<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, 2002
                               -------------

( )      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND
         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>
                           Nevada                                                       23-2860734
--------------------------------------------------------------         --------------------------------------------
(State or other jurisdiction of incorporation or organization)             (IRS Employer Identification Number)

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

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after distribution under a
plan confirmed by court.

                                                    Yes ___          No ___

                      APPLICABLE ONLY TO CORPORATE ISSUERS

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

Number of shares outstanding of the issuer's common stock as of June 30, 2002:
19,182,239
Number of shares outstanding of the issuer's Series A preferred stock as of June
30, 2002:  8,000.
Number of shares outstanding of the issuer's Series B preferred stock as of June
30, 2002: 375,000.


<PAGE>


                                      INDEX
<TABLE>
<CAPTION>

                                                                                                               PAGE
PART I   FINANCIAL INFORMATION

<S>  <C>                                                                                                         <C>
ITEM 1            FINANCIAL STATEMENTS (Unaudited)................................................................3
                  Consolidated Balance Sheets.....................................................................3
                  Consolidated Statements of Loss.................................................................5
                  Consolidated Statements of Deficit..............................................................6
                  Consolidated Statements of Cash Flow............................................................7
                  Notes to Consolidated Financial Statements......................................................8

ITEM 2            MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  CONDITION AND RESULTS OF OPERATIONS............................................................23

PART II           OTHER INFORMATION..............................................................................24

ITEM 2            Sale of Securities.............................................................................24

ITEM 6            Exhibits and Reports on Form 8-K...............................................................26

SIGNATURES        ...............................................................................................26

</TABLE>

                                      -2-
<PAGE>

<TABLE>
<CAPTION>

DALECO RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2002 AND 2001--PREPARED BY MANAGEMENT (UNAUDITED)
===================================================================================================================
                                                                                           2002             2001
<S>                                                                                      <C>               <C>
ASSETS
Current Assets
         Cash Accounts                                                                $   630,721       $    68,532
         C/Ds                                                                             132,743            75,000
         Account Receivables                                                              388,962           727,639
         Jib Receivables                                                                       --                --
         Prepaid Mineral Royalties (note 5c)                                              409,642                --
         Other Current Assets                                                               5,369            11,474
                                                                                      -----------       -----------
                                    Total Current Assets                              $ 1,567,437       $   882,645
Other Assets
         Investment in Mining Joint Venture                                           $        --       $        --
         Goodwill                                                                         813,357           813,357
         Accumulated Amortization Goodwill                                               (813,357)         (813,357)
                  Net Goodwill                                                                 --                --
         Debt Placement Costs                                                             584,815           584,815
         Accumulated Amortization                                                        (584,815)         (567,532)
                  Net Debt Placement Costs                                                     --            17,283
         Equity Placement Costs                                                                --                --
         Accumulated Amortization Equity Costs                                                 --                --
                  Net Equity Placement                                                         --                --
         Other Assets                                                                          --                --
                                    Total Other Assets                                $         0       $    17,283
                                                                                      ===========       ===========
Fixed Assets
         Oil and Gas Properties (note 3)                                              $12,607,950       $12,607,950
         Accumulated DD&A                                                              (6,027,950)       (5,682,330)
                  Net Oil and Gas Property                                              6,580,000         6,925,620
         Mineral Properties (note 5)                                                   12,609,100        12,609,100
         Accumulated DD&A                                                                      --                --
                  Net Mineral Property                                                 12,609,100        12,609,100
         Timber Properties (note 4)                                                     1,028,342         1,028,342
         Accumulated DD&A                                                              (1,028,342)         (953,342)
                  Net Timber Property                                                          --            75,000
         Technology/Patent Rights (note 6)                                              7,767,000         6,707,000
         Accumulated DD&A                                                              (1,208,148)         (435,000)
                  Net Tech./Patent Rights                                               6,558,852         6,272,000
         Property, Equipment, Furniture & Fixtures                                        514,749           485,648
         Accum. Depr (P, E, P & P)                                                       (472,105)         (140,878)
                  Net (P, E, P & P)                                                        42,644           344,770
         Leasehold Improvements                                                                --                --
         Accu. Amort. (Lease improvements)                                                     --                --
                  Net Lease Improvements                                                       --                --
                    Total Fixed Assets                                                $25,790,596       $26,226,490
                                                                                      ===========       ===========

                   Total Assets                                                       $27,358,033       $27,126,418
                                                                                      ===========       ===========
</TABLE>




                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                      -3-

<PAGE>

<TABLE>
<CAPTION>

DALECO RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2002 AND 2001--PREPARED BY MANAGEMENT (UNAUDITED)
===================================================================================================================
                                                                                           2002             2001
<S>                                                                                  <C>                <C>
LIABILITIES
Current Liabilities
         Trade A/P                                                                   $    721,982      $  2,006,495
         Notes Payable (note 7)                                                           112,543           132,543
         Note Due Related Pty. (note 8)                                                   688,946           551,946
         HFI Financing (note 10a)                                                       5,154,783         5,154,783
         Loans--1st Regional (note 10d)                                                   100,000           100,000
         CAMI Loans (Note 7c)                                                             514,881           514,881
         Sonata and Standard Energy Financing (notes 7b and 10b)                                0           307,092
         Accrued Interest Expense (notes 7(c), 8, 10a and 10b)                          2,148,265         2,298,212
         Accrued Dividend Expense (notes 11d and 16)                                    1,337,929           726,390
         Accrued Expense Reimbursements                                                    56,031            43,454
         Accrued Salary Expense                                                           170,595           120,595
                                    Total Current Liabilities                        $ 11,005,956      $ 11,956,391
                                                                                     ------------      ------------

         Long Term Debt                                                              $          0      $          0

                  Total Long Term Debt                                               $          0      $          0
                                                                                     ------------      ------------

                                    Total Liabilities                                $ 11,005,956      $ 11,956,391
                                                                                     ------------      ------------

EQUITY
         Beginning Retained Earnings                                                 $(19,743,005)     $(18,886,706)
         Current Period Income/(loss)                                                    (478,738)         (548,212)
         Add. Paid in Capital                                                          36,378,167        34,550,242
         Preferred Stock (note 11)                                                          3,830            20,178
         Common Stock                                                                     191,822            34,525
                                    Total Equity                                     $ 16,352,077      $ 15,170,027
                                                                                     ------------      ------------

                                    Total Liabilities and Equity                     $ 27,358,033      $ 27,126,418
                                                                                     ============      ============

</TABLE>

















                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                      -4-
<PAGE>

<TABLE>
<CAPTION>

DALECO RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF LOSS FOR THE PERIODS
ENDED JUNE 30, 2002 AND 2001--PREPARED BY MANAGEMENT (UNAUDITED)
====================================================================================================================
                                                             Three Months Ended              Nine Months Ended
                                                          June 30,        June 30,         June 30,       June 30,
                                                            2002            2001             2002           2001

