UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549




FORM
10-Q


(Mark
one)




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




For
the quarterly period ended June 30,
2009




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




For
the transition period
from                                                                     to




Commission File Number
    0-12214




DALECO RESOURCES
      CORPORATION(Exact
      name of registrant as specified in its
  charter)




Nevada
            
            23-2860734(State
      or other jurisdiction of
              incorporation
      or organization)
            
            (I.R.S.
      Employer
              Identification
      No.)





17
      Wilmont Mews, 5th
      Floor
              West Chester, Pennsylvania
      19382
            
            (610) 429-0181(Address
      of principal executive offices) (Zip Code)
            
            (Registrant’s
      telephone number
              including
      are code)




(Former
      name, former address and former fiscal year, if changed since last
      report)




Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.     Yes x    No
o




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.




Large
      accelerated filer o
            Accelerated
      filer oNon-accelerated
      filer o (Do
      not check if a smaller
            Smaller
      reporting company xreporting
      company)




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).     Yes o    No
x




APPLICABLE
ONLY TO CORPORATE ISSUERS:


Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date:


Number of shares outstanding of the
issuer'sCommonStock as ofJuly 31, 2009:44,081,346
 Number of shares outstanding of the
issuer’s Series BPreferredStock as ofJuly 31, 2009:145,000











DALECO
RESOURCES CORPORATION





TABLE
OF CONTENTS





PAGEPART
      I - FINANCIAL INFORMATIONITEM
      1.
            CONSOLIDATED
      FINANCIAL STATEMENTS
            3Consolidated
      Balance Sheets
            3Consolidated
      Statements of Operations
            5Consolidated
      Statements of Cash Flows
            6Notes
      to Consolidated Financial Statements
            7ITEM
      2.
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
      AND RESULTS OF OPERATIONS
            14ITEM
      3.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK
            19ITEM
      4.
            CONTROLS
      AND PROCEDURES
            19ITEM
      4T.
            CONTROLS
      AND PROCEDURES
            20PART
      II - OTHER INFORMATIONITEM
      1.
            LEGAL
      PROCEEDINGS
            21ITEM
      1A.
            RISK
      FACTORS
            21ITEM
      2.
            UNREGISTERED
      SALE OF EQUITY SECURITIES AND USE OF PROCEEDS
            21ITEM
      3.
            DEFAULTS
      UPON SENIOR SECURITIES
            21ITEM
      4.
            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
            21ITEM
      5.
            OTHER
      INFORMATION
            22ITEM
      6.
            EXHIBITS
            22SIGNATURES
            23





-2-




PART
I – FINANCIAL INFORMATION
 
 Item
1. Consolidated Financial Statements.
 
 DALECO
RESOURCES CORPORATION
 CONSOLIDATED
BALANCE SHEETS







June
      30
              2009
            
            
            September
      30
              2008(Unaudited)ASSETSCurrent
      Assets:Cash
      and Equivalents
            
            $
            55,639
            
            
            $
            472,912Accounts
      Receivable
            
            
            263,764
            
            
            
            474,692Other
      Current Assets
            
            
            7,424
            
            
            
            7,424Total
      Current Assets
            
            
            326,827
            
            
            
            955,028Other
      Assets:Technology
      and Patent Rights
            
            
            6,594,500
            
            
            
            6,594,500Accumulated
      Amortization
            
            
            (5,055,253
            )
            
            
            (4,622,164
            )Net
      Technology and Patent Rights
            
            
            1,539,247
            
            
            
            1,972,336Securities
      Available for Future Sale
            
            
            1,552
            
            
            
            5,510Restricted
      Cash Deposits
            
            
            105,958
            
            
            
            105,825Prepaid
      Mineral Royalties – Long-term
            
            
            420,000
            
            
            
            490,000Interest
      Receivable
            
            
            146,095
            
            
            
            131,387Total
      Other Assets
            
            
            2,212,852
            
            
            
            2,705,058Property,
      Plant and Equipment:Oil
      and Gas Properties, at cost
            
            
            4,424,512
            
            
            
            4,424,512Accumulated
      Depreciation, Depletion and Amortization
            
            
            (3,761,345
            )
            
            
            (3,626,795
            )Net
      Oil and Gas Properties
            
            
            663,167
            
            
            
            797,717Mineral
      Properties, at cost
            
            
            9,877,128
            
            
            
            12,609,100Accumulated
      Depreciation, Depletion and Amortization
            
            
            (95,000
            )
            
            
            (950,000
            )Net
      Mineral Properties
            
            
            9,782,128
            
            
            
            11,659,100Equipment,
      Furniture and Fixtures, at cost
            
            
            79,902
            
            
            
            79,902Accumulated
      Depreciation
            
            
            (65,797
            )
            
            
            (60,271
            )Net
      Equipment, Furniture and Fixtures
            
            
            14,105
            
            
            
            19,631Total
      Net Property, Plant and Equipment
            
            
            10,459,400
            
            
            
            12,476,448TOTAL
      ASSETS
            
            $
            12,999,079
            
            
            $
            16,136,534




SEE ACCOMPANYING NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS.




-3-




DALECO
RESOURCES CORPORATION
 CONSOLIDATED
BALANCE SHEETS


June
      30
              2009
            
            
            September
      30
              2008(Unaudited)LIABILITIES
      AND SHAREHOLDERS’ EQUITYCurrent
      Liabilities:Accounts
      Payable
            
            $
            1,878,290
            
            
            $
            2,175,950Federal
      and State Income Taxes Payable
            
            
            275,695
            
            
            
            264,795Note
      Payable - Related Party
            
            
            30,485
            
            
            
            45,485Premium
      Finance Note Payable
            
            
            6,483
            
            
            
            2,636EV&T
      Note
            
            
            567,213
            
            
            
            567,213Note
      Payable - First Regional Bank – Current Portion
            
            
            15,000
            
            
            
            99,970CAMI
      Notes
            
            
            514,881
            
            
            
            514,881Accrued
      Interest Expense
            
            
            698,780
            
            
            
            603,499Accrued
      Dividends Payable
            
            
            1,713,400
            
            
            
            1,626,004Accrued
      Expense Reimbursements
            
            
            19,051
            
            
            
            20,293Accrued
      Bonus Expense
            
            
            1,373,831
            
            
            
            1,373,831Accrued
      Salary Expense
            
            
            950,500
            
            
            
            986,698Total
      Current Liabilities
            
            
            8,043,609
            
            
            
            8,281,255Note
      Payable – First Regional Bank – Long-term Portion
            
            
            51,250
            
            
            
            --TOTAL
      LIABILITIES
            
            
            8,094,859
            
            
            
