<PAGE>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                 FOURTH AMENDED
                                   FORM 10-QSB

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

For the quarterly period ended March 31, 2004
                               --------------

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

For the transition period from __________________ to ______________

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

                          DALECO RESOURCES CORPORATION
              ----------------------------------------------------
              Name of small business issue as specified in Charter

Nevada                                    23-2860734
------                                    ----------
(State or other jurisdiction of           (IRS Employer Identification Number)
incorporation or organization)

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

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

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

                      APPLICABLE ONLY TO CORPORATE ISSUERS

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

Number of shares outstanding of the issuer's common stock as of March 31, 2004:
28,337,402
Number of shares outstanding of the issuer's Series A preferred stock as of
March 31, 2004: 8,000
Number of shares outstanding of the issuer's Series B preferred stock as of
March 31, 2004: 185,000


<PAGE>


                                      INDEX

                                                                            PAGE
PART I   FINANCIAL INFORMATION

ITEM 1   FINANCIAL STATEMENTS (Unaudited)....................................  3
         Consolidated Balance Sheets.........................................  3
         Consolidated Statement Of Loss......................................  5
         Consolidated Statement Of Deficit...................................  6
         Consolidated Statement Of Cash Flow.................................  7
         Notes to Consolidated Financial Statements..........................  8

ITEM 2   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS................................. 30

ITEM 3   CONTROLS AND PROCEDURES............................................. 32

PART II  OTHER INFORMATION................................................... 34

ITEM 2   CHANGE IN SECURITIES................................................ 34

ITEM 4   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................. 35

ITEM 6   Exhibits and Reports on Form 8-K.................................... 36

SIGNATURES................................................................... 37

                                      -2-

<PAGE>

<TABLE>
<CAPTION>
DALECO RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2004 AND SEPTEMBER 30, 2003--
PREPARED BY MANAGEMENT (UNAUDITED) AND SEPTEMBER 30, 2003 (RE-AUDITED)
==============================================================================================================================
                                                                                          MARCH 31, 2004    SEPTEMBER 30, 2003
                                                                                           (UNAUDITED)         (RE-AUDITED)
<S>                                                                                       <C>               <C>
ASSETS
CURRENT ASSETS
         Cash Accounts                                                                       $   260,304          $   428,968
         C/Ds                                                                                    136,000              136,000
         Account receivables                                                                     512,097              423,935
         Prepaid Mineral Royalties (note 5c)                                                     300,297              270,287
         Other Current Assets                                                                      4,569                4,569
                                                                                             -----------          -----------
                              TOTAL CURRENT ASSETS                                           $ 1,213,266          $ 1,263,789
                                                                                             -----------          -----------
OTHER ASSETS
         Prepaid Mineral Royalties L/T                                                       $   265,190          $   265,190



         Debt Placement Costs                                                                    869,861              584,815
         Accumulated Amortization                                                               (608,569)            (584,815)
         Net Debt Placement Costs                                                                261,292                -----
         Equity Placement Costs                                                                    -----                -----
         Accumulated Amortization Equity Costs                                                     -----                -----
         Net Equity Placement                                                                      -----                -----
         Other Assets                                                                              -----                -----

                              TOTAL OTHER ASSETS                                             $   526,482          $   265,190
                                                                                             -----------          -----------
Fixed Assets
         Oil and Gas Properties (note 3)                                                     $12,607,950          $12,607,950
         Accumulated DD&A                                                                     (7,607,950)          (7,307,950)
                  Net Oil and Gas Property                                                     5,000,000            5,300,000
         Mineral Properties (note 5)                                                          12,609,100           12,609,100
         Accumulated DD&A                                                                       (125,000)            (100,000)
                  Net Mineral Property                                                        12,484,100           12,509,100
         Timber Properties (note 4)                                                            1,028,342            1,028,342
         Accumulated DD&A                                                                     (1,208,342)          (1,028,342)
                  Net Timber Property                                                              -----                -----
         Technology/Patent Rights (note 6)                                                     7,767,000            7,767,000
         Accumulated DD&A                                                                     (2,539,938)          (2,166,123)
                  Net Tech./Patent Rights                                                      5,227,062            5,600,877
         Property, Equipment, Furniture & Fixtures                                               514,749              514,749
         Accum. Depr (P, E, P & P)                                                              (499,640)            (493,998)
                  Net (P, E, P & P)                                                               15,109               20,751
         Leasehold Improvements                                                                    -----                 ----
         Accumulated Amortization (Lse Improvements)                                               -----                  ---
                  Net Lse Improvements                                                             -----                  ---
                              TOTAL FIXED ASSETS                                             $22,726,271          $23,430,726
                                                                                             ===========          ===========
                              TOTAL ASSETS                                                   $24,466,019          $24,959,707
                                                                                             ===========          ===========
</TABLE>

                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                      -3-

<PAGE>

<TABLE>
<CAPTION>
DALECO RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2004 AND SEPTEMBER 30, 2003--
PREPARED BY MANAGEMENT (UNAUDITED) AND SEPTEMBER 30, 2003 (RE-AUDITED)
==============================================================================================================================
                                                                                          MARCH 31, 2004    SEPTEMBER 30, 2003
                                                                                           (UNAUDITED)         (RE-AUDITED)
<S>                                                                                       <C>               <C>
LIABILITIES
CURRENT LIABILITIES
         Trade A/P                                                                         $     964,750        $     970,347
         Notes Payable (note 7)                                                                  142,543              142,543
         Note Due related Pty (note 8).                                                          742,410              733,410
         HFI Financing (note 10a)                                                                  -----            5,154,783
         Loans--1st Regional (note 10d)                                                          100,000              100,000
         CAMI Notes                                                                              514,881              514,881
         Sonata and Standard Energy  Financing (notes 7b and 10b)                                221,126                -----
         Accrued Interest Expense (notes 10a and 10b)                                            329,682            1,786,871
         Accrued Dividend Expense (notes 11d and 16)                                           2,332,950            1,243,043
         Accrued Expense Reimbursements                                                           64,837               60,187
         Accrued Salary Expense                                                                  507,583              364,351
                              TOTAL CURRENT LIABILITIES                                    $   5,920,763        $  11,075,416
                                                                                           -------------        -------------
LONG TERM LIABILITIES
         Long Term Debt                                                                    $     386,970        $       -----
         Mandatory Redeemable Preferred Stock                                                    400,000              400,000
         Total Long Term Debt                                                              $     786,970        $     400,000
                                                                                           -------------        -------------
                              TOTAL LIABILITIES                                            $   6,707,734        $  11,475,416
                                                                                           -------------        -------------
EQUITY
         Beginning Retained Earnings                                                       $ (20,670,413)       $ (22,421,362)
         Current Period Income/(loss)                                                           (603,105)          (2,672,386)
         Dividends Paid (Cash & Stock)                                                             -----              (10,000)
         Add. Paid in Capital                                                                 38,746,579           38,322,010
         Preferred Stock (note 11)                                                                 1,850                3,100
         Common Stock (note 11)                                                                  283,374              262,849