<S>                                                     <C>               <C>             <C>           <C>
Revenue
         O&G Sales                                      $  303,629      $  577,456      $   786,980     $ 2,156,293
         N P I Receipts                                          0               0                0               0
         Royalty Receipts                                    4,074           7,701           12,604          23,510
         Timber Sales                                            0               0                0               0
         Mineral Sales                                           0               0                0               0
                  Total Operating Income                $  307,703      $  585,157      $   799,584     $ 2,179,803
                                                        ----------      ----------      -----------     -----------
         Interest Income                                         0               0                0               0
         Well Management                                    17,111          52,033           51,334         246,505
         Ptr. Management                                         0               0                0               0
         Other Income                                            0               0                0               0
                  Total Other Income                    $   17,111      $   52,033           51,334     $   246,505
                                                        ----------      ----------      -----------     -----------
                  Total Income                          $  324,814      $  637,190      $   850,918     $ 2,426,308
                                                        ==========      ==========      ===========     ===========
Expenses
         LOE--Oil and Gas                                  206,700          61,165          509,904         610,621
         LOE--Timber                                             0               0                0               0
         LOE--Minerals                                           0               0                0               0
         N P I Exp.                                              0               0                0               0
         Prod Tax                                           21,314          37,667           58,954         118,595
         DD&A (Fixed Assets)                               276,256         267,834        1,095,685         828,643
         Third Party Distributions                           3,500         415,986           39,767       1,115,002
                  Total Well Expense                    $  507,770      $  782,652      $ 1,704,310     $ 2,672,861
                                                        ----------      ----------      -----------     -----------
         Interest Expense                                   71,137         216,963          461,773         591,911

         General and Administrative Expenses               205,626         107,596          480,499         405,220
         Legal and Professional Fees                        13,182          57,762          187,567         118,808
         Financial Advisor Fees                                  0               0           30,000               0
         Shareholder Information                             5,837           3,148           23,413           6,296
         Amortization of Debt Costs                              0          17,281                0          51,843
         Amortization of Goodwill                                0               0                0               0
                  Total Expenses                        $  803,552      $1,185,402      $ 2,887,552     $ 3,846,939
                                                        ==========      ==========      ===========     ===========

                  Net Income (Loss)                     $ (478,738)     $ (548,212)     $(2,036,644)    $(1,420,631)
                                                        ==========      ==========      ===========     ===========

Primary Net Income (loss) per Common Share                  $(0.02)         $(0.16)         $(0.11)          $(0.41)

Fully Diluted Net Income (Loss) per Common Share            $(0.01)         $(0.02)         $(0.06)          $(0.06)
</TABLE>







                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                      -5-
<PAGE>

<TABLE>
<CAPTION>

DALECO RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF DEFICIT FOR THE PERIODS
ENDED JUNE 30, 2002 AND 2001--PREPARED BY MANAGEMENT (UNAUDITED)
====================================================================================================================
                                                                                   2002                     2001
<S>                                                                           <C>                      <C>
Deficit--Beginning of Period                                                  ($19,743,005)            ($18,886,706)
Net loss for the period                                                           (478,738)                (548,212)
Dividends on Preferred Stock                                                            --                       --
Deficit--End of Period                                                        ($20,221,742)            ($19,434,918)
                                                                              =============            =============

</TABLE>








































                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                      -6-

<PAGE>

<TABLE>
<CAPTION>

DALECO RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE PERIODS
ENDED JUNE 30, 2002 AND 2001--PREPARED BY MANAGEMENT (UNAUDITED)
===================================================================================================================
                                                                 Three Months Ended          Nine Months Ended
                                                                June 30,     June 30,      June 30,      June 30,
                                                                  2002         2001          2002          2001
<S>                                                           <C>           <C>          <C>           <C>
Operating Activities
Net loss for the period                                        $ (478,738)  $ (548,212)  $ (2,036,644) $ (1,420,631)
Items not affecting working capital
         Change in DD&A for period                             $  276,256   $  267,834   $  1,095,685  $    828,643
         Debt Amortization                                             --       17,281             --        51,843
         Amortization of Good Will                                     --           --             --            --
                                    Subtotal                   $  276,256   $  285,115   $  1,095,685  $   (880,486)
Items affecting Working Capital:
         (Increase) Decrease in other assets                   $       --   $       --   $    (18,274) $         --
         (Increase) Decrease in Pre-paid Royalties                     --           --             --            --
         (Increase) Decrease in Accounts Receivable               383,960     (183,955)        78,026        99,536
         Increase (Decrease) in Partnership Accrued
           Distributions                                               --           --             --            --
         Increase (Decrease) in Trade Payables                   (182,608)     677,047     (1,351,834)    1,214,913
         Increase (Decrease) in other Accrued Expenses             56,031           --         12,577            --
         Gain/(loss) on Sale of Properties                             --           --             --            --
                                    Subtotal                   $  257,383   $  493,092   $ (1,279,505) $  1,314,449
                                                               ----------   ----------   ------------  ------------

Cash provided (used) for operating activities                  $   54,901   $  229,995   $ (2,220,464) $    774,304
                                                               ----------   ----------   ------------  ------------

Investing Activities
         (Increase)/decrease in Investment in Subsidiaries     $  242,257   $       --   $     57,743  $         --
         Leasing, Acquisition and Well Costs Incurred                  --           --             --            --

Cash Provided from/(used for) Investing Activities             $  247,257   $       --   $     57,743  $         --

Financing Activities
         Increase/(decrease) Notes due Related Parties         $  137,000   $   16,274       $137,000  $     16,275
         Increase/(decrease) Other Notes due                      (20,000)          --       (281,549)           --
         Increase/(decrease) Accrued Interest                      (9,198)          --       (121,504)      362,244
         Increase/(decrease) Accrued Dividends                   (201,213)    (420,000)      (850,297)   (1,260,000)
         Dividends Paid                                           (10,000)          --        (20,000)           --
         Proceeds of Equity Issuance                              201,081       55,000      1,428,752        55,000
         Proceeds of L/T Debt                                          --           --             --            --
Cash provided from/(used for) financing activities                 97,670     (348,725)       292,402      (826,481)
Net Increase/(decrease) in cash for period                     $  394,828   $ (118,730)  $ (1,870,319) $    (52,177)
Cash and Cash Equivalents--Beginning of Period                 $  235,893   $  262,262   $  2,501,040  $    195,709
                                                               ----------   ----------   ------------  ------------
Cash and Cash Equivalents--End of Period                       $  630,721   $  143,532   $    630,721  $    143,532
                                                               ==========   ==========   ============  ============
                  Change in Cash FY                            $  394,828   $ (118,730)  $ (1,870,319) $    (52,177)
</TABLE>

                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                      -7-
<PAGE>



DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS
ENDED JUNE 30, 2002 AND 2001--PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================
1.       CONTINUED OPERATIONS

         The financial statements have been prepared on the basis of a going
         concern, which contemplates that the Company will be able to realize
         assets and discharge liabilities in the normal course of business.
         Accordingly, they do not give effect to adjustments that would be
         necessary should the Company be required to liquidate its assets. As of
         June 30, 2002, the Company has reported a loss of $ 478,738. The
         ability of the Company to meet its total liabilities of $11,005,956
         and to continue as a going concern is dependent upon the availability
         of future funding, achieving profitable timber operations and
         successful development of newly acquired mineral assets. On July 24,
         2002 ("Closing Date"), the Company entered into a $10,000,000 Equity
         Line of Credit Agreement with Cornell Capital Partners, L.P. ("CCP").
         As part of the transaction, the Company issued to CCP a two year
         convertible debenture in a face amount of $300,000. The debenture is
         convertible into common stock at a price equal to the lessor of 120% of
         the final bid price on the Closing Date or 80% of the average lowest
         three closing bid prices as reported by Bloomberg of the Company's
         common stock for the five trading days immediately preceding the date
         of the conversion. The equity line provides for the Company to draw
         down $75,000 per week over a three year period. Prior to commencing its
         draws under the Equity Line, the Company will be filing a registration
         statement on Form SB-2 with the Securities and Exchange Commission.

