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

                                  FORM 10-KSB/A

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

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

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

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

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

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

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

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

                   COMMON STOCK (par value $0.0001 per share)

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

      Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. |_|

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

      Aggregate market value of the voting and non-voting  common shares held by
non-affiliates of the registrant as of June 30, 2005: $7,713,520 (See Item 5)

      Number of shares outstanding of registrant's Common Stock, par value
$.0001, as of June 30, 2005: 22,986,824 shares of Common Stock (See Item 11)

      Documents incorporated by reference: NONE

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


                                       1
<PAGE>

                                     PART I

                    NOTE REGARDING FORWARD LOOKING STATEMENTS

        CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS

             OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This Annual Report contains historical information as well as forward-looking
statements. Statements looking forward in time are included in this Annual
Report pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Such statements involve known and unknown risks
and uncertainties that may cause our actual results in future periods to be
materially different from any future performance suggested herein. We wish to
caution readers that in addition to the important factors described elsewhere in
this Form 10-KSB, the following forward-looking statements, among others,
sometimes have affected, and in the future could affect, our actual results and
could cause our actual consolidated results during 2004, and beyond, to differ
materially from those expressed in any forward-looking statements made by or on
our behalf.

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

ITEM 1. DESCRIPTION OF BUSINESS

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

GENERAL

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


                                       2
<PAGE>

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

Prior Operations

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

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

Business Plan

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

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

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

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


                                       3
<PAGE>

Middle East

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

Far East

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

Puerto Rico

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

On June 28, 2005, the Company received notification from the Planning Board of
Puerto Rico (Junta de Planification de Puerto Rico) that the Brisas del
Atlantico project was not approved because the 36-acre tract is located in an
area zoned rural/agricultural, and housing development is not included in the
current master development plan for that area. Based on the previous endorsement
of the project by the Mayor of Aguadilla and the lack of any objections as to
the proposed land use from the Department of Agriculture (Departamento de
Agricultura), as submitted with the original permit application, the Company
submitted a formal request to the Planning Board to reconsider its decision on
July 6, 2005. The Planning Board agreed and reconsidered the matter during its
meeting on July 18, 2005. Currently, the Company is awaiting notification of a
decision from the Planning Board.


                                       4
<PAGE>

In December, 2004, we secured the rights to an additional 40 acre tract located
in Guayanilla for our second Section 124 project. This tract of land is part of
a 150 acre development that will also include other residential properties,
commercial/retail buildings and a hotel. The master plan for this entire project
is currently being prepared by the project's developer. We formed a second
majority owned joint venture in Puerto Rico in December 2004, to manage
construction and related activities required to build approximately 300 homes on
this property under the Section 124 low income housing program.

COMPETITION

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

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

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

EMPLOYEES

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

RISK FACTORS

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

NO REVENUE AND MINIMAL ASSETS.

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


                                       5
<PAGE>

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

Our operations have not generated any revenue nor are they profitable. We have
incurred net operating losses from the formation of our Company through December
31, 2004, of $3,739,799 and expect that we will continue to incur operating
losses in the future. In 2004, we generated no revenue, incurred operating
expenses of $1,848,078 and had a net loss of $1,950,399. As of June 30, 2005, we
had approximately $10,500 of cash on hand to fund operations. There is no
assurance that we will operate profitably in the future. Failure to achieve or
maintain profitability may materially and adversely affect the future value of
our common stock.

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

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

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

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

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

AS A HOUSING DEVELOPER WE FACE ECONOMIC AND MARKET RISKS.

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


                                       6
<PAGE>

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

OUR MARKETS ARE VERY COMPETITIVE.

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

WE DO NOT EXPECT TO PAY DIVIDENDS.

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

VOLATILITY OF STOCK PRICE.

The market price of our common stock, as is the case for companies without
established operations, is extremely volatile due to our uncertain future
prospects and general market and economic conditions. During the eighteen month
period ended June 30, 2005, the closing per share price of our common stock has
fluctuated from $1.09 to $0.16 per share. Our common stock currently trades in
the OTC Bulletin Board market.

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

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


                                       7
<PAGE>

ITEM 2. DESCRIPTION OF PROPERTY.

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

ITEM 3. LEGAL PROCEEDINGS.

On July 1, 2005, the Company was served with a summons and complaint filed in
the United States District Court for the Southern District of New York by
Charter Capital Resources, Inc. and Beryl Zyskind. The complaint lists as
defendants the Company; Peter F. Russo, our President and Chief Executive
Officer; Neil Berman, a stockholder and noteholder of the Company; and Standard
Registrar & Transfer Agency, the Company's transfer agent. The suit alleges that
the plaintiffs own 300,000 shares of the Company's common stock and that the
defendant's have interfered with the plaintiff's right to transfer 232,134 of
their shares. The plaintiff's seek alleged compensatory damages of $200,000,
punitive damages, costs and reasonable attorneys' fees, and an order requiring
the defendant's to take the necessary steps to transfer the 232,134 shares to
the street name of the plaintiffs' broker for immediate sale in the public
market.

On July 20, 2005, the Company filed an answer to the complaint which denies the
allegations and filed a motion to disqualify plaintiffs' attorneys.

The Company disputes any wrongdoing by the Company or Mr. Russo and will contest
vigorously the claims asserted against them. The Company will also vigorously
defend its transfer agent pursuant to an indemnity agreement.

The Company believes that this matter will have no material effect upon the
Company or its operations.

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

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
ISSUER PURCHASES OF EQUITY SECURITIES.

Our common stock has been quoted on the Over-the-Counter Bulletin Board operated
by the National Association of Securities Dealers, since approximately February
1, 2001. Our shares are listed under the symbol "DLTM". The quotations in the
table below reflect inter-dealer prices, without retail mark-up, mark-down, or
commission and may not represent actual transactions.