                                   TOTAL EQUITY                                            $  17,758,878        $  13,484,291
                                                                                           -------------        -------------
                              TOTAL LIABILITIES AND EQUITY                                 $  24,466,019        $  24,959,707
                                                                                           =============        =============
</TABLE>


                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                      -4-

<PAGE>

<TABLE>
<CAPTION>
DALECO RESOURCES CORPORATION
CONSOLIDATED STATEMENT OF LOSS FOR THE QUARTERS ENDING AND THE SIX MONTHS
ENDING MARCH 31, 2004 AND 2003 -- PREPARED BY MANAGEMENT (UNAUDITED)
===========================================================================================================================
                                                                      3 Months Ending                    6 Months Ending
                                                                   2004             2003              2004             2003
                                                                   ----             ----              ----             ----
<S>                                                          <C>             <C>              <C>               <C>
REVENUE
     O&G Sales                                               $  286,105       $  327,603      $    629,765     $    672,060
     N P I Receipts                                                                -----             -----            -----
     Royalty Receipts                                             8,972            6,710            16,988           12,018
     Timber Sales                                                                  -----             -----            -----
     Mineral Sales                                                6,918            -----            25,399            -----
              Total Operating Income                         $  301,995       $  334,313      $    672,152     $    684,079
                                                             ----------       ----------      ------------     ------------
     Interest Income                                                  $            -----             -----            -----
     Well Management                                             41,506           16,505            58,011           33,616
     Other Income                                                34,700            -----         5,823,250            -----
              Total Other Income                             $   76,206       $   16,505      $  5,881,261     $     33,616
                                                             ----------       ----------      ------------     ------------
              Total Income                                   $  378,201       $  350,819      $  6,553,514     $    717,695
                                                             ==========       ==========      ============     ============
EXPENSES
     LOE - Oil and Gas                                       $  260,108       $  148,002      $    473,951     $    306,225
     LOE--Timber                                                  2,700            3,500             6,000            9,000
     LOE--Minerals                                               11,391           14,138            70,875           49,138
     N P I Exp.                                                   -----            -----             -----            -----
     Prod Tax                                                    20,970           25,977            46,110           53,515
     DD&A (Fixed Assets)   642,512                              360,016          321,256           704,457          642,512
     Third Party Distributions                                    7,223            5,808            16,144            9,837
              Total Operational Expense                      $  662,408       $  518,682      $  1,317,537     $  1,070,227
                                                             ----------       ----------      ------------     ------------
     Interest Expense                                            43,765          164,398           185,453          344,748
     General and Administrative Expenses                        163,583          131,780           338,543          225,462
     Legal and Professional Fees                                 64,094          112,362           139,809          232,383
     Financial Advisor Fees                                       -----            -----             -----            -----
     Shareholder Information                                     23,702            -----            26,900            1,841
     Amortization of Debt Costs                                  23,754            -----            23,754            -----
     Amortization of Goodwill                                     -----            -----             -----            -----
         Total Expenses                                      $  981,306       $  927,222      $  2,031,996     $  1,874,662
                                                             ----------       ----------      ------------     ------------
Net Income (Loss) before  gain on debt forgiveness (Note 10) $ (603,105)      $ (576,404)     $ (1,266,268)    $ (1,156,967)
                                                             ==========       ==========      ============     ============
Basic and Fully Diluted Net Loss per Common Share                 ($.02)           ($.02)            ($.04)           ($.04)
Gain On Debt Forgiveness (Note 10)                                  N/A              N/A        $5,787,687              N/A
Basic /Fully Diluted Net Effect Gain (Loss)/Share (Note 10)         N/A              N/A         $.20/$/15              N/A
Net Income (Loss) After  gain on debt forgiveness (Note 10)         N/A              N/A        $4,521,418              N/A
Basic/Fully Diluted Income (Loss)/Share  (Note 10)                  N/A              N/A         $.16/$.11              N/A
</TABLE>

                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                      -5-

<PAGE>

<TABLE>
<CAPTION>
DALECO RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF DEFICIT FOR THE SIX MONTHS
ENDED MARCH 31, 2004 AND 2003 - PREPARED BY MANAGEMENT (UNAUDITED)
==========================================================================================================

                                                                                    2004              2003
                                                                                    ----              ----
<S>                                                                        <C>               <C>
DEFICIT - BEGINNING OF PERIOD                                              $ (25,103,748)    $ (22,421,362)
Net loss for the period                                                        4,521,418        (1,156,968)
Dividends on Preferred Stock                                                    (691,188)            ----
DEFICIT - END OF PERIOD                                                    $ (21,273,518)    $ (23,508,330)
</TABLE>



























                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                      -6-

<PAGE>


<TABLE>
<CAPTION>
DALECO RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE QUARTERS ENDING AND SIX MONTHS
ENDING MARCH 31, 2004 AND 2003 - PREPARED BY MANAGEMENT (UNAUDITED)
===========================================================================================================================
                                                                      3 Months Ending                    6 Months Ending
                                                                   2004             2003              2004             2003
                                                                   ----             ----              ----             ----
<S>                                                          <C>              <C>             <C>              <C>
OPERATING ACTIVITIES
Net Income/( loss) for the period                            $ (603,105)      $ (576,404)     $  4,521,418     $ (1,156,967)
Items not affecting working capital
     Change in DD & A for period                             $  383,770       $  321,256      $    728,211     $    642,512
     Debt Amortization                                           23,754            -----            23,754
     Amortization of Good Will                                    -----            -----             -----            -----
     Gain on Debt Forgiveness                                     -----            -----        (5,787,687)           -----
                  Sub Total                                  $  407,524       $  321,256      $ (5,035,722)    $    642,512
                                                             ----------       ----------      ------------     ------------
Items affecting Working Capital:
     (Increase) Decrease in other assets                     $    -----       $      800      $   (285,046)    $        800
     (Increase) Decrease in Pre-paid Royalties                    -----            -----           (30,000)           -----
     (Increase) Decrease in accounts receivable                   9,029          225,733           (88,162)         463,336
     Increase (Decrease) in Trade payables                     (851,908)        (147,155)           (5,597)        (359,791)
     Increase. (Decrease) in other Accrued Expenses              66,027           33,403           147,882           94,880
     Gain/(loss) on Sale of Properties                           34,700            -----            34,700            -----
                  Sub Total                                  $ (742,152)      $  112,781      $   (226,223)    $    199,225
                                                             ----------       ----------      ------------     ------------

CASH PROVIDED (USED) FOR OPERATING ACTIVITIES                $ (937,733)      $ (142,367)     $   (740,527)    $   (315,230)
                                                             ----------       ----------      ------------     ------------