         The Company will continue to research and entertain project specific
         funding commitments and other capital funding alternatives if and as
         they become available.

         As of June 30, 2002, the Company and certain of it subsidiaries were in
         default of certain debt obligations (See Notes 7, 8 and 10(a) below).
         The holders of these instruments are working with the Company to
         achieve the ultimate extinguishment of the 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, Sustainable Forest Industries
                  Inc., Deven Resources, Inc., Tri-Coastal Energy, Inc., Clean
                  Age Minerals, Incorporated, CA Properties, Inc. and 16/6, Inc.
                  The Company's investments in oil and gas leases are accounted
                  for using proportionate consolidation whereby the Company's
                  prorata share of each of the assets, liabilities, revenues and
                  expenses of the investments are aggregated with those of the
                  Company in its financial statements. The Companies investments
                  in minerals are accounted for using purchasing accounting
                  methods.

                                      -8-

<PAGE>
DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS
ENDED JUNE 30, 2002 AND 2001--PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================
         c.       Oil and gas properties and equipment

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

                  Costs of exploratory wells found to be dry during the year
                  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
                  un-discounted 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. The Company
                  has not accrued any costs associated with the potential
                  abandonment and restoration of mineral extraction mine sites
                  to date. Any required site specific restoration cost accruals
                  will be made once mineral extraction is initiated.

                                      -9-

<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS
ENDED JUNE 30, 2002 AND 2001--PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================
         e.       Property and Equipment

                  Property and equipment are recorded at cost and depreciated
                  over the straight-line method over a period of five years. The
                  carrying value of property and equipment is impaired from time
                  to time in addition to typical depreciation charges based on
                  independent appraisals of the operational condition of the
                  specific unit of property and/or equipment.

         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.

         g.       Mineral Acquisition

                  The Company has recorded the acquisition of Clean Age
                  Minerals, Incorporated and associated mineral rights at cost.

         h.       Debt Issue Costs

                  Debt issue costs as of December 31, 1998, represent those
                  associated with the Heller Financial, Inc. loan (see Note 10)
                  and are being amortized over a period of five years. As of
                  March 31, 2002, all debt issuance costs had been fully
                  amortized.

         i.       Cash and Cash Equivalents

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

         j.       Fair Value of Financial Instruments

                  Cash and cash equivalents, receivables, and all liabilities
                  have fair values approximating carrying amounts, except for
                  the Heller Financial, Inc. loan 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. The
                  fair value of all debt is based on discounted cash flow
                  analysis.

         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 references 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.

                                      -10-

<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS
ENDED JUNE 30, 2002 AND 2001--PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================
3.       Oil and Gas and Equipment
<TABLE>
<CAPTION>

                                                                                    2002              2001
                                                                                    ----              ----

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

Proven undeveloped lease acreage costs                                         1,745,840         1,745,840

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

Accumulated depletion, depreciation and amortization                           6,087,950         5,682,330
                                                                             -----------       -----------
                                                                             $ 6,520,000       $ 6,925,620
                                                                             ===========       ===========
</TABLE>

         (a)      Sale of Oil and Gas Properties

                  $878,685 in cash was received from the sale of the Company's
                  coalbed methane properties in Alabama in December 1999 (First
                  Quarter of Fiscal 2000). The Company reported the depreciation
                  of these properties in its audited financial statements for
                  the fiscal year ending September 30, 1999, but could not
                  report the income until the net amounts were actually received
                  during fiscal year 2000.

                  On September 28, 2001, effective January 1, 2001, the
                  Company's sponsored partnership, Developing Energy Partners I,
                  L.P. sold all of its wells in Pennsylvania and West Virginia
                  for $3,250,000, of which $2,234,722 was received at closing
                  and 1,015,278 was attributed to production revenues collected
                  between January 1, 2001 and September 28, 2001.

                  Since the Company, as managing general partner, was
                  responsible for the receipt and distribution of all funds from
                  the sales of these assets, 100% of the proceeds were
                  tabulated as part of the gross revenues of the Company on its
                  financial statements for the relevant periods. As indicated on
                  those statements, net funds attributable to the limited
                  partners of Developing Energy Partners I, L.P. were shown as
                  both a line item, "Third Party Distributions", and within the
                  appropriate notes to those financial statements.

                  On or about July 31, 2002 but effective as of July 1, 2002,
                  the Company sold all of its oil and gas properties in Pontotoc
                  County, Oklahoma, consisting of 11 gross wells and 1.08 net
                  wells, to the operator. These properties were marginal
                  properties and wells with the revenues from production being
                  just slightly above lease operating costs. Since these
                  properties were part of the collateral for the Heller Loan
                  (See Note 10(a)), all the proceeds from the sale went to
                  Heller.

                                      -11-

<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS
ENDED JUNE 30, 2002 AND 2001--PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================
 4.      Timber Rights Acquisition

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

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

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

         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 the Company given 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. To reflect adjustments to the carry
         value of these assets, the Company has taken charges accumulating
         $1,028,500 as of September 30, 2001.

         The Company has maintained its concession rights since the inception of
         timber operations in 1997.

 5.      Mineral Properties

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

                  CAP owns or has under long-term lease: (a) 5,200 acres(+/-) in
                  Marfa, Presidio County, Texas, containing high grade zeolite;
                  (b) 5,020 acres(+/-) of calcium carbonate deposits located in
                  the Oro Grande area, Cibola County, New Mexico; (c) five (5)
                  mining claims located in Sierra County, New Mexico covering
                  800 acres(+/-) of kaolin; (d) seventeen (17) mining claims
                  covering 1360 acres (+/-) in Grant County, New Mexico
                  containing perlite (note: The perlite property title rights
                  associated with the perlite claims are being disputed and may
                  have an adverse impact on the Company's ability to the
                  extraction of these minerals); and (e) eleven (11) zeolite
                  mining claims covering approximately 220 acres(+/-) located in
                  Beaver County, Utah.

                                      -12-

<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS
ENDED JUNE 30, 2002 AND 2001--PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

         b.       Minerals and Equipment
                                                      2002                2001
         Proven undeveloped lease costs        $12,609,100         $12,609,100
         Mine development costs                         --                  --
         Accumulated depletion and                      --                  --
         Depreciation
                                               $12,609,100         $12,609,100
                                               -----------         -----------

         c.       Prepaid Royalties.

                  The Company receives a credit in the nature of "prepaid
                  royalties" for rents paid on the Marfa Zeolite Lease, Presidio
                  County, Texas, and a portion of the New Mexico Oro Grande
                  Limestone Lease in Cibola County, New Mexico.

 6.      Patents & Technology

         As part of the acquisition of Clean Age Minerals, Inc. (See Note 6(a)
         above), the Company also acquired U.S. Patent No: 5387738. This patent,
         owned by Clean Age Minerals, Inc. (previously owned by Matrix-Loc, Inc.
         which was acquired by Clean Age Minerals, Inc. as a result of
         Matrix-Loc's merger with Clean Age Minerals as of March 18, 2002),
         deals with a reagent and process for the remediation of water and
         contaminated soils. The Company's subsidiary 16/6, Inc. has applied for
         a patent on its I(2)Technology. (Patent Pending #09/659641) This patent
         application covers the ability to extract certain text documentation
         from existing published documents.

