) did not have a material effect on the Company's results of operations or
financial position.

In November 2004 the FASB issued SFAS No. 151, an amendment to ARB No. 43
chapter 4 "Inventory Costs". SFAS No. 151 requires that abnormal costs of idle
facility expenses, freight, handling costs and wasted material (spoilage) be
recognized as current-period charges. SFAS No. 151 is effective for fiscal years
beginning after June 15, 2005. Adoption of SFAS No. 151 is not expected to have
a material impact on the Company's results of operations or financial position.

In December 2004, the FASB issued SFAS No. 153 an amendment of APB Opinion No.
29 "Exchanges of Nonmonetary Assets". SFAS No. 153 amends APB Opinion No. 29 by
eliminating the exception under APB No. 29 for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance. A nonmonetary exchange
has commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. SFAS No. 153 is effective for
periods beginning after June 15, 2005. The adoption of SFAS No. 153 is not
expected to have a material effect on the Company's financial position or
results of operations.

<PAGE>

In December 2004, the FASB staff issued FASB Staff Position ("FSP") FAS 109-1,
"Application of FASB Statement No. 109, Accounting for Income Taxes, to the Tax
Deduction on Qualified Production Activities Provided by the American Jobs
Creation Act of 2004" to provide guidance on the application of Statement 109 to
the provision within the American Jobs Creations Act of 2004 (the "Act") that
provides tax relief to U.S. domestic manufacturers. The FSP states that the
manufacturers, deduction provided for under the Act should be accounted for as a
special deduction in accordance with Statement 109 and not as a tax rate
reduction. The FSP is effective upon issuance. The adoption of FAS 109-1 could
have a material effect on the Company's results of operations or financial
position.

In December 2004, the FASB staff issued FSP No. FAS 109-2, "Accounting and
Disclosure Guidance for the Foreign Earnings Repatriation Provision Within the
American Jobs Creation Act of 2004" to provide accounting and disclosure
guidance for the repatriation provisions included in the Act. The Act introduced
a special limited-time dividends received deduction on the repatriation of
certain foreign earnings to a U.S. taxpayer as more fully described in Note 8 of
Notes to Consolidated Financial Statements. The FSP is effective upon issuance.
The adoption of FAS 109-2 could have a material effect on the Company's results
of operations and financial position.

In December 2004, the Financial Accounting Standard Board ("FASB") issued
Statement on Financial Accounting Standards ("SFAS") No. 123(R), "Share-Based
Payment" (revised), that will require compensation costs related to share-based
payment transactions to be recognized in the financial statements. With limited
exceptions, the amount of compensation cost will be measured based on the
grant-date fair value of the equity or liability instruments issued. In
addition, liability awards will be remeasured each reporting period.
Compensation cost will be recognized over the period that an employee provides
service in exchange for the reward. The statement also amends SFAS No. 95,
"Statement of Cash Flows", to require that excess tax benefits be reported as a
financing cash inflow rather than as a reduction of taxes paid. SFAS No. 123(R)
is effective as to the Company as of the beginning of the first interim period
that begins after June 15, 2005. The Company is currently evaluating its
position and will make its determination to account for the compensation costs
either prospectively or retroactively at the time of adoption. The adoption of
SFAS 123(R) is expected to have a material effect on the Company's results of
operations.

Quantitative and Qualitative Disclosures About Market Risk

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

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

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


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

ITEM 7. FINANCIAL STATEMENTS.

The Company's Financial Statements and Notes to Financial Statements are
attached hereto as Exhibit A and incorporated herein by reference.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

There have been no changes in or disagreements with the Company's independent
auditors during the last two years.

ITEM 8A. CONTROLS AND PROCEDURES.

Evaluation of disclosure controls and procedures:

Based on their evaluation as of the close of the fiscal year covered by this
report, Peter F. Russo, our Chief Executive Officer, and Martin G. Chilek, our
Chief Financial Officer, have concluded that the Company's disclosure controls
and procedures are effective in timely alerting them to material information
relating to the Company (including its consolidated subsidiaries) required to be
included in this Annual Report on Form 10-KSB. There have been no changes in the
Company's internal controls or in other factors which could significantly affect
internal controls subsequent to the date the Company carried out its evaluation.

Limitations on the effectiveness of controls:

A control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met. Because of inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues, if any,
within a company have been detected.

ITEM 8B. OTHER INFORMATION.

None
                                    PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.

DIRECTORS AND EXECUTIVE OFFICERS

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

<PAGE>

NAME                          AGE                         TITLE(S)
----------                  --------                    ------------
Peter F. Russo                62                 President, CEO, Secretary and
                                                 Director

Martin G. Chilek              54                 Vice President, Chief
                                                 Financial Officer and Assistant
                                                 Secretary

Jerome Kindrachuk             60                 Vice President--International

Peter F. Russo joined the Company on March 11, 2003 as President and a director,
and was elected Chief Executive Officer in June 2003. Mr. Russo had been an
independent consultant to several private businesses during the period from
August 2001 until he joined the Company. In that capacity, he developed business
and operating strategies and plans for a start-up, new concept modular housing
company focused on the affordable housing market. In that assignment, he
developed proposals for low-income housing projects under the federal Section 42
tax credit program in Philadelphia, Baltimore and Washington D.C. In another
assignment, Mr. Russo was instrumental in structuring a new U.S. holding company
with affiliated real estate service operations in Europe. From June 2000 to July
2001, Mr. Russo served as President and Chief Operating Officer for Bartram
Healthcare Financial Services, Inc., a start-up healthcare services company
providing financial systems and services. From January 1998 to June 2000, Mr.
Russo was an independent consultant for projects that included the development
of new market penetration strategies in various regions of the former
Yugoslavia, that included securing a U.S. export grant and providing
environmental technologies to Eastern European power generating stations.

Martin G. Chilek joined the Company as Vice President and CFO in January 2004.
Prior to joining the Company, from June 2003 to December 2003, he was an
independent consultant providing transitional management, strategic planning and
financial management services to privately held and public companies. During the
past five years, Mr. Chilek also served as Vice President-Operations of
MicroTech Leasing Corporation from October 2000 through May 2003. From October
1999 through October 2000, Mr. Chilek was employed by Acquisitions Management
Services, Inc., a merger and acquisitions services company, as Director of
Business Development. Mr. Chilek filed for personal bankruptcy in February 2000,
and discharged in July 2000, as a protective measure due to stockholder suits
following the bankruptcy of U.S. Physicians, Inc. in October 1998. Mr. Chilek
was Senior Vice President-Administration of U.S. Physicians, Inc. at the time it
filed its petition in bankruptcy.

Jerome Kindrachuk joined the Company in July 2003 as Vice President-Finance and
Administration and in January 2004 was appointed as Vice President-
International and an officer of the Company. Prior to joining the Company, Mr.
Kindrachuk served, from March 2002 to September 2002, as director of finance for
CEVA International, Inc., a company that provided environmental services and
technologies to countries in Central and Eastern Europe. From October 2002 to
June 2003, Mr. Kindrachuk was a consultant to the Company for market penetration
strategies in Eastern Europe. During the past five years, he also served as
Chief Executive Officer of Winner Automotive Group from February 2000 to
February 2002.
<PAGE>

Our directors are elected by the stockholders and our officers are appointed by
our board of directors. Our officers hold office until their successors are
elected and qualified. Vacancies in our board are filled by the board itself.
There are currently two vacancies on our board of directors.

We do not have an audit committee, although we intend to establish such a
committee, with an independent "financial expert" member as defined in the rules
of the Securities and Exchange Commission.

There are no family relationships between any of our executive officers and/or
directors.

We have a corporate code of conduct in place, which provides 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.


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

                                    Number      Transactions   Known Failures
                                    Of late     Not Timely     To File a
Name and principal position         Reports     Reported       Required Form
---------------------------        -----------  ------------   --------------
Peter F. Russo, President                            1

Martin G. Chilek, CFO                                1

Jerome Kindrachuk, Vice President                    1




ITEM 10. EXECUTIVE COMPENSATION


<TABLE>
<CAPTION>
          Annual  Compensation                       Awards                            Payouts
-------------------------------------------------   --------------------------   ---------------------
(a)              (b)     (c)       (d)      (e)        (f)            (g)           (h)        (i)


Name                                        Other   Restricted     Securities
and              Year                      Annual     Stock        Underlying     LTIP       All Other
Principal               Salary    Bonus     Comp.     Awards        Options/     Payouts       Comp.
Position         (1)      ($)      ($)      ($)        ($)          SARs(#)        ($)          ($)
-------------    ----   -------   -----    ------   ----------     ----------    ------      ---------
<S>              <C>    <C>       <C>      <C>      <C>           <C>            <C>           <C>
Peter F.         2004   $57,588                       $9,000
Russo            2003   $31,800                       $6,000                                   $31,938
President (2)

Martin G.
Chilek           2004   $64,700                      $16,000

Jerome
Kindrachuk       2004   $42,738                       $9,000                                   $13,612

Gary T.          2003                     $20,000    $93,625
Robinson (2)
</TABLE>

<PAGE>

(1)   Fiscal years ended December 31, 2003 and 2004.
(2)   The other compensation for Peter F. Russo was fees for consulting work
      completed prior to his employment. The restricted stock value for Gary T.
      Robinson was for compensation earned during his tenure as CEO.

None of our officers or directors received any compensation for services from
our date of inception (November 17, 1999) to December 31, 2002.

EMPLOYMENT AGREEMENTS

On March 11, 2003, we entered into a contract with Peter F. Russo to serve as
President. It provides for three years' employment from March 11, 2003, at a
salary of $10,000 per month through June 30, 2003, and $15,000 per month
thereafter, payable in bi-monthly installments, plus benefits. An Amendment was
made to the contract to reduce his compensation to $6,500 per month effective
January 1, 2004. We also have an employment contract with Jerome Kindrachuk,
effective July 2003 prior to Mr. Kindrachuk's appointment as an officer of the
Company. It provides for three years' employment from July 1, 2003, at a salary
of $10,000 per month, payable in bi-monthly installments, plus benefits. An
amendment was made to the contract to reduce compensation to $6,000 per month
effective January 1, 2004. All other officers are employed by us on an at will
basis, and the terms and conditions of employment are subject to change.

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.

COMPENSATION PLANS

STOCK OPTION PLANS

In December 2001, the Company's stockholders approved a stock option plan
entitled the 2001 Employee Stock Option Plan (the "2001 Plan"), pursuant to
which 2,000,000 shares of common stock were reserved for issuance, and in August
2004, our stockholders approved the 2004 Stock Option Plan (the "2004 Plan"),
pursuant to which 10,000,000 shares of common stock were reserved for issuance.
As of December 31, 2004, 613,000 shares of common stock remained available for
issuance of options under the 2001 Plan; as of March 28, 2005, all shares under
that Plan had been issued.

The 2004 Plan authorizes the Board of Directors (the "Board"), or a committee
comprised of non-employee directors ("Committee"), to grant, over a 10-year
period, options to purchase up to 10,000,000 shares of the Company's common
stock. Persons eligible to receive options under the Plan include key employees
and directors who are also employees of the Company or any subsidiary, and
consultants to the Company or any subsidiary, as determined by the Board or
Committee. The persons to be granted options under the Plan and the number and
purchase price of the shares represented by each option, the time or times at
which the options may be exercised, and the terms and provisions of each option
(which need not be uniform for all options) will be determined by the Board or
Committee. The purchase price per share may not be less than 100% of the fair
market value of the Company's stock at the time of grant. The purchase price may
be paid in cash or common stock of the Company held for at least six months with
a market value equal to that of the shares being acquired or, in the discretion
of the board or committee, any combination of these. Options granted under the
Plan may be in the form of "incentive stock options" which qualify as such under
Section 422 of the Internal Revenue Code or non-qualified stock options which do
not meet the criteria for incentive stock options under Section 422. The tax
treatment afforded stock options qualifying as incentive stock options is
generally more favorable to employees than that afforded to non-qualified stock
options, in that the exercise of an incentive stock option does not require the
optionee to recognize income for federal income tax purposes at the time of
exercise. (The difference between the exercise price of the incentive stock
option and the fair market value of the stock at the time of purchase is,
however, an item of tax preference which may require payment of an alternative
minimum tax.)
<PAGE>

Options granted under the Plan are, generally, transferable only by will or by
the laws of descent and distribution, and may be exercised during the lifetime
of the optionee only by the optionee or by his legal representative in the event
of his disability. In its sole discretion, however, the Board or Committee may
permit an optionee to make certain transfers of non-qualified stock options,
provided that the transfers are to "family members" and are not for value, as
defined in the General Instructions to Form S-8 under the Securities Act of
1933.

The term of each option cannot be more than 10 years from the date of grant, and
options can be exercised only during the participant's employment with the
Company or one of its subsidiaries. If any option expires or is terminated prior
to its exercise in full and prior to the termination of the Plan, the shares
subject to such unexercised option will be available for the grant of new
options under the Plan. Further, any shares used as full or partial payment by
an optionee upon exercise of an option may subsequently be used by the Company
to satisfy other options granted under the Plan, subject to the limitation on
the total number of shares authorized to be issued under the Plan.

The Plan permits an outstanding option to be exercised after termination of
employment only to the extent that the option was exercisable on the date of
termination but in no event beyond the original term of the option (i) within
one year by the estate or rightful heir(s) of the optionee if the optionee's
employment is terminated due to the optionee's death; (ii) within one year after
the date of such termination if the termination is due to the optionee's
Disability (as defined in the Plan); or (iii) within three months after the date
of such termination if the termination was due to the optionee's Retirement (as
defined in the Plan) or was for reasons other than death or Disability and other
than "for cause" (as defined in the Plan). Upon termination of an optionee's
employment "for cause," any unexercised options held by the optionee will be
forfeited.

Unexercised options will terminate in the event of the Company's dissolution,
liquidation, or sale of all or substantially all of its assets. In the event of
our merger with another corporation, the option would be assumed or an
equivalent option substituted by the successor corporation or, if such successor
corporation does not agree to assume the option or substitute an equivalent
option, the Board can provide for the option holder to have the right to
exercise the option as to all of the optioned shares, including shares as to
which the option would not otherwise be exercisable. The number of shares
subject to options and the option prices will be appropriately adjusted in the
event of changes in our outstanding common stock by reason of stock dividends,
recapitalizations, mergers, consolidations, stock splits and combinations of
shares, and the like. The Board may at any time terminate or modify the Plan
except, that without further approval of the stockholders, the Board may not
make any changes to the Plan which would materially increase the number of
shares that may be issued under the Plan, materially modify the eligibility
requirements for participation in the Plan, or require stockholder approval
under the Delaware General Corporation Law, the Exchange Act, or the Internal
Revenue Code.

