UNITED
STATES





SECURITIES
AND EXCHANGE COMMISSION





WASHINGTON,
D.C.







FORM
10-Q





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





For the
quarterly period ended September 30, 2010





OR





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


For the
transition period from ____________ to _________________





Commission
File Number 000-30563





DELTA
MUTUAL, INC.


(Exact
name of registrant as specified in its charter)





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





14362
      N. Frank Lloyd Wright Blvd., Suite 1103, Scottsdale, AZ
                
                85260(Address
      of Principal Executive Offices)
                
                (Zip
      Code)





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





(Former
      Name, Former Address and Former Fiscal Year, if changed since last
      report)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant
was


required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  YES x NO  ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).


Yes  ̈
             No
 ̈





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


Large
      accelerated filer    ̈
            
            Accelerated
      filer    ̈Non-accelerated
      filer      ̈
            
            Smaller
      reporting company   x





(Do not
check if a smaller reporting company)





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


 ̈
Yes               
x No





The
number of shares outstanding the issuer's common stock, par value $.0001 per
share, was 28,422,125 as of November 19, 2010.











DELTA
MUTUAL, INC.





INDEX




PagePart
      I.  Financial Information
                      1Item
      1. Financial Statements.
                      1Consolidated
      Balance Sheets as of September 30, 2010  and as of December 31,
      2009 (Restated) (unaudited)
                      2Consolidated
      Statements of Operations for the Nine and Three Months Ended
      September 30, 2010 and 2009 (unaudited)
                      3Consolidated
      Statements of Cash Flows for the Nine months Ended September 30, 2010 and
      2009 (unaudited)
                      4-5Notes
      to Unaudited Consolidated Financial Statements
                      6-14Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations.
                      15Item
      3. Quantitative and Qualitative Disclosures About Market
    Risk.
                      18Item
      4T.Controls and Procedures.
                      19Part
      II. Other Information
                      19Item
      1.  Legal Proceedings.
                      19Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds.
                      20Item
      6.  Exhibits.
                      20Signatures
                      21










PART I.
FINANCIAL INFORMATION





Item 1.
Financial Statements





Certain
information and footnote disclosures required under accounting principles
generally accepted in the United States of America have been condensed or
omitted from the following consolidated financial statements pursuant to the
rules and regulations of the Securities and Exchange Commission. It is suggested
that the following consolidated financial statements be read in conjunction with
the year-end consolidated financial statements and notes thereto included in the
Company’s Annual Report on Form 10-K for the year ended December 31,
2009.





The
results of operations for the nine and three months ended September 30, 2010 and
2009 are not necessarily indicative of the results for the entire fiscal year or
for any other period.




1




DELTA
MUTUAL, INC. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS


(UNAUDITED)





September 30,
                                        
                                        
                                        December 31,2010
                                        
                                        
                                        2009(Restated)ASSETSCurrent
      Assets:Cash
                                        
                                        $
                                        338,243
                                        
                                        
                                        $
                                        102,008Advances
      and other receivables
                                        
                                        
                                        7,655
                                        
                                        
                                        
                                        137,776Total
      current assets
                                        
                                        
                                        345,898
                                        
                                        
                                        
                                        239,784Property
      and equipment:Oil
      and gas properties, full cost method of accounting:Proved
      undeveloped
                                        
                                        
                                        664,954
                                        
                                        
                                        
                                        -Unproved
                                        
                                        
                                        995,234
                                        
                                        
                                        
                                        -Lithium
      production properties
                                        
                                        
                                        29,095
                                        
                                        
                                        
                                        -Furniture
      and equipment
                                        
                                        
                                        -
                                        
                                        
                                        
                                        14,0841,689,283
                                        
                                        
                                        
                                        14,084Less
      accumulated depreciation, depletion and amortization
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (14,084
                                        )1,689,283
                                        
                                        
                                        
                                        -Investments
      in non-consolidating entities
                                        
                                        
                                        217,313
                                        
                                        
                                        
                                        1,470,714Other
      assets
                                        
                                        
                                        6,368
                                        
                                        
                                        
                                        39,508TOTAL
      ASSETS
                                        
                                        $
                                        2,258,862
                                        
                                        
                                        $
                                        1,750,005LIABILITIES
      AND STOCKHOLDERS’ EQUITY (DEFICIENCY)Current
      Liabilities:Accounts
      payable
                                        
                                        $
                                        79,472
                                        
                                        
                                        $
                                        134,192Accrued
      expenses
                                        
                                        
                                        166,551
                                        
                                        
                                        
                                        267,029Notes
      payable
                                        
                                        
                                        805,605
                                        
                                        
                                        
                                        805,605Total
      Current Liabilities
                                        
                                        
                                        1,051,628
                                        
                                        
                                        
                                        1,206,826Stockholders’
      Equity:Preferred
      stock $0.0001 par value-authorized 10,000,000 shares; no shares issued and
      outstanding at September 30, 2010 and December 31, 2009,
      respectively
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Common
      stock $0.0001 par value - authorized 250,000,000 shares; 28,333,593 and
      24,211,275 shares issued and outstanding at September 30, 2010 and
      December 31, 2009, respectively
                                        
                                        
                                        2,833
                                        
                                        
                                        
                                        2,421Additional
      paid-in-capital
                                        
                                        
                                        5,341,900
                                        
                                        
                                        
                                        4,137,095Accumulated
      deficit
                                        
                                        
                                        (4,083,990
                                        )
                                        
                                        
                                        (3,596,337
                                        )Accumulated
      other comprehensive income (expense)
                                        
                                        
                                        (53,509
                                        )
                                        
                                        
                                        -Total
      Stockholders' Equity
                                        
                                        
                                        1,207,234
                                        
                                        
                                        
                                        543,179
                                        )TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY)
                                        
                                        $
                                        2,258,862
                                        
                                        
                                        $
                                        1,750,005





See Notes
to Unaudited Consolidated Financial Statements


2





DELTA
MUTUAL, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF OPERATIONS


(UNAUDITED)





Nine
      months Ended September 30,
                              
                              
                              Three
      Months Ended September 30,2010
                              
                              
                              2009
                              
                              
                              2010
                              
                              
                              2009Revenue:
                              
                              $
                              -
                              
                              
                              $
                              14,458
                              
                              
                              $
                              -
                              
                              
                              $
                              14,458Costs
      and expenses:Loss
      on sale of investments
                              
                              
                              
                              
                              
                              
                              157,939
                              
                              
                              
                              
                              
                              
                              
                              157,939General
      and administrative expenses
                              
                              
                              554,604
                              
                              
                              
                              1,007,303
                              
                              
                              
                              98,364
                              
                              
                              
                              272,360Loss
      from continuing operations
                              
                              
                              (554,604
                              )
                              
                              
                              (1,150,784
                              )
                              
                              
                              (98,364
                              )
                              
                              
                              (415,841
                              )Foreign
      exchange gain (loss)
                              
                              
                              (29,838
                              )
                              
                              
                              -
                              
                              
                              
                              (25,025
                              )Interest
      expense, net
                              
                              
                              (34,745
                              )
                              
                              
                              (31,512
                              )
                              
                              
                              (11,582
                              )
                              
                              
                              (10,770
                              )Loss
      from continuing operations before provision for income
    taxes
                              
                              
                              (619,187
                              )
                              
                              
                              (1,182,296
                              )
                              
                              
                              (134,970
                              )
                              
                              
                              (426,611
                              )Provision
      for income taxes
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -Net
      loss from continuing operations
                              
                              
                              (619,187
                              )
                              
                              
                              (1,182,296
                              )
                              
                              
                              (134,970
                              )
                              
                              
                              (426,611
                              )Discontinued
      operationsGain
      (loss) of disposal of Far East operations and South American Hedge
      Fund operations, and United States construction technology
      activities
                              
                              
                              131,534
                              
                              
                              
