Edgar Filing: DALECO RESOURCES CORP

Unassociated Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended March 31, 2009

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

For the transition period from __________ to __________

Commission File Number 0-12214

DALECO RESOURCES CORPORATION

(Exact name of registrant as specified in its charter)

Nevada

(State or other jurisdiction of

incorporation or organization)

23-2860734

(I.R.S. Employer

Identification No.)

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

___________________________________________________________________________

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

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

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

APPLICABLE ONLY TO CORPORATE ISSUERS:

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

Number of shares outstanding of the issuer's Common Stock as of April 30, 2009: 43,081,346

Number of shares outstanding of the issuer’s Series B Preferred Stock as of April 30, 2009: 145,000

DALECO RESOURCES CORPORATION

TABLE OF CONTENTS

		PAGE
PART I - FINANCIAL INFORMATION

ITEM 1.	CONSOLIDATED FINANCIAL STATEMENTS	3
	Consolidated Balance Sheets	3
	Consolidated Statements of Operations	5
	Consolidated Statements of Cash Flows	6
	Notes to Consolidated Financial Statements	7

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
	CONDITION AND RESULTS OF OPERATIONS	12

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
	MARKET RISK	16

ITEM 4.	CONTROLS AND PROCEDURES	16

ITEM 4T.	CONTROLS AND PROCEDURES	17

PART II - OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	18

ITEM 1A.	RISK FACTORS	18

ITEM 2.	UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS	18

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	18

ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	18

ITEM 5.	OTHER INFORMATION	19

ITEM 6.	EXHIBITS	19

SIGNATURES		20

PART I – FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements.

DALECO RESOURCES CORPORATION

CONSOLIDATED BALANCE SHEETS

	March 31 2009			September 30 2008
	(Unaudited)
ASSETS
Current Assets:
Cash and Equivalents	$	81,531		$	472,912
Accounts Receivable		250,764			474,692
Other Current Assets		7,424			7,424
Total Current Assets		339,719			955,028

Other Assets:
Technology and Patent Rights		6,594,500			6,594,500
Accumulated Amortization		(4,910,890	)		(4,622,164	)
Net Technology and Patent Rights		1,683,610			1,972,336
Securities Available for Future Sale		253			5,510
Restricted Cash Deposits		105,958			105,825
Prepaid Mineral Royalties – Long-term		520,000			490,000
Interest Receivable		141,428			131,387
Total Other Assets		2,451,249			2,705,058

Property, Plant and Equipment:
Oil and Gas Properties, at cost		4,424,512			4,424,512
Accumulated Depreciation, Depletion and Amortization		(3,716,495	)		(3,626,795	)
Net Oil and Gas Properties		708,017			797,717
Mineral Properties, at cost		12,609,100			12,609,100
Accumulated Depreciation, Depletion and Amortization		(950,000	)		(950,000	)
Net Mineral Properties		11,659,100			11,659,100
Equipment, Furniture and Fixtures, at cost		79,902			79,902
Accumulated Depreciation		(63,955	)		(60,271	)
Net Equipment, Furniture and Fixtures		15,947			19,631
Total Net Property, Plant and Equipment		12,383,064			12,476,448

TOTAL ASSETS	$	15,174,032		$	16,136,534

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.

DALECO RESOURCES CORPORATION

CONSOLIDATED BALANCE SHEETS

	March 31 2009			September 30 2008
	(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts Payable	$	1,805,455		$	2,175,950
Federal and State Income Taxes Payable		272,395			264,795
Note Payable - Related Party		35,485			45,485
Premium Finance Note Payable		13,550			2,636
EV&T Note		567,213			567,213
Note Payable - First Regional Bank – Current Portion		15,000			99,970
CAMI Notes		514,881			514,881
Accrued Interest Expense		661,399			603,499
Accrued Dividends Payable		1,684,480			1,626,004
Accrued Expense Reimbursements		19,051			20,293
Accrued Bonus Expense		1,373,831			1,373,831
Accrued Salary Expense		960,066			986,698
Total Current Liabilities		7,922,806			8,281,255
Note Payable – First Regional Bank – Long-term Portion		55,000			--
TOTAL LIABILITIES		7,977,806			8,281,255