INVESTING ACTIVITIES
     (Increase)/decrease in Investment in Subsidiaries       $    -----       $    -----      $      -----     $      -----
     Leasing, Acquisition and Well Costs Incurred                 -----            -----             -----            -----

CASH PROVIDED FROM/(USED FOR) INVESTING ACTIVITIES           $    -----       $    -----      $      -----     $      -----

FINANCING ACTIVITIES
     Increase/(decrease) Notes due Related Parties           $    6,000       $   19,000      $      9,000     $     19,000
     Increase/(decrease) Other Notes due                          -----            -----             -----            -----
     Increase/(decrease) Sonata Note Due                        (23,606)           -----           608,096            -----
     Increase/(decrease) Accrued Interest                        69,926          (36,823)       (1,457,189)         (39,679)
     Increase/(decrease) Accrued Dividends                      850,590           85,000         1,084,907          170,000
     Dividends Paid                                               -----            -----             -----            -----
     Proceeds of Equity Issuance                                 26,867          262,075           287,029          357,075
     Proceeds of L/ Debt   -                                      -----         (225,000)           40,000         (300,000)
CASH PROVIDED FROM/(USED FOR) FINANCING ACTIVITIES           $  929,777       $  104,252      $    571,843     $    206,396
                                                             ----------       ----------      ------------     ------------
NET INCREASE/(DECREASE) IN CASH FOR PERIOD                   $   (7,956)      $  (38,115)     $   (168,684)    $   (108,834)

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD              $  404,260       $  554,963      $    564,988     $    625,682
CASH AND CASH EQUIVALENTS - END OF PERIOD                    $  396,304       $  516,848      $    396,304     $    516,848
     CHANGE IN CASH FY 1ST QTR.                              $   (7,956)      $  (38,115)     $   (168,684)    $   (108,834)
                                                             ==========       ==========      ============     ============
</TABLE>

                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                      -7-

<PAGE>


DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2004 AND 2003 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

1.       CONTINUED OPERATIONS
The Company's audited financial statements for it fiscal year ending September
30, 2003, were re-audited by the accounting firm of Vasquez & Company, LLP and
filed with the Securities and Exchange Commission on January 11, 2005. Vasquez &
Company was retained by the Company to replace its prior auditor, Jay J.
Shapiro, who resigned as the Company's auditor on September 9, 2004. (See the
Company's Form 8-K dated September 14, 2004, Form 8-K dated December 2, 2004 and
Form 8-K dated December 3, 2004). The Company filed its First Amendment to it
Annual Report on Form 10-KSB for the period ending September 30, 2003 on January
11, 2005. The Audited Numbers referenced herein are taken from the Company's
Audited Financial Statements as filed on January 11, 2005.

         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. For the quarter ending March 31, 2004, the
Company reported a loss of $603,105. The ability of the Company to meet its
total liabilities of $6,307,734, and to continue as a going concern is dependent
upon the availability of future funding, achieving profitable timber operations
and successful development its 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
lesser 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. In accordance with the provisions of the Equity
Line of Credit, the Company filed a registration statement on Form SB-2 with the
Securities and Exchange Commission, which became effect on November 7, 2002.
Commencing in November 2002 and concluding in January 2003, CCP converted the
entire Debenture in 5,027,881 shares of common stock at an average price per
share of $0.117 when including all other fees and costs associated with the
issuance of the debentures and $0.06 if just the conversion price without
including other fees and costs.

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

         As of March 31, 2004, the Company was in default of certain debt
obligations (See Notes 7, 8 and 14 below). The holders of these instruments are
working with the Company to achieve the extinguishment of the obligations.

                                      -8-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2004 AND 2003 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

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., Tri-Coastal
Energy, L.P., 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.

         C.       OIL AND GAS PROPERTIES AND EQUIPMENT

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

         Costs of exploratory wells found to be dry during the year or before
the issuance of these financial statements are charged against earnings in that
year. Costs of successful exploration wells and development wells are
capitalized. All costs of development wells and successful exploration wells are
charged to earnings on a unit-of-production basis based upon proved developed

                                      -9-
<PAGE>


DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2004 AND 2003 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================
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 including $20,000,000 in mineral properties.

         D.       SITE RESTORATION, DISMANTLEMENT AND ABANDONMENT COSTS

         The salvage value of producing wells or mining deposits 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.

         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.

                                      -10-
<PAGE>


DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2004 AND 2003 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

         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 of $285,046 were capitalized in the quarter ending
December 31, 2003, and represent those costs associated with Sonata Investment
Company, Ltd.'s acquisition of Heller Financial, Inc. loan and the restructuring
of the Heller Loan (see Note 10).

         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.

3.       OIL AND GAS AND EQUIPMENT

                                                         March 31,     March 31,
                                                              2004          2003
                                                              ----          ----

Proven lease acreage costs                             $ 5,429,996   $ 5,429,996

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

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

Accumulated depletion, depreciation and amortization     7,457,950     6,432,950
                                                       -----------   -----------
                                                       $ 5,150,000   $ 6,175,000
                                                       -----------   -----------

                                      -11-
<PAGE>


DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2004 AND 2003 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================
(A)      SALE OF OIL AND GAS PROPERTIES

         On or about July 31, 2002 but effective as of July 1, 2002, the Company
sold certain oil and gas properties in 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.

         In January, 2004, the Company sold certain inactive oil wells in
Pontotoc County, Oklahoma for net proceeds amounting to $30,500 and the
assumption of all residual abandoning liabilities. The proceeds from the sale of
these wells went to reduce the Sonata Loan (See Note 10(a)).

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.

         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. The
Company has fully written off its investment in Sustainable.

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

5.       MINERAL PROPERTIES

A.       CLEAN AGE MINERALS INCORPORATED. CLEAN AGE MINERALS INCORPORATED. In
         September 2000, the Company acquired Clean Age Minerals Incorporated
         ("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) twenty eight (28) mining claims
         located in Sierra County, New Mexico covering 2,675 acres(+/-) of
         Kaolin; and (d) 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 THREE MONTHS
ENDED MARCH 31, 2004 AND 2003 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

         B.       MINERALS AND EQUIPMENT
                                                    3/31/2004        3/31/2003
         Proven undeveloped lease costs           $12,609,100      $12,609,100
         Mine development costs                         -----               --
         Accumulated depletion and                   (125,000)              --
         Depreciation
                                                  $12,484,100      $12,609,100
                                                  -----------      -----------

                   (1). The Company has begun to amortize its mineral properties
         at a nominal amortization rate of $100,000 per year subject to higher
         adjustments per year as production increases. During the quarter ending
         March 31, 2004, the Company took a charge of $25,000 towards the annual
         amount. The Company is utilizing a modified unit of production basis in
         determining its amortization rates for its mineral properties.