            8,281,255SHAREHOLDERS’
      EQUITY:Preferred
      Stock – 20,000,000 shares authorizedSeries
      A Preferred Stock (outstanding: none)
            
            
            --
            
            
            
            --Series
      B Preferred Stock – par value of $0.01 per share  (outstanding:
      145,000 shares)
            
            
            1,450
            
            
            
            1,450Common
      Stock – 100,000,000 shares authorized – parvalue
      of $0.01 per share
              (outstanding:
      2009 - 44,081,346; 2008 - 43,081,346 shares)
            
            
            440,813
            
            
            
            430,813Additional
      Paid in Capital
            
            
            45,252,072
            
            
            
            45,118,409Accumulated
      Deficit
            
            
            (40,209,967
            )
            
            
            (37,119,203
            )Subscriptions
      Receivable
            
            
            (576,000
            )
            
            
            (576,000
            )Accumulated
      Other Comprehensive Loss
            
            
            (4,148
            )
            
            
            (190
            )TOTAL
      SHAREHOLDERS’ EQUITY
            
            
            4,904,220
            
            
            
            7,855,279TOTAL
      LIABILITIES AND SHAREHOLDERS’ EQUITY
            
            $
            12,999,079
            
            
            $
            16,136,534




SEE
ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.





-4-




DALECO
RESOURCES CORPORATION
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 (UNAUDITED)


Three
      Months Ended
              June 30
            
            
            Nine
      Months Ended
              June 302009
            
            
            2008
            
            
            2009
            
            
            2008Revenues:Oil
      and Gas Sales
            
            $
            71,158
            
            
            $
            276,921
            
            
            $
            271,589
            
            
            $
            634,158Royalty
      Receipts
            
            
            2,325
            
            
            
            5,692
            
            
            
            10,425
            
            
            
            12,749Mineral
      Sales
            
            
            1,209
            
            
            
            1,208
            
            
            
            4,834
            
            
            
            3,371Well
      Management Revenue
            
            
            59,395
            
            
            
            68,293
            
            
            
            190,794
            
            
            
            192,340Total
      Operating Revenues
            
            
            134,087
            
            
            
            352,114
            
            
            
            477,642
            
            
            
            842,618Expenses:Lease
      Operating Expenses - Oil and Gas
            
            
            43,492
            
            
            
            53,465
            
            
            
            151,291
            
            
            
            144,911Exploration
      Expenses - Minerals
            
            
            --
            
            
            
            6,000
            
            
            
            --
            
            
            
            9,502Operating
      Expenses and Other Costs - Minerals
            
            
            93,046
            
            
            
            26,434
            
            
            
            130,418
            
            
            
            87,273Production
      and Severance Taxes – Oil and Gas
            
            
            4,235
            
            
            
            13,317
            
            
            
            16,509
            
            
            
            32,554Depreciation,
      Depletion and Amortization
            
            
            191,055
            
            
            
            240,154
            
            
            
            573,165
            
            
            
            720,465General
      and Administrative Expenses
            
            
            91,563
            
            
            
            150,465
            
            
            
            327,994
            
            
            
            578,536Legal
      and Professional Fees and Expenses
            
            
            31,418
            
            
            
            42,076
            
            
            
            132,897
            
            
            
            187,173Shareholder
      Information Expenses
            
            
            17,910
            
            
            
            12,035
            
            
            
            37,378
            
            
            
            31,821Amortization
      of Equity Placement Costs
            
            
            --
            
            
            
            2,829
            
            
            
            --
            
            
            
            8,487Total
      Expenses
            
            
            472,719
            
            
            
            546,775
            
            
            
            1,369,652
            
            
            
            1,800,722Other
      Income (Expense):Interest
      and Dividend Income
            
            
            4,689
            
            
            
            8,591
            
            
            
            20,390
            
            
            
            40,257Interest
      Expense
            
            
            (52,205
            )
            
            
            (80,182
            )
            
            
            (154,776
            )
            
            
            (164,726
            )Loss
      on Abandonment of Mineral Property
            
            
            (1,976,972
            )
            
            
            --
            
            
            
            (1,976,972
            )
            
            
            --Gain
      on Sale of Oil and Gas Properties
            
            
            --
            
            
            
            250,000
            
            
            
            --
            
            
            
            400,000Total
      Other Income (Expense), Net
            
            
            (2,024,488
            )
            
            
            178,409
            
            
            
            (2,111,358
            )
            
            
            275,531Loss
      Before Income Taxes
            
            
            (2,363,120
            )
            
            
            (16,252
            )
            
            
            (3,003,368
            )
            
            
            (682,573
            )Taxes
      based on Income
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --Net
      Loss
            
            
            (2,363,120
            )
            
            
            (16,252
            )
            
            
            (3,003,368
            )
            
            
            (682,573
            )Preferred
      Stock Dividends
            
            
            (28,920
            )
            
            
            --
            
            
            
            (87,396
            )
            
            
            --Net
      Loss Applicable to Common Shareholders
            
            $
            (2,392,040
            )
            
            $
            (16,252
            )
            
            $
            (3,090,764
            )
            
            $
            (682,573
            )Basic
      and Fully Diluted Net Loss per Share
            
            $
            (0.06
            )
            
            $
            (--
            )
            
            $
            (0.07
            )
            
            $
            (0.02
            )Weighted-average
      number of shares of Common Stock Outstanding
            
            
            43,257,170
            
            
            
            43,081,346
            
            
            
            43,139,954
            
            
            
            43,081,346




SEE
ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.




-5-




DALECO
RESOURCES CORPORATION
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 FOR
THE NINE MONTHS ENDED JUNE 30, 2009 AND 2008
 (UNAUDITED)









2009
            
            
            2008Cash
      Flows From Operating Activities:Net
      Loss
            
            $
            (3,003,368
            )
            
            $
            (682,573
            )Adjustments
      to Reconcile Net Loss to Net Cash Provided by
              (Used
      in) Operating Activities:Depreciation,
      Depletion and Amortization
            
            
            573,165
            
            
            
            720,465Amortization
      of Discount on Note Payable
            
            
            --
            
            
            
            18,720Amortization
      of Equity Placement Costs
            
            
            --
            
            
            
            8,487Stock-Based
      Compensation Expense
            
            
            53,663
            
            
            
            162,086Non-cash
      Charge for Issuance of Securities
            
            
            90,000
            
            
            
            --Loss
      on Abandonment of Mineral Property
            
            
            1,976,972
            
            
            
            --Gain
      on Sale of Oil and Gas Properties
            
            
            --
            
            
            
            (400,000
            )Changes
      in Operating Assets and Liabilities:Receivables
            
            
            196,220
            
            
            
            (185,002
            )Other
      Current Assets
            
            
            
            
            