                              (6,452
                              )
                              
                              
                              131,534
                              
                              
                              
                              -Net
      loss
                              
                              $
                              (487,653
                              )
                              
                              $
                              (1,188,748
                              )
                              
                              $
                              (3,436
                              )
                              
                              $
                              (426,611
                              )Loss
      per common share - basic and diluted:Loss
      from continuing operations
                              
                              $
                              (0.02
                              )
                              
                              $
                              (0.05
                              )
                              
                              $
                              (0.00
                              )
                              
                              $
                              (0.02
                              )Discontinued
      operations
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              0.00
                              
                              
                              $
                              -Weighted
      average common shares - basic and diluted
                              
                              
                              26,680,950
                              
                              
                              
                              22,633,898
                              
                              
                              
                              27,880,617
                              
                              
                              
                              22,748,635Amounts
      attributable to common shareholders:Net
      loss
                              
                              $
                              (0.02
                              )
                              
                              $
                              (0.05
                              )
                              
                              $
                              (0.00
                              )
                              
                              $
                              (0.02
                              )





See Notes to Unaudited Consolidated Financial
Statements


3





DELTA
MUTUAL, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(UNAUDITED)





Nine
      months Ended September 30,2010
                    
                    
                    2009Cash
      flows from operating activities:Net
      loss
                    
                    $
                    (487,653
                    )
                    
                    $
                    (1,188,748
                    )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation,
      depletion and amortization
                    
                    
                    -
                    
                    
                    
                    509Loss
      on sale of investments
                    
                    
                    -
                    
                    
                    
                    157,939Issuance
      of common stock for services
                    
                    
                    109,550
                    
                    
                    
                    120,000
                    )Compensatory
      element of option issuance
                    
                    
                    -
                    
                    
                    
                    590,235Changes
      in operating assets and liabilities
                    
                    
                    8,063
                    
                    
                    
                    (15,044
                    )Net
      cash used in operating activities
                    
                    
                    (370,040
                    )
                    
                    
                    (335,109
                    )Cash
      flows from investing activities:Oil
      and gas properties exploration and development costs
                    
                    
                    (473,722
                    )
                    
                    
                    -Proceeds
      from sales of investments
                    
                    
                    -
                    
                    
                    
                    206,848Investment
      in lithium production properties
                    
                    
                    (30,000
                    )Net
      cash used in investing activities
                    
                    
                    (503,722
                    )
                    
                    
                    206,848Cash
      flows from financing activities:Proceeds
      from loans
                    
                    
                    -
                    
                    
                    
                    326,403Proceeds
      from sale of common stock
                    
                    
                    1,095,667
                    
                    
                    
                    10,000Repayment
      of Loan
                    
                    
                    -
                    
                    
                    
                    (200,000
                    )Contribution
      from stockholder
                    
                    
                    -
                    
                    
                    
                    (1,000
                    )Net
      cash provided by financing activities
                    
                    
                    1,095,667
                    
                    
                    
                    130,403Effect
      of exchange rates
                    
                    
                    14,330
                    
                    
                    
                    -Net
      increase (decrease) in cash
                    
                    
                    236,235
                    
                    
                    
                    2,14Cash
      - Beginning of period
                    
                    
                    102,008
                    
                    
                    
                    13,957Cash
      - End of period
                    
                    $
                    338,243
                    
                    
                    $
                    16,099





See Notes
to Unaudited Consolidated Financial Statements


4





DELTA
MUTUAL, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(UNAUDITED)


(Continued)





Nine months Ended September
    30,2010
                      
                      
                      2009Supplementary
      information:Changes
      in operating assets and liabilities consists of:(Increase)
      decrease in other prepaid expenses
                      
                      $
                      -
                      
                      
                      $
                      (5,718
                      )(Increase)
      decrease in advances and other receivables
                      
                      
                      130,121(Increase)
      decrease in other assets
                      
                      
                      33,140Increase
      (decrease) in accounts payable and accrued expenses
                      
                      
                      (155,198
                      )
                      
                      
                      (9,326
                      )$
                      8,063
                      
                      
                      $
                      (72,184
                      )Supplementary
      disclosure of cash flow information:Cash
      paid for interest
                      
                      $
                      -
                      
                      
                      $
                      -Cash
      paid for income taxes
                      
                      $
                      -
                      
                      
                      $
                      -Supplementary
      disclosure of non-cash investing and financing activities:Issuance
      of common stock for services
                      
                      $
                      109,550
                      
                      
                      $
                      120,000





See Notes
to Unaudited Consolidated Financial Statements


5





DELTA
MUTUAL, INC. AND SUBSIDIARIES


NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


For the
Nine months Ended September 30, 2010 and 2009





1. BASIS
OF PRESENTATION





The
accounting policies followed by Delta Mutual, Inc. and its subsidiaries
(“Delta” or the “Company”) are set forth in the notes to the Company’s
audited consolidated financial statements in the Annual Report on Form 10-K
filed for the year ended December 31, 2009.  Such policies have been
continued without change and all material items included in those notes have not
changed except as a result of normal transactions in the interim, or as
disclosed within this report.  Although management believes the unaudited
interim related disclosures in these consolidated financial statements are
adequate to make the information presented not misleading, certain information
and footnote disclosures normally included in annual audited consolidated
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted pursuant
to the rules and regulations of the Securities and Exchange Commission. The
condensed consolidated financial statements included herein should be read in
conjunction with the consolidated audited financial statements and the notes
thereto included in Amendment No. 1 to the Company’s Annual Report on Form 10-K
for the year ended December 31, 2009, filed with the Securities and Exchange
Commission on May 14, 2010.





In the
opinion of management, all adjustments, including normal recurring adjustments
necessary to present fairly the financial position of the Company with respect
to the interim financial statements and the results of operations for the
interim period ended September 30, 2010, have been included.





The
results of operations and the cash flows for the periods ended September 30,
2010 are not necessarily indicative of the results to be expected for the full
year.





PRINCIPLES OF
CONSOLIDATION





The
Company's financial statements include the accounts of all majority-owned
subsidiaries where its ownership is more than 50 percent of the common
stock.  All significant intercompany amounts have been
eliminated.





As of
September 30, 2010, the Company also held a 45% ownership interest in
Delta–Envirotech, Inc., which is engaged in certain business opportunities in
the Middle East related to environmental remediation and other related projects.
These activities are managed and carried out by the majority stockholders of
Delta-Envirotech, Inc., (“Envirotech”), Hi-Tech Consulting and Construction,
Inc. and an unrelated individual.  Envirotech has entered into strategic
alliance agreements with several United States-based entities with technologies
and products in the environmental field to support its activities. Envirotech
was consolidated as the variable interest entity (VIE) up until September 30,
2009. As of December 31, 2009 management determined that Delta-Envirotech, Inc.
does not meet the criteria to be considered a VIE for the year ending December
31, 2009 as the Company does not exercise significant influence over the
operations or financial results of Envirotech.  Accordingly, the results of
operations and of financial data have been deconsolidated from the consolidated
financial statements of the Company effective December 31, 2009.





GOING
CONCERN





The
consolidated financial statements for the period ended September 30, 2010 have
been prepared on a going concern basis which contemplates the realization of
assets and settlement of liabilities and commitments in the normal course of
business. The Company has a past history of recurring losses from operations and
has an accumulated deficit of $4,083,990 and working capital deficiency of
$705,730 as of September 30, 2010.  Additionally, the Company will require
additional funding to execute its future strategic business plan. Successful
business operations and its transition to attaining profitability are dependent
upon obtaining additional financing and achieving a level of revenue adequate to
support its cost structure.





The
Company's business is subject to the risks of its oil and gas investments in
South America. The likelihood of success of the Company must be considered in
light of the expenses, difficulties, delays and unanticipated challenges
encountered in connection with the operations of the oil and gas concession in
Argentina. There is no assurance that the Company will ultimately achieve a
profitable level of operations.