The 2004 Plan gives the Board the power to issue a restricted stock award to an
Employee representing shares of Common Stock that are issued subject to such
restrictions on transfer and other incidents of ownership and such forfeiture
conditions as the Board may determine ("Restricted Shares"). In connection with
issuance of any Restricted Shares, the Board may (but shall not be obligated to)
require the payment of a specified purchase price (which price may be less than
Fair Market Value as defined in the Plan).

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 the second quarter of 2003, the Company established a health insurance
benefit plan that is offered to all employees. During the third quarter of 2004,
the Company made a dental insurance plan available to all employees.



<PAGE>

Option/SAR Grants in Last Fiscal Year

Individual Grants

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
         (a)                  (b)                   (c)                      (d)                (e)
                           Number of             Percent of             Exercise or
                           Securities              Total                 Base Price          Expiration
        Name               Underlying           Options/SARSs              ($/Sh)               Date
                           Options/SARS          Granted to
                             Granted            Employee in
                                                Fiscal Year
----------------------------------------------------------------------------------------------------------
<S>                        <C>                      <C>                      <C>             <C>
Peter F. Russo (1)         2,500,000                38.5                     $0.25           11/19/09
----------------------------------------------------------------------------------------------------------
Martin G. Chilek           1,750,000                26.9                     $0.25           11/19/09
(2)
----------------------------------------------------------------------------------------------------------
Jerome Kindrachuk            750,000                11.5                     $0.25           11/19/09
(3)
----------------------------------------------------------------------------------------------------------
</TABLE>

(1)  The options are exercisable as to 16 percent of the shares covered by each
     option immediately upon grant of the option; the option grant became
     exercisable as to an additional 16 percent on January 3, 2005; and becomes
     exercisable as to an additional 68 percent on January 3, 2006.

(2)  The options are exercisable as to 23 percent of the shares covered by each
     option immediately upon grant of the option; the option grant became
     exercisable as to an additional 23 percent on January 3, 2005; and becomes
     exercisable as to an additional 54 percent on January 3, 2006.

(3)  The options are exercisable as to 33 percent of the shares covered by each
     option immediately upon grant of the option; the option grant became
     exercisable as to an additional 33 percent on January 3, 2005; and becomes
     exercisable as to an additional 33 percent on January 3, 2006.

     The following table summarizes the number and value of unexercised options
held by our executive officers as of December 31, 2004.

<TABLE>
<CAPTION>
FISCAL YEAR-END OPTION VALUES
----------------------------------------------------------------------------------------------------------------------
                                                                       Number of Securities     Value of Unexercised
                                                                       Underlying Unexercised   in-the-Money Option/
                                                                       Options/SARS At          SARs at Fiscal
                                                                       Fiscal Year-End (#)      Year-End ($)
                             Shares Acquired on                        Exercisable/             Exercisable/
Name                         Exercise (#)         Value Realized ($)   Unexercisable            Unexercisable
--------------------------- -------------------- --------------------- ------------------------ ----------------------
<S>                               <C>                  <C>             <C>                      <C>
Peter F. Russo                    -                    -               2,500,000/0              1,200,000/0
                                                                       400,000/2,100,000        192,000/1,008,000
Martin G. Chilek                                                       1,750,000/0              840,000/0
                                                                       400,000/1,350,000        192,000/648,000
Jerome Kindrachuk                                                      750,000/0                360,000/0
                                                                       250,000/500,000          120,000/240,000
</TABLE>

      The above value has been calculated based on closing price of the
common stock as quoted on the OTC Bulletin Board on December 31, 2004.

No officer or director exercised any options in the fiscal year ended December
31, 2004.
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.

The following table sets forth information, as of April 12, 2005, 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:

<TABLE>
<CAPTION>
Name and Address of Beneficial Owner                    Number of Shares Owned       Percentage**
                                                             Beneficially
<S>                                                          <C>                       <C>
Peter F. Russo                                                900,000(1)                 4.16

Martin G. Chilek                                              900,000(2)                 4.16

Jerome A. Kindrachuk                                          600,000(3)                 2.81

All Officers and Directors as a Group                          2,400,000                10.46

T&T Asset Management                                         2,925,000(4)               13.21

J. Friedman & Sons                                           2,700,638(5)               11.82

United Charities of America                                  1,202,877(6)                5.63

Sophie Angelastri                                            1,840,751(7)                8.26

Nice Holdings, Ltd.                                          2,400,000 (8)              10.32

Neil Berman                                                  6,255,120(9)               23.83

Ivano Angelastri                                             1,400,000(10)               6.71

The Divergence Fund, LP                                      1,700,000(11)               7.54
</TABLE>

** Based on 20,849,113 shares outstanding on April 12, 2005.

----------------

(1) In addition to 100,000 shares owned directly, Mr. Russo holds options
expiring November 19, 2009 to purchase an aggregate of 2,500,000 shares of
common stock at an exercise price of $.25 per share, of which options to
purchase 800,000 shares are presently exercisable.
<PAGE>

(2) In addition to 100,000 shares owned directly, Mr. Chilek holds options
expiring November 19, 2009 to purchase an aggregate of 1,750,000 shares of
common stock at an exercise price of $.25 per share, of which options to
purchase 800,000 shares are presently exercisable.

(3) In addition to 100,000 shares owned directly, Mr. Kindrachuk holds options
expiring November 19, 2009 to purchase an aggregate of 750,000 shares of common
stock at an exercise price of $.25 per share, of which options to purchase
500,000 shares are presently exercisable.

(4) In addition to 1,625,000 shares owned directly, T&T Asset Management holds
notes convertible into 800,000 shares of common stock at a conversion price of
$0.05 per share and warrants expiring March 31, 2006 to purchase 500,000 shares
of common stock at an exercise price of $0.10 per share.

(5) In addition to 700,638 shares owned directly, J.Friedman & Sons holds notes
convertible into 1,000,000 shares of common stock at a conversion price of $0.05
per share and warrants expiring March 31, 2006 to purchase 1,000,000 shares of
common stock at an exercise price of $0.10 per share.

(6) In addition to 702,877 shares owned directly, United Charities of America
holds warrants expiring March 31, 2006 to purchase 500,000 shares of common
stock at an exercise price of $0.10 per share.

(7) In addition to 403,951 shares owned directly, Ms. Angelastri holds notes
convertible into 1,033,280 shares of common stock at a conversion price of $.125
per share and warrants expiring March 31, 2006 to purchase 400,000 shares of
common stock at an exercise price of $0.10 per share. Ms. Angelastri disclaims
any beneficial ownership of shares of common stock held by her husband Ivano
Angelastri.

(8) Nice Holdings, Ltd., holds notes convertible into 1,200,000 shares of common
stock at a conversion price of $0.05 per share and warrants expiring March 31,
2006 to purchase 1,200,000 shares of common stock at an exercise price of $0.10
per share.

(9) In addition to 855,200 shares owned directly, Neil Berman holds notes
convertible into 1,549,920 shares of common stock at a conversion price of
$0.125 per share, notes convertible into 3,620,000 shares at a conversion price
of $0.05 per share, and warrants expiring March 31, 2006 to purchase 230,000
shares of common stock at an exercise price of $0.10 per share.

(10) Mr. Angelastri disclaims any beneficial ownership of shares of common
stock, convertible notes and warrants held by his wife Sophie Angelastri. (11)
The Divergence Fund, LP holds notes convertible into 1,000,000 shares of common
stock at a conversion price of $0.05 per share and warrants expiring March 31,
2006 to purchase 700,000 shares of common stock at an exercise price of $0.10
per share.

Securities Authorized for Issuance under Equity Compensation Plans

The following table sets forth information with respect to our common stock
issued and available to be issued under outstanding options, warrants and rights
as of December 31, 2004.
<PAGE>

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
                                  (a)                          (b)                          (c)
----------------------------------------------------------------------------------------------------------------------
Plan category                     Number of securities to be   Weighted-average exercise    Number of securities
                                  issued upon exercise of      price of outstanding         remaining available for
                                  outstanding options,         options, warrants and        future issuance under
                                  warrants and rights          rights                       equity compensation plans
                                                                                            (excluding securities
                                                                                            reflected in column (a))
----------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                            <C>                        <C>
Equity compensation plans               6,500,000                      $0.25                      4,113,000
approved by security holders
----------------------------------------------------------------------------------------------------------------------
Equity compensation plans not
approved by security holders
----------------------------------------------------------------------------------------------------------------------
Total                                   6,500,000                                                 4,113,000
----------------------------------------------------------------------------------------------------------------------
</TABLE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

On March 6, 2003 the Company entered into a consulting agreement with M.U.R.G.
LLC ("M.U.R.G."), a Florida-based real estate consulting firm. The consultant
was to provide advisor services in connection with a proposed construction of
approximately 500 homes in Puerto Rico by the Company. We advanced M.U.R.G.
$100,000 against its future commission compensation and M.U.R.G. delivered to us
its promissory note payable on demand with interest accruing at the rate of 5%
per annum. Gary T. Robinson, Former Chief Executive Officer and Former Chairman
of the Board, loaned the Company $100,000 that enabled us to make the advance to
M.U.R.G. The project did not go forward and on June 16, 2003 Mr. Robinson agreed
to assume the promissory note from M.U.R.G. and eliminate the loan amount due
him from the Company.

On March 11, 2003, we entered into a contract with Peter F. Russo to serve as
President. It provides for three years' employment from March 11, 2003, at a
salary of $10,000 per month through June 30, 2003, and $15,000 per month
thereafter, payable in bi-monthly installments, plus benefits. On September 20,
2004 the contract was amended to adjust the salary to $6,500 per month effective
January 1, 2004. Certain benefits were also eliminated effective the same dates.
We also have an employment contract with Jerome Kindrachuk effective July 2003,
prior to Mr. Kindrachuk's appointment as an officer of the Company. It provides
for three years' employment from July 1, 2003, at a salary of $10,000 per month,
payable in bi-monthly installments, plus benefits. On September 22, 2004 the
contract was amended to adjust salary to $6,000 per month effective January 1,
2004. Certain benefits were also eliminated effective the same dates.

<PAGE>

During the first quarter of 2004, the Company paid consulting fees to Jerome
Kindrachuk of $13,612 for services rendered prior to his employment. The
following officers of the Company were issued shares of common stock under the
2001 Employee Stock Option Plan as follows:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Name                                  Date of Issuance              Number of Shs.        Per Share
                                                                                          Valuation
-------------------------------------------------------------------------------------------------------------
<S>                                   <C>                           <C>                   <C>
Peter F. Russo                        December 10, 2004             50,000                $0.18
-------------------------------------------------------------------------------------------------------------
Martin G. Chilek                      January 14, 2004              89,500                $0.078
                                      December 10, 2004             50,000                $0.18

-------------------------------------------------------------------------------------------------------------
Jerome Kindrachuk                     December 10, 2004             50,000                $0.18
-------------------------------------------------------------------------------------------------------------
</TABLE>

ITEM 13. EXHIBITS.

Exhibit No.                 Description of Exhibits
------------     ---------------------------------------------------------------

3.1              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.

<PAGE>

4.1              Delta Mutual, Inc. 2001 Employee Stock Option Plan,
                 incorporated herein by reference to Appendix B to the Company's
                 definitive Information Statement pursuant to Section 14C of the
                 Exchange Act, filed with the Commission on November 9, 2001.

4.2              Delta Mutual, Inc. 2001 Employee Stock Option Plan, as amended
                 December 1, 2003.

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.

4.3              Form of 6% Convertible Promissory Notes of the Company due
                 2006. Incorporated by reference to Exhibit 4.3 to the Company's
                 Current Report on Form 8-K, filed with the Commission on
                 September 24, 2004.

4.4              Form of Warrants to purchase shares of Common Stock, of the
                 Company issued to the purchasers of the Company's 6%
                 Convertible Promissory Notes. Incorporated by reference to
                 Exhibit 4.4 to the Company's Current Report on Form 8-K, filed
                 with the Commission on September 24, 2004.

4.5              4% Convertible Promissory Note of the Company due May 2006
                 issued in the principal amount of $129,160 on May 12, 2004.
                 Incorporated herein by reference to Exhibit 4.5 to the
                 Company's Quarterly Report on Form 10-QSB, filed with the
                 Commission on November 15, 2004.

4.6              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.

4.7              4% Convertible Promissory Note "A" of the Company due December
                 2006 issued in the principal amount of $157,000 on July 1,
                 2004. Incorporated herein by reference to Exhibit 4.7 to the
                 Company's Quarterly Report on Form 10-QSB, filed with the
                 Commission on November 15, 2004.

4.8              4% Convertible Promissory Note "B" of the Company due January
                 2007 issued in the principal amount of $37,500 on July 16,
                 2004. Incorporated herein by reference to Exhibit 4.8 to the
                 Company's Quarterly Report on Form 10-QSB, filed with the
                 Commission on November 15, 2004.

<PAGE>

4.9              6% Promissory note of the Company due December 2005 issued in
                 the principal amount of $71,731.29 on March 22, 2005.
                 Incorporated herein by reference to Exhibit 4.9 to the
                 Company's current report on Form 8K filed with the Commission
                 on March 25, 2005.

4.10             8% Promissory note of the Company due October 2, 2005 issued in
                 the principal amount of $210,655.04 on April 5, 2004.
                 Incorporated herein by reference to Exhibit 4.10 to the
                 Company's current report on Form 8K filed with the Commission
                 on April 11, 2005.

10.1             Agreement of Sale with Enterprises Solutions, Inc. dated May
                 11, 2001, and amendments. Incorporated herein by reference to
                 Exhibit 10.2 to the Company's current report on Form 8-K, filed
                 with the Commission on May 23, 2001.

10.2             Promissory note from Enterprises Solutions, Inc. dated October
                 31, 2001. Incorporated by reference to Exhibit 10.3 to the
                 Company's annual report on Form 10-KSB, filed with the
                 Commission on April 16, 2002.

10.3             Promissory Note to Rosanne Solomon dated November 27, 2001.
                 Incorporated herein by reference to Exhibit 10.1 to Amendment
                 No. 3 to the Company's registration statement on Form S-4,filed
                 with the Commission on November 30, 2001.

10.4             License Agreement with Enterprises Solutions, Inc. dated
                 December 11, 2001. Incorporated by reference to Exhibit 10.5 to
                 the Company's annual report on Form 10-KSB, filed with the
                 Commission on April 16, 2002.