            
            --Pre-paid
      Mineral Royalties
            
            
            (30,000
            )
            
            
            --Restricted
      Cash Deposits
            
            
            (133
            )
            
            
            (1,954
            )Accounts
      Payable
            
            
            (297,660
            )
            
            
            (125,638
            )Accrued
      Interest Expense
            
            
            95,281
            
            
            
            86,420Other
      Accrued Expenses
            
            
            (26,540
            )
            
            
            13,626Net
      Cash Used in Operating Activities
            
            
            (372,400
            )
            
            
            (385,363
            )Cash
      Flows From Investing Activities:Receipts
      from Sale of Oil and Gas Properties
            
            
            --
            
            
            
            350,000Net
      Cash Used in Investing Activities
            
            
            --
            
            
            
            350,000Cash
      Flows From Financing Activities:Proceeds
      of Notes Payable
            
            
            21,860
            
            
            
            102,171Payments
      on Other Notes and Debt
            
            
            (66,733
            )
            
            
            (94,319
            )Net
      Cash Provided By (Used In) Financing Activities
            
            
            (44,873
            )
            
            
            7,852Net
      Change in Cash and Equivalents
            
            
            (417,273
            )
            
            
            (27,511
            )Cash
      and Equivalents at Beginning of Year
            
            
            472,912
            
            
            
            224,267Cash
      and Equivalents at End of Period
            
            $
            55,639
            
            
            $
            196,756Supplemental
      Information:Income
      Taxes Paid
            
            $
            --
            
            
            $
            --Interest
      Paid
            
            $
            59,495
            
            
            $
            39,327Supplemental
      Disclosure of Non-cash Transactions:Receivable
      from Sale of Oil and Gas Properties
            
            $
            --
            
            
            $
            50,000Discount
      on Note Payable Resulting from Issuance of Warrants to Purchase Common
      Stock
            
            $
            --
            
            
            $
            18,720Issuance
      of Securities for Services Performed
            
            $
            90,000
            
            
            $
            --Preferred
      Dividends Not Paid
            
            $
            87,396
            
            
            $
            --




SEE
ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.




-6-




DALECO
RESOURCES CORPORATION
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 AS
OF JUNE 30, 2009




1.
            Continued
      Operations and Going Concern





The unaudited consolidated 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.
The Company incurred a net loss of $3,003,368 for the nine months ended June 30,
2009. The ability of the Company to meet its total liabilities of $8,094,859 and
to continue as a going concern is dependent upon the availability of future
funding, achieving profitability within its mineral segment and ongoing
profitability within its oil and gas operations. If the Company is unable to
continue as a going concern, there is uncertainty relative to full
recoverability of its assets including the $20 million acquisition of Clean Age
Minerals, Inc. in September 2000.





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





As of June 30, 2009, the Company and
certain of its subsidiaries were in default of certain debt obligations and
certain employment agreements. The holders of these instruments are working with
the Company to achieve the ultimate extinguishment of the
obligations.




2.
            Summary
      of Significant Accounting Policies


Basis
of Presentation







The
unaudited consolidated financial statements included herein have been prepared
in accordance with accounting principles generally accepted in the United States
for interim financial information and with the instructions to Form 10-Q
and Article 8 and Rule 10-01 of Regulation S-X.  They do not
include all information and notes required by generally accepted accounting
principles for complete financial statements. However, except as disclosed
herein, there has been no material changes in the information disclosed in the
notes to the consolidated financial statements included in the Company’s annual
report on Form 10-KSB of Daleco Resources Corporation for the year ended
September 30, 2008. In the opinion of management, all adjustments (including
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended June 30, 2009, are
not necessarily indicative of the results that may be expected for any other
interim period or the entire year. For further information, these unaudited
consolidated financial statements and the related notes should be read in
conjunction with the Company’s audited consolidated financial statements for the
year ended September 30, 2008, included in the Company’s annual report on Form
10-KSB (“2008 Annual Report”).





Unless otherwise noted, references to
“year” pertain to the Company’s fiscal year, which begins on October 1 and ends
on September 30; for example, 2009refers to fiscal 2009, which is the period from October 1,
2008to September 30, 2009.





Certain reclassifications have been made
to prior period financial statements to conform to the current period
presentation.


-7-
  DALECO
RESOURCES CORPORATION
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 AS
OF JUNE 30, 2009
  Significant
Accounting Policies







There were no changes to the Company’s
Significant Accounting Policies from those disclosed in our 2008Annual Report.


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 as of 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.





Fair
Value Measurements





The
Company’s only financial instruments are (a) cash, securities available for
future sale, and short-term trade receivables, payables and debt for which the
carrying amounts approximate fair values, and (b) long-term debt.  Based on
the borrowing rates currently available to the Company for long-term bank loans
with similar terms and average maturities, the carrying amount of long-term debt
approximates fair value of $66,250 at June 30, 2009.





RECENTLY
ADOPTED ACCOUNTING STANDARDS





In September 2006, the FASB issued
SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair
value, establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value measurements.The Company adopted SFAS 157 as of October 1, 2008 and noted no material impact onthe Company’sfinancial position or results of
operations as a result of the adoption.





In
February 2007, the Financial
Accounting Standards Board (“FASB”) issued Statement of Financial Accounting
Standards (“SFAS”) No. 159, “The Fair Value Option for Financial Assets and
Financial Liabilities” (“SFAS 159”). SFAS 159 permits entities to choose to
measure many financial instruments and certain other items at fair value in
order to mitigate volatility in reported earnings caused by measuring related
assets and liabilities differently without having to apply complex hedge
accounting provisions.The
Company adopted SFAS 159 as of October 1, 2008 and noted no material impact onitsfinancial position or results of
operations as a result of the adoption.




RECENTLY
ISSUED ACCOUNTING STANDARDS





In June
2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles,” Replaces SFAS
No. 162, establishes the source of authoritative U.S. generally accepted
accounting principles (GAAP) recognized by the FASB to be applied by
nongovernmental entities. On the effective date for financial statements issued
for interim and annual periods ending after September 15, 2009, the Codification
will supersede all then–existing non-SEC accounting and reporting standards. The
Company has determined that the adoption of SFAS No. 168 will not have an impact
on the financial statements.





In June
2009, the FASB issued SFAS No. 167, “Amendments to FASB interpretation No.
46(R),” establishes how a company determines when an entity that is
insufficiently capitalized or not controlled through voting should be
consolidated. This statement improves financial reporting by enterprises
involved with variable interest entities, which addresses the effects on certain
provisions of FASB interpretation No. 46, “Consolidation of Variable Interest
Entities,” as a result of the elimination of the qualifying special-purpose
entity concept in FASB No. 166, “Accounting for Transfers of Financial Assets,”
and constituent concerns about the application of certain key provisions of
Interpretation 46(R). SFAS No. 167 is effective for annual periods beginning
after November 15, 2009. This statement is effective for the Company beginning
October 1, 2010 and is expected to have no material impact on the financial
statements.




