<PAGE>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   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, 2000
                               --------------

( ) 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                                                               23-2860739
--------------------------------------------------------------         ---------------------------------------
(State or other jurisdiction of incorporation or organization)         (IRS Employer Identification Number)

983 Old Eagle School Road, Suite 615
Wayne, Pennsylvania 19087                                              (610) 293-9400
----------------------------------------------------------             ---------------------------------------
(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.

3,102,574 shares of common stock as of May 1, 2000


<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................................18

PART II OTHER INFORMATION

ITEM 6  Exhibits and Reports on Form 8-K...................................19

SIGNATURES.................................................................20



<PAGE>


DALECO RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2000 AND 1999 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>

                                                                                           2000                1999
<S>                                                                                <C>                  <C>
ASSETS
Current Assets
     Cash and cash equivalents                                                         $282,562            $432,400
     Accounts receivable                                                                509,084             342,581
     Other                                                                                4,264              11,474
                                                                                    -----------         -----------
                  Total Current Assets                                                 $795,910            $786,455

Oil and gas properties and equipment (note 3)                                         7,306,438           8,789,931
Property and equipment                                                                   27,633              32,632
Timber rights (note 4)                                                                  700,000             828,342
Mineral Properties (note 5)                                                                  --                  --
Goodwill (note 15)                                                                           --              37,693
Debt Issue Costs                                                                        172,815             272,815
                                                                                    -----------         -----------
                  Total Assets                                                      $ 9,002,796         $10,747,868
                                                                                    ===========         ===========
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities                                            $ 2,939,390          $2,670,118
Current portion of long-term debt                                                     6,675,727             200,000
Note Payables (note   )                                                                 452,092                  --
Due to related parties (note 7)                                                         537,511             445,839
                                                                                    -----------         -----------
                  Total Current Liabilities                                         $10,604,720          $3,315,957
Long-term debt (note 10)                                                                     --           6,285,054
Debentures (note 9)                                                                          --                  --
                                                                                    -----------         -----------
                  Total Liabilities                                                 $10,604,720          $9,601,011
                                                                                    -----------         -----------
Commitments and Contingencies (note 15 and 16)
Shareholders' Equity
     3,102,574 (1998--2,776,788) Common shares,
     par value $0.01 per share                                                          $31,027             $31,026
     16,000 Preferred Shares, par value $0.01 per share (note 7)                            160                 160
     Additional Paid in Capital                                                      14,430,928          14,388,255
     Accumulated deficit                                                            (16,064,039)        (13,272,584)
                                                                                    -----------         -----------
                  Total Shareholders' Equity                                        (1,641,924)           1,146,857
                                                                                    -----------         -----------
                  Total Liabilities and Shareholders' Equity                        $ 9,002,796         $10,747,868
                                                                                    ===========         ===========

</TABLE>

                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                      -3-
<PAGE>


DALECO RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF LOSS FOR THE PERIODS
ENDED MARCH 31, 2000 AND 1999 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>



                                                         Three Months Ended                  Six Months Ended

                                                        March 31,       March 31,          March 31,       March 31,
                                                          2000            1999               2000            1999
<S>                                                     <C>             <C>              <C>               <C>
Gross Oil and Gas Operating Revenue                     $616,770        $379,916         $1,186,699        $816,735
Less:    Lease Operating Expenses                        383,707         195,184            910,387         473,165
         Severance taxes                                  26,824           6,425             72,885          12,550
         Net Profits Interest and Related Expenses            --         167,043            (10,541)        402,249
         Depletion, depreciation and amortization         29,200          55,000             56,423         120,000
                                                        --------       ---------          ---------       ---------
Net Income (Loss) from Oil and Gas Operations            177,039         (43,736)           157,545        (191,229)
                                                        --------       ---------          ---------       ---------

Timber Revenues                                            --                 --                 --          22,032
Timber Operating Costs                                     --             21,867                 --          54,981
                                                        --------       ---------          ---------       ---------
Net Loss From Timber Operations                            --            (21,867)                --         (27,408)
                                                        --------       ---------          ---------       ---------

Other Activities
Management and Administrative Fees                       107,140         153,844            240,056         276,289
Income from sale of Properties                           408,765              --            878,685              --
Administration Expenses                                 (163,051)       (222,969)          (528,736)       (403,787)
Amortization of Debenture Issue Costs                         --         (50,000)              --          (100,000)
Amortization of Goodwill                                      --        (100,000)              --          (200,000)
Interest expense                                        (219,552)       (177,978)        (1,120,913)       (343,756)
                                                        --------       ---------          ---------       ---------
Net income (Loss) Other Activities                       133,302        (397,103)          (530,908)       (771,254)
                                                        --------       ---------          ---------       ---------

