CannAwake Corp - FORM 10-Q/A

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EX-32 - CannAwake Corp	v190747_ex32.htm
EX-31 - CannAwake Corp	v190747_ex31.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.

Amendment No. 1

FORM 10-Q

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

For the quarterly period ended March 31, 2010

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

For the transition period from ____________ to _________________

Commission File Number 000-30563

DELTA MUTUAL, INC.

(Exact name of registrant as specified in its charter)

DELAWARE	14-1818394

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

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

(480) 477-5808

(Registrant’s Telephone Number, Including Area Code)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO ¨

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

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

Large accelerated filer ¨	Accelerated filer ¨

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

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

The number of shares outstanding the issuer's common stock, par value $.0001 per share, was 27,073,996 as of March 31, 2010.

DELTA MUTUAL, INC.

INDEX

			Page

Part I. Financial Information

	Item 1.	Financial Statements

Consolidated Balance Sheets as of March 31, 2010 and as of December 31, 2009 (unaudited)			1

Consolidated Statements of Operations for the Three Months Ended March 31, 2010 and 2009 (unaudited)			2

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2010 and 2009 (unaudited)			3-4

Notes to Unaudited Consolidated Financial Statements			5-18

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23

	Item 4T.	Controls and Procedures.	23

Part II. Other Information

	Item 1.	Legal Proceedings.	24

	Item 5.	Other Information.	24

	Item 6.	Exhibits.	25

Signatures			25

WE ARE FILING THIS AMENDMENT NO. 1 TO OUR FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2010 (THE “MARCH 31, 2010 FORM 10-Q”) TO AMEND THE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AND ITEM 4T. “CONTROLS AND PROCEDURES”. IN THIS AMENDMENT, OUR FINANCIAL STATEMENTS HAVE BEEN RESTATED AS OF DECEMBER 31, 2009 AND MARCH 31, 2010, DUE TO AN UNDERSTATEMENT OF THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF THOSE RESPECTIVE DATES. IN ORDER TO PRESERVE THE NATURE AND CHARACTER OF THE DISCLOSURES SET FORTH IN THE MARCH 31, 2010 FORM 10-Q AS OF MAY 24, 2010, THE DATE ON WHICH THE MARCH 31, 2010 10-Q WAS FILED, NO ATTEMPT EXCEPT AS DESCRIBED ABOVE HAS BEEN MADE IN THIS AMENDMENT NO. 1 TO MODIFY OR UPDATE DISCLOSURES.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

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

in the Company's Annual Report on Form 10-K for the year ended December 31, 2009.

The results of operations for the three months ended March 31, 2010 and 2009 are not necessarily indicative of the results for the entire fiscal year or for any other period.

DELTA MUTUAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	March 31,			December 31,
	2010			2009
ASSETS	(Restated)			(Restated)

Current Assets:
Cash	$	511,644		$	102,008
Advances and other receivables		142,917			137,776
Total current assets		654,561			239,784

Investments in non-consolidated affiliates		1,507,763			1,470,713
Other assets		39,458			39,508

TOTAL ASSETS	$	2,201,782		$	1,750,005

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts payable	$	121,286		$	134,192
Accrued expenses		286,973			267,029
Notes payable		805,605			805,605
Total current liabilities		1,213,864			1,206,826

Stockholders' Equity:
Preferred stock $0.0001 par value-authorized
10,000,000 shares; no shares issued and outstanding
at March 31, 2010 and December 31, 2009, respectively
Common stock $0.0001 par value - authorized
250,000,000 shares; 27,073,996 and 24,211,275 shares
issued and outstanding at March 31, 2010 and
December 31, 2009, respectively		2,707			2,421
Additional paid-in-capital		4,867,808			4,137,095
Accumulated deficit		(3,882,598	)		(3,596,337	)
Total Delta Mutual Inc. and Subsidiaries Stockholders' Equity		987,918			543,179

Noncontrolling interest		-			-
Total Stockholders' Equity		987,918			543,179

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	2,201,782		$	1,750,005

See Notes to Unaudited Consolidated Financial Statements

DELTA MUTUAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended
	March 31,			March 31,
	2010			2009
	(Restated)			(Restated)
Revenue:	$	-		$	-

Costs and expenses:
General and administrative expenses		275,394			290,140
		275,394			290,140

Loss from continuing operations		(275,394	)		(290,140	)

Other income		715			-
Interest expense		(11,582	)		(9,971	)

Loss from continuing operations before provision for income taxes		(286,261	)		(300,111	)

Provision for income taxes		-			-

Net loss from continuing operations		(286,261	)		(300,111	)

Discontinued operations
Gain (loss) of disposal fo Far East operations and South American Hedge Fund operations, and United States construction technology activities		-			(6,513	)

Net loss		(286,261	)		(306,624	)

Less: Net loss attributable to noncontrolling interest		-			-

Net loss attributable to Delta Mutual Inc. and Subsidiaries	$	(286,261	)	$	(306,624	)

Net loss per common share - basic and diluted
Loss from continuing operations attributable to Delta Mutual Inc. and Subsidiaries common shareholders	$	(0.01	)	$	(0.01	)

Loss from discontinued operations attributable to Delta Mutual Inc. and Subsidiaries common shareholders	$	(0.00	)	$	(0.00	)

Net income per common share	$	(0.01	)	$	(0.01	)

Weighted average common shares - basic and diluted		24,928,941			22,493,955

Amounts attributable to Delta Mutual Inc. and subsidiaries common shareholders:
Net loss	$	(286,261	)	$	(306,624	)

See Notes to Unaudited Consolidated Financial Statements

DELTA MUTUAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Three Months Ended
	March 31,			March 31,
	2010			2009
Cash flows from operating activities:	(Restated)			(Restated)

Net loss	$	(286,261	)	$	(306,624	)

Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		-			170
Issuance of common stock for services		75,000			-
Compensatory element of option issuance		-			196,745
Changes in operating assets and liabilities		1,947			28,290