-8-




DALECO
RESOURCES CORPORATION
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 AS
OF JUNE 30, 2009




In June
2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial
Assets,” which is an amendment of SFAS No. 140, “Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities,” requires
entities to provide more information about sales of securitized financial assets
and similar transactions, particularly if the seller retains some risk to the
assets. This statement will improve the relevance, representation faithfulness,
and comparability of the information that a reporting entity provides in its
financial statements about a transfer of financial assets. It will also take
into account the effects of a transfer on its financial position, financial
performance, and cash flows, and a transferor’s continuing involvement. SFAS No.
166 is effective for annual periods beginning after November 15,
2009.  This statement is effective for the Company beginning October
1, 2010 and is expected to have no material impact on the financial
statements.







In May
2009, the FASB issued SFAS No. 165, “Subsequent Events,” which requires entities
to disclose the date through which they have evaluated subsequent events and
whether the date corresponds with the release of their financial statements. The
statement establishes general standards of accounting for and disclosure of
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued. SFAS No. 165 is effective for interim
or annual financial periods ending after June 15, 2009, and shall be applied
prospectively. The Company adopted this statement and has adequately disclosed
subsequent events in the financial statements.




In April 2009, the FASB issued FASB
Staff Position (FSP) No. FAS 115-2 and FAS 124-2, “Recognition and Presentation
of Other-Than-Temporary Impairments,” to determine whether the holder of an
investment in a debt or equity security for which changes in fair value are not
regularly recognized in earnings (such as securities classified as
held-to-maturity or available-for-sale) should recognize a loss in earnings when
the investment is impaired. FSP No. FAS 115-2 and FAS 124-2 improves the
presentation and disclosure of other-than-temporary impairments on debt and
equity securities in the financial statements. The effective date for interim
and annual reporting periods ending after June 15, 2009, with early adoption
permitted for periods ending after March 15, 2009. Earlier adoption for periods
ending before March 15, 2009, is not permitted.  The adoption of this
FSP did not have an impact on the Company’s financial statements.





In April 2009, the FASB issued FSP FAS
141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business
Combination That Arise from Contingencies. This FSP requires that assets
acquired and liabilities assumed in a business combination that arise from
contingencies be recognized at fair value if fair value can be reasonably
estimated. If fair value cannot be reasonably estimated, the asset or liability
would generally be recognized in accordance with SFAS No. 5, “Accounting for
Contingencies” and FASB Interpretation No. 14, “Reasonable Estimation of the
Amount of a Loss”. Further, the FASB removed the subsequent accounting guidance
for assets and liabilities arising from contingencies from SFAS No. 141(R). The
requirements of this FSP carry forward without significant revision the guidance
on contingencies of SFAS No. 141, “Business Combinations”, which was superseded
by SFAS No. 141(R). The FSP also eliminates the requirement to disclose an
estimate of the range of possible outcomes of recognized contingencies at the
acquisition date. For unrecognized contingencies, the FASB requires that
entities include only the disclosures required by SFAS No. 5. This FSP shall be
effective for assets or liabilities arising from contingencies in business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15,
2008.   This statement is effective for the Company beginning
October 1, 2009and is expected to have no material impact on the
financial statements.




-9-




DALECO
RESOURCES CORPORATION
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 AS
OF JUNE 30, 2009




On December 31, 2008, the SEC published
final rules and interpretations updating its oil and gas reporting requirements.
Many of the revisions are updates to definitions in the existing oil and gas
rules to make them consistent with the Petroleum Resource Management System,
which is a widely accepted standard for the management of petroleum resources
that was developed by several industry organizations. Key revisions include the
ability to include nontraditional resources in reserves, the use of new
technology for determining reserves, permitting disclosure of probable and
possible reserves, and changes to the pricing used to determine reserves based
on a 12-month average price rather than a period end spot price. The average is
to be calculated using the first-day-of-the-month price for each of the 12
months that make up the reporting period. The new rules are effective for annual
reports for fiscal years ending on or after December 31, 2009. Early adoption is
not permitted.This
statement is effective for the Company beginning October 1, 2010
andis currently
assessing the impact that the adoption will have on its consolidated financial
statements and disclosures.





In December 2007, the Financial
Accounting Standards Board (“FASB”) issued SFAS No. 141R, “Business
Combinations” (“SFAS 141R”). SFAS 141R revises the principles and requirements
for how the acquirer recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, any non-controlling
interest in the acquiree, and the goodwill acquired in a business combination or
gain from a bargain purchase. SFAS 141R also revises the principles and
requirements for how the acquirer determines what information to disclose to
enable users of the financial statements to evaluate the nature and financial
effects of the business combination.This Statement applies prospectively to
business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December
15, 2008.  It is
effective for the Company beginning October 1, 2009 and is expected to have no
material impact on the financial statements.





Also in December 2007, the FASB
issued SFAS No. 160, “Non-controlling Interest in Consolidated Financial
Statements — an amendment of ARB No. 51” (“SFAS 160”). SFAS 160 amends ARB
No. 51 to establish accounting and reporting standards for the
non-controlling interest in a subsidiary and for the deconsolidation of a
subsidiary.This Statement is effective for fiscal
years, and interim periods within those fiscal years, beginning on or after
December 15, 2008.It is effective for the
Company beginning October 1, 2009 and is expected to have no material impact on
the financial statements.





In June 2008, the Financial
Accounting Standards Board (“FASB”) issued a FASB Staff Position (“FSP”) on the
FASB’s Emerging Issues Task Force (“EITF”) Issue No. 03-06-1, “Determining
Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities,” (“FSP EITF 03-06-1”). This FSP addresses whether
instruments granted in share-based payment transactions are participating
securities prior to vesting and, therefore, need to be included in the earnings
allocation in computing earnings per share (“EPS”) under the two-class method
described in SFAS No. 128, “Earnings Per Share.” It affects entities that accrue
or pay non-forfeitable cash dividends on share-based payment awards during the
awards’ service period. FSP EITF 03-06-1 is effective for fiscal years beginning
after December 15, 2008, and interim periods within those fiscal years and
will require a retrospective adjustment to all prior period EPS.This FSP is effective for the Company
beginning October 1, 2009 and iscurrently evaluating the impact this
FSP will have onitscalculation and presentation of
EPS.




