<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 June 30, 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

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

 983 Old Eagle School Road, Suite 615
      Wayne, Pennsylvania 19087                           (610) 293-9400
-----------------------------------------           ---------------------------
(Address of Principal Executive Offices)             (Issuer's telephone number)

                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 July 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 Cash Flow.................................5
          Notes to Consolidated Financial Statements..........................6

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 JUNE 30, 2000 and 1999 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
                                                                                         2000                1999
<S>                                                                                  <C>                   <C>
ASSETS
Current Assets
     Cash and cash equivalents                                                     $    322,511        $    153,365
     Accounts receivable                                                                792,392             238,206
     Other                                                                               11,470              11,474
                                                                                   ------------        ------------
                  Total Current Assets                                                1,126,377             403,045
Oil and gas properties and equipment (note 3)                                         7,280,713           8,729,931
Property and equipment                                                                   27,633              32,632
Timber rights (note 4)                                                                  700,000             828,342
Mineral properties (note 5)                                                                  --                  --
Goodwill (note 15)                                                                           --                  --
Debt Issue Costs                                                                        172,815             222,815
                                                                                   ------------        ------------
                  Total Assets                                                     $  9,307,538        $ 10,216,765
                                                                                   ============        ============
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities                                           $  3,318,702        $  2,547,516
Current portion of long-term debt                                                     6,754,426             200,000
Notes payable other                                                                     452,092                  --
Due to related parties (note 7)                                                         586,984             463,039
                                                                                   ------------        ------------
                  Total Current Liabilities                                          11,112,204           3,210,555
Current debt (note 6 and 9)                                                                  --           6,285,054
Debentures (note 8)                                                                          --                  --
                  Total Liabilities                                                  11,112,204           9,495,609
                                                                                   ------------        ------------
Commitments and Contingencies (notes 7)
Shareholders' Equity
     3,102,574 (1998 - 2,926,788) Common Shares,                                         31,026              31,026
     par value $0.01 per share (note 10)
     16,000 Preferred Shares, par value $0.01 per share (note 6)                            160                 160
     Additional Paid in Capital                                                       14,430928          14,388,255
     Accumulated deficit                                                            (16,266,780)        (13,698,285)
                                                                                   ------------        ------------
                  Total Shareholders' Equity                                         (1,804,666)            721,156
                                                                                   ------------        ------------
                  Total Liabilities and Shareholders' Equity                          9,307,538          10,216,765
                                                                                   ============        ============
</TABLE>
                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                       -3-
<PAGE>

DALECO RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF LOSS FOR THE PERIODS
ENDED JUNE 30, 2000 and 1999 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
                                                         Three Months Ended                  Nine Months Ended
                                                        June 30,        June 30,           June 30,        June 30,
                                                          2000           1999                2000           1999
<S>                                                     <C>            <C>              <C>             <C>
Gross Oil and Gas Operating Revenue
Oil and Gas Sales                                      $ 699,136       $ 297,896         $1,885,835     $ 1,114,631
Less:    Lease Operating Expenses                        611,929         201,163          1,522,316         674,328
         Severance taxes                                  42,196           6,201            115,081          18,751
         Net Profits Interest and Related Expenses            --         102,401            (10,541)        504,650
         Depletion, Depreciation and Amortization         25,725          60,000             82,148         180,000
                                                       ---------       ---------         ----------     -----------
Net Income (Loss) from Oil and Gas Operations             19,725         (71,867)           176,831        (263,098)
                                                       ---------       ---------         ----------     -----------

Timber Revenues                                               --           5,541                 --          27,573
Timber Operating Costs                                        --          10,217                 --          59,657
                                                              --       ---------                 --     -----------
Net Loss From Timber Operations                               --          (4,678)                --         (32,084)
                                                                       ---------                        -----------

Management and Administrative Fee Revenues               113,786         130,454            353,842         406,743
Income from sale of properties                                --              --            878,685              --
Administration Expenses                                 (175,228)       (199,859)          (703,964)       (603,646)
Amortization of Debenture Issue Costs                         --         (50,000)                --        (150,000)
Financial Advisors Expense                                    --              --                 --              --
Amortization of Goodwill                                      --         (37,693)                 --       (237,693)
Interest expense                                         100,586        (172,058)         1,221,499        (515,814)
                                                       ---------       ---------         ----------     -----------
Net Income/(Loss) other activities                      (162,028)       (329,156)          (692,936)     (1,100,410)
                                                       ---------       ---------         ----------     -----------

NET Income/(Loss)                                       (142,742)      $(405,703)          (516,105)    $(1,395,592)
                                                       =========       =========         ==========    ============