Net cash used in operating activities		(209,314	)		(81,419	)

Cash flows from investing activities:
Increase in investments		(37,050	)		(193,500	)

Net cash used in investing activities		(37,050	)		(193,500	)

Cash flows from financing activities:
Proceeds from notes payable		-			266,763
Proceeds from sale of common stock		656,000			-
Contribution from stockholder		-			(1,000	)

Net cash used in financing activities		656,000			265,763

Net increase (decrease) in cash		409,636			(9,156	)
Cash - Beginning of period		102,008			13,957
Cash - End of period	$	511,644		$	4,801

See Notes to Unaudited Consolidated Financial Statements

DELTA MUTUAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(Continued)

	Three Months Ended
	March 31,			March 31,
	2010			2009
Supplementary information:	(Restated)			(Restated)
Changes in operating assets and liabilities consists of:
Increase (decrease) in advances and other receivables	$	(5,141	)	$	(6,433	)
Increase (decrease) in other assets		50			-
Increase (decrease) in accounts payable and accrued expenses		7,038			34,723
	$	1,947		$	28,290

Supplemental disclosure of cash flow information:
Cash paid for interest	$	-		$	-
Cash paid for taxes	$	-		$	-

Supplementary information:
Non-cash financing and investing activities
Issuance of common stock for services	$	75,000		$	200,000

See Notes to Unaudited Consolidated Financial Statements

DELTA MUTUAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2010 and 2009

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Effective March 4, 2008, Delta entered into a Membership Interest Purchase Agreement, pursuant to which Delta acquired from, Egani, Inc. all the shares of Altony SA (“Altony”), an Uruguayan Sociedad Anonima, which owned 100% of the issued and outstanding membership interests in South American Hedge Fund LLC, a Delaware limited liability company (sometimes herein referred to as “SAHF”). At the closing of the Agreement, Delta issued 13,000,000 shares of common stock to Egani, Inc., which constituted, following such issuance, a majority of the outstanding shares of Delta’s common stock. Immediately following the closing of the Agreement, Altony became a wholly-owned subsidiary of Delta. For accounting purposes, the transaction was treated as a recapitalization of the Company, as of March 4, 2008, with Altony as the acquirer and Delta as the holding company. The principal business of Altony was the ownership and management of SAHF, which maintained its business office in Uruguay and has investments in oil and gas concessions in Argentina and intends to focus its investment activities in the energy sector. As of December 30, 2009, Altony closed its business operations and is currently under a process of dissolution. The Company’s principal business at this time is conducted by our subsidiary, South American Hedge Fund, which has investments in oil and gas concessions in Argentina and intends to focus its investments in the energy sector, including development of energy producing investments and alternative energy production in Latin America and North America. As of December 31, 2008 the securities trading activities of South American Hedge Fund were accounted for as a discontinued operation.

On April 22, 2009, the Company's Board of Directors declared a one-for-ten reverse stock split of its common stock. All share and per share amounts have been restated to reflect the reverse stock split except for stockholders' equity (deficit). See Note 12, "Stockholders' Equity", for further information.

During 2009, the Delta discontinued the operations, and commenced the dissolution of the following inactive wholly-owned and majority-owned subsidiaries: Delta Development Partners, L.P., Delta Development Partners II LP, Guayanilla and Developers Corp., Delta TA LP and Delta Technologies Inc.

As of December 31, 2009, Delta also terminated the operation of oil sludge processing facilities in Bahrain and Kuwait and the manufacture of insulating concrete from ICF products in Saudi Arabia, which are accounted for as discontinued operations.

As of December 31, 2009, the Company also held a 45% ownership interest in Delta–Envirotech, Inc., which is engaged in certain business opportunities in the Middle East related to environmental remediation and other related projects. These activities are managed and carried out by the majority stockholders of Delta-Envirotech, Inc., (“Envirotech”), Hi-Tech Consulting and Construction, Inc. and an unrelated individual. Envirotech has entered into strategic alliance agreements with several United States-based entities with technologies and products in the environmental field to support its activities. Envirotech was consolidated as the variable interest entity (VIE) up until September 30, 2009. As of December 31, 2009 management determined that Delta-Envirotech, Inc. does not meet the criteria to be considered a VIE for the year ending December 31, 2009 as the Company does not exercise significant influence over the operations or financial results of Envirotech. Accordingly, the results of operations and of financial data have been deconsolidated from the consolidated financial statements of the Company effective December 31, 2009 (see also Note 3).

Delta Mutual, Inc. and all of the above referenced subsidiaries are collectively referred to as “Delta” or “the Company” throughout this filing. All significant intercompany balances and transactions have been eliminated in consolidation.

GOING CONCERN

The consolidated financial statements for the period ended March 31, 2010 have been prepared on a going concern basis which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business. The Company has a past history of recurring losses from operations and has an accumulated deficit of $3,882,598 and working capital deficiency of $559,303 as of March 31, 2010. Additionally, the Company will require additional funding to execute its future strategic business plan. Successful business operations and its transition to attaining profitability is dependent upon obtaining additional financing and achieving a level of revenue adequate to support its cost structure.

DELTA MUTUAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2010 and 2009

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

INTERIM REVIEW REPORTING

The accompanying unaudited consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC). Certain information and footnote disclosures, normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such SEC rules and regulations. Nevertheless, the Company believes that the disclosures are adequate to make the information presented not misleading. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's 2009 Annual Report as filed on Form 10K.

In the opinion of management, all adjustments, including normal recurring adjustments necessary to present fairly the consolidated financial position of the Company with respect to the interim consolidated financial statements and the results of its consolidated operations for the interim period ended March 31, 2010, have been included. The results of consolidated operations for interim periods are not necessarily indicative of the results for a full year.

PRINCIPLES OF CONSOLIDATION

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

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company’s consolidated financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions and could have a material effect on the reported amounts of the Company’s consolidated financial position and results of operations.