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. During Fiscal year 2003 the Company
         conducted mining activities on its Kaolin deposits in Sierra County,
         New Mexico for the purpose of testing the minerals and producing
         samples for sales. The Company commenced production of its New Mexico
         Calcium Carbonate properties in Fiscal Year 2003. It anticipates the
         commencement of the commercial production of its Kaolin deposits in
         Fiscal Year 2004, and has commenced production of its Zeolite deposit
         in the first quarter of Fiscal Year 2004. The Company did make limited
         sales of its CA Series products in Fiscal Year 2003 primarily for
         testing to confirm their suitability for certain applications. The
         Company began the commercial sales of one of its CA Series Products
         under the tradename "ReNuGen" in the first quarter of 2004. Testing of
         the Company's Kaolin was commenced in December 2002 to confirm its
         properties in various applications in the paper, paint and coating
         industries. A portion of the Prepaid royalties ($265,190) attributable
         to the Calcium Carbonate deposits are not anticipated to be fully
         recovered in Fiscal Year 2004 and are carried as Long Term Assets. The
         remainder of the prepaid royalties ($300,297) are anticipated to be
         fully used in Fiscal Year 2004 and are listed as Current Assets.

                                      -13-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2004 AND 2003 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

6.       PATENTS & TECHNOLOGY


         As part of the acquisition of Clean Age Minerals Incorporated (See Note
         5(a) above), the Company also acquired U.S. Patent No: 5387738. This
         patent, owned by Clean Age Minerals Incorporated (previously owned by
         Matrix-Loc, Inc. which was acquired by Clean Age Minerals Incorporated
         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.
         patent application on its I(2) Technology as denied by the United
         States Patent Office on June 13, 2003. The Company has elected, at this
         time, not to appeal the Patent Office Examiner's decision or proceed
         with the "independent build-out" of the technology in a proprietary but
         unpatented form.

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 ($32,213) 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)). As of March 31, 2004, the Company owed the Kanes
         $70,000 of accrued but unpaid interest.

b.       During fiscal 1998, the Company borrowed $145,000 from four (4)
         persons. The debt was evidenced by Notes that matured on November 21,
         1998. The Notes earned interest at 2% over the prime rate charged by
         the Huntingdon National Bank of Columbus, Ohio, through the maturity
         date, and 18% thereafter. The Note holders were also given warrants.
         (See Note 11(b)-- Warrants) $75,000 in principal amount plus accrued

                                      -14-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2004 AND 2003 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

         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, 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. Since June 30, 2002, only two of
         the original four (4) notes, each in the face amount of $25,000, remain
         outstanding. The accrued but unpaid interest on these two notes as of
         March 31, 2004 is $30,218.

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 March 31, 2004, the total amount payable on these
         notes is $659,047 representing principal of $514,881 and accrued but
         unpaid interest of $144,166.


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. This amount remains
         outstanding as of March 31, 2004.

         (2) Note dated October 1, 1995 bearing interest at the rate of 7% as a
         result of various advances as to the Company in the principal amount of
         $484,348 as of March 31, 2004.

         (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 Huntingdon National Bank of Columbus, Ohio, through the maturity
         date, November 21, 1998 and 18% thereafter.


                                      -15-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2004 AND 2003 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

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

         As of March 31, 2004, the outstanding principal and accrued but unpaid
         interest on the obligations listed under numbers 1 through 4 to Mr.
         Amir amounted to $807,758.

         Mr. Amir was also entitled to a cash payment of $25,000 under his Key
         Man Contract on June 30, 2002. This bonus has not been paid (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
         $91,551 of which $59,338 remains outstanding (See Note 7(a)).

         As of March 31, 2004, the Company owed Mr. Amir $10,809 in
         un-reimbursed business expenses and $137,504 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
         were reflected in the prior financial statements. Mr. Amir subsequently
         advanced the Company an additional $137,000 (see 8(a)(4) above).

         Mr. Amir converted $10,000 of indebtedness into 71,942 shares of Common
         Stock as of December 3, 2002. The conversion was at the average of the
         closing bid and asking price for the Common Stock for the five trading
         days prior to the date of conversion.

         As of March 31, 2004, the Company was indebted to Mr. Amir in the
         aggregate amount of $1,061,039.

(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 March 31, 2004, the Martin Debt amounts to $172,520
         representing $134,811 in principal and $37,709 in accrued but unpaid
         interest. The Martin Debt is evidenced by a Note providing for an
         annual rate of interest of 8%. These amounts are included in the
         amounts shown for the Company's obligation to the former officers and
         directors of Clean Age Minerals Incorporated. (See Note 7(c)). As of
         March 31, 2004, the Company owed Mr. Martin $137,501 in accrued but
         unpaid salary and $12,864 in accrued and unpaid reimbursable business
         expenses.

                                      -16-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2004 AND 2003 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

(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 September 30, 2002. This bonus was not paid. As of March
         31, 2004, the Company owed Mr. Novinskie $40,418 in unreimbursed
         expenses and $137,505 in accrued but unpaid salary and $25,000 in
         accrued and unpaid bonuses (as discussed previously).

         Mr. Novinskie converted $10,000 of indebtedness into 71,942 shares of
         Common Stock as of December 3, 2002. The conversion was at the average
         of the closing bid and asking price for the Common Stock for the five
         trading days prior to the date of conversion. As of March 31, 2004, the
         Company was indebted to Mr. Novinskie in the aggregate amount of
         $177,923.


9.       DEBENTURES

                                                      2003             2002
                                                      ----             ----

                  8% Convertible Debentures        $30,000          $30,000

         A.       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 March 31, 2004, $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:

                                      -17-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2004 AND 2003 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

         A.       SONATA LOAN

                  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 (principal and accrued
         interest) under this arrangement as of September 30, 2003 and 2002, was
         $6,708,474 and $6,967,975, respectively. Interest on the borrowings was
         at prime plus 2%. Principal was paid out of 85% of the net cash flow
         from the properties. Additional interest was 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, due to the
         pledged properties failure to generate the required interest payments.
         This failure was solely attributable to the low worldwide prices for
         oil. As a result, the full amount of the Heller Loan had been
         reclassified as current debt. With the recovery of oil prices, the
         Heller Loan had come back into compliance and on October 15, 2003,
         Heller declared the Heller Loan to be in full compliance. The
         obligations to Heller were non-recourse to the Company and payable
         solely out of the oil and properties pledged to Heller as collateral.
         By agreement between Heller and Tri-Coastal, the Termination Date of
         the Heller Loan was extended from October 15, 2003 until January 31,
         2004. In the Company's third fiscal quarter (March through June 2003)
         Heller advised Tri-Coastal that it was desirous of liquidating
         Tri-Coastal's oil and gas properties in full satisfaction of the Heller
         Loan. Heller had previously wanted Tri-Coastal to sell its oil and gas
         properties, however, a purchase price acceptable to Heller could not be
         obtained.

                  At Heller's request, Tri-Coastal engaged Madison Energy
         Advisors to assist in marketing Tri-Coastal's properties.