-10-


DALECO
RESOURCES CORPORATION
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 AS
OF JUNE 30, 2009




3.
            Capital
      Stock





Common
Stock





During June 2009, the Company issued
1,000,000 shares of Common Stock to William Smith, a consultant to the Company,
in exchange for $90,000 of services associated with product testing and the
identification of potential markets for the Company’s product, ReNugenTM, at
$0.09 per share pursuant to Rule 701 under the Securities Act of 1933, as
amended.





Series
B Preferred Stock





No shares
of Series B Preferred Stock were issued or converted to Common Stock during the
nine months ended June 30, 2009.




Options
and Warrants to Purchase Common Stock




Number
      of Options and Warrants
            
            
            Weighted
      Average Price per ShareOptions
      and Warrants Outstanding at September 30, 2008
            
            
            4,260,641
            
            
            $
            0.57Options
      and Warrants Expired
            
            
            (1,213,336
            )
            
            $
            0.62Options
      and Warrants Outstanding at June 30, 2009
            
            
            3,047,305
            
            
            $
            0.55





Summarized
information relating to the stock options to purchase Common Stock outstanding
as of June 30, 2009, is as follows:




Exercise
              Price
      per Share
            
            
            Number
      of
              Shares
      Underlying
              Options
      Unexercised
            
            
            Weighted
      Average Exercise
              Price
              Per
      Share
            
            
            Weighted
      Average Remaining Life
              (Years)
            
            
            Number
      of
              Shares
              Underlying
              Options
      Exercisable
            
            
            Weighted
      Average Exercise
              Price
      Per
              Share$
            0.28-$0.75
            
            
            
            2,225,000
            
            
            $
            0.55
            
            
            
            0.84
            
            
            
            2,125,000
            
            
            $
            0.56




Stock-Based
Compensation





During
the nine months ended June 30, 2009, options to purchase 650,000 shares of
Common Stock expired unexercised. There are options to purchase 2,225,000 shares
of Common Stock outstanding as of June 30, 2009, of which 2,000,000 are held by
current officers, Directors and employees of the Company
(“Insiders”).  The exercise prices for the options held by Insiders
range from $0.28 per share to $0.75 per share.





In
accordance with the provisions of SFAS 123(R), “Share-Based Payment”, the
Company has recorded stock-based compensation expense of $53,663 and $162,086
for the nine months ended June 30, 2009 and 2008, respectively, which is
included in General and Administrative Expenses. No tax benefit has been
recognized.  The stock-based compensation expense is based on the fair
value at the grant date. The fair value of the options was estimated using the
Black-Scholes option-pricing model with the following assumptions: risk free
interest rates between 3.14% and 4.72%; expected life of three to seven years;
and expected volatility between 56% and 184%.




-11-


DALECO
RESOURCES CORPORATION
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 AS
OF JUNE 30, 2009




Net
Income (Loss) Per Share





Net
income (loss) per share is computed in accordance with SFAS No. 128, "Earnings
per Share". Basic net income (loss) per share is calculated by dividing the net
income (loss) attributable to common shareholders by the weighted average number
of shares outstanding during the period. Fully diluted earnings per share
reflect the potential dilution of securities that could share in earnings of an
entity. In a loss year, dilutive common equivalent shares are excluded from the
loss per share calculation as the effect would be anti-dilutive.





Options
and warrants to purchase shares of Common Stock were outstanding during the
periods but have not been included in the computation of diluted earnings per
share because such options and warrants would have an anti-dilutive effect on
net loss per share. No other adjustments were made for purposes of per share
calculations.





Payment
of Accrued Dividends





There was
no cash dividend payment in respect to the Series A or B Preferred Stocks during
the nine months ended June 30, 2009 and 2008.





4.
            Notes
      Payable





During
November 2008, the Company made a principal payment of $25,000 on the $100,000
loan from First Regional Bank and entered into a new note for $75,000 with the
bank of which the maturity date is November 18, 2013 and the interest rate is
5.05%. Consistent with the provisions of the Note, the Company has been
making  monthly payments of principal of $1,250 and interest. The
current balance of the Note is $ 66,250.





5.
            Property and
      Equipment





The
Company periodically reviews the carrying value of its property and equipment
for impairment as required under SFAS No. 144 “Accounting for the Impairment or
Disposal of Long-Lived Assets”. During the quarter ended June 30, 2009, the
Company determined that additional efforts to develop its calcium carbonate
minerals in New Mexico were no longer warranted. Accordingly,


the
Company charged-off the mineral net book value ($1,876,972) and prepaid
royalties ($100,000) in respect to the property during such quarter. The loss on
abandonment of the calcium carbonate property totaled $1,976,972.




6.
            Subsequent
      Events





(a)
            During
      July 2009, the Company offered a Private Placement under the provisions of
      Regulation D promulgated under the Securities Act of 1933, as
      amended  (the “2009 Private Placement”). Private Placement
      consists of up to Five Hundred Thousand Dollars ($500,000) of 7.25%
      Convertible Debentures (“Debentures” or “Debenture”).  The
      Debentures offered by the Company, are five (5) year instruments maturing
      on July 30, 2014, bearing interest at Seven and one quarter percent (7.25
      %) per annum on the balance outstanding from time to
      time.  Interest will commence to accrue immediately upon
      issuance of the Debentures and will be paid quarterly on each September
      30, December 31, March 31 and June 30, which the Debentures are
      outstanding.  Payment of principal will commence on September 30
      following the second anniversary of the Closing Date of this
      Offering.  The Company's fiscal year ends on September 30. The
      Company extended the offering period for the Debentures until September
      15, 2009, at the request of potential
investors.




-12-


DALECO
RESOURCES CORPORATION
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 AS
OF JUNE 30, 2009


(b)
            The
      Company gave notice to NZ Travertine, LLC, in August, 2009, of its
      election not to renew the Company’s Calcium Carbonate lease in Cibola
      County, New Mexico. (See Item 2. Management’s Discussion and Analysis of
      Financial Condition and Results of Operations, Minerals Operating Expenses
      and Other Costs, Loss on
Abandonment.)





(c)
            Management
      performed an evaluation of Company activity through August 19, 2009,
      the date the unaudited consolidated financial statements were
      issued.  The Company concluded that there are no other significant
      subsequent events requiring disclosure.







-13-


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







Forward
Looking Statements





This
Quarterly Report on Form 10-Q contains forward-looking statements, within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended.





The
following discussion is intended to inform existing and potential security
holders generally of some of the risks and uncertainties that can affect the
Company and to take advantage of the “safe harbor” protection for
forward-looking statements afforded under Federal securities
laws.  From time to time, management or persons acting on the
Company’s behalf make forward-looking statements to inform existing and
potential security holders about the Company.  Forward-looking
statements are generally accompanied by words such as “estimate,” “project,”
“predict,” “believe,” “expect,” “anticipate,” “plan” or other words that convey
the uncertainty of future events or outcomes.





