<PAGE>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                 FIRST AMENDMENT
                                   FORM 10-QSB

(X)      QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
         THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2001
                               --------------

( )      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
         THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________ to ______________

Commission File Number 0-12214
                       -------

                          DALECO RESOURCES CORPORATION
  ----------------------------------------------------------------------------
              Name of small business issue as specified in Charter
<TABLE>
<CAPTION>

<S>                                                                    <C>
Delaware                                                               23-2860734
----------------------------------------------------------             ---------------------------------------
(State or other jurisdiction of incorporation or organization)         (IRS Employer Identification Number)

120 North Church Street
West Chester, Pennsylvania 19380                                       (610) 429-1258
----------------------------------------------------------             ---------------------------------------
(Address of Principal Executive Offices)                               (Issuer's telephone number)
</TABLE>

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after distribution under a
plan confirmed by court.
                                                                 Yes ___ No ___


                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date.

Number of shares outstanding of the issuer's common stock as of March 31, 2001:
3,402,574
Number of shares outstanding of the issuer's Series A preferred stock as
of March 31, 2001: 16,000.
Number of shares outstanding of the issuer's Series B preferred stock as
of March 31, 2001: 2,001,800


<PAGE>


                                      INDEX

                                                                          PAGE
PART I            FINANCIAL INFORMATION

ITEM 1            FINANCIAL STATEMENTS (Unaudited)...........................3
                  Consolidated Balance Sheets................................3
                  Consolidated Statement Of Income...........................4
                  Consolidated Statement Of Deficit..........................5
                  Consolidated Statement Of Cash Flow........................6
                  Notes to Consolidated Financial Statements.................7

ITEM 2            MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  CONDITION AND RESULTS OF OPERATIONS.......................17

PART II           OTHER INFORMATION

ITEM 6            Exhibits and Reports on Form 8-K..........................18

SIGNATURES .................................................................19

                                      -2-
<PAGE>


DALECO RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2001 AND 2000 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>

                                                                                           2001                2000
<S>                                                                                    <C>                 <C>
ASSETS
Current Assets
     Cash and cash equivalents                                                         $262,262            $282,562
     Accounts receivable                                                                543,684             509,084
     Other                                                                               11,474               4,264
                                                                                   ------------        ------------
                  Total Current Assets                                                 $817,420            $795,910

Oil and gas properties and equipment                                                  6,973,454           7,306,438
Property and equipment                                                                  344,770              27,633
Timber rights                                                                           150,000             700,000
Mineral properties                                                                   12,609,100               -----
Patents and Technologies                                                              6,304,500               -----
Investments                                                                             112,500               -----
Debt Issue Costs                                                                         34,564             172,815
                                                                                   ------------        ------------
                  Total Assets                                                      $27,346,308          $9,002,796
                                                                                   ============        ============
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities                                             $2,319,887          $2,939,390
Current portion of long-term debt                                                     7,017,390           6,675,727
Note Payables (note   )                                                               1,080,872             452,092
Due to related parties (note 7)                                                         844,920             537,511
                                                                                   ------------        ------------
                  Total Current Liabilities                                         $11,263,069         $10,604,720

Shareholders' Equity
     3,402,574 (2000--3,102,574) Common shares,
     par value $0.01 per share                                                          $34,025             $31,027
     16,000 Series A Preferred Shares,
     par value $0.01 (2000-16,000)(note 7)                                                  160                 160
     2,001,800  Series B Preferred Shares,
     par value $0.01 per share (note 11)                                                 20,018               -----
     Additional Paid in Capital                                                      34,495,742          14,451,128
     Accumulated deficit                                                            (18,466,706)        (16,084,239)
                                                                                   ------------        ------------
                  Total Shareholders' Equity                                         16,083,239         (1,601,924)
                                                                                   ------------        ------------
                  Total Liabilities and Shareholders' Equity                        $27,346,308          $9,002,796
                                                                                   ============        ============
</TABLE>

                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS



                                      -3-

<PAGE>

DALECO RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF LOSS FOR THE PERIODS
ENDED MARCH 31, 2001 AND 2000 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>

                                                         Three Months Ended                  Six Months Ended

                                                       March 31,       March 31,          March 31,       March 31,
                                                          2001           2000                2001           2000

<S>                                                    <C>              <C>              <C>             <C>
Gross Oil and Gas Operating Revenue                    $895,510         $616,770         $1,594,646      $1,186,699
Less:    Lease Operating Expenses                       636,543          383,707          1,248,472         910,387
         Severance taxes                                 38,732           26,824             80,928          72,885
         Net Profits Interest and Related Expenses        -----            -----              -----         (10,541)
         Depletion, depreciation and amortization        45,084           29,200             70,809          56,423
                                                      ---------         --------         ----------      ----------
Net Income (Loss) from Oil and Gas Operations           175,151          177,039            194,437         157,545
                                                      ---------         --------         ----------      ----------

