**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-QSB**





**(Mark
      one)**





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





**For
      the quarterly period ended** **June
      30, 2008**





**o**
            **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**


(Exact
      name of small business issuer as specified in its charter)





**Nevada**
            **23-2860734**(State
                or other jurisdiction of
              incorporation
                or organization)
            (IRS
                Employer
              Identification
                No.)





**17
                Wilmont Mews, 5****th****Floor**
              **West
                Chester, Pennsylvania 19382**
            **(610)
                429-0181**(Address
                of principal executive offices)
            (Issuer’s
                telephone number)





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





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




**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 July 31, 2008:
      43,081,346


Number
      of
      shares outstanding of the issuer’s Series B Preferred Stock as of July 31, 2008:
      145,000





Transitional
      Small Business Disclosure Format (Check one): Yes o No x





**DALECO
      RESOURCES CORPORATION**





**TABLE
      OF CONTENTS**





**PAGE****PART
                I - FINANCIAL INFORMATION**ITEM
                1.
            CONSOLIDATED
                FINANCIAL STATEMENTS
            
            3Consolidated
                Balance Sheets
            
            3Consolidated
                Statements of Income
            
            5Consolidated
                Statements of Cash Flows
            
            6Notes
                to Consolidated Financial Statements
            
            7ITEM
                2.
            MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                AND RESULTS OF OPERATIONS
            
            13ITEM
                3.
            CONTROLS
                AND PROCEDURES
            
            17**PART
                II - OTHER INFORMATION**ITEM
                1.
            LEGAL
                PROCEEDINGS
            
            20ITEM
                2.
            UNREGISTERED
                SALE OF EQUITY SECURITIES AND USE OF PROCEEDS
            
            20ITEM
                3.
            DEFAULTS
                UPON SENIOR SECURITIES
            
            20ITEM
                4.
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS
            
            20ITEM
                5.
            OTHER
                INFORMATION
            
            20ITEM
                6.
            EXHIBITS
            
            21**SIGNATURES**
            
            22




-2-


**PART
      I – FINANCIAL
      INFORMATION**





**Item
      1. Consolidated Financial Statements.**





**DALECO
      RESOURCES CORPORATION**


**CONSOLIDATED
      BALANCE SHEETS**





**June 30**
              **2008**
            
            **September 30**
              **2007****(Unaudited)****ASSETS****Current
                Assets:**Cash
                and Equivalents
            
            $
            196,756
            
            $
            224,267Accounts
                Receivable
            
            
            598,906
            
            
            391,200Other
                Current Assets
            
            
            7,424
            
            
            7,424Total
                Current Assets
            
            
            803,086
            
            
            622,891**Other
                Assets:**Technology
                and Patent Rights
            
            
            6,594,500
            
            
            6,594,500Accumulated
                Amortization
            
            
            (4,477,801
            )
            
            (4,044,712
            )Net
                Technology and Patent Rights
            
            
            2,116,699
            
            
            2,549,788Equity
                Placement Costs
            
            
            35,750
            
            
            35,750Accumulated
                Amortization of Equity Placement Costs
            
            
            (33,086
            )
            
            (24,599
            )Net
                Equity Placement Costs
            
            
            2,664
            
            
            11,151Securities
                Available for Future Sale
            
            
            6,967
            
            
            5,700Restricted
                Cash Deposits
            
            
            145,932
            
            
            143,978Prepaid
                Mineral Royalties –
                Long-term
            
            
            460,000
            
            
            460,000Interest
                Receivable
            
            
            124,372
            
            
            97,076Total
                Other Assets
            
            
            2,856,634
            
            
            3,267,693**Property,
                Plant and Equipment:**Oil
                and Gas Properties, at cost
            
            
            4,424,512
            
            
            5,276,563Accumulated
                Depreciation, Depletion and Amortization
            
            
            (3,582,845
            )
            
            (4,303,047
            )Net
                Oil and Gas Properties
            
            
            841,667
            
            
            973,516Mineral
                Properties, at cost
            
            
            12,609,100
            
            
            12,609,100Accumulated
                Depreciation, Depletion and Amortization
            
            
            (950,000
            )
            
            (800,000
            )Net
                Mineral Properties
            
            
            11,659,100
            
            
            11,809,100Equipment,
                Furniture and Fixtures, at cost
            
            
            79,902
            
            
            191,151Accumulated
                Depreciation
            
            
            (58,429
            )
            
            (164,151
            )Net
                Equipment, Furniture and Fixtures
            
            
            21,473
            
            
            27,000Total
                Net Property, Plant and Equipment
            
            
            12,522,240
            
            
            12,809,616**TOTAL
                ASSETS**
            
            $
            16,181,960
            
            $
            16,700,200





SEE
      ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
      STATEMENTS.


-3-


**DALECO
      RESOURCES CORPORATION**


**CONSOLIDATED
      BALANCE SHEETS**





**June 30**
              **2008**
            
            **September 30**
              **2007****(Unaudited)****LIABILITIES
                AND SHAREHOLDERS’ EQUITY****Current
                Liabilities:**Accounts
                Payable
            
            $
            2,090,222
            
            $
            2,204,133Federal
                and State Income Taxes Payable
            
            
            200,827
            
            
            192,427Note
                Payable - Related Party
            
            
            45,485
            
            
            45,485Note
                Payable - Other
            
            
            7,852
            
            
            —EV&T
                Note –
                Current Portion
            
            
            567,213
            
            
            567,213Note
                Payable - First Regional Bank
            
            
            100,000
            
            
            100,000CAMI
                Notes
            
            
            514,881
            
            
            514,881Accrued
                Interest Expense
            
            
            550,966
            
            
            464,546Accrued
                Dividends Payable
            
            
            1,602,915
            
            
            1,602,915Accrued
                Expense Reimbursements
            
            
            38,911
            
            
            49,327Accrued
                Bonus Expense
            
            
            1,373,831
            
            
            1,373,831Accrued
                Salary Expense
            
            
            994,917
            
            
            991,002Total
                Current Liabilities
            
            
            8,088,020
            
            
            8,105,760**TOTAL
                LIABILITIES**
            
            
            8,088,020
            
            
            8,105,760**SHAREHOLDERS’
                EQUITY:**Preferred
                Stock –
                20,000,000 shares authorizedSeries
                A Preferred Stock (outstanding: none)Series
                B Preferred Stock – par value of $0.01 per share (outstanding: 145,000
                shares)
            