 7.      Notes Payable

         a.       During the year ended September 30, 1995, the Company received
                  $1,100,000 in return for two notes payable, with the producing
                  wells of the Company used as collateral. Interest of 10% per
                  annum was due monthly. In fiscal 1996, the Company repaid
                  $300,000 of the outstanding balance. In fiscal 1997, the
                  remaining $800,000 was converted into 16,000 shares of 10%
                  cumulative preferred stock, at $50.00 per share ("Series A
                  Preferred Stock"). The Series A Preferred Stock was subject to
                  a put on August 20, 1999. The holders of the Series A
                  Preferred Stock filed a lawsuit in the Los Angeles Superior
                  Court, California against the Company, as well as Mr. Amir and
                  Mr. Erlich as guarantors. Mr. Amir satisfied his obligation
                  under his guarantee and purchased one-half, or 8,000 shares of
                  the Series A Preferred Stock, of the 16,000 shares of the
                  Series A Preferred Stock owned by the Kanes.. The Company and
                  Mr. Erlich entered into a Stipulation for the Entry of
                  Judgment granting the Company until August 1, 2001 in which to
                  satisfy the put for the remaining 8,000 shares of Series A
                  Preferred Stock plus accumulated interest. (See Litigation
                  Note 14). Mr. Amir converted his Series A Preferred shares
                  into 408,163 shares of Company common stock. A portion of the
                  dividends due Mr. Amir on the Series A Preferred Stock was
                  paid to Mr. Amir in the third quarter of fiscal 2002. (See
                  Note 8(a)).

         b.       During  fiscal 1998, the Company  borrowed $145,000 from four
                  (4) persons. The debt was evidenced by Notes which matured on
                  November 21, 1998. The Notes earned interest at 2% over the
                  prime rate charged by the Huntington National Bank of

                                      -13-

<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS
ENDED JUNE 30, 2002 AND 2001--PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================
                  Columbus, Ohio, through the maturity date, and 18% thereafter.
                  The Noteholders were also given warrants. (See Note
                  11(b)--Warrants) $75,000 in principal amount plus accrued
                  interest due to Sonata Investment Company, Ltd. ("Sonata") was
                  paid to Sonata on November 30, 2001. On June 7, 2002, Mr.
                  Lincoln converted his Note in the amount of $20,000, plus
                  accrued and unpaid interest of $13,528.17, into 49,818 shares
                  of common stock. The debt was converted at a price of $.673
                  per share which represented the average of the bid and closing
                  prices for the five day period prior to the conversion.
                  Presently, only two of the 4 Notes comprising $50,000, in the
                  aggregate, of the original $145,000 remain outstanding On
                  August 1, 2001, the Company borrowed $42,000 from Standard
                  Energy Company. This loan earned interest at 2% per annum. The
                  Standard Energy Company loan was satisfied on November 30,
                  2001. As of June 30, 2002, only two of the original four (4)
                  notes each in the face amount of $25,000, remain outstanding.

         c.       Pursuant to Paragraph 5.1 of the Agreement and Plan of Merger
                  by and among Clean Age Minerals, Incorporated ("CAMI") and
                  Strategic Minerals, Inc. ("SMI") and the Company dated
                  September 19, 2000, obligations of CAMI to certain officers,
                  directors and third parties were to have been satisfied by SMI
                  or the Company within one (1) year of the merger. The
                  indebtedness totaled (including the Martin Debt as defined in
                  Note 8(b) below) $514,881 and was evidenced by Notes dated
                  September 19, 2000. The Notes were due and payable on or
                  before September 18, 2001 and provide for interest at the rate
                  of 8% per annum. These Notes remain outstanding. As of June
                  30, 2002, the total amount payable on these notes is $586,979
                  representing principal of $514,881 and accrued but unpaid
                  interest of $72,098.

8.       Due to (from) Related Parties

         (a)      Due to (from) Amir.

                  Mr. Amir has entered into four (4) Notes with the Company as
                  follows:

                  (1)      Note dated October 1, 1995, bearing interest at the
                           rate of prime plus 3 percent in the principal amount
                           of $91,062.00.

                  (2)      Note dated October 1, 1995 bearing interest at the
                           rate of 7% in the principal amount of $435,884;

                  (3)      Note dated July 20, 1998 in the face amount of
                           $25,000 (See Note 7(b)) bearing interest at the rate
                           of 2% over the prime rate charged by the Huntington
                           National Bank of Columbus, Ohio, through the maturity
                           date, November 21, 1998 and 18% thereafter

                  (4)      Note dated June 17, 2002 bearing interest at the rate
                           of 7% in the principal amount of $137,000.

                           As of June 30, 2002, the outstanding principal and
                           accrued but unpaid interest on the obligations listed
                           under numbers 1 through 4 to Mr. Amir amounted to
                           $699,763.

                                      -14-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS
ENDED JUNE 30, 2002 AND 2001--PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================
         Mr. Amir was also entitled to payment of $25,000 under his Key Man
         Contract on June 30, 2002.  (See Note 13(b)).

         Prior to conversion of his Series A Preferred Stock into common stock,
         Mr. Amir was entitled to have received dividends in the amount of
         $91,550.72 of which $59,337.72 remains outstanding (See Note 7(a)).

         As of June 30, 2002, the Company owed Mr. Amir $11,762.41 in
         unreimbursed expenses and $16,667 in accrued but unpaid salary.

         During 2002, the Company paid Mr. Amir $170,000 in partial payment of
         the accrued and unpaid interest on his notes, unreimbursed expenses and
         dividends attributable to the Class A Preferred Stock. These payments
         have been reflected in the current and prior quarterly statements. Mr.
         Amir subsequently advanced the Company an additional $137,000 (see
         8(a)(.4). above).

         As of June 30, 2002, the Company was indebted to Mr. Amir in the amount
         of $812,531.

         (b)      By virtue of the merger of Clean Age Minerals, Incorporated
                  ("CAMI") with Strategic Minerals, Inc. on September 19, 2000,
                  Strategic Minerals, Inc. assumed the obligation of CAMI to Mr.
                  Robert E. Martin in the amount of $134,811 ("Martin Debt").
                  The Martin Debt was to have been satisfied on or before
                  September 18, 2001 but was not and remains outstanding. As of
                  June 30, 2002, the Martin Debt amounts to $153,593
                  representing $134,811 in principal and $ 18,782 in accrued but
                  unpaid interest. The Martin Debt is evidenced by a Note
                  providing for an annual rate of interest of 8%.

         (c)      Novinskie Debt. Under the terms of Mr. Novinskie's employment
                  agreement (See Note 13(b)), Mr. Novinskie was to have received
                  a cash bonus of $25,000 as of June 30, 2002. This bonus was
                  not paid. As of June 30, 2002, the Company owed Mr. Novinskie
                  $38,120 in unreimbursed expenses and $16,667 in accrued but
                  unpaid salary and $25,000 in accrued and unpaid bonuses (as
                  discussed previously).

 9.      Debentures

                                                           2002             2001
                                                           ----             ----

                  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 (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 December 31, 1996, $600,000 of the 7%
                  debentures had been converted into 107,712 common shares. The
                  remaining balance was converted into 132,916 common shares
                  during 1997.

