CannAwake Corp - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - CannAwake Corp	Financial_Report.xls
EX-31 - CERTIFICATION - CannAwake Corp	f10q0312ex31i_deltamutual.htm
EX-3.2B - AMENDED AND RESTATED BY-LAWS - CannAwake Corp	f10q0312ex3ii_deltamutual.htm
EX-32 - CERTIFICATION - CannAwake Corp	f10q0312ex32i_deltamutual.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.

FORM 10-Q

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

For the quarterly period ended March 31, 2012

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

For the transition period from ____________ to _________________

Commission File Number 000-30563

DELTA MUTUAL, INC.

(Exact name of registrant as specified in its charter)

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

15100 North 78th Place, Suite 200, Scottsdale, AZ		85260
(Address of Principal Executive Offices)		(Zip Code)

(480) 483-0420

(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 o

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 x No o

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 o		Accelerated filer o

Non-accelerated filer o		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).

o Yes x No

The number of shares outstanding the issuer's common stock, par value $.0001 per share, was 32,010,826 as of May 11, 2012.

DELTA MUTUAL, INC.

INDEX

	Page

Part I. Financial Information	1

Item 1. Financial Statements.	1

Consolidated Balance Sheets as of March 31, 2012 (unaudited) and December 31, 2011 (unaudited)	2

Consolidated Statements of Operations for the Three months Ended March 31, 2012 and 2011 (unaudited)	3

Consolidated Statements of Cash Flows for the Three months Ended March 31, 2012 and 2011 (unaudited)	4-5

Notes to Unaudited Consolidated Financial Statements	6-13

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	14

Item 3. Quantitative and Qualitative Disclosures About Market Risk.	19

Item 4.Controls and Procedures.	19

Part II. Other Information	20

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	20

Item 6. Exhibits.	20

Signatures	21

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Certain information and footnote disclosures required under accounting principles generally accepted in the United States of America have been condensed or omitted from the following consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. It is suggested that the following consolidated financial statements be read in conjunction with the year-end consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

The results of operations for the three months ended March 31, 2012 and 2011 are not necessarily indicative of the results for the entire fiscal year or for any other period.

DELTA MUTUAL, INC. AND SUBSIDIARIES

DELTA MUTUAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
	March 31,			December 31,
	2012			2011
ASSETS

Current Assets:
Cash	$	1,616,806		$	211,303
Receivable from sale of bidding rights and oil and gas properties		5,500,000			-
Advances and other receivables		2,781			7,155
Total current assets		7,119,587			218,458

Investment in mineral properties		173,932			171,871
Investments in unproved oil and gas properties		1,180,822			2,115,280
Investment in oil refinery		79,234			-
Property and equipment		63,786			47,151
Other assets		6,368			7,060

TOTAL ASSETS	$	8,623,729		$	2,559,820

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts payable	$	171,964		$	107,372
Accrued expenses		315,550			364,109
Notes payable		849,625			1,043,365
Income taxes payable		354,981			-
Total current liabilities		1,692,120			1,514,846

Commitments and Contingencies

Stockholders' Equity:
Preferred stock $0.0001 par value-authorized 10,000,000 shares; no shares issued and outstanding at March 31, 2012 and December 31, 2011, respectively		-			-
Common stock $0.0001 par value - authorized 250,000,000 shares; 31,992,026 and 31,507,026 shares issued and outstanding at March 31, 2012 and December 31, 2011, respectively		3,199			3,151
Additional paid-in capital		6,767,778			6,550,576
Retained earnings (deficit)		361,795			(5,354,385	)
Accumulated other comprehensive loss		(201,163	)		(154,367	)
Total stockholders' equity		6,931,609			1,044,974

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	8,623,729		$	2,559,820

The accompanying notes are an integral part of the unaudited consolidated financial statements

DELTA MUTUAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
	Three months ending March 31,
	2012			2011

Sales	$	1,789		$	-
Costs and Expenses:
General, and administrative		434,215			135,137
		434,215			135,137
Loss from operations		(432,427	)		(135,137	)


Other Income (Expense):
Foreign exchange gain (loss)		15,906			4,888
Interest expense		(12,318	)		(11,010	)
Gain on sale of bidding rights		6,500,000			-
Net other income (expense)		6,503,588			(6,122	)
Income (loss) before income taxes		6,071,162			(141,259	)

Provision for income taxes		354,981			-

Net earnings (loss)	$	5,716,181		$	(141,259	)

Net earnings (loss) per common share:
Basic	$	0.18		$	(0.00	)
Diluted	$	0.16		$	(0.00	)

Weighted average common shares - Basic		31,605,323			29,065,381
Weighted average common shares - Diluted		35,979,603			29,065,381

The accompanying notes are an integral part of the unaudited consolidated financial statements

DELTA MUTUAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	Three months ending March 31,
	2012			2011