10.5             Employment Agreement between Kenneth A. Martin and the Company.
                 Incorporated by reference to Exhibit 10.6 to the Company's
                 annual report on Form 10-KSB, filed with the Commission on
                 April 16, 2002.

10.6             Agreement, dated January 13, 2003, between the Company and
                 Kenneth A. Martin. Incorporated by reference to Exhibit 10.7 to
                 the Company's registration statement on Form S-8, filed with
                 the Commission on February 13, 2003.

<PAGE>

10.7             Agreement, dated February 3, 2003, between the Company and
                 Peter F. Russo. Incorporated by reference to Exhibit 10.8 to
                 the Company's registration statement on Form S-8, filed with
                 the Commission on February 13, 2003.

10.8             Agreement, dated February 4, 2003, between the Company and J.
                 Dapray Muir. Incorporated by reference to Exhibit 10.9 to the
                 Company's registration statement on Form S-8, filed with the
                 Commission on February 13, 2003.

10.9             Executive Employment Agreement, effective March 11, 2003, by
                 and between the Company and Peter F. Russo. Incorporated herein
                 by reference to Exhibit 10.8 to the Company's Annual Report on
                 Form 10-KSB, filed with the Commission on April 14, 2003.

10.10            Consulting Agreement, effective February 28, 2003, between
                 M.U.R.G., LLC and Delta Mutual, Inc. Incorporated herein by
                 reference to Exhibit 10.9 to the Company's Annual Report on
                 Form 10-KSB, filed with the Commission on April 14, 2003.

10.11            Agreement, March 31, 2003, between the Company and Burrows
                 Consulting Inc. Incorporated herein by reference to Exhibit
                 10.3 to the Company's current report on Form 8-K, filed with
                 the Commission on April 25, 2003.

10.12            License Agreement with Joseph Friedman and Sons, International,
                 Inc., dated April 2, 2003. Incorporated herein by reference to
                 Exhibit 10.7 to the Company's Annual Report on Form 10-KSB,
                 filed with the Commission on April 14, 2003.

10.13            Agreement, dated July 1, 2003, between the Company and Gary T.
                 Robinson. Incorporated herein by reference to Exhibit 10.10 to
                 the Company's registration statement on Form S-8, filed with
                 the Commission on August 20, 2003.

10.14            Agreement, dated August 29, 2003, between the Company and
                 Burrows Consulting Inc. Incorporated herein reference to
                 Exhibit 10.10 to the Company's current report on Form 8-K,
                 filed with the Commission on September 4, 2003.

<PAGE>

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.

10.17            Agreement to Purchase Stock, dated January 14, 2004, between
                 Delta Mutual, Inc. and Hi Tech Consulting and Construction,
                 Inc., as sellers, and Ali Razmara, as purchaser. Incorporated
                 herein by reference to Exhibit 10.17 to the Company's Annual
                 Report on Form 10-KSB, filed with the Commission on April 6,
                 2004.

10.18            Consulting Agreement, dated as of March 21, 2004, between
                 Delta Mutual, Inc. and Clark Street Capital. Incorporated
                 herein by reference to Exhibit 10.18 to the Company's Quarterly
                 Report on Form 10-QSB, filed May 19, 2004.

10.19            Consulting Services Agreement, dated as of April 16, 2004,
                 between Delta Mutual, Inc. and Basic Investors, Inc.
                 Incorporated herein by reference to Exhibit 10.19 to the
                 Company's Quarterly Report on Form 10-QSB, filed May 19, 2004.

10.20            Memorandum of Understanding, dated as of March 17, 2004, by and
                 between Delta-Envirotech, Inc., PT Faryan Nusantara and
                 Crescent Aeronautical Technology. Incorporated herein by
                 reference to Exhibit 10.20 to the Company's Quarterly Report on
                 Form 10-QSB, filed May 19, 2004.

10.21            Agreement, dated April 5, 2004, Trans Indies Realty Investment
                 Corporation and Delta Developers Corp. Incorporated herein by
                 reference to Exhibit 10.21 to the Company's Quarterly Report on
                 Form 10-QSB, filed August 12, 2004.
<PAGE>

10.22            Term Sheet, dated May 12, 2004, among Delta Mutual, Inc., Neil
                 Berman and Ivano Angelastri. Incorporated herein by reference
                 to Exhibit 10.22 to the Company's Quarterly Report on Form
                 10-QSB, filed August 12, 2004.

10.23            Term Sheet, dated July 1, 2004, between Delta Mutual, Inc. and
                 Neil Berman. Incorporated herein by reference to Exhibit 10.23
                 to the Company's Quarterly Report on Form 10-QSB, filed August
                 12, 2004.

10.24            Settlement Agreement and Mutual General Releases, dated
                 November 26, 2004, between the Company and Joseph Friedman and
                 Sons International, Inc. Incorporated herein by reference to
                 Exhibit 10.24 to the Company's Current Report on Form 8-K,
                 filed with the Commission on December 2, 2004.

10.25            Delta Mutual, Inc. Code of Conduct and Business Ethics, filed
                 herewith.

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.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES.

(1) Aggregate fees for the last two years:

                                  2004             2003
                                  ----             ----

                                $75,116          $52,855

(2) Audit related fees:           2004             2003
                                  ----             ----

                                $72,704          $48,855


(3) Tax fees:
                                  2004             2003
                                  ----             ----

                                 $5,000           $4,000

<PAGE>

(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

                                   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 14, 2005


By:/s/ Peter F. Russo
   ------------------------------
Peter F. Russo
President, Chief Executive Officer and Director

By:/s/ Martin G. Chilek
   ------------------------------
Martin G. Chilek
Vice President and Chief Financial Officer
Principal Financial Officer

<PAGE>

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.


     SIGNATURE                    TITLE                      DATE
-----------------           -----------------           ---------------

/s/ Peter F. Russo
---------------------
Peter F. Russo                 President                 April 14, 2005
                               And Director

<PAGE>

                DELTA MUTUAL, INC. AND CONSOLIDATED SUBSIDIARIES

                          INDEX TO FINANCIAL STATEMENTS



                                                                           PAGE

Accountant's Report                                                         F-1


Financial Statements:

    Consolidated Balance Sheet as of December 31, 2004                      F-2


    Consolidated Statement of Operations for the years ended
      December 31, 2004 and 2003                                            F-3


    Consolidated Statement of Stockholders' Deficiency as of
      December 31, 2004 and 2003, Respectively                              F-4


    Consolidated Statement of Cash Flows for the years ended
      December 31, 2004 and 2003.                                           F-5


    Notes to Consolidated Financial Statements                              F-6


<PAGE>

                [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.


We have audited the  accompanying  consolidated  balance sheets of Delta Mutual,
Inc.  and  subsidiaries  as of  December  31,  2004 and  2003,  and the  related
consolidated statements of operations,  stockholders  deficiency and cash flows
for each of the two years in the period ended December 31, 2004. These financial
statements   are  the   responsibility   of  the   Companys   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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,  such consolidated  financial  statements present fairly, in all
material respects, the financial position of Delta Mutual, Inc. and subsidiaries
as of December 31, 2004 and 2003, and the results of their  operations and their
cash flows for each of the two years in the period ended  December 31, 2004,  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.  Since a change in control,  new
Company  management  has  embarked  upon a new mission and  strategic  direction
intending to establish a series of subsidiaries  and joint  ventures,  primarily
for the establishment of business operation focusing upon providing technologies
and services in the  environmental  remediation  industry and utilizing  certain
construction   technologies  to  participate  in  selected  housing  development
projects.  As more fully  explained in Note 1, to the financial  statements  the
Company needs to obtain additional  financing to fulfill its proposed activities
and 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.
-----------------------------------
WIENER, GOODMAN & COMPANY, P.C.

Eatontown, New Jersey
March 30, 2005


                                      F-1
<PAGE>

                       DELTA MUTUAL INC., AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS

                                                           December 31
                                                   ---------------------------
                                                       2004            2003
                                                   ------------   ------------
  Current Assets:
            Cash                                   $    113,780   $     14,057
            Prepaid expenses                                 40          3,962
            Refundable deposits                         144,700         25,200
                                                   ------------   ------------
               Total Current Assets                     258,520         43,219

  Property & Equipment - net                              8,689          7,033
  Investment in joint ventures                                1         33,800
  Capitalized construction costs                        170,000             --
  Other assets                                            4,234            650
                                                   ------------   ------------
                    Total Assets                   $    441,444   $     84,702
                                                   ============   ============

                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY

  Current Liabilities:
           Accounts payable                        $    202,929   $    186,592
           Accrued expenses                             426,137        265,286
           Loan due former officer/stockholder             --           56,364
           Loan to related parties                         --          122,000
           Due to related parties                          --           11,200
                                                   ------------   ------------
             Total Current Liabilities                  629,066        641,442

  Long term convertible debt                            891,400             --
                                                   ------------   ------------

                    Total Liabilities                 1,520,466        641,442
                                                   ------------   ------------

  Minority interest in consolidated subsidiaries        183,160            150


   Stockholders' Deficiency:
     Common stock $0.0001 par value -
           Authorized 100,000,000 shares;
           19,133,571 and 9,361,688  shares issued
           and outstanding, respectively                  1,913            936
     Additional paid-in-capital                       4,446,004      1,231,574
    Deficit accumulated during the
           development stage                         (5,710,099)    (1,789,400)
                                                   ------------   ------------

  Total Stockholders' Deficiency                     (1,262,182)      (556,890)
                                                   ------------   ------------

  TOTAL LIABILITIES AND
  STOCKHOLDERS' DEFICIENCY                         $    441,444   $     84,702
                                                   ============   ============

 See notes to consolidated financial statements


                                      F-2
<PAGE>

                      DELTA MUTUAL, INC., AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS


                            Years Ended December 31,

                                             2004             2003
                                       ---------------   ---------------

  Revenue                              $            --   $            --
                                       ---------------   ---------------


  Costs and Expenses
      General and administrative
      expenses                               1,848,078         1,209,853
                                       ---------------   ---------------

   Loss from operations                     (1,848,078)       (1,209,853)
                                       ---------------   ---------------

   Minority interest share of loss
   of consolidated subsidiaries                101,644                --

   Write down of joint venture                 (33,799)               --

   Interest element of warrant issue        (2,112,500)               --

   Interest expense                            (27,966)          (39,656)
                                       ---------------   ---------------

   Loss before benefit
   from income taxes                        (3,920,699)       (1,249,509)

   Benefit from income taxes                        --                --
                                       ---------------   ---------------
   Net loss                            $    (3,920,699)   $   (1,249,509)
                                       ===============   ===============


   Loss per common share -
   basic and diluted                   $          0.28   $          0.19
                                       ===============   ===============

   Weighted average number of
   common shares outstanding -
   basic and diluted                        14,250,963         6,734,384
                                       ===============   ===============


    See notes to consolidated financial statements


                                      F-3
<PAGE>

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

<TABLE>
<CAPTION>
                                            Number of        Common          Paid in                           Total
                                            Common           Stock           Capital
                                            Shares                                            Deficit
                                                                                              Accumulated
                                            -------------    -------------   -------------    -------------    -------------
<S>                                               <C>        <C>             <C>              <C>              <C>

Balance, January 1, 2003                          857,000    $          56   $     304,329    $    (539,891)   $    (235,476)
Issuance of common stock for interest             100,000               10          28,740             --             28,750
expense (valued at $0.275-$0.30 per
share)

Issuance of common stock for services             950,000               95         244,499             --            244,594
(valued at $0.035 - $0.50)

Issuance of common stock in lieu of               280,000               28          93,597             --             93,625
payment of officer loan (valued at
$0.334375 per share)

Sale of common stock (at $0.125 - $0.50)          450,000               45         112,455                           112,500

Issuance of common stock for investment            50,000                5           7,495             --              7,500
in joint venture (valued at $0.15 per
share)

Issuance of common stock for repayment            520,000               52         127,074             --            127,126
of debt (valued at $0.10 - $0.69336)

Stock split February 24, 2003 (five for         4,708,050              471            (471)            --                 --
one)

Issuance of common stock for license              288,638               28          39,972             --             40,000
agreement (valued at $0.138582 per share)

Issuance of common stock for promissory           800,000               80         249,920             --            250,000
note repayment (valued at $0.3125 per
share)

Issuance of common stock awards from the          358,000               36          23,964             --             24,000
Company's stock option plan (valued at
$0.067039 per share)

Net loss                                             --               --              --         (1,249,509)      (1,249,509)
                                            -------------    -------------   -------------    -------------    -------------

Balance, December 31, 2003                      9,361,688             936        1,231,574       (1,789,400)        (556,890)
</TABLE>


See notes to consolidate financial statements


                                      F-4
<PAGE>

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

<TABLE>
<CAPTION>
                                    Number of        Common           Paid in                            Total
                                    Common Shares    Stock            Capital
                                                                                       Deficit
                                                                                       Accumulated
                                    --------------   --------------   --------------   --------------    --------------
<S>                                      <C>         <C>              <C>              <C>               <C>

Issuance of common stock for             2,636,328              264          246,178             --             246,442
repayment and conversion for
debt and interest expense (valued
at $0.05 - $0.137 per share)

Issuance of common stock for             3,840,000              384          457,791             --             458,175
services (valued at $0.05 - $0.30
per share)

Sale of common stock (valued at          2,544,055              254          275,996             --             276,250
$0.05 - $0.18 per share)


Issuance of common stock for               412,000               41           69,999             --              70,040
settlement Agreement (valued at
$0.17 per share)

Issuance of common stock awards            339,500               34           51,966             --              52,000
from the Company's 2001 stock
option plan (valued at $0.078 -
$0.18 per share)

Issuance of common stock purchase             --               --          2,112,500             --           2,112,500
warrants in connection with the
proceeds from borrowings (valued
at $0.10 per share)

Net loss                                       --             --                 --       (3,920,699)       (3,920,699)
                                    --------------   --------------   --------------   --------------    --------------

Balance, December 31, 2004              19,133,571   $        1,913   $    4,446,004   $   (5,710,099)   $   (1,262,182)
                                    ==============   ==============   ==============   ==============    ==============
</TABLE>