                  Through Tri-Coastal's efforts, Sonata Investment Company,
         Ltd., ("Sonata") an affiliate of Standard Energy Company of Columbus,
         Ohio, became aware of Heller's desire to either sell the Tri-Coastal
         properties or sell the Heller Loan.

                  Sonata is an independent, privately held company that is not
         affiliated with the Company in management, ownership or in any other
         fashion. The Company has done other financings (see Note 10(b) below)
         with Sonata previously, and the Company has consulted for Sonata and/or
         its affiliated entities regarding oil and gas projects, acquisitions,
         exploration and development plays.

                                      -18-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2004 AND 2003 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

                  Sonata and Heller arrived at an agreement by which Sonata
         would purchase the Heller Loan for $605,000. Sonata simultaneously
         entered into an agreement with Tri-Coastal and the Company whereby
         Sonata would advance to Tri-Coastal/Daleco an additional $50,000 for
         working capital and reduce the amount of the Heller Loan to $655,000
         ("Sonata Loan"). In consideration of Sonata's reduction of the Heller
         Loan from $5,154,783 to $655,000, Daleco agree to:

                  (1) issue to Sonata or its nominee 250,000 shares of Daleco
         Common Stock (see Note 11);

                  (2) grant Sonata or its nominee warrants for 250,000 shares of
         Daleco Common Stock at $.906 per share with an expiration date of
         December 31, 2007 (see Note 11(b)); and

                  (3) extend the expiration dates for the warrants currently
         held by Sonata until December 31, 2007 (see Note 11 (b))

                  On December 31, 2003, Sonata acquired the Heller Loan from
         Heller Financial, Inc. for $605,000. Tri-Coastal made a principal
         reduction payment of $23,298 to Sonata on December 31,2003. This
         payment was consistent with the provisions of both the Heller Loan and
         the Sonata Loan and was made in the ordinary course.

                  Tri-Coastal, Sonata and Daleco entered into a Second Amended
         Loan Agreement amending the Heller Loan Agreement dated August 22, 1997
         ("Heller Loan Agreement") and the First Amended Loan Agreement dated
         March 27, 1998 ("First Amended Loan Agreement") (hereinafter the Heller
         Loan Agreement, First Amended Loan Agreement and the Seconded Amended
         Loan Agreement are collectively referred to as the "Sonata Loan
         Agreement").

                  The Sonata Loan Agreement provides that the Heller Loan: (i)
         was reduced to a three (3) year loan in the principal amount of
         $655,000 plus interest at the prime rate, to move, as established by
         the National City Bank, Columbus, Ohio plus three percent ("Sonata
         Loan"); (ii) will be repaid out of 85% of the net revenues from
         Tri-Coastal's oil and gas properties, but in no event will the amount
         of interest and principal paid in any six month period be less than
         one-sixth of the original face amount of the Sonata Loan, less any
         prepayments, plus all accrued and unpaid interest with the full amount
         of the Sonata Loan plus all accrued and unpaid interest paid in full on
         or before December 30, 2006; (iii) 66 2/3rds of the net cash flow from
         production from Tri-Coastal's assets after satisfaction of the Sonata
         Loan; (iv) the issuance of stock and warrants as set forth above; and
         (v) Daleco's guaranty of the Sonata Loan.

                                      -19-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2004 AND 2003 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

                  Under the terms of the Sonata Loan Agreement, the Sonata Loan
         will become a general obligation of the Company.

                  As a result of the purchase of the Heller Loan and the entry
         into the Sonata Loan Agreement in the first quarter of fiscal year
         2004, the Company realized:

                  (1)      Reduction of the Heller Loan from $5,154,783 to
         $655,000;

                  (2)      Reduction in accrued interest payable of $1,572,000;

                  (3)      Transaction costs recorded as Debt Placement Costs on
         the Balance Sheet of $285,046 consisting of:

                           (a)      $226,500 for issuance of the 250,000 shares
                                    of common stock;

                           (b)      $48,546 for the extension of warrants held
                                    by Sonata; and

                           (c)      $10,000 in legal costs associated with the
                                    transaction.

                  The transaction resulted in an net benefit amounting to
         $5,787,687.

                  As a result of the benefit of this gain resulting from
         Sonata's acquisition of the Heller Loan as set forth above, the
         "Earnings Per Share Calculations" comparison for the quarter ending
         December 31, 2003, the fiscal quarter when the transaction occurred,
         was recorded as follows:

                                      -20-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2004 AND 2003 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================
                                                        Fiscal Quarters Ending
                                                        ----------------------
                                                          12/31/03     12/31/02
                                                          --------     --------

Net Income (loss) (before gain on debt forgiveness)     $ (663,163)  $ (580,564)
Basic and Fully Diluted Income (loss)/Share,                 ($.02)       ($.03)
(calculated on 28,307,975 shares outstanding)

Gain on debt forgiveness                                $5,787,687
Net Gain (Loss)/share, Basic and fully Diluted           $.20/$.15

Net Income (loss)(including gain on debt forgiveness    $5,124,523   $ (580,564)
Basic and Fully Diluted Income (loss)/Share              $.18/$.13        ($.03)
     (calculated on 28,307,975 shares outstanding, Basic &
      39.327,554 shares, Fully Diluted Basis)


         As of March 31, 2004, $46,904 of principal and $6,895 of interest had
         been paid to Sonata on the Sonata Loan.

         B. SONATA INVESTMENT COMPANY, LTD. (See also Note 10(a) above).

         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 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.       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, 2004. The loan is secured by personal
         assets of Dov Amir an officer and Director of the Company.

                                      -21-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2004 AND 2003 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

         d. Mr. Erlich, a former officer and director of the Company loaned
         $87,543 ("Loan Amount") to the Company. This loan is evidenced by a
         Note dated February 1, 2000 and has no maturity date. The Note provides
         that the Loan Amount shall earn interest at the rate of nine percent
         (9%) per annum. As of March 31, 2004, the total principle and accrued
         interest on the Note amounts were $130,877.


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>
Balance as of March 31, 2003                            25,754,261                        8,000             375,000
Issuance on the conversion of (2)                        1,520,000                                         (190,000)
     Series B Preferred
Issuance on Payment of Dividends (2)                       552,950
     On Series B Preferred
Issuance to Sonata as payment for (3)                      250,000
     L/T Debt Financing
Issuance on Terms of Terra Silex Financing(4)              220,169
Issuance on payment of obligations (5)                      40,022
     By H. P. Pryor, a Director of the Company &
     Mr. Lyons, a printer used by the Company
     R.A. Lenser and Associates

Ending Balance as of March 31, 2004                     28,337,402                        8,000             185,000
                                                        ----------                        -----             -------
</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.

                                      -22-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2004 AND 2003 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

 (2) During Fiscal Year 2003, the holders of Series B Preferred Stock converted
     190,000 shares of Preferred Stock for 1,520,000 shares of Common Stock. The
     stock was converted at the price of $1.25 per share of Common Stock. The
     Series B Preferred Stock has a face value of $10.00 per share. Interest was
     also paid in common stock at the time of conversion.