Cash flows from Operating Activities:
Net earnings (loss)	$	5,716,181		$	(141,259	)
Adjustments to reconcile net earnings (loss) to net cash used in operating activities:
Gain on sale of bidding rights		(6,500,000	)		-
Loss on settlement of note payable		9,133			-
Issuance of common stock for services		3,500			-
Changes in operating assets and liabilities		380,054			(10,265	)
Net cash used in operating activities		(391,132	)		(151,524	)
Cash flows from investing activities:
Oil and gas properties exploration and development costs		(94,606	)		(36,683	)
Investment in oil refinery		(79,653	)		-
Purchases of furniture and equipment		(17,533	)		-
Proceeds from sales of oil and gas properties and bidding rights		2,000,000			-
Investment in mineral properties		(4,922	)		(58,956	)
Net cash provided by (used in) investing activities		1,803,286			(95,639	)

Cash flows from financing activities:
Proceeds from sales of common stock		-			347,000
Net cash provided by financing activities		-			347,000
Effect of Exchange Rates on Cash		(6,651	)		13,543
Net increase in cash		1,405,503			113,381
Cash - Beginning of period		211,303			209,004
Cash - End of period	$	1,616,806		$	322,385

Changes in operating assets and liabilities consists of:
(Increase) decrease in advances and other receivables	$	(1,789	)	$	-
Increase (decrease) in accounts payable and accrued expenses		26,862			(10,265	)
Increase (decrease) in income taxes payable		354,981			-
Changes in assets and liabilities	$	380,054		$	(10,265	)

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

Supplementary information:
Non cash financing and investing activities:
Issuance of common stock for mineral property	$	-		$	16,000
Issuance of common stock for services	$	3,500		$	-
Issuance of common stock for debt	$	213,750		$	-

The accompanying notes are an integral part of the unaudited consolidated financial statements.

DELTA MUTUAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
	Three months ending March 31,
	2012			2011

Net earnings (loss)	$	5,716,181		$	(141,259	)
Other comprehensive income (loss):
Foreign currency translation adjustment	$	(46,796	)		(19,530	)
Net change in other comprehensive income (loss)		(46,796	)		(19,530	)
Comprehensive income (loss)	$	5,669,385		$	(160,789	)

The accompanying notes are an integral part of the unaudited consolidated financial statements

DELTA MUTUAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

As of and for the Three Months Ended March 31, 2012 and 2011

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Delta Mutual, Inc. ("Delta" or "the Company") was incorporated in Delaware on November 17, 1999. Effective March 4, 2008, Delta entered into a Membership Interest Purchase Agreement, pursuant to which Delta acquired, from Egani, Inc. shares of Altony SA, an Uruguayan Sociedad Anonima (“Altony”), which owned 100% of the issued and outstanding membership interests in South American Hedge Fund LLC, a Delaware limited liability company (“SAHF”). At the closing of the Agreement, Delta issued 130,000,000 shares of common stock to Egani, Inc., which constituted, following such issuance, a majority of the outstanding shares of the common stock. Immediately following the closing of the Agreement, Altony became a wholly owned subsidiary of the Company. For accounting purposes, the transaction was treated as a recapitalization of the Company, as of March 4, 2008, with Altony as the acquirer. Altony SA closed its business operations and was subsequently dissolved.

The primary focus of the Company’s business is its SAHF subsidiary, which has investments in oil and gas concessions in Argentina and focuses on the energy sector, including the development and supply of energy and alternative energy sources in Latin America and North America.

As of December 31, 2008, Delta terminated all of the construction technology activities that were carried out by Delta Technologies, Inc. (a wholly owned subsidiary).

Effective January 1, 2009, the Company had ceased all operations other than the investments of its SAHF subsidiary and became a development stage corporation, as defined in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915 “Development Stage Entities”. During the quarter ending March 31, 2012, one of the Company’s properties began producing oil and the Company began recognizing revenue. Accordingly, the Company is no longer in the development stage.

SIGNIFICANT ACCOUNTING POLICIES

The Company’s significant accounting policies are summarized in Note 1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. There were no significant changes to these accounting policies during the three months ended March 31, 2011 and the Company does not expect that the other recent accounting pronouncements will have a material impact on its financial statements.

2. INVESTMENT IN UNPROVED OIL AND GAS PROPERTIES

a) As of March 31, 2012, the Company has a 10% ownership interest in the Jollin and Tonono oil and gas concessions located in Salta Province, Argentina. SAHF originally purchased an 18% carry-over interest in the Jollin and Tonono concessions on May 15, 2007, and subsequently increased its ownership to 23.5%, 9% of which was carry-over and 14.5% of which was working. SAHF in 2009 transferred 13.5% to Maxipetrol, under an arrangement where SAHF’s remaining 10% interest would be in a carry-over mode.

SAHF received its foreign registration in Argentina and was admitted as a member of the joint venture on July 2, 2010. The Company will begin receiving revenue from the Jollin and Tonono blocks when the first well is approved for commercial production.

b) At March 31, 2012, the Company retains an 18% ownership interest in the Tartagal and Morillo oil and gas concessions located in Salta Province. During 2007, SAHF had originally purchased an 18% ownership of these concessions During 2008, SAHF exchanged 50% of its ownership in this investment with a third party, where the acquirer agreed to assume 50% of SAHF’s obligations with respect to future development expenses.