See notes to consolidated  financial statements


                                      F-5
<PAGE>

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



                                                   Years Ended December 31
                                           --------------------------------
                                                2004               2003
                                           --------------    --------------
Cash flows from operating activities:
 Net loss                                  $   (3,920,699)   $   (1,249,509)
 Adjustments to reconcile net loss to
  net cash used in operating activities:
 Depreciation                                       2,137             1,759
  on-cash compensation, including
  settlement and common stock awards              528,215           337,344
 Issuance of common stock awards                   52,000
 Minority interest share of losses
  of consolidated subsidiaries                    (101,644)             --

 Non-cash fair value of warrants                2,112,500               --
 Bad debt                                          47,521               --
 Write-down of joint venture                       33,799               --
 Changes in operating assets
  and liabilities                                (106,253)          429,666
                                           --------------    --------------
Net cash used in operating activities          (1,352,424)         (480,740)
                                           --------------    --------------

Cash flows from investing activities:
 Purchase of fixed assets                          (3,793)          (33,992)
 Advances to joint ventures                          --            (115,100)
 Advances to ESI                                     --
                                           --------------    --------------

Net cash used in
  Investing activities                             (3,793)         (149,092)
                                           --------------    --------------

Cash flows from financing activities:
 Proceeds from sale of common stock               276,250           112,500
 Proceeds from loans                                 --                  --
 Repayment of loans                                  --                  --
 Proceeds from minority interest                  284,654               150
 Proceeds from former officer
   and stockholder                                   --             515,383
 Repayment to former officer
   and stockholder                                (56,364)         (109,015)
 Proceeds from related parties                       --             187,000
 Repayment to related parties                     (10,000)          (65,000)
 Proceeds from convertible debt                   961,400                --
                                           --------------    --------------

 Net cash provided by
   financing activities                         1,455,940           641,018
                                           --------------    --------------

 Net increase in cash                              99,723            11,186
 Cash - Beginning of year                          14,057             2,871
                                           --------------    --------------
 Cash - End of year                        $      113,780    $       14,057
                                           ==============    ==============

                 See notes to consolidated financial statements


                                      F-6
<PAGE>

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

                                                  Years Ended December 31,
                                           -----------------------------------
                                                2004                2003
                                           ---------------     ---------------
 Supplementary information:
   Cash paid during year for:
      Interest                             $        12,328     $
                                           ===============     ===============

      Income taxes                         $            --     $            --
                                           ===============     ===============
 Changes in operating assets and
   liabilities consists of:
  (Increase) in loan receivable            $       (51,221)    $            --
  (Increase) decrease  in prepaid expenses           3,922              (3,962)
  (Increase) decrease  in deposits                (119,500)                 --
   Increase in other assets                       (173,584)               (650)
   Increase in accounts payable
      and accrued expenses                         234,130             434,278
                                           ---------------     ---------------
                                           $      (106,253)    $       429,666
                                           ===============     ===============
 Non-cash financing activities:

 Issuance of common stock for
  promissory note                          $            --     $       250,000
                                           ===============     ===============

 Offset of note receivable and convertible
    debt in connection with termination
    Agreement                              $            --     $            --
                                           ===============     ===============

 Forgiveness of debt to former
      Shareholders                         $            --     $            --
                                           ===============     ===============

 Offset of note receivable to
   liquidate loan to officer               $            --     $       350,000
                                           ===============     ===============

 Issuance of common stock for debt         $        46,442     $       127,126
                                           ===============     ===============

 Issuance of common stock for investment
    in unconsolidated subsidiary           $            --              7,500
                                           ===============     ===============

 Issuance of common stock in lieu of
    payment of accrued expenses            $            --     $        93,625
                                           ===============     ===============

 See notes to consolidate financial statements


                                      F-7
<PAGE>

                               DELTA MUTUAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      Basis of Presentation

      The Company's  financial  statements  for the year ended December 31, 2004
      have  been  prepared  on a going  concern  basis  which  contemplates  the
      realization of assets and settlement of liabilities and commitments in the
      normal  course  of  business.  Management  recognizes  that the  Company's
      continued existence is dependent upon its ability to obtain needed working
      capital   through   additional   equity  and/or  debt  financing  and  the
      commencement of its planned principal operations.  As of December 31, 2004
      operations  had  commenced  and,  accordingly,  the  Company  is no longer
      considered a development stage enterprise.

      The  Company's  business  is subject to most of the risks  inherent in the
      establishment of a new business  enterprise.  The likelihood of success of
      the Company must be  considered  in light of the  expenses,  difficulties,
      delays and  unanticipated  challenges  encountered in connection  with the
      formation of a new business,  raising  operating and development  capital,
      and the marketing of a new product. There is no assurance the Company will
      achieve a profitable level of operations.

      The Company  presently does not have  sufficient  liquid assets to finance
      its anticipated  funding needs and  obligations.  The Company's  continued
      existence is dependent upon its ability to obtain needed  working  capital
      through  additional  equity  and/or debt  financing  to achieve a level of
      sales  adequate  to support  its cost  structure.  Management  is actively
      seeking  additional  capital to ensure the continuation of its development
      activities and complete the proposed joint ventures.  However, there is no
      assurance that additional  capital will be obtained and the joint ventures
      will be profitable.  These uncertainties raise substantial doubt about the
      ability of the Company to continue as a going  concern.  The  accompanying
      financial statements do not include any adjustments that might result from
      the outcome of uncertainties should the Company be unable to continue as a
      going concern.


                                      F-8
<PAGE>


      Business Plan

      Since the change in control,  new Company  management  has embarked upon a
      new mission and strategic  direction,  through the  establishment of joint
      ventures and a limited  partnership.  This  structure is primarily for the
      establishment of business operations focused on providing construction and
      environmental  technologies  and services to specific  geographic areas in
      Puerto   Rico,   the  Middle   East  and  the  Far  East.   The   Company,
      simultaneously,  made a strategic  decision to minimize its  activities in
      Eastern Europe and to maintain a small passive investment in the area that
      can be expanded in the future should circumstances change.


      The Company has entered into strategic  alliance  agreements  with several
      United  States-based  entities  with  technologies  in  the  environmental
      technology field to support the Company's world wide activities.

      On March 18, 2003 the Company entered into a Letter of Intent with Hi Tech
      Consulting  and  Construction,  Inc.  to form a joint  venture  to provide
      environmental  technology services for certain business sectors located in
      the Middle East and Africa.  The joint  venture  agreement  was  finalized
      January 14, 2004, and the joint venture company,  Delta-Envirotech,  Inc.,
      is based in the  Commonwealth of Virginia and incorporated in the State of
      Delaware.

      Middle East

      On January 22, 2004, the Company announced a strategic  alliance agreement
      between Delta-Envirotech,  Inc. and ZAFF International, Ltd., a technology
      company  located in Saudi Arabia.  The strategic  alliance states that the
      two  companies  will  jointly  pursue  projects  related to soil and water
      reclamation  requirements  in the Middle  East.  On December 1, 2004,  the
      Company  announced  that  ZAFF  International,   Ltd.,  Delta's  strategic
      partner,   received   its   operating   license   from  the  Saudi  Arabia
      environmental  authorities  to employ all soil,  refinery  waste and waste
      water technologies held by Delta for environmental recovery projects. ZAFF
      International,  Ltd.  is  one of  the  first  companies  to be  granted  a
      multi-technology environmental license in Saudi Arabia.

      Far East

      In April 2004,  Delta-Envirotech executed an agreement with the Indonesian
      government's  technology  authority,  LIPI. The agreement outlines a joint
      cooperation  between   Delta-Envirotech,   Inc.  and  a  local  Indonesian
      technology  company  to  commence  energy  recovery  and waste  processing
      operations in Indonesia.  A local joint  venture is being  established  to
      conduct the actual recovery and processing activities.

      Puerto Rico

      On January  20,  2004,  the Company  announced  the  formation  of a joint
      venture project to develop  government  sponsored,  Section 124 low income
      housing in the  Commonwealth of Puerto Rico. The  development,  Brisas Del
      Atlantico,  has been  approved for  development  under  Section 124 of the
      Housing Department,  which provides for government  subsidized  low-income
      housing.  The  Company is the  General  Partner  and  majority  owner of a
      limited  partnership that is the majority  shareholder of Delta Developers
      Corp., a Puerto Rico  corporation,  formed to manage the  construction and
      related  activities  required to build  approximately 270 low income homes
      under Section 124. The necessary  building permits have been submitted for
      approval and a real estate agency has been hired to sell the homes planned
      for  construction.  Due to events  related  to the  ballot  recount in the
      Puerto Rico gubernatorial  election held November 2, 2004, the election of
      a new governor was not certified  until late December  2004.  These events


                                      F-9
<PAGE>

      have delayed the Company's permit approval process. Currently, the Company
      expects the  building  permits to be approved  and presale of the homes to
      begin in the third quarter of 2005.

      On December 9, 2004, the Company announced the formation of a second joint
      venture  project to develop  government  sponsored  Section 124 low income
      housing in the Commonwealth of Puerto Rico using the same  construction as
      the first project.  The Company is the majority owner of Delta  Developers
      Guayanilla  Corp., a Puerto Rico  corporation.  The Company plans to build
      approximately 300 low income houses under Section 124.

      The Company is currently dependent on equity investments and/or loans from
      private investors to pay its operating  expenses.  There are no assurances
      that  such  investors  will  continue  to  advance  funds or invest in the
      Company's  securities.  In the  event  the  Company  is  unable  to obtain
      additional  capital or  funding  it may be unable to pursue  its  business
      plans.  Due to the fact that the company has  limited  operations  at this
      time, it is anticipated that its cash  requirements  will be limited,  and
      that all necessary  capital,  to the extent required,  will be provided by
      investors.  The  Company  anticipates  that it will be  required  to raise
      capital  in the  amount  of  $3,000,000  in the next 12 months in order to
      continue  to fund  its  limited  operations  and to  finance  its  planned
      business operations. However there is no assurance that additional capital
      will be obtained and the joint ventures will be profitable.

      SIGNIFICANT ACCOUNTING POLICIES

      PRINCIPLES OF CONSOLIDATION

      The consolidated  financial statements include the accounts of the Company
      and its majority - owned subsidiaries and joint ventures. The consolidated
      statements  include  100  percent of the assets and  liabilities  of these
      subsidiaries  and joint  ventures and the ownership  interests of minority
      participants   are  recorded  as  "Minority   interests  in   consolidated
      subsidiaries".  All  intercompany  transactions  and  balances  have  been
      eliminated.

      INVESTMENTS

      Long-term  investments  between 20% and 50% in  associated  companies  are
      accounted  for under the equity  method and are included in  Investment in
      Joint  Ventures  on the  Company's  balance  sheet at December  31,  2004.
      Investments  in associated  companies  where the Company has a controlling
      interest and exercises  significant  influence are  consolidated  with the
      Company's operations unless otherwise disclosed.

      USE OF ESTIMATES

      The  preparation of consolidated  financial  statements in conformity with
      accounting  principals  generally accepted in the United States of America
      requires  management  to make  estimates and  assumptions  that effect the
      reported amounts of assets and  liabilities,  and disclosure of contingent
      assets and  liabilities  at the date of the financial  statements  and the
      reported  amounts of  revenues  and  expenses  during the  period.  Actual
      results could differ from those efforts.


                                      F-10
<PAGE>

      LOSS PER SHARE

      Basic and diluted  loss per share is computed by dividing  net loss by the
      weighted  average  number of common  shares  outstanding  during the year.
      Potential common shares are excluded from the loss per share  calculation,
      because the effect would be  antidilutive.  Potential common shares relate
      to the convertible debt and common stock purchase warrants. As of December
      31,  2004,  there  were  13,953,200  potential  common  shares  related to
      convertible  debt  issued by the Company and  8,080,000  potential  common
      shares related to common stock purchase warrants issued by the Company. As
      of December 31, 2003, there were no potential common shares.

      REVENUE RECOGNITION ON CONSTRUCTION CONTRACTS

      The  Company  will  recognize  revenue  in  accordance  with the  guidance
      contained in SEC Staff  Accounting  Bulletin No. 104 "Revenue  Recognition
      Finance Statements" (SAB No. 104).

      Revenue and profits in  construction  contracts will be recorded under the
      percentage of completion  method.  Progress toward  completion is measured
      using the cost to cost method. Under the cost to cost method, revenues and
      profits  are  recognized  based on the ratio that costs  incurred  bear to
      total estimated costs. This method is subject to physical  verification of
      actual progress towards completion.  To date the Company has recognized no
      revenue as defined.

      EVALUATION OF LONG-LIVED ASSETS

      The Company reviews property and equipment for impairment  whenever events
      or  changes  in  circumstances  indicate  the  carrying  value  may not be
      recoverable in accordance  with guidance in SFAS No. 144  "Accounting  for
      the Impairment or Disposal of Long-Lived Assets". If the carrying value of
      the  long-lived  asset exceeds the present value of the related  estimated
      future  cash flows,  the asset would be adjusted to its fair market  value
      and an  impairment  loss  would be  charged  to  operations  in the period
      identified.

      DEPRECIATION AND AMORTIZATION

      Property and equipment are stated at cost. Depreciation is provided for by
      the  straight-line  method over the estimated  useful lives of the related
      assets.

      STOCK OPTION PLAN

      The Company accounts for equity-based  compensation issued to employees in
      accordance  with  Accounting  Principles  Board  ("APB")  Opinion  No.  25
      "Accounting for Stock Issued to Employees". APB No. 25 requires the use of
      intrinsic value method, which measures compensation cost as the excess, if
      any,  of the quoted  price of the stock at the  measurement  date over the
      amount the  employee  must pay to acquire  the stock.  The  Company  makes
      disclosures  of pro forma net  earnings  and  earnings per share as if the
      fair-market-value  based method of accounting had been applied as required
      by SFAS No. 123 "Accounting for Stock-Based Compensation".


                                      F-11
<PAGE>

      In December 2002, the FASB issued SFAS No. 148 "Accounting for Stock-Based
      Compensation-Transition  and Disclosure an amendment of FASB Statement No.
      123".  SFAS No.  148  provides  alternative  methods of  transition  for a
      voluntary  change  to the  fair  value  based  method  of  accounting  for
      stock-based  employee  compensation.  It also requires  disclosure in both
      annual and interim financial statements about the method of accounting for
      stock  based  employee  compensation  and the effect of the method used on
      reported  results.  The Company adopted the disclosure  provisions of SFAS
      No. 148  beginning  with the year ended  December  31,  2002.  The Company
      grants stock options with exercise prices at fair market value at the date
      of grant.  The Company will continue to account for  stock-based  employee
      compensation  under  recognition and measurement  principle of APB Opinion
      No. 25 and related  interpretations through December 15, 2005. Thereafter,
      the Company  will  account  for  stock-based  compensation  under SFAS No.
      123(R).  The Company is currently  evaluating its position and will make a
      determination to account for the compensation  costs either  prospectively
      or retroactively at the time of adoption.