Other Activities
Management and Administrative Fees                       80,686          107,140            194,472         240,056
Income from sale of Properties                            -----          408,765              -----         878,685
Administration Expenses                                (170,591)        (163,051)          (361,818)       (528,736)
Amortization of Debt Issue Costs                        (17,281)           -----            (34,562)          -----
Amortization of Patents and Technologies               (145,000)           -----           (290,000)          -----
Amortization and Depreciation                           (75,000)           -----           (200,000)          -----
Interest expense                                       (190,791)        (219,552)          (374,948)     (1,120,913)
                                                      ---------         --------         ----------      ----------
Net income (Loss) Other Activities                     (517,977)         133,302         (1,066,856)       (530,908)
                                                      ---------         --------         ----------      ----------

Net income (Loss) for Period                          ($342,826)        $310,341          ($872,419)      $(373,363)
                                                      =========         ========         ==========      ==========


PRIMARY AND FULLY DILUTED NET (LOSS)
  PER COMMON SHARE                                       ($0.10)           $0.10             ($0.26)         ($0.12)
                                                      =========         ========         ==========      ==========
</TABLE>



                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS




                                      -4-
<PAGE>


DALECO RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE PERIODS
ENDED MARCH 31, 2001 AND 2000 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

                                                    2001                   2000

Deficit - Beginning of Period               ($16,754,287)          $(16,374,580)
Net Income (loss) for the period                (812,419)               310,341
Dividends on Preferred Stock                    (840,000)               (20,000)
                                            ------------           ------------
Deficit - End of Period                     ($18,466,706)          $(16,084,239)
                                            ============           ============





























                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS


                                      -5-

<PAGE>


DALECO RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE PERIODS
ENDED MARCH 31, 2001 AND 2000 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>

                                                         Three Months Ended             Six Months Ended

                                                       March 31,       March 31,     March 31,       March 31,
                                                          2001           2000           2001           2000
Operating Activities

<S>                                                    <C>              <C>          <C>             <C>
Net Income (Loss)                                      ($342,826)       $310,341     ($872,419)      ($373,163)
Items not affecting Working Capital Depletions,
Depreciation, and Amortization                           282,365          29,200       595,371          56,423
                                                        --------        --------      --------        --------
                                                         (60,461)        339,541      (277,048)       (316,740)
Items affecting Working Capital:
(Increase) Decrease in Other Assets                        -----          58,880         -----          58,405
(Increase) Decrease in Receivables                       (41,262)        (18,616)      283,491         (64,968)
Increase (Decrease) in Accounts Payable                  692,828        (117,751)      537,866        (231,917)
                                                        --------        --------      --------        --------
Cash provided (used) for Operations                      591,105         262,054       544,309        (555,220)
                                                        --------        --------      --------        --------

Financing Activities
Increase (Decrease) in Debt Obligations                  (54,838)         38,972       362,244          48,972
Dividends                                               (420,000)        (20,000)     (840,000)        (40,000)
Cash Provided From (used by) Financing Activities       (474,838)         18,972      (477,756)        631,737
                                                        --------        --------      --------        --------

NET INCREASE (DECREASE) IN CASH                          116,267         281,026        66,553          76,517
CASH - BEGINNING OF PERIOD                               145,995           1,536       195,709         206,045
                                                        --------        --------      --------        --------
CASH - END OF PERIOD                                    $262,262        $282,562      $262,262        $282,562
                                                        ========        ========      ========        ========

</TABLE>













                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS


                                      -6-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2001 AND 2000 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================
1.       CONTINUED OPERATIONS

         The financial statements have been prepared on the basis of a going
         concern, which contemplates that the Company will be able to realize
         assets and discharge liabilities in the normal course of business.
         Accordingly, they do not give effect to adjustments that would be
         necessary should the Company be required to liquidate its assets. As of
         March 31, 2001 the Company has reported a loss of $342,826. The ability
         of the Company to meet its total liabilities of $11.3 million and to
         continue as a going concern is dependent upon the availability of
         future funding, achieving profitable timber operations, and the
         successful development of the newly acquired mineral assets.

         As of March 31, 2001, certain of the Company's subsidiaries were in
         default of certain debt obligations.