                                      -15-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS
ENDED JUNE 30, 2002 AND 2001--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 ($10.171875), or (2) 75% of the average
                  closing bid price for the five trading days immediately
                  preceding the date of conversion. As of June 30, 2000,
                  $1,280,000 of the 8% debentures had been converted into
                  981,322 common shares.

 10.     Long-Term Debt

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

         a.       Heller Financial, Inc.

                  In August 1997, the Company entered into an arrangement with
                  Heller Financial, Inc. ("Heller") whereby Heller 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 Energy, Inc. The amount outstanding (principle and
                  accrued interest) under this arrangement as of June 30, 2002
                  and 2001, was $6,982,954 and $7,017,390, respectively.
                  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 attributable to
                  the decrease in worldwide prices for oil. As a result, the
                  full amount of the Heller Loan has been reclassified as
                  current debt. With the recovery of oil prices, the Heller Loan
                  has come back into compliance, However, Heller has not
                  rescinded its default notice. The obligations to Heller are
                  non-recourse to the Company and payable solely out of the oil
                  and properties pledged to Heller as collateral.

         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 remained outstanding as of December 31, 2000.
                  Sustainable had the right to request an additional $250,000
                  prior to December 31, 1999, which was not exercised. The
                  Company and Westlands were guarantors of the loan with

                                      -16-

<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS
ENDED JUNE 30, 2002 AND 2001--PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================
                  Westland's (now Tri-Coastal Energy, L.P.) wells being pledged
                  as collateral, subordinated to the Heller Financing. The loan
                  was to have been 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 received a profits
                  participation of 25% of the net profits of Sustainable while
                  the loan was outstanding and 20% after the loan is repaid
                  (after payout). While the obligations were outstanding, Sonata
                  sought and the Company agreed to grant Sonata additional
                  collateral to secure its loan in the nature of a security
                  interest in the Patent then owned by Matrix-Loc and the
                  mineral leases owned by subsidiaries of CAMI. The totality of
                  the Sonata debt, plus all accrued and unpaid interest was
                  satisfied on November 30, 2001, and all collateral for the
                  loan was released.

         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 was due at $25,000 per quarter. The loan
                  was 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

                  In September, 1998, the Company assumed a $100,000 loan with
                  First Regional Bank when it acquired Haly Corporation.
                  Interest is at 6.9% and the loan matures December 12, 2002.
                  The loan is secured by personal assets of an officer of the
                  Company.



                                      -17-

<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS
ENDED JUNE 30, 2002 AND 2001--PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================
11.     Capital Stock
<TABLE>
<CAPTION>
                                                                                                          NUMBER OF
                                                                                                           SERIES B
                                                                               NUMBER OF SERIES           PREFERRED
                                                  NUMBER OF COMMON                  A PREFERRED          SHARES PAR
                                                 SHARES, PAR VALUE             SHARES PAR VALUE         VALUE $0.01
                                                   $0.01 PER SHARE          $0.01 PER SHARE (1)       PER SHARE (1)
                                                 -----------------          -------------------       -------------

<S>                <C> <C>                               <C>                             <C>              <C>
Balance as of June 30, 2001                              3,452,574                       16,000           2,001,800
Issued pursuant to the Terra Silex                         817,728
Agreement
Issued for the acquisition of 16/6, Inc.                 1,000,000
Issued for development of Natural                          300,000
Resource Exchange
Issuance to Kanes                                           50,000
Issuance to SCOA                                           640,000
Issuance on conversion of Series A                         408,163                       (8,000)
Preferred Stock
Issuance on the conversion of                           12,513,774                                       (1,626,800)
Series B Preferred
Balance as of June 30, 2002                             19,182,239                        8,000             375,000
</TABLE>


 (1) On February 28, 2002, the Shareholders approved an amendment to the
     Articles of Incorporation of the Company, providing for an increase in the
     authorized common stock of the Company from 20,000,000 shares to 50,000,000
     shares of Common Stock. The Shareholders also approved the change of the
     Company's state of incorporation from Delaware to Nevada. This was effected
     through the merger of Daleco Resources Corporation, a Delaware corporation
     ("Old Daleco") with and into Daleco Resources Corporation of Nevada, a
     Nevada corporation ("New Daleco"). The merger was consummated as of March
     26, 2002. The Articles of Incorporation of New Daleco provide for
     authorized capital stock of 50,000,000 shares of common stock, par value
     $0.01 and 20,000,000 shares of preferred stock, par value $0.01.


                                      -18-

<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS
ENDED JUNE 30, 2002 AND 2001--PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================
         a.       Common Stock Options
<TABLE>
<CAPTION>
                                                                       2002                  2001
                                                                       ----                  ----
<S>                                                               <C>                  <C>
                  Outstanding and Exercisable (3)
                   at beginning of period                         6,110,000             3,610,000

                  Canceled                                         (414,384)             (125,000)

                  Granted                                                --             2,500,000

                  Reclassified(1)                                   (85,616)                   --

                  Exercised                                              --                    --

                  Outstanding and Exercisable (2)
                   at end of period                               5,610,000             6,110,000
                                                                  ---------             ---------
</TABLE>

                           (1) These shares were reclassified as a grant under
                  the Key Man Contracts with Mr. Amir and Mr. Novinskie.
                  Previously they were included as options. The exact amount of
                  the grant was not determinable until June 30, 2002 when the
                  exercise price of the $25,000 portion of the $50,000 Key Man
                  Contract bonus was to be paid to Mr. Novinskie and Mr. Amir in
                  common stock.

                           (2) Of the 5,610,000 options outstanding, 5,110,000
                  are held by current officers, directors and employees of the
                  Company. The exercise price for the options held by insiders
                  range from $0.25 per share to $2.19 per share.

                           On November 16, 2001, the Company entered into Key
                  Man Employment Contracts with Mr. Dov Amir, Chairman of the
                  Board of Directors and Chief Executive Officer of the Company,
                  Mr. Gary J. Novinskie, President and Chief Operating Officer
                  of the Company, and Mr. Robert E. Martin, a Director of the
                  Company and President of Clean Age Minerals, Inc. (previously
                  Strategic Minerals, Inc., see merger discussion). Under the
                  employment agreements (see Note 13 below), Messrs. Amir and
                  Novinskie were granted options for 500,000 shares of common
                  stock and Mr. Martin was granted options for 1,000,000 shares
                  of common stock. All these options expire on the third
                  anniversary of the vesting of the options or two years after
                  the key man ceases to be an employee of the Company. The
                  exercise price for Mr. Martin's options are priced at $1.08
                  per share, 90% of the average closing price for the common
                  stock for the five business days prior to October 1, 2001. The
                  exercise price for Messrs. Amir's and Novinskie's options is
                  90% of the average closing price for the common stock at the
                  close of business for the five trading days immediately
                  preceding June 30, 2002. The exercise price was determined to
                  be $0.526 per share Mr. Amir and Mr. Novinskie received a
                  signing bonus under the Key Man Contracts of $50,000, $25,000
                  of which is to be paid in common stock on or before June 30,
                  2002, at a price equal to the average closing price for the
                  common stock for the five business days preceding the date of
                  issuance. Mr. Amir and Mr. Novinskie were each awarded 42,808
                  shares under this grant.