On March 28, 2011, the third party agreed to the transfer its 9% carried interest in the Tartagal and Morillo concession back to the Company, in exchange for 200,000 shares of the Company’s common stock, with a fair value of $50,000, and a percentage of proceeds in the event of an unexpected sale of the concession in excess of over $6 million, which brought the Company’s total interest in the Tartagal and Morillo concession to 18%. The Company was admitted to the joint venture for these blocks on May 11, 2011.

DELTA MUTUAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

As of and for the Three Months Ended March 31, 2012 and 2011

As of March 30, 2012, the Company agreed to sell 50% of its ownership interest in this property to PPL for $500,000. The Company follows the full cost method of accounting, and thus, no gain was recognized, in accordance with ASC 932-10-599 ©)(3)(i)..

The Company’s share of the development costs for the Tartagal and Morillo concessions will be repaid from 50% of the Company's share of the future production profits from the concessions.

On January 26, 2011 our joint venture partner announced that well No. CAX-1002 was indicating 15 cubic meters per day which translated to 94 barrels of oil daily. On February 21, 2011 they also announced that the other work over well No. CAX-1 was demonstrating production of 5 cubic meters per day or equal to 10 to 15 Barrels per day. The Company began recognizing its share of the production from these two wells in the three months ending March 31, 2012.

c) As of March 31, 2012, the Company owns 20% of the oil and gas exploration rights to five blocks in the Salta Province of Northern Argentina. The managing partner holds this interest in escrow until SAHF is officially admitted into the joint venture of the exploration rights concession.

The ownership interests in The Salta Province Exploration Rights Concession ("Salta Joint Venture") are:

·	Consortium Ketsal Kilwa – 60% (managing partner)

·	Ambika S.A. – 20%

·	SAHF – 20%

During the second quarter 2010, the Salta Joint Venture began drilling the first well on the Guemes block of The Salta Province Exploration Rights Concession. SAHF acted as the project manager for this drilling project, but did not charge the Salta Joint Venture a management fee. Production testing to verify the commercial sustainability of the well still needs to be performed.

The 2010 concessions, totaling approximately $1.1 million, of which SAHF’s share is approximately $220,000, payable for The Salta Province Exploration Rights Concession are past due and are being contested with the Government by the Salta Joint Venture. Prior to the drilling of the Guemes well, the managing partner began negotiating with the government of Argentina to have the concessions' penalties waived and it was agreed that the Government will not draw on the Performance Bond posted by Ketsal, in exchange for opening a well on Guemes and continued development activities in the province. SAHF opened up well in Guemes known as "Dos Morros" and the overdue charges have been waived.

d) On August 10, 2011, the Company’s tender offer, made through its wholly-owned subsidiary, SAHF, for the ownership right to explore, and eventually, produce oil and natural gas in the block known as “Valle de Lerma” was declared the winning bid by the Salta provincial government. SAHF made the offer in a joint venture agreement with Remsa, PetroNexus, Grasta SA, a local mid-size gasoline refinery located in Buenos Aires, Argentina. The Valle de Lerma block is located in the province of Salta in the northwestern region of Argentina and has an area of 5259 km2. On October 25, 2011 SAHF was awarded an Exploration and Exploitation Oil & Gas Block License by the Government of Salta, Argentina, and will file an environmental impact study and proceed to reentry and work-over of the wells. SAHF holds a majority of the license interest and is the responsible operator. The license allows SAHF 20 years to explore and produce hydrocarbons with a renewal option of ten more years in exchange for a commitment to spend $2 million on the property in exploration and development costs.

The Company and its partners, Resta, PetroNexus and Grasta Petroleum will develop the block exploration starting with 2D Seismic interpretation with PetroNexus LLC; geological model application and Hydrocarbon Micro seepage Survey with Geo Microbial Technologies Argentina (Guemes Method), and La Troja well work over with a local rig company. The exploration terms are four years for the first period, three years for the second and two years for the last period. At March 31, 2012, SAHF owned 60% of the rights to explore Valle de Lerma; GRASTA owns 5%; PetroNexus owns 30%; and Remsa owns 5%.

DELTA MUTUAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

As of and for the Three Months Ended March 31, 2012 and 2011

The Company evaluated these investments for impairment and concluded that, except as described above, no loss in value occurred as of March 31, 2012. The following table summarizes the Company’s investments in these unproved oil and gas properties. One of the Company’s oil and gas producing properties began producing during the quarter ending March 31, 2012. No depletion was recorded for the quarter as the amount was not material.