6





USE OF
ESTIMATES





The
preparation of the financial statements requires the Company to make estimates
and judgments that affect the reported amount of assets, liabilities, and
expenses, and related disclosures of contingent assets and liabilities. On an
on-going basis, the Company evaluates its estimates, including those related to
oil and gas properties, 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.  In the opinion of management, all normal recurring adjustments
considered necessary for a fair presentation have been included in these
financial statements.  Certain amounts for prior periods have been
reclassified to conform to the current presentation.





Management
believes that it is reasonably possible that the following material estimates
affecting the financial statements could happen in the coming year:





·
            Proved
      oil and gas reserves;


·
            Expected
      future cash flow from proved oil and gas
  properties;


·
            Future
      exploration and development costs;
and


·
            Future
      dismantlement and restoration
costs.





REVENUE
RECOGNITION





Revenues
are recognized in accordance with SEC staff accounting bulletin, Topic 13,
Revenue Recognition, which specifies that only when persuasive evidence for an
arrangement exists; the fee is fixed or determinable; and collection is
reasonably assured can revenue be recognized.





OIL AND GAS
PROPERTIES





The
Company follows the full cost method of accounting for oil and gas
properties.  Under this method, all direct costs and certain indirect costs
associated with acquisition of properties and successful as well as unsuccessful
exploration and development activities are capitalized. Depreciation, depletion,
and amortization of capitalized oil and gas properties and estimated future
development costs, excluding unproved properties, are based on the
unit-of-production method based on proved reserves.  Net capitalized costs
of oil and gas properties, less related deferred taxes, are limited to the lower
of unamortized cost or the cost ceiling, defined as the sum of the present value
of estimated future net revenues from proved reserves based on un-escalated
prices discounted at 10 percent, plus the cost of properties not being
amortized, if any, plus the lower of cost or estimated fair value of unproved
properties included in the costs being amortized, if any, less related income
taxes. Costs in excess of the present value of estimated future net revenues as
discussed above are charged to proved property impairment expense.  No gain
or loss is recognized upon sale or disposition of oil and gas properties, except
in unusual circumstances. We apply the full cost ceiling test on a quarterly
basis on the date of the latest balance sheet presented.





As of
September 30, 2010, the Company has not recorded any depletion and impairment,
if any, of its oil and gas properties, as well as accrual of assets retirement
obligations, pending a complete report on reserve studies and analysis of proved
and unproved oil and gas reserves.





DISCONTINUED
OPERATIONS





During
the quarter ended September 30, 2008, the Company discontinued all its
operations in the Far East (Indonesia). During the quarter ended December 31,
2008, the Company discontinued all of its construction technology activities
that were carried out by its wholly owned subsidiary, Delta Technologies, Inc.
and the trading of securities by its South American Hedge Fund subsidiary. These
discontinued operations resulted in a loss of   $0 and $(6,452)
for the nine months ending September 30, 2010 and 2009, respectively and $0
and  $61 for the three months ending September 30, 2010 and 2009,
respectively.





Summarized
statement of loss for discontinued operations is as follows:





Nine
      months Ended September 30,
                                      
                                      
                                      Three Months Ended September
      30,2010
                                      
                                      
                                      2009
                                      
                                      
                                      2010
                                      
                                      
                                      2009Net
      sales
                                      
                                      $
                                      —
                                      
                                      
                                      $
                                      —
                                      
                                      
                                      $
                                      —
                                      
                                      
                                      $
                                      —Impairment
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —Provision
      for income taxes
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —Income
      (loss) from operations, net of taxes
                                      
                                      
                                      131,534
                                      
                                      
                                      
                                      (6,452
                                      )
                                      
                                      
                                      131,534
                                      
                                      
                                      
                                      (6,452
                                      )Gain
      on disposition of minority interest
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —Provision
      for income taxes
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —Loss
      from discontinued operations, net of taxes
                                      
                                      $
                                      131,534
                                      
                                      
                                      $
                                      (6,452
                                      )
                                      
                                      $
                                      131,534
                                      
                                      
                                      $
                                      (6,452
                                      )




7


RECENT ACCOUNTING
PRONOUNCEMENTS





In
January 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-06
which is intended to improve disclosures about fair value measurements. The
guidance requires entities to disclose significant transfers in and out of fair
value hierarchy levels, the reasons for the transfers and to present information
about purchases, sales, issuances and settlements separately in the
reconciliation of fair value measurements using significant unobservable inputs
(Level 3). Additionally, the guidance clarifies that a reporting entity should
provide fair value measurements for each class of assets and liabilities and
disclose the inputs and valuation techniques used for fair value measurements
using significant other observable inputs (Level 2) and significant unobservable
inputs (Level 3). The Company has applied the new disclosure requirements as of
January 1, 2010, except for the disclosures about purchases, sales,
issuances and settlements in the Level 3 reconciliation, which will be effective
for interim and annual periods beginning after December 15, 2010. The
adoption of this guidance has not had and is not expected to have a material
impact on the Company’s consolidated financial statements.





In
February 2010, the FASB issued ASU 2010-09, which requires that an SEC
filer, as defined, evaluate subsequent events through the date that the
financial statements are issued. The update also removed the requirement for an
SEC filer to disclose the date through which subsequent events have been
evaluated in originally issued and revised financial statements. The adoption of
this guidance on January 1, 2010 did not have a material effect on the
Company’s consolidated financial statements.





In April 2010, the Financial Accounting Standards Board’s
(“FASB”) Emerging Issues Task Force (“EITF”) issued an amendment to previously
issued guidance regarding the classification of a share-based payment award as
either equity or a liability. The amendments clarify that a share-based payment
award with an exercise price denominated in the currency of a market in which a
substantial portion of the entity’s equity securities trades should not be
considered to contain a condition that is not a market, performance or service
condition. Therefore, such an award should not be classified as a liability if
it otherwise qualifies as equity.  This guidance is effective for fiscal
years and interim periods within
those fiscal years beginning on or after December 15, 2010. Earlier application
is permitted. This guidance should be applied by recording a cumulative-effect
adjustment to the opening balance of retained earnings and the cumulative-effect
adjustment should be calculated for all awards outstanding as of the beginning
of the fiscal year in which it is initially applied, as if the guidance had been
applied consistently since the inception of the award. The cumulative-effect
adjustment should be presented separately. The Company is currently evaluating
the impact of this guidance on its operating results, financial position and
cash flows.





In January 2009, the SEC issued
revisions to the natural gas and oil reporting disclosures, “Modernization of
Oil and Gas Reporting, Final Rule” (the “Final Rule”). In addition to changing
the definition and disclosure requirements for natural gas and oil reserves, the
Final Rule changed the requirements for determining quantities of natural gas
and oil reserves. The Final Rule also changed certain accounting requirements
under the full cost method of accounting for natural gas and oil activities. The
amendments are designed to modernize the requirements for the determination of
natural gas and oil reserves, aligning them with current practices and updating
them for changes in technology. The Final Rule was effective for annual reports
on Form10-K for fiscal years ending on or after December 31, 2009.  In
addition, in  January
2010, the FASB issued an accounting standards update relating to standards for
extractive oil and gas activities. The accounting standards update amends
existing standards to align the proved reserves calculation and disclosure
requirements under US GAAP with the requirements in the SEC rules. The new
standards were to be applied prospectively as a change in estimates. In April
2010, the FASB issued a further accounting standards update regarding extractive
oil and gas industries to incorporate in accounting standards the revisions to
Rule 4-10 of the SEC’s Regulation S-X. The amendment primarily consists of the
addition and deletion of definitions of terms related to fossil fuel exploration
and production arising from technology changes over the past several decades.
The accounting guidance in Rule 4-10 did not change. The Company is in the
process of determining the impact of this guidance on its consolidated financial
position and results of operations.