                           On September 11, 2000 the Board of Directors of the
                  Company granted options for 3,500,000 shares of common stock
                  to three directors, one officer and one employee of the
                  Company. Messrs. Amir, and Novinskie, officers and directors
                  of the Company, were each awarded options for 1,000,000


                                      -19-

<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS
ENDED JUNE 30, 2002 AND 2001--PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================
                  shares. Ms. Spencer the Secretary of the Company was granted
                  an option for 250,000 shares and an employee, Mr. Payne, the
                  Controller, was awarded an option for 250,000. Mr. Trainor, a
                  director, was awarded options for 1,000,000. Mr. Trainor's
                  options were transferred to his law firm in accordance with
                  his firm's policies. Subsequently, Mr. Trainor's law firm
                  assigned options to him for 500,000 of the 1,000,000
                  originally granted. The 3,500,000 options are exercisable at a
                  price of $.25 per share which was above the fair market value
                  of the Company's stock at the time of issue. The options were
                  granted for service and dedication to the Company to the
                  recipients who, while not being currently paid or paid at a
                  wage scale substantially below market, continued to work for
                  the benefit of the Company and the shareholders. These options
                  vested upon their grant.

                           (3) The Company accounts for all stock-based
                  compensation (options) in accordance with the Financial
                  Accounting Standard Boards Statement of Financial Accounting
                  Standards No. 123 (SFAS 123). SFAS 123 permits the Company's
                  use of the intrinsic value method prescribed by Accounting
                  Principles Board Opinion No. 25. Under SFAS 123, the fair
                  value of stock options and compensation costs are measured as
                  of the grant date.


         b.       Common Stock Warrants

                  Common Stock warrants outstanding at June 30, 2002, consist of
                  the following(1):

<TABLE>
<CAPTION>
                                                                                                    Price Per
     Issuance                                Expiration Date               Amount (1)                 Share
     --------                                ---------------               ----------                 -----
<S>                                        <C>                              <C>                 <C>
Financing Sources(2)                       August 10, 2002 to                                       $0.55 to
                                            November 20, 2005                724,579                  $2.50

Terra Silex Warrant(3)                      December 31, 2006                250,000                  $1.25

SCOA Warrants(4)                            November 15, 2006               2,240,000            $2.00 to $3.00
</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.

                           On June 8, 2002, warrants for 65,500 shares with an
                           exercise price of $10.81 per share expired. Those
                           warrants were issued as part of the Company's
                           issuance of 8% convertible debentures in 1996. With
                           the expiration of these warrants, no warrants remain
                           outstanding from the issuance of the 8% convertible
                           debentures.


                  (2)      Financing Sources

                           On July 21, 1998, a total of 263,638 warrants
                           expiring on November 20, 2005 were granted to four
                           persons who loaned the Company a total of $145,000 in
                           July 1998. (See Note 7b). The warrants may be
                           exercised at any time before the expiration date at
                           an exercise price of $0.55. On August 9, 2001, the
                           expiration date for a total of 25,000 warrants was
                           extend to August 10, 2002 for warrants previously
                           granted (August 26,1997) to Kane interests as
                           consideration for extending the time period on the
                           redemption of their remaining Class "A" Preferred
                           Shares. The exercise price of the "Kane Warrants" at
                           any time before the expiration date is $2.50.

                                      -20-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS
ENDED JUNE 30, 2002 AND 2001--PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================
                                    On November 28, 2001, a total of 435,941
                           warrants to purchase common stock were granted to
                           Sonata Investment Ltd (warrants for 395, 273 shares
                           of common stock ("Sonata Warrant")) and Standard
                           Energy (warrants for 40, 668 shares of common stock
                           ("Standard Warrant")) as consideration for entering
                           into the Loan Conversion Agreement dated August 1,
                           2001. The Loan Conversion Agreement extended the date
                           by which the Company had to satisfy its obligations
                           to both Sonata Investment Company, Ltd. ("Sonata")
                           (See Note 10(b)) and Standard Energy Company
                           ("Standard") and granted both Sonata and Standard the
                           right to convert the debt into common stock of the
                           Company at such time as the Company advised Sonata
                           and Standard of its intent to satisfy the Company's
                           obligations to one or both entities. Sonata and
                           Standard are affiliated entities. The exercise price
                           was fixed at $1.05. The Sonata and Standard Warrants
                           were to have expired August 1, 2002. However, the
                           Company agreed to extend the termination date of the
                           Sonata and Standard Warrants until July 31, 2004 in
                           exchange for Sonata's relinquishing its twenty
                           percent (20%) interest in the net profits of the
                           Company's subsidiary Sustainable Forest Industries,
                           Inc. (See Note 10(b))

                           (3) Terra Silex Warrant Under a Stock Purchase
                           Agreement dated September 11, 2001 by and among the
                           Company and Terra Silex Holding, LLC, Terra Silex was
                           granted a warrant for 250,000 shares ("Terra Silex
                           Warrant") at an exercise price of $1.25 The Terra
                           Silex Warrant expires on December 31, 2006.

                           (4) Sumitomo Warrants: Under a Stock Purchase
                           Agreement by and among Sumitomo Corporation of
                           America ("SCOA") and the Company dated as of November
                           16, 2001, SCOA was granted warrants for 1,700,000
                           shares of common stock with a five (5) year term at
                           exercise prices ranging from $2.00 per share for the
                           first 850,000 shares, $2.50 per share for the next
                           510,000 shares and $3.00 per share for the remaining
                           340,000 shares. The Company and SCOA also entered
                           into a Master Distribution and Marketing Agreement
                           dated as of November 16, 2001 under which SCOA was
                           granted warrants for 540,000 shares. These warrants
                           have a five (5) year term and have an exercise price
                           of $2.00 per share for the first 108,000 shares,
                           $2.50 pen share for the next 162,000 shares and $3.00
                           per share for the remaining 270,000 shares.

         c.       Net Income Per Share. Net income per share was calculated on
                  the primary basis of the weighted average number of common
                  shares outstanding which amounted to 19,182,239 for the period
                  ended June 30, 2002 (2001 -- 3,452,574). For the periods
                  ending June 30, 2002 and 2001, the exercise of the options and
                  warrants outstanding as at year end did not have a dilutive
                  effect on the net income per share.

                                      -21-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS
ENDED JUNE 30, 2002 AND 2001--PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================
         d.       Payment of Accrued Dividends.

                  $603,024 of accrued dividends attributable to the 8%
                  Cumulative Convertible Preferred Stock issued in the
                  acquisition of CAMI ("CAMI Preferred") was paid in 480,998
                  shares of Common Stock upon conversion of 1,626,800 shares of
                  the CAMI Preferred Stock to Common Stock commencing October,
                  2001 through June 30, 2002. See also Note 16, regarding
                  payment of accrued dividends on the Series A Preferred Stock
                  held by the Kanes through June 30, 2002.

 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

         a.       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. The one remaining SFI employment
                  contract expired in accordance with its terms on April 17,
                  2002 and was not renewed. The Company retains the services of
                  the employee. As of June 30, 2002, Mr. Novinskie and Mr.
                  Amir's employment contracts provided for bonuses of $50,000
                  each to be paid one-half in common stock and one-half in cash.
                  The price of the stock to be issued was determined by taking
                  the closing average of the bid and asked price for the
                  Company's stock for the five (5) trading days preceding June
                  30, 2002. (See Note 13(b) below).

         b.       On November 16, 2001, the Company entered into a Stock
                  Purchase Agreement with SCOA ("SCOA SPA"). As a condition to
                  the closing of the SCOA SPA, SCOA required that the Company
                  enter into Key Man Employment Contracts ("Key Man Contracts")
                  with Messrs. Robert E. Martin, Gary J. Novinskie and Dov Amir.
                  The Key Man Contracts are for an initial three (3) year term.