	Concession Investments		Exploration Rights		Total

At December 31,2011	$	870,372	$	1,244,908	$	2,115,280

Drilling and development costs		—		94,606		94,606

Sale of 50% interest in Tartagal & Morillo and Valle de Lerma		(500,000)		(500,000)		(1,000,000)

Translation gain (loss)		(9,444)		(25,652)		(35,096	)

At March 31, 2012	$	360,928	$	813,862	$	1,180,822

3. INVESTMENT IN OIL REFINERY

On January 13, 2012, the Company, through its wholly owned subsidiary, SAHF, signed a purchase option agreement with Cruz Norte, SA to purchase 33.33% of the Caimancito Refinery, located in the Jujuy Province, Argentina. In March 2012, the purchase option agreement was finalized and signed and Cruz Norte transferred 1/3 of its stake in the refinery to SAHF. The purchase price of the refinery was $150,000 for the 33.33% of the outstanding shares of Caimancito Refinery; the purchase price is split into two payments of $75,000: one in March 2012, and one in June 2012. As of the date of this report, the Company had wired to Cruz Norte SA $75,000 in three payments in March 2012. There were no operations in the refinery during the three months ending March 31, 2012. When operations begin, the Company will account for the investment under the equity method.

DELTA MUTUAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

As of and for the Three Months Ended March 31, 2012 and 2011

4. PROPERTY AND EQUIPMENT

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. The Company purchased oil field equipment during the fourth quarter of 2011. The equipment will be placed in service during 2012. The Company did not provide any depreciation this equipment for the quarter ending March 31, 2012 as the equipment was not yet in service.

Property and equipment consists of:

	March 31, 2012		December 31, 2011
Oilfield equipment	$	62,626	$	47,151

Furniture and equipment		1,160		---
Less accumulated depreciation		---		---
Total property and equipment	$	63,786	$	47,151

5. FAIR VALUE MEASUREMENT

The Company utilizes the accounting guidance for fair value measurements and discloses for all financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis during the reporting period.

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, "Fair Value Measurements and Disclosures", establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers are defined as follows:

Level 1 - Observable inputs such as quoted market prices in active markets.

Level 2 - Inputs other then quoted prices in active markets that are either directly or indirectly observable.

Level 3 - Unobservable inputs about which little or no market data exists, therefore requiring an entity to develop its own assumptions.

As of March 31, 2012, the Company held certain financial assets that are measured at fair value on a recurring basis. These consisted of cash and cash equivalents and unproved oil and gas properties. The fair value of the cash and cash equivalents is determined based on quoted market prices in public markets and is categorized as Level 1. The investment in unproved oil and gas companies is determined by the Company to develop its own assumptions and is categorized as Level 3. The Company does not have any financial assets measured at fair value on a recurring basis as Level 2 and there were no transfers in or out of Level 2 or Level 3 during the three months ended March 31, 2012.

DELTA MUTUAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

As of and for the Three Months Ended March 31, 2012 and 2011

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, 2012 and December 31, 2011.

March 31, 2012	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	$	1,610,330	$	1,610,330	$	-	$	-
Unproved oil and gas properties		1,184,377						1,184,377
Receivable from sale of bidding rights		5,500,000						5,500,000
Investment in oil refinery		79,234						79,234
Investment in mineral properties		173,932						173,932
Total	$	8,547,873	$	1,610,330	$	-	$	6,937,543
December 31, 2011	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	$	211,303	$	211,303	$	-	$	-
Unproved oil and gas properties		2,115,280						2,115,280
Investment in mineral properties		171,871						171,871
Total	$	2,498,454	$	211,303	$	-	$	2,287,151

There were no changes to the Company’s valuation techniques used to measure asset fair values on a recurring or nonrecurring basis during the year December 31, 2011 and the Company did not have any other financial liabilities within the scope of the fair value disclosure requirements as of December 31, 2011. 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.

6. RECEIVABLE FROM SALE OF BIDDING RIGHTS AND OIL AND GAS PROPERTIES

Effective March 30, 2012, the Company entered into the Cooperation Agreement with Principle Petroleum Ltd. (“PPL”). Under the Cooperation Agreement, the Company has agreed to sell to PPL, for a price of $7 million certain exploration and exploitation rights to oil and gas deposits and certain bidding rights held by Delta on the following areas: Valle de Lerma in the province of Salta; San Salvador de Jujuy; Libertador General San Martin in the province of Jujuy; and Selva Maria in the province of Formosa. Pursuant to a separate Agreement dated March 31, 2012, the Company has agreed with PPL to assign and transfer 50% of SAHF's current ownership of the Tartagal and Morillo (i.e., a 9% interest in the concession) to PPL for a purchase price of $500,000. PPL has also agreed in an Undertaking to provide funds to the operating entities of Valle de Lerma, Selva Maria, San Salvador and Libertador, in the aggregate amount of up to $10,000,000 (San Salvador, Libertador and Selva Maria are pending for approval from the government, which is standard procedure in Argentina).

In the March 31, 2012 quarter, the Company received a $2,000,000 deposit from PPL on account of its obligations under the above agreements to purchase exploration and exploitation rights in certain properties. The remainder of the proceeds was recorded as a $5.5 million receivable from the sale of bidding rights and oil and gas properties. The Company expects this receivable to be fully settled by August 2012.