Other
ASU’s that are effective after September 30, 2010, are not expected to have a
significant effect on the Company’s consolidated financial position or results
of operations.





2.  VARIABLE INTEREST
ENTITY





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




8





As
of December 31, 2009, management determined that Delta-Envirotech,
Inc. was no longer considered a variable interest entity (VIE) for the year
ending December 31, 2009 and, accordingly, Envirotech has been deconsolidated
from the accompanying consolidated financial statements effective December 31,
2009. As of December 31, 2009, the majority stockholders of Envirotech are
exercising significant influence over operating and financing policies of
Envirotech, as well as managing its business activities, and therefore it
is not considered a VIE of the Company. As a result of this deconsolidation, the
Company removed the assets and liabilities of the VIE from the consolidated
financial statements, and any assets and liabilities of Envirotech that were
eliminated in consolidation were restored at fair value.





Prior to
December 31, 2009, the Company was deemed to be the primary beneficiary of the
Envirotech because of the relatively significant financial support provided
to Envirotech in the form of an investment of $375,000 and notes
receivable from Envirotech of $810,867. Due to the significant operating losses
of Envirotech, and the resulting deconsolidation as of December 31,
2009, the Company’s entire investment and the note receivable which
aggregated approximately $1,186,000 as of December 31, 2009 were
reduced to zero in order to account for the restored assets at fair value.
Furthermore, since the Company is not liable for Envirotech’s liabilities or
operating losses per the agreed terms with Envirotech, the Company’s
historical portion of Envirotech’s operating losses were reversed and
recorded as a net gain on deconsolidation of approximately $882,000 that was
recorded as a separate line item in the accompanying consolidated financial
statements in the fourth quarter of 2009.





3.
PROPERTY AND EQUIPMENT





Oil and Gas
Properties





Jollin and Tonono Oil and
Gas Concessions


The
Company, through SAHF, has a 10% interest concession in the carryover mode ("no
cost obligations to SAHF") in the Jollin and Tonono oil and gas concessions
located in Northern Argentina.





During
the year ended December 31, 2008, the third party owners of the Jollin and
Tonono concessions formed an Argentine-registered joint venture and paid,
in the aggregate, approximately $848,000 of development costs, all of which
were capitalized. Since the Company was not registered as a foreign company in
Argentina, it could not become a member of the joint venture in 2008. The third
party owners of these concessions have agreed that, upon admission of the
Company as a member of the joint venture, the Company will retain its ownership.
However, in exchange for this agreement, the Company’s weighted average pro-rata
portion of the 2008 aggregate development cost, of approximately $223,024, all
of which was included in accounts payable in the Company’s consolidated balance
sheet at December 31, 2008, was to be repaid to the other members from its
pro-rata share of the future earnings of the concession. On September 25, 2009,
the Company sold 13.5% of its ownership interest in the Jollin and Tonono oil
and gas concession to Maxi-Petroleros De Occidente S.A. ("Maxipetrol") for
$206,832.  Maxipetrol, prior to the sale, owned 48% of the Jollin and
Tonono oil and gas concession.  In connection with the sale, Maxipetrol
assumed full responsibility to develop the oil and gas concession until
production is achieved in the blocks.  This obligation includes all future
and former costs incurred for the Jollin and Tonono oil and gas concession,
until such time as the well is producing.  All prior unpaid costs accrued
by the Company, were assumed by Maxipetrol.  The Company recorded a
$157,939 loss on the disposition of its 13.5% investment to Maxipetrol and the
loss is included in its statement of operations for the year ended December 31,
2009.  In addition, as of December 31, 2009, the Company recorded a
reversal of $223,024 to adjust balances in investments and accounts payable as a
result of the forgiveness of the aggregate development cost payable. 
 During the nine months ending September 30, 2010 the Company paid $139,762
in additional canons to maintain its ownership interest in the
concession.





The
Company received its foreign registration in Argentina and was admitted as a
member of the joint venture on July 2, 2010. Accordingly, the Company has
reclassified its concession costs in the amount of $664,954 associated with this
property to proved oil and gas properties as of June 30, 2010 based upon the
reserve report received from the third party working interest owner of the joint
venture. The Company will begin receiving revenue from the Jollin and Tonono
blocks when the first well is approved for commercial production.The Company has not
recorded impairment and depletion charges for the nine months ended September
30, 2010, as the Company did not receive an updated complete report on reserve
studies and analysis from its joint venture operating member of the concessions
to determine whether oil and gas properties were considered unproved and
depleted.





Salta Province Exploration
Rights


During
2008, the Company purchased 40% of the oil and gas exploration rights to five
geographically defined areas in the Salta Province of Northern Argentina from
Ketsal, SA (“Ketstal”) for $697,000 cash. In 2009, SAHF assigned 50% of its
rights to a third party.  As of September 30, 2010, SAHF owns 20% of the
rights to this oil and gas concession. The Company expects that in 2010,
substantially all of the exploration costs required to retain the exploration
rights will be borne by Ketstal, the majority owner.




9





The
Company is responsible for managing the drilling activities in the Salta
Province and bears its pro-rata share of the costs.  Exploratory drilling
activities commenced in April 2010 on the Guemes Block and the first well was
spud in June 2010.  The Company paid $106,672 for additional concession
fees to become an exploration company in Argentina and incurred $326,910 in
exploratory drilling costs through September 30, 2010 that were capitalized as
work-in-progress under the full cost method of accounting.   In July
2010, the Company found positive traces of the presence of natural gas and
hydrocarbons of low-density quality through its analysis of core samples. 
Well logging while drilling also confirmed the potential existence of formations
with sufficient hydrocarbons to make the well economically productive. 
Production testing to verify the commercial sustainability of the well will
commence upon the receipt of the oil production license from the government
during the third quarter, subject to the weather conditions during the
wintertime in Argentina. The Company has not recorded impairment and depletion
charges for the nine months ended September 30, 2010, as the Company has not
arranged for a complete report on reserve studies and analysis to determine
whether proved reserves exist.  Following the Guemes successful drilling
operation, the Joint Venture completed its application for the Oil & Gas
Operator License from the federal Secretary of Energy. A license approval is
expected before the end of the fourth quarter. After the rainy season,
activities to produce oil in the Guemes well will resume.





Lithium Production
Properties





On April
29, 2010, the Company acquired certain properties from Minera Jujuy from the
Jujuy Province, Argentina, located in the Northwest part of Argentina,
south of the border with Bolivia, for $30,000.  Management believes that
these properties have high concentrations of lithium and borates brines. The
Company now owns 51% and controls 100% (through an agreement between the
parties) of an area of approximately 147,000 hectares  (approximately
350,000 acres) in an area of North Guayatayoc, Argentina. As these properties
are in the initial stage of development, management did not consider it
necessary to assess impairment or depletion for the nine months ended September
30, 2010.





5.
INVESTMENTS IN NON-CONSOLIDATING AFFILIATES





As of
September 30, 2010, the Company, through SAHF, retains 9% of the total
concession in the carryover mode ("no cost obligations to SAHF") in the Tartagal
and Morillo oil and gas concessions located in Northern Argentina.In March 2009, a Hong Kong
public company purchased 60% of the ownership in the Tartagal and Morillo oil
and gas concessions, from the other majority owners, for total consideration of
approximately $270 million. To date, the working interest owners have expended
approximately $27 million on 2D and 3D seismic surveys and other geological
studies.The
Companyexpects to
begin receiving revenue from the Tartagal and Morillo blocks when the first well
is approved for commercial production.





The
Company has applied to be formally admitted as a member of the joint venture.
When this registration is received, the Company will reclassify the $217,313
concession costs associated with this property to proved oil and gas properties
based upon the reserve report received from the third party working interest
owner of the joint venture. The Company has not recorded any impairment and
depletion charges for this concession as the Company is in the process of
obtaining a reserve report from the operating member of the joint venture. 
As of November 10th, one work-over drilling in Campo Alcoba in the Tartagal
block was finished and deemed successful. Before the end of the fourth quarter,
production from aforementioned well is expected.





