**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** **March
      31, 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**
              (State
                or other jurisdiction of
              incorporation
                or organization)
            **23-2860734**
              (IRS
                Employer
              Identification
                No.)





**17
                Wilmont Mews, 5****th****Floor**
              **West
                Chester, Pennsylvania 19382**
              (Address
                of principal executive offices)
            **(610)
                429-0181**
              (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 April 30, 2008:
      43,081,346


Number
      of shares outstanding of the issuer’s Series B Preferred Stock as of April 30,
      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
            18**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
            21ITEM
                5.
            OTHER
                INFORMATION
            21ITEM
                6.
            EXHIBITS
            22**SIGNATURES**
            23




-
          2-


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





**March
                31**
              **2008**
            
            **September
                30**
              **2007****(Unaudited)****ASSETS****Current
                Assets:**Cash
                and Equivalents
            
            $
            116,704
            
            $
            224,267Accounts
                Receivable
            
            
            461,589
            
            
            391,200Other
                Current Assets
            
            
            7,678
            
            
            7,424Total
                Current Assets
            
            
            585,971
            
            
            622,891**Other
                Assets:**Technology
                and Patent Rights
            
            
            6,594,500
            
            
            6,594,500Accumulated
                Amortization
            
            
            (4,333,438
            )
            
            (4,044,712
            )Net
                Technology and Patent Rights
            
            
            2,261,062
            
            
            2,549,788Equity
                Placement Costs
            
            
            35,750
            
            
            35,750Accumulated
                Amortization of Equity Placement Costs
            
            
            (30,257
            )
            
            (24,599
            )Net
                Equity Placement Costs
            
            
            5,493
            
            
            11,151Securities
                Available for Future Sale
            
            
            3,040
            
            
            5,700Restricted
                Cash Deposits
            
            
            145,362
            
            
            143,978Prepaid
                Mineral Royalties - Long-term
            
            
            460,000
            
            
            460,000Interest
                Receivable
            
            
            116,833
            
            
            97,076Total
                Other Assets
            
            
            2,991,790
            
            
            3,267,693**Property,
                Plant and Equipment:**Oil
                and Gas Properties, at cost
            
            
            4,736,563
            
            
            5,276,563Accumulated
                Depreciation, Depletion and Amortization
            
            
            (3,850,947
            )
            
            (4,303,047
            )Net
                Oil and Gas Properties
            
            
            885,616
            
            
            973,516Mineral
                Properties, at cost
            
            
            12,609,100
            
            
            12,609,100Accumulated
                Depreciation, Depletion and Amortization
            
            
            (900,000
            )
            
            (800,000
            )Net
                Mineral Properties
            
            
            11,709,100
            
            
            11,809,100Equipment,
                Furniture and Fixtures, at cost
            
            
            79,902
            
            
            191,151Accumulated
                Depreciation
            
            
            (56,587
            )
            
            (164,151
            )Net
                Equipment, Furniture and Fixtures
            
            
            23,315
            
            
            27,000Total
                Net Property, Plant and Equipment
            
            
            12,618,031
            
            
            12,809,616**TOTAL
                ASSETS**
            
            $
            16,195,792
            
            $
            16,700,200




SEE
      ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.




-
          3-


**DALECO
          RESOURCES CORPORATION**
 **CONSOLIDATED
          BALANCE SHEETS**


**March
                31**
              **2008**
            
            **September
                30**
              **2007****(Unaudited)****LIABILITIES
                AND SHAREHOLDERS’ EQUITY****Current
                Liabilities:**Accounts
                Payable
            
            $
            2,073,887
            
            $
            2,204,133Federal
                and State Income Taxes Payable
            
            
            192,427
            
            
            192,427Note
                Payable - Sonata, net of unamortized discount of $14,040 at
                2008
            
            
            60,960
            
            
            --Note
                Payable - Related Party
            
            
            45,485
            
            
            45,485Note
                Payable - Other
            
            
            12,817
            
            
            --EV&T
                Note - Current Portion
            
            
            567,213
            
            
            567,213Note
                Payable - First Regional Bank
            
            
            100,000
            
            
            100,000CAMI
                Notes
            
            
            514,881
            
            
            514,881Accrued
                Interest Expense
            
            
            521,629
            
            
            464,546Accrued
                Dividends Payable
            
            
            1,602,915
            
            
            1,602,915Accrued
                Expense Reimbursements
            
            
            52,831
            
            
            49,327Accrued
                Bonus Expense
            
            
            1,373,831
            
            
            1,373,831Accrued
                Salary Expense
            
            
            1,003,134
            
            
            991,002Total
                Current Liabilities
            
            
            8,122,010
            
            
            8,105,760**TOTAL
                LIABILITIES**
            
            
            8,122,010
            
            
            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 - par
              value
                of $0.01 per share
              (outstanding:
                43,081,346 shares)
            