                                      -22-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS
ENDED JUNE 30, 2002 AND 2001--PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================
                  The Key Man Contracts provide for acceleration of the vesting
                  of incentive options should the Key Man be terminated prior to
                  the expiration of the term of the Key Man Contracts. Each of
                  Messrs Novinskie and Amir are granted options for 500,000
                  shares of Company Common Stock while Mr. Martin was granted
                  options for 1,000,000 shares of Common Stock. There are like
                  provisions for the acceleration of the salary due each
                  employee over the life of the Contract. (See Note 11a.) The
                  Key Man Contract also provided for a bonus to Messrs.
                  Novinskie and Amir of $50,000 to be paid one-half in cash and
                  one-half in stock. (See Note 13(a) above). Mr. Novinskie's
                  cash bonus has not been paid. Mr. Amir's bonus was debited
                  against an advance given to Mr. Amir in the third quarter.
                  (See Note 8.) Under Mr. Martin's Key Man Contract, he was
                  granted a salary of $50,000 for the six month period April 1,
                  2002 through September 30, 2002 ($8,333.34 per month), and
                  $100,000 per year for the remaining two (2)years of his Key
                  Man Contract. In accordance with his contract, the Company
                  commenced paying Mr. Martin's salary as of April 1, 2002.

 14.     Litigation Settlement and Pending Litigation

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

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

                  Mr. Amir satisfied his obligation under his guaranty to
                  purchase one-half on 8,000 shares from the Plaintiffs. The
                  Company entered into Stipulation for the Entry of Final
                  Judgment and Judgment thereon as to Daleco Resources

                                      -23-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS
ENDED JUNE 30, 2002 AND 2001--PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================
                  Corporation, pursuant to which the Company shall have until
                  August 1, 2001 in which to redeem the remaining 8,000 shares
                  for $400,000 plus accrued interest through the date of
                  settlement at a rate of ten percent (10%) per annum. The Kanes
                  have been granting the Company an extension of the August 1,
                  2001 date on a month to month basis. On December 7, 2001, the
                  Company paid the Kanes $90,000 representing all accrued and
                  unpaid dividends on the Series A Preferred Stock through
                  December 31, 2001. The Company has paid all dividends due and
                  payable to the Kanes for periods through the fiscal quarter
                  ending March 31, 2002. Payments for the current quarter
                  (ending June 30, 2002), in the amount of $10,000, are still
                  outstanding.

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

         c.       Elizabeth McFadden v. BBC/DRI Blacklick Joint Venture, Belden
                  & Blake Corporation and Deven Resources, Inc., Civil
                  Action--Equity, No. 50640 CD 2001, Court of Common Pleas,
                  Indiana County, Pennsylvania.

                  This action was commenced by Plaintiff to prevent Belden &
                  Blake Corporation from laying a pipeline and utilization of an
                  easement across Plaintiffs property. Plaintiff's action had
                  been dismissed once, and Plaintiff had refiled the complaint
                  allegedly addressing new issues and adding Deven Resources,
                  Inc. as a new defendant.

                  Developing Energy Partners I, L.P. ("DEP"), for which Deven
                  Resources, Inc. ("DRI") was the general partner, owned a 40%
                  interest in BBC/DRI Blacklick Joint Venture ("Joint Venture").
                  Belden & Blake Corporation ("BBC") owned the remaining 60% of
                  the Joint Venture prior to September 28, 2001 at which time it
                  acquired the 40% interest held by DEP. The pipeline and
                  utilization of the easement by BBC which are the subject of
                  this action are attributable to wells drilled on acreage under
                  lease to the Joint Venture ("BBC Wells"). DEP went non-consent
                  on the BBC Wells. Under the Joint Venture agreement, since DEP
                  went non-consent on the BBC Wells, DEP had no responsibility
                  or liability for any costs associated with the BBC Wells.
                  Since the pipeline and easement usage across the lands of the
                  Plaintiff was exclusively related to the BBC Wells, DEP had no
                  liability for the costs associated with this lawsuit. The
                  relief sought by the lawsuit is to enjoin BBC from laying its
                  lines across the Plaintiffs property and for damages to the
                  surface of Plaintiffs property resulting from BBC's actions.

                  Under the terms of the agreement covering the sale of DEP's
                  40% interest in the Joint Venture, BBC agreed to indemnify and
                  hold DEP and its general partner, DRI, harmless from and
                  against any and all damages and costs, if any, arising out of
                  the McFadden litigation.

                                      -24-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS
ENDED JUNE 30, 2002 AND 2001--PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================
 15.     Acquisitions

         Clean Age Minerals, Incorporated

         CAMI, a Nevada corporation, was acquired by the Company through a
         merger with the Company's newly formed subsidiary, Strategic Minerals,
         Inc., a Nevada corporation, on September 19, 2000 Strategic Minerals,
         Inc. was the surviving corporation which subsequently changed its name
         to Clean Age Minerals, Incorporated. The Shareholders of CAMI received
         2,001,800 shares of Daleco Resources Corporation Series B, 8%
         Cumulative Convertible Preferred Stock, stated value $10.00, par value
         $.0I, in exchange for 20, 018,000 shares of CAMI Common Stock
         constituting all of the capital stock of CAMI. CAMI, through its
         subsidiaries CAP and Lone Star owns in fee and leasehold interests in
         non-metallic minerals in the States of Texas, New Mexico and Utah. The
         Company does not presently mine its minerals. Additionally, the Company
         acquired, as part of the merger, a patented process utilizing many of
         the minerals owned or under lease to the Company, for the cleansing and
         decontamination of water and soils.








                                      -25-

<PAGE>




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

                  The Private Securities Litigation Reform Act of 1995 (the
                  "Reform Act") provides a safe harbor for forward-looking
                  statements made by or on behalf of the Company. All
                  statements, other than statements of historical facts, which
                  address activities, events or developments that the Company
                  expects on 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 on 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, 2002, was influenced by a variety of factors
                  which were beyond the control of management, such as the
                  variability of the demand for and the pricing of crude oil and
                  natural gas within the Company's operating areas and the
                  demand and pricing, both domestically or internationally, for
                  the Company's timber and industrial minerals impacted on the
                  Company's results. The prior certification of the Company's
                  timber and Patented Process by independent parties also
                  hindered the Company's ability to enter into immediate
                  contracts for the sale of these products.

                  During the quarter ending June 30, 2002, the Company's sale of
                  produced hydrocarbons (oil and natural gas), the issuance of
                  securities, and proceeds from the sale of assets provided its
                  main source of capital.

                                      -26-
<PAGE>


                  With the cooperation and lead of SCOA, in accordance with the
                  provisions of the Master Distribution and Marketing Agreement,
                  contacts are being negotiated with technical and industrial
                  entities as well as academic institutions to certify the
                  results of CAMl's Patented Processes and to work with
                  industrial partners to establish test sites at which the
                  efficacy of the Patented Processes can be verified.

                  The Company has also, through its arrangements with SCOA and
                  through its existing contacts, entered into discussions with
                  potential users of the Company's timber products for railroad
                  ties, utility poles and other wood products. During the
                  quarter, the Company focused on the implementation of it's the
                  Master Distribution and Marketing Agreement with SCOA. Key
                  areas were the identification of potential market outlets for
                  Clean Ages' industrial minerals and environmental technology.