REVENUE RECOGNITION

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

FAIR VALUE OF FINANCIAL INSTRUMENTS

Cash, advances and other receivables, investments in non-consolidated affiliates, accounts payable and accrued expenses, and notes payable as reflected in the consolidated financial statements, approximate fair value. Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

LONG-LIVED ASSETS

The Company reviews property and equipment and finite-lived intangible assets for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable in accordance with guidance in Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 360-15-35, "Impairment or Disposal of Long-Lived Assets" ("ASC 360-15-35"). If the carrying value of the long-lived asset exceeds the present value of the related estimated future cash flows, the asset would be adjusted to its fair value and an impairment loss would be charged to operations in the period identified. Because the Company discontinued its operations in the Far East (Indonesia) as of the quarter ended June 30, 2008 and discontinued its construction technology activities as of the quarter ended December 31, 2008, the property and equipment and intangible assets related to these operations were evaluated for impairment. Based on the results of that analysis, the Company recorded an impairment charge of $467,995 during the year ended December 31, 2008.

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

DELTA MUTUAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2010 and 2009

INVESTMENTS

The Company accounts for non-marketable investments using the equity method of accounting if the investment gives it the ability to exercise significant influence over, but not control of, an investee. Significant influence generally exists if there is an ownership interest representing between 20% and 50% of the voting stock of the investee. Under the equity method of accounting, investments are stated at initial cost and are adjusted for additional investments and their proportionate share of earnings or losses and distributions. The Company records its share of the investee’s earnings or losses in earnings (losses) from unconsolidated entities, net of income taxes, in its consolidated statements of operations. Equity investments of less than 20% are stated at cost. The cost is not adjusted for its proportionate share of earnings or losses. The Company evaluates its equity method investments for impairment when events or changes in circumstances indicate, in management’s judgment, that the carrying value of such investments may have experienced an other-than-temporary decline in value. When evidence of loss in value has occurred, the Company compares fair value of the investment to its carrying value to determine whether impairment has occurred. If the estimated fair value is less than the carrying value and management considers the decline to be other than temporary, the excess of the carrying value over the estimated fair value is recognized as impairment in the consolidated financial statements.

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

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

INCOME TAXES

The Company accounts for income taxes in accordance with the liability method. Under the liability method, deferred assets and liabilities are recognized based upon anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases. The Company establishes a valuation allowance to the extent that it is more likely than not that deferred tax assets will not be utilized against future taxable income.

UNCERTAIN TAX POSITIONS

In July 2006, the Financial Accounting Standards Board (“FASB”) issued guidance codified in Accounting Standards Codification (“ASC”) Topic 740-10-25 “Accounting for Uncertainty in Income Taxes”. ASC Topic 740-10-25 supersedes guidance codified in ASC Topic 450, “Accounting for Contingencies”, as it relates to income tax liabilities and lowers the minimum threshold a tax position is required to meet before being recognized in the financial statements from “probable” to “more likely than not” (i.e., a likelihood of occurrence greater than fifty percent). Under ASC Topic 740-10-25, the recognition threshold is met when an entity concludes that a tax position, based solely on its technical merits, is more likely than not to be sustained upon examination by the relevant taxing authority. Those tax positions failing to qualify for initial recognition are recognized in the first interim period in which they meet the more likely than not standard, or are resolved through negotiation or litigation with the taxing authority, or upon expiration of the statute of limitations. Reversal of a tax position that was previously recognized occurs when an entity subsequently determines that a tax position no longer meets the more likely than not threshold of being sustained.

The Company is subject to ongoing tax exposures, examinations and assessments in various jurisdictions. Accordingly, the Company may incur additional tax expense based upon the outcomes of such matters. When applicable, the Company adjusts tax expense to reflect the Company’s ongoing assessment of the valuation of matters which require judgment, which can materially increase or decrease its effective rate, as well as impact operating results.

Under ASC Topic 740-10-25, only the portion of the liability that is expected to be paid within one year is classified as a current liability. As a result, liabilities expected to be resolved without the payment of cash (e.g. resolution due to the expiration of the statute of limitations) or are not expected to be paid within one year are not classified as current. The Company has recently adopted a policy of recording estimated interest and penalties as income tax expense and tax credits as a reduction in income tax expense.

Management believes that the Company does not have any significant uncertain tax positions for the years ended December 31, 2009 or 2008, considering its loss making history since inception.

The number of years with open tax audits varies depending on the tax jurisdiction. The Company’s major taxing jurisdictions include the United States (including applicable states). The Company has never been subject to a tax audit historically.

DELTA MUTUAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2010 and 2009

LEGAL COSTS AND CONTINGENCIES

In the normal course of business, the Company incurs costs to hire and retain external legal counsel to advise it on regulatory, litigation and other matters. The Company expenses these costs as the related services are received. If a loss is considered probable and the amount can be reasonably estimated, the Company recognizes an expense for the estimated loss. If the Company has the potential to recover a portion of the estimated loss from a third party, the Company makes a separate assessment of recoverability and reduces the estimated loss if recovery is also deemed probable.

NET INCOME (LOSS) PER SHARE

Basic and diluted net income (loss) per common share are presented in accordance with Accounting Standard Codifications (ASC) Topic 260, “Earning per Share”, for all periods presented. Stock subscriptions, options and warrants have been excluded from the calculation of the diluted income (loss) per share for the periods presented in the statements of operations, because all such securities were anti-dilutive. The net income (loss) per share is calculated by dividing the net income (loss) by the weighted average number of shares outstanding during the periods.

FOREIGN CURRENCY TRANSLATION

The functional currency in South America, which is where nearly all of the Company’s operations take place, is the U.S. dollar. The functional currency for some foreign operations is the local currency of the foreign operation. Assets and liabilities of foreign operations are translated at balance sheet date rates of exchange and income, expense and cash flow items are translated at the average exchange rate for the period. Translation adjustments are recorded in Cumulative Other Comprehensive Income. The translation gains or losses were not material for the years ended December 31, 2009 and 2008, respectively. Therefore, there were no adjustments as to Other Comprehensive Income (Loss).