 2.      Summary of Significant Accounting Policies

         a.       Use of estimates

                  The preparation of financial statements in conformity with
                  generally accepted accounting principles requires management
                  to make estimates and assumptions that affect the reported
                  amounts of assets and liabilities and disclosure of contingent
                  assets and liabilities at the date of the financial statements
                  and the reported amounts of revenues and expenses during the
                  reporting period. Actual results could differ from those
                  estimates.

         b.       Basis of consolidation

                  The consolidated financial statements of Daleco Resources
                  Corporation (the "Company") have been prepared in accordance
                  with generally accepted accounting principles and include the
                  accounts of the Company and its wholly-owned subsidiaries
                  Westlands Resources Corporation ("Westlands"), Sustainable
                  Forest Industries Inc. ("Sustainable"), Deven Resources, Inc.
                  ("Deven"), Tri-Coastal Energy, Inc.("Tri-Coastal"), and Haly
                  Corp ("Haley"), Clean Age Minerals, Inc., CA Properties, Inc.,
                  Lone Star Properties, Inc., Matrix-Loc, Inc. and 16/6, Inc.
                  The Company's investments in oil and gas leases are accounted
                  for using proportionate consolidation whereby the Company's
                  prorata share of each of the assets, liabilities, revenues and
                  expenses of the investments are aggregated with those of the
                  Company in its financial statements. The Company's investment
                  in mineral assets is accounted for using the purchase method
                  of accounting.


                                      -7-

<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2001 AND 2000 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

         c.       Oil and gas properties and equipment

                  The Company follows the successful efforts method of
                  accounting for the costs of exploration and development
                  activities. Direct acquisition costs of developed and
                  undeveloped leases are capitalized. Costs of undeveloped
                  leases on which proved reserves are found are transferred to
                  proven oil and gas properties. Each undeveloped lease with
                  significant acquisition cost is reviewed periodically and a
                  valuation allowance provided for any estimated decline in
                  value. Capitalized costs of proved developed leases are
                  charged to income on the units of production basis based upon
                  total proved reserves. The capitalized costs of these proved
                  developed leases are written down to their projected net
                  recoverable amount.

                  Costs of exploratory wells found to be dry during the year or
                  before the issuance of these financial statements are charged
                  against earnings in that year. Costs of successful exploration
                  wells and development wells are capitalized. All costs of
                  development wells and successful exploration wells are charged
                  to earnings on a unit-of-production basis based upon proved
                  developed reserves. Where the costs of developed wells and
                  successful exploration wells exceed projected net recoverable
                  amounts, such wells are written down to their projected net
                  recoverable amount. Net recoverable amount is the aggregate of
                  estimated un-discounted future net revenues from proven
                  reserves less operating and production expenses.

                  Effective in the first quarter of 1997, the Company began
                  assessing the impairment of capitalized costs of proved oil
                  and gas properties and other long-lived assets in accordance
                  with Statement of Financial Accounting Standards No. 121 (SFAS
                  121), Accounting for the Impairment of Long-Lived Assets and
                  for Long-Lived Assets to be Disposed of. Under this method,
                  the Company generally assesses its oil and gas properties on a
                  field-by-field basis utilizing its current estimate of future
                  revenues and operating expenses. In the event net undiscounted
                  cash flow is less than the carrying value, an impairment loss
                  is recorded based on estimated fair value, which would
                  consider discounted future net cash flows. SFAS 121 did not
                  have any impact on the Company's change in method of assessing
                  impairment of oil and gas properties and other long-lived
                  assets.

         d.       Site restoration, dismantlement and abandonment costs

                  The salvage value of producing wells is expected to exceed the
                  cost of site restoration and abandonment. As a result, no such
                  costs are accrued in these financial statements.

         e.       Property and Equipment

                  Property and equipment are recorded at cost and depreciated
                  over the straight-line method over a period of five years.

         f.       Timber Rights

                  The Company has recorded the acquisition of timber rights at
                  cost. These costs are deferred until commercial production
                  commences. Where the costs exceed projected net recoverable
                  amounts, the timber rights are written down to the projected
                  net recoverable amount. Net recoverable amount is the
                  aggregate of estimated un-discounted future net revenues from
                  the sale of timber less operating and production expenses.


                                      -8-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2001 AND 2000 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

         g.       Mineral Acquisition

                  The Company has recorded the acquisition of CAMI and
                  associated mineral assets at cost.

         h.       Debt Issue Costs

                  Debt issue costs represent those associated with the Heller
                  Financial, Inc. loan (see Note 9) are being amortized over a
                  period of five years.

         i.       Cash and Cash Equivalents

                  Cash and cash equivalents include cash and investments with
                  original maturities of three months or less.

         j.       Fair Value of Financial Instruments

                  Cash and cash equivalents, receivables, and all liabilities
                  have fair values approximating carrying amounts, except for
                  the Heller Financial, Inc., and Sonata Investment Company,
                  LTD., loans for which it is not practicable to estimate fair
                  values. The loans are to be repaid out of net cash flows.
                  Additional interest or profit participation is payable after
                  the payment of principal.

         k.       Reverse Stock Split

                  Effective February 24, 1998, the majority of stockholders of
                  the Company approved a reverse ten-for-one stock split. All
                  reference to the number of common and preferred shares, stock
                  options, warrants, and per share amounts elsewhere in these
                  financial statements and related footnotes have been restated
                  as appropriate to reflect the effect of the reverse split for
                  all periods presented.