 (3) On December 31, 2003, Sonata Investment Company, Ltd. ("Sonata") acquired
     the Heller Loan (See Note 10(a)) and reduced the face amount of the Loan.
     As a condition of and as part of the fee for acquiring the Heller Loan (See
     Note 10(a)) and reducing the loan to $655,000 Sonata was given 250,000
     shares of common stock. The closing price for the Company's common stock on
     December 30, 2003, he day prior to the award, was $.906 per share. The
     value of the stock given to Sonata was thus $226,500.

 (4) Terra Silex Holding, LLC was issued 220,169 shares of Common Stock in
     accordance with Paragraph 6.3 of the Terra Silex Stock Purchase Agreement
     at a price of $.117 per share. Paragraph 6.3 of the Terra Silex Stock
     Purchase Agreement, Antidilution, gives Terra Silex Holdings, LLC the right
     to purchase stock should the Company sell over 500,000 shares in "one
     block". The conversion of the Cornell Capital Debenture triggered Terra
     Silex's right to exercise the antidilution provisions of its agreement with
     the Company.

 (5) As of February 28, 2003, Mr. Pryor, a director of the Company, converted
     $450.75 of debt owed to him by the Company into 3,563 shares of common
     stock. Mr. Lyons accepted 7,032 shares in full satisfaction of the
     Company's obligation to his printing company. R.A. Lenser and Associates
     accepted 29,472 shares of Common Stock in satisfaction of $26,867 owed by
     the Company for oil and gas engineering services.

     During the period ending March 31, 2004, the Company issued shares of it
     common stock in-lieu of monetary payments to certain third party venders,
     directors, attorneys and/or employees of the Company for services, debt
     and/or products provided. (See Note 5 above.) In accordance with procedures
     established SFAS 123, the Company values the stock consideration paid for
     all such market priced services, debt and/or products at the fair market
     value of the security issued at the time of its issuance. The Company has
     followed the practice of utilizing the average of the bid and offer closing
     prices for its stock for the five business days immediately preceding the
     issuance date as a measure of the fair market value of its securities.

                                      -23-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2004 AND 2003 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

         A.       COMMON STOCK OPTIONS
                                                      MARCH 31,        MARCH 31
                                                           2004            2003
                                                           ----            ----
                  Outstanding and Exercisable
                   at beginning of period (1)         5,500,000       6,110,000

                  Canceled                                -----        (524,384)

                  Granted (2)                           400,000           -----

                  Reclassified                            -----         (85,616)

                  Exercised                               -----            (---)

                  Outstanding and Exercisable
                   at end of period (3)               5,900,000       5,500,000
                                                      ---------       ---------

         (1) Of the 5,900,000 options outstanding, 4,830,000 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 $1.08
         per share.

         (2) Options for 400,000 shares of Common Stock at a price of $.853 were
         grant to two independent directors, Mr. Pryor (200,000) and Lord
         Gilbert (200,000) under the Company's Non-Qualified Independent
         Director Stock Option Plan as approved by the Shareholders of the
         Company at it's the Annual Shareholder's Meeting on March 25, 2004.

         (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 March 31, 2004, consist of the
following(1):

                                                                     PRICE PER
ISSUANCE                        EXPIRATION DATE      AMOUNT (1)        SHARE
--------                        ---------------      ----------        -----
Financing Sources (1) & (2)   November 20, 2005 to                   $0.55 to
                               December 31, 2007      699,579          $1.05

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

                                      -24-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2004 AND 2003 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

         (1)      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, November 20, 2005, at an exercise
         price of $0.55.

         (2) 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)). As additional consideration for the acquisition of the Heller
         Loan, the expiration date for the Sonata and Standard Warrants was
         extended until December 31, 2007. 250,000 warrants were also issued to
         Sonata Investment Company as additional consideration for acquisition
         the Heller Loan at an exercise price of $.906 per share with an
         expiration date of December 31, 2007 (See Note 10(a)).

         (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.

                                      -25-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2004 AND 2003 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

         (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 (primary basis) was calculated on the primary
         basis of the weighted average number of common shares outstanding that
         amounted to 28,337,402 (Fully Diluted--39,756,981 for the period ending
         March 31, 2003 (March 31, 2004 - 25,754,261). For the periods ending
         March 31, 2004 and 2003, the exercise of the options and warrants
         outstanding as at year end did not have a dilutive effect on the net
         income per share (see also Note 10(a)).

         D.       PAYMENT OF ACCRUED DIVIDENDS

         $1,384,021 of accrued dividends attributable to the 8% Cumulative
         Convertible Preferred Stock issued in the acquisition of CAMI ("CAMI
         Preferred") was paid in 1,058,168 shares of Common Stock upon
         conversion of 1,816,800 shares of the CAMI Preferred Stock to Common
         Stock commencing October, 2001 through March 31, 2004. See also Note
         14(b), regarding payment of accrued dividends on the Series A Preferred
         Stock held by the Kanes through March 31, 2004.

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 $26.1 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.

                                      -26-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2004 AND 2003 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

13.      EMPLOYMENT CONTRACTS AND COMMITMENTS

a.       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. 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 also has not been paid. (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. (See Note 8(b).

14.      LITIGATION SETTLEMENT AND PENDING LITIGATION

a.       Kane v. Daleco Resources Corp., et. al. On or about January 14, 2000,
         Stanley B. Kane, et. al. commenced an action in the Superior Court, Los
         Angeles, California to enforce their right to have the Company
         repurchase 16,000 shares (stated value $50,000 purchase) of Series A,
         10% Cumulative Preferred Stock. The Plaintiffs had the right to put the
         stock to the Company on August 20, 1999, which they did. Although the
         Company continued to pay quarterly dividends 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 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 dividends through the date of settlement at a

                                      -27-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2004 AND 2003 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

         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
         June 30, 2002. Payments for the last seven quarters ending March 31,
         2004, in the amount of $70,000, are still outstanding.

         Mr. Erlich has filed a Cross Complaint against the Company for payment
         of his obligation under his guarantee and his loans to the Company.
         (See Note 7(a)). The Company and Mr Erlich have agreed to stay his
         counterclaim until January 1, 2005 during which time the Company can
         satisfy the Erlich Note (See Note 7(d)) and the suit will be dismissed.

15.      ACQUISITIONS

         DALECO'S 16/6, INC.

         Effective July 7, 2001, Daleco acquired 16/6, Inc., a software
development firm The I(2) technology covers the ability to extract certain text
documentation from existing published documents from the Internet and
micro-payments thereof.

         Daleco acquired all of the outstanding capital stock of 16/6, Inc. in
exchange for 1,000,000 shares of common stock of
Daleco.