      The Company has adopted the  disclosure-only  provisions  of SFAS No. 123,
      "Accounting for Stock-Based Compensation" (SFAS No. 123). Had compensation
      cost for the Company's stock option plan been determined based on the fair
      market  value at the  grant  date of awards  in 2004  consistent  with the
      provisions  of SFAS No.  123,  the  Company's  net loss and loss per share
      would have been reduced to the pro forma amounts included below:



       For the year ended
                                              December 31,
                                    --------------------------------
                                         2004               2003
                                    --------------    --------------

Net loss-as reported                $   (3,920,699)   $   (1,249,509)

  Deduct:  Total stock-based
  employee compensation expense
  determined under fair value based
  method for all awards,
  net of taxes                             406,250                --
                                    --------------    --------------

Net loss- pro forma                 $   (4,326,949)   $   (1,249,509)
                                    ==============    ==============

Loss per common share
  basic and diluted- as reported    $        (0.28)   $        (0.19)

Loss per common share
  basic and diluted - pro forma     $        (0.30)   $        (0.19)

      The fair  value of each  option  grant is  estimated  on the date of grant
      using the Black-Scholes  option-pricing  model with the following weighted
      average-average  assumptions  used for grants in 2004:  dividends yield of
      0%, expected  volatility of 116% and expected life of 10 years.  6,500,000
      options were granted  during the year ended  December 31, 2004,  and there
      were no option grants in 2003.


                                      F-12
<PAGE>

      The Company is also  authorized  to issue shares of stock to its employees
      from its 2001  Employee  Stock  Option  Plan.  The  Company  expenses  the
      issuance of stock awards in  accordance  with SFAS No. 123.  Shares issued
      from the Plan are  expensed at the time of  issuance,  as the common stock
      issued has no  restrictions  to the  employees.  The Company  issued stock
      awards to five employees totaling 339,500 shares from the 2001 Plan during
      2004 and 358,000 shares issued to four  employees  during 2003. The shares
      issued were at fair market value as compensation to employees. The Company
      recorded  compensation  expense of $52,000  and $24,000 and is included in
      the Company's statement of operations for the year ended December 31, 2004
      and 2003, respectively.


                                      F-13
<PAGE>

      STOCK-BASED COMPENSATION

      The  Company   issues   shares  of  its  common  stock  to  employees  and
      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, 2004 and 2003 the Company  issued  3,840,000 and
      1,230,000 common shares respectively, and recorded compensation expense of
      $458,175,  and $244,594  respectively,  in connection with the issuance of
      these  shares.  In 2004,  the Company  issued  412,000  common  shares and
      recorded $70,040 in settlement expenses in connection with the termination
      of a license agreement.

      The Company  also  granted  8,880,000  warrants to the various  lenders to
      acquire the  Company's  common  stock  during the year ended  December 31,
      2004. The warrants are  exercisable  at a price per share of $0.10,  which
      was below the fair market value at the time of the grant. The warrants may
      be exercised any time after issuance and expire March 31, 2006. During the
      year ended December 31, 2004, 800,000 warrants were exercised.  There were
      no warrants issued during the year ended December 31, 2003.

      The fair value of the  8,880,000  warrants  amount to  $2,112,500  and was
      charged to  operations  and is  included  in  interest  element of warrant
      issuance  in  accompanying  statement  of  operations  for the year  ended
      December 31, 2004.

      INCOME TAXES

      The  Company  accounts  for  income  taxes  using an asset  and  liability
      approach under which deferred taxes are recognized by applying enacted tax
      rates  applicable  to future years to the  differences  between  financial
      statement  carrying  amounts  and the tax  basis of  reported  assets  and
      liabilities.  The principal  item giving rise to deferred taxes are future
      tax benefits of certain net operating loss carryforwards.

      FAIR VALUE OF FINANCIAL INSTRUMENTS

      For  financial  instruments  including  cash,  accounts  payable,  accrued
      expenses,  and  convertible  debt, it was assumed that the carrying amount
      approximated   fair  value  because  of  the  short   maturities  of  such
      instruments.

      RECLASSIFICATIONS

      Certain  reclassifications  have  been  made to prior  period  amounts  to
      conform to current year presentation.


      NEW FINANCIAL ACCOUNTING STANDARDS


      In December 2004, the Financial  Accounting Standard Board ("FASB") issued
      Statement  on  Financial   Accounting   Standards   ("SFAS")  No.  123(R),
      "Share-Based  Payment"  (revised),  that will require  compensation  costs
      related  to  share-based  payment  transactions  to be  recognized  in the
      financial statements.  With limited exceptions, the amount of compensation
      cost will be measured based on the grant-date  fair value of the equity or
      liability  instruments  issued.  In  addition,  liability  awards  will be
      remeasured  each reporting  period.  Compensation  cost will be recognized
      over the period that an  employee  provides  service in  exchange  for the
      reward.  The statement also amends SFAS No. 95, "Statement of Cash Flows",
      to require that excess tax benefits be reported as a financing cash inflow
      rather than as a reduction of taxes paid.  SFAS No. 123(R) is effective as


                                      F-14
<PAGE>

      to the Company as of the beginning of the first interim period that begins
      after June 15, 2005. The Company is currently  evaluating its position and
      will make its  determination to account for the compensation  costs either
      prospectively or  retroactively  at the time of adoption.  The adoption of
      SFAS 123(R) is expected to have a material effect on the Company's results
      of operations.

      In December 2004,  the FASB staff issued FASB Staff  Position  ("FSP") FAS
      109-1,  "Application  of FASB  Statement  No. 109,  Accounting  for Income
      Taxes, to the Tax Deduction on Qualified Production Activities Provided by
      the  American  Jobs  Creation  Act of 2004"  to  provide  guidance  on the
      application  of Statement  109 to the  provision  within the American Jobs
      Creations  Act of 2004  (the  "Act")  that  provides  tax  relief  to U.S.
      domestic manufacturers.  The FSP states that the manufacturers,  deduction
      provided for under the Act should be accounted for as a special  deduction
      in accordance with Statement 109 and not as a tax rate reduction.  The FSP
      is  effective  upon  issuance.  The  adoption  of FAS 109-1  could  have a
      material  effect on the  Company's  results  of  operations  or  financial
      position.

      In December 2004, the FASB staff issued FSP No. FAS 109-2, "Accounting and
      Disclosure Guidance for the Foreign Earnings Repatriation Provision Within
      the  American  Jobs  Creation  Act of  2004"  to  provide  accounting  and
      disclosure  guidance for the repatriation  provisions included in the Act.
      The Act introduced a special limited-time  dividends received deduction on
      the  repatriation of certain foreign  earnings to a U.S.  taxpayer as more
      fully described in Note 8 of Notes to Consolidated  Financial  Statements.
      The FSP is effective upon issuance. The adoption of FAS 109-2 could have a
      material  effect on the  Company's  results of  operations  and  financial
      position.

      In December 2004, the FASB issued SFAS No. 153 an amendment of APB Opinion
      No. 29 "Exchanges of Nonmonetary Assets".  SFAS No. 153 amends APB Opinion
      No. 29 by  eliminating  the  exception  under  APB No. 29 for  nonmonetary
      exchanges  of similar  productive  assets and  replaces  it with a general
      exception for exchanges of nonmonetary  assets that do not have commercial
      substance.  A nonmonetary  exchange has commercial substance if the future
      cash flows of the entity are expected to change  significantly as a result
      of the  exchange.  SFAS No. 153 is effective for periods  beginning  after
      June 15,  2005.  The  adoption  of SFAS No. 153 is not  expected to have a
      material  effect  on  the  Company's  financial  position  or  results  of
      operations.

      In November, 2004 the FASB issued SFAS No. 151, an amendment to ARB No. 43
      chapter 4 "Inventory Costs".  SFAS No. 151 requires that abnormal costs of
      idle  facility  expenses,  freight,  handling  costs and  wasted  material
      (spoilage)  be  recognized  as  current-period  charges.  SFAS No.  151 is
      effective for fiscal years beginning after June 15, 2005. Adoption of SFAS
      No. 151 is not expected to have a material impact on the Company's results
      of operations or financial position.


                                      F-15
<PAGE>

      In December 2003, the FASB issued SFAS No. 132(R),  "Employer's Disclosure
      about  Pensions and Other  Postretirement  Benefits"  (revised).  SFAS No.
      132(R) retains disclosure requirements of the original SFAS No. 132(R) and
      requires  additional  disclosures  relating to assets,  obligations,  cash
      flows,  and net periodic  benefit  cost.  SFAS No. 132(R) is effective for
      fiscal  years  ending  after  December  15,  2003,   except  that  certain
      disclosures  are  effective  for fiscal  years ending after June 15, 2004.
      Interim period  disclosures  are effective for interim  periods  beginning
      after  December 15, 2003.  The adoption of SFAS No.  132(R) did not have a
      material  effect on the  Company's  results  of  operations  or  financial
      position.

      In May  2003,  the FASB  issued  SFAS No.  150,  "Accounting  for  Certain
      Financial   Instruments  with  Characteristics  of  Both  Liabilities  and
      Equity."  SFAS No. 150  clarifies  the  accounting  for certain  financial
      instruments  with  characteristics  of both  liabilities  and  equity  and
      requires that those instruments be classified as liabilities in statements
      of financial  position.  Previously,  many of those financial  instruments
      were  classified  as  equity.  SFAS No.  150 is  effective  for  financial
      instruments  entered into or modified after May 31, 2003, and otherwise is
      effective at the beginning of the first  interim  period  beginning  after
      June 15, 2003. The adoption of the provisions of SFAS No. 150 did not have
      a material effect on the Company's financial position.

      In April 2003,  the FASB issued SFAS No. 149,  "Amendment of Statement No.
      133 on Derivative  Instruments  and Hedging  Activities."  This  statement
      amends and clarifies  financial  accounting  and reporting for  derivative
      instruments,  including certain derivative  instruments  embedded in other
      contracts  and for  hedging  activities  under  FASB  Statement  No.  133,
      "Accounting  for  Derivative  Instruments  and Hedging  Activities."  This
      Statement  is  effective  for  contracts  entered  into or modified  after
      September  30,  2003,  and  for  hedging  relationships  designated  after
      September  30, 2003.  Adoption of this  statement  did not have a material
      impact on the Company's results of operations or financial position.

      In January  2003,  the FASB  issued  FASB  Interpretation  ("FIN") No. 46,
      "Consolidation of Variable Interest  Entities." In December 2003, the FASB
      issued  FIN  No.   46(R)   (revised)   to  address   certain  FIN  No.  46
      implementation  issues.  This  interpretation  requires  that the  assets,
      liabilities,  and  results of  activities  of a Variable  Interest  Entity
      ("VIE") be  consolidated  into the financial  statements of the enterprise
      that has a  controlling  interest in the VIE. FIN No. 46(R) also  requires
      additional  disclosures  by primary  beneficiaries  and other  significant
      variable  interest  holders.  For  entities  acquired  or  created  before
      February 1, 2003, this  interpretation  is effective no later than the end
      of the first  interim or  reporting  period  ending  after March 15, 2004,
      except for those VIE's that are considered to be special purpose entities,
      for which the effective date is no later than the end of the first interim
      or annual  reporting  period  ending  after  December  15,  2003.  For all
      entities  that  were  acquired   subsequent  to  January  31,  2003,  this
      interpretation  is  effective  as of the first  interim  or annual  period
      ending after  December 31, 2003. The adoption of FIN No. 46 did not have a
      material  impact on the  Company's  results  of  operations  or  financial
      position.

      In November 2002, the FASB issued FIN No. 45, "Guarantor's  Accounting and
      Disclosure  Requirements for Guarantees,  Including Indirect Guarantees of
      Indebtedness of Others",  and  interpretation of FASB Statements No. 5, 57
      and 107 and Rescission of FASB Interpretation No. 34. FIN No. 45 clarifies
      the requirements of SFAS No. 5, Accounting for Contingencies,  relating to
      the guarantor's accounting for, and disclosure of, the issuance of certain
      types of  guarantees.  This  interpretation  clarifies that a guarantor is
      required to recognize, at the inception of certain types of guarantees,  a
      liability for the fair value of the  obligation  undertaken in issuing the
      guarantee.  The initial recognition and initial measurement  provisions of


                                      F-16
<PAGE>

      this  Interpretation  are applicable on a prospective  basis to guarantees
      issued  or  modified  after  December  31,  2002,   irrespective   of  the
      guarantor's   fiscal  year-end.   The  disclosure   requirements  in  this
      interpretation are effective for financial statements of interim or annual
      periods ending after December 15, 2002. The Company  adopted FIN No. 45 on
      January 1, 2003. The adoption of FIN No. 45 did not have a material impact
      on the Company's results of operations or financial position.

      In June  2002,  the  FASB  issued  SFAS No.  146,  "Accounting  for  Costs
      Associated  with Exit or Disposal  Activities."  This  Statement  requires
      recording costs associated with exit or disposal  activities at their fair
      values  when a  liability  has been  incurred.  Under  previous  guidance,
      certain exit costs were accrued upon  management's  commitment  to an exit
      plan. The Company adopted SFAS No. 146 on January 1, 2003. The adoption of
      SFAS No. 146 did not have a  material  impact on the  Company's  result of
      operations or financial position.

2.    REFUNDABLE DEPOSITS

                                                     December 31,
                                            -------------------------------
                                                 2004             2003
                                            --------------   --------------
      Deposits on land                      $       60,700   $       25,200
      Other joint venture deposits                  84,000               --
                                            --------------   --------------
                                            $      144,700   $       25,200
                                            ==============   ==============

3.    PROPERTY AND EQUIPMENT




                                                     December 31,
                                            -------------------------------
                                                 2004             2003
                                            --------------   --------------

      Equipment                             $        4,778   $          985
      Leasehold improvements                         7,807            7,807
                                            --------------   --------------
                                            $       12,585   $        8,792
      Less accumulated
      Depreciation                                  (3,896)          (1,759)
                                            --------------   --------------
                                            $        8,689   $        7,033
                                            ==============   ==============


      Depreciation  expense  for the  years  ended  December  31,  2004 and 2003
      amounted to $2,137 and $1,759, respectively.