Net income (Loss) for Period                            $310,341       $(462,706)         $(373,363)      $(989,891)
                                                        ========       =========          =========       =========

PRIMARY AND FULLY Diluted NET (LOSS)
  PER COMMON SHARE                                         $0.10          $(0.14)            $(0.12)         $(0.32)
                                                           =====          ======             ======          ======
</TABLE>

                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                      -4-


<PAGE>


DALECO RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE PERIODS
ENDED March 31, 2000 AND 1999 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>

                                                                                 2000              1999
<S>                                                                        <C>               <C>
Deficit - Beginning of Period                                              $(16,374,380)     $(12,242,693)
Net Income (loss) for the period                                                310,341          (989,891)
Dividends on Preferred Stock                                                    (80,000)          (40,000)
                                                                           ------------      ------------
Deficit - End of Year                                                      $(16,144,039)     $(13,272,584)
                                                                           ============      ============


</TABLE>




                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                      -5-

<PAGE>


DALECO RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE PERIODS
ENDED MARCH 31, 2000 AND 1999 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>

                                                         Three Months Ended                  Six Months Ended

                                                       March 31,       March 31,          March 31,       March 31,
                                                          2000           1999                2000           1999
<S>                                                     <C>            <C>                <C>             <C.
Operating Activities
Net  Income (Loss)                                      $310,341       $(462,706)         $(373,163)      $(989,891)
Items not affecting Working Capital Depletion:
Depreciation, and Amortization and Write-Downs            29,200         205,000             56,423         470,000
                                                        --------        --------            -------        --------
                                                         339,541        (257,706)          (316,740)       (519,891)
Item affecting Working Capital Depletion:
(Increase) Decrease in Other Assets                          --               --              --                 --
(Increase) Decrease in Receivables                       (18,616)        (88,800)           (64,967)         (3,564)
Increase (Decrease) in Accounts Payable                 (132,871)        497,580           (247,037)        773,503
                                                        --------        --------            -------        --------
Cash provided (used) for Operations                      188,054         151,074           (628,744)        250,048
                                                        --------        --------            -------        --------

INVESTMENT ACTIVITIES
Leasing Acquisition and Well Costs Incurred                   --              --                 --              --
                                                        --------        --------            -------        --------
Cash provided from/(used for) Investing Activities            --              --                 --              --
                                                        --------        --------            -------        --------

Financing Activities
Increase in amounts due to Related Parties                37,972          12,010             48,972          30,010
Dividends Paid                                           (20,000)        (20,000)           (40,000)        (40,000)
Proceeds From Long-Term Debt                                  --              --                 --              --
                                                        --------        --------            -------        --------
Cash Provided From (used by) Financing Activities        (17,972)         (7,990)             8,972          (9,990)
                                                        --------        --------            -------        --------

NET INCREASE (DECREASE) IN CASH                          206,026         143,084              1,517         240,058
Cash - Beginning of Period                                 1,536         289,316            206,045         192,342
                                                        --------        --------            -------        --------
Cash - End of Period                                    $207,562        $432,400            207,562        $432,400
                                                        ========        ========            =======        ========
</TABLE>

                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                      -6-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2000 AND 1999 - 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 it assets. As of March 31, 2000 the
     Company has reported a gain of $133,302 of the three month period then
     ending and a loss of $528,736 for the six month period ending March
     31,2000. The ability of the Company to meet these liabilities and total
     liabilities of $ 10.6 Million and to continue as a going concern is
     dependent upon the availability of future funding, the successful
     completion of its drilling projects (see Note 5), achieving profitable
     timber operations (see Note 4) and consummation of its acquisition of Clean
     Age Minerals.

     As of the date of this report, certain of the Company's subsidiaries are in
     default relative to 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., and Haly
          Corp. 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.

     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 proven reserves are found are
          transferred to proven oil and gas properties. Each undeveloped lease

                                      -7-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2000 AND 1999 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

          with significant acquisition cost is reviewed periodically and a
          valuation allowance provided for any estimated decline in value.
          Capitalized costs of proven developed leases are charged to income on
          the units of production basis based upon total proved reserves. The
          capitalized costs of these proven 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 proven 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, 2000 AND 1999 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

     g. Debt Issue Costs

          Debt issue costs as of March 31, 2000 and 1999, represent those
          associated with the Heller Financial, Inc. loan (see Note 9) and will
          be amortized over a period of five years.

     h. Cash and Cash Equivalents

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

     I. Goodwill

          Goodwill associated with the acquisition of Deven Resources, Inc. is
          being amortized over a three (3) year period.