            
            1,450
            
            
            1,450Common
                Stock – 100,000,000 shares authorized - parvalue
                of $0.01 per share(outstanding:
                43,081,346 shares)
            
            
            430,813
            
            
            430,813Additional
                Paid in Capital
            
            
            45,092,019
            
            
            44,911,213Retained
                Deficit
            
            
            (36,855,609
            )
            
            (36,173,036
            )Subscriptions
                Receivable
            
            
            (576,000
            )
            
            (576,000
            )Accumulated
                Other Comprehensive Loss
            
            
            1,267
            
            
            —**TOTAL
                SHAREHOLDERS’ EQUITY**
            
            
            8,093,940
            
            
            8,594,440**TOTAL
                LIABILITIES AND SHAREHOLDERS’ EQUITY**
            
            $
            16,181,960
            
            $
            16,700,200





SEE
      ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
      STATEMENTS.


-4-


**DALECO
      RESOURCES CORPORATION**


**CONSOLIDATED
      STATEMENTS OF INCOME**


**(UNAUDITED)**




**Three Months Ended**
              **June 30**
            
            **Nine Months Ended**
              **June 30****2008**
            
            **2007**
            
            **2008**
            
            **2007****Revenues:**Oil
                and Gas Sales
            
            $
            276,921
            
            $
            239,224
            
            $
            634,158
            
            $
            676,489Royalty
                Receipts
            
            
            5,692
            
            
            3,792
            
            
            12,749
            
            
            18,005Mineral
                Sales
            
            
            1,208
            
            
            22,709
            
            
            3,371
            
            
            31,020Well
                Management Revenue
            
            
            68,293
            
            
            44,917
            
            
            192,340
            
            
            145,158Total
                Operating Revenues
            
            
            352,114
            
            
            310,642
            
            
            842,618
            
            
            870,672**Expenses:**Lease
                Operating Expenses - Oil and Gas
            
            
            53,465
            
            
            108,971
            
            
            144,911
            
            
            331,206Exploration
                Expenses - Minerals
            
            
            6,000
            
            
            36,751
            
            
            9,502
            
            
            82,941Operating
                Expenses and Other Costs - Minerals
            
            
            26,434
            
            
            35,640
            
            
            87,273
            
            
            55,156Production
                and Severance Taxes –
                Oil and
                Gas
            
            
            13,317
            
            
            12,323
            
            
            32,554
            
            
            34,104Depreciation,
                Depletion and Amortization
            
            
            240,154
            
            
            253,355
            
            
            720,465
            
            
            760,066General
                and Administrative Expenses
            
            
            150,465
            
            
            1,720,567
            
            
            578,536
            
            
            2,719,410Legal
                and Professional Fees and Expenses
            
            
            42,076
            
            
            48,907
            
            
            187,173
            
            
            261,816Shareholder
                Information Expenses
            
            
            12,035
            
            
            4,211
            
            
            31,821
            
            
            34,710Amortization
                of Equity Placement Costs
            
            
            2,829
            
            
            2,829
            
            
            8,487
            
            
            8,487Total
                Expenses
            
            
            546,775
            
            
            2,223,554
            
            
            1,800,722
            
            
            4,287,896**Other
                Income (Expense):**Interest
                and Dividend Income
            
            
            8,591
            
            
            13,235
            
            
            40,257
            
            
            39,223Interest
                Expense
            
            
            (80,182
            )
            
            (27,538
            )
            
            (164,726
            )
            
            (68,294
            )Gain
                on Sale of Oil and Gas Properties
            
            
            250,000
            
            
            —
            
            
            400,000
            
            
            —Total
                Other Income (Expense), Net
            
            
            178,409
            
            
            (14,303
            )
            
            275,531
            
            
            (29,071
            )Loss
                Before Income Taxes
            
            
            (16,252
            )
            
            (1,927,215
            )
            
            (682,573
            )
            
            (3,446,295
            )Taxes
                based on Income
            
            
            —
            
            
            —
            
            
            —
            
            
            —Net
                Loss
            
            $
            (16,252
            )
            $
            (1,927,215
            )
            $
            (682,573
            )
            $
            (3,446,295
            )Basic
                and Fully Diluted Net Loss per Share
            
            $
            (—
            )
            $
            (0.05
            )
            $
            (0.02
            )
            $
            (0.08
            )Weighted-average
                Number of Shares of Common Stock Outstanding
            
            
            43,081,346
            
            
            42,426,544
            
            
            43,081,346
            
            
            42,250,082





SEE
      ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
      STATEMENTS.


-5-


**DALECO
      RESOURCES CORPORATION**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**FOR
      THE NINE MONTHS ENDED JUNE 30, 2008 AND 2007**


**(UNAUDITED)**


**2008**
            
            **2007****Cash
                Flows From Operating Activities:**Net
                Loss
            
            $
            (682,573
            )
            $
            (3,446,295
            )Adjustments
                to Reconcile Net Loss to Net Cash Provided by(Used
                in) Operating Activities:Depreciation,
                Depletion and Amortization
            
            
            720,465
            
            
            760,066Amortization
                of Discount on Note Payable
            
            
            18,720
            
            
            —Amortization
                of Equity Placement Costs
            
            
            8,487
            
            
            8,487Bonus
                Expense
            
            
            —
            
            
            1,327,491Stock-Based
                Compensation Expense
            
            
            162,086
            
            
            420,390Gain
                on Sale of Oil and Gas Properties
            
            
            (400,000
            )
            
            —Changes
                in Operating Assets and Liabilities:Receivables
            
            
            (185,002
            )
            
            (116,612
            )Other
                Current Assets
            
            
            —
            
            
            2,113Pre-paid
                Mineral Royalties
            
            
            —
            
            
            (30,000
            )Restricted
                Cash Deposits
            
            
            (1,954
            )
            
            696Accounts
                Payable
            
            
            (125,638
            )
            