 3.      Oil and Gas Properties and Equipment
<TABLE>
<CAPTION>

                                                                2001                 2000
                                                             -----------         -----------

<S>                                                           <C>                 <C>
Proven lease acreage costs                                    $5,429,996          $5,429,996

Proven undeveloped lease acreage costs                         1,745,810           1,745,810

Well costs                                                     5,432,145           5,432,145
                                                             -----------         -----------
                                                             $12,607,950         $12,607,950

Accumulated depletion, depreciation and amortization(1)        5,634,496           5,589,412
                                                             -----------         -----------
                                                              $6,973,454          $7,018,538
                                                             ===========         ===========
</TABLE>

                                      -9-

<PAGE>
DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2001 AND 2000 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

4.       Timber Rights Acquisition

         Effective September 29, 1995, the Company entered into an agreement
         ("Acquisition Agreement") to purchase 100% of the issued and
         outstanding shares of the common stock of Sustainable Forest Industries
         Inc. ("Sustainable"), a privately held Delaware Company, in exchange
         for 150,000 shares of common stock of the Company.

         Prior to this, Sustainable entered into a Timber Acquisition Agreement
         on September 27, 1995 with Oreu Timber and Trading Co., Ltd. ("Oreu"),
         a Guyana Corporation which is an affiliate of May Joy Agricultural
         Cooperative Society Ltd. ("May Joy"). Under the terms of the agreement,
         Sustainable has been assigned the exclusive harvesting and cutting
         rights for the timber concession issue by Permit No. 1367. This permit
         was originally granted to May Joy who subsequently assigned harvesting
         rights to Oreu as per an agreement dated January 3,1995.

         In exchange for the timber rights, Oreu received a 10% ownership of
         Sustainable. This ownership was subsequently converted to equivalent
         shares of the Company as a result of the acquisition of Sustainable.

5.       Mineral Properties

         a.       Clean Age Minerals, Incorporated

                  In September 2000, the Company acquired Clean Age Minerals,
                  Inc. ("CAMI") by way of merger with the Company's wholly owned
                  subsidiary, Strategic Minerals, Inc. CAMI has three (3)
                  subsidiaries, CA Properties, Inc., Matrix-Loc, Inc. and Lone
                  Star Minerals, Inc. (collectively "CAP").

                  CAP owns or has under long-term lease: (a) 5,200 acres(+/-) in
                  Marfa, Presidio County, Texas, containing high grade zeolite;
                  (b) 5,020 acres(+/-) of calcium carbonate deposits located in
                  the Oro Grande area, Cibola County, New Mexico; (c) five (5)
                  mining claims located in Sierra County, New Mexico covering
                  800 acres(+/-) of kaolin; (d) seventeen (17) mining claims
                  covering 1,360 acres(+/-) in Grant County, New Mexico
                  containing perlite; and (e) eleven (11) zeolite mining claims
                  covering approximately 220 acres(+/-) located in Beaver
                  County, Utah.

         b.       Yukon and Mexican Properties

                  In February 1995, the Company acquired 109 mining claims from
                  shareholders of the Company for $15,673 representing their
                  cost to acquire the claims. Additional costs of $8,300 were
                  incurred during fiscal 1997 to maintain these claims. The
                  claims were not renewed and written-off during Fiscal 1998 and
                  1999.


                                      -10-

<PAGE>
DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2001 AND 2000 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

6.       Patents & Technology

         As part of the acquisition of Clean Age Minerals, Inc. (See Note 6(a)
         above), the Company also acquired U.S. Patent No: 5387738. This patent,
         owned by Matrix-Loc, Inc. deals with a reagent and process for the
         remediation of water join and contaminated soils. These costs are being
         amortized over a period of eleven years.