SHAREHOLDERS’ EQUITY:
Preferred Stock – 20,000,000 shares authorized
Series A Preferred Stock (outstanding: none)		--			--
Series B Preferred Stock – par value of $0.01 per share (outstanding: 145,000 shares)		1,450			1,450
Common Stock – 100,000,000 shares authorized – par value of $0.01 per share (outstanding: 43,081,346 shares)		430,813			430,813
Additional Paid in Capital		45,163,337			45,118,409
Accumulated Deficit		(37,817,927	)		(37,119,203	)
Subscriptions Receivable		(576,000	)		(576,000	)
Accumulated Other Comprehensive Loss		(5,447	)		(190	)
TOTAL SHAREHOLDERS’ EQUITY		7,196,226			7,855,279

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	15,174,032		$	16,136,534

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.

DALECO RESOURCES CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended March 31						Six Months Ended March 31
	2009			2008			2009			2008
Revenues:
Oil and Gas Sales	$	74,105		$	178,123		$	200,431		$	357,237
Royalty Receipts		3,900			3,628			8,100			7,057
Mineral Sales		1,208			1,008			3,625			2,163
Well Management Revenue		65,699			66,232			131,399			124,047
Total Operating Revenues		144,912			248,991			343,555			490,504

Expenses:
Lease Operating Expenses - Oil and Gas		67,743			38,539			107,799			91,446
Exploration Expenses - Minerals		--			--			--			3,502
Operating Expenses and Other Costs - Minerals		18,113			15,847			37,372			60,839
Production and Severance Taxes – Oil and Gas		4,604			9,200			12,274			19,237
Depreciation, Depletion and Amortization		191,054			240,156			382,110			480,311
General and Administrative Expenses		115,108			208,230			236,431			428,071
Legal and Professional Fees and Expenses		45,523			117,394			101,479			145,097
Shareholder Information Expenses		16,282			18,456			19,468			19,786
Amortization of Equity Placement Costs		--			2,829			--			5,658
Total Expenses		458,427			650,651			896,933			1,253,947

Other Income (Expense):
Interest and Dividend Income		8,214			9,956			15,701			31,666
Interest Expense		(50,656	)		(45,487	)		(102,571	)		(84,544	)
Gain on Sale of Oil and Gas Properties		--			150,000			--			150,000
Total Other Income (Expense), Net		(42,442	)		114,469			(86,870	)		97,122

Loss Before Income Taxes		(355,957	)		(287,191	)		(640,248	)		(666,321	)
Taxes based on Income		--			--			--			--
Net Loss		(355,957	)	$	(287,191	)		(640,248	)		(666,321	)
Preferred Stock Dividends		(29,238	)		--			(58,476	)
Net Loss Applicable to Common Shareholders	$	(385,195	)	$	(287,191	)	$	(698,724	)	$	(666,321	)

Basic and Fully Diluted Net Loss per Share	$	(0.01	)	$	(0.01	)	$	(0.02	)	$	(0.02	)
Weighted-average number of shares of Common Stock Outstanding		43,081,346			43,081,346			43,081,346			43,081,346

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.

DALECO RESOURCES CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED MARCH 31, 2009 AND 2008

(UNAUDITED)

	2009			2008
Cash Flows From Operating Activities:
Net Loss	$	(640,248	)	$	(666,321	)
Adjustments to Reconcile Net Loss to Net Cash Provided by (Used in) Operating Activities:
Depreciation, Depletion and Amortization		382,110			480,311
Amortization of Discount on Note Payable		--			4,680
Amortization of Equity Placement Costs		--			5,658
Stock-Based Compensation Expense		44,928			129,603
Gain on Sale of Oil and Gas Properties		--			(150,000	)
Changes in Operating Assets and Liabilities:
Receivables		213,887			40,146
Other Current Assets		--			(254	)
Pre-paid Mineral Royalties		(30,000	)		--
Restricted Cash Deposits		(133	)		(1,384	)
Accounts Payable		(370,495	)		(130,246	)
Accrued Interest Expense		57,900			57,083
Other Accrued Expenses		(20,274	)		15,636
Net Cash Used in Operating Activities		(362,325	)		(195,380	)