            572,325Accrued
                Interest Expense
            
            
            86,420
            
            
            33,281Other
                Accrued Expenses
            
            
            13,626
            
            
            59,924Net
                Cash Used in Operating Activities
            
            
            (385,363
            )
            
            (408,134
            )**Cash
                Flows From Investing Activities:**Purchases
                of Fixed Assets
            
            
            —
            
            
            (62,606
            )Receipts
                from Sale of Oil and Gas Properties
            
            
            350,000
            
            
            —Net
                Cash Provided by (Used in) Investing Activities
            
            
            350,000
            
            
            (62,606
            )**Cash
                Flows From Financing Activities:**Proceeds
                of Notes Payable
            
            
            102,171
            
            
            —Payments
                on Other Notes and Debt
            
            
            (94,319
            )
            
            (117,621)
            )Proceeds
                of Equity Issuances
            
            
            —
            
            
            488,260Net
                Cash Provided by Financing Activities
            
            
            7,852
            
            
            370,639Net
                Change in Cash and Equivalents
            
            
            (27,511
            )
            
            (100,101
            )Cash
                and Equivalents at Beginning of Year
            
            
            224,267
            
            
            317,743Cash
                and Equivalents at End of Period
            
            $
            196,756
            
            $
            217,642**Supplemental
                Information:**Income
                Taxes Paid
            
            $
            —
            
            $
            —Interest
                Paid
            
            $
            39,327
            
            $
            35,013**Supplemental
                Disclosure of Non-cash Transactions:**Payment
                of Dividends in-kind
            
            $
            —
            
            $
            200,000Conversion
                from Preferred Stock to Common Stock
            
            $
            —
            
            $
            200,000Receivable
                from Sale of Oil and Gas Properties
            
            $
            50,000
            
            $
            —Discount
                on Note Payable Resulting from Issuance of Stock Purchase
                Warrants
            
            $
            18,720
            
            $
            —





SEE
      ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
      STATEMENTS.


-6-


**DALECO
      RESOURCES CORPORATION**


**NOTES
      TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**AS
      OF JUNE 30, 2008 AND 2007**





**1.
      Continued Operations and Going Concern**





The
      unaudited consolidated financial statements have been prepared on the basis
      of a
      going concern which contemplates that the Company will be able to realize assets
      and discharge liabilities in the normal course of business. Accordingly, they
      do
      not give effect to adjustments that would be necessary should the Company be
      required to liquidate its assets. The Company incurred a net loss of $682,573
      for the nine months ended June 30, 2008. The ability of the Company to meet
      its
      total liabilities of $8,088,020 and to continue as a going concern is dependent
      upon the availability of future funding, achieving profitability within its
      mineral segment and ongoing profitability within its oil and gas operations.
      If
      the Company is unable to continue as a going concern, there is uncertainty
      relative to full recoverability of its assets including the $20 million
      acquisition of Clean Age Minerals, Inc. in September 2000.





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





As
      of
      June 30, 2008, the Company and certain of its subsidiaries were in default
      of
      certain debt obligations and certain employment agreements. The holders of
      these
      instruments are working with the Company to achieve the ultimate extinguishment
      of the obligations.





**2.
      Summary of Significant Accounting Policies**





***Basis
      of Presentation***





The
      interim consolidated financial statements are unaudited but, in our opinion,
      reflect all adjustments necessary for a fair presentation of the results of
      operations and financial position for such periods in accordance with accounting
      principles generally accepted in the United States for interim financial
      information and with the instructions to Form 10-QSB and Item 310(b) of
      Regulation S-B. All such adjustments reflected in the interim consolidated
      financial statements are considered to be of a normal recurring nature. The
      results of operations for any interim period are not necessarily indicative
      of
      results for the full year. Accordingly, these financial statements should be
      read in conjunction with the financial statements and notes thereto contained
      in
      the Company’s Annual Report on Form 10-KSB for the fiscal year ended
      September 30, 2007.





Unless
      otherwise noted, references to “year” pertain to the Company’s fiscal year,
      which begins on October 1 and ends on September 30; for example, 2008 refers
      to
      fiscal 2008, which is the period from October 1, 2007 to September 30,
      2008.





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





***Significant
      Accounting Policies***





There
      were no changes to the Company’s Significant Accounting Policies from those
      disclosed in our Annual Report on Form 10-KSB for the fiscal year ended
      September 30, 2007.





***Use
      of Estimates***





The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities and disclosure of
      contingent assets and liabilities as of the date of the financial statements
      and
      the reported amounts of revenues and expenses during the reporting period.
      Actual results could differ from those estimates.


-7-


**DALECO
      RESOURCES CORPORATION**


**NOTES
      TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**AS
      OF JUNE 30, 2008 AND 2007**





***Recently
      Issued Accounting Standards***





In
      June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for
      Uncertainty in Income Taxes” (“FIN 48”). FIN 48 is an interpretation of FASB
      Statement No. 109, “Accounting for Income Taxes,” and it seeks to reduce
      the diversity in practice associated with certain aspects of measurement and
      recognition in accounting for income taxes. In addition, FIN 48 requires
      expanded disclosure with respect to the uncertainty in income taxes. We adopted
      FIN 48 as of October 1, 2007 and noted no material impact on our financial
      position or results of operations as a result of the adoption.





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value
      Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework
      for measuring fair value in generally accepted accounting principles and expands
      disclosures about fair value measurements. This pronouncement is effective
      as of
      the beginning of our 2009 fiscal year. We are currently evaluating the impact,
      if any, that SFAS 157 will have on our financial position or results of
      operations.





In
      September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting
      for Defined Benefit Pension and Other Postretirement Plans” (“SFAS 158”). SFAS
      158 requires employers to recognize the overfunded or underfunded status of
      a
      defined benefit postretirement plan as an asset or liability in its statement
      of
      financial position and to recognize changes in that funded status in the year
      in
      which the changes occur through comprehensive income. We adopted SFAS 158 as
      of
      September 30, 2007 and noted no material impact on our financial position or
      results of operations as a result of the adoption.