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

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

2005:    1st Quarter                     0.69                          0.28
         2nd  Quarter                    0.96                          0.23


                                       8
<PAGE>

During the last two fiscal years, no cash dividends have been declared on
Delta's common stock and current Company management does not anticipate that
dividends will be paid in the foreseeable future. As of June 30, 2005, there
were 88 record holders of our common stock.

RECENT SALES OF UNREGISTERED SECURITIES

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


                                       9
<PAGE>

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

                                       10
<PAGE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
        Date             Title and Amount           Purchaser            Principal        Total Offering
                                                                        Underwriter      Price/Underwriting
                                                                                            Discounts
---------------------------------------------------------------------------------------------------------------------
<S>                     <C>                     <C>                         <C>        <C>
                        50,000 shares of
January 14, 2004        common stock            Consultant                  NA         $.0825 per share/NA
---------------------------------------------------------------------------------------------------------------------
                        400,000 shares of
January 24, 2004        common stock            Private Investor            NA         $.125 per share/NA
---------------------------------------------------------------------------------------------------------------------
February 11, 2004       400,000 shares of       Private Investor            NA         $.125 per share/NA
                        common stock
---------------------------------------------------------------------------------------------------------------------
                        200,000 shares of       Private Investor
February 18, 2004       common stock                                        NA         $.125 per share/NA
---------------------------------------------------------------------------------------------------------------------
                        155,000 shares of       Consultant
February 25, 2004       common stock                                        NA         $.16 per share/NA
---------------------------------------------------------------------------------------------------------------------
                        200,000 shares of       Consultant
February 25, 2004       common stock                                        NA         $.10 per share/NA
---------------------------------------------------------------------------------------------------------------------
                        100,000 shares of       Private Investor
February 26, 2004       common stock                                        NA         $.125 per share/NA
---------------------------------------------------------------------------------------------------------------------
                        140,000 shares of       Private Investor
February 27, 2004       common stock                                        NA         $.137 per share/NA
---------------------------------------------------------------------------------------------------------------------
March 2, 2004           200,000 shares of       Consultant                  NA         $.25 per share/NA
                        common stock
---------------------------------------------------------------------------------------------------------------------
                        30,000 shares of
March 31, 2004          common stock            Vendor                      NA         $.30 per share/NA
---------------------------------------------------------------------------------------------------------------------
                        50,000 shares of
March 31, 2004          common stock            Consultant                  NA         $.0825 per share/NA
---------------------------------------------------------------------------------------------------------------------
                        200,000 shares of
April 14, 2004          common stock            Private Investor            NA         $.125/NA
---------------------------------------------------------------------------------------------------------------------
                        400,000 shares of
April 16, 2004          common stock            Consultant                  NA         $.18/NA
---------------------------------------------------------------------------------------------------------------------
                        200,000 shares of
April 16, 2004          common stock            Consultant                  NA         $.18/NA
---------------------------------------------------------------------------------------------------------------------
                        100,000 shares of
May 5, 2004             common stock            Employee                    NA         $.14/NA
---------------------------------------------------------------------------------------------------------------------
                        60,000 shares of
May 5, 2004             common stock            Employee                    NA         $.14/NA
---------------------------------------------------------------------------------------------------------------------
                        25,000 shares of
May 5, 2004             common stock            Employee                    NA         $.14/NA
---------------------------------------------------------------------------------------------------------------------
                        35,000 shares of
May 5, 2004             common stock            Private Investor            NA         $.125/NA
---------------------------------------------------------------------------------------------------------------------
                        35,000 shares of
May 5, 2004             common stock            Private Investor            NA         $.125/NA
---------------------------------------------------------------------------------------------------------------------
                        200,00 shares of
May 6, 2004             common stock            Private Investor            NA         $.125/NA
---------------------------------------------------------------------------------------------------------------------
                        100,000 shares of
May 6, 2004             common stock            Consultant                  NA         $.125/NA
---------------------------------------------------------------------------------------------------------------------
                        100,000 shares of
May 11, 2004            common stock            Private Investor            NA         $.125/NA
---------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       11
<PAGE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
       Date            Title and Amount         Purchasers                Principal             Total Offering
                                                                         Underwriter         Price/Underwriting
                                                                                                  Discounts
---------------------------------------------------------------------------------------------------------------------
<S>                     <C>                     <C>                         <C>        <C>
                        $193,740 principal      Private Investor            NA         $193,740/NA
                        amount of 4%
May 12, 2004            convertible note due
                        May 12, 2006
                        convertible into
                        1,549,920 shares of
                        common stock
---------------------------------------------------------------------------------------------------------------------
May 12, 2004            $129,160 principal      Private Investor            NA         $129,160/NA
                        amount of 4%
                        convertible note due
                        May 12, 2006
                        convertible into
                        1,033,280 shares of
                        common stock
---------------------------------------------------------------------------------------------------------------------
May 25, 2004            60,000 shares of        Private Investor            NA         $.125/NA
                        common stock
---------------------------------------------------------------------------------------------------------------------
June 8, 2004            50,000 shares of        Private Investor            NA         $.125/NA
                        common stock
---------------------------------------------------------------------------------------------------------------------
                        50,000 shares of
June 10, 2004           common stock            Private Investor            NA         $.125/NA
---------------------------------------------------------------------------------------------------------------------
                        50,000 shares of
June 10,2004            common stock            Private Investor            NA         $.125/NA
---------------------------------------------------------------------------------------------------------------------
                        30,000 shares of
June 10,2004            common stock            Private Investor            NA         $.125/NA
---------------------------------------------------------------------------------------------------------------------
                        15,000 shares of
June 10,2004            common stock            Private Investor            NA         $.125/NA
---------------------------------------------------------------------------------------------------------------------
                        15,000 shares of
June 10,2004            common stock            Private Investor            NA         $.125/NA
---------------------------------------------------------------------------------------------------------------------
                        400,000 shares of
June 14, 2004           common stock            Private Investor            NA         $.18/NA
---------------------------------------------------------------------------------------------------------------------
July 1, 2004            $157,000  principal     Private Investor            NA         $157,000/NA
                        amount of 4%
                        convertible
                        promissory note due
                        December 31, 2006
                        convertible into
                        3,140,000 shares of
                        common stock
---------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       12
<PAGE>