DELTA MUTUAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

As of and for the Three Months Ended March 31, 2012 and 2011

7. NOTES PAYABLE

	March 31, 2012		December 31, 2011
Notes payable to three investors, interest at 8%, due July 2014	$	150,655	$	150,655
Note payable to third party, interest at 6%, due August 10, 2011		15,000		15,000
Note payable to third party interest at 6%, due September 20, 2007		60,000		60,000
Notes payable to stockholders and related parties, interest at 6%, due June 20, 2012		623,970		623,970
Notes payable to third party, interest at 6%, due August 10, 2011.	_--_			193,740
Total	$	849,625	$	1,043,365

The Company included accrued interest payable on the aforesaid notes in accrued expenses as of March 31, 2012 and December 31, 2011, respectively. Interest expense for the three months ended March 31, 2012 and 2011 was $12,318 and $11,010, respectively. On March 15, 2012, the $193,740 past due note payable and related accrued interest was settled by the agreement to pay $50,000 cash and the issuance of 475,000 shares of common stock. Also subsequent to March 31, 2012, the maturity dates of the past due notes to three investors in the amount of $150,655 were extended to July 2014.

8. ACCRUED EXPENSES

	March 31, 2012		December 31, 2011
Accrued compensation	$	46,020	$	46,020
Accrued interest		137,996		186,555
Accrued expenses		131,534		131,534

Total	$	315.550	$	364,109

9. INCOME TAXES

The Company had not made provision for income taxes prior to the three months ended March 31, 2012, since the Company has the benefit of net operating losses carried forward in these periods. Domestic NOL carryforwards were utilized in the computation of the provision for income taxes for the three months ending March 31, 2012.

Due to the operating loss of the Company's Argentina subsidiary, the Company is not required to pay any income tax in Argentina. However, the Company has been subject to the personal assets tax or Minimum Presumptive Tax (MPIT) on the assets owned by SAHF that has a branch office in Argentina.

Personal assets tax or MPIT applies to individuals with assets owned as of December 31st each year. Taxpayers are required to pay the equivalent of 0.5% to 1.25% of the assets owned as of that date, depending on their global tax value if it exceeds a certain amount. For resident individuals, the tax applies on assets owned in Argentina and abroad. For non-resident individuals, the tax applies only on assets owned in Argentina.

The law presumes (without admitting evidence to rebut the presumption) that shares, quotas and other participation interests held in the capital of Argentine companies (including branches) that are held by non-resident entities are indirectly owned by foreign individuals. The tax amounts to 0.5% annually (based on the equity value according to the financial statements), which must be paid by the Argentine companies.

The Company has been current in paying the MPIT. This is not an income tax, which is why it is not included in our tax provision.

Deferred income tax assets consist of:

	Tax Effect
	March 31, 2012			December 31, 2011
Net operating loss carry-forwards	$	578,000		$	2,071,000

Less valuation allowance		(578,000	)		(2,071,000	)

Deferred income tax assets, net	$	--		$	--

The Company is subject to taxation in the United States and certain state jurisdictions. The Company’s tax years for 2008 and forward are subject to examination by the United States and applicable state tax authorities due to the carry forward of unutilized net operating losses.

10. OTHER INCOME

During the three months ended March 31, 2012 and 2011, the Company incurred foreign exchange gains of $15,520 and $4,888, respectively, on its US dollar denominated payments to its SAHF subsidiaries for operating expenses that were offset by the gain of the sale of bidding rights.

Effective March 30, 2012, the Company entered into the Cooperation Agreement with Principle Petroleum Ltd. (“PPL”). Under the Cooperation Agreement, we have agreed to sell to PPL, for a price of $7.5 million certain exploration and exploitation rights to oil and gas deposits and certain bidding rights held by Delta on the following areas: Tartagal & Morillo, Valle de Lerma in the province of Salta; San Salvador de Jujuy; Libertador General San Martin in the province of Jujuy; and Selva Maria in the province of Formosa. $6,500,000 of these proceeds are attributable to bidding rights for which the Company has no cost basis. The proceeds are non refundable in the event the Company is unsuccessful in the bids. Therefore, the Company recognized a gain of $6.5 million for the sale of these bidding rights during the three months ending March 31, 2012.

11. STOCKHOLDERS' EQUITY

For the three months ended March 31, 2012 and 2011, the Company issued 10,000 and 0 shares, respectively of its common stock to a related party for services performed. For the three months ended March 31, 2012 and 2011, the Company also issued 475,000 and 0 shares, respectively, for the settlement of a note payable.