16.      NEW ACCOUNTING STANDARD

         In May 2003, the Financial Accounting Standards Board (FASB) issued
SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics
of both Liabilities and Equity. This Statement establishes standard for how an
issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. SFAS No. 150 requires that an
issuer classify a financial instrument that is within its scope as a liability
(or an asset in some circumstances). The financial instruments affected include
mandatory redeemable stock, certain financial instruments that require or may
require the issuer to buy back some of its shares in exchange for cash or other
assets, and certain obligations that can be settled with shares of stock.

         Effective July 1, 2003, Daleco adopted the Statement as required, for
its mandatory redeemable Series A, 10% Cumulative Convertible Preferred Stock,
stated value $50.00 and par value $.01, in line with the satisfaction of its
$400,000 obligation to Mr. Kane, as mentioned under Note 14(b). As a result,
Long-term Debt (see Note 10 (c) above) included the preferred securities which
had been previously included as part of the Shareholders' Equity.

                                      -28-
<PAGE>

DALECO RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 2004 AND 2003 - PREPARED BY MANAGEMENT (UNAUDITED)
================================================================================

         In accordance with the requirements of SFAS No. 150, prior period
amounts have not been reclassified to be in conformity with the current
presentation.






                                      -29-
<PAGE>



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

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

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

         During the second fiscal quarter, ending March 31, 2004 the Company
         continued to pursue its plans for the commercialization of the mineral
         holdings of its wholly owned subsidiary, Clean Age Minerals, Inc. as
         its primary objective. Sustainable Forest Industries, Inc., the
         Company's wholly owned subsidiary involved in tropical timber,
         continued its efforts to develop market awareness for its products
         while the Company's subsidiaries active in the oil and natural gas
         sector focused on its operations to maintain production levels.

         The Company's performance during its second fiscal quarter ended March
         31, 2004, was influenced by a variety of factors typical within the
         natural resource sectors which were beyond the control of management,
         such as the variability of the demand for and the pricing of crude oil

                                      -30-
<PAGE>

         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. As in previous periods, the Company remained
         highly dependent on the revenues derived from the sale of its oil and
         natural gas production. During the quarter ending March 31, 2004, the
         Company's energy segments benefited from higher oil and gas prices.
         These benefits however did not translate into significantly higher net
         operating margins from the segment as a result of `down-hole' problems
         in several wells. The required incremental well repair work increased
         outlays in this expense category by roughly 75% ($112,106) over the
         prior year's quarter.

         During the quarter, the Company's direct expenditures related to the
         commercialization of its mineral holdings remained substantially
         constant as compared to prior year's period. Clean Age Minerals
         continued its ongoing contract extraction operations and mineral
         product deliveries from both its Calcium Carbonate mine in New Mexico
         and its Zeolite deposit in Texas. The focus of both operations has been
         on "seeding" the targeted markets with "trial material" to gain
         end-user awareness while developing market support inventory levels. As
         of March 31, 2004, commercial quality inventories of Calcium Carbonate
         have reached targeted levels of 25,000 tons as part of the Company's
         operating venture with ANP Inc., its project partner. Extraction and
         product preparation efforts associated with Clean Age Minerals' Zeolite
         deposit have also continued. The main focus for these efforts has been
         the Company's ongoing market introduction of its ReNuGen (TM) product
         which is based on its CA-Series environmental technology. To date,
         application testing of ReNuGen (TM) has been successful at several
         sites, Information gained from these test applications have been
         instrumental in increasing awareness and acceptance of the product with
         the targeted Waste Water Treatment industry. Additional applications
         for Clean Age Minerals' CA-Series engineered products are undergoing
         investigative work. The Company's efforts to commercialize the Sierra
         Kaolin products from its New Mexico Kaolin deposit are ongoing and are
         focused on product development as well as the identification of
         opportunities for both joint venturing and/or the internal development
         of Kaolin processing capabilities.

         Within its timber segment, Sustainable Forest Industries has continued
         its efforts to commercially market tropical hardwoods into domestic
         markets. Plans are to introduce a construction shingles product
         utilizing the Wallaba tropical hardwood species later this fiscal year.
         Market surveys and certification testing have indicated that the
         Wallaba Roofing and Siding Shingles have significant performance
         capabilities as compared to products currently available on the market.
         Efforts are also under way to identify distribution and financing
         partners to support these efforts.

                                      -31-
<PAGE>

         For the three month period ending March 31, 2004, total operating
         revenues increased nominally by $27,382 (7.8%) while direct operating
         expenses increased by $104,966 (53.7%) as compared with the same
         quarter last year. The increase in direct operating expense is
         associated with increased levels of activity in all business segments
         but was most impacted by higher levels of expenditures for producing
         well maintenance within the oil and natural gas sector. For the
         quarter, the Company recorded a loss of $603,105 as compared to a loss
         of $576,404 for the prior fiscal year's first quarter.

Item 3 -     Controls and Procedures

             Sarbanes-Oxley Act

         On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act
         of 2002 ("SOA"). The SOA is the first major revision to the securities
         laws since the enactment of the Securities Act of 1933 and the
         Securities and Exchange Act of 1934. The SAO, promulgated in large part
         in response to the collapse of Enron/Worldcom demise, covers a variety
         of measures all of which will not be covered here.

         The SOA is applicable to all publicly traded reporting companies no
         matter how small or large. The SOA provides for additional controls
         such as the chief executive officer's certificate regarding the
         accuracy of the Company's financial statements and providing for a
         criminal penalty for making a false statement to the certification by
         an executive officer that the financial statements do not contain any
         untrue statement of a material fact or omit to state a material fact
         necessary to make the statements, in light of the circumstances under
         which the statement were made, not misleading with respect to the
         period covered by the annual report. The certification also requires
         that the executive officer of the company certify that the financial
         statements and other materials presented in the annual report fairly
         present all material respects the financial condition, results of
         operations and cash flows of the Company as of and for the periods
         covered by the annual report. This requirement exceeds the previous
         requirement that the financial statements merely be presented in
         accordance with generally accepted accounting principles.

         The Company believes that it has historically provided its financials
         in this fashion, having separately reported and presented each segment
         of the Company's business for the past few years.

         The SOA also suggests but does not presently require that a "Disclosure
         Committee" be established. Rules of the exchange on which the Company's
         Common Stock, NASDAQ, will require the establishment of "disclosure
         controls." This committee would consider the materiality of information
         and determine disclosure obligations on a timely basis. This committee
         would, in essence, become the Company's "watchman" for public
         disclosures. The Company has not, as of the date of this report,
         established such a committee. The Company has only six employees, and
         three independent directors. All parties are intricately involved in

                                      -32-
<PAGE>

         the decision making processes at the Company and no disclosure or
         decision not to disclose information is made without the input of
         inside management, counsel and at least one, if not more, independent
         directors. At such time as the Company changes its method of operation
         and/or increases the number of employees, it will reconsider the
         creation of a "Disclosure Committee."