Cash Flows From Investing Activities:
Purchases of Fixed Assets		--			--
Net Cash Used in Investing Activities		--			--

Cash Flows From Financing Activities:
Proceeds from Borrowings		21,860			87,817
Payments on Notes and Debt		(50,916	)		--
Net Cash Provided By (Used In) Financing Activities		(29,056	)		87,817

Net Change in Cash and Equivalents		(391,381	)		(107,563	)
Cash and Equivalents at Beginning of Year		472,912			224,267
Cash and Equivalents at End of Period	$	81,531		$	116,704

Supplemental Information:
Income Taxes Paid	$	--		$	--
Interest Paid	$	44,671		$	22,619

Supplemental Disclosure of Non-cash Transactions:
Receivable from Sale of Oil and Gas Properties	$	--		$	150,000
Discount on Note Payable Resulting from Issuance of Warrants to Purchase Common Stock	$	--		$	18,720
Preferred Dividends Not Paid	$	58,476		$	--

SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.

DALECO RESOURCES CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2009

1. Continued Operations and Going Concern

The unaudited consolidated financial statements have been prepared on the basis of a going concern which contemplates that the Company will be able to realize assets and discharge liabilities in the normal course of business. Accordingly, they do not give effect to adjustments that would be necessary should the Company be required to liquidate its assets. The Company incurred a net loss of $640,248 for the six months ended March 31, 2009. The ability of the Company to meet its total liabilities of $7,977,806 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, 2009, the Company and certain of its subsidiaries were in default of certain debt obligations and certain employment agreements. The holders of these instruments are working with the Company to achieve the ultimate extinguishment of the obligations.

2. Summary of Significant Accounting Policies

Basis of Presentation

The unaudited consolidated financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 8 and Rule 10-01 of Regulation S-X. They do not include all information and notes required by generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there has been no material changes in the information disclosed in the notes to the consolidated financial statements included in the Company’s annual report on Form 10-KSB of Daleco Resources Corporation for the year ended September 30, 2008. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2009, are not necessarily indicative of the results that may be expected for any other interim period or the entire year. For further information, these unaudited consolidated financial statements and the related notes should be read in conjunction with the Company’s audited consolidated financial statements for the year ended September 30, 2008, included in the Company’s annual report on Form 10-KSB (“2008 Annual Report”).

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

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

DALECO RESOURCES CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2009

Significant Accounting Policies

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

Use of Estimates

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

RECENTLY ADOPTED ACCOUNTING STANDARDS

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. The Company adopted SFAS 157 as of October 1, 2008 and noted no material impact on the Company’s 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. The Company adopted SFAS 159 as of October 1, 2008 and noted no material impact on its financial position or results of operations as a result of the adoption.

RECENTLY ISSUED ACCOUNTING STANDARDS

In April 2009, the FASB issued FSP FAS 107-1 and Accounting Principles Board (APB) 28-1, Interim Disclosures about Fair Value of Financial Instruments. The FSP amends SFAS No. 107 “Disclosures about Fair Value of Financial Instruments” to require an entity to provide disclosures about fair value of financial instruments in interim financial information. This FSP is to be applied prospectively and is effective for interim and annual periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. The Company will include the required disclosures in its quarter ending June 30, 2009 report.

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

DALECO RESOURCES CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2009

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

Also in December 2007, the FASB issued SFAS No. 160, “Non-controlling Interest in Consolidated Financial Statements — an amendment of ARB No. 51” (“SFAS 160”). SFAS 160 amends ARB No. 51 to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. This pronouncement is effective as of the beginning of the Company’s 2010 fiscal year. The company is currently evaluating the impact, if any, that SFAS 160 will have on its 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.

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.

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

DALECO RESOURCES CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2009

3. Capital Stock

Common Stock

No shares of Common Stock were issued during the six months ended March 31, 2009.

Series B Preferred Stock

No shares of Series B Preferred Stock were issued or converted to Common Stock during the quarter ended March 31, 2009.

Options and Warrants to Purchase Common Stock

	Number of Options and Warrants			Weighted Average Price per Share
Options and Warrants Outstanding at September 30, 2008		4,260,641		$	0.57
Options Expired (1)		(200,000	)	$	0.43
Options and Warrants Outstanding at March 31, 2009		4,060,641		$	0.58

(1)	In December 2008, an option for the purchase of 200,000 shares held by a former Director of the Company expired.