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


                                       13
<PAGE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
        Date             Title and Amount           Purchaser            Principal        Total Offering
                                                                        Underwriter      Price/Underwriting
                                                                                            Discounts
---------------------------------------------------------------------------------------------------------------------
<S>                     <C>                      <C>                        <C>        <C>
September 23, 2004      $10,000 principal        Private Investor           NA         $10,000/NA
                        amount of 6%
                        convertible
                        promissory note due
                        September 22, 2006,
                        convertible into an
                        aggregate of 200,000
                        shares of common stock
---------------------------------------------------------------------------------------------------------------------
September 23, 2004      Warrants to purchase     Private Investor           NA         NA/NA
                        an aggregate of
                        200,000 share of
                        common stock issued
                        in connection with
                        the sale of the 6%
                        convertible
                        promissory note
---------------------------------------------------------------------------------------------------------------------
September 27, 2004      $20,000 principal        Private Investor           NA         $20,000/NA
                        amount of 6%
                        convertible
                        promissory note due
                        September 26, 2006,
                        convertible into an
                        aggregate of 400,000
                        shares of common stock
---------------------------------------------------------------------------------------------------------------------
September 27, 2004      Warrants to purchase     Private Investor           NA         NA/NA
                        an aggregate of
                        400,000 shares of
                        common stock issued
                        in connection with
                        the sale of the 6%
                        convertible
                        promissory note
---------------------------------------------------------------------------------------------------------------------
October 4,  2004        750,000 shares of        Consultant                 NA         $0.05/NA
                        common stock
---------------------------------------------------------------------------------------------------------------------
October 19, 2004        $25,000 principal        Private Investor           NA         $25,000/NA
                        amount of 6%
                        convertible promissory
                        note due October 18,
                        2006, convertible into
                        an aggregate of
                        500,000 shares of
                        common stock
---------------------------------------------------------------------------------------------------------------------
October 19, 2004        Warrants to purchase     Private investor           NA         NA/NA
                        an aggregate of
                        500,000 shares of
                        common stock issued in
                        connection with the
                        sale of the 6%
                        convertible promissory
                        note
---------------------------------------------------------------------------------------------------------------------
October 22, 2004        250,000 shares of        Consultant                 NA         $0.1415/NA
                        common stock
---------------------------------------------------------------------------------------------------------------------
November 2, 2004        $12,500 principal        Private investor           NA         $12,500/NA
                        amount of 6%
                        convertible promissory
                        note due November 1,
                        2006, convertible into
                        an aggregate of
                        250,000 shares of
                        common stock
---------------------------------------------------------------------------------------------------------------------
November 1, 2004        250,000 shares of        Consultant                 NA         $0.125/NA
                        common stock
---------------------------------------------------------------------------------------------------------------------
November 2, 2004        Warrants to purchase     Private investor           NA         NA/NA
                        an aggregate of
                        250,000 shares of
                        common stock issued in
                        connection with the
                        sale of the 6%
                        convertible promissory
                        note
---------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       14
<PAGE>

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

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

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


                                       15
<PAGE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
        Date             Title and Amount           Purchaser            Principal        Total Offering
                                                                        Underwriter      Price/Underwriting
                                                                                            Discounts
---------------------------------------------------------------------------------------------------------------------
<S>                     <C>                      <C>                        <C>        <C>
December 6, 2004        150,000 shares of         Private Investor          NA         $.10 per share/NA
                        common stock issued
                        upon exercise of
                        outstanding common
                        stock purchase warrant
---------------------------------------------------------------------------------------------------------------------
December 7, 2004        200,000 shares of         Private Investor          NA         $.10 per share/NA
                        common stock issued
                        upon exercise of
                        outstanding common
                        stock purchase warrant
---------------------------------------------------------------------------------------------------------------------
December 13, 2004       150,000 shares of         Private Investor          NA         $.10 per share/NA
                        common stock issued
                        upon exercise of
                        outstanding common
                        stock purchase warrant
---------------------------------------------------------------------------------------------------------------------
December 15, 2004       54,055 shares of          Private Investor          NA         $.185 per share/NA
                        common stock
---------------------------------------------------------------------------------------------------------------------
December 22, 2004       300,000 shares of         Private Investor          NA         $.10 per share/NA
                        common stock issued
                        upon exercise of
                        outstanding common
                        stock purchase warrant
---------------------------------------------------------------------------------------------------------------------
</TABLE>

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

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

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

GENERAL

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


                                       16
<PAGE>

RESULTS OF OPERATIONS

During the fiscal year ended December 31, 2004 we incurred a net loss of
$1,950,399, because we had no revenue to offset operating expenses. The loss in
fiscal 2004 was primarily attributable to general and administrative expenses of
approximately $1,848,000 including professional fees in the approximate amount
of $366,100, gain on minority interest share of losses of consolidated
subsidiaries of $101,644, write down of joint venture of $33,799, accretion of
convertible debt of $142,200 and interest expense of about $28,000. From
inception (November 17, 1999) to December 31, 2004, we had a net loss of
$3,739,799.