DISCONTINUED OPERATIONS

During the quarter ended June 30, 2008, the Company discontinued all its operations in the Far East (Indonesia). During the quarter ended December 31, 2008, the Company discontinued all of its construction technology activities that were carried out by its wholly owned subsidiary, Delta Technologies, Inc. and the trading of securities by its South American Hedge Fund subsidiary. These discontinued operations resulted in a loss of $0 and $(2,310,473), respectively, for the years ended December 31, 2009 and 2008, respectively, and $0 and $(6,513) for the quarters ending March 31, 2010 and 2009, respectively.

Summarized statement of loss for discontinued operations is as follows:

	Three Months Ended March 31,
	2010		2009

Net sales	$	—	$	—

Impairment		—		—

Provision for income taxes		—		—

Loss from operations, net of taxes		—		(6,513	)

Gain on disposition of minority interest		—		—

Provision for income taxes		—		—

Loss from discontinued operations, net of taxes	$	-0-	$	(6,513	)

OTHER CRITICAL ACCOUNTING POLICIES

The Securities and Exchange Commission recently issued “Financial Reporting Release No. 60 Cautionary Advice About Critical Accounting Policies” (“FRR 60”), suggesting companies provide additional disclosures, discussion and commentary on their accounting policies considered most critical to its business and financial reporting requirements. FRR 60 considers an accounting policy to be critical if it is important to the Company’s financial condition and results of operations, and requires significant judgment and estimates on the part of management in the application of the policy. For a summary of the Company’s significant accounting policies, including the critical accounting policies discussed below, please refer to the accompanying notes to the financial statements.

DELTA MUTUAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2010 and 2009

RECENT ACCOUNTING PRONOUNCEMENTS

During the second quarter of 2009, the Company implemented additional interim disclosures about fair value of financial instruments, as required by FASB ASC Paragraph 825-10-65-1. Prior to implementation, disclosures about fair values of financial instruments were required to be disclosed annually only. As the required modifications only related to additional disclosures of fair values of financial instruments in interim financial statements, the adoption did not affect the Company’s consolidated financial position or results of operations.

Beginning in the second quarter of 2009, the Company is required disclose the date through which subsequent events have been evaluated, in accordance with the requirements in FASB ASC Paragraph 855-10-50-1. With regards to the unaudited consolidated financial statements and notes to those financial statements contained in this Form 10-Q, the Company has evaluated all subsequent events through May 24, 2010 (the date the Company’s unaudited consolidated financial statements are issued).

In September 2009, the FASB implemented certain modifications to FASB ASC Topic 860, Transfers and Servicing, as a means to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets, the effects of a transfer on its financial position, financial performance, and cash flows, and a transferor’s continuing involvement, if any, in transferred financial assets. These modifications must be applied as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009. The Company does not expect the adoption of this standard to have an impact on the Company’s consolidated results of operations, financial condition or cash flows.

During the third quarter of 2009, the Company adopted the FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles in accordance with FASB ASC Topic 105, “Generally Accepted Accounting Principles” (the “Codification”). The Codification has become the source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. Effective with the Company’s adoption on July 1, 2009, the Codification has superseded all prior non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification has become non-authoritative. As the adoption of the Codification only affected how specific references to GAAP literature have been disclosed in the notes to the Company’s consolidated financial statements, it did not result in any impact on the Company’s consolidated results of operations, financial condition or cash flows.

The FASB has published FASB Accounting Standards Update No. 2009-12, Fair Value Measurements and Disclosures (Topic 820)—Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). This Update amends Subtopic 820-10, Fair Value Measurements and Disclosures—Overall, to permit a reporting entity to measure the fair value of certain investments on the basis of the net asset value per share of the investment (or its equivalent). This Update also requires new disclosures, by major category of investments, about the attributes of investments included within the scope of this amendment to the Codification. The guidance in this Update is effective for interim and annual periods ending after December 15, 2009. The Company does not expect the adoption of this standard to have an impact on the Company’s consolidated results of operations, financial condition or cash flows.

In June 2009, the Financial Accounting Standards Board (FASB) amended its accounting guidance on the consolidation of variable interest entities (VIE). Among other things, the new guidance requires a qualitative rather than a quantitative assessment to determine the primary beneficiary of a VIE based on whether the entity (1) has the power to direct matters that most significantly impact the activities of the VIE and (2) has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. In addition, the amended guidance requires an ongoing reconsideration of the primary beneficiary. The provisions of this new guidance were effective as of the beginning of our 2010 fiscal year, and the adoption did not have a material impact on our consolidated financial statements.

Consolidations: In December 2009, the FASB issued ASU No. 2009-17 (formerly Statement No. 167), “Consolidations (Topic 810) – Improvements to Financial Reporting for Enterprises involved with Variable Interest Entities”. ASU 2009-17 amends the consolidation guidance applicable to variable interest entities. The amendments to the consolidation guidance affect all entities, as well as qualifying special-purpose entities (QSPEs) that are currently excluded from previous consolidation guidance. ASU 2009-17 was effective as of the beginning of the first annual reporting period that begins after November 15, 2009. ASU 2009-17 did not have an impact on our consolidated financial condition, results of operations, or disclosures.

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

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

DELTA MUTUAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2010 and 2009

2. RESTATEMENT

In the second quarter of 2010, the Company identified the number of common shares issued and outstanding was understated by approximately 974,000 shares, or 3.7% as of March 31, 2010. The Company also determined that approximately, 564,000 shares had been issued in lieu of payment for services performed by third parties, and approximately 37,000 shares had been issued to third parties for cash that was used for travel expenses by the Company. Accordingly, the Company recorded additional expense amounts of $75,000 for the three months ending March 31, 2010 and $15,500 for the year ending December 31, 2009, respectively. This adjustment resulted in an increase of net loss from $211,261, as previously reported, to $286,261 as restated for the three months ending March 31, 2010 and a reduction of net income from $850,091, as previously reported, to $834,591 as restated for the year ending December 31, 2009. Furthermore, the number of shares issued in other stock sales for cash was understated by 64,000 shares and an increase of approximately 309,000 in shares outstanding is attributable to the net impact of the reverse merger in 2008 and, accordingly, approximately $30 was reclassified from additional paid in capital to common stock. The Company has reflected the impact of these adjustments and the increase in shares outstanding in its Consolidated Financial Statements for the three months ending March 31, 2009 and 2008 and the year ended December 31, 2009.