Except
for statements of historical or present facts, all other statements contained in
this report are forward-looking statements.  The forward-looking
statements may appear in a number of places and include statements with respect
to, among other things,  business objectives and strategic plans;
operating strategies; acquisition strategies; drilling of wells; oil and gas
reserve estimates (including estimates of future net revenues associated with
such reserves and the present value of such future net revenues); estimates of
future production of oil, natural gas and minerals; expected results or benefits
associated with recent acquisitions; marketing of oil, gas and minerals;
expected future revenues and earnings, and results of operations; future
capital, development and exploration expenditures; expectations regarding cash
flow and future borrowings sufficient to fund ongoing operations and debt
service, capital expenditures and working capital requirements; nonpayment of
dividends; expectations regarding competition; impact of the adoption of new
accounting standards and the Company’s financial and accounting systems; and
effectiveness of the Company’s control over financial reporting.





These
statements by their very nature are subject to certain risks, uncertainties and
assumptions and will be influenced by various factors.  Should any of
the assumptions underlying a forward-looking statement prove incorrect, actual
results could vary substantially.





Various
risk factors could cause actual results to differ materially from those
expressed in forward-looking statements, including, without limitation, the
following:





·
            volatility
      of the market price for both crude oil and natural
  gas;


·
            volatility
      of the market price for the Company’s
minerals;


·
            market
      capacity and demand for the Company’s
minerals;


·
            the
      timing, effects and success of the Company’s acquisitions, exploration and
      development activities;


·
            the
      timing, quantity and marketability of
  production;


·
            effectiveness
      of management’s strategies and
decisions;


·
            competition;


·
            changes
      in the legal and/or regulatory environment and/or changes in accounting
      standards;


·
            policies
      and practices or related interpretations by auditors and/or regulatory
      agencies;


·
            climatic
      conditions; and


·
            unanticipated
      problems, issues or events.




-14-




Many, if
not all, of these factors are beyond the Company’s control and are impossible to
predict.  These factors are not intended to represent an exhaustive
list of the general or specific facts or factors that may affect the
Company.





All
forward-looking statements speak only as of the date made.  All
subsequent forward-looking statements are expressly qualified in their entirety
by the cautionary statements above.  Except as may be required by law,
the Company undertakes no obligation to update any forward-looking statement to
reflect events or circumstances after the date on which the forward-looking
statement is made or to reflect the occurrence (or non-occurrence) of
anticipated or unanticipated events or circumstances.





Results of
Operations:





For
the three and nine months ended June 30, 2009 and 2008:





Three Months Ended June 30
            
            
            Nine Months Ended June 302009
            
            
            2008
            
            
            2009
            
            
            2008Revenues
            
            $
            134,087
            
            
            $
            352,114
            
            
            $
            477,642
            
            
            $
            842,618Net
      Loss
            
            $
            (2,363,120
            )
            
            $
            (16,252
            )
            
            $
            (3,003,368
            )
            
            $
            (682,573
            )Oil
      and Gas Production and Cost Information:Production:Oil
      (Bbl)
            
            
            544
            
            
            
            1,109
            
            
            
            2,353
            
            
            
            2,615Gas
      (Mcf)
            
            
            9,540
            
            
            
            10,348
            
            
            
            27,707
            
            
            
            36,233Average
      Price:Oil
      (per Bbl)
            
            $
            55.88
            
            
            $
            120.58
            
            
            $
            51.49
            
            
            $
            103.57Gas
      (per Mcf)
            
            $
            4.27
            
            
            $
            13.84
            
            
            $
            5.43
            
            
            $
            10.03Lease
      Operating Expense and Production Tax per Mcfe
            
            $
            3.73
            
            
            $
            3.93
            
            
            $
            4.01
            
            
            $
            3.42


_____


Bbl   =
One barrel of oil or condensate


Mcf   =
One thousand cubic feet


Mcfe =
One thousand cubic feet gas equivalent





The
decrease in gas production experienced during the three and nine months ended
June 30, 2009 is primarily a result of wells being “off-line” for repair,
declines in the producing gas-oil ratio from certain producing wells operated by
the Company in Texas and curtailments resulting from third party maintenance of
natural gas pipelines and processing facilities servicing these properties. The
increase in Lease Operating Expenses and Production Tax per Mcfe is primarily
the result of the base well/lease operating costs being applied to the reduced
production volumes for the nine months ended June 30, 2009. The reduction in oil
and gas operating revenues during the three and nine months ended June 30, 2009
is the result of the decline in production volumes and the significant declines
in the price received by the Company for the crude oil and natural gas sold
during period as compared to prior year’s three and nine month
periods.




-15-




Minerals
Operations





The
Company is an Exploration Stage company in respect to its mineral
holdings.





Minerals
Exploration Expenses





Minerals
exploration expenses were $9,502 for the nine months ended June 30, 2008. The
Company did not incur minerals exploration expenses during the first three
quarters of fiscal 2009. These expenses were primarily for costs associated with
the exploration and quantification of mineral resources and mineral
reserves.





Minerals
Operating Expenses and Other Costs





Minerals
operating expenses and other costs totaled $93,046 and $130,418 for the three
and nine months ended June 30, 2009, respectively, and $26,434 and $87,273 for
the comparable periods of fiscal year 2008.  The increase is primarily
attributable to the charge of $90,000 during the quarter ended June 30, 2009
related to the issuance of Common Stock in exchange for services.During June 2009, the Company issued
1,000,000 shares of Common Stock to William Smith, a consultant to the Company,
in exchange for $90,000 of services for the marketing of and development of a
market for the Company’s product, ReNugenTM, at $0.09 per
share.





Loss
on Abandonment





During
the quarter ended June 30, 2009, the Company determined that additional efforts
to develop its calcium carbonate minerals in New Mexico were no longer
warranted. Accordingly, the Company charged-off the mineral net book value
($1,876,972) and prepaid royalties ($100,000) in respect to the property during
such quarter. The loss on abandonment of the calcium carbonate property totaled
$1,976,972.





Depreciation,
Depletion and Amortization: Oil and Gas





Depreciation,
depletion and amortization (“DD&A”) totaled $46,692 and $140,076 for the
three and nine months ended June 30, 2009, respectively, and $45,591 and
$136,776 for the comparable periods of fiscal year 2008.





Depreciation,
Depletion and Amortization: Minerals





Depreciation,
depletion and amortization totaled $144,363 and $433,089 for the three and nine
months ended June 30, 2009, respectively, and $194,563 and $583,689 for the
comparable periods of fiscal year 2008. Such amounts include amortization of
Technology and Patent Rights of $144,363 and $433,089 in the three and nine
month periods of each fiscal year, respectively.