In
      February 2007, the
      Financial Accounting Standards Board (“FASB”) issued Statement of Financial
      Accounting Standards (“SFAS”) No. 159, “The Fair Value Option for Financial
      Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits entities to
      choose to measure many financial instruments and certain other items at fair
      value in order to mitigate volatility in reported earnings caused by measuring
      related assets and liabilities differently without having to apply complex
      hedge
      accounting provisions. This pronouncement is effective as of the beginning
      of
      our 2009 fiscal year. We are currently evaluating the impact, if any, that
      SFAS
      159 will have on our financial position or results of operations.





In
      December 2007, the Financial Accounting Standards Board (“FASB”) issued
      SFAS No. 141R, “Business Combinations” (“SFAS 141R”). SFAS 141R revises the
      principles and requirements for how the acquirer recognizes and measures in
      its
      financial statements the identifiable assets acquired, the liabilities assumed,
      any noncontrolling interest in the acquiree, and the goodwill acquired in a
      business combination or gain from a bargain purchase. SFAS 141R also revises
      the
      principles and requirements for how the acquirer determines what information
      to
      disclose to enable users of the financial statements to evaluate the nature
      and
      financial effects of the business combination. This pronouncement is effective
      as of the beginning of our 2010 fiscal year. We are currently evaluating the
      impact, if any, that SFAS 141R will have on our financial position or results
      of
      operations.





Also
      in
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interest
      in Consolidated Financial Statements — an amendment of ARB No. 51” (“SFAS
      160”). SFAS 160 amends ARB No. 51 to establish accounting and reporting
      standards for the noncontrolling interest in a subsidiary and for the
      deconsolidation of a subsidiary. This pronouncement is effective as of the
      beginning of our 2010 fiscal year. We are currently evaluating the impact,
      if
      any, that SFAS 160 will have on our financial position or results of
      operations.


-8-


**DALECO
      RESOURCES CORPORATION**


**NOTES
      TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**AS
      OF JUNE 30, 2008 AND 2007**





In
      March
      2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments
      and Hedging Activities" ("SFAS No. 161"). SFAS 161 requires companies with
      derivative instruments to disclose information that should enable
      financial-statement users to understand how and why a company uses derivative
      instruments, how derivative instruments and related hedged items are accounted
      for under FASB Statement No. 133 "Accounting for Derivative Instruments and
      Hedging Activities" and how derivative instruments and related hedged items
      affect a company's financial position, financial performance and cash flows.
      SFAS 161 is effective for financial statements issued for fiscal years and
      interim periods beginning after November 15, 2008. The adoption of this
      statement is not expected to have a material effect on the Company's future
      financial position or results of operations.





In
      May
      2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
      Accounting Principles (“SFAS 162”). SFAS 162 identifies a consistent framework,
      or hierarchy, for selecting accounting principles to be used in preparing
      financial statements that are presented in conformity with U.S. generally
      accepted accounting principles for nongovernmental entities (the “Hierarchy”).
      The Hierarchy within SFAS 162 is consistent with that previously defined in
      the
      AICPA Statement on Auditing Standards No. 69, “The Meaning of Present Fairly in
      Conformity With Generally Accepted Accounting Principles” (“SAS 69”). SFAS 162
      is effective 60 days following the United States Securities and Exchange
      Commission’s (the “SEC”) approval of the Public Company Accounting Oversight
      Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity
      With Generally Accepted Accounting Principles”. The adoption of SFAS 162 will
      not have a material effect on the Consolidated Financial Statements because
      the
      Company has utilized the guidance within SAS 69.





**3.
      Capital Stock**




***Common
      Stock***





No
      shares
      of Common Stock were issued during the nine months ended June 30,
      2008.





***Series
      B Preferred Stock***




No
      shares
      of Series B Preferred Stock were issued or converted to Common Stock during
      the
      nine months ended June 30, 2008.





***Options
      and Warrants to Purchase Common Stock***





**Number of**
              **Options**
              **and**
              **Warrants**
            
            **Weighted**
              **Average**
              **Price****per**
              **Share**Options
                and Warrants Outstanding at September 30, 2007
            
            
            6,935,641
            
            $
            0.58Options
                Expired**(1)
                (2)**
            
            
            (875,000
            )
            $
            0.54Warrants
                Issued**(3)**
            
            
            822,305
            
            $
            0.55Warrants
                Expired**(4)
                (5) (6) (7)**
            
            
            (2,622,305
            )
            $
            0.59Options
                and Warrants Outstanding at June 30, 2008
            
            
            4,260,641
            
            $
            0.57





(1)
            During
                November 2007, (i) an option (held by a former director/officer of
                the
                Company) to purchase 600,000 shares of Common Stock (at an exercise
                price
                of $0.48 per share), and (ii) options (held by two former
                directors/officers of the Company) to purchase a total of 200,000
                shares
                of Common Stock (at an exercise price of $0.75 per share), expired
                unexercised. See Note 9.b. of the Notes to Consolidated Financial
                Statements contained in the Company’s Annual Report on Form 10-KSB for the
                fiscal year ended September 30,
                2007.


-9-


**DALECO
      RESOURCES CORPORATION**


**NOTES
      TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**AS
      OF JUNE 30, 2008 AND 2007**


(2)
            In
                March 2007, options held by David Matz to purchase a total of 75,000
                shares of Common Stock expired as a result of the termination his
                employment with the Company. See Note 9.b. of the Notes to Consolidated
                Financial Statements contained in the Company’s Annual Report on Form
                10-KSB for the fiscal year ended September 30,
                2007.


(3)
            On
                December 21, 2007, Sonata Investment Company, Ltd. (“Sonata”) loaned the
                Company $75,000 (see Note 5). The Company issued warrants for the
                purchase
                of 822,305 shares of Common Stock (at an exercise price of $0.55
                per
                share). These warrants will expire on December 31, 2010.


(4)
            On
                December 31, 2007, the Financing Sources Warrants (see Note 9.d.1.
                of the
                Notes to Consolidated Financial Statements contained in the Company’s
                Annual Report on Form 10-KSB for the fiscal year ended September
                30, 2007)
                for the purchase of 822,305 shares of Common Stock expired unexercised.
                See Note 5.