PRIMARY AND FULLY Diluted NET (LOSS)
  PER COMMON SHARE                                     $   (0.05)      $   (0.13)        $    (0.17)    $     (0.45)
                                                       =========       =========         ==========     ===========
</TABLE>
                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                       -4-
<PAGE>

DALECO RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE PERIODS
ENDED JUNE 30, 2000 and 1999 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
                                                         Three Months Ended                  Nine Months Ended
                                                       June 30,       June 30,           June 30,       June 30,
                                                         2000           1999               2000           1999
<S>                                                  <C>             <C>                <C>           <C>
Operating Activities
Net Income/(Loss)                                     $(142,742)     $(405,703)         $(515,905)    $(1,395,592)
Items not affecting Working Capital:
Depletion, Depreciation, and Amortization                25,725        147,693             79,772         617,693
and Write-Downs
Gain/Loss on Sales of Properties                             --             --            878,685              --
Change in Other                                        (140,004)            --           (384,272)             --
                                                      ---------      ---------          ---------     -----------
                                                       (257,021)      (258,010)           (58,280)       (777,899)
Items affecting Working Capital:
(Increase) Decrease in Other Assets                      (7,206)            --            (11,470)             --
(Increase) Decrease in Receivables                     (283,308)       104,375           (348,276)        100,811
Increase (Decrease) in Accounts Payable                 379,312       (122,600)           147,395         668,901
                                                      ---------      ---------          ---------     -----------
                                                         88,798        (18,225)          (212,351)       (568,090)
Cash provided (used) for Operations                    (168,223)      (276,235)          (154,071)       (276,235)
                                                      ---------      ---------          ---------     -----------

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

Financing Activities
Increase in amounts due to Related Parties               49,473         17,200             98,445          29,210
Increase/(Decrease) amounts due Other Notes             178,699             --            232,092              --
Dividends Paid                                          (20,000)       (20,000)           (60,000)        (60,000)
Issuance of Common Stock                                     --             --                 --              --
Proceeds From Long-Term Debt                                 --             --                 --              --
                                                      ---------      ---------          ---------     -----------
Cash Provided From (used by) Financing Activities       208,172         (2,800)           270,537         (30,790)
                                                      ---------      ---------          ---------     -----------

NET INCREASE (DECREASE) IN CASH                          39,949       (279,035)           116,466         (38,977)
Cash - Beginning of Period                              282,562        432,400            206,045         192,342
                                                      ---------      ---------          ---------     -----------
Cash - End of Period                                    322,511      $ 153,365            322,511     $   153,365
                                                      =========      =========          =========     ===========
</TABLE>
                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                       -5-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED JUNE 30, 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 June 30, 2000 the Company has reported
   a loss of $142,742 for the quarter then ending and a loss of $516,105 for the
   nine-month period. The ability of the Company to meet these liabilities and
   total liabilities of $11.1 Million and to continue as a going concern is
   dependent upon the availability of future funding, the continued successful
   of its oil and gas operations (see Note 5), and achieving profitable timber
   operations (see Note 4) and consummation of its acquisition of Clean Age
   Minerals, Inc. (See Note 15)

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

                                      -6-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED JUNE 30, 2000 AND 1999 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

      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

                                      -7-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED JUNE 30, 2000 AND 1999 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

      net revenues from the sale of timber less operating and production
      expenses.

   g. Debt Issue Costs

      Debt issue costs as of June 30, 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.

                                      -8-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED JUNE 30, 2000 AND 1999 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

 3.      Oil and Gas and Equipment
<TABLE>
<CAPTION>
                                                                                2000                 1999
                                                                                ----                 ----
<S>                                                                               <C>                 <C>
Proven lease acreage costs                                                   $5,4299,995         $ 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                           4,690,697           4,043,531
                                                                             $ 7,280,713         $ 8,729,931
                                                                             ===========         ===========
</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 3,1995,1

   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, which has been recorded as timber
   rights.

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.
   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.

                                      -9-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED JUNE 30, 2000 AND 1999 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

   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
   16, 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%                          470,922           371,977
                                                      --------          --------
                                                      $561,984          $463,039
                                                      ========          ========

         The amounts due to Haly Corporation were eliminated through the
         acquisition of Haly as of September 30, 1997 (see Note 15). Amir and
         Erlich are officers and shareholders of the Company. These amounts have
         no fixed repayment terms.

8. Debentures
                                                  2000        1999

           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 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 (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.