                                      F-17
<PAGE>

4.    DUE FROM CEVA INTERNATIONAL, INC.

      On June 17, 2003 the Company and Dr.  Louis Rose entered into an agreement
      whereby  Dr. Rose  assigned  all of his  rights,  title and  interest in a
      promissory note from CEVA  International,  Inc.  ("CEVA") in the amount of
      $250,000 to the Company in exchange for an aggregate of 800,000  shares of
      the Company's  common  stock.  The note was  guaranteed by Gary  Robinson,
      formerly the Company's largest shareholder.  CEVA did not pay the note and
      the Company  exercised  its right  against the  guarantor  by reducing the
      amount  owed on the  revolving  line of credit  with Gary  Robinson in the
      amount of $250,000. See Note 9 below.

5.    INVESTMENT IN JOINT VENTURES

      a) In  December  2003,  the  Company  formed a joint  venture  to  develop
      government sponsored,  Section 124, low income housing in the commonwealth
      of Puerto Rico. The Company became the general  partner and majority owner
      of a limited partnership,  Delta Development Partners,  LP, that holds the
      majority share of Delta Developers Corp, a Puerto Rico corporation, formed
      to manage  the  construction  and  related  activities  required  to build
      approximately  270 low income homes under  Section 124. The  operations of
      the joint  venture  have been  consolidated  with the Company for the year
      ended December 31, 2004.

      During the year  ended  December  31,  2004,  Neil  Berman,  an  investor,
      purchased a 25% interest in Delta Development Partners, LP for $148,000.

      On  October  6,  2004 the  Company  entered  into a second  joint  venture
      agreement to develop government sponsored,  Section 124 low income housing
      in the Commonwealth of Puerto Rico. The Company became the general partner
      and majority owner of a limited  partnership,  Delta Development  Partners
      II, LP, that holds the majority share of Delta Developers Guayanilla Corp,
      a Puerto Rico  corporation  formed to manage the  construction and related
      activities  required to build  approximately  300 low income  houses under
      Section 124. The  operations of the joint  venture have been  consolidated
      with the Company for the year ended December 31, 2004.

      During the  period  October  6, 2004  through  December  31,  2004,  Ebony
      Finance,  Ltd.  and T & T  Asset  Management,  investors,  purchased  a 4%
      interest from the existing partners in Delta  Development  Partners II, LP
      for $40,000.

b)    On March 18,  2003,  the  Company  entered  into a letter  of intent  with
      Hi-Tech  Consulting  and  Construction,  Inc.  ("Hi-Tech") to form a joint
      venture to provide environmental  technology services primarily to markets
      in  the  Middle  East  and  Africa.  The  joint  venture  company,   named
      Delta-Envirotech,  Inc., is based in Virginia and focuses on participating
      in foreign government sponsored pollution remediation projects.  The joint
      venture  agreement  was concluded  January 14, 2004 and  Delta-Envirotech,
      Inc., a Delaware  corporation,  was formed.

      On January 14,  2004,  Delta and Hi-Tech  agreed to each sell 75 shares of
      the joint  venture to Ali Razmara  ("Razmara"),  representing  a ten (10%)
      percent interest, for $2. The transaction became effective July 14, 2004.

      On January 22, 2004,  the Company  announced the conclusion of a strategic
      alliance agreement between Delta-Envirotech,  Inc. and ZAFF International,
      Ltd.,  an  advanced  technology  company  located  in  Saudi  Arabia.  The
      strategic  alliance  states that the two  companies  will  jointly  pursue
      projects related to soil and water reclamation  requirements in the Middle
      East.


                                      F-18
<PAGE>

      The operations  of the  joint  venture  have been  consolidated  with the
      Company for the year  ending  December  31, 2004 as the Company  maintains
      effective control over the operations.

c)    On May 1, 2003,  the  Company  entered  into a joint  venture in  Romania,
      forming a new Company,  Delta TP Mediu,  SRL. The joint venture,  of which
      the Company owns 10%, was  organized  to  primarily  pursue the  sourcing,
      treatment  and  processing  of  hydrocarbon  based  and  other  industrial
      residuals  and,  where  possible,  to  create  alternative  fuels  and raw
      materials for  industrial use primarily in Romania.  The Company  invested
      $33,800 in the joint venture,  consisting of $15,100 in cash, the issuance
      of 100,000 shares of common stock valued at $15,000 and a cash  obligation
      of $11,200 to the joint  venture  which is  included in the Due to Related
      Party amount on the  Company's  balance  sheet at December  31, 2003.  The
      Company made a strategic  decision to minimize its  activities  in Eastern
      Europe and the  investment  has been  written  down to $1 and a charge was
      taken against operations in 2004.

d)    On April 25,  2003,  the Company  entered into a letter of intent with Ms.
      Jamie  Burrows and Burrows  Consulting,  Inc.,  a Texas based  corporation
      (collectively referred to as "Burrows") to form a joint venture company to
      be known as Delta  Specialty  Services based in Houston,  Texas and was to
      engage in  providing  waste  remediation  technologies  and  services on a
      project basis to the United States  Government,  foreign  governments  and
      their respective departments, agencies, political sub-divisions as well as
      to private  entities around the world.  The funding  commitments  were not
      accomplished  on the  established  timetable and the joint venture has not
      commenced  operations and activities have ceased in this area. The Company
      expensed  $75,000  that had been  advanced  to the  joint  venture  and is
      included  in the  Company's  statement  of  operations  for the year ended
      December 31, 2003. No charges were incurred during 2004.

6.    CONVERTIBLE DEBT

a)    On May 12, 2004, the Company issued two convertible notes in the principal
      amounts of $193,740 and $129,160, respectively, to a related party and the
      spouse of a related party.  Each note is due May 12, 2006. Both notes bear
      interest  of 4% per  annum and are  convertible  into  common  stock at an
      initial  conversion  price of $0.125 per share.  Interest  expense for the
      year ended  December  31,  2004  amounted  to $6,617 and was  included  in
      accrued expenses on the Company's balance sheet at December 31, 2004.


b)    On July 1, 2004, the Company issued a convertible  note to a related party
      for $157,000 due  December  31,  2006.  The note bears  interest of 4% per
      annum and are convertible into common stock at an initial conversion price
      of $0.05 per share.  On January 7, 2005, the Company issued 500,000 shares
      of common stock as partial repayment of $25,000 of the principal amount of
      the note.  Interest  expense for the year ended December 31, 2004 amounted
      to $3,165 and was included in accrued  expenses on the  Company's  balance
      sheet at December 31, 2004.


c)    On July 16, 2004, the Company issued a convertible note to a related party
      for $37,500 due January 16, 2007.  The note bears interest of 4% per annum
      and is  convertible  into common stock at an initial  conversion  price of
      $0.05 per share.  Interest  expense for the year ended  December  31, 2004
      amounted  to $682 and was  included in accrued  expenses on the  Company's
      balance sheet at December 31, 2004.


d)    On September 20, 2004, the Company issued a series of convertible notes to
      various  lenders in the aggregate  amount of $301,500 with a maturity date


                                      F-19
<PAGE>

      of September  16, 2006.  Of the  aggregate  principal  amount  $71,500 was
      issued to three related  parties.  The notes bear interest of 6% per annum
      and are convertible  into common stock at an initial  conversion  price of
      $0.05 per share.  On November 19, 2004,  the Company issued 400,000 shares
      of common stock to one of the lenders as repayment of the principal amount
      of a $20,000 convertible note issued by the Company on September 20, 2004.
      The Company paid the interest on the note of $198 by issuing the lender an
      additional  3,951 shares of common  stock.  Interest  expense for the year
      ended  December 31, 2004 amounted to $4,918 and $4,220 was included in the
      accrued expenses on the Company's balance sheet at December 31, 2004.

e)    On September 23 and September 27, 2004, the Company issued two convertible
      notes in the principal  amounts of $10,000 and $20,000,  respectively,  to
      two related  parties..  The notes are due September 22, 2006 and September
      26, 2006,  respectively.  Each note bears  interest of 6% per annum and is
      convertible into common stock at an initial  conversion price of $0.05 per
      share.  Interest  expense for the year ended December 31, 2004 amounted to
      $475 and was included in accrued  expenses on the Company's  balance sheet
      at December 31, 2004.


f)    On October 19, 2004,  the Company  issued a convertible  note to a related
      party for $25,000 due October 18, 2006.  The note bears interest of 6% per
      annum and is convertible into common stock at an initial  conversion price
      of $0.05 per share. On November 23, 2004, the Company repaid the principal
      amount of this note by issuing 500,000 shares of common stock. The Company
      paid the interest on the note of $144 by issuing the lender an  additional
      2,877 shares of common stock.

g)    On November 2 and  November 5, 2004,  the Company  issued two  convertible
      notes in the principal  amounts of $12,500 and $25,000,  respectively,  to
      two lenders,  one of whom was a related party.  The notes are due November
      1, 2006 and November 4, 2006 respectively.  Each note bears interest of 6%
      per annum and is  convertible  into common stock at an initial  conversion
      price of $0.05 per share.  On  November 8, 2004,  the  Company  repaid the
      $25,000 note by issuing  500,000 shares of common stock with interest paid
      in cash.  On January 3,  2005,  the  Company  repaid the  $12,500  note by
      issuing  250,000 shares of common stock.  The Company paid the interest of
      $127 by issuing the lender an additional 2,542 shares of common stock.

h)    On November 26, 2004, the Company entered into a settlement  agreement and
      mutual  release with a stockholder.  As part of the settlement  amount the
      Company  issued a  convertible  note for $50,000 due on November 24, 2006.
      The note bears  interest  of 6% per annum and is  convertible  into common
      stock at an initial conversion price of $0.05 per share.

i)    At December 31, 2004,  the Company's  outstanding  convertible  notes were
      convertible into 13,953,200 shares of common stock.

      The following  table shows the  maturities by year of the total  long-term
      convertible debt obligations at December 31:

                                            2005        $         --
                                            2006             853,900
                                            2007              37,500
                                                        ------------
                                                        $    891,400
                                                        ============


                                      F-20
<PAGE>

7.    ACCRUED EXPENSES

      Accrued expenses consist of the following:

                                                Years Ended
                                                December 31,
                                         ---------------------------
                                              2004           2003
                                         ------------   ------------

              Professional fees          $     50,000   $     20,000
              Consulting fees                    --           61,500
              Interest expense                 16,077         10,598
              Payroll expense                 125,110           --
              Payroll expense officers        214,149        158,224
              Payroll tax expense              20,801         14,964
                                         ------------   ------------
                                         $    426,137   $    265,286
                                         ============   ============

8.    LOAN RECEIVABLE - FORMER OFFICER/SHAREHOLDER

      During 2003, the Company  entered into a revolving  credit  agreement with
      Gary  Robinson  ("Robinson"),  the  former  Chairman  and Chief  Executive
      Officer of the Company,  in the amount of $300,000.  The credit  agreement
      bears  interest at 4.2%.  Robinson  advanced the Company  $515,383 and the
      Company repaid Robinson $109,515 through December 31, 2004.

      In March 2003,  the  Company  entered  into a  consulting  agreement  with
      M.U.R.G. and advanced M.U.R.G. $100,000 against future compensation in the
      form of a promissory  note. The project did not go forward and on June 16,
      2003,  Robinson  agreed to assume the  promissory  note from M.U.R.G.  and
      reduce the amount due him.

      On March 4, 2004,  the Company  paid  $121,508  to David Green  ("Green"),
      which  constituted full and complete  repayment of a $100,000 loan made by
      Green to  Robinson.  The loan was  secured  by a pledge  of the  Company's
      common stock.  The Company  offset the payment to Green against the amount
      due Robinson.

      The Company recorded  interest expense of $425 and $7,986 on the revolving
      line  of  credit  for  the  years  ended   December  31,  2004  and  2003,
      respectively.

      After adjustments for expense reimbursements and interest due Robinson and
      offsets as noted above,  Robinson owed the Company  $51,221 as of December
      31,  2004.  The full  amount  of the  receivable  has been  reserved  as a
      potential bad debt.


                                      F-21
<PAGE>

9.    LOANS FROM RELATED PARTIES

a)    On January 7, 2003,  the Company  borrowed  $15,000  from  Michael  Pisani
      ("Pisani") a stockholder of the Company.  Pisani received 50,000 shares of
      common stock (valued at fair market value) which  represented  the payment
      of interest  accruing on the unpaid principle  balance through January 27,
      2003, the maturity date. The Company recorded interest expense of $ 15,000
      in 2003 for the issuance of the shares.

      The Company did not pay the  outstanding  balance on the maturity date and
      was  required to pay monthly  interest of one (1%)  percent to Pisani.  On
      April 7, 2003, the Company  repaid Pisani $5,000  against the  outstanding
      balance.  The balance due Pisani at December 31, 2003 was $10,000.  In May
      2003,  the note was amended.  Subsequently,  a dispute  arose  between the
      parties about the validity of the amendment.

      In March, 2004 the Company repaid the principal and interest due under the
      terms of the amended  note.  Pisani,  through  counsel,  has  informed the
      Company that, by accepting  repayment,  he does not prejudice his position
      regarding the validity of the original  note. The Company is attempting to
      resolve  this  dispute.  If the  matter  can not be  resolved  and  Pisani
      prevails in a legal action against the Company, Pisani may be entitled to,
      in addition to the principal amount and interest that he has received from
      the Company, shares of common stock as additional interest.

      The Company recorded  interest expense of $1,599 and $16,600 for the years
      ended December 31, 2004 and 2003, respectively, and $1,600 was included in
      the accrued expense on the Company's balance sheet at December 31, 2003.

b)    On May 15, 2003 the Company borrowed $12,000 from Michael Fasci, ("Fasci")
      a  stockholder  of the Company.  Fasci  received  50,000  common shares of
      common  stock which  represented  the payment of interest  through May 26,
      2003,  the maturity  date. The Company  recorded  interest  expense in the
      amount of $13,750  and $6,705 for the years  ended  December  31, 2004 and
      2003, respectively. On February 27, 2004 the Company issued 140,000 shares
      of common  stock  (valued at fair market  value) in repayment of the loan,
      interest,  penalty and expenses amounting to $19,100. $840 was included in
      the accrued expense on the Company's balance sheet at December 31, 2003.

c)    On October 17, 2003 the company borrowed $60,000 from Mitchell  Rosenthal,
      a  shareholder  of the Company,  with  interest at the rate of six percent
      (6%) per annum. The note was repaid in December 2003 through conversion of
      security that was posted against the loan by Gary T. Robinson on behalf of
      the Company.  The Company  recorded  interest expense of $156 for the year
      ended December 31, 2003.

d)    On December 30, 2003 the Company  borrowed  $50,000 from Edward Tuccio,  a
      shareholder  of the  Company.  The note was due  December  29,  2004  with
      interest at six percent (6%) per annum. The note was converted on February
      11,  2004 into  500,000  shares of common  stock  (valued  at fair  market
      value). The Company recorded accrued interest expense of $168 for the year
      ended  December  31, 2004 The Company did not expense any interest for the
      year ended December 31, 2003.