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

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

2004 COMPARED TO 2003

The net loss increased from approximately $1,250,000 in 2003 to approximately
$1,950,000 for the twelve months ended December 31, 2004.

The items of significant increase or decrease in the twelve months ended
December 31, 2004 over the comparable period of the prior year were an increase
in general and administrative expense from approximately $1,210,000 in 2003 to
approximately $1,848,000, gain on minority interest share of losses of
consolidated subsidiaries of $101,644, write down of joint venture of $33,799
and accretion of convertible debt of $142,200 for the twelve months ended
December 31, 2004, and a decrease in interest expense from approximately $40,000
in 2003 to approximately $28,000 for the twelve months ended December 31, 2004.

PLAN OF OPERATION

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


                                       17
<PAGE>

Puerto Rico

The Company formed majority owned joint ventures in Puerto Rico to manage the
construction and related activities required to build low income homes in Puerto
Rico under the Section 124 low income housing program. In December 2003, the
Company secured the purchase rights to 36 acres that are designated Section 124
eligible, in the City of Aguadilla. Approximately 270 low income homes are
planned for construction on this property, in a project called "Brisas del
Atlantico." The necessary building permits were submitted for approval and a
real estate agency was hired to sell the homes planned for construction. Due to
events related to the ballot recount in the Puerto Rico gubernatorial election
held November 2, 2004, the election of a new governor was not certified until
late December 2004. These events delayed the Company's permit approval process.

On June 28, 2005, the Company received notification from the Planning Board of
Puerto Rico (Junta de Planification de Puerto Rico) that the Brisas del
Atlantico project was not approved because the 36-acre tract is located in a
area zoned rural/agricultural, and housing development is not included in the
current master development plan for the that area. Based on the previous
endorsement of the project by the Mayor of Aguadilla and the lack of any
objections as to the proposed land use from the Department of Agriculture
(Departamento de Agricultura), as submitted with the original permit
application, the Company submitted a formal request to the Planning Board to
reconsider its decision on July 6, 2005. The Planning Board agreed and
reconsidered the matter during its meeting on July 18, 2005. Currently, the
Company is awaiting notification of a decision from the Planning Board.

In December, 2004, we secured the rights to an additional 40 acre tract located
in Guayanilla for our second Section 124 project. This tract of land is part of
a 150 acre development that will also include other residential properties,
commercial/retail buildings and a hotel. The master plan for this entire project
is currently being prepared by the project's developer. We formed a second
majority owned joint venture in Puerto Rico in December 2004, to manage
construction and related activities required to build approximately 300
additional homes on this property under the Section 124 low income housing
program.

Middle East and Far East

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

Central and Eastern Europe

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

FUNDING

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

LIQUIDITY

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


                                       18
<PAGE>

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

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

ASSETS

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

CRITICAL ACCOUNTING ISSUES

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

Other Matters

Accounting Pronouncements

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

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


                                       19
<PAGE>

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

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

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


                                       20
<PAGE>

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

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

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

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


                                       21
<PAGE>

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

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

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

Quantitative and Qualitative Disclosures About Market Risk

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

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


                                       22
<PAGE>

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

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

ITEM 7. FINANCIAL STATEMENTS.

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

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

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

ITEM 8A. CONTROLS AND PROCEDURES.

Evaluation of disclosure controls and procedures:

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

Limitations on the effectiveness of controls:

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

ITEM 8B. OTHER INFORMATION.

None
                                    PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.

DIRECTORS AND EXECUTIVE OFFICERS

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


                                       23
<PAGE>

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

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

Jerome Kindrachuk             60                 Vice President--International

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

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

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


                                       24
<PAGE>

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

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

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

We have a corporate code of conduct in place, which provides for internal
procedures concerning the reporting and disclosure of corporate matters that are
material to our business and to our stockholders. Our corporate code of conduct
includes a code of ethics for our officers and employees as to workplace
conduct, dealings with customers, compliance with laws, improper payments,
conflicts of interest, insider trading, company confidential information, and
behavior with honesty and integrity.

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

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

Martin G. Chilek, CFO                                1

Jerome Kindrachuk, Vice President                    1

ITEM 10. EXECUTIVE COMPENSATION

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

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

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

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

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


                                       25
<PAGE>

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

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

EMPLOYMENT AGREEMENTS

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

DIRECTORS' COMPENSATION

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

COMPENSATION PLANS

STOCK OPTION PLANS

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

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


                                       26
<PAGE>

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

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

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

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

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

We have not adopted any other deferred compensation, pension, profit sharing,
stock option plan or programs for the benefit of our officers or employees.
During the second quarter of 2003, the Company established a health insurance
benefit plan that is offered to all employees. During the third quarter of 2004,
the Company made a dental insurance plan available to all employees.


                                       27
<PAGE>

Option/SAR Grants in Last Fiscal Year

Individual Grants

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

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

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

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

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

FISCAL YEAR-END OPTION VALUES

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

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

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


                                       28
<PAGE>

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

The following table sets forth information, as of June 30, 2005, with respect to
the beneficial ownership of the Company's Common Stock by each person known by
the Company to be the beneficial owner of more than five percent (5%) of the
outstanding Common Stock and by directors and officers of the Company, both
individually and as a group:

<TABLE>
<CAPTION>
Name and Address of Beneficial Owner                    Number of Shares Owned       Percentage**
                                                             Beneficially
<S>                                                          <C>                        <C>
Peter F. Russo                                                 900,000(1)                3.78

Martin G. Chilek                                               900,000(2)                3.78

Jerome A. Kindrachuk                                           600,000(3)                2.55

All Officers and Directors as a Group                        2,400,000                   9.57

T&T Asset Management                                         2,925,000(4)               12.04

J. Friedman & Sons                                           2,700,638(5)               10.81

United Charities of America                                  1,202,877(6)                5.12