6. 
FAIR VALUE OF FINANCIAL INSTRUMENTS





The
Company adopted FASB ASC 820, Fair Value Measurements and Disclosures (“ASC
820”) on January 1, 2008, for all financial assets and liabilities that are
recognized or disclosed at fair value in the condensed consolidated financial
statements on a recurring basis or on a nonrecurring basis during the reporting
period. While the Company adopted the provisions of ASC 820 for non-financial
assets and liabilities that are recognized or disclosed at fair value in the
financial statements on a recurring basis, no such assets or liabilities existed
at the balance sheet date. As permitted by ASC 820, the Company delayed
implementation of this standard for all non-financial assets and liabilities
recognized or disclosed at fair value in the financial statements on a
nonrecurring basis and adopted these provisions effective January 1,
2009.





The fair
value is an exit price, representing the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date.  The Company utilizes market data or
assumptions that market participants would use in pricing the asset or
liability.  ASC 820 establishes a three-tier fair value hierarchy, which
prioritizes the inputs used in measuring fair value.  These tiers
include:  Level 1, defined as observable inputs such as quoted market
prices in active markets; Level 2, defined as inputs other than quoted prices in
active markets that are either directly or indirectly observable; and Level 3,
defined as unobservable inputs about which little or no market data exists,
therefore requiring an entity to develop its own assumptions.





As of
September 30, 2010, the Company held certain financial assets that are measured
at fair value on a recurring basis.  These consisted of cash and cash
equivalents and investments in non-consolidated affiliates.  The fair value
of the cash and cash equivalents is determined based on quoted market prices in
public markets and is categorized as Level 1.  The fair value of
investments in non-consolidated affiliates is developed by the Company based
upon its own assumptions and is categorized as Level 3.  The Company does
not have any financial assets measured at fair value on a recurring basis as
Level 2 and there were no transfers in or out of Level 2 or Level 3 during the
three months ended September 30, 2010.




10





The
following table sets forth by level, within the fair value hierarchy, the
Company’s financial assets accounted for at fair value on a recurring basis as
of September 30, 2010.





Total
                                    
                                    
                                    Quoted Prices in
                                      Active Markets for
                                      Identical Assets
                                      (Level 1)
                                    
                                    
                                    Significant Other
                                      Observable Inputs
                                      (Level 2)
                                    
                                    
                                    Significant
                                      Unobservable
                                      Inputs (Level 3)Cash
      and cash equivalents
                                    
                                    $
                                    338,243
                                    
                                    
                                    $
                                    338,243
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $Oil
      and gas properties:Proved
                                    
                                    
                                    664,954
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    664,954Unproved
                                    
                                    
                                    995,234
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    995,234Lithium
      production properties
                                    
                                    
                                    29,095
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    29,095Investments
      in non-consolidating affiliates
                                    
                                    
                                    217,313
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    217,313Total
                                    
                                    $
                                    2,244,839
                                    
                                    
                                    $
                                    338,243
                                    
                                    
                                    $
                                    882,267
                                    
                                    
                                    $
                                    1,024,329





The
Company had no financial assets accounted for on a non-recurring basis as of
September 30, 2010.





There
were no changes to the Company’s valuation techniques used to measure asset fair
values on a recurring or nonrecurring basis during the nine months ended
September 30, 2010, and the Company did not have any financial liabilities as of
September 30, 2010. The Company has other financial instruments, such as
advances and other receivables, accounts payable and other liabilities, notes
payable and other assets, which have been excluded from the tables above. Due to
the short-term nature of these instruments, the carrying value of advances and
other receivables, accounts payable and other liabilities, notes payable and
other assets approximate their fair values.





7. NOTES
PAYABLE





September
      30,
                            
                            
                            December 31,2010
                            
                            
                            2009Notes
      payable to three investors, interest at 8%, due August 10,
      2011
                            
                            $
                            150,655
                            
                            
                            $
                            150,655Notes
      payable to stockholders and related parties, interest at 6%, due June 20,
      2012
                            
                            
                            401,210
                            
                            
                            
                            401,210Notes
      payable to third parties, interest at rates of 4% to 6%, due August
      10, 2011
                            
                            
                            253,740
                            
                            
                            
                            253,740$
                            805,605
                            
                            
                            $
                            805,605





For
the three and nine months ended September 30, 2010 and September 30, 2009, the
Company recorded interest expense of $11,582,  $10,770, $34,745
and $31,512, respectively.





8. INCOME
TAXES





The
Company has not made provision for income taxes in the three or nine month
periods ended September 30, 2010 and 2009 since the Company has the benefit of
net operating losses carried forward in these periods.





Due to
uncertainties surrounding the Company’s ability to generate future taxable
income to realize deferred income tax assets arising as a result of net
operating losses carried forward, the Company has not recorded any deferred
income tax asset as of September 30, 2010 or December 31, 2009. The net
operating losses carry forwards will begin to expire in varying amounts from
year 2019 to 2029, subject to its eligibility as determined by the respective
tax regulatory authorities.





11





The
Company is subject to taxation in the United States and certain state
jurisdictions. The Company’s tax years for 2002 and forward are subject to
examination by the United States and applicable state tax authorities due to the
carry forward of unutilized net operating losses.





9.
ACCRUED EXPENSES





Accrued
expenses consist of the following:





September 30, 2010
                          
                          
                          December 31, 2009Professional
      fees
                          
                          $
                          -
                          
                          
                          $
                          34,023Interest
      expense
                          
                          
                          34,745
                          
                          
                          
                          -Payroll
      expense
                          
                          
                          131,806
                          
                          
                          
                          131,806Other
      accrued expenses
                          
                          
                          -
                          
                          
                          
                          101,200Total
                          
                          $
                          166,551
                          
                          
                          $
                          267,029





10. 
LOSS PER COMMON SHARE





The
following table sets forth the reconciliation and diluted net loss per common
share computation for the three and nine months ended September 30,
2010.





Nine
      months Ending
                    
                    
                    Three Months EndingSeptember
      30, 2010
                    
                    
                    September
      30, 2010Basic
      and diluted EPS:Net
      income (loss) ascribed to common shareholders - basic and
      diluted
                    
                    $
                    (487,653
                    )
                    
                    $
                    (3,456
                    )Weighted
      shares outstanding - basic and diluted
                    
                    
                    26,680,950
                    
                    
                    
                    27,880,617Basic
      and diluted net loss per common share
                    
                    $
                    (0.02
                    )
                    
                    $
                    (0.01
                    )





11. 
 STOCK-BASED COMPENSATION





The
Company issued shares of its common stock to non-employees as stock-based
compensation.  The Company recorded compensation expense of $0 and
$393,490, respectively, in conjunction with the issuance of these
shares.





As of
September 30, 2010, the Company did not have any outstanding employee stock
options.





12. 
 STOCKHOLDERS' EQUITY





On April
22, 2009, the Company’s board of directors approved amendments to the
Certificate of Incorporation to: (1) effect a 1 for 10 reverse split of all the
outstanding common stock; and (2) authorize a new class of 10,000,000 shares of
preferred stock, par value $0.0001 per share, and to authorize the board of
directors to issue one or more series of the preferred stock with such
designations, rights, preferences and restrictions as determined by majority
vote of the directors. Thereafter on April 23, 2009, the Company received
written consent from stockholders of the Company holding a majority of the
outstanding shares of common stock approving the Amendments. The effective date
of the Amendments was July 6, 2009, the date the reverse stock split was made
effective for trading purposes by the Financial Industry Regulatory
Authority.  All share and per share data (except par value) have been
adjusted to reflect the effect of the stock split for all periods
presented.