                                      F-22
<PAGE>

e)    On December  11,  2003 the Company  borrowed  $50,000  from Neil Jones,  a
      shareholder  of the  Company.  The note was due  December  16,  2004  with
      interest at six percent  (6%) per annum.  The  Company  recorded  interest
      expense of $112 and $63 for the year  ended  December  31,  2004 and 2003,
      respectively. Accrued interest is in the amount of $132 is included in the
      Company  balance sheet at December 31, 2003.  The note was converted  into
      500,000 shares of common stock on January 24, 2004.

10.   MINORITY INTERESTS

      Minority   interests   primarily   consist  of   ownership   interest   in
      Delta-Envirotech,   Inc.,   Delta   Development   Partners,   L.P.,  Delta
      Development Partners II, L.P., Delta Developers Corp. and Delta Developers
      Guayanilla,  Corp. The income and losses from operations of these entities
      and  their  respective  minority  interests  have  been  reflected  in the
      Company's statement of operations for the twelve months ended December 31,
      2004.  There  are  losses  for the  minority  interests  in  excess of the
      $101,644 attributed to the minority interests due to basis limitations. In
      future periods, the profits attributable to the minority interests will be
      first  absorbed  against  any  unused  losses  until the  losses are fully
      absorbed.  The  amount  on the  Company's  balance  sheet  represents  the
      minority interests as of December 31, 2004.

      The following  represents a schedule of minority  interests as of December
      31,

                                                 2004            2003
                                             ------------   ------------
        Delta Development Partners L.P.      $    143,010   $        --
        Delta Development Partners II, L.P         40,000            --
        Delta Developers Guayanilla, Corp.            150            --
        Delta Developers Corp.                       --              150
        Delta-Envirotech, Inc.                       --              --
                                             ------------   ------------
                                             $    183,160   $        150
                                             ============   ============

11.   STOCKHOLDER'S DEFICIENCY

a.    On January 12, 2003,  the Company  entered into an agreement  with Kenneth
      Martin,  the Company's former controlling  shareholder,  to compensate him
      for past  services  rendered to the  Company in the amount of $12,454,  of
      which was accrued at December 31, 2002.  The Company  issued 30,000 shares
      of common stock registered  pursuant to a Form S-8 registration  statement
      in full payment of the Company's debt.

b.    On February 4, 2003, the Company and J. Dapray Muir,  Esq. ( the Company's
      previous  attorney)  entered into an agreement to compensate  him for past
      services  rendered to the  Company in the amount of $34,669,  all of which
      was accrued at December  31, 2002.  The Company  issued  50,000  shares of
      common stock,  registered pursuant to a Form S-8 registration statement in
      full payment of the Company's debt.

c.    On February 24, 2003 the Board of Directors effected a forward stock split
      of five to one. All references to common stock after that date reflect the
      forward stock split.

d.    On February 3, 2003,  the Company and Peter  Russo,  an  executive  of the
      Company,  entered into an agreement to  compensate  him for past  services
      rendered to the Company in the amount $20,000, all of which was accrued at
      December  31,  2002.  The Company  issued  40,000  shares of common  stock
      registered  pursuant to a Form S-8 registration  statement in full payment
      of the Company's debt


                                      F-23
<PAGE>

e.    On February 10, 2003, the Company and Jerome  Kindrachuk,  an executive of
      the Company, entered into an agreement to compensate him for past services
      rendered to the Company in the amount of $20,000, all of which was accrued
      at December 31, 2002. The Company issued 200,000 shares of common stock in
      full payment of the Company's debt in February 2003.

f.    On April 29, 2003,  the Company and Peter  Russo,  the CEO of the Company,
      entered  into  an  agreement  to  compensate  him  in  recognition  of his
      commitment  for  services  in the amount of $22,500.  The  Company  issued
      100,000 shares of common stock in full payment of this debt.

g.    On April 29, 2003, the Company and Jerry  Kindrachuk,  an executive of the
      Company, entered into an agreement to compensate him in recognition of his
      commitment  for  services  in the amount of $22,500.  The  Company  issued
      100,000 shares of common stock in full payment of this debt.

h.    On April  29,  2003 the  Company  and  Steven  L.  Gray,  entered  into an
      agreement to compensate  him for past services  rendered to the Company in
      the amount of $50,000.  The Company  issued 100,000 shares of common stock
      in full payment of this debt.

i.    On April  29,  2003,  the  Company  and  Kevin  Forcier,  entered  into an
      agreement to compensate  him for past services  rendered to the Company in
      the amount of $10,000. The Company issued 20,000 shares of common stock in
      full payment of this debt.

j.    On April 29,  2003,  the  Company  and T&T  Asset  Management  of  Zurich,
      Switzerland,  entered  into an  agreement  to  compensate  them  for  past
      services  rendered in the amount of $50,000.  The Company  issued  240,000
      shares of common stock in full payment of this debt.

k.    On June 30, and July 23, 2003, the Company and Michael Kahn,  entered into
      an agreements to compensate him for past services  rendered to the Company
      in the amount of $16,500 and  $16,500  respectively.  The  Company  issued
      80,000 shares of common stock in full payment of this debt.

l.    On July 1, 2003, the Company entered into an agreement with Gary Robinson,
      a stockholder,  former CEO and former chairman, to compensate him for past
      services rendered to the Company in the amount of $93,625,  the fair value
      of the  services.  The  Company  issued  280,000  shares of  common  stock
      registered  pursuant to a Form S-8 registration  statement in full payment
      of the Company's debt.

m.    On August 8, 2003 the Company and Joseph Tomasek entered into an agreement
      to compensate him for past services rendered in the amount of $40,000. The
      Company  issued  200,000  shares of common  stock in full  payment of this
      debt.

n.    On August 8, 2003,  the Company  and a private  investor  entered  into an
      agreement  for the  purchase by the  investor of 100,000  shares of common
      stock for $50,000.

o.    On August 11, 2003,  the Company and Joy Miller  entered into an agreement
      for compensation of services to the Company in the amount of $43,750.  The
      Company  issued  100,000  shares of common  stock in full  payment of this
      debt.


                                      F-25
<PAGE>

p.    On August 22,  2003,  the Company and a private  investor  entered into an
      agreement  for the  purchase by the  investor of 250,000  shares of common
      stock for $50,000.

q.    On October 21, 2003, the Company entered into agreements for  compensation
      for services with Nela Pavaliou and Business Centres  International,  Inc.
      in the amount of $1,750 for each.  The  Company  issued  50,000  shares of
      common stock in full payment of this debt.

r.    On  November  15,  2003,  the  Company  and Neil  Berman  entered  into an
      agreement for the purchase by Mr. Berman of 100,000 shares of common stock
      for $12,500.

      On November 15 and December  15, 2003 the Company and Neil Berman  entered
      into consulting  agreements with compensation for consulting of $8,500 and
      $850 respectively.  The Company issued 100,000 and 10,000 shares of common
      stock respectively in full payment of this debt.

s.    On January  14,  2004,  the  Company and David  Razmara,  entered  into an
      agreement to compensate  him for past services  rendered to the Company in
      the amount of $4,125,  all of which was accrued at December 31, 2003.  The
      Company issued 50,000 shares of common stock in full payment of this debt.

t.    In February 2004, the Company sold to a private investor 300,000 shares of
      restricted  common  stock for  $37,500,  valued at $.125 per  share,  fair
      market value at the time of issuance.

u.    The  Company  and Citrus  Land and  Development  Company  entered  into an
      agreement  for services  rendered to the Company in the amount of $25,000.
      In February  2004,  the Company  issued  355,000 shares of common stock in
      connection with this agreement.

v.    On March 31, 2004 the Company and MicroCap, Inc. entered into an agreement
      for services rendered to the Company in the amount of $9,000.  The Company
      issued 30,000 shares of common stock in connection with this agreement.

w.    The Company and Kenneth Martin entered into an agreement to compensate him
      for past  services in the amount of  $50,000,  all of which was accrued at
      December 31, 2003. In March 2004,  the Company  issued  200,000  shares of
      common stock in full payment of this debt.

x.    On March 31, 2004, pursuant to a joint venture agreement dated January 14,
      2004, the Company issued 50,000 shares of common stock to David Razmara in
      consideration  of services  rendered to the joint venture in the amount of
      $4,125.

y.    On April 16, 2004,  the Company and Burton  Lasalle  Capital  Corporation,
      entered  into an  agreement  for  services  rendered to the Company in the
      amount of $36,000.  In April 2004 the  Company  issued  200,000  shares of
      common stock in connection with this agreement.

z.    On April 16, 2004, the Company and Basic  Investors,  Inc. entered into an
      agreement  for services  rendered to the Company in the amount of $72,000.
      In April  2004,  the  Company  issued  400,000  shares of common  stock in
      connection with this agreement.

aa.   On March 4, 2004, the Company and Charter Capital Resources,  Inc. entered
      into an agreement  for  services  rendered to the Company in the amount of
      $12,500. In May 2004, the Company issued 100,000 shares of common stock in
      connection with this agreement.


                                      F-26
<PAGE>

bb.   On March 21, 2004 the Company and Clark  Street  Capital,  entered into an
      agreement  for services  rendered to the Company in the amount of $72,000.
      In June  2004,  the  Company  issued  400,000  shares of  common  stock in
      connection with this agreement.

cc.   On April 5, 2004,  the  Company  and Inna  Turney,  through  her  assignee
      Business  Centres  International,  entered into an agreement  for services
      rendered  to the  Company  in the  amount of $7,500.  In April  2004,  the
      Company  issued 50,000  shares of common stock in full  settlement of this
      debt.

dd.   On May 5, 2004,  the Company  issued to three  employees  an  aggregate of
      185,000  shares of common  stock  valued at $25,900 in  consideration  for
      their respective commitments as employees of the Company.

ee.   During  the second  quarter of 2004 the  Company  sold  840,000  shares of
      restricted  common  stock for  $105,000  valued at $.125 per  share,  fair
      market value at the time of issuance.

ff.   In August 2004, pursuant to a placement agent agreement dated May 3, 2004,
      the Company issued 250,000 shares of common stock to T&T Asset  Management
      of Zurich,  Switzerland in consideration of past services  rendered to the
      Company in the amount of $31,250,  all of which was  expensed at September
      30, 2004.

gg.   On  September  16, 2004,  pursuant to a placement  agent  agreement  dated
      September 1, 2004,  the Company  issued  125,000 shares of common stock to
      T&T Asset  Management of Zurich,  Switzerland in consideration of services
      rendered to the Company in the amount of $6,250.

hh.   On  September  17, 2004,  pursuant to an amended and  restated  consulting
      services  agreement  dated  September 7, 2004,  the Company issued 100,000
      shares of common stock to Basic Investors, Inc. for past services rendered
      to the Company in the amount of $12,000 as full  payment of the  Company's
      debt,  all of which was expensed at September 30, 2004.  In return,  Basic
      Investors  returned to the Company 400,000 shares of common stock that was
      issued to Basic in April 2004 in consideration of services rendered to the
      Company in the amount of $72,000.

ii.   On September 10, 2004, the Company and B C N Investments,  L.L.C.  entered
      into an agreement  for  services  rendered to the Company in the amount of
      $36,000  all of which was  expensed at  September  30,  2004.  The Company
      issued 300,000 shares of common stock in connection with this agreement.

jj.   On September 20, 2004, the Company and Commonwealth Holdings, Inc. entered
      into an agreement  for  services  rendered to the Company in the amount of
      $12,000  all of which was  expensed at  September  30,  2004.  The Company
      issued 100,000 shares of common stock in connection with this agreement.

kk.   During the third  quarter of 2004,  the  Company  sold  350,000  shares of
      restricted common stock for $43,750 valued at $.125 per share, fair market
      value at the time of issuance.

ll.   On  October 4,  2004,  pursuant  to an  agreement  dated May 3, 2004,  the
      Company  issued  750,000  shares of common stock to Ebony  Finance Ltd. of
      Zurich,  Switzerland  in  consideration  of past services  rendered to the
      Company in the amount of  $37,500,  all of which was  expensed  during the
      year ended December 31, 2004.


                                      F-27
<PAGE>

mm.   On October 22, 2004, the Company and VarGrowth Corp., Inc. entered into an
      agreement  for services  rendered to the Company in the amount of $35,375,
      all of which was expensed  during the year ended  December  31, 2004.  The
      Company  issued  250,000  shares of common stock in  connection  with this
      agreement.

nn.   On November 1, 2004, the Company and Consulting Medical Management entered
      into an agreement  for  services  rendered to the Company in the amount of
      $31,250,  all of which was  expensed  during the year ended  December  31,
      2004. The Company issued 250,000 shares of common stock in connection with
      this agreement.

oo.   On November 9, 2004,  the Company  and  Michael  Schantz  entered  into an
      agreement  for services  rendered to the Company in the amount of $25,000,
      all of which was expensed  during the year ended  December  31, 2004.  The
      Company  issued  250,000  shares of common stock in  connection  with this
      agreement.

pp.   On November  15,  2004,  pursuant to a monthly  retainer  agreement  dated
      August 15, 2004, the Company issued 45,000 shares of common stock to Focus
      Partners LLC in consideration of past services  rendered to the Company in
      the  amount of  $5,400,  all of which was  expensed  during the year ended
      December 31, 2004.

qq.   On November  16,  2004,  pursuant to an advisory  agreement  dated June 7,
      2004, the Company  issued 250,000 shares of common stock to  Constellation
      Capital Corp. in consideration of past services rendered to the Company in
      the amount of  $37,500,  all of which was  expensed  during the year ended
      December 31, 2004.

rr.   On November  26,  2004,  pursuant  to a  settlement  agreement  and mutual
      general  release,  the Company  issued  412,000  shares of common stock to
      Joseph Friedman and Sons International,  Inc. ("Friedman"),  a stockholder
      of the Company, in respect of the complete release provided by Friedman to
      the Company as contained in the settlement  agreement.  The  consideration
      for the release was in the amount of  $70,040,  all of which was  expensed
      during the year ended December 31, 2004.

ss.   In December  2004,  the Company  issued 800,000 shares of its common stock
      through the exercise of the Company's common stock warrants,  held by four
      warrant holders, at an exercise price of $0.10 per share.

tt.   During the fourth  quarter of 2004,  the Company sold 54,055 shares of its
      restricted  common  stock for  $10,000,  valued at $0.185 per share,  fair
      market value at the time of issuance.