Summarized information relating to the stock options to purchase Common Stock outstanding as of March 31, 2009, is as follows:

Exercise Price per Share		Number of Shares Underlying Options Unexercised		Weighted Average Exercise Price Per Share		Weighted Average Remaining Life (Years)		Number of Shares Underlying Options Exercisable		Weighted Average Exercise Price Per Share
$0.28-$0.85		2,675,000		$0.57		1.17		2,525,000		$0.58

Stock-Based Compensation

During the six months ended March 31, 2009, options to purchase 200,000 shares of Common Stock expired unexercised. There are options to purchase 2,675,000 shares of Common Stock outstanding as of March 31, 2009, of which 2,450,000 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.

DALECO RESOURCES CORPORATION

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2009

In accordance with the provisions of SFAS 123(R), “Share-Based Payment”, the Company has recorded stock-based compensation expense of $44,928 and $129,603 for the six months ended March 31, 2009 and 2008, respectively, which is included in General and Administrative Expenses. No tax benefit has been recognized. The stock-based compensation expense is based on the fair value at the grant date. The fair value of the options was estimated using the Black-Scholes option-pricing model with the following assumptions: risk free interest rates between 3.14% and 4.72%; expected life of three to seven years; and expected volatility between 56% and 184%.

Net Income (Loss) Per Share

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

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

Payment of Accrued Dividends

There was no cash dividend payment in respect to the Series A or B Preferred Stocks during the six months ended March 31, 2009 and 2008.

5.	Notes Payable

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

6.	Property and Equipment

The Company periodically reviews the carrying value of its property and equipment for impairment as required under SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets”. Based on its assessment, considering that the Company’s mineral business is still under the exploration stage, management believes that no impairment of its property and equipment is necessary during this quarter ended March 31, 2009.

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

Forward Looking Statements

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

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

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

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

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

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

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

market capacity and demand for the Company’s minerals;

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

the timing, quantity and marketability of production;

effectiveness of management’s strategies and decisions;

competition;

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

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

climatic conditions; and

unanticipated problems, issues or events.

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, 2009 and 2008:

	Three Months Ended March 31						Six Months Ended March 31
	2009			2008			2009			2008
Revenues	$	144,912		$	248,991		$	343,555		$	490,504
Net Loss	$	(355,957	)	$	(287,191	)	$	(640,248	)	$	(666,321	)
Oil and Gas Production and Cost Information:
Production:
Oil (Bbl)		791			634			1,809			1,506
Gas (Mcf)		9,141			13,509			18,167			25,885
Average Price:
Oil (per Bbl)	$	40.18		$	93.52		$	50.17		$	91.04
Gas (per Mcf)	$	4.63		$	8.80		$	6.04		$	8.50
Lease Operating Expense and Production Tax per Mcfe	$	5.21		$	2.76		$	4.14		$	3.17

Bbl = One barrel of oil or condensate

Mcf = One thousand cubic feet

Mcfe = One thousand cubic feet gas equivalent

The decrease in gas production experienced during the three and six months ended March 31, 2009 is primarily a result of wells being “off-line” for repair, declines in the producing gas-oil ratio from certain producing wells operated by the Company in Texas and curtailments resulting from third party maintenance of natural gas pipelines and processing facilities servicing these properties. The increase in Lease Operating Expenses and Production Tax per Mcfe is primarily the result of the base well/lease operating costs being applied to the reduced production volumes for the three and six months ended March 3 1, 2009. The reduction in oil and gas operating revenues during the three and six months ended March 31, 2009 is the result of the decline in production volumes and the significant declines in the price received by the Company for the crude oil and natural gas sold during period as compared to prior year’s three and six month period.

Minerals Operations

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

Minerals Exploration Expenses

Minerals exploration expenses were $3,502 for the six months ended March 31, 2008. The Company did not incur minerals exploration expenses during the first two quarters of fiscal 2009. These expenses were primarily for costs associated with the exploration and quantification of mineral resources and mineral reserves.