Sophie Angelastri                                            1,837,231(7)                7.52

Nice Holdings, Ltd.                                          2,400,000 (8)               9.45

Neil Berman                                                  5,900,120(9)               20.78

Ivano Angelastri                                             1,265,500(10)               5.51

The Divergence Fund, LP                                      1,720,090(11)               7.11
</TABLE>

** Based on 22,986,824 shares outstanding on June 30, 2005.

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

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


                                       29
<PAGE>

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

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

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

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

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

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

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

(9) In addition to 500,200 shares owned directly, Mr.Berman holds notes
convertible into 1,549,920 shares of common stock at a conversion price of
$0.125 per share, notes convertible into 3,620,000 shares at a conversion price
of $0.05 per share, and warrants expiring March 31, 2006 to purchase 230,000
shares of common stock at an exercise price of $0.10 per share.

(10) Mr. Angelastri disclaims any beneficial ownership of shares of common
stock, convertible notes and warrants held by his wife Sophie Angelastri.

(11) In addition to 520,090 shares owned directly, The Divergence Fund, LP holds
notes convertible into 500,000 shares of common stock at a conversion price of
$0.05 per share and warrants expiring March 31, 2006 to purchase 700,000 shares
of common stock at an exercise price of $0.10 per share.

Securities Authorized for Issuance under Equity Compensation Plans

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


                                       30
<PAGE>

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

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

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

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


                                       31
<PAGE>

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

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

ITEM 13. EXHIBITS.

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

3.1              Articles of Incorporation of the Company, as currently in
                 effect, incorporated herein by reference to Exhibit 3.1 to
                 Amendment No. 1 to the Company's Registration Statement on Form
                 10-SB filed with the Commission on June 15, 2000.

3.1a             Amendment to Certificate of Incorporation, filed September 1,
                 2004. Incorporated herein by reference to Exhibit 3.1a to the
                 Company's Current Report on Form 8-K, filed with the Commission
                 on September 3, 2004.

3.1b             Form of Restatement of Certificate of Incorporation of Delta
                 Mutual, Inc., as amended. Incorporated herein by reference to
                 Exhibit 3.1b to the Company's Quarterly Report on Form 10-QSB,
                 filed with the Commission on November 15, 2004.

3.2              By-Laws of the Company. Incorporated herein by reference to
                 Exhibit 3.2 to Amendment No. 1 to the Company's Registration
                 Statement on Form 10-SB filed with the Commission on June 15,
                 2000.

3.2a             Amendment to Article III, Section I of the By-Laws.
                 Incorporated herein by reference to the Company's quarterly
                 report on Form 10-QSB, filed with the Commission on November
                 21, 2000.


                                       32
<PAGE>

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

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

4.2a             Delta Mutual, Inc. 2004 Stock Option Plan. Incorporated herein
                 by reference to Exhibit B to the Company's Definitive Proxy
                 Statement, filed with the Commission on June 16, 2004.

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

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

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

4.6              Convertible Promissory Note of the Company due May 2006 issued
                 in the principal amount of $193,740 on May 12, 2004.
                 Incorporated herein by reference to Exhibit 4.6 to the
                 Company's Quarterly Report on Form 10-QSB, filed with the
                 Commission on November 15, 2004.

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

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


                                       33
<PAGE>

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

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

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

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

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

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

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

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


                                       34
<PAGE>

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

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

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

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

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

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

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

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


                                       35
<PAGE>

10.15            Strategic Alliance Agreement, dated September 10, 2003, between
                 Delta-Envirotech, Inc. and ZAFF International Ltd. Incorporated
                 herein by reference to Exhibit 99.2 to the Company's current
                 report on Form 8-K, filed with the Commission on January 22,
                 2004.

10.16            Agreement, dated January 14, 2004, by and between Delta Mutual,
                 Inc. and Hi Tech Consulting and Construction, Inc. Incorporated
                 herein by reference to Exhibit 10.16 to the Company's Annual
                 Report on Form 10-KSB, filed with the Commission on April 6,
                 2004.

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

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

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

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

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


                                       36
<PAGE>

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

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

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

10.25            Delta Mutual, Inc. Code of Conduct and Business Ethics.
                 Incorporated herein by reference to Exhibit 10.25 to the
                 Company's Annual Report on Form 10-KSB, filed with the
                 Commission on April 14, 2005.

10.26            Executive Employment Agreement, dated May 23, 2005, between
                 Delta Mutual, Inc. and Martin G. Chilek. Incorporated herein
                 by reference to Exhibit 10.26 to the Company's Current Report
                 on Form 8-K, filed with the Commission on May 25, 2005.

10.27            Investment Banking Agreement, dated June 17, 2005, between
                 Delta Mutual, Inc. and T&T Vermoegensverwaltungs AG.
                 Incorporated herein by reference to Exhibit 10.27 to the
                 Company's Current Report on Form 8-K, filed with the
                 Commission on June 30, 2005.

31.1             Certification of Chief Executive Officer Pursuant to Section
                 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

31.2             Certification of Chief Financial Officer Pursuant to Section
                 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

32.1             Certification of Chief Executive Officer Pursuant to 18 U.S.C.
                 Section 1350, as Adopted Pursuant to Section 906 of the
                 Sarbanes-Oxley Act of 2002, filed herewith.

32.2             Certification of Chief Financial Officer Pursuant to 18 U.S.C.
                 Section 1350, as Adopted Pursuant to Section 906 of the
                 Sarbanes-Oxley Act of 2002, filed herewith.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES.

(1) Aggregate fees for the last two years:

                                  2004             2003
                                  ----             ----

                                $75,116          $52,855

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

                                $72,704          $48,855

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

                                 $5,000           $4,000


                                       37
<PAGE>

(4) All other fees: NA

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

                                   SIGNATURES

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

DELTA MUTUAL, INC.