12.   INCOME TAXES

      The liability method,  prescribed by SFAS No. 109,  "Accounting for Income
      Taxes", is used by the Company in accounting for income taxes.  Under this
      method,  deferred  tax assets  and  liabilities  are based on  differences
      between  financial  reporting and tax basis of assets and  liabilities and
      are measured  using the enacted tax rates and laws that are expected to be
      in effect when the differences are expected to reverse.

      During the year ended December 31, 2004,  the Company  recorded a deferred
      tax asset associated with its net operating loss ("NOL")  carryforwards of
      approximately  $5,120,000  that was fully offset by a valuation  allowance
      due to the determination that it was more likely than not that the Company
      would be unable to utilize these benefits in the foreseeable  future.  The
      Company's NOL carryforward expires beginning in 2010 through 2017.

<PAGE>

      There is no provision  for income  taxes for the years ended  December 31,
      2004 and 2003 as there was no taxable income in either year.

      The  types of  temporary  differences  between  tax  basis of  assets  and
      liabilities  and their financial  reporting  amounts that give rise to the
      deferred tax  liability and deferred tax asset and their  approximate  tax
      effects are as follows:

<TABLE>
<CAPTION>
                                                December 31, 2004                 December 31, 2003
                                       --------------------------------- ---------------------------------
                                        Temporary         Tax             Temporary            Tax
                                        Difference        Effect          Difference           Effect
                                       --------------    --------------   --------------    --------------
<S>                                    <C>                    <C>         <C>               <C>
      Gross deferred tax asset         $    5,120,000         $ 1,74000   $      608,000    $      207,000
       resulting from net operating
       loss carryforward
      Valuation allowance                  (5,120,000)       (1,740,000)        (608,000)         (207,000)
                                       --------------    --------------   --------------    --------------

       Net deferred income tax asset   $         --      $         --     $         --      $         --
                                       ==============    ==============   ==============    ==============
</TABLE>

      The reconciliation of the effective income tax rate to the federal
      statutory rate is as follows:

                                        For the Year Ended
                                          December 31,
                                       ---------------------
                                         2004         2003
                                       --------     --------
      Federal income tax rate               34%          34%
      Valuation allowance on net
      operating loss carryforward          (34)%        (34)%
          Effective income tax rate          0%           0%
                                       ========     ========

13.   STOCK OPTION PLANS

      In December 2001, the Company's  stockholders approved a stock option plan
      entitled the 2001 Employee  Stock Option Plan (the "2001 Plan"),  pursuant
      to which 2,000,000  shares of common stock were reserved for issuance.  In
      August 2004,  the  Company's  stockholders  approved the 2004 Stock Option
      Plan (the "2004  Plan"),  pursuant  to which  10,000,000  shares of common
      stock were reserved for issuance.  As of December 31, 2004, 613,000 shares
      of common stock remained  available for issuance of options under the 2001
      Plan and 3,500,000 shares of common stock remained  available for issuance
      of options under the 2004 Plan. As of March 28, 2005, all shares under the
      2001 Plan had been issued.

<PAGE>

      A summary of the status of the  Company's  options and stock  awards under
      the Plans as of December 31, 2004, and changes during the year then ended,
      is presented below:
<TABLE>
<CAPTION>
                                            2004                    2003
                                     ----------------    ----------------
                                            Weighted-           Weighted-
                                            Average             Average
                                            Exercise            Exercise
                                     Shares Price        Shares Price
                                     ----------------    ----------------   ----------------    ----------------
<S>                                  <C>                <C>                 <C>                 <C>
    Options out-
      standing, begin-
      ning of year                               --      $           --                 --      $           --
      Options granted                       6,500,000    $           0.25               --      $           --
      Options exercised                          --      $           --                 --      $           --
      Stock awards granted                    429,000    $         0.1375            358,000    $          0.067
      Stock awards issued                    (429,000)   $         0.1375           (358,000)   $          0.067
      Options cancelled/expired                  --      $           --                 --      $           --
                                     ----------------    ----------------   ----------------    ----------------
    Options out-
       standing, end
       of year                              6,500,000    $           0.25               --      $           --
                                                                            ================    ================
    Options price
       range at end
       of year                       $           0.25
    Options price
       range for
       exercised
       shares                                    --
    Options available
       for grant at end
       of year                              4,113,000                             1,642,000
    Weighted-
       average fair
       value of options
       granted during the
       year                          $           0.25                       $           --

</TABLE>

      The following table summarizes information about fixed price stock options
      outstanding December 31, 2004.

<TABLE>
<CAPTION>

                                                  Weighted-
                              Number Out-          Average             Weighted-            Number                Weighted-
          Range of            standing at        Remaining             Average           Exercisable at           Average
         Exercise             December 31,        Contractual          Exercise           December 31,            Exercise
          Prices               2004                 Life                Price                2004                   Price
      -----------------    -----------------   -----------------   -----------------   -----------------     -----------------
<S>     <C>                      <C>               <C>                <C>                  <C>                      <C>
      $0.25                    6,500,000           9                 $0.25                1,600,000                 $0.25

</TABLE>


      A summary of the status of the  Company's  Stock  Purchase  Warrants as of
      December 31, 2004, and changes during the year is then presented below:


<TABLE>
<CAPTION>
                                                             2004                                2003
                                                 -------------------------------   -------------------------------
                                                                    Weighted-                       Weighted-
                                                                    Average                         Average
                                                                    Exercise                        Exercise
                                                    Shares          Price               Shares      Price
                                                 --------------   --------------   --------------   --------------
<S>                                              <C>              <C>                    <C>        <C>
  Warrants out-
           Standing, beginning of
           Year                                            --     $          --           --        $         --
   Warrants granted                                   8,880,000   $         0.10          --        $         --
   Warrants exercised                                  (800,000)  $         0.10          --        $         --
   Warrants cancelled/expired                            --       $         --            --        $         --
                                                 --------------   --------------   --------------   --------------

   Warrants outstanding, end of year                  8,080,000   $         0.10          --        $         --
                                                 ==============   ==============   ==============   ==============
  Warrant price range at
              end of year                                         $        0.10                     $         --
  Warrant price range for
              exercised shares                                    $        0.10                     $         --
  Weighted-average fair value of
           warrants granted below market value
           during the year                                        $        0.24                     $         --
</TABLE>

      The following  table  summarizes  information  about fixed price  warrants
      outstanding at December 31, 2004.
<TABLE>
<CAPTION>
                                                Weighted-
                            Number Out-          Average          Weighted-           Number          Weighted-
       Range of             standing at          Remaining       Average           Exercisable at     Average
       Exercise              December 31,        Contractual     Exercise          December 31,      Exercise
         Prices               2004               Life            Price               2004              Price
      ----------------     --------------     -------------     ----------       --------------     ----------
<S>     <C>                     <C>                <C>           <C>                     <C>             <C>
        $0.10               8,080,000               2            $0.10                8,080,000          $0.10
</TABLE>


14.   COMMITMENTS AND CONTINGENCIES

a.    Executive Employment Agreements

      Effective March 11, 2003, the Company entered into an employment agreement
      with  Peter  Russo  for three  years  with a renewal  option  upon  mutual
      agreement.   The  agreement  compensates  Mr.  Russo  $10,800  per  month.
      Additionally,  Mr. Russo will receive an incentive of 1.5% of adjusted net
      profits  beginning  with the year  2003 and each  fiscal  year  thereafter
      during the term of this  agreement,  payable in stock.  For the year ended
      December 31, 2004 and 2003 no incentive  payments  were made or accrued as
      the Company  recorded a loss each year.  This  agreement  and Mr.  Russo's
      employment  may be terminated by the Company at its discretion at any time
      after the initial term,  provided that the Mr. Russo be paid six months of
      his base compensation  then in effect.  Effective June 11, 2003, Mr. Russo
      was appointed  president and chief executive officer of the Company and in
      recognition of his new responsibilities  agreed to compensation of $15,000
      per month  effective  July 1, 2003.  On September  20, 2004,  Mr.  Russo's
      employment  agreement  was  amended by mutual  agreement,  and his monthly
      salary was reduced to $6,500  effective  January 1, 2004. In addition,  he
      will be  eligible  for  any  incentive  compensation  program  for  senior
      executives that is established by the board of directors. During the years
      ending  December 31, 2004 and 2003, Mr. Russo earned $78,000 and $120,000,
      respectively.  At December  31, 2004 and 2003,  the Company owed Mr. Russo
      $121,887 and $98,224,  respectively, in accrued salary and the amounts are
      included in accrued expenses on the Company's balance sheet.

      Effective July 1, 2003 and prior to his appointment as a Company  officer,
      the Company entered into an employment  agreement with Jerome  Kindrachuk,
      for three years with a renewal option upon mutual agreement. The agreement


<PAGE>


      compensates  Mr.  Kindrachuk  $10,000  per month.  The  agreement  and Mr.
      Kindrachuk's employment may be terminated by the Company at its discretion
      at any time after the initial term,  provided that Mr.  Kindrachuk be paid
      six months of his base compensation then in effect. On September 22, 2004,
      Mr. Kindrachuk's employment agreement was amended by mutual agreement, and
      his monthly  salary was reduced to $6,000  effective  January 1, 2004.  In
      addition,  he will be eligible for any incentive  compensation program for
      senior  executives  that is established by the board of directors.  During
      the years  ending  December  31,  2004 and  2003,  Mr.  Kindrachuk  earned
      compensation  of $72,000 and $60,000,  respectively.  At December 31, 2004
      and  2003,   the  Company  owed  Mr.   Kindrachuk   $92,262  and  $60,000,
      respectively,  in accrued  salary and the amounts are  included in accrued
      expenses on the Company's balance sheet.

b.    License Agreements

      In April 2003, the Company entered into a License  Agreement (the "License
      Agreement") with Joseph Friedman and Sons International, Inc. ("Friedman")
      where the Company licensed certain environmental  technologies to Friedman
      in the  territory of the Former Soviet  Union.  The License  Agreement was
      predicated  upon  technologies  that were  assigned to the Company under a
      separate agreement with the technology owner. Due to actions taken against
      the technology  owner by his creditors during the latter part of 2003, the
      technology  owner  lost his  ability  to assign  the  technologies  to the
      Company.  Accordingly,  the Company was unable to convey  these  rights to
      Friedman.

      The Company  and  Friedman  executed an Addendum to the License  Agreement
      (the "Addendum") in April 2003. The Addendum contemplated the formation of
      joint ventures  between the Company and Friedman to provide  environmental
      services in the license  territory under  contracts  obtained by Friedman,
      with  the  Company   owning  not  less  than  60%  of  any  joint  venture
      established.  In consideration of the potential benefit to the Company (as
      majority owner of the joint  ventures),  it issued Friedman 288,368 shares
      of common stock valued at $40,000, with certain anti-dilution  provisions.
      The Company  also  granted  Friedman the right to nominate a member to its
      board of directors. In November 2003, Friedman made a claim for additional
      shares of common stock, citing the anti-dilution language of the Addendum.
      Friedman  also  requested  that its nominee be appointed to the  Company's
      board of directors.

      In light of the events that  effected the License  Agreement,  the Company
      notified Friedman on March 30, 2004, as provided in the License Agreement,
      terminating the License  Agreement and the Addendum.  The Company took the
      position that the termination of the Addendum eliminated  Friedman's right
      to a board seat.

      Effective  November  26,  2004,  the  Company  entered  into a  settlement
      agreement and mutual general release with Friedman  (reference note number
      5) and as part of the settlement  agreement the Company issued to Friedman
      a $50,000  principal  amount 6% Convertible  Promissory Note, due November
      24, 2006,  initially  convertible  into  1,000,000  shares of Common Stock
      together  with  Warrants  to purchase an  additional  1,000,000  shares of
      Common Stock and issued 412,000 shares of Common Stock (Reference  "Recent
      Sales of  Unregistered  Securities")  in  settlement of any and all claims
      made for additional shares attributable to the anti-dilution  language and
      to forego the requirement of appointing a nominee to the Board.

      During the year ended December 31, 2004, the Company expensed warrants of
      $349,400 and stock valued at $70,040, in connection with the terminated
      license agreement.

<PAGE>


c.    Financing Agreement

      On July 8, 2003,  the Company  entered into an agreement with Rolan Jansen
      and Ivano  Angelastri  ("J&A") to introduce  and arrange  equity,  debt or
      other financing  agreements with strategic  partners,  for the Company, or
      its affiliates for a finders fee of 6.0% to Rolan Jansen and 2.0% to Ivano
      Angelastri  of the gross  proceeds of the equity  financing.  For the year
      ended  December 31, 2003,  no financing  was  introduced to the Company in
      connection with this agreement.

d.    Investor Relations Agreements

      On August  15,  2004 the  Company  entered  into an  agreement  with Focus
      Partners LLC  ("Focus")  for a  month-to-month  retainer,  as its investor
      relations and strategic communications consultant. Focus received a fee of
      $19,060  for 2004 and  restricted  Common  Stock in the  amount  of 45,000
      shares (valued at $5,400) for the year 2004.

e.    Leases

      The  Company  entered in to a lease  March 1, 2003 for a  business  office
      space.  The lease will require the Company to pay certain  executory costs
      (such as insurance and maintenance).

      Future minimum lease payments for the operating lease is as follows:

                                       Year Ending
                                       December 31,
                                  -------------------
                                  2005   $      7,800
                                  2006          1,300
                                  2007           --
                                         ------------
                                         $      9,100


      Rent  expense was $7,800 and $6,662 for the years ended  December 31, 2004
      and 2003, respectively.

      In addition,  the Company has a month-to-month  lease on a business office
      in McLean,  Virginia  at a cost of $1,100 per month that began in November
      2004. For the year 2004 the Company incurred expense of $2,200.

15.   SUBSEQUENT EVENTS

a.    On March 22, 2005,  the Company  issued to a related party a 6% Promissory
      Note in the  principal  amount  of  $71,731.29,  with  the  principal  and
      interest due in three equal installments with the final installment due at
      maturity, on December 20, 2005.

b.    On April 5,  2005,  the  Company  issued 8%  Promissory  Notes to  private
      investors in the amount of  $210,655.04,  with the  principal and interest
      due at maturity, on October 2, 2005.