            
            430,813
            
            
            430,813Additional
                Paid in Capital
            
            
            45,059,536
            
            
            44,911,213Retained
                Deficit
            
            
            (36,839,357
            )
            
            (36,173,036
            )Subscriptions
                Receivable
            
            
            (576,000
            )
            
            (576,000
            )Accumulated
                Other Comprehensive Loss
            
            
            (2,660
            )
            
            --**TOTAL
                SHAREHOLDERS’ EQUITY**
            
            
            8,073,782
            
            
            8,594,440**TOTAL
                LIABILITIES AND SHAREHOLDERS’ EQUITY**
            
            $
            16,195,792
            
            $
            16,700,200




SEE
      ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.





-
          4-


**DALECO
        RESOURCES CORPORATION**
 **CONSOLIDATED
        STATEMENTS OF INCOME**
 **(UNAUDITED)**





**Three
                Months Ended**
              **March
                31**
            
            
            **Six
                Months Ended**
              **March
                31****2008**
            
            
            **2007**
            
            
            **2008**
            
            
            **2007****Revenues:**Oil
                and Gas Sales
            
            $
            178,123
            
            $
            224,226
            
            $
            357,237
            
            $
            437,265Royalty
                Receipts
            
            
            3,628
            
            
            7,869
            
            
            7,057
            
            
            14,213Mineral
                Sales
            
            
            1,008
            
            
            2,611
            
            
            2,163
            
            
            8,311Well
                Management Revenue
            
            
            66,232
            
            
            50,013
            
            
            124,047
            
            
            100,211Total
                Operating Revenues
            
            
            248,991
            
            
            284,719
            
            
            490,504
            
            
            560,000**Expenses:**Lease
                Operating Expenses - Oil and Gas
            
            
            38,539
            
            
            80,186
            
            
            91,446
            
            
            222,205Exploration
                Expenses - Minerals
            
            
            --
            
            
            46,191
            
            
            3,502
            
            
            46,191Operating
                Expenses and Other Costs - Minerals
            
            
            15,847
            
            
            3,980
            
            
            60,839
            
            
            19,516Production
                and Severance Taxes - Oil and Gas
            
            
            9,200
            
            
            3,554
            
            
            19,237
            
            
            21,781Depreciation,
                Depletion and Amortization
            
            
            240,156
            
            
            253,805
            
            
            480,311
            
            
            506,710Stock-Based
                Compensation Expense
            
            
            67,496
            
            
            142,000
            
            
            129,603
            
            
            281,000Bonus
                Expense
            
            
            --
            
            
            50,000
            
            
            --
            
            
            130,000General
                and Administrative Expenses
            
            
            140,734
            
            
            332,716
            
            
            298,468
            
            
            587,844Legal
                and Professional Fees and Expenses
            
            
            117,394
            
            
            77,586
            
            
            145,097
            
            
            212,909Shareholder
                Information Expenses
            
            
            18,456
            
            
            27,285
            
            
            19,786
            
            
            30,498Amortization
                of Equity Placement Costs
            
            
            2,829
            
            
            2,829
            
            
            5,658
            
            
            5,658Total
                Expenses
            
            
            650,651
            
            
            1,020,132
            
            
            1,253,947
            
            
            2,064,312**Other
                Income (Expense):**Interest
                and Dividend Income
            
            
            9,956
            
            
            13,339
            
            
            31,666
            
            
            25,988Interest
                Expense
            
            
            (45,487
            )
            
            (21,274
            )
            
            (84,544
            )
            
            (40,756
            )Gain
                on Sale of Oil and Gas Properties
            
            
            150,000
            
            
            --
            
            
            150,000
            
            
            --Total
                Other Income (Expense), Net
            
            
            114,469
            
            
            (7,935
            )
            
            97,122
            
            
            (14,768
            )Loss
                Before Income Taxes
            
            
            (287,191
            )
            
            (743,348
            )
            
            (666,321
            )
            
            (1,519,080
            )Taxes
                based on Income
            
            
            --
            
            
            --
            
            
            --
            
            
            --Net
                Loss
            
            $
            (287,191
            )
            $
            (743,348
            )
            $
            (666,321
            )
            $
            (1,519,080
            )Basic
                and Fully Diluted Net Loss per Share
            
            $
            (0.01
            )
            $
            (0.02
            )
            $
            (0.02
            )
            $
            (0.04
            )Weighted-average
                Number of Shares of Common Stock Outstanding
            
            
            43,081,346
            
            
            42,354,676
            
            
            43,081,346
            
            
            42,161,850




SEE
      ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.