As of
September 30, 2010, the board of directors had not authorized the issuance of
any series of preferred stock.





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





For the
nine months ended September 30, 2010 and 2009 the Company issued 672,755, and
200,000 shares of common stock, respectively, valued at approximately $0.16
and  $0.60 per share, respectively, for services valued at $109,550
and  $120,000, respectively.





During nine months ended
September 30, 2010 and 2009, the Company received $1,095,667 and $10,000,
respectively, from various unrelated individuals to purchase 3,449,563 and
28,572 shares of common stock, respectively.




12





13.
COMMITMENTS AND CONTINGENCIES





POLITICAL
RISK





The
Company is exposed in the inherent risks for the foreseeable future of
conducting business internationally. Language barriers, foreign laws and tariffs
and taxation issues all have a potential effect on the Company’s ability to
transact business. Political instability may increase the difficulties and costs
of doing business. Accordingly, events resulting from changes in the political
climate could have a material effect on the Company.





OPERATING
LEASES





The
Company’s lease for its principal office space in Arizona became effective
December 1, 2009 for a period of 13 months. Future minimum lease payments under
operating leases for the year ending December 31, 2010 will approximate $16,000.
The Company recorded lease rental expenses for the three and nine months ended
September 30, 2010, and September 30, 2009, of $4,157, $9,927,  $9,093
and $14,536 respectively, in the accompanying unaudited consolidated statements
of operations.





LEGAL
PROCEEDINGS





Former Employee Wage
Claims


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





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





Legal Fee Collection
Claim


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





Former Interim Chief
Financial Officer


On April
20, 2010, the Company gave notice of termination, effective April 30, 2010, of
its agreement with ValuCorp, dated as of November 1, 2009, pursuant to which
ValuCorp had provided Michael Gilburd as the Company’s Interim Chief Financial
Officer.  Mr. Gilburd asserted that ValuCorp is entitled to be issued
an unspecified number of shares of common stock in connection with this
agreement.  The Company does not believe there is any agreement with
ValuCorp regarding the issuance of stock to ValuCorp.





EMPLOYMENT
AGREEMENTS





On April
26, 2010, the Company’s Board of Directors approved five-year term executive
employment agreements (“Employment Agreements”) between the Company and Dr.
Daniel R. Peralta, the Company’s Chairman and Chief Executive Officer, and
Malcolm W. Sherman, the Company’s Executive Vice President, effective March 22,
2010 and March 23, 2010, respectively.  Dr. Peralta’s Employment Agreement
provides for a fixed annual salary of $500,000; Mr. Sherman’s Employment
Agreement provides for a fixed annual salary of $350,000. Under the Employment
Agreements, both executives are eligible for participation in a bonus pool with
other senior executives, the quarterly bonus amounts being based on financial
performance comparisons with prior fiscal quarters, beginning with the quarterly
reports of the Company for the year 2006 and each subsequent year during the
respective terms of each of the Employment Agreements. Such bonuses will be
pooled with those of other senior executives and be computed based on a total
bonus pool equal to 15% of the net profits of the Company as set forth in the
Company’s SEC filings.




13





The
Company’s Board of Directors, with the agreement of the two executives,
conditioned approval of the Employment Agreements on limitation of the salary of
Dr. Peralta to $200,000, and the salary of Mr. Sherman to $150,000, until the
cash flow of the Company was sufficient to pay the salaries specified in the
Employment Agreements and meet other operating obligations of the Company. 
Further, there would be no accruals of unpaid salaries under this agreement with
the two executives.




14





ITEM 2.
            MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF
      OPERATIONS





The
following is a discussion of our financial condition, results of operations,
liquidity and capital resources. This discussion should be read in conjunction
with our consolidated financial statements and the notes thereto, included in
Amendment No. 1 to our Annual Report on Form 10-K filed for the year ended
December 31, 2009 filed with the Securities and Exchange Commission on May 14,
2010. The terms “Delta” and the terms “we”, “us”, “our” or the “Company” refer
to Delta Mutual, Inc. and all of its consolidated subsidiaries.





As of
September 30, 2010, the Company also held a 45% ownership interest in
Delta–Envirotech, Inc., which is engaged in certain business opportunities in
the Middle East related to environmental remediation and other related projects.
These activities are managed and carried out by the majority stockholders of
Delta-Envirotech, Inc., (“Envirotech”), Hi-Tech Consulting and Construction,
Inc. and an unrelated individual.  Envirotech has entered into strategic
alliance agreements with several United States-based entities with technologies
and products in the environmental field to support its activities. Envirotech
was consolidated as the variable interest entity (VIE) up until September 30,
2009. As of December 31, 2009 management determined that Delta-Envirotech, Inc.
does not meet the criteria to be considered a VIE for the year ending December
31, 2009 as the Company does not exercise significant influence over the
operations or financial results of Envirotech.  Accordingly, the results of
operations and of financial data have been deconsolidated from the consolidated
financial statements of the Company effective December 31, 2009.





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 are an
independent energy company primarily engaged in the development and production
of oil and gas through our South American Hedge Fund subsidiary, which has
investments in oil and gas exploration and production in Argentina and a
property for the production of lithium in Argentina.  We plan to grow
through the acquisition and subsequent development and exploitation of producing
properties, principally through the identification and development of fields
utilizing new technologies such as modern log analysis and reservoir modeling
techniques, as well as 3-D seismic surveys and horizontal drilling. As a result
of these activities, we believe that we have a number of development
opportunities on our properties. In addition, we intend to expand upon our
development activities with complementary exploration projects in our core areas
of operation. Success in our development and exploration activities is critical
in the maintenance and growth of our current production levels and associated
reserves.





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





Our
current business plan for 2010 and beyond anticipates a substantial increase in
revenue primarily from our investments in oil and gas concessions in Argentina.
If we do not achieve the expected levels of revenue, we may be required to raise
additional capital through equity and/or debt financing.





GOING
CONCERN





During
the nine months ended September 30, 2010, we had a net loss of $487,653. The
Company has an accumulated deficit of $4,083,990 and working capital deficiency
of $705,730 as of September 30, 2010.  Additionally, the Company may
require additional funding to execute its strategic business plan for 2010 and
beyond. These factors raise substantial doubt about the Company’s ability to
continue as a going concern. Successful business operations and its transition
to attaining profitability is dependent upon obtaining additional financing and
achieving a level of revenue adequate to support its cost structure. There can
be no assurances that there will be adequate financing available to the Company,
if the Company requires financing. The accompanying consolidated financial
statements have been prepared assuming that the Company will continue as a going
concern. This basis of accounting contemplates the recovery of the Company’s
assets and the satisfaction of liabilities in the normal course of business. The
consolidated financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the outcome
of this uncertainty.




15





Additionally,
the Company will require additional funding to execute its future strategic
business plan. Successful business operations and its transition to attaining
profitability is dependent upon obtaining additional financing and achieving a
level of revenue adequate to support its cost structure.





The
Company's business is subject to the risks of its oil and gas investments in
South America. The likelihood of success of the Company must be considered in
light of the expenses, difficulties, delays and unanticipated challenges
encountered in connection with the operations of the oil and gas concession in
Argentina. There is no assurance that the Company will ultimately achieve a
profitable level of operations.





EXPLORATION AND DEVELOPMENT
ACTIVITY





Our
future oil and gas production, and therefore our success, is highly dependent
upon our ability to find, acquire and develop additional reserves that are
profitable to produce. The rate of production from our oil and gas properties
and our proved reserves will decline as our reserves are produced unless we
acquire additional properties containing proved reserves, conduct successful
development and exploration activities or, through engineering studies, identify
additional behind-pipe zones or secondary recovery reserves. We cannot assure
you that our exploration and development activities will result in increases in
our proved reserves. If our proved reserves decline in the future, our
production may also decline and, consequently, our cash flow from operations and
the amount that we are able to borrow under our credit facility will also
decline. In addition, the vast majority of our estimated proved reserves at
September 30, 2010 were undeveloped. By their nature, estimates of undeveloped
reserves are less certain. Recovery of such reserves will require significant
capital expenditures and successful drilling operations. We may be unable to
acquire or develop additional reserves, in which case our results of operations
and financial condition could be adversely affected.