7.       Notes Payable

         During the year ended September 30, 1995, the Company received
         $1,100,000 in return for two notes payable, with the producing wells of
         the Company used as collateral. Interest of 10% per annum was due
         monthly. In fiscal 1996, the Company repaid $300,000 of the outstanding
         balance. In fiscal 1997, the remaining $800,000 was converted into
         16,000 shares of 10% cumulative preferred stock, at $50.00 per share
         ("Series A Preferred Stock"). The Series A Preferred Stock was subject
         to a put on August 20, 1999. The holders of the Series A Preferred
         Stock filed a lawsuit in the Los Angeles Superior Court, California
         against the Company, as well as Mr. Amir and Mr. Erlich as guarantors.
         Mr. Amir satisfied his obligation and purchased his, or 8,000 shares of
         the Series A Preferred Stock. The Company and Mr. Erlich entered into a
         Stipulation for the Entry of Judgment granting the Company until August
         1, 2001 in which to satisfy the put for the remaining 8,000 shares of
         Series A Preferred Stock plus accumulated interest. (See Litigation
         Note 17). Mr. Amir has not made a demand on the Company for payment.

         During fiscal 1998, the Company borrowed $145,000 from four (4)
         persons. The debt was evidenced by Notes which matured on November 21,
         1998. The Notes earned interest at 2% over the prime rate charged by
         the Huntingdon National Bank of Columbus, Ohio, through the maturity
         date, and 18% thereafter. The Noteholders were also given warrants.
         $75,000 in principal amount plus accrued interest due to Sonata
         Investment Company, Ltd. ("Sonata") was paid to Sonata on November 30,
         2001. (See Note 11(b)--Warrants and Schedule IX--Short Term
         Borrowings). On August 1, 2001, the Company borrowed $42,000 from
         Standard Energy Company. This loan earned interest at 2% per annum.
         This loan was satisfied on November 30, 2001.

                                      -11-


<PAGE>
DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2001 AND 2000 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

8.       Due to (from) Related Parties

         Amounts have been advanced by officers (current and past) of the
         Company. These advances bear interest at 9% and have no fixed
         re-payment terms.

9.       Debentures
                                                           2001          2000
                                                           ----          ----
                          8% Convertible                 $30,000       $30,000
                          Debentures

         a.       7% Convertible Debentures

                  On May 31, 1996 the Company issued $1,000,000 of 7%
                  convertible debentures with interest payable in cash or stock
                  on a semi-annual basis, and a term of three years. The
                  placement agent's fees were 10% of the gross proceeds and
                  10,000 warrants at $10.00, with an expiration date of May 30,
                  2001 (see Note 10). The debentures could be converted after a
                  holding period of: (a) as to 50% of the principal amount, 40
                  days (July 10, 1996), and (b) the remaining 50%, 60 days (July
                  30, 1996). The debentures were convertible into the Company's
                  common stock at the lessor of (1) a 35% discount on the
                  previous five day average closing bid price at conversion, or;
                  (2) the previous day average closing bid price at closing (May
                  31, 1996). All of the debentures have been converted into
                  common stock.

         b.       8% Convertible Debentures

                  On September 11, 1996, the Company issued $1,310,000 worth of
                  8% convertible debentures with interest payable in stock only
                  and accruing until conversion or redemptions after the term of
                  two years. The placement agent's fees were 10% of the gross
                  proceeds and 12,111 warrants at $10.07 expiring November 16,
                  2001. The debentures may be converted after a holding period
                  of 45 days after closing at the lessor of: (1) the fixed
                  conversion price ($10.171875), or (2) 75% of the average
                  closing bid price for the five trading days immediately
                  preceding the date of conversion. As of December 31, 1999,
                  $1,280,000 of the 8% debentures had been converted into
                  981,322 common shares. As of December 31, 2000, $30,000 of the
                  debentures remained outstanding.


                                      -12-
<PAGE>


DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2001 AND 2000 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

10.      Debt

         Long-term debt of the Company consists of the following:

         a.       Heller Financial, Inc.

                  During the fourth quarter of fiscal 1997, the Company entered
                  into an arrangement with Heller Financial, Inc. ("Heller")
                  whereby Heller has agreed to provide the Company with up to
                  $15,000,000 to rework existing horizontal wells, rework its
                  vertical wells as horizontal wells, and develop additional
                  acreage. Under the terms of the agreement, all of the
                  properties of Westlands were transferred to a newly formed
                  Limited Partnership, Tri-Coastal Energy, L.P., the general
                  partner of which is Tri-Coastal Energy, Inc., (Tri-Coastal)
                  and the sole limited partner of which is Westlands. Westlands
                  is also the sole shareholder of Tri-Coastal. Interest on the
                  borrowings is at prime plus 2%. Principal is paid out of 85%
                  of the net cash flow from the properties. Additional interest
                  is payable from 50% of the net cash flow from these properties
                  after the payment of principal. In January 1999, Heller
                  declared the Loan to be in default as a result of the pledged
                  properties failure to generate the required interest payments.
                  This was solely due to the decrease in the price for oil world
                  wide. As a result, the full amount of the Heller loan has been
                  reclassified as current debt.

         b.       Sonata Investment Company, LTD.