3. VARIABLE INTEREST ENTITY

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

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

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

4. PROPERTY AND EQUIPMENT

	March 31,			December 31,
	2010			2009
Equipment	$	6,277		$	6,277
Leasehold improvements		7,807			7,807
		14,084			14,084
Less accumulated depreciation		(14,084	)		(14,084	)
	$	0		$	0

DELTA MUTUAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2010 and 2009

Depreciation expense for the three months ended March 31, 2010 and March 31, 2009 was $0 and $170, respectively.

5. INVESTMENT IN NONCONSOLIDATED AFFILIATES

Jollin and Tonono Oil and Gas Concessions

At March 31, 2010 the Company has a 10% ownership interest in the Jollin and Tonono oil and gas concessions located in Northern Argentina. During 2007, SAHF purchased a 47% ownership of these concessions and paid the purchase price by issuing a non-interest bearing note in the principal amount of $1,820,000 to Oxipetrol-Petroleros de Occidente S.A. (Oxipetrol), one of the other owners, with a maturity date of July 2008. The Company’s purchase price was based upon the price tendered by the original purchasers of the concessions that was accepted by the Argentine government, who formerly owned these properties. The government uses a number of factors In determining the selling prices for an oil and gas concession in Argentina, including the location and size of the concession and the current market prices of crude oil and natural gas. Prior to the maturity date of the note payable, the Company and Oxipetrol mutually agreed to reduce the principal amount of the Company’s note primarily because of changes in oil and gas prices. Based upon the agreed purchase price reduction, the Company repaid Oxipetrol $1,270,000 at the maturity date. As a result of this transaction, the Company recorded a one time, retroactive adjustment, reducing the value of this investment by $550,000 at December 31, 2008.

During 2008, SAHF exchanged 50% of its ownership in this investment with a third party for no cash consideration, however, the acquirer contractually agreed to assume 50% of the Company’s obligations for all future development expenses. The Company recorded a $635,000 loss on disposition of 50% of this investment in its consolidated statement of operations for the year ended December 31, 2008.

Subsequently, during the year ended December 31, 2008, the third party owners of the Jollin and Tonono concessions formed an Argentine-registered joint venture and paid, in the aggregate, approximately $848,000 of development costs, all of which were capitalized. Since the Company is not registered as a foreign company in Argentina, it could not become a member of the joint venture in 2008. The third party owners of these concessions have agreed that, upon admission of the Company as a member of the joint venture, the Company will retain its ownership. However, in exchange for this agreement, the Company’s weighted average pro-rata portion of the 2008 aggregate development cost, of approximately $223,024, all of which was included in accounts payable in the Company’s consolidated balance sheet at December 31, 2008, must be repaid to the other members from its pro-rata share of the future earnings of the concession. As of December 31, 2009, the Company recorded a reversal of $223,024 to adjust balances in investments and accounts payable as a result of the forgiveness of the aggregate development cost payable. The Company has applied for foreign registration in Argentina and should be admitted as a member of the joint venture during the second quarter of 2010.

On September 25, 2009, the Company sold 13.5% of its ownership interest in the Jollin and Tonono oil and gas concession to Maxi-Petroleros De Occidente S.A. ("Maxipetrol") for $206,832. Maxipetrol, prior to the sale, owned 48% of the Jollin and Tonono oil and gas concession. In connection with the sale, Maxipetrol will assume full responsibility to develop the oil and gas concession until production is achieved in the blocks. This obligation includes all future and former costs incurred for the Jollin and Tonono oil and gas concession, until such time as the well is producing. All prior unpaid costs accrued by the Company, were assumed by Maxipetrol. The Company through SAHF will retain 10% of the total concession in the carryover mode ("no cost obligations to SAHF") and will begin receiving revenue from the Jollin and Tonono blocks when the first well is approved for commercial exploration. The Company recorded a $157,939 loss on the disposition of its 13.5% investment to Maxipetrol and the loss is included in its statement of operations for the year ended December 31, 2009.

Salta Province Exploration Rights

During 2008, the Company purchased 40% of the oil and gas exploration rights to five geographically defined areas in the Salta Province of Northern Argentina from Kestal, SA (“Kestal”) for $697,000 cash. Kestal retained a 60% interest. Kestal had originally acquired 100% of these explorations rights from the government of Argentina in 2007, at a price that was accepted by the Argentine government for the oil and gas concession.

In 2009, SAHF assigned 50% of its rights to a third party. The Company incurred no additional costs or expenses related to this investment in 2009. As of March 31, 2010, SAHF owns 20% of the rights to this oil and gas concession. The Company expects that in 2010, substantially all of the exploration costs required to retain the exploration rights will be borne by Kestal, the majority owner.

DELTA MUTUAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2010 and 2009

Tartagal and Morillo Oil and Gas Concessions

During 2007, the Company purchased an 18% ownership in the Tartagal and Morillo oil and gas concessions located in Northern Argentina and paid the purchase price by issuing a non-interest bearing note in the principal amount of $480,000 to Oxipetrol, one of the other owners, with a maturity date of July 2008. The purchase price for this investment was based on the original price paid to the Argentine government to acquire these concessions by the original owners. Prior to the maturity date, the Company and Oxipetrol mutually agreed to reduce the principal amount of the Company’s note primarily because of changes in oil and gas prices. Based upon the purchase price reduction, the Company repaid Oxipetrol $450,000 at the maturity date of the note. As a result of this transaction, the Company recorded a one time, retroactive adjustment reducing the value of this investment by $30,000 at December 31, 2008.