     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. The effect of the
          reverse stock split has been retroactively reflected in these
          financial statements. 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.


                                       -9-
<PAGE>
DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2000 AND 1999 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

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

                                                             2000                1999
                                                             ----                ----
<S>                                                        <C>                <C>
Proven lease acreage costs                                 5,429,995          $6,071,637

Proven undeveloped lease acreage costs                     1,745,810           1,906,220

Well costs                                                 4,795,605           4,795,605
                                                         -----------         -----------
                                                         $11,971,410         $12,773,462
Accumulated depletion, depreciation and amortization       4,664,972           3,983,531
                                                         -----------         -----------
                                                         $ 7,306,438         $ 8,789,931
                                                         ===========         ===========
</TABLE>


 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.

     The acquisition has been accounted for by the purchase method. The purchase
     price of $962,500 was determined based on the fair value of the 150,000
     common shares of Daleco given up to acquire Sustainable. The fair value of
     the net liabilities of Sustainable acquired was $65,842 resulting in
     consideration of approximately $1,028,500 that has been recorded as timber
     rights.

     During Fiscal 1997, the Company obtained funds to permit Sustainable to
     begin implementation of its business plan. (See Note 9).

 5. Mineral 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.

                                      -10-
<PAGE>
DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2000 AND 1999 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================


     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.

 6. 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.

     During fiscal 1996, the Company repaid $300,000 of the outstanding balance.
     During fiscal 1997, the remaining $800,000 was converted into 16,000 shares
     of 10% cumulative preferred stock, at $50.00 per share. The 160,000 shares
     were to have been repurchased by the Company as of August 22, 1999. (See
     Note 17, Litigation).

     During fiscal 1998, the Company borrowed $145,000 from four (4) persons.
     The debt was evidenced by Notes that 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. (See Note
     10(b)--Warrants).

 7. Due to (from) Related Parties
                                                         2000              1999
                                                         ----              ----
      Net due (from) to Amir and Erlich
               Bearing interest at prime +3%          $ 91,062          $ 91,062
               Bearing interest at 7%                  446,449           354,777
                                                      --------          --------
                                                      $537,511          $445,839
                                                      ========          ========

     The amounts due to Haly Corporation were eliminated through the acquisition
     of Haly as of September 30, 1997 (see Note 18). Amir and Erlich are
     officers and shareholders of the Company. These amounts have no fixed
     repayment terms.

 8. Debentures
                                                         2000          1999
                                                         ----          ----
                        8% Convertible Debentures      $30,000       $30,000
                                                       -------       -------

     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 12). 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


                                      -11-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2000 AND 1999 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================


          (July 30, 1996). The debentures are 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). As of September
          30, 1996, $600,000 of the 7% debentures had been converted into
          107,712 common shares. The remaining balance was converted into 80,579
          common shares during 1997.

     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 ($1 0.171875), or (2) 75% of
          the average closing bid price for the five trading days immediately
          preceding the date of conversion. As of March 31, 2000, $1,280,000 of
          the 8% debentures had been converted into 981,322 common shares.

 9.  Debt

     The debt of the Company consists of the following:

     a. Heller Financial, Inc.

          During the forth 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, re-complete 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. The amount outstanding under this
          arrangement as of March 31, 1999, was $5,835,054. 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.


                                      -12-
<PAGE>
DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2000 AND 1999 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

     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 remaining
          balance of this loan has been reclassified as current debt.

     c. PNC Bank Loan

          During the fourth quarter of fiscal 1998, Deven Resources, Inc.
          obtained a term loan of $300,000 with interest at prime plus 12%.
          Principal is due at $25,000 per quarter. The loan is secured by
          specific properties owned by Deven. This loan was paid off on December
          15, 1999 through the sale of Deven's Net Profits interests in certain
          properties in Armstrong and Fayette Counties, Pennsylvania.

     d. First Regional Bank

          As of December 31, 1997, 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 1999. The loan is secured by personal
          assets of an officer of the Company.