-
          5-


**DALECO
        RESOURCES CORPORATION**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **FOR
        THE SIX MONTHS ENDED MARCH 31, 2008 AND 2007**
 **(UNAUDITED)**


**2008**
            
            **2007****Cash
                Flows From Operating Activities:**Net
                Loss
            
            $
            (666,321
            )
            $
            (1,519,080
            )Adjustments
                to Reconcile Net Loss to Net Cash Provided by
              (Used
                in) Operating Activities:Depreciation,
                Depletion and Amortization
            
            
            480,311
            
            
            506,710Amortization
                of Discount on Note Payable
            
            
            4,680
            
            
            --Amortization
                of Equity Placement Costs
            
            
            5,658
            
            
            5,658Bonus
                Expense
            
            
            --
            
            
            130,000Stock-Based
                Compensation Expense
            
            
            129,603
            
            
            281,000Gain
                on Sale of Oil and Gas Properties
            
            
            (150,000
            )
            
            --Changes
                in Operating Assets and Liabilities:Receivables
            
            
            40,146
            
            
            (32,880
            )Other
                Current Assets
            
            
            (254
            )
            
            2,113Pre-paid
                Mineral Royalties
            
            
            --
            
            
            (30,000
            )Restricted
                Cash Deposits
            
            
            (1,384
            )
            
            1,816Accounts
                Payable
            
            
            (130,246
            )
            
            302,098Accrued
                Interest Expense
            
            
            57,083
            
            
            22,187Other
                Accrued Expenses
            
            
            15,636
            
            
            (46,523
            )Net
                Cash Used in Operating Activities
            
            
            (195,380
            )
            
            (376,901
            )**Cash
                Flows From Investing Activities:**Purchases
                of Fixed Assets
            
            
            --
            
            
            (64,386
            )Receipts
                from Sale of Oil and Gas Properties
            
            
            --
            
            
            --Net
                Cash Provided by (Used in) Investing Activities
            
            
            --
            
            
            (64,386
            )**Cash
                Flows From Financing Activities:**Proceeds
                of Notes Payable
            
            
            87,817
            
            
            --Payments
                on Other Notes and Debt
            
            
            --
            
            
            (116,159
            )Proceeds
                of Equity Issuances
            
            
            --
            
            
            270,260Net
                Cash Provided by Financing Activities
            
            
            87,817
            
            
            154,101Net
                Change in Cash and Equivalents
            
            
            (107,563
            )
            
            (287,186
            )Cash
                and Equivalents at Beginning of Year
            
            
            224,267
            
            
            317,743Cash
                and Equivalents at End of Period
            
            $
            116,704
            
            $
            30,557**Supplemental
                Information:**Income
                Taxes Paid
            
            $
            --
            
            $
            --Interest
                Paid
            
            $
            22,619
            
            $
            18,568**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
            
            $
            150,000
            
            $
            --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 MARCH 31, 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 $666,321
      for the six months ended March 31, 2008. The ability of the Company to meet
      its
      total liabilities of $8,122,010 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
      March 31, 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 Sates 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 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 ending
      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 MARCH 31, 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.




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.




-
          8-
 
 **DALECO
          RESOURCES CORPORATION**
 **NOTES
          TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          OF MARCH 31, 2008 AND 2007**


**3.
        Capital Stock**


***Common
      Stock***





No
      shares
      of Common Stock were issued during the six months ended March 31,
      2008.





***Series
      B Preferred Stock***




No
      shares
      of Series B Preferred Stock were issued or converted to Common Stock during
      the
      six months ended March 31, 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)**
            
            
            (2,622,305
            )
            $
            0.59Options
                and Warrants Outstanding at March 31, 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.
 (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.


-
          9-





**DALECO
      RESOURCES CORPORATION**


**NOTES
      TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**AS
      OF MARCH 31, 2008 AND 2007**


(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 March 31, 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
            
            
            1.96
            
            
            2,375,000
            
            $
            0.57





***Stock-Based
      Compensation***





During
      the six months ended March 31, 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 March 31, 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 $129,603 and $281,000
      for the six months ended March 31, 2008 and 2007, respectively. 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%.