(5)
            On
                November 29, 2007, TPA Warrants (see Note 9.d.3. of the Notes to
                Consolidated Financial Statements contained in the Company’s Annual Report
                on Form 10-KSB for the fiscal year ended September 30, 2007) for
                the
                purchase of 1,500,000 shares of Common Stock (at an exercise price
                of
                $0.50 per share) expired
                unexercised.


(6)
            On
                February 26, 2008, the Conley Warrants (see Note 9.d.2. of the Notes
                to
                Consolidated Financial Statements contained in the Company’s Annual Report
                on Form 10-KSB for the fiscal year ended September 30, 2007) warrants
                for
                the purchase of 300,000 shares of Common Stock (at an exercise price
                of
                $0.13 per share) expired
                unexercised.


(7)
            In
                February 2008, the expiration date of the Anthony Warrants (see Note
                9.d.2. of the Notes to Consolidated Financial Statements contained
                in the
                Company’s Annual Report on Form 10-KSB for the fiscal year ended September
                30, 2007) warrants for the purchase of 200,000 shares of Common Stock
                (at
                an exercise price of $0.13 per share) was extended to February 26,
                2009.
                In connection with the extension of such date, the Company recognized
                stock-based compensation expense of $4,027.





Summarized
      information relating to the stock options to purchase shares of Common Stock
      outstanding as of June 30, 2008, is as follows:





**Exercise**
              **Price per**
              **Share**
            
            **Number of**
              **Shares**
              **Underlying**
              **Options**
              **Unexercised**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price per**
              **Share**
            
            **Weighted**
              **Average**
              **Remaining**
              **Life**
              **(Years)**
            
            **Number of**
              **Shares**
              **Underlying**
              **Options**
              **Exercisable**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price per**
              **Share**$0.28-$0.85
            
            
            2,875,000
            
            $
            0.56
            
            
            1.70
            
            
            2,425,000
            
            $
            0.57





***Stock-Based
      Compensation***





During
      the nine months ended June 30, 2008, options to purchase 875,000 shares of
      Common Stock expired unexercised. There are options for 2,875,000 shares of
      Common Stock outstanding as of June 30, 2008, of which 2,400,000 are held by
      current officers, Directors and employees of the Company (“Insiders”). The
      exercise prices for the options held by Insiders range from $0.28 per share
      to
      $0.85 per share.





In
      accordance with the provisions of SFAS 123(R), “Share-Based Payment”, the
      Company has recorded stock-based compensation expense of $162,086 and $420,390
      for the nine months ended June 30, 2008 and 2007, respectively, which is
      included in General and Administrative Expenses. The stock-based compensation
      expense is based on the fair value of the options and warrants at the grant
      date. The fair value of the options and warrants was estimated using the
      Black-Scholes option-pricing model with the following assumptions: risk free
      interest rates between 2.05% and 4.72%; expected life of one to seven years;
      and
      expected volatility between 48% and 184%.


-10-


**DALECO
      RESOURCES CORPORATION**


**NOTES
      TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**AS
      OF JUNE 30, 2008 AND 2007**





***Net
      Income (Loss) Per Share***




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





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





***Payment
      of Accrued Dividends***




There
      was
      no cash dividend payment in respect to the Series B Preferred Stock during
      the
      nine months ended June 30, 2008 and 2007. A total of 80,000 shares of Common
      Stock were issued during the nine months ended June 30, 2007 to a holder of
      the
      Series B Preferred Stock in satisfaction of accrued dividends.





**4.**  **Employment
      Contracts and Separation Agreement**





In
      August
      2005, the Company entered into employment contracts with Stephan V. Benediktson
      as Chief Executive Officer of the Company and Nathan Trynin as Executive Vice
      President of the Company. The employment contracts contain bonus provisions
      tied
      to the performance of the Company's Common Stock. Accordingly, the Company
      recognized $1,197,491 and $1,327,491 of bonus expense during the three and
      nine
      months ended June 30, 2007, respectively, which is included in General and
      Administrative Expenses. In August 2007, Messrs. Benediktson and Trynin resigned
      from their respective positions with the Company. The Board of Directors
      approved bonuses aggregating $1,373,831.





In
      October 2006, Mr. Amir and the Company entered into a Separation Agreement.
      The
      Company has not made certain payments required by the Separation Agreement
      applicable to the Amir Debt. Also, pursuant to the Separation Agreement the
      Company was to satisfy the loan from First Regional Bank to the Company or
      provide sufficient substitute collateral for the bank so that the Amir Assets
      were released. The Company has not been able to accomplish either of these
      and
      the Amir Assets have not been released by the bank.





In
      October 2007, the Company gave notice to Mr. Matz that it was not extending
      his
      employment agreement beyond the term that ends in January 2008. Such agreement
      has terminated. During the first three quarters of 2008, the Company defaulted
      in respect to payments of salary required pursuant to the employment agreements
      with Messrs. Novinskie, Matz and Blackstone.




-11-


**DALECO
      RESOURCES CORPORATION**


**NOTES
      TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**AS
      OF JUNE 30, 2008 AND 2007**





**5.** **Notes
          Payable**





In
      April
      2007, the Company defaulted in respect to payments required by the Settlement
      Agreement with EV&T (see Note 6d of the Notes to Consolidated Financial
      Statements included in the Annual Report on Form 10-KSB for the fiscal year
      ended September 30, 2007).





During
      November 2007, the Company renewed the $100,000 note payable to First Regional
      Bank and the maturity date was extended to November 17, 2008. Mr. Amir has
      pledged certain of his personal assets as collateral (“Amir Assets”) for such
      note.





On
      December 21, 2007, Sonata loaned the Company $75,000. The maturity date of
      such
      loan is December 20, 2008, and interest, at 8%, is due quarterly. The Company
      used the proceeds for general working capital purposes. The Company paid the
      note during the third quarter of 2008. In connection with this loan, the Company
      issued warrants for the purchase of 822,305 shares of Common Stock at a purchase
      price of $0.55 per share with an expiration date of December 31, 2010. In
      connection with the issuance of these warrants, the Company recognized a
      discount on the note payable of $18,720. This amount was to be accreted over
      a
      period of one year. As of June 30, 2008, the Company recorded $18,720 of this
      amount under interest expense as the note was paid during the third quarter
      of
      2008.