During 2008, SAHF exchanged 50% of its ownership in this investment with a third party for no cash consideration; however, the acquirer contractually agreed to assume 50% of the Company’s obligations with respect to all future development expenses. The Company recorded a $225,000 loss on disposition of this investment in its consolidated financial statements for the year ended December 31, 2008.

In March 2009, a Hong Kong public company purchased 60% of the ownership in the Tartagal and Morillo oil and gas concessions, from the other majority owners, for total consideration of approximately $270 million. These funds will be used for development and operating expenses in 2009 and beyond.

As of March 31, 2009, the Company, through SAHF, retains 9% of the total concession in the carryover mode ("no cost obligations to SAHF") and will begin receiving revenue from Tartagal and Morillo blocks when the first well is approved for commercial exploration.

The Company evaluated each of these investments in the foregoing nonconsolidated affiliates for impairment and concluded that, except as described above, no loss in value occurred as of March 31, 2010 and December 31, 2009, respectively. The following table summarizes the Company’s investments in these nonconsolidated affiliates.

	Concession			Exploration
	Investments			Rights		Total

At December 31, 2007	$	2,300,000		$	—	$	2,300,000

Adjustment of purchase price		(580,000	)		—		(580,000	)

Disposition of investment, net		(860,000	)		—		(860,000	)

Additional investment in 2008		223,024			697,000		920,024

Equity in net earnings (loss)		—			—		-

At December 31, 2008		1,083,024			697,000		1,780,024

Additional investments in 2009		349,000			—		349,000

Adjustment of additional investment during 2009 and 2008		(293,540	)		—		(293,540	)

Disposition of investment, net		(364,771	)		—		(364,771	)

At December 31, 2009	$	773,713		$	697,000	$	1,470,713

Additional investments in 2010		37,050					37,050

At March 31, 2010	$	810,763		$	697,000	$	1,507,763

DELTA MUTUAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2010 and 2009

6. FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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

As of March 31, 2010, the Company held certain financial assets that are measured at fair value on a recurring basis. These consisted of cash and cash equivalents and investments in non-consolidated affiliates. The fair value of the cash and cash equivalents is determined based on quoted market prices in public markets and is categorized as Level 1. The fair value of investments in non-consolidated affiliates is developed by the Company based upon its own assumptions and is categorized as Level 3. The Company does not have any financial assets measured at fair value on a recurring basis as Level 2 and there were no transfers in or out of Level 2 or Level 3 during the three months ended March 31, 2010.

The following table sets forth by level, within the fair value hierarchy, the Company’s financial assets accounted for at fair value on a recurring basis as of March 31, 2010.

	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Cash and cash equivalents	$	511,644	$	511,644	$	-	$	-
Non-consolidated affiliates		1,507,763		-		-	$	1,507,763
Total	$	2,019,407	$	511,644	$	-	$	1,507,763

The Company had no financial assets accounted for on a non-recurring basis as of March 31, 2010.

There were no changes to the Company’s valuation techniques used to measure asset fair values on a recurring or nonrecurring basis during the three months ended March 31, 2010, and the Company did not have any financial liabilities as of March 31, 2010. The Company has other financial instruments, such as advances and other receivables, accounts payable and other liabilities, notes payable and other assets, which have been excluded from the tables above. Due to the short-term nature of these instruments, the carrying value of advances and other receivables, accounts payable and other liabilities, notes payable and other assets approximate their fair values.

DELTA MUTUAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2010 and 2009

7. NOTES PAYABLE

	March 31,		December 31,
	2010		2009
Notes payable to three investors, interest at 8%, due August 10, 2011	$	150,655	$	150,655

Notes payable to stockholders and related parties, interest at 6%, due June 20, 2012		401,210		401,210

Notes payable to third parties, interest at rates of 4% to 6%, due August 10, 2011		253,740		253,740
	$	805,605	$	805,605

For the three months ended March 31, 2010 and March 31, 2009, the Company recorded interest expense of $11,582 and $9,971, respectively.

8. INCOME TAXES

The Company has not made provision for income taxes in the three month period ended March 31, 2010 and the year ended December 31, 2009, respectively, since the Company has the benefit of net operating losses carried forward in these periods.

Due to uncertainties surrounding the Company’s ability to generate future taxable income to realize deferred income tax assets arising as a result of net operating losses carried forward, the Company has not recorded any deferred income tax asset as of December 31, 2009 and 2008, respectively. The net operating losses carry forwards will begin to expire in varying amounts from year 2019 to 2029, subject to its eligibility as determined by the respective tax regulatory authorities.

DELTA MUTUAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2010 and 2009

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

9. ACCRUED EXPENSES

Accrued expenses consist of the following:

	March 31, 2010		December 31, 2009
Professional fees	$	41,523	$	34,023
Interest expense		11,582		-
Payroll expense		131,806		131,806



Other accrued expenses		102,062		101,200
Total	$	286,973	$	267,029

10. LOSS PER COMMON SHARE

The following table sets forth the reconciliation and diluted net loss per common share computation for the three months ended March 31, 2010.

	Three Months
	Three Months Ended
	March 31, 2010
Continuing operations
Basic and diluted EPS:
Net loss ascribed to common shareholders - basic and diluted	$	(286,261	)
Weighted shares outstanding - basic and diluted		24,211,275
Basic and diluted net loss per common share	$	(0.01	)

Discontinued operations
Basic and diluted EPS:
Net loss ascribed to common shareholders - basic and diluted	$	0
Weighted shares outstanding - basic and diluted		24,211,275
Basic and diluted net loss per common share	$	0

DELTA MUTUAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2010 and 2009

11. STOCK-BASED COMPENSATION

The Company issues shares of its common stock to non-employees as stock-based compensation. The Company accounts for the services using the fair market value of the services rendered. For the years ended December 31, 2009 and 2008, the Company issued 330,000 and 1,055,000 shares, respectively, and recorded compensation expense of $139,500 and $238,500, respectively, in conjunction with the issuance of these shares.