10. Capital Stock
<TABLE>
<CAPTION>



                                                               NUMBER OF COMMON SHARES,     NUMBER OF PREFERRED
                                                                     PAR VALUE                SHARES PAR VALUE
                                                                  $0.01 PER SHARE             $0.01 PER SHARE          AMOUNT
<S>                                                                <C>                          <C>                <C>
      Authorized                                                   20,000,000                   10,000,000
                                                                   ----------                   ----------

      Balance as at September 30, 1997                              2,756,988                                       $14,086,131
      Issued for Professional services rendered                       194,900                                           273,377
                                                                                                    16,000              800,000
                                                                                                    ------          -----------
      Shares cancelled due to cancellation of                             (46)
                                                                    =========
      Fractional Shares
      Balance as at September 30, 1998                              2,951,642                       16,000          $14,329,827
                                                                                                    -------         ===========
      Issued for Professional services rendered                       150,932
                                                                    =========
      Balance as at September 30, 1999                              3,102,574                       16,000           14,388,258
                                                                    =========                       ======           ==========
      Balance as of December 31, 1999                               3,102,574                       16,000           14,388,258
                                                                    =========                       ======           ==========
</TABLE>

                                      -13-
<PAGE>
DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2000 AND 1999 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

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.

     a. Common Stock Options

          In January 1995, the Company granted fully vested common stock
          purchase options expiring on January 6, 2000 for 85,000 common shares
          at $2.50 per share. On the same date, the common stock purchase
          options previously outstanding, which expired on September 5,1995 for
          35,670 common shares at $3.20 per share, were gifted back to the
          Company and canceled. The following summary sets out the activity in
          common stock purchase options:

                                                        1999            1998
--------------------------------------------------------------------------------
Outstanding and Exercisable
at beginning of year                                   35,000          700,000
--------------------------------------------------------------------------------
Canceled                                               15,000         (350,000)
--------------------------------------------------------------------------------
Granted                                               120,000               --
--------------------------------------------------------------------------------
Exercised                                                 --                --
                                                      ------            ------
--------------------------------------------------------------------------------
Outstanding and Exercisable
at end of year                                        140,000           35,000
                                                      =======           ======
--------------------------------------------------------------------------------


          In October 1995, the Financial Accounting Standards Board issued
          Statement of Financial Accounting Standards No. 123, Accounting for
          Stock-Based Compensation, (SFAS 123). SFAS 123 permits the Company's
          continued use of the intrinsic value based method prescribed by
          Accounting Principles Board Opinion No. 25 (APB 25). SFAS 123 requires
          additional disclosures, including proforma calculations of net
          earnings and earnings per share, as if the fair value method of
          accounting prescribed by SFAS 123 had been applied. The fair value of
          stock options and compensation cost are measured at the date of grant.

          The common stock purchase options were issued for past services at an
          exercise price of $2.50 per share when the underlying stock was at
          $2.245 per share. Had compensation cost been determined based on the
          fair value of the common stock purchase options using the provisions
          of SFAS 123, the Company's net loss and loss per share in 1995 would
          have increased by $161,500 and $0.10, respectively.

          For the proforma calculation, the fair value of each option on the
          date of grant was estimated using the Black-Scholes option pricing
          model and the following assumptions for awards in 1995: zero dividend
          yield expected volatility of 119.64%, risk -free interest rate of
          7.84%, and expected life of 5 years. Using these assumptions, the
          grant-date fair value per share of the options granted in 1995 was
          $1.80.

                                      -14-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2000 AND 1999 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

     b. Common Stock Warrants

          Common stock warrants outstanding at March 31, 1999, consist of the
          following:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
              Issuance                        Expiration Date                           Amount                  Price Per Share
----------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>                                       <C>                          <C>
Acquisition of Sustainable                  September 30, 2000                          50,000                          $3.50
----------------------------------------------------------------------------------------------------------------------------------
Consulting Agreements                         May 8, 2001 to                           160,000                          $3.50
                                              October 1, 2001
----------------------------------------------------------------------------------------------------------------------------------
Consulting Agreement                        September 30, 2001                          10,000                         $10.00
----------------------------------------------------------------------------------------------------------------------------------
8% Debenture Holders and                   September 11, 2001 to                       186,470                      $4.386 to
Placement Agents (I.)                          June 8, 2002                                                            $10.81
----------------------------------------------------------------------------------------------------------------------------------
$145,000 Loan                                November 20, 2003                         263,638                           $.55
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

     (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 of
          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: (1) each warrant may be exercised for one common
          share with an exercise price of $10.73, or (2) 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 3,102,574 for,
          the period ended March 31, 2000. For the period ended March 31, 2000
          and 1999 the exercise of the options and warrants outstanding as at
          year end did not have a dilutive effect on the net income per share.