Minerals Operating Expenses and Other Costs

Minerals operating expenses and other costs totaled $18,113 and $37,372 for the three and six months ended March 31, 2009, respectively, and $15,847 and $60,839 for the comparable periods of fiscal year 2008. The decrease is primarily attributable to certain lease payments related to the calcium carbonate and zeolite properties during the prior fiscal periods.

Depreciation, Depletion and Amortization: Oil and Gas

Depreciation, depletion and amortization (“DD&A”) totaled $46,691 and $93,384 for the three and six months ended March 31, 2009, respectively, and $43,950 and $87,900 for the comparable periods of fiscal year 2008.

Depreciation, Depletion and Amortization: Minerals

Depreciation, depletion and amortization totaled $144,363 and $288,726 for the three and six months ended March 31, 2009, respectively, and $194,563 and $389,126 for the comparable periods of fiscal year 2008. Such amounts include amortization of Technology and Patent Rights of $144,363 and $288,726 in the three and six month periods of each fiscal year, respectively.

General and Administrative Expenses

These expenses totaled $115,108 and $236,431 for the three and six months ended March 31, 2009, respectively, and $208,230 and $428,071 for the comparable periods of fiscal year 2008. The Company recorded stock-based compensation expense of $22,464 and $44,928 for the three and six months ended March 31, 2009, respectively, and $67,496 and $129,603 for the comparable periods of fiscal year 2008. See Note 3 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.

Legal and Professional Fees and Expenses

These expenses totaled $45,523 and $101,479 for the three and six months ended March 31, 2009, respectively, and $117,394 and $145,097 for the comparable periods of fiscal year 2008. The decrease is primarily attributed to decreased professional fees related to auditing services. During the six months ended March 31, 2008, the Company’s professional fees were reduced by $42,000 which the Company received in respect to fees charged by a prior auditor engaged by the Company in fiscal 2004 while such auditor was not registered with the PCAOB.

Interest Expense

Interest expense totaled $50,656 and $102,571 for the three and six months ended March 31, 2009, respectively, and $45,487 and $84,544 for the comparable periods of fiscal year 2008. 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 $362,325 and $195,380 for the six months ended March 31, 2009 and 2008, respectively. Funds have been and are being deployed in efforts to enhance the commercial viability of the Company’s existing resource assets, to identify potential expansion opportunities and to retire obligations associated with the Company’s assets. The Company’s net cash at March 31, 2009 was $81,531.

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 Investment Company, Ltd. 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.

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.

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

The venture, with the assistance of its consultants, has begun technical presentations of the product formulations to entities active on both the demand and supply sides of the coatings, fillers and pigments sectors of the paint and paper industries. Preliminary feedback from these initial presentations has been encouraging and has 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. Quantitative and Qualitative Disclosures About Market Risk.

None

Item 4. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer/Chief Financial Officer evaluated, with the participation of management, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based upon this evaluation, our Chief Executive Officer/Chief Financial Officer has concluded that our disclosure controls and procedures were effective as of March 31, 2009 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.

On March 31, 2009, the Company had three employees. All day-to-day financial matters are overseen by the interim Chief Executive Officer/President/Chief Financial Officer with oversight by the Board of Directors. All contracting by the Company, for other than everyday items, is done with the approval the entire Board of Directors.

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

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

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

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

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.

Item 4T. Controls and Procedures.

See Item 4 above.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

None

Item 1A. Risk Factors.

Not required for smaller reporting companies.

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

None

Item 3. Defaults Upon Senior Securities.

None

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

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

Election of Directors for a term expiring in 2009:

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

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

For				Against				Abstain
	31,456,464				1,093,264				--

Item 5. Other Information.

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

Item 6. Exhibits.

Exhibit Number	Description	Located at
10.22	Second Amendment to Loan Agreement dated December 31, 2003	Filed Herewith

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

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

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

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

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

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 19, 2009		/s/ Gary J. Novinskie
		Gary J. Novinskie Interim Chief Executive Officer, President, Chief Financial Officer and Director (Principal Executive Officer and Principal Financial Officer)

Dated: May 19, 2009		/s/ Richard W. Blackstone
		Richard W. Blackstone Principal Accounting Officer