***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.




-
          10-


**DALECO
        RESOURCES CORPORATION**
 **NOTES
        TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        OF MARCH 31, 2008 AND 2007**


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
      six months ended March 31, 2008 and 2007. A total of 80,000 shares of Common
      Stock were issued during the six months ended March 31, 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 $50,000 and 130,000 of bonus expense during the three and six months
      ended March 31, 2007, respectively. 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 two quarters of 2008, the Company defaulted
      in
      respect to payments of salary required pursuant to the employment agreements
      with Messrs. Novinskie, Matz and Blackstone.





**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
      ending 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. 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 is to be
      accreted over a period of one year. As of March 31, 2008, the Company recorded
      $4680 of this amount under interest expense.




-
          11-


**DALECO
        RESOURCES CORPORATION**
 **NOTES
        TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        OF MARCH 31, 2008 AND 2007**


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





General
      and administrative expenses were reduced by $42,000 during the six months ended
      March 31, 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.**
            **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. 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.





**8.**
            **Subsequent
                Event**





On
      April
      30, 2008, the Company agreed to sell 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 are marginal producers. The assets
      sold have no net book value. Accordingly, the Company will recognize 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 six months ended March 31, 2008, compared to the three and six
      months ended March 31, 2007:*


**Three
                Months Ended**
            
            **Six
                Months Ended****2008**
            
            **2007**
            
            **2008**
            
            **2007****Revenues**
            
            $
            248,991
            
            $
            284,719
            
            $
            490,504
            
            $
            560,000**Net
                Loss**
            
            $
            (287,191
            )
            $
            (743,348
            )
            $
            (666,321
            )
            $
            (1,519,080
            )**Oil
                and Gas Production and Cost Information:**Production:Oil
                (Bbl)
            
            
            634
            
            
            1,711
            
            
            1,506
            
            
            2,890Gas
                (Mcf)
            
            
            13,509
            
            
            17,025
            
            
            25,885
            
            
            38,099Average
                Price:Oil
                (per Bbl)
            
            $
            93.52
            
            $
            53.10
            
            $
            91.04
            
            $
            55.17Gas
                (per Mcf)
            
            $
            8.80
            
            $
            7.83
            
            $
            8.50
            
            $
            7.29Lease
                Operating Expense and Production Tax per Mcfe
            
            $
            2.76
            
            $
            3.07
            
            $
            3.17
            
            $
            4.40


_____


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 six months ended March 31, 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 six months ended March 31, 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 intends to work on certain Texas wells in the third and
      fourth quarters of 2008.




-
          14-




**Minerals
      Operations**





The
      Company is not a Production Stage Company in respect to any of its minerals.
      It
      is a Development Stage company for a portion of its kaolin deposit in New Mexico
      and a portion of its zeolite deposit in Texas. It is an Exploration Stage
      company in respect to the remainder of its mineral holdings.





***Minerals
      Exploration Expenses***





Minerals
      exploration expenses were $3,502 and $46,191 for the six months ended March
      31,
      2008 and 2007, respectively. These expenses are primarily for costs associated
      with the exploration and quantification of mineral resources and mineral
      reserves.





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





Minerals
      operating expenses and other costs were $15,847 and $60,839 for the three and
      six months ended March 31, 2008 and $3,980 and $19,516 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: Oil and Gas**





Depreciation,
      depletion and amortization (“DD&A”) totaled $43,950 and $87,900 for the
      three and six months ended March 31, 2008 and $57,150 and $114,300 during the
      comparable periods of fiscal 2007. The decrease in DD&A is primarily a
      result of the decrease in oil and gas production.





**Depreciation,
      Depletion and Amortization: Minerals**





DD&A
      totaled $194,563 and $389,126 for the three and six months ended March 31,
      2008
      and 2007, respectively. Such amounts include amortization of Technology and
      Patent Rights of $144,363 and $288,726, respectively.





**Stock
      Based Compensation Expense**





The
      Company recorded stock based compensation expense of $67,496 and $129,603 for
      the three and six months ended March 31, 2008 and $142,000 and $281,000 during
      the comparable periods of fiscal 2007. See Note 3 of the Notes to Unaudited
      Consolidated Financial Statements included in this interim report.





**Bonus
      Expense**





The
      Company recognized bonus expense $50,000 and $130,000 for the three and six
      months ended March 31, 2007. See Note 4 of the Notes to Unaudited Consolidated
      Financial Statements included in this interim report.




-
          15-




**General
      and Administrative Expenses, Legal and Professional Fees and Shareholder
      Information Expenses**





These
      expenses decreased 37% and 44% to $276,584 and $463,351 for the three and six
      months ended March 31, 2008 as compared to $437,587 and $831,251 during the
      comparable periods of fiscal 2007. The decrease is primarily attributed to
      the
      Company’s decreased staff and decreased professional fees related to potential
      acquisitions and resource development. Also, 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.