A summary of the warrant activity for the three months ending March 31, 2012 is presented below:

	Warrants		Weighted Average Exercise Price		Weighted Average Contractual Term	Aggregated Intrinsic Value
Outstanding, January 1, 2012		7,900,640	$	0.21	6.0 years	$	1,538,130

Granted		-		-

Expired/Cancelled		-		-

Exercised		-		-

Outstanding, March 31, 2012		7,900,640	$	0.21	6.0 years	$	1,538,130

Exercisable, March 31, 2012		7,900,640	$	0.21	6.0 years	$	1,538,130

DELTA MUTUAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

As of and for the Three Months Ended March 31, 2012 and 2011

12. EARNINGS (LOSS) PER SHARE

Basie and diluted earnings (loss ) per common share are presented in accordance with ASC Topic 260 “Earnings pershare”. Common stock warrants have been excluded from the calculation of diluted earnings (loss) per share for the three months ended March 31, 2011 in the statemnets of operations, because all suc securities were anti dilutive and were not issued until the fourth quarter of 2011. Basic net earnings (loss) per share is calculated by dividing the net earnings (loss) per share by the weighted average number of share outstanding during the periods. Diluted net earnging per share is calculated by dividing the net earnings by the weighted average number of shares and potential shares outstanding during the period.

The weighted average shares outstanding used in the computations of basic and diluted earnings (loss) per share are as follows:

	Three Months Ending March 31,
Basic weighted average shares outstanding	2012		2011
		31,605,323		29,605,381
Potential common shares
		4,374,280		-
Diluted weighted average shares outstanding
		35,979,603		29,605,381

13. COMMITMENTS AND CONTINGENCIES

ECONOMIC AND 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 economic and political climate could have a material effect on the Company.

OPERATING LEASES

The Company entered into a lease agreement in February 2012 for 3,551 square feet of office space for its principal office in Arizona. The lease expires in February 2013 and the Company has an option to extend the lease for an additional two years. The Company is required to pay various executor costs in connection with the lease.

The Company has sublet a portion of the premises on a month-to-month basis for $1,800 per month.

Rent expense was $8,602 and $4,526 for the three months ended March 31, 2012 and 2011, respectively.

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.

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

GENERAL

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

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

GENERAL

The Company was incorporated under the name Delta Mutual, Inc. in Delaware on November 17, 1999. In 2003, we established business operations focused on providing environmental and construction technologies and services. Our operations in the Far East (Indonesia) and our construction operations in Puerto Rico were discontinued in 2008.

Effective March 4, 2008, we acquired 100% of the issued and outstanding membership interests in the parent of South American Hydrocarbon Fluids LLC, a Delaware limited liability company (formerly South American Hedge Fund LLC, sometimes herein referred to as “SAHF”). For accounting purposes, the transaction was treated as a recapitalization of the Company, as of March 4, 2008, with the parent of SAHF as the acquirer. SAHF maintains a branch office in Argentina, where it is engaged in oil and gas exploration and development activities.

Overview

We are an independent oil and gas company engaged in oil and gas acquisition, exploitation, production and exploration activities primarily in Argentina. In addition, we have ownership interests in certain mineral rights that are located in Argentina. In August 2007, SAHF signed agreements to purchase partial ownership interests in four oil and gas concessions in Northern Argentina. The joint venture owning these concessions then started the process to obtain the necessary government and environmental operating permits for the commercial exploitation of these concessions. These oil and gas investments were contributed to the Company as part of the reverse merger transaction in March 2008.

Our goal is to generate meaningful growth in shareholder value through the discovery and development of proved oil and gas reserves or other mineral, and we have focused on concessions where there are shut-in, plugged or abandoned wells that have, in our assessment, a high probability of additional recovery of reserves through the revitalization of the wells using standard oil and gas industry practices to bring back wells into production or to enhance production. In addition, our growth plan is centered upon the pursuit of energy related development projects that we believe will generate attractive rates of return while maintaining a balanced portfolio of lower risk, long-lived oil and gas properties that provide stable cash flows.

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.

Specifically, we have focused, and plan to continue to focus, on the following investments in South America.

Recent Developments—PPL Agreement

Effective March 30, 2012, we entered into the Cooperation Agreement with Principle Petroleum Ltd. (“PPL”). Under the Cooperation Agreement, we have agreed to sell to PPL, for a price of $7,000,000 certain exploration and exploitation rights to oil and gas deposits and certain bidding rights held by Delta on the following areas: Valle de Lerma in the province of Salta; San Salvador de Jujuy; Libertador General San Martin in the province of Jujuy; and Selva Maria in the province of Formosa. Pursuant to a separate Agreement dated March 31, 2012, we have agreed with PPL to assign and transfer 50% of SAHF's current ownership of the Tartagal and Morillo (i.e., a 9% interest in the concession) to PPL for a purchase price of $500,000, payable in the second quarter of 2012. PPL has also agreed in an Undertaking to provide funds to the operating entities of Valle de Lerma, Selva Maria, San Salvador and Libertador, in the aggregate amount of up to $10,000,000 (San Salvador, Libertador and Selva Maria are pending for approval from the government, which is standard procedure in Argentina).

In the March 31, 2012 quarter, we received a $2,000,000 deposit from PPL on account of its obligations under the above agreements to purchase exploration and exploitation rights in certain properties.