Jollin and Tonono Oil and
Gas Concessions


The
Company, through SAHF, has a 10% interest concession in the carryover mode ("no
cost obligations to SAHF") in the Jollin and Tonono oil and gas concessions
located in Northern Argentina.





During
the year ended December 31, 2008, the third party owners of the Jollin and
Tonono concessions formed an Argentine-registered joint venture and paid,
in the aggregate, approximately $848,000 of development costs, all of which
were capitalized. Since the Company was not registered as a foreign company in
Argentina, it could not become a member of the joint venture in 2008. The third
party owners of these concessions have agreed that, upon admission of the
Company as a member of the joint venture, the Company will retain its ownership.
However, in exchange for this agreement, the Company’s weighted average pro-rata
portion of the 2008 aggregate development cost, of approximately $223,024, all
of which was included in accounts payable in the Company’s consolidated balance
sheet at December 31, 2008, was to be repaid to the other members from its
pro-rata share of the future earnings of the concession. On September 25, 2009,
the Company sold 13.5% of its ownership interest in the Jollin and Tonono oil
and gas concession to Maxi-Petroleros De Occidente S.A. ("Maxipetrol") for
$206,832.  Maxipetrol, prior to the sale, owned 48% of the Jollin and
Tonono oil and gas concession.  In connection with the sale, Maxipetrol
assumed full responsibility to develop the oil and gas concession until
production is achieved in the blocks.  This obligation includes all future
and former costs incurred for the Jollin and Tonono oil and gas concession,
until such time as the well is producing.  All prior unpaid costs accrued
by the Company, were assumed by Maxipetrol.  The Company recorded a
$157,939 loss on the disposition of its 13.5% investment to Maxipetrol and the
loss is included in its statement of operations for the year ended December 31,
2009.  In addition, as of December 31, 2009, the Company recorded a
reversal of $223,024 to adjust balances in investments and accounts payable as a
result of the forgiveness of the aggregate development cost payable. During the
three months ending September 30, 2010 the Company paid $139,762 in additional
canons to maintain its ownership interest in the concession.





The
Company received its foreign registration in Argentina and was admitted as a
member of the joint venture on July 2, 2010. Accordingly, the Company has
reclassified its concession costs in the amount of $664,954 associated with this
property to proved oil and gas properties as of September 30, 2010 based upon
the reserve report received from the third party working interest owner of the
joint venture. The Company will begin receiving revenue from the Jollin and
Tonono blocks when the first well is approved for commercial
production.





Salta Province Exploration
Rights


During
2008, the Company purchased 40% of the oil and gas exploration rights to five
geographically defined areas in the Salta Province of Northern Argentina from
Ketsal, SA (“Ketsal”) for $697,000 cash. In 2009, SAHF assigned 50% of its
rights to a third party.  As of September 30, 2010, SAHF owns 20% of the
rights to this oil and gas concession. The Company expects that in 2010,
substantially all of the exploration costs required to retain the exploration
rights will be borne by Ketsal, the majority owner.





The
Company is responsible for managing the drilling activities in the Salta
Province and bears its pro-rata share of the costs.  Exploratory drilling
activities commenced in April 2010 on the Guemes Block and the first well was
spud in June 2010.  The Company paid $106,672 for additional concession
fees to become an exploration company in Argentina and incurred $326,910 in
exploratory drilling costs through September 30, 2010 that were capitalized as
work-in-progress under the full cost method of accounting.   In July
2010, the Company found positive traces of the presence of natural gas and
hydrocarbons of low-density quality through its analysis of core samples. 
Well logging while drilling also confirmed the potential existence of formations
with sufficient hydrocarbons to make the well economically productive. 
Production testing to verify the commercial sustainability of the well will
commence upon the receipt of the oil production license from the government
during the third quarter, subject to the weather conditions during the
wintertime in Argentina. The Company has not recorded impairment and depletion
charges for the nine months ended September 30, 2010, as the Company has not
arranged for a complete report on reserve studies and analysis to determine
whether proved reserves exist.  Following the Guemes successful drilling
operation, the Joint Venture completed its application for the Oil & Gas
Operator License from the federal Secretary of Energy. A license approval is
expected before the end of the fourth quarter. After the rainy season,
activities to produce oil in the Guemes well will resume




16





Tartagal and
Morillo


As of
September 30, 2010, the Company, through SAHF, retains 9% of the total
concession in the carryover mode ("no cost obligations to SAHF") in the Tartagal
and Morillo oil and gas concessions located in Northern Argentina.In March 2009, a Hong Kong
public company purchased 60% of the ownership in the Tartagal and Morillo oil
and gas concessions, from the other majority owners, for total consideration of
approximately $270 million. To date, the working interest owners have expended
approximately $27 million on 2D and 3D seismic surveys and other geological
studies.The
Companyexpects to
begin receiving revenue from the Tartagal and Morillo blocks when the first well
is approved for commercial production.





The
Company has applied to be formally admitted as a member of the joint venture.
When this registration in received, the Company will reclassify the $217,313
concession costs associated with this property to proved oil and gas properties
based upon the reserve report received from the third party working interest
owner of the joint venture. The Company has not recorded any impairment and
depletion charges for this concession as the Company is in the process of
obtaining a reserve report from the operating member of the joint venture. 
As of November 10th, one work-over drilling in Campo Alcoba in the Tartagal
block was finished and deemed successful. Before the end of the fourth quarter,
production from aforementioned well is expected.





Lithium Production
Properties


On April
29, 2010, the Company acquired certain properties from Minera Jujuy from the
Jujuy Province, Argentina located in the Northwest part of Argentina, south
of the border with Bolivia, for $30,000.  Management believes that these
properties have high concentrations of lithium and borates brines. The Company
now owns 51% and controls 100% (through an agreement between the parties) of an
area of approximately 147,000 hectares  (approximately 350,000 acres)
in an area of North Guayatayoc, Argentina.





RESULTS
OF OPERATIONS





NINE
MONTHS ENDED SEPTEMBER 30, 2010 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30,
2009





During
the nine months ended September 30, 2010, we incurred a net loss from continuing
operations of $619,187 compared to a loss of $1,182,296 for the nine months
ended September 30, 2009. The decrease in our loss from continuing operations
for the nine months ended September 30, 2010 over the comparable period of the
prior year is primarily due to a decrease in general and administrative expenses
associated with the discontinuance of the Company’s equity compensation
programs.





Our net
loss for the nine months ended September 30, 2010 was approximately $487,653,
including a non-recurring gain of $131,534 from the reversal of certain
liabilities from discontinued operations, compared to a net loss
of  $1,188,748 for the comparable prior year period, which included
$6,452 of loss from discontinued operations.





THREE
MONTHS ENDED SEPTEMBER 30, 2010 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30,
2009





During
the three months ended September 30, 2010, we incurred a net loss from
continuing operations of $134,970 compared to $426,611 for the three months
ended September 30, 2009. The decrease in our loss from continuing operations
for the three months ended September 30, 2010 over the comparable period of the
prior year is primarily due to a decrease in general and administrative expenses
associated with the discontinuance of the Company’s equity compensation
programs.





Our net
loss for the three months ended September 30, 2010 was $3,436 compared to a net
loss of $426,611 for the comparable prior year period.   The three
months ended September 31, 2010 include a non-recurring gain of $131,534 from
the reversal of certain liabilities from discontinued operations.





LIQUIDITY





At
September 30, 2010 and December 31, 2009, we had working capital deficits of
$705,730 and $967,042, respectively.