**6.** **Audit
          Fee Refund**





General
      and administrative expenses were reduced by $42,000 during the nine months
      ended
      June 30, 2008 as the Company received $42,000 (plus interest) in December 2007
      in respect to fees charged by a prior auditor engaged by the Company in fiscal
      2004 while such auditor was not registered with the PCAOB.





**7.** **Sale
          of Oil and Gas Properties**





In
      March
      2008, the Company entered into an agreement to sell its interests in certain
      operated gas wells and related gas gathering system in West Virginia with cash
      consideration to the Company of $150,000 of which $100,000 was received in
      April
      2008. The remaining $50,000 is pending awaiting the consent of a joint interest
      owner in the remaining asset. Revenues and expenses applicable to such assets
      included in the 2007 and 2008 periods are not material as the wells have not
      produced since March 2006. The assets sold have no net book value. Accordingly,
      the Company recognized gain on sale of oil and gas properties of $150,000 during
      the second quarter of 2008.





In
      May
      2008, the Company sold its interests in certain oil and gas properties
      (primarily undeveloped acreage) in Pennsylvania for $250,000. Revenues and
      expenses applicable to such assets included in the 2007 and 2008 periods are
      not
      material as the two gas wells were marginal producers. The assets sold have
      no
      net book value. Accordingly, the Company recognized gain on sale of oil and
      gas
      properties of $250,000 during the third quarter of 2008.


-12-


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





**Forward
      Looking Statements**





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





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





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





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





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





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


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


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


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


·
            the
                timing, quantity and marketability of
                production;


·
            effectiveness
                of management’s strategies and
                decisions;


·
            competition;


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


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


·
            climatic
                conditions; and


·
            unanticipated
                problems, issues or events.


-13-





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





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





**Results
      of Operations** **:**





*For
      the three and nine months ended June 30, 2008, compared to the three and nine
      months ended June 30, 2007:*


**Three Months Ended**
            
            **Nine Months Ended****2008**
            
            **2007**
            
            **2008**
            
            **2007****Revenues**
            
            $
            352,114
            
            $
            310,642
            
            $
            842,618
            
            $
            870,672**Net
                Loss**
            
            $
            (16,252
            )
            $
            (1,927,215
            )
            $
            (682,573
            )
            $
            (3,446,295
            )**Oil
                and Gas Production and Cost Information:**Production:Oil
                (Bbl)
            
            
            1,109
            
            
            1,163
            
            
            2,615
            
            
            4,053Gas
                (Mcf)
            
            
            10,348
            
            
            20,383
            
            
            36,233
            
            
            58,482Average
                Price:Oil
                (per Bbl)
            
            $
            120.58
            
            $
            69.41
            
            $
            103.57
            
            $
            59.26Gas
                (per Mcf)
            
            $
            13.84
            
            $
            7.78
            
            $
            10.03
            
            $
            7.26Lease
                Operating Expense and Production Tax per Mcfe
            
            $
            3.93
            
            $
            4.43
            
            $
            3.42
            
            $
            4.41


_____


Bbl
      = One
      barrel of oil or condensate


Mcf
      = One
      thousand cubic feet


Mcfe
      =
      One thousand cubic feet gas equivalent





The
      decrease in oil production is primarily a result of the decrease in well
      workovers during the nine months ended June 30, 2008 in respect to the
      properties operated by the Company in Texas. The decrease in gas production
      is
      primarily a result of (i) the aforementioned lack of workovers of certain wells
      in Texas; (ii) the occasional curtailment by the transporting pipeline of
      production from certain wells in West Virginia; and, (iii) the cessation of
      production from certain other wells in West Virginia while compression
      facilities were being installed by the Company. The decrease in Lease Operating
      Expenses and Production Tax per Mcfe is primarily the result of the decrease
      in
      Lease Operating Expenses in the nine months ended June 30, 2008. Such expenses
      were greater in the prior fiscal periods primarily as a result of the workover
      expenses incurred to maintain and enhance production of the Company’s properties
      in Texas. The Company worked on three Texas wells in the third quarter of 2008
      and intends to work on certain additional Texas wells in the fourth quarter
      of
      2008.





**Minerals
      Operations**





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





***Minerals
      Exploration Expenses***





Minerals
      exploration expenses totaled $6,000 and $9,502 for the three and nine months
      ended June 30, 2008 and $36,751 and $82,941 during the comparable periods of
      fiscal 2007, respectively. These expenses are primarily for costs associated
      with the exploration and quantification of mineral resources and mineral
      reserves.




-14-


***Minerals
      Operating Expenses and Other Costs***





Minerals
      operating expenses and other costs totaled $26,434 and $87,273 for the three
      and
      nine months ended June 30, 2008 and $35,640 and $55,156 during the comparable
      periods of fiscal 2007, respectively. Increases are primarily attributable
      to
      lease payments related to the calcium carbonate and zeolite properties during
      fiscal 2008.





**Depreciation,
      Depletion and Amortization: Minerals**





Depreciation,
      depletion and amortization (“DD&A”) totaled $194,563 and $583,689 for the
      three and nine months ended June 30, 2008 and 2007, respectively. Such amounts
      include amortization of Technology and Patent Rights of $144,363 and $433,089,
      respectively.





**Depreciation,
      Depletion and Amortization: Oil and Gas and Other**





DD&A
      totaled $45,591 and $136,776 for the three and nine months ended June 30, 2008
      and $58,792 and $176,377 during the comparable periods of fiscal 2007. The
      decrease in DD&A is primarily a result of the decrease in oil and gas
      production.