**Interest
      Expense**





Interest
      expense increased to $45,487 and $84,544 for the three and six months ended
      March 31, 2008 as compared to $21,274 and $40,756 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.





**Liquidity
      and Capital Resources**





The
      Company’s cash flow used in operating activities was $195,380 and 376,901 for
      the six months ended March 31, 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 March 31, 2008 was $116,704.





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.





-
          16-





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. On April 30, 2008, the Company agreed to sell its interests in certain
      oil
      and gas properties (primarily undeveloped acreage) in Pennsylvania for $250,000.
      See Notes 7 and 8 of the Notes to Unaudited Consolidated Financial Statements
      included in this interim report.





**Acquisition
      and Growth**





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.





The
      efforts of the Company and Tecumseh Professional Associates LLC to evaluate
      the
      Sierra KaolinTM 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 minerals extracted
      from the target area have been deemed to be suitable for the coatings, fillers
      and pigments markets. Product formulations have been prepared and tested in
      these industrial applications. The results of the mineral analysis and
      application testing have indicated that commercially viable products can be
      produced from the deposit’s extracted mineral.





The
      venture, with the assistance of its consultants, has begun technical
      presentations of the product formulations to entities active within the
      coatings, fillers and pigments sectors of the paint and paper industries. While
      responses to these presentations are expected over the next several months,
      preliminary feedback has been encouraging. Tecumseh, as the project’s manager,
      is proceeding with its efforts to prepare the mineral deposit site for
      production. These efforts include the preparation and submittal of the required
      regulatory filings to secure an 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.





**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.





-
          17-


**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-Q,
      our
      Chief Executive Officer/Chief Financial Officer evaluated, with the
      participation of management, the effectiveness of our disclosure controls and
      procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities
      Exchange Act of 1934, as amended (the “Exchange Act”)). Based upon this
      evaluation, our Chief Executive Officer/Chief Financial Officer has concluded
      that our disclosure controls and procedures were effective as of March 31,
      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.





On
      March
      31, 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.




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          18-




**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;
 §
              Nominating
                  and Governance Committee Charter;
                  and,
 §
              Compensation
                  Committee Charter.




Each
      of
      these items is filed as an Exhibit to this quarterly report (Exhibits 3.4,
      3.5
      and 3.6, respectively) and is posted on the corporate governance page of the
      Company’s web site at www.dalecoresources.com.




***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.




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          19-




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.





**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




-
          20-




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





On
      April
      10, 2008, the Company held its Annual Meeting of Shareholders. The following
      matters were voted upon at such meeting:





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


**Name
                  of Nominee**
              **For**
              **Withheld**Dov
                  Amir
              28,860,563
              3,808,076Lord
                  Gilbert [John}
              28,210,075
              4,458,564David
                  A. Grady
              29,085,832
              3,582,807Carl
                  A. Haessler
              29,085,832
              3,582,807Robert
                  E. Martin
              29,926,832
              2,741,807Charles
                  T. Maxwell
              29,085,832
              3,582,807Gary
                  J. Novinskie
              29,023,102
              3,645,537William
                  Pipkin
              29,085,832
              3,582,807




b.
            Proposal
                to Ratify the Selection of Vasquez & Company, LLP, as the Company’s
                Independent Registered Public Accounting Firm for the fiscal year
                ending
                September 30, 2008:


**For**
              **Against**
              **Abstain**31,525,477
              823,158
              320,004




On
      April
      10, 2008





**Item
      5. Other Information.**





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




-
          21-




**Item
      6. Exhibits.**





ExhibitNumber
            Description
            Located
                at3.4
            Corporate
                Governance Policy Adopted April 10, 2008
            Filed
                Herewith3.5
            Nominating
                and Governance Committee Charter Adopted April 10, 2008
            Filed
                Herewith3.6
            Compensation
                Committee Charter Adopted April 10, 2008
            Filed
                Herewith31.1
            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.




-
          22-




**SIGNATURES**





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





**DALECO
                RESOURCES CORPORATION**Dated:
              May 15, 2008
            By:
            /s/
              Gary
              J. NovinskieGary
              J. NovinskieInterim
                Chief Executive Officer, President, Chief
              Financial Officer and Director (Principal Executive
                  Officer
                and Principal Financial
                  Officer)


Dated:
              May 15, 2008
            By:
            /s/
              Richard W. BlackstoneRichard
              W. BlackstoneSecretary
              and
              Controller (Principal Accounting Officer)




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          23-