Dated: July 22, 2005

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

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


                                       38
<PAGE>

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

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

/s/ Peter F. Russo
---------------------
Peter F. Russo                 President                 July 22, 2005
                               and Director


                                       39
<PAGE>

                DELTA MUTUAL, INC. AND CONSOLIDATED SUBSIDIARIES

                          INDEX TO FINANCIAL STATEMENTS

                                                                            PAGE

Accountant's Report                                                         F-1

Financial Statements:

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

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

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

    Consolidated Statements of Cash Flows for the years ended
      December 31, 2004 and 2003.                                           F-6

    Notes to Consolidated Financial Statements                              F-8


                                       40
<PAGE>

                {LETTERHEAD OF WIENER, GOODMAN & COMPANY, P.C.)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Delta Mutual Inc.

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

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Delta Mutual, Inc. and subsidiaries
as of December 31, 2004 and 2003, and the results of their operations and their
cash flows for each of the two years in the period ended December 31, 2004, in
conformity with accounting principles generally accepted in the United States of
America.

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. Since a change in control, new
Company management has embarked upon a new mission and strategic direction
intending to establish a series of subsidiaries and joint ventures, primarily
for the establishment of business operation focusing upon providing technologies
and services in the environmental remediation industry and utilizing certain
construction technologies to participate in selected housing development
projects. As more fully explained in Note 1, to the financial statements the
Company needs to obtain additional financing to fulfill its proposed activities
and achieve a level of sales adequate to support its cost structure.

These uncertainties raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans are also described in Note 1.
The accompanying consolidated financial statements do not include any
adjustments that might result from the outcome of these uncertainties should the
Company be unable to continue as a going concern.

/s/ WIENER, GOODMAN & COMPANY, P.C.
-----------------------------------
WIENER, GOODMAN & COMPANY, P.C.

Eatontown, New Jersey
March 30, 2005, except for Notes 1, 6, 12, 14 and 15 for which the date is July
18, 2005.

                                       F-1

<PAGE>

                       DELTA MUTUAL INC., AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS

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

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

                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY

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

  Accretion of convertible debt                         142,200             --
                                                   ------------   ------------

                    Total Liabilities                   771,266        641,442
                                                   ------------   ------------

  Minority interest in consolidated subsidiaries        183,160            150

   Stockholders' Deficiency:
     Common stock $0.0001 par value -
           Authorized 100,000,000 shares;
           19,133,571 and 9,361,688  shares issued
           and outstanding, respectively                  1,913            936
     Additional paid-in-capital                       3,224,904      1,231,574
    Deficit accumulated during the
           development stage                         (3,739,799)    (1,789,400)
                                                   ------------   ------------

  Total Stockholders' Deficiency                     (  512,982)      (556,890)
                                                   ------------   ------------

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

 See notes to consolidated financial statements

                                       F-2

<PAGE>

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

                            Years Ended December 31,

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

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

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

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

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

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

   Accretion of convertible debt              (142,200)               --

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

   Loss before benefit
   from income taxes                        (1,950,399)       (1,249,509)

   Benefit from income taxes                        --                --
                                       ---------------   ---------------
   Net loss                            $    (1,950,399)   $   (1,249,509)
                                       ===============   ===============

   Loss per common share -
   basic and diluted                   $          0.14   $          0.19
                                       ===============   ===============

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

    See notes to consolidated financial statements

                                       F-3

<PAGE>

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

<TABLE>
<CAPTION>
                                            Number of        Common          Paid in          Deficit          Total
                                            Common           Stock           Capital          Accumulated
                                            Shares
                                            -------------    -------------   -------------    -------------    -------------
<S>                                             <C>          <C>             <C>              <C>              <C>
Balance, January 1, 2003                          857,000    $          56   $     304,329    $    (539,891)   $    (235,476)
Issuance of common stock for interest             100,000               10          28,740             --             28,750
expense (valued at $0.275-$0.30 per
share)

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

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

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

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

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

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

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

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

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

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

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

See notes to consolidate financial statements

                                       F-4

<PAGE>

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

<TABLE>
<CAPTION>
                                    Number of        Common           Paid in          Deficit           Total
                                    Common Shares    Stock            Capital          Accumulated
                                    --------------   --------------   --------------   --------------    --------------
<S>                                     <C>          <C>              <C>              <C>               <C>
Issuance of common stock for             2,636,328              264          246,178             --             246,442
repayment and conversion for
debt and interest expense (valued
at $0.05 - $0.137 per share)

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

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

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

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

Beneficial conversion feature                  --               --           891,400             --             891,400
of convertible debt

Net loss                                       --               --               --        (1,950,399)       (1,950,399)
                                    --------------   --------------   --------------   --------------    --------------

Balance, December 31, 2004              19,133,571   $        1,913   $    3,224,904   $   (3,739,799)   $     (512,982)
                                    ==============   ==============   ==============   ==============    ==============
</TABLE>

See notes to consolidated financial statements

                                       F-5

<PAGE>

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

                                                   Years Ended December 31
                                           --------------------------------
                                                2004               2003
                                           --------------    --------------
Cash flows from operating activities:
 Net loss                                  $   (1,950,399)   $   (1,249,509)
 Adjustments to reconcile net loss to
  net cash used in operating activities:
 Depreciation                                       2,137             1,759
  on-cash compensation, including
  settlement and common stock awards              528,215           337,344
 Issuance of common stock awards                   52,000
 Minority interest share of losses
  of consolidated subsidiaries                   (101,644)              --