**General
      and Administrative Expenses**





These
      expenses decreased 91% and 79% to $150,465 and $578,536 for the three and nine
      months ended June 30, 2008 as compared to $1,720,567 and $2,719,410 during
      the
      comparable periods of fiscal 2007. Stock-based compensation expense and bonus
      expense are included in general and administrative expenses. The Company
      recorded stock-based compensation expense of $32,483 and $162,086 for the three
      and nine months ended June 30, 2008 and $139,390 and $420,390 during the
      comparable periods of fiscal 2007 (see Note 3 of the Notes to Unaudited
      Consolidated Financial Statements included in this interim report). The Company
      recognized bonus expense of $1,197,491 and $1,327,491 for the three and nine
      months ended June 30, 2007 (see Note 4 of the Notes to Unaudited Consolidated
      Financial Statements included in this interim report). General and
      administrative expenses also decreased as a result of the Company’s decreased
      staff. Further, general and administrative expenses for fiscal 2008 are reduced
      by $42,000 which the Company received during December 2007 in respect to fees
      charged by a prior auditor engaged by the Company in fiscal 2004 while such
      auditor was not registered with the PCAOB.





**Legal
      and Professional Fees and Expenses**





These
      expenses totaled $42,076 and $187,173 for the three and nine months ended June
      30, 2008 and $48,907 and $261,816 during the comparable periods of fiscal 2007.
      The decrease is primarily attributed to decreased professional fees related
      to
      potential acquisitions and resource development.





**Interest
      Expense**





Interest
      expense increased to $80,182 and $164,726 for the three and nine months ended
      June 30, 2008 as compared to $27,538 and $68,294 during the comparable periods
      of fiscal 2007. This increase is primarily attributable to default interest
      rates associated with certain debt as the Company has defaulted on certain
      required payments.




-15-


**Liquidity
      and Capital Resources**





The
      Company’s cash flow used in operating activities was $385,363 and $408,134 for
      the nine months ended June 30, 2008 and 2007, respectively. Funds have been
      and
      are being deployed in efforts to enhance the commercial viability of the
      Company’s existing resource assets, to identify potential expansion
      opportunities and to retire obligations associated with the Company’s assets.
      The Company’s net cash at June 30, 2008 was $196,756.





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





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





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





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





During
      December 2007, Sonata loaned the Company $75,000 which the Company used to
      satisfy certain delinquent vendor payables (see Note 5 of the Notes to Unaudited
      Consolidated Financial Statements included in this interim report). This note
      was repaid in May 2008 with a portion of the proceeds from the sale of the
      Pennsylvania properties (see below).





In
      March
      2008, the Company entered into an agreement to sell its interests in certain
      operated gas wells and related gas gathering system in West Virginia with cash
      consideration to the Company of $150,000 of which $100,000 was received in
      April
      2008. In May 2008, the Company sold its interests in certain oil and gas
      properties (primarily undeveloped acreage) in Pennsylvania for $250,000 (see
      Note 7 of the Notes to Unaudited Consolidated Financial Statements included
      in
      this interim report).





**Commercialization
      of Existing Assets**





The
      Company is continuing to pursue plans to commercialize its calcium carbonate,
      kaolin and zeolite projects which are critical for the Company to achieve
      profitability and establishing the Company as a market innovator in industrial
      minerals. Those plans have progressed from the data acquisition and analysis
      phase into ongoing mineral processing and facility design phase. The Company
      and
      its current partner and potential other partners are actively investigating
      various commercial applications for its mineral based products.




-16-


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





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





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





**Off-balance
      Sheet Arrangements**





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




**Item
      3. Controls and Procedures.**





(a) *Evaluation
      of Disclosure Controls and Procedures.* As of
      the end of the period covered by this Quarterly Report on Form 10-QSB, our
      Chief
      Executive Officer/Chief Financial Officer evaluated, with the participation
      of
      management, the effectiveness of our disclosure controls and procedures (as
      defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of
      1934, as amended (the “Exchange Act”)). Based upon this evaluation, our Chief
      Executive Officer/Chief Financial Officer has concluded that our disclosure
      controls and procedures were effective as of June 30, 2008 to ensure that
      information required to be disclosed in the reports that we file or submit
      under
      the Exchange Act is recorded, processed, summarized and reported within the
      time
      periods specified in the Securities and Exchange Commission’s rules and
      forms.





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





***INTERNAL
      CONTROL OVER FINANCIAL REPORTING***





The
      Company’s Annual Report on Form 10-KSB for the fiscal year ended September 30,
      2007, does not include a report of management’s assessment regarding internal
      control over financial reporting or an attestation report of the Company’s
      registered public accounting firm due to a transition period established by
      rules of the Securities and Exchange Commission for a small business
      issuer.




-17-


On
      June
      30, 2008, the Company had four employees. All day-to-day financial matters
      are
      overseen by the interim Chief Executive Officer/President/Chief Financial
      Officer and the Controller, with oversight by the Board of Directors. All
      contracting by the Company, for other than everyday items, is done with the
      approval the entire Board of Directors.





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





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





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





**Code
      of Ethics**





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





**Corporate
      Governance**





In
      April
      2008, the Board of Directors of the Company adopted the following:





§
            Corporate
                Governance Policy (see Exhibit 3.4 to this quarterly
                report);


§
            Nominating
                and Governance Committee Charter (see Exhibit 3.5 to this quarterly
                report); and,


§
            Compensation
                Committee Charter (see Exhibit 3.6 to this quarterly
                report).





Each
      of
      these items is posted on the corporate governance page of the Company’s web site
      at www.dalecoresources.com.


-18-




***RECENTLY
      ADOPTED ACCOUNTING STANDARDS***





In
      June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for
      Uncertainty in Income Taxes” (“FIN 48”). FIN 48 is an interpretation of FASB
      Statement No. 109, “Accounting for Income Taxes,” and it seeks to reduce
      the diversity in practice associated with certain aspects of measurement and
      recognition in accounting for income taxes. In addition, FIN 48 requires
      expanded disclosure with respect to the uncertainty in income taxes. We adopted
      FIN 48 as of October 1, 2007 and noted no material impact on our financial
      position or results of operations as a result of the adoption.





In
      September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting
      for Defined Benefit Pension and Other Postretirement Plans” (“SFAS 158”). SFAS
      158 requires employers to recognize the overfunded or underfunded status of
      a
      defined benefit postretirement plan as an asset or liability in its statement
      of
      financial position and to recognize changes in that funded status in the year
      in
      which the changes occur through comprehensive income. We adopted SFAS 158 as
      of
      September 30, 2007 and noted no material impact on our financial position or
      results of operations as a result of the adoption.