                  During the third quarter of fiscal 1997, Sustainable entered
                  into a loan agreement with Sonata Investment Company, LTD. for
                  $250,000, which remains outstanding as of September 30, 1997.
                  Sustainable has the right to request an additional $250,000
                  prior to December 31, 1999. The Company and Westlands are
                  guarantors of the loan with Westlands (now Tri-Coastal Energy,
                  L.P.) wells being pledged as collateral, subordinated to the
                  Heller Financing. The loan is to be repaid out of 25% of
                  Sustainable's net cash flow with any remaining balance due by
                  December 31, 1999. Interest is at 12%. In addition, Sonata
                  will receive a profits participation of 25% of the net profits
                  of Sustainable while the loan is outstanding and 20% after the
                  loan is repaid (after payout). Should Sustainable request the
                  additional $250,000 from Sonata and should Sonata elect not to
                  make said advance, then the after payout rate reduces from 20%
                  to 15%. The full amount of this loan has been reclassified as
                  current debt. Sonata sought and the Company agreed to grant
                  Sonata additional collateral to secure its loan in the nature
                  of a security interest in the Patent owned by Matrix-Loc and
                  the mineral leases owned by subsidiaries of CAMI. The totality
                  of the Sonata debt, plus all accrued and unpaid interest was
                  satisfied on November 30, 2001, and all collateral for the
                  Sonata debt has been released..

         c.       First Regional Bank

                  As of December 31, 1998, the Company assumed a $100,000 loan
                  with First Regional Bank when it acquired Haly Corporation.
                  Interest is at 6.9% and the loan matures in 2001. The loan is
                  secured by personal assets of an officer of the Company.

                                      -13-

<PAGE>


DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2001 AND 2000 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================


11.      Capital Stock
<TABLE>
<CAPTION>

                                       NUMBER OF COMMON SHARES,      NUMBER OF PREFERRED
                                              PAR VALUE                SHARES PAR VALUE
                                           $0.01 PER SHARE             $0.01 PER SHARE

<S>                                           <C>                           <C>
      Authorized                              20,000,000                    10,000,000
                                              ----------                    ----------
                                                               Series A       Series B
      Balance as of March 31, 2000             3,402,574        16,000          -----
                                                               Series A       Series B
      Balance as of March 31, 2001             3,402,574        16,000       2,001,800(1)
                                               =========        ======    ============

</TABLE>

Upon re-domestication of the Company into the U.S. as of October 1,1997, par
value was established at $0.01 per share for both common and preferred stock.

(1)      Of the 2,001,800 shares of Series B, 10% cumulative convertible
         preferred authorized for exchange for the shares of Clean Age Minerals,
         Incorporated ("CAMI") only 1,689,200 have actually been issued due to
         some CAMI shareholders not having surrendered their shares of CAMI
         common stock for conversion.

         a.       Common Stock Options

                                    2001           2000          1999
-------------------------------- ------------ -------------- -------------
Outstanding and Exercisable
   at beginning of year            3,530,000        155,000       155,000
-------------------------------- ------------ -------------- -------------
Canceled                                 (0)      (125,000)         -----
-------------------------------- ------------ -------------- -------------
Granted                                  (0)      3,500,000         -----
-------------------------------- ------------ -------------- -------------
Exercised                                (0)          -----         -----
                                   --------       ---------       -------
-------------------------------- ------------ -------------- -------------
Outstanding and Exercisable
   at end of year                  3,530,000      3,530,000       155,000
                                   =========      =========       =======
-------------------------------- ------------ -------------- -------------


                  As of September 11, 2000, the Board of Directors of the
                  Company issued 3.5 million of options at an exercise price of
                  $.25 per share to three directors and two employees of the
                  Company. This was the fair value of the Company's stock at the
                  time of issue.

         b.       Common Stock Warrants

                  Common stock warrants outstanding at March 31, 2001, consist
                  of the following:
<TABLE>
<CAPTION>

------------------------------ ---------------------- ------------------- -------------------------
              Issuance            Expiration Date        Amount             Price Per Share
------------------------------ ---------------------- ------------------- -------------------------
<S>                             <C>                        <C>                         <C>
Consulting Agreements             May 8, 2001 to                 140,000                     $3.50
                                  October 1, 2001
------------------------------ ---------------------- ------------------- -------------------------
Consulting Agreement            September 30, 2001                12,211                    $10.73
------------------------------ ---------------------- ------------------- -------------------------
8% Debenture Holders and       September 11, 2001 to             131,000                 $4.386 to
Placement Agents (1.)              June 8, 2002                                             $10.81
------------------------------ ---------------------- ------------------- -------------------------
Financing Sources                November 20, 2005               288,138             $.55 to $2.50
------------------------------ ---------------------- ------------------- -------------------------
</TABLE>

                                      -14-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2001 AND 2000 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================


         (1.)     Common Stock Warrants Attached to Debenture

                  In connection with the issuance of the 8% convertible
                  debentures in September 1996; a number of warrants were
                  granted to the holders of the debentures, the agents, and
                  subagents who placed the debentures.