General
and Administrative Expenses







These
expenses totaled $91,563 and $327,994 for the three and nine months ended June
30, 2009, respectively, and $150,465 and $578,536 for the comparable periods of
fiscal year 2008.  The Company recorded stock-based compensation
expense of $8,735 and $53,663 for the three and nine months ended June 30, 2009,
respectively, and $32,483 and $162,086 for the comparable periods of fiscal year
2008. General and administrative expenses also decreased as a result of the
Company’s decreased staff.




-16-




Legal
and Professional Fees and Expenses





These
expenses totaled $31,418 and $132,897 for the three and nine months ended June
30, 2009, respectively, and $42,076 and $187,173 for the comparable periods of
fiscal year 2008.  The decrease is primarily attributed to decreased
professional fees related to auditing services. During the nine months ended
June 30, 2008, the Company’s professional fees were reduced by $42,000 which the
Company received in respect to fees charged by a prior auditor engaged by the
Company in fiscal 2004 while such auditor was not registered with the
PCAOB.





Interest
Expense





Interest
expense totaled $52,205 and $154,776 for the three and nine months ended June
30, 2009, respectively, and $80,182 and $164,726 for the comparable periods of
fiscal year 2008.





Liquidity
and Capital Resources





The
Company’s cash flow used in operating activities was $372,400 and $385,363 for
the nine months ended June 30, 2009 and 2008, respectively. Funds have been and
are being deployed in efforts to enhance the commercial viability of the
Company’s existing resource assets, to identify potential expansion
opportunities and to retire obligations associated with the Company’s assets.
The Company’s net cash at June 30, 2009 was $55,639.





Liquidity
is a measure of a company’s ability to access cash.  The Company has
historically addressed its long-term liquidity requirements through the issuance
of equity securities and borrowings or debt financing for certain
activities.





At
present, the Company does not have a credit facility or other line of credit
upon which it may draw. As operating activities increase, the Company will
evaluate the need for such a credit facility.   For desired
acquisitions or project enhancements, the Company must seek project specific
financing.  None of the Company’s properties is
encumbered.





The
prices the Company receives for its oil and gas and the level of production have
a significant impact on the Company’s cash flows.  The Company is
unable to predict with any degree of certainty the prices the Company will
receive for its future oil and gas production and the success of the Company’s
exploration, exploitation and production activities.  Increases in the
sales of the Company’s minerals, which to date have not been mined in
substantial commercial quantities, will also affect cash flow.





In an
effort to address liquidity shortfalls, the Company has instituted cost
containment procedures including staff decreases, sold certain of its oil and
gas properties, and is evaluating the sale of additional oil and gas
properties.It may take months and possibly longer to
sell these properties at a suitable price. The market is affected by many
factors, such as general economic conditions, availability of financing,
interest rates and other factors, including supply and demand that are beyond
our control. We cannot predict whether we will be able to sell a property for
the price or on the termsacceptable tous or whether any price or other terms
offered by a prospective purchaser would be acceptable to us. We cannot predict
the length of time needed to find a willing purchaser and to close the sale of
any property.





During
December 2007, Sonata Investment Company, Ltd. loaned the Company $75,000 which
the Company used to satisfy certain delinquent vendor payables. This note was
repaid in May 2008 with a portion of the proceeds from the sale of the
Pennsylvania properties (see below).





In March
2008, the Company entered into an agreement to sell its interests in certain
operated gas wells and related gas gathering system in West Virginia with cash
consideration to the Company of $150,000 of which $100,000 was received in April
2008. In May 2008, the Company sold its interests in certain oil and gas
properties (primarily undeveloped acreage) in Pennsylvania for
$250,000.




-17-




During
July 2009, the Company offered a Private Placement under the provisions of
Regulation D promulgated under the Securities Act of 1933, as amended (the “2009
Private Placement”). Private Placement consists of up to Five Hundred Thousand
Dollars ($500,000) of 7.25% Convertible Debentures (“Debentures” or
“Debenture”).  The Debentures offered by the Company, are five (5)
year instruments maturing on July 30, 2014, bearing interest at Seven and one
quarter percent (7.25 %) per annum on the balance outstanding from time to
time.  Interest will commence to accrue immediately upon issuance of
the Debentures and will be paid quarterly on each September 30, December 31,
March 31 and June 30, which the Debentures are outstanding.  Payment
of principal will commence on September 30 following the second anniversary of
the Closing Date of this Offering.  The Company's fiscal year ends on
September 30. The Company extended the offering period for the Debentures until
September 15, 2009, at the request of potential investors.




Commercialization
of Existing Assets





During
the quarter ended June 30, 2009, the Company determined that additional efforts
to develop its calcium carbonate minerals in New Mexico were no longer
warranted. The Company continues to pursue plans to commercialize its kaolin and
zeolite projects which are critical for the Company to achieve profitability and
establishing the Company as a market innovator in industrial minerals. Those
plans have progressed from the data acquisition and analysis phase into ongoing
mineral processing and facility design phase. The Company and its current
partner and potential other partners are actively investigating various
commercial applications for its mineral based products.





The
efforts of the Company and Tecumseh Professional Associates LLC to develop the
Sierra Kaolin deposit are progressing. The venture’s efforts to commercialize
the Sierra Kaolin deposit have focused on an initial target area encompassing
approximately 32 acres out of the project’s 2,740 acres. The test minerals
extracted from the target area have been processed into product formulations
determined by independent consultants to be suitable for coatings, fillers and
pigments for use within the paint and paper manufacturing industries. The
analysis results of the processed minerals with respect to its physical
properties such as but not limited to, brightness, color, opacity, oil
absorption have indicated that commercially viable products can be produced from
the deposit’s extracted minerals.





The
venture, with the assistance of its consultants, has begun technical
presentations of the product formulations to entities active on both the demand
and supply sides of the coatings, fillers and pigments sectors of the paint and
paper industries. Preliminary feedback from these initial presentations has been
encouraging and has led to follow-up discussions and submission of product
samples for prospective application testing. The final results of these
inquiries and testing are expected over the next several months. Tecumseh, as
the project’s manager, is proceeding with its efforts to prepare the mineral
deposit site for production. These efforts include the submittal of the required
regulatory filings and follow-up meetings with the representatives of the
various regulatory agencies responsible for the issuance of the extraction
permit for the project. Work continues on product identification and process
flow sheet design and is expected to be completed in the next few
months.





The
Company continues to focus on establishing business and/or financial
relationships that will provide the necessary capital to effectively exploit its
zeolite mineral resource holdings.  With respect to the Company’s
zeolite deposit, certain initial small scale tests have progressed to the point
where larger scalable pilot tests of commercial applications are to be
initiated.