 Accretion of convertible debt                    142,200               --
 Bad debt                                          47,521               --
 Write-down of joint venture                       33,799               --
 Changes in operating assets
  and liabilities                                (106,253)          429,666
                                           --------------    --------------
Net cash used in operating activities          (1,352,424)         (480,740)
                                           --------------    --------------

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

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

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

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

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

                 See notes to consolidated financial statements

                                       F-6

<PAGE>

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

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

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

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

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

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

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

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

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

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

 See notes to consolidate financial statements

                                       F-7

<PAGE>

                               DELTA MUTUAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      Basis of Presentation

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

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

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

                                       F-8

<PAGE>

      Business Plan

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

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

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

      Middle East

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

      Far East

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

      Puerto Rico

      The Company formed majority owned joint ventures in Puerto Rico to manage
      the construction and related activities required to build low income homes
      in Puerto Rico under the Federal Government's Section 124 low income
      housing program. In December 2003, the Company secured the purchase rights
      to 36 acres that are designated Section 124 eligible, in the City of
      Aguadilla. Approximately 270 low income homes are planned for construction
      on this property, in a project called "Brisas del Atlantico." The
      necessary building permits were submitted for approval and a real
      estate agency was hired to sell the homes planned for construction. Due to
      events related to the ballot recount in the Puerto Rico gubernatorial
      election held November 2, 2004, the election of a new governor was not
      certified until late December 2004. These events delayed the Company's
      permit approval process.

      On June 28, 2005, the Company received notification from the Planning
      Board of Puerto Rico (Junta de Planification de Puerto Rico)that the
      Brisas del Atlantico project was not approved because the 36-acre tract is
      located in a area zoned rural/agricultural, and housing development is not
      included in the current master development plan for that area. Based on
      the previous endorsement of the project by the Mayor of Aguadilla and the
      lack of any objections as to the proposed land use from the Department of
      Agriculture (Departamento de Agricultura), as submitted with the original
      permit application, the Company submitted a formal request to the Planning
      Board to reconsider its decision on July 6, 2005. The Planning Board
      agreed and reconsidered the matter during its meeting on July 18, 2005.
      Currently, the Company is awaiting notification of a decision from the
      Planning Board.

                                      F-9

<PAGE>

      In December, 2004, we secured the rights to an additional 40 acre tract
      located in Guayanilla for our second Section 124 project. This tract of
      land is part of a 150 acre development that will also include other
      residential properties, commercial/retail buildings and a hotel. The
      master plan for this entire project is currently being prepared by the
      project's developer. We formed a second majority owned joint venture in
      Puerto Rico in December 2004, to manage construction and related
      activities required to build approximately 300 additional homes on this
      property under the Section 124 low income housing program.

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

      SIGNIFICANT ACCOUNTING POLICIES

      PRINCIPLES OF CONSOLIDATION

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

      INVESTMENTS

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

      USE OF ESTIMATES

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

                                      F-10

<PAGE>

      LOSS PER SHARE

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

      REVENUE RECOGNITION ON CONSTRUCTION CONTRACTS

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

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

      EVALUATION OF LONG-LIVED ASSETS

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

      DEPRECIATION AND AMORTIZATION

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

      STOCK OPTION PLAN

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

                                      F-11

<PAGE>

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

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

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

Net loss-as reported                $   (1,950,399)   $   (1,249,509)

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

Net loss- pro forma                 $   (2,356,649)   $   (1,249,509)
                                    ==============    ==============

Loss per common share
  basic and diluted- as reported    $        (0.14)   $        (0.19)

Loss per common share
  basic and diluted - pro forma     $        (0.17)   $        (0.19)

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

                                      F-12

<PAGE>

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

                                      F-13

<PAGE>

      STOCK-BASED COMPENSATION

      The Company issues shares of its common stock to employees and
      non-employees as stock-based compensation. The Company accounts for the
      services using the fair market value of the services rendered. For the
      years ended December 31, 2004 and 2003 the Company issued 3,840,000 and
      1,230,000 common shares respectively, and recorded compensation expense of
      $458,175, and $244,594 respectively, in connection with the issuance of
      these shares. In 2004, the Company issued 412,000 common shares and
      recorded $70,040 in settlement expenses in connection with the termination
      of a license agreement.

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

      INCOME TAXES

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

      FAIR VALUE OF FINANCIAL INSTRUMENTS

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

      RECLASSIFICATIONS

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

      NEW FINANCIAL ACCOUNTING STANDARDS

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

                                      F-14

<PAGE>

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

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

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

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

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

                                      F-15

<PAGE>

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

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

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

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

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

                                      F-16

<PAGE>

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

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

2.    REFUNDABLE DEPOSITS

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

3.    PROPERTY AND EQUIPMENT

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

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

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

                                      F-17

<PAGE>

4.    DUE FROM CEVA INTERNATIONAL, INC.

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

5.    INVESTMENT IN JOINT VENTURES

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

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

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

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

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

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

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

                                      F-18

<PAGE>

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

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

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

6.    CONVERTIBLE DEBT

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

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

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

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

                                      F-19

<PAGE>

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

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

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

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

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

i)    In accordance with Emerging Issues Task Force 00-27, the Company performed
      calculations allocating the proceeds from the issuance of convertible debt
      with detachable warrants to each respective security at their fair values.
      The Company used the conversion value of the convertible debt and the
      calculated fair value of the warrants using the Black-Scholes valuation
      model as its estimate of fair value. The Company compared the allocated
      proceeds of the convertible debt to the difference between its conversion
      value and face amount. The calculated fair value of convertible debt of
      $725,855 was recorded as the value of the Beneficial Conversion Feature
      and accordingly credited to Additional Paid-In Capital. The value of the
      warrants of $235,545 was recorded as a reduction of the convertible debt.
      The convertible debt is recorded at zero. The convertible debt will be
      accreted to its face value of $891,400 under the interest method until it
      is either converted or matures. As of December 31, 2004 the accretion
      amounted to $142,200.