17





At
September 30, 2010, we had total assets of $2,258,862 compared to total assets
of $1,750,005 at December 31, 2009. Cash increased $236,235 for the nine
months ending September 30, 2010 compared to year-end 2009 due primarily to the
issuance of common stock. Net cash used in operating activities in the nine
months ending September 30, 2010, was $370,040, as compared with $335,109 in the
comparable period in 2009; net cash used in investing activities in the nine
months ending September 30, 2010 was $503,722 in 2010, as compared
with  sale of investments of $206,848 in the comparable period in
2009. Cash used in operating and financing activities during the nine months
ending September 30, 2010 and 2009, was offset by net cash from financing
activities of $1,095,667 and $130,403, respectively.





CRITICAL
ACCOUNTING POLICIES





There
have been no changes from the Critical Accounting Policies described in our
Annual Report on Form 10-K for the year ended December 31, 2009 except that the
Company adopted the full cost method of accounting for its exploration and
development activities.





Under the
full cost method, all direct costs and certain indirect costs associated with
acquisition of properties and successful as well as unsuccessful exploration and
development activities are capitalized. Depreciation, depletion, and
amortization of capitalized oil and gas properties and estimated future
development costs, excluding unproved properties, are based on the
unit-of-production method based on proved reserves.  Net capitalized costs
of oil and gas properties, less related deferred taxes, are limited to the lower
of unamortized cost or the cost ceiling, defined as the sum of the present value
of estimated future net revenues from proved reserves based on unescalated
prices discounted at 10 percent, plus the cost of properties not being
amortized, if any, plus the lower of cost or estimated fair value of unproved
properties included in the costs being amortized, if any, less related income
taxes. Costs in excess of the present value of estimated future net revenues as
discussed above are charged to proved property impairment expense.  No gain
or loss is recognized upon sale or disposition of oil and gas properties, except
in unusual circumstances. We apply the full cost ceiling test on a quarterly
basis on the date of the latest balance sheet presented.





USE OF
ESTIMATES





The
preparation of the financial statements requires the Company to make estimates
and judgments that affect the reported amount of assets, liabilities, and
expenses, and related disclosures of contingent assets and liabilities. On an
on-going basis, the Company evaluates its estimates, including those related to
oil and gas properties, 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.  In the opinion of management, all normal recurring adjustments
considered necessary for a fair presentation have been included in these
financial statements.  Certain amounts for prior periods have been
reclassified to conform to the current presentation.





Management
believes that it is reasonably possible that the following material estimates
affecting the financial statements could happen in the coming year:





·
            Proved
      oil and gas reserves;


·
            Expected
      future cash flow from proved oil and gas
  properties;


·
            Future
      exploration and development costs;
and


·
            Future
      dismantlement and restoration
costs.





NEW
FINANCIAL ACCOUNTING STANDARDS





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





Item
3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.





Interest
Rate Risk - Interest rate risk refers to fluctuations in the value of a security
resulting from changes in the general level of interest rates. Investments that
are classified as cash and cash equivalents have original maturities of three
months or less. Our interest income is sensitive to changes in the general level
of U.S. interest rates.





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





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




18





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





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





Foreign
Currency Risk - Our financial results could be affected by factors such as
changes in foreign currency exchange rates or weak economic conditions in
foreign markets. Because our revenue is reported in U.S. dollars, fluctuating
exchange rates of the local currency, when converted into U.S. dollars, may have
an adverse impact on our revenue and income. We have not hedged foreign
currency exposures related to transactions denominated in currencies other than
U.S. dollars. We do not engage in financial transactions for trading or
speculative purposes.





Item
4T. – CONTROLS AND PROCEDURES





Evaluation of Controls and
Procedures





We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our Securities Exchange Act reports is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms, and that such information is accumulated and
communicated to our management, including our chief executive and financial
officer, to allow timely decisions regarding required disclosure. In designing
and evaluating the disclosure controls and procedures, management recognized
that any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives,
as ours are designed to do, and management necessarily was required to apply its
judgment in evaluating the cost- benefit relationship of possible controls and
procedures.





As of
September 30, 2010, an evaluation was performed under the supervision and with
the participation of our management, including our Chief Executive Officer and
Principal Financial Officer, of the effectiveness of the design and operation of
our disclosure controls and procedures. Based upon that evaluation, our Chief
Executive Officer and Principal Financial Officer concluded that our disclosure
controls and procedures were effective.





Changes in
Internal Controls





There
have been no changes in the Company's internal controls over financial reporting
that occurred during the Company's last fiscal quarter to which this report
relates that have materially affected, or are reasonably likely to materially
affect, the Company's internal control over financial reporting, except that the
Company increased its internal controls around the issuance and recording of
common stock sales.





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 the inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues and instances of
fraud, if any, within a company have been detected. The Company's disclosure
controls and procedures are designed to provide reasonable assurance of
achieving its objectives. The Company's chief executive officer and principal
financial officer concluded that the Company's disclosure controls and
procedures are effective at that reasonable assurance level.





PART
II—OTHER INFORMATION





ITEM
1.          LEGAL
PROCEEDINGS.





Former Employee Wage
Claims


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




19




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





Legal Fee Collection
Claim


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





Former Interim Chief
Financial Officer


On April
20, 2010, the Company gave notice of termination, effective April 30, 2010, of
its agreement with ValuCorp, dated as of November 1, 2009, pursuant to which
ValuCorp had provided Michael Gilburd as the Company’s Interim Chief Financial
Officer.  Mr. Gilburd has asserted that ValuCorp is entitled to be
issued an unspecified number of shares of common stock in connection with this
agreement.  The Company does not believe there is any agreement with
ValuCorp regarding the issuance of stock to ValuCorp.





ITEM
2.       UNREGISTERED SALES OF EQUITY SECURITIES
AND USE OF PROCEEDS.





The following table sets forth the sales of
unregistered securities since the Company’s last report filed under this
item.





Principal
                          
                          Total
      Offering Price/Date
                          
                          Title and Amount(1)
                          
                          Purchaser
                          
                          Underwriter
                          
                          Underwriting DiscountsJuly
      16, 2010
                          
                          106,667
      shares of common stock.
                          
                          Private
      investor.
                          
                          NA
                          
                          $.46   per
      share/NAMay
      27, 2010
                          
                          156,250
      shares of common stock.
                          
                          Private
      investor.
                          
                          NA
                          
                          $.32   per
      share/NAAugust
      24, 2010
                          
                          40,000
      shares of common stock.
                          
                          Private
      investor.
                          
                          NA
                          
                          $.25  
      per share/NAAugust
      24, 2010
                          
                          92,800
      shares of common stock.
                          
                          Consultant
      services.
                          
                          NA
                          
                          $.25   per
      share/NASeptember
      13, 2010
                          
                          70,000
      shares of common stock.
                          
                          Private
      investor.
                          
                          NA
                          
                          $.50   per
      share/NASeptember
      13, 2010
                          
                          60,000
      shares of common stock.
                          
                          Private
      investor.
                          
                          NA
                          
                          $.50   per
      share/NASeptember
      13, 2010
                          
                          70,000
      shares of common stock.
                          
                          Private
      investor.
                          
                          NA
                          
                          $.50   per
      share/NA


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





ITEM
6.  EXHIBITS.





31.1
            Certification of Chief Executive
      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.


20





SIGNATURES





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





DELTA
      MUTUAL, INC.BY:
            /s/ Daniel R. PeraltaDaniel
      R. PeraltaPresident
      and Chief Executive Officer, Principal Financial
  Officer





Dated:
November  22, 2010





EXHIBIT
INDEX





31
              Certification
      of Chief Executive Officer and Principal Financial Officer Pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002.32
              Certification
      of Chief Executive Officer and Principal Financial Officer Pursuant to 18
      U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.




21