The Company had outstanding employee stock options of 350,000 that were exercisable as of January 1, 2009. As of December 31, 2009, none of the eligible employees exercised such options and therefore the options either were cancelled or expired upon termination of employee stock option plan through a resolution of the board of directors. As of March 31, 2010, the Company did not have any outstanding employee stock options.

12. STOCKHOLDERS' EQUITY

On April 22, 2009, the Company’s board of directors approved amendments to the Certificate of Incorporation to: (1) effect a 1 for 10 reverse split of all the outstanding common stock; and (2) authorize a new class of 10,000,000 shares of preferred stock, par value $0.0001 per share, and to authorize the board of directors to issue one or more series of the preferred stock with such designations, rights, preferences and restrictions as determined by majority vote of the directors. Thereafter on April 23, 2009, the Company received written consent from stockholders of the Company holding a majority of the outstanding shares of common stock approving the Amendments. The effective date of the Amendments was July 6, 2009, the date the reverse stock split was made effective for trading purposes by the Financial Industry Regulatory Authority. See accompanying Consolidated Statements of Operations for the impact on the Company's loss per share amounts as a result of the reverse stock split. By reason of the reverse split, the number of outstanding shares of our common stock was reduced from 227,225,270 to 22,722,527.

All share and per share data (except par value) have been adjusted to reflect the effect of the stock split for all periods presented except for stockholders' deficit. As a result, there is no overall financial effect of the reverse split; however, the number of outstanding employee stock options has been reduced from 3,500,000 to 350,000 and the exercise price for the respective options has increased by a factor of 10 (see Note 10).

As of March 31, 2010, the board of directors had not authorized the issuance of any series of preferred stock.

The Company issues shares of common stock for services and repayment of debt and interest valued at fair market value at time of issuance. For the year ended December 31, 2008, the Company issued 230,057 shares of common stock upon the conversion of convertible notes in the principal amount of $143,600, valued at $0.50 - $0.70 per share; and issued 11,563 shares of common stock for payment of accrued interest in the amount of $7,048, valued at $0.50 - $0.70 per share.

For the year ended December 31, 2009, the Company issued 60,000 shares to an unrelated individual, valued at $0.58 per share towards conversion of notes payable and accrued interest of $35,000 in common stock.

For the three months ended March 31, 2010 and the year ended December 31, 2009, the Company issued 534,555 and 358,582 shares of common stock, respectively, valued at $0.14 and $0.15 - $0.60 per share, respectively, for services valued at $75,000 and $149,500, respectively.

During the year 2009, the Company received $170,000 pursuant to subscription agreements to purchase 1,298,748 shares of common stock from various unrelated individuals.

During the three months ended March 31, 2010, the Company received $656,000 pursuant to subscription agreements to purchase 2,328,166 shares of common stock from various unrelated individuals.

13. COMMITMENTS AND CONTINGENCIES

POLITICAL RISK

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

DELTA MUTUAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2010 and 2009

OPERATING LEASES

The Company’s lease for its principal office space in Arizona became effective December 1, 2009 for a period of 13 months. Future minimum lease payment under operating leases for the year ending December 31, 2010 will approximate $16,000. The Company recorded lease rental expenses for the three months ended March 31, 2010, and March 31, 2009, of $4,935 and $30,577 respectively, in the accompanying unaudited consolidated statements of operations.

LEGAL PROCEEDINGS

Former Employee Wage Claims

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

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

Legal Fee Collection Claim

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

Former Interim Chief Financial Officer

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

14. SUBSEQUENT EVENTS

Employment Agreements

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

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

DELTA MUTUAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2010 and 2009

Acquisition of Lithium Production Properties

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

Appointment of Interim Chief Financial Officer

On May 14, 2010, our Board of Directors approved an agreement with Tatum LLC, a executive services consulting firm, for Kristen Magnuson to serve as our Interim Chief Financial Officer effective May 18, 2010.

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

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

GENERAL

Effective March 4, 2008, Delta entered into a Membership Interest Purchase Agreement, pursuant to which Delta acquired from, Egani, Inc. all the shares of Altony SA (“Altony”), an Uruguayan Sociedad Anonima, which owned 100% of the issued and outstanding membership interests in South American Hedge Fund LLC, a Delaware limited liability company (sometimes herein referred to as “SAHF”). At the closing of the Agreement, Delta issued 13,000,000 shares of common stock to Egani, Inc., which constituted, following such issuance, a majority of the outstanding shares of Delta’s common stock. Immediately following the closing of the Agreement, Altony became a wholly- owned subsidiary of Delta. For accounting purposes, the transaction was treated as a recapitalization of the Company, as of March 4, 2008, with Altony as the acquirer and Delta as the holding company. The principal business of Altony was the ownership and management of SAHF, which maintained its business office in Uruguay and has investments in oil and gas concessions in Argentina and intends to focus its investment activities in the energy sector. As of December 30, 2009, Altony closed its business operations and is currently under a process of dissolution. The Company’s principal business at this time is conducted by our subsidiary, South American Hedge Fund, which has investments in oil and gas concessions in Argentina and intends to focus its investments in the energy sector, including development of energy producing investments and alternative energy production in Latin America and North America. As of December 31, 2008 the securities trading activities of South American Hedge Fund were accounted for as a discontinued operation.

Delta Mutual, Inc. and all of the above referenced subsidiaries are collectively referred to as “Delta” or “the Company” throughout this filing.

GOING CONCERN

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.