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

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

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

                                      F-20

<PAGE>

7.    ACCRUED EXPENSES

      Accrued expenses consist of the following:

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

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

8.    LOAN RECEIVABLE - FORMER OFFICER/SHAREHOLDER

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

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

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

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

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

                                      F-21

<PAGE>

9.    LOANS FROM RELATED PARTIES

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

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

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

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

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

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

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

                                      F-22

<PAGE>

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

10.   MINORITY INTERESTS

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

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

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

11.   STOCKHOLDER'S DEFICIENCY

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

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

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

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

                                      F-23

<PAGE>

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

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

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

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

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

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

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

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

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

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

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

                                      F-25

<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

                                      F-26

<PAGE>

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

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

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

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

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

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

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

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

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

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

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

                                      F-27

<PAGE>

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

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

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

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

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

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

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

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

12.   INCOME TAXES

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

      During the year ended December 31, 2004, the Company recorded a deferred
      tax asset associated with its net operating loss ("NOL") carryforwards of
      approximately $3,740,000 that was fully offset by a valuation allowance
      due to the determination that it was more likely than not that the Company
      would be unable to utilize these benefits in the foreseeable future. The
      Company's NOL carryforward expires beginning in 2010 through 2017.


                                      F-28
<PAGE>

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

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

<TABLE>
<CAPTION>
                                                December 31, 2004                 December 31, 2003
                                       --------------------------------- ---------------------------------
                                        Temporary         Tax             Temporary            Tax
                                        Difference        Effect          Difference           Effect
                                       --------------    --------------   --------------    --------------
<S>                                    <C>                  <C>           <C>               <C>
      Gross deferred tax asset         $    3,740,000       $ 1,272,000   $      608,000    $      207,000
       resulting from net operating
       loss carryforward
      Valuation allowance                  (3,740,000)       (1,272,000)        (608,000)         (207,000)
                                       --------------    --------------   --------------    --------------

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

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

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

13.   STOCK OPTION PLANS

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


                                      F-29
<PAGE>

      A summary of the status of the Company's options and stock awards under
      the Plans as of December 31, 2004, and changes during the year then ended,
      is presented below:

<TABLE>
<CAPTION>
                                            2004                    2003
                                     ----------------    ----------------
                                            Weighted-           Weighted-
                                            Average             Average
                                            Exercise            Exercise
                                     Shares Price        Shares Price
                                     ----------------    ----------------   ----------------    ----------------
<S>                                         <C>          <C>                      <C>           <C>
    Options out-
      standing, begin-
      ning of year                               --      $           --                 --      $           --
      Options granted                       6,500,000    $           0.25               --      $           --
      Options exercised                          --      $           --                 --      $           --
      Stock awards granted                    429,000    $         0.1375            358,000    $          0.067
      Stock awards issued                    (429,000)   $         0.1375           (358,000)   $          0.067
      Options cancelled/expired                  --      $           --                 --      $           --
                                     ----------------    ----------------   ----------------    ----------------
    Options out-
       standing, end
       of year                              6,500,000    $           0.25               --      $           --
                                                                            ================    ================
    Options price
       range at end
       of year                       $           0.25
    Options price
       range for
       exercised
       shares                                    --
    Options available
       for grant at end
       of year                              4,113,000                             1,642,000
    Weighted-
       average fair
       value of options
       granted during the
       year                          $           0.25                       $           --
</TABLE>

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

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

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

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

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


                                      F-30
<PAGE>

      The following table summarizes information about fixed price warrants
      outstanding at December 31, 2004.

<TABLE>
<CAPTION>
                                                Weighted-
                            Number Out-          Average          Weighted-           Number          Weighted-
       Range of             standing at          Remaining       Average           Exercisable at     Average
       Exercise              December 31,        Contractual     Exercise          December 31,      Exercise
         Prices               2004               Life            Price               2004              Price
      ----------------     --------------     -------------     ----------       --------------     ----------
<S>                         <C>                     <C>          <C>                  <C>                <C>
        $0.10               8,080,000               2            $0.10                8,080,000          $0.10
</TABLE>

14. COMMITMENTS AND CONTINGENCIES

a.    Executive Employment Agreements

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

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


                                      F-31
<PAGE>

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

b.    License Agreements

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

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

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

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

      During the year ended December 31, 2004, the Company expensed common stock
      valued at $70,040, in connection with the terminated license agreement.


                                      F-32
<PAGE>

c.    Financing Agreement

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

d.    Investor Relations Agreements

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

e.    Leases

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

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

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

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

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

15.   SUBSEQUENT EVENTS

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

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

c.    On July 1, 2005, the Company was served with a summons and complaint filed
      in the United States District Court for the Southern District of New York
      by Charter Capital Resources, Inc. and Beryl Zyskind. The complaint lists
      as defendants the Company; Peter F. Russo, our President and Chief
      Executive Officer; Neil Berman, a stockholder and noteholder of the
      Company; and Standard Registrar & Transfer Agency, the Company's transfer
      agent. The suit alleges that the plaintiffs own 300,000 shares of the
      Company's common stock and that the defendant's have interfered with the
      plaintiff's right to transfer 232,134 of their shares. The plaintiff's
      seek alleged compensatory damages of $200,000, punitive damages, costs and
      reasonable attorneys' fees, and an order requiring the defendant's to take
      the necessary steps to transfer the 232,134 shares to the street name of
      the plaintiffs' broker for immediate sale in the public market.

      On July 20, 2005, the Company filed an answer to the complaint which
      denies the allegations and filed a motion to disqualify plaintiffs'
      attorneys.

                                      F-33