PART II.          OTHER INFORMATION

Item 2.  Sale of Securities.

         Terra Silex Agreement:
         ----------------------

         On September 20, 2001, the Company entered into a Stock Purchase
         Agreement with Terra Silex Holdings, LLC ("Terra Silex") ("Terra Silex
         Agreement") pursuant to which the Company agreed to sell Terra Silex up
         to 1,800,000 shares of Common Stock at a price of $1.25 per share. At
         the time of the Terra Silex Agreement, the market price of the
         Company's Common Stock was $1.05.

         The Terra Silex Agreement provided for the purchase of the Common Stock
         in three (3) tranches. At closing, Terra Silex acquired 400,00 shares.
         The second tranche was to close within sixty (60) days, subject to
         Terra Silex's satisfactory completion of its due diligence. The second
         tranche for 400,000 shares closed on November 20, 2001. The third
         tranche for 1,000,000 shares was to have closed sixty (60) days after
         the second tranche closing, subject to Terra Silex's continued
         satisfactory due diligence. Terra Silex requested and was granted an
         extension until February 15, 2002 in which to exercise the third
         tranche. Terra Silex was also granted a warrant for 500,000 shares
         ("Terra Silex Warrant"). The term of the warrant for five (5) years at
         an exercise price of $1.25 and is pro rated in amount should Terra
         Silex not fund all three tranches. On February 15, 2002, Terra Silex
         failed to exercise the third tranche. As such, Terra Silex's right to
         purchase additional shares under this Terra Silex Agreement terminated.
         The Terra Silex Warrant is only vested as to 250,000 shares with the
         remaining 250,000 shares of the Terra Silex Warrant having been
         forfeited as a result of Terra Silex's failure to fund the third
         tranche.

         SCOA SPA:
         --------

         Effective, November 16, 2001, the Company entered into a Stock Purchase
         Agreement with Sumitomo Corporation of America ("SCOA") ("SCOA SPA").
         The SCOA SPA provided for the purchase of 640,000 shares of Company
         Common Stock at a price of $1.25 pen share. The SCOA SPA also granted
         SCOA 1,700,000 warrants, at exercise prices ranging from $2.00 per
         share for the first 850,000 shares, $2.50 per share for the next
         510,000 shares and $3.00 per share for the remaining 340,000 shares.

                                      -27-
<PAGE>


         The SCOA SPA provides for SCOA to nominate one person to serve as a
         director of the Company and also to have an "observer" present at the
         meetings of the Board of Directors. At such time as SCOA has acquired
         at least 1,500,000 shares under the SPA through the exercise of its
         warrants plus the additional acquisition (640,000 original purchase
         shares plus 860,000 warrant shares) the observer shall be nominated to
         serve as a director of the Company.

         Also on November 16, 2001, the Company entered into a Master
         Distribution and Marketing Agreement ("Marketing Agreement") with SCOA.
         Under the Marketing Agreement, SCOA received warrants for 540,000
         shares. These warrants have a five (5) year term and have an exercise
         price of $2.00 per share for the first 108,000 shares, $2.50 pen share
         for the next 162,000 shares and $3.00 per share for the remaining
         270,000 shares.

         CHANGE OF STATE OF INCORPORATION:
         --------------------------------

         The Shareholders at the Company's Annual Meeting on February 28, 2002,
         approved the change of the Company's state of incorporation from
         Delaware to Nevada. This was effected through the merger of Daleco
         Resources Corporation, a Delaware corporation ("Old Daleco") with and
         into Daleco Resources Corporation of Nevada, a Nevada corporation ("New
         Daleco"). The merger was consummated as of March 26, 2002. The Articles
         of Incorporation of New Daleco provide for authorized capital stock of
         50,000,000 shares of common stock and 20,000,000 shares of preferred
         shares. The Bylaws of Old Daleco became the Bylaws of New Daleco, as
         amended to reflect the laws of the State of Nevada. The Board of
         Directors of Old Daleco elected at the Annual Meeting of Shareholders
         on February 28, 2002 became the Board of Directors of New Daleco. The
         Officers of Old Daleco were appointed as the Officers of New Daleco.
         Under the Articles of Merger filed with the Secretary of State of
         Nevada, the name of New Daleco was changed to Daleco Resources
         Corporation.

         The materials sent to each shareholder in connection with the Company's
         annual meeting contained a typographical error, referring in places to
         10,000,000 instead of 20,000,000 preferred shares. On the basis of this
         error, the Company agreed to place this issue again before the
         Shareholders at the next annual meeting should any shareholder so
         request. Terra Silex Holdings, LLC has so requested. As such, at the
         next annual meeting of the Shareholders of the Company, the
         shareholders will be asked to vote to either keep the authorized shares
         of preferred stock at 20,000,000 shares or reduce the authorized number
         to 10,000,000. The total number of all classes of the Company's
         preferred shares issued and outstanding as of June 30, 2002 is 383,000
         shares.

         CONSOLIDATION OF SUBSIDIARIES
         ------------------------------

         The Company consolidated the subsidiaries of Strategic Minerals, Inc.
         by merging Lone Star Properties, Inc., a Nevada corporation with and
         into its parent, CA Properties, Inc. Lone Star Properties, Inc. owned
         one asset and that was a fee and leasehold interest in zeolite deposits
         in Marfa, Texas. As a result of this merger, all of the Company's fee
         and leasehold interests of non-nutation minerals are held in one
         company, CA Properties, Inc.

                                      -28-
<PAGE>


         The Company also merged Matrix-Loc, Inc., a Texas corporation, with and
         into Strategic Minerals, Inc., a Nevada corporation. The only asset of
         Matrix-Loc was the Company's Patent, U.S. Patent No: 5.387.738. As a
         result of the merger, the Company eliminated the only subsidiary it
         owned that was incorporated in Texas, thus reducing the costs
         associated with maintaining corporations incorporated in multiple
         jurisdictions.

         The Company caused the name of Strategic Minerals, Inc. to be changed
         to Clean Age Minerals, Inc. Since Strategic Minerals, Inc. was
         operating under the name of Clean Age Minerals, Inc. due to its name
         recognition, the Company felt it more prudent to change the name of
         Strategic Minerals, Inc. to Clean Age Minerals, Inc. to avoid possible
         confusion and to simplify recognition in the market place.








                                      -29-

<PAGE>


ITEM 6   Exhibits and Reports on Form 8-K

         8-K dated May 16, 2002 and filed on May 17, 2002.

         Form S-8 filed on June 24, 2002

                                   SIGNATURES

In connection with the Quarterly Report of Daleco Resources Corporation (the
"Company") on Form 10-QSB for the period ending June 30, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I,, Dov
Amir, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss.
1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

   (1)      The Report fully complies with the requirements of Section 13(a) or
            15(d) of the Securities Exchange Act of 1934; and

   (2)      The information contained in the Report fairly presents, in all
            material respects, the financial condition and result of operations
            of the Company.



                                                      /s/ Dov Amir
                                               ---------------------------------
                                               Dov Amir
                                               Chief Executive Officer
                                               August 9,2002

         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 9, 2002                                  /s/ Gary J. Novinskie
                                               ---------------------------------
                                               Gary J. Novinskie
                                               President/Chief Financial Officer


Date: August 9, 2002                                  /s/ Dov Amir
                                               ---------------------------------
                                               Dov Amir
                                               Chief Executive Officer


                                      -30-