Jollin and Tonono Oil and Gas Concessions

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

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

SAHF received its foreign registration in Argentina and was admitted as a member of the joint venture on July 2, 2010. Accordingly, the Company has reclassified its concession costs in the amount of $688,475 associated with this property to proved oil and gas properties as of December 31, 2010 based upon the reserve report received from the third party working interest owner of the joint venture. The Company will begin receiving revenue from the Jollin and Tonono blocks when the first well is approved for commercial production.

Salta Province Exploration Rights

During 2008, SAHF purchased 40% of the oil and gas exploration rights to five geographically defined areas in the Salta Province of Northern Argentina from Ketsal, SA (“Ketsal”) for $697,000 cash. In 2009, SAHF assigned 50% of its rights to a third party. As of March 31, 2012, SAHF owns 20% of the rights to this oil and gas concession.

SAHF is responsible for managing the drilling activities in the Salta Province and bears its pro-rata share of the costs. Exploratory drilling activities commenced in April 2010 on the Guemes Block and the first well was spud in September 2010. SAHF paid $106,672 for additional concession fees to become an exploration company in Argentina and incurred $179,806 in exploratory drilling costs during the nine months ended September 30, 2010 that were capitalized as work-in-progress under the full cost method of accounting. In July 2010, SAHF found positive traces of the presence of natural gas and hydrocarbons of low-density quality through its analysis of core samples. Well logging while drilling also confirmed the potential existence of formations with sufficient hydrocarbons to make the well economically productive. Production testing to verify the commercial sustainability of the well is expected to commence in the first quarter of 2012.

Tartagal and Morillo

As of March 31, 2012, the Company, through SAHF, retained 18% of the total concession in the carryover mode ("no cost obligations to SAHF") in the Tartagal and Morillo oil and gas concessions located in Northern Argentina. In March 2009, a Hong Kong public company purchased 60% of the ownership in the Tartagal and Morillo oil and gas concessions, and has invested approximately $60 million to date on geological studies, 2D and 3D seismic surveys on both blocks and two work-over drills and an exploratory well drill in Tartagal. SAHF’s participation was increased from 9% to 18% in March 2011, through the purchase of an additional 9% interest in the concession from Ambika S.A. On May 11, 2011, SAHF received the Argentinian Salta Government’s approval for its 18% ownership share for the Tartagal and Morillo concessions. Effective March 31, 2012, we agreed to sell 50% of our interest to PPL.

Valle de Lerma

On August 10, 2011, the Company’s tender offer, made through our wholly-owned subsidiary, SAHF, for the ownership right to explore, and eventually, produce oil and natural gas in the block known as “Valle de Lerma” was declared the winning bid by the Salta provincial government. SAHF made the offer in a joint venture agreement with Grasta SA, a local mid-size gasoline refinery located in Buenos Aires, Argentina. Other partners in the block include PetroNEXUS and REMSA. On October 25, 2011 SAHF was awarded an Exploration and Exploitation Oil & Gas Block License by the Government of Salta, Argentina.

The Valle de Lerma block is located in the province of Salta in the northwestern region of Argentina and has an area of 5259 km2, SAHF has filed an environmental impact study and, upon its approval, will proceed to the reentry and work-over of the wells. SAHF holds a majority of the license interest and is the responsible operator. The license allows SAHF 20 years to explore and produce hydrocarbons with a renewal option of ten more years.

The Company and its partners have started the block exploration with 2D Seismic reinterpretation and will follow it with: geological model application and Hydrocarbon Micro seepage Survey with Geo Microbial Technologies Argentina (Guemes Method), and La Troja well work over with a local rig company. The exploration terms are four years for the first period, three years for the second and two years for the last period.

SAHF currently owns 60% of the rights to explore Valle de Lerma; GRASTA owns 5%; PetroNEXUS owns 30%; and REMSA owns 5%. Pursuant to the agreements with PPL, we have agreed to sell 50% of our interest in Valle de Lerma, as well as our interest in bidding rights on three other properties.

Caimancito Refinery

On January 13, 2012, we, through our wholly-owned subsidiary, SAHF, signed a purchase option agreement with Cruz Norte, SA to purchase 33.33% of the Caimancito Refinery, located in the Jujuy Province, Argentina. In March, 2012, the purchase option agreement was finalized and signed and Cruz Norte transferred 1/3 of its stake in the refinery to SAHF. The purchase price of the refinery was $150,000 for the 33.33% of the outstanding shares of Caimancito Refinery; the purchase price is split into two payments of US$75,000: one in March 2012, and one in June 2012. As of the date of this report, the Company has wired to Cruz Norte SA $75,000 in three payments in March 2012.

Lithium Production Properties

On March 1, 2010, we signed a purchase option agreement with Minera Jujuy from the Jujuy Province, Argentina related to the acquisition of approximate 143,000 hectares with 29 mines located in the Northwest part of Argentina, south of the border with Bolivia, with high lithium and borates brines concentration. Currently, we are performing sampling and geological conclusions with a local geological company in order to determine value to the property. SAHF purchased control of 51% of the Guayatayoc project via a partnership agreement with Oscar Chedrese and Servicios Mineros SA. The project holds the concession for a period of 20 years.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2012 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2011

During the three months ended March 31, 2012, we generated net earnings of $5.7 million compared to a net loss of $141,000 for the three months ended March 31, 2011. The decrease in our net loss for the three months ended March 31, 2012 over the prior three month period is primarily due to the gain on the sale of certain bidding rights to PPL.