Off-balance
Sheet Arrangements





The
Company has no “off-balance sheet arrangements” and does not expect to enter
into any such arrangements in the foreseeable future.




-18-


Item
3. Quantitative and Qualitative Disclosures About Market
Risk.







None





Item
4. Controls and Procedures.





(a)Evaluation of
Disclosure Controls and Procedures.As of the end of the period covered by
this Quarterly Report on Form 10-Q, our Chief Executive Officer/Chief Financial Officer evaluated, with
the participation of management, the effectiveness of our disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based upon
this evaluation, ourChief Executive Officer/Chief Financial Officer hasconcluded that our disclosure controls
and procedures were effective as ofJune 30, 2009to ensure that information required to
be disclosed in the reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission’s rules and forms.





On June 30, 2009, the Company had three
employees.  All day-to-day financial matters are overseen by the
interim Chief Executive Officer/President/Chief Financial Officer with oversight
by the Board of Directors.  All contracting by the Company, for other
than everyday items, is done with the approval the entire Board of
Directors.





In light of the size of the Company,
its limited cash flow and the transparency of its actions, the Company has
instituted a limited number of formal controls and procedures in addition to
those required under the Sarbanes Oxley Act of 2002 related to the composition
of its Board of Directors and the establishment of various Board Committees.
These policies include an Employee Manual outlining procedures relating but not
limited to employee dispute resolution and issues related to “controlled
substances” and policies in handling the recordation and transfer of funds. Any
problem which cannot be resolved internally or which an employee does not desire
to discuss with a superior may be discussed with counsel or an independent
member of the Board of Directors.




The Chief Financial Officer/Chief
Executive Officer, with the assistance of the Audit Committee, established,
consistent with the provisions of Rule 13a-15(f) and Rule 15d-15(f) of the '34
Act, a procedure and check list for the filing of all information and reports
required by the Securities and Exchange Act of 1934, as amended and the
Sarbanes-Oxley Act ("SOX"). Since the Company employs only three people, as of
the filing date, the responsibility for reporting and filing reports falls on
the shoulders of the Company's Chief Executive Officer/President/Chief Financial
Officer In addition to the mandatory filing requirements established by the
Securities and Exchange Commission, OTC:BB (the exchange on which the
Registrant's stock is traded) and SOX, the Registrant has taken the position
that any transaction that could impact the value of the Company or the Company's
stock by five percent or greater requires disclosure.   All press
releases are published by the Company only after submittal to the Board of
Directors and counsel for review, comment and approval.





The Company's internal controls over
financial reporting and record maintenance have been developed by the Company as
approved by the Board of Directors.  These procedures are for the
detailed and accurate recordation of all transactions in which the Company is
involved and the disposition of assets. They provide reasonable assurance that
the transactions recorded permit the accurate preparation of financial
statements in accordance with generally accepted accounting principals and that
receipt and expenditures of the Company are being made only in accordance with
authorization of management.  The controls provide reasonable
assurances regarding the prevention and timely detection of unauthorized use of
Company assets and acquisition or disposition of the Company's assets that could
have a material effect on the Company's financial statements.





(b)Changes in Internal
Control Over Financial Reporting.No changes were made to our internal
control over financial reporting (as such term is defined in
Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during our most recent
fiscal quarter that have materially affected, or are reasonably likely to
materially affect, our internal control over financial
reporting.




-19-




Code
of Ethics





The Board of Directors of the Company
has adopted a Code of Ethics (see Exhibit 14.1to the Company’s Annual
Report on Form 10-KSB for the fiscal year ended September 30, 2007)for
all of the Company's employees, officers and Directors.  Each officer
and Director of the Company annually affirms that he has read the Company’s Code
of Ethics and agrees to be bound thereby.




Item
4T. Controls and Procedures.





See
      Item 4  above.




-20-




PART
II. OTHER INFORMATION





Item
      1. Legal Proceedings.





None





Item
      1A. Risk Factors.





Not
      required for smaller reporting
companies.





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





None





Item
      3. Defaults Upon Senior Securities.





None





Item
4. Submission of Matters to a Vote of Security Holders.





On April
8, 2009, the Company held its Annual Meeting of Shareholders.  The
following matters were voted upon at such meeting:





a.
            Election
      of Directors for a term expiring in
2009:





Name of
      Nominee
            
            For
            
            
            WithheldDov
      Amir
            
            
            30,523,648
            
            
            
            --Lord
      Gilbert [John}
            
            
            29,725,992
            
            
            
            --David
      A. Grady
            
            
            30,291,471
            
            
            
            --Carl
      A. Haessler
            
            
            30,624,742
            
            
            
            200,000Robert
      E. Martin
            
            
            31,564,549
            
            
            
            --Charles
      T. Maxwell
            
            
            30,578,046
            
            
            
            --Gary
      J. Novinskie
            
            
            30,449,922
            
            
            
            --




b.
            Proposal
      to Ratify the Selection of Vasquez & Company, LLP, as the Company’s
      Independent Registered Public Accounting Firm for the fiscal year ending
      September 30, 2009:





For
            
            
            Against
            
            
            Abstain31,456,464
            
            
            
            1,093,264
            
            
            
            --





-21-




Item
      5. Other Information.





The Company's Common Stock is traded on
the Over the Counter Market, Bulletin Board ("OTC:BB") symbol
“DLOV.”





Item
      6. Exhibits.





Exhibit


Number
            Description – Located
      at





10.22
            Second
      Amendment to Loan Agreement dated December 31, 2003 – Located at Exhibit
      10.22 to the Company’s Form 10-Q for the Quarter Ended March 31,
      2009





31.1
            Certification
      of CEO under Section 302 of the Sarbanes-Oxley Act of 2002 - Filed
      Herewith





31.2
            Certification
      of CFO under Section 302 of the Sarbanes-Oxley Act of 2002 - Filed
      Herewith





32.1
            Certification
      of CEO under Section 906 of the Sarbanes-Oxley Act of 2002 - Filed
      Herewith





32.2
            Certification
      of CFO under Section 906 of the Sarbanes-Oxley Act of 2002 - Filed
      Herewith




The Registrant incorporates by
reference its Exhibit List as attached to its Form 10-KSB for the fiscal year
ended September 30, 2008.




-22-




SIGNATURES





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




DALECO RESOURCES
      CORPORATIONDated:August 19,2009
              
              /s/ Gary J.
      NovinskieGary J.
      NovinskieInterim Chief Executive Officer,
      President,Chief
                Financial Officerand Director(PrincipalExecutive
                Officerand PrincipalFinancial
      Officer)




Dated:August 19, 2009
            /s/ Richard
      W. BlackstoneRichard W.
      BlackstonePrincipal Accounting
      Officer




-23-