                  With respect to the warrants granted to the debenture holders
                  and subagents, the warrants were granted in three equal
                  installments on September 11, 1996; November 26, 1996; and
                  June 8,1997. These warrants will expire five years from the
                  date of each installment: September 11, 2001; November 26,
                  2001; and June 8, 2002. The number of shares of common stock
                  into which the warrants may be converted and the exercise
                  price of the warrants were determined by (among other
                  variables and future events) the amount of debentures still
                  outstanding on each date of grant, and the average closing bid
                  price of the Company's common stock for the five trading days
                  immediately preceding each date of grant.

                  On September 11, 1996, a total of 12,211 warrants expiring on
                  September 11, 2001 were granted to the agents. The warrants
                  may be exercised at any time before the expiration date by
                  either of the two methods as follows: (a) each warrant may be
                  exercised for one common share with an exercise price of
                  $10.73, or (b) all or a portion of the warrants may be
                  exercised on a cashless basis where a reduced number of shares
                  of common stock will be issued based upon the difference
                  between the average closing price of the Company's common
                  stock for the five business days immediately preceding the
                  date of exercise and the exercise price, divided by the
                  average closing market price, times the number of warrants
                  being exercised.

         c.       Net Income Per Share

                  Net income per share was calculated on the basis of the
                  weighted average number of shares outstanding which amounted
                  to 3,402,574 for the period ended March 31, 2001 (for 2000 -
                  3,102,574). For the periods ended March 31, 2001 and 2000 the
                  exercise of the options and warrants outstanding as at year
                  end did not have a dilutive effect on the net income per
                  share.

12.      Income Taxes

         The Company has no current and deferred taxes payable. The Company and
         its subsidiary have significant tax losses to be applied against future
         income. The subsidiary Company's tax filings show net operating losses
         to be applied against future taxable income in the amount of
         approximately $28 million to be utilized in various years through 2009.
         The tax benefit of these losses is estimated to be approximately $10
         million. No potential benefit of these losses has been recognized in
         the accounts.

                                      -15-

<PAGE>
DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2001 AND 2000 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================


 13.     Litigation

         Southland Drilling Company, a Division of Triad Drilling Company v.
         Westlands Resources Corporation, Daleco Resources Corporation and
         Tri-Coastal Energy, L.P., Cause No. 98-34542, In the 270th Judicial
         District Court of Harris County, Texas. On or about July 21, 1998,
         Southland Drilling Company ("Southland") commenced a lawsuit against
         the Company and its subsidiaries Westlands and Tri-Coastal. The lawsuit
         sought to recover the amount of $260,577.66 allegedly due and owing for
         work performed on the DRC GA #3 Well and the DRC VI #1 Well, Burleson
         County, Texas. The Company settled this matter by the filing of a Joint
         Motion for Entry of Agreed Judgement on December 1, 2000. Under the
         terms of the agreement, the Company is obligated to pay Southland
         $300,000 ("Settlement Amount") and has given a judgment note in that
         amount to Southland. The Company had 90 days from settlement in which
         to pay the note during which period Southland will forbear from taking
         any action. The Company failed to pay the Settlement Amount within the
         allotted 90 day period. As part of the Terra Silex Agreement, Terra
         Silex acquired the Southland Judgment from Southland and filed a
         release and satisfaction of the Southland Judgment.

         Kane v. Daleco Resources Corp., et. al. On or about January 14, 2000,
         Stanley B. Kane, et. al. commenced an action in the Superior Court, Los
         Angeles, California to enforce their right to have the Company
         repurchase 16,000 shares (stated value $50,000 purchase) of Series A,
         10% Cumulative Preferred Stock. The Plaintiffs had the right to put the
         stock to the Company on August 20, 1999, which they did. Although the
         Company continued to pay quarterly interest on the Series A Preferred
         Stock, it did not redeem the shares due to its lack of liquidity. Also
         named in the suit were Messrs. Dov Amir (a current officer and director
         of the Company) and Mr. Louis Erlich (who was an officer and director
         of the Company at the time of the issuance of the Series A Preferred
         Stock) who had given personal guaranties to the Plaintiffs.