                                      -10-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED JUNE 30, 2000 AND 1999 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

   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 June 30, 1999, $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 worldwide. 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

                                      -11-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED JUNE 30, 2000 AND 1999 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

       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>
                                                                      SHARES
                                                      ------------------------------------------
                                                       NUMBER OF COMMON      NUMBER OF PREFERRED
                                                      SHARES, PAR VALUE         SHARES PAR VALUE         DOLLAR
                                                        $0.01 PER SHARE          $0.01 PER SHARE         AMOUNT
Authorized                                                   20,000,000               10,000,000
                                                             ----------               ----------
<S>                                                             <C>                         <C>        <C>
Balance as at September 30,1997                               2,756,788                   16,000     14,086,131
                                                              =========                   ======    ===========
Issued for Professional Services Rendered                       194,900                       --        273,377
Fractional shares                                                  (46)
                                                              ---------
Balance as at September 30, 1998                              2,951,642                   16,000    $14,329,827
                                                              =========                   ======    ===========
Issued upon conversion of notes payable                         150,932                       --         59,938
                                                              ---------                   ------    -----------
Balance as of September 30, 1999                              3,102,574                   16,000     14,338,258
                                                              =========                   ======    ===========
Balance as of June 30, 2000                                   3,102,574                   16,000     14,338,258
                                                              =========                   ======    ===========
</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.

                                      -12-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED JUNE 30, 2000 AND 1999 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

    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:
<TABLE>
<CAPTION>
                                                      2000                1999
    ----------------------------------------------------------------------------------
<S>                                                         <C>                <C>
    Outstanding and Exercisable                            140,000
    at beginning of year                                                       35,000
    ----------------------------------------------------------------------------------
    Canceled                                                10,000             15,000
    ----------------------------------------------------------------------------------
    Granted                                                                   120,000
    ----------------------------------------------------------------------------------
    Exercised                                                                      --
                                                                              -------
    ----------------------------------------------------------------------------------
    Outstanding and Exercisable                            130,000            140,000
    at end of year                                         =======            =======
    ----------------------------------------------------------------------------------
</TABLE>
       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.

    b. Common Stock Warrants

       Common stock warrants outstanding at June 30, 2000, 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                        March 18, 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>
                                      -13-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED JUNE 30, 2000 AND 1999 - 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 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 that amounted to 3,102,574 for the period
       ended June 30, 2000. For the period ended June 30, 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.

11. 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.

12. 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

                                      -14-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED JUNE 30, 2000 AND 1999 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

    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 is 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.

13. 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
    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.

                                      -15-
<PAGE>

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

14. 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 10).

    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.

15. Subsequent Event

         In December 1999, the Company entered into a letter of intent to
    acquire 14,000,000 of the outstanding shares of Clean Age Minerals, Inc., a
    Nevada corporation ("CAMI") for 1.4 million shares of Series B 8% Cumulative
    Convertible Preferred Stock of the Company plus $600,000 for the remaining
    6,000,000 shares of CAMI common stock. The acquisition, in the form of a
    merger with a newly formed wholly owned subsidiary of the Company named
    Strategic Minerals, Inc., is anticipated to close during August 2000.

16. 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

                                      -16-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED JUNE 30, 2000 AND 1999 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

    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. The Company has been
    advised that the Plaintiffs and Mr. Erlich have agreed to resolve the
    Complaint. As part of this resolution, the Company has agreed to grant the
    Kane's warrants for 25,000 shares at an excise price of $2.50 per share,
    which will expire in August 2002.

17. Contingencies

    None.

18. Segmented Information

    Substantially all of the Company's operating activities are in oil and gas
    exploration and development in the United States which is considered to be
    the Company's domestic segment. In addition, the Company has a 100% owned
    subsidiary involved in the harvesting of timber Concessions in Guyana.

                                      -17-

<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 third fiscal Quarter ended June
         30, 2000, was influenced by a variety of factors:

              -Oil prices remained high, but the increase in revenues was
              consumed by payment of Heller debt. The Company, like most
              domestic independents, is unable to influence the price of oil.
              The announcements by OPEC of its intent to increase production and
              thus lower the price of oil on a worldwide basis should, if it

                                      -18-
<PAGE>

              occurs, would affect the Company through the resultant decrease in
              oil pricing.

              -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.

              -In December 2000, the Company entered into a letter of intent
              with Clean Age Minerals, Inc. ("CAMI") to acquire all of the
              outstanding capital stock of CAMI through a tax free transaction.
              CAMI, through its wholly owned subsidiaries, owns a patent on a
              process for the remediation of waste products and water and leases
              on deposits of zeolite, bentonite and calcium carbonate in the
              States of Texas, New Mexico and Utah. The transaction will be
              treated and recorded as an acquisition.

PART II. OTHER INFORMATION

ITEM 6 Exhibits and Reports on Form 8-K

       None.

                                      -19-
<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: August 15, 2000                  /s/ Gary J. Novinskie
                                           -------------------------------------
                                           Gary J. Novinskie
                                           President and Chief Financial Officer