During the three months ended March 31, 2012 our net loss from operations was approximately $432,000 compared to a net loss from operations of approximately $136,000 in the three months ended March 31, 2011. The increase in our net loss from operations is primarily due to employee bonuses paid in 2012 for the significant improvement in the Company’s operations during 2012.

LIQUIDITY

At March 31, 2012, we had a working capital surplus of approximately $5.4 million, compared with a working capital deficit of approximately $1.3 million at December 31, 2011. The significant improvement is due to the sale of certain bidding rights and oil and gas properties to PPL as of March 31, 2012

At March 31, 2012, we had total assets of approximately $8.6 million compared to total assets of approximately $2.6 million at December 31, 2011. Net cash used in operating activities in the three months ended March 31, 2012 was approximately $392,000, as compared with approximately $151,000 in 2011; and net cash generated from investing activities was approximately $1.8 million 2012, as compared with cash used of approximately $96,000 in 2011. Cash used in operations and investing activities in 2011 was offset by net cash provided from financing activities of approximately $347,000. There was no cash generated or used by financing activities in the three months ending March 31, 2012.

Estimated 2012 Capital Requirements

In the case of the Jollin and Tonono and Tartagal and Morillo oil and gas properties, we have carried interests; therefore, no further capital expenditures are required on our part. For the exploration rights in Salta Province, we have completed the drilling and development of one well in Guemes that is expected to begin production testing in early 2013. We have sufficient funds for our portion (20%) of the costs of installation of the battery storage facility to complete the Guemes production and storage facilities. In the event our revenue expectations for 2012 are not met, we are not required to make any additional capital investment to protect our assets.

We estimate that our capital requirements in 2012 to develop the Valle de Lerma, San Salvador, Libertador and Selva Maria properties (San Salvador, Libertador and Selva Maria are pending for approval from the government) will approximate $7,000,000, funds for which investments would be provided by PPL, pursuant to its commitment to invest developmental funds of $10,000,000 for these properties.

USE OF ESTIMATES

The preparation of the financial statements requires the Company to make estimates and judgments that affect the reported amount of assets, liabilities, and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to oil and gas properties, intangible assets, income taxes and contingencies and litigation. The Company bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included in these financial statements. Certain amounts for prior periods have been reclassified to conform to the current presentation.

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

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

	·	Future exploration and development costs; and
	·	Future dismantlement and restoration costs.

NEW FINANCIAL ACCOUNTING STANDARDS

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

Critical Accounting Policies

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

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

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

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

ITEM 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 and Nine 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 4. – 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, 2012, an evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our Chief Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective.

Changes in Internal Controls

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

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

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

Date	Title and Amount(1)	Purchaser	Principal Underwriter	Total Offering Price/Underwriting Discounts
January 5, 2012	10,000 shares of common stock	Consultant.	NA	$0.35 per share/NA
April 3, 2012	237,500 shares of common stock in conversion of promissory note and accrued interest.	Private investor.	NA	$0.45 per share/NA
April 9, 2012	237,500 shares of common stock in conversion of promissory note and accrued interest.	Private investor.	NA	$0.45 per share/NA
April 10, 2012	18,800 shares of common stock.	Consultant.	NA	$0.20 per share/NA

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

ITEM 5. OTHER INFORMATION.

On May 16, 2012, our Board of Directors adopted amendments to our By-Laws providing for updates to the By-Laws to conform to the Delaware General Corporation Law, to update the By-Laws to reflect current evidence of ownership, transfer and delivery operational requirements of the stock markets and the Company’s transfer agent relating to stock certificates, to provide for the call of special meetings of stockholders only by the Chief Executive Officer, or by the Chief Executive Officer at the request of the Board of Directors, and generally to clarify the procedures for elections of and nominations for directors.

Our Amended and Restated By-Laws are filed as Exhibit 3.2b to this quarterly report.

ITEM 6. EXHIBITS.

3.2b	Amended and Restated By-Laws of the Company, filed herewith.
31	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
32	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.

Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K.

SEC Ref. No.		Title of Document
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Label Linkbase Document
101.PRE		XBRL Taxonomy Presentation Linkbase Document

The XBRL related information in Exhibits 101 to this Quarterly Report on Form 10-Q shall not be deemed “filed” or a part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, and is not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of those sections.

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, Chief Executive Officer and Principal Financial Officer

Dated: May 21, 2012

EXHIBIT INDEX

3.2b	Amended and Restated By-Laws of the Company.

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

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

SEC Ref. No.		Title of Document
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Label Linkbase Document
101.PRE		XBRL Taxonomy Presentation Linkbase Document

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