         Because the drafting and approval of all the Company's reports is a
         collective process, the suggestions of the SOA to establish Disclosure
         Committees, a Disclosure Controls Monitor, conduct internal drafting
         sessions, distribution of draft reports and dealing with internal
         trading policies are presently either not applicable or are already
         implemented, have been and are part of the Company's operating
         procedures.

         The SOA also provides for certain controls on auditors and the
         accounting industry. The Company only utilizes its auditors for
         auditing purposes. As such, the Company feels that it is and will be in
         full compliance with the final regulations promulgated by the
         Securities and Exchange Commission ("SEC") under the SOA.

         The SEC has acknowledged that a "one-size fits all" approach to
         establishing effective disclosure controls and procedures and has not
         prescribed any specific disclosure controls and procedures. Rather, the
         SEC expects "each company to develop a process that is consistent with
         its business and internal management and supervisory practice." The
         Company believes that it has fully complied with the intent of the SOA
         and Regulations promulgated by the SEC.



                                      -33-
<PAGE>


PART II. OTHER INFORMATION

Item 1.  None

Item 2.  Change in Securities.

         There were no sales of securities by the registrant during the quarter
ending March 31, 2004.




                                      -34-
<PAGE>

Item 3            None

                  (See Note 10 to the Company's Financial Statements)



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

                  On March 25, 2004, the Company held its Annual Meeting of the
Shareholders. At the Annual Meeting, the following matters were voted upon:

                  1. Election of Directors: The following persons were elected
to serve as directors of the Company until the next Annual Meeting of
Shareholders: Dov Amir, Gary J. Novinskie, Alfonso Knoll, H. Paul Pryor, Robert
G. Graustein and Robert E. Martin. The votes for these directors were as
follows:

NAME OF NOMINEE                FOR              AGAINST            ABSTAIN
---------------                ---              -------            -------
Dov Amir                   23,332,048              0             1,558,910
Gary J. Novinskie          23,321,846              0             1,569,112
Robert E. Martin           23,163,256              0             1,727,702
Alfonso Knoll              22,898,043              0             1,992,915
Robert G. Graustein        22,926,944              0             1,926,014
Lord Gilbert (John)        24,212,676              0               678,282
H. Paul Pryor              23,333,457              0             1,557,501


                  2. Ratification of Jay J. Shapiro as the Company's independent
accountant for Fiscal Year 2004.

                      FOR              AGAINST            ABSTAIN
                  24,830,217           59,314              1,427

                  3. Approval of the Company's Non-Qualified Independent
Director Stock Option Plan.

                      FOR              AGAINST            ABSTAIN
                  9,113,966           1,753,846         12,992,803

         The Company incorporates by reference its definitive Proxy Statement
filed with the Securities and Exchange Commission on February 4, 2004, filed in
accordance Regulation 14A under the Securities and Exchange Act of 1934, as
amended.

                                      -35-
<PAGE>


Item 5            Other Information

                  a. Registrants Definitive Proxy Statement dated February 4,
2004.

                  b. The Company's prior auditor resigned in September 2004.
Prior to his resignation, it was determined that the Company's prior auditor was
not registered with the PCAOB as required by the Sarbanes Oxley Act of 2002, as
amended. The Company replaced its prior auditor with Vasquez & Company (see the
Company's Form 8-K dated September 14, 2004, Form 8-K dated December 2, 2004 and
Form 8-K dated December 3, 2004). As such, the financials previously reported in
the Company's prior filings listing the financial statements as of September 30,
2003 as audited were incorrect. This Third amendment properly notes that the
financial statements as of September 30, 2003 originally filed by the Company in
January 2004 were not "audited" due to the Company's prior auditor not being
registered in accordance with the PCAOB. The Company's new auditor, Vazquez &
Company, LLP, has re-audited the Company's financial statements for its fiscal
year ending, September 30, 2003, which were filed by the Registrant in its First
Amended Annual Report on Form 10-KSB for the period ending September 30, 2003 on
or about January 11, 2005.


ITEM 6            Exhibits and Reports on Form 8-K

                  None.


                                      -36-
<PAGE>

                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.


                                    DALECO RESOURCES CORPORATION


Dated:  February 22, 2005           By:  /s/ Gary J. Novinskie
                                         ---------------------------------
                                         Gary J. Novinskie, President


         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:  February 22, 2005                   /s/ Gary J. Novinskie
                                         ---------------------------------
                                         Gary J. Novinskie
                                         President and Director


Date: February 22, 2005                    /s/ Dov Amir
                                         ---------------------------------
                                         Dov Amir
                                         Chief Executive Officer and Chairman of
                                         the Board of Directors



                                      -37-
<PAGE>

                                  CERTIFICATION


         I, Gary J. Novinskie, certify that:

         1. I have reviewed this Fourth Amended quarterly report on Form 10-QSB
of Daleco Resources Corporation for the period ending March 31, 2004.

         2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

         3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

         4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

                  (a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

                  (b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and

                  (c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

         5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

                  (a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weakness in internal controls; and

                                      -38-
<PAGE>

                  (b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant's
internal controls; and

         6. The registrant's other certifying officers and I have indicated in
this quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: February 22, 2005                      /s/ Gary J. Novinskie
                                         -------------------------------------
                                         Gary J. Novinskie
                                         President and Chief Financial Officer




                                      -39-
<PAGE>

                                  CERTIFICATION


         I, Dov Amir, certify that:

         1. I have reviewed this Fourth Amended quarterly report on Form 10-QSB
of Daleco Resources Corporation for the period ending March 31, 2004.

         2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

         3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

         4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

                  (a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

                  (b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and

                  (c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

         5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

                  (a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weakness in internal controls; and

                                      -40-
<PAGE>

                  (b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant's
internal controls; and

         6. The registrant's other certifying officers and I have indicated in
this quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: February 22, 2005                       /s/ Dov Amir
                                         -------------------------------------
                                         Dov Amir
                                         Chief Executive Officer



                                      -41-
<PAGE>


In connection with the Quarterly Report of Daleco Resources Corporation (the
"Company") on Form 10-QSB for the period ending March 31, 2004 as filed with the
Securities and Exchange Commission on May 17, 2004, as amended May 28, 2004, as
amended on November 22, 2004,and as amended on February 22, 2005 (the "Report"),
I, Gary J. Novinskie, President and Chief Financial 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/ Gary J. Novinskie
                                         -------------------------------------
                                         Gary J. Novinskie
                                         President and Chief Financial Officer
                                         February 22, 2005



                                      -42-
<PAGE>



In connection with the Quarterly Report of Daleco Resources Corporation (the
"Company") on Form 10-QSB for the period ending March 31, 2004 as filed with the
Securities and Exchange Commission on May 17, 2004, as amended May 28, 2004,
amended on November 22, 2004,and as amended on February 22, 2005 (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:

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

         (4)  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
                                         February 22, 2005




                                      -43-