***RECENTLY
      ISSUED ACCOUNTING STANDARDS***





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value
      Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework
      for measuring fair value in generally accepted accounting principles and expands
      disclosures about fair value measurements. This pronouncement is effective
      as of
      the beginning of our 2009 fiscal year. We are currently evaluating the impact,
      if any, that SFAS 157 will have on our financial position or results of
      operations.





In
      February 2007, the
      Financial Accounting Standards Board (“FASB”) issued Statement of Financial
      Accounting Standards (“SFAS”) No. 159, “The Fair Value Option for Financial
      Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits entities to
      choose to measure many financial instruments and certain other items at fair
      value in order to mitigate volatility in reported earnings caused by measuring
      related assets and liabilities differently without having to apply complex
      hedge
      accounting provisions. This pronouncement is effective as of the beginning
      of
      our 2009 fiscal year. We are currently evaluating the impact, if any, that
      SFAS
      159 will have on our financial position or results of operations.





In
      December 2007, the Financial Accounting Standards Board (“FASB”) issued
      SFAS No. 141R, “Business Combinations” (“SFAS 141R”). SFAS 141R revises the
      principles and requirements for how the acquirer recognizes and measures in
      its
      financial statements the identifiable assets acquired, the liabilities assumed,
      any noncontrolling interest in the acquiree, and the goodwill acquired in a
      business combination or gain from a bargain purchase. SFAS 141R also revises
      the
      principles and requirements for how the acquirer determines what information
      to
      disclose to enable users of the financial statements to evaluate the nature
      and
      financial effects of the business combination. This pronouncement is effective
      as of the beginning of our 2010 fiscal year. We are currently evaluating the
      impact, if any, that SFAS 141R will have on our financial position or results
      of
      operations.





Also
      in
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interest
      in Consolidated Financial Statements — an amendment of ARB No. 51” (“SFAS
      160”). SFAS 160 amends ARB No. 51 to establish accounting and reporting
      standards for the noncontrolling interest in a subsidiary and for the
      deconsolidation of a subsidiary. This pronouncement is effective as of the
      beginning of our 2010 fiscal year. We are currently evaluating the impact,
      if
      any, that SFAS 160 will have on our financial position or results of
      operations.





In
      March
      2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments
      and Hedging Activities" ("SFAS No. 161"). SFAS 161 requires companies with
      derivative instruments to disclose information that should enable
      financial-statement users to understand how and why a company uses derivative
      instruments, how derivative instruments and related hedged items are accounted
      for under FASB Statement No. 133 "Accounting for Derivative Instruments and
      Hedging Activities" and how derivative instruments and related hedged items
      affect a company's financial position, financial performance and cash flows.
      SFAS 161 is effective for financial statements issued for fiscal years and
      interim periods beginning after November 15, 2008. The adoption of this
      statement is not expected to have a material effect on the Company's future
      financial position or results of operations.


-19-





In
      May
      2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
      Accounting Principles” (“SFAS 162”). SFAS 162 identifies a consistent framework,
      or hierarchy, for selecting accounting principles to be used in preparing
      financial statements that are presented in conformity with U.S. generally
      accepted accounting principles for nongovernmental entities (the “Hierarchy”).
      The Hierarchy within SFAS 162 is consistent with that previously defined in
      the
      AICPA Statement on Auditing Standards No. 69, “The Meaning of Present Fairly in
      Conformity With Generally Accepted Accounting Principles” (“SAS 69”). SFAS 162
      is effective 60 days following the United States Securities and Exchange
      Commission’s (the “SEC”) approval of the Public Company Accounting Oversight
      Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity
      With Generally Accepted Accounting Principles”. The adoption of SFAS 162 will
      not have a material effect on the Consolidated Financial Statements because
      the
      Company has utilized the guidance within SAS 69.




**PART
      II. OTHER INFORMATION**





**Item
      1. Legal Proceedings.**





None





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





None





**Item
      3. Defaults Upon Senior Securities.**





None




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





None





**Item
      5. Other Information.**




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


-20-





**Item
      6. Exhibits.**





**Exhibit**
              **Number**
            
            **Description**
            
            **Location**3.4
            
            Corporate
                Governance Policy Adopted April 10, 2008
            
            Incorporated
                by reference to Exhibit 3.4 to the Company’s Quarterly Report on Form
                10-QSB for the quarterly period ended March 31, 20083.5
            
            Nominating
                and Governance Committee Charter Adopted April 10, 2008
            
            Incorporated
                by reference to Exhibit 3.5 to the Company’s Quarterly Report on Form
                10-QSB for the quarterly period ended March 31, 20083.6
            
            Compensation
                Committee Charter Adopted April 10, 2008
            
            Incorporated
                by reference to Exhibit 3.6 to the Company’s Quarterly Report on Form
                10-QSB for the quarterly period ended March 31, 200831.1
            
            Certification
                of CEO under Section 302 of the Sarbanes-Oxley Act of 2002
            
            Filed
                Herewith31.2
            
            Certification
                of CFO under Section 302 of the Sarbanes-Oxley Act of 2002
            
            Filed
                Herewith32.1
            
            Certification
                of CEO under Section 906 of the Sarbanes-Oxley Act of 2002
            
            Filed
                Herewith32.2
            
            Certification
                of CFO under Section 906 of the Sarbanes-Oxley Act of 2002
            
            Filed
                Herewith


The
      Registrant incorporates by reference its Exhibit List as attached to its Form
      10-KSB for the fiscal year ended September 30, 2007.


-21-





**SIGNATURES**





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




**DALECO
                RESOURCES CORPORATION**Dated:
                August 12, 2008
            /s/
                Gary J. NovinskieGary
                J. NovinskieInterim
                Chief Executive Officer, President, ChiefFinancial
                Officer and Director (Principal Executive Officer
              and
                Principal Financial Officer)Dated:
                August 12, 2008
            /s/
                Richard W. BlackstoneRichard
                W. BlackstoneSecretary
                and Controller (Principal Accounting
                Officer)




-22-