RESULTS OF OPERATIONS

During the quarter ended March 31, 2010, we had a loss from continuing operations of $(286,261). The Company has an accumulated deficit of $3,882,598 and working capital deficiency of $559,303 as of March 31, 2010. Additionally, the Company may require additional funding to execute its strategic business plan for 2010. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Successful business operations and its transition to attaining profitability is dependent upon obtaining additional financing and achieving a level of revenue adequate to support its cost structure. There can be no assurances that there will be adequate financing available to the Company, if the Company requires financing. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

THREE MONTHS ENDED MARCH 31, 2010 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2009

During the three months ended March 31, 2010, we incurred a net loss from continuing operations of $(286,261) compared to $(290,140) for the three months ended March 31, 2009. The decrease in our loss from continuing operations for the three months ended March 31, 2010 over the comparable period of the prior year was primarily due the discontinuance of operations of Delta Development Partners, L.P., Delta Development Partners IILP, Guayanilla and Developers Corp., Delta TA LP and Delta Technologies Inc., and the termination of the operation of oil sludge processing facilities in Bahrain and Kuwait and ICF products, and deconsolidation of Delta-Envirotech, Inc., which were included in the Company’s general and administrative expense in 2009. In addition, we had other income of $715 in the three months ending March 31, 2010 compared to $0 in the comparable prior year period due to an increase in cash of $409,636 year over year received from sales of common stock. In the quarter ending March 31, 2009 we had interest expense of $9,971 compared to $11,582 in the quarter ending March 31, 2010.

Our net loss for the three months ended March 31, 2010 was $(286,261) compared to a net loss of $(306,624) for the comparable prior year period. The net loss for the three months ended March 31, 2009 included a loss on disposal of discontinued operations of $(6,513).

PLAN OF OPERATION

The primary focus of the Company’s business is its South American Hedge Fund subsidiary that has investments in oil and gas exploration and production in Argentina and will continue to focus on the energy sector, including the development of a property for the production of lithium in Argentina, and development and supply of energy and alternative energy sources in Latin America and North America.

Oil and Gas Investments

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

Jollin and Tonono Concessions

In 2008, the majority owners of these concessions formed an Argentine-registered joint venture to operate these concessions. Since SAHF was not registered in Argentina, it could not become an official member of the joint venture. The other owners of the joint venture have agreed that SAHF will be admitted as a member of the joint venture, upon the registration of SAHF as a foreign company in Argentina. SAHF has applied for foreign registration and expects to become a member during the second quarter of 2010.

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

Tartagal and Morillo Concessions

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

In March 2009, a Hong Kong public company, following approval by its shareholders, agreed to acquire a 60% participation interest in these concessions for approximately $280 million. The Company expects that the funds from this acquisition will be used for development and operating expenses in 2009 and 2010. Deliveries of crude oil from these concessions are expected to begin in the second half of 2010.

Salta Province Exploration Rights

SAHF holds a 20% interest in the oil and gas exploration rights to five geographically defined areas in the Salta Province of Northern Argentina. Provided certain development activities are under taken by the majority owner, these exploration rights will remain in effect through the year 2010. The partners to the joint venture are fulfilling their financial obligations as agreed.

FUNDING

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

LIQUIDITY

At March 31, 2010 and December 31, 2009, we had working capital deficits of $559,303 and $967,042, respectively.

At March 31, 2010, we had total assets of $2,201,782 compared to total assets of $1,750,005 at December 31, 2009. Cash increased $409,636 for the three months ended March 31, 2010 compared to year end 2009 due to the issuance of common stock. Net cash used in operating activities in the three months ended March 31, 2010, was $209,314, as compared with $81,419 in the comparable period in 2009; net cash used in investing activities was $37,050 in 2010, as compared with $193,500 in 2009. Cash used in operating activities was offset by net cash from financing activities of approximately $656,000.

CRITICAL ACCOUNTING ISSUES

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

NEW FINANCIAL ACCOUNTING STANDARDS

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

Critical Accounting Policies

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

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

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

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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

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

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

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

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

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

Item 4T. – CONTROLS AND PROCEDURES

Evaluation of Controls and Procedures

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

As of March 31, 2010, an evaluation was performed under the supervision and with the participation of our management, including our chief executive and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our chief executive and principal financial officer concluded that our disclosure controls and procedures were not effective. Specifically, our chief executive and principal financial officer determined that certain stock issuances were not recorded correctly for financial statement reporting purposes in our first quarter. Subsequent to March 31, 2010, the Company has taken steps to ensure that stock issuances are recorded correctly in our financial statements, and the Company believes that the financial statements in this report accurately present the Company’s financial position and results of operations as of the date of such financial statements.

Changes in Internal Controls

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

Limitations on the Effectiveness of Controls

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. The Company's disclosure controls and procedures are designed to provide reasonable assurance of achieving its objectives. The Company's chief executive officer and principal financial officer concluded that the Company's disclosure controls and procedures are effective at that reasonable assurance level.

PART II—OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS.

Former Employee Wage Claims

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

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

Legal Fee Collection Claim

Former Interim Chief Financial Officer

Item 5. OTHER INFORMATION.

On May 14, 2010, our Board of Directors approved an agreement with Tatum LLC, a recruiting firm, for Kristen Magnuson to serve as our Interim Chief Financial Officer effective May 18, 2010.

Kristen L. Magnuson, 54, has been a member of the board of directors of Convio, Inc. since January 2008. Since October 2009, Ms. Magnuson has been a Partner at Tatum LLC. From September 1997 to August 2009, Ms. Magnuson served as Chief Financial Officer of JDA Software Group, Inc., a provider of enterprise software solutions for supply chain processes, and was promoted to Executive Vice President in March 2001. From 1990 to 1997, Ms. Magnuson served as Vice President of Financial Planning for Michaels Stores Inc., an arts and crafts retailer. From March 1987 to August 1990, she served as Senior Vice President and Controller of MeraBank N.A., a federal savings bank. Ms. Magnuson is a C.P.A. and holds a B.B.A. in Accounting from the University of Washington.

ITEM 6. EXHIBITS.

31	Certification of Chief Executive Officer and Principal Financial Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002.

32	Certification of Chief Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Oxley Act of 2002.

SIGNATURES

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

	DELTA MUTUAL, INC.

	BY:	/s/ Daniel R. Peralta
		Daniel R. Peralta
		President and Chief Executive Officer

Dated: July 21, 2010

EXHIBIT INDEX

31	Certification of Chief Executive Officer and Principal Financial Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002.

32	Certification of Chief Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Oxley Act of 2002.

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