                                      -15-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2000 AND 1999 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

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 $27
     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.

13. Employment Contracts and Commitments

     In connection with the acquisition of Sustainable and under Management
     Agreement dated April 17, 1995, the Company agreed to engage two key
     officers for a period of seven years ending April 17, 2002. The two key
     officers are entitled to a base salary of $75,000 plus additional incentive
     payments each based upon a percentage of net income of Sustainable. At the
     time of termination for any reason, the key officers are entitled to a
     severance payment equal to the total of the annual base salary plus
     additional annual incentive payments he is then receiving multiplied by the
     remaining years, or portions thereof, of the contract period. During fiscal
     1997, the Company reached a settlement with one of the officers in the
     total amount of $60,000 to be paid at $5,000 per month through February
     1998.

     In connection with the acquisition of Deven and under the Stock Purchase
     Agreement dated October 1,1996, the Company agrees that should certain
     Deven officers be involuntarily terminated, other than in response to the
     Deven Officer's gross negligence, willful misconduct, ineptitude or
     inability to perform the duties of his position, ("Involuntary Personnel
     Action") on or before September 30, 2001 ("Coverage Period"), the said
     Deven Officer who was the object of said Involuntary Personnel Action shall
     be entitled to receive a sum equal to 150% of the aggregate base salary
     plus the cash equivalent of all benefits for the period of time between the
     date of the Involuntary Personnel Action and the remaining portion of the
     Coverage Period ("Settlement Consideration").

     However, the Settlement Consideration shall not be less than two years
     severance even though the period between the Involuntary Personnel Action
     and the expiration of the Coverage Period be less than two years.

     The Company had two contracts with financial advisors during fiscal 1997.
     The first expired in May 1997; the second expired October 31, 1997. Neither
     contract was renewed.

14. Litigation Settlement

     In April 1997, the Company commenced an Adversary Action styled Daleco
     Resources Corporation v. Reserve Production Inc., Liquidating Trust and
     Leonard Pipkin, Trustee, in the United States Bankruptcy Court for the
     Eastern District of Texas, Tyler Division, Case No. 97-6036. The case was
     commenced to enforce the Company's rights under that certain Asset Purchase
     Agreement dated December 20, 1996 (Asset Purchase Agreement) as approved by
     the Bankruptcy Court on February 13, 1997. In the Adversary Action, the

<PAGE>
DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2000 AND 1999 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

     Company alleged that the defendants' had failed to meet their conditions to
     Closing under the Asset Purchase Agreement and were thus required to refund
     the Company's $100,000 Earnest Money Deposit and pay for the reworking of
     the Jody Well. Subsequent to the commencement of the Company's adversary
     action, a case was commenced in the United States District Court for the
     Eastern District of Texas, Tyler Division, styled Reserve Production
     Liquidating Trust v. Daleco Resources Corporation, Westlands Resources
     Corporation, David F. Lincoln, Gary J. Novinskie and C. Warren Trainor,
     C.A. No.: 6:97 CV 705 ("District Court Action"). The District Court Action
     was in essence a counter claim against the Company and three of is
     directors asserting matters, which should have been addressed in an answer
     to the Adversary Action. The Company filed a motion to dismiss the District
     Court Action; however, prior to ruling on the Company's Motion, the
     Adversary Action was resolved through Court mandated mediation. Under the
     terms of the settlement, the Company's Earnest Money Deposit was returned
     and the Reserve Production Inc., Liquidating Trust, Reserve Production
     Liquidating partnership, and Leonard Pipkin, trustee, were required to
     resolve all outstanding claims for the reworking of the Jody Well.

     The Company incurred $224,875 in costs to settle this litigation.

15. Acquisitions

     During fiscal 1997, the Company completed the acquisitions of Deven
     Resources, Inc. and Haly Corporation.

     All of the outstanding stock of Deven was acquired on October 1, 1996 in
     exchange for 2.6 million shares of Daleco stock plus $150,000 in cash. The
     market value of the stock was approximately $2.4 million. The acquisition
     was accounted for as a purchase resulting in oil and gas properties of $1.5
     million, goodwill of $1.25 million less liabilities assumed of $200,000.
     Deven receives an annual management fee of $200,000 from a partnership of
     which it has a 1% general partner interest.