         Mr. Amir satisfied his obligation under his guaranty to purchase
         one-half or 8,000 shares from the Plaintiffs. The Company entered into
         Stipulation for the Entry of Final Judgment and Judgment thereon as to
         Daleco Resources Corporation, pursuant to which the Company shall have
         until August 1, 2001 in which to redeem the remaining 8,000 shares for
         $400,000 plus accrued interest through the date of settlement at a rate
         of ten percent (10%) per annum. The Kanes have been granting the
         Company an extension of the August 1, 2001 date on a month to month
         basis.

         Mr. Erlich has filed a Cross Complaint against the Company for payment
         of his obligation under his guarantee.

                                      -16-

<PAGE>


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

                  The Private Securities Litigation Reform Act of 1995 (the
                  "Reform Act") provides a safe harbor for forward-looking
                  statements made by or on behalf of the Company. All
                  statements, other than statements of historical facts, which
                  address activities, events or developments that the Company
                  expects or anticipates will or may occur in the future,
                  including such things as the anticipated development of
                  revenues, acquisition of additional properties or the
                  obtaining of capital, business strategy, development trends in
                  the industry segments in which the Company is active,
                  expansion and growth of the Company's business and operations
                  and other such matters are forward-looking statements. To take
                  advantage of the safe harbor provisions provided by the Reform
                  Act, the Company is identifying certain factors that could
                  cause actual results to differ materially from those expressed
                  in any forward-looking statements, whether oral or written,
                  made by or on behalf of the Company. Many of these factors
                  have previously been identified in filings or statements made
                  by or on behalf of the Company.

                  All phases of the Company's operations are subject to
                  influences outside of the Company's control. Any one, or a
                  combination, of these factors could materially affect the
                  results of the Company's operations. These factors include:
                  competitive pressures, inflation, trade restrictions, interest
                  rate fluctuations and other capital market conditions,
                  weather, future and options trading in, and the availability
                  of natural resources and services from other sources.
                  Forward-looking statements are made by or on behalf of the
                  Company's knowledge of its business and the environment in
                  which it operates, but because of the factors listed above, as
                  well as other environmental factors over which the Company has
                  no control, actual results may differ from those in the
                  forward-looking statements. Consequently, all of the
                  forward-looking statements made are qualified in their
                  entirety by these cautionary statements and there can be no
                  assurance that the actual results or developments anticipated
                  by the Company will be realized or, even if substantially
                  realized, that they will have the expected effect on the
                  business and/or operations of the Company.

                  The Company's performance during its fiscal Quarter ended
                  March 31, 2001, was influenced by a variety of factors which
                  were beyond the control of management. These factors are
                  primarily the variablilty of the demand for and the pricing of
                  crude oil and natural gas with the Company's operating areas.
                  In addition the demand and pricing both domestically or
                  internationally for the Company's timber and industrial
                  minerals can have a impact on the Company's results.

                                      -17-
<PAGE>

                  Another factor that has played a significant roll during the
                  quarter is the restrictive conditions imposed by the project
                  financing and limited partnership structure which affects the
                  rate at which the company could develop its managed oil and
                  gas producing properties.

                  During the quarter ending March 31, 2001, the Company's energy
                  segment continued to play the primary role in the Company's
                  operations. The main reason for this focus was the further
                  increases in the price received by the Company for its oil and
                  natural gas sales. Consequently, the Company was able to
                  significantly increase its distributions to its third party
                  partners in its energy sector. The company continued the Clean
                  Age Mineral acquisition assimilation process during the
                  quarter. The efforts were expanded to include seeking
                  incremental investment capital for direct use in the
                  development of Clean Age's industrial mineral and
                  environmental technology assets. As of the quarter's end,
                  these efforts were ongoing but had not been successful. The
                  Company was able to "launch" its Natural Resources Exchange
                  internet site (WWW.B1S1.COM) during the quarter which
                  significantly enhanced the exposure of Clean Age's mineral
                  holding to the industrial market place.

                  The Company's emphasis on its South American timber activities
                  remained consistent with the prior quarter's. In general, the
                  impact of the higher oil and gas prices had a significant
                  financial impact on the Company's operating cash flows for the
                  quarter. This favorable was offset by the ongoing non-cash
                  generating corporate administrative activities required to
                  begin defining and positioning the Company's mineral and
                  timber subsidiaries for the future.


PART II. OTHER INFORMATION
         -----------------

ITEM 6            Exhibits and Reports on Form 8-K

                           None.

                                      -18-

<PAGE>



                                   SIGNATURES

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

                          DALECO RESOURCES CORPORATION



Date:  December 12, 2001                     /s/ Gary J. Novinskie
                                          ------------------------------------
                                          Gary J. Novinskie
                                          President


Date: December 12, 2001                      /s/ Dov Amir
                                          ------------------------------------
                                          Dov Amir
                                          Chief Executive Officer






















                                      -19-