     All of the outstanding stock of Haly, a related party, was acquired on
     September 30, 1997. Daleco issued 3 million shares of common stock to
     Messrs. Amir and Erlich along with $1,000 cash. In exchange, the Company
     received and retired 3 million shares of common stock owned by Haly along
     with interests in wells owned by Haly. The acquisition was accounted for as
     a purchase. The amounts due Haly were written off into common stock less
     the First Regional Bank loan assumed by Daleco (see Note 11).

     Mid Continent:
     -------------

          On March 27, 1998, but affective as of November 1, 1997, Tri-Coastal
     Energy acquired in the States of Kansas and Oklahoma consisting of 298
     wells, 6,409 gross and 4,828 net acres. The purchase price for the
     acquisition was $2,315,000. The purchase was funded by an Amendment to the
     Heller Transaction, which increased the Heller Transaction Loan Commitment
     to $19,000,000. An additional $2,294,397 was drawn down by Tri-Coastal at
     closing for development of the Mid-Continent properties. In January 2000,
     the majority of these properties were divested.

                                      -17-
<PAGE>
DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2000 AND 1999 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

16. Subsequent event

     On December 18, 1998, an unaffiliated company agreed to purchase 1,848,566
     shares of common stock for $9 Million. The Company has not yet received the
     proceeds on this sale and no stock has been issued. The Company is pursuing
     its options to seek performance under the terms of the stock purchase
     agreement, to include filing a complaint in Arbitration before the American
     Arbitration Association in Philadelphia, Pennsylvania under the contracts
     dispute resolution provisions.

17. Litigation

     On January 14, 2000, Daniel Kane individually and his Trustee and Stanley
     B. Kane individually and his Trustee commenced an action against Daleco
     Resources Corporation, Dov Amir an individual and Louis W. Erlich an
     individual to force the buyback provisions under the Loan Conversion
     Agreement dated August 22, 1997. Specifically the Complaint alleged that
     under the Loan Buyback Agreement, the Kanes conversion of $800,000 in debt
     to equity (See Note 6, Notes Payable) was due on or about August 22, 1999.
     Messrs. Amir and Erlich were sued in their capacity as individual
     guarantors under the obligation, each of whom was liable for repayment of
     one-half of the sum due and owing to the Plaintiffs by Daleco Resources
     Corporation. On or about February 2000, Mr. Amir satisfied his obligation
     to the Plaintiff's and was dismissed from the case. The case is currently
     active in the Superior Court in the Central District of California.


                                      -18-
<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, event 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 second fiscal Quarter ended March 31,
     2000, was influenced by a variety of factors:

         -Oil prices improved during the quarter, which resulted in a net gain
          from oil and gas operations. The Company, like most domestic
          independents, is unable to influence the price of oil. The
          announcements by OPEC of its intent to reduce production and thus
          increase the demand for oil on a worldwide basis should, if it occurs,
          materially benefit the Company through the resultant increase in oil
          pricing.

                                      -19-
<PAGE>


         -The Company's timber subsidiary, Sustainable Forest Industries
          continues to attempt to market Guyana woods domestically. To date,
          while there has been a tremendous interest shown in the potential for
          Guyana woods, especially in the railroad industry, no substantial
          contracts have been obtained.

         -On December 18, 1998, the Company entered into a contract with
          Infinite Networks Corporation whereby the Company agreed to sell 1,
          848,566 shares of common stock for $9 Million. This agreement has yet
          to be consummated. The Company is pursuing its options to seek
          performance under the terms of the stock purchase agreement.

         -The Company is investigating alternative funding sources to near term
          acquisition capital needs.

     With the end of the fiscal quarter ending March 31, 2000, several elements
     which will affect the Company's future economic performance improved. For
     example, the crude oil prices received throughout the Company's operating
     areas began to firm in response to output restriction put in place by the
     OPEC nations. Early indications are that the crude price gains experienced
     during the quarter will hold throughout the fiscal year. In addition,
     natural gas prices have risen significantly in response to market demand.
     These two price factors should stabilize the Company's overall cash flow
     and operating performance.


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

ITEM 6 Exhibits and Reports on Form 8-K

         None.



<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:  June 12, 2000                             /s/ Gary J. Novinskie
                                                 -----------------------
                                                 Gary J. Novinskie
                                                 President


Date:  June 12, 2000                             /s/ Edward J. Furman
                                                 -----------------------
                                                 Edward J. Furman
                                                 Chief Financial Officer



                                      -21-