SecProbe.io

CORRESP
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Prepared and filed by St Ives Burrups

  LAW    OFFICES OF

  EHMANN,    VAN DENBERGH, TRAINOR & SCOTT, P.C.

  TWO PENN CENTER PLAZA, SUITE 220

  TELEPHONE:  (215) 851-9800

  1500 JOHN F. KENNEDY BOULEVARD

  DIRECT    DIAL:  Ext. 222

  PHILADELPHIA, PENNSYLVANIA 19102

  FAX:  (215) 851-9820

May 4, 2005

VIA FAX

Securities and Exchange Commission
  Division of Corporate Finance
  450 Fifth Street, N.W.
  Washington, D.C. 20549-00405
  ATTN:  Mr. Kevin Stertzel
  Fax No: 202-942-9528

  Re:

  Daleco Resources Corporation

  File No: 0-12214

Gentlemen:

                 By  letter dated April 12, 2005, the Staff of the Securities and Exchange  Commission (“SEC”) (“Staff”) provided comments (“Comment Letter”) to Daleco  Resources Corporation’s (“Daleco”, the “Company” or “Registrant”) Form 10-KSB  filed with the SEC on January 18, 2005 and Form 10-KSB/A filed February 3, 2005  (“10-K”).  By letter dated April 20,  2005, the Staff granted the Registrant until May 4, 2005 in which to respond to  the Comment Letter.  For ease of  reference, we have incorporated the Staff’s comments, with Daleco’s comments  immediately following.

Comment #1.

Note 2D. Site Restoration, Dismantlement and  Abandonment Costs. page 48

  1.

  We note your accounting policy disclosure and it    appears that you have not adopted the provisions of SFAS 143. On a supplemental    basis, please provide us with an analysis of your asset retirement    obligations, including the disclosures normally required in accordance with    paragraph 22c. of SPAS 143. At a minimum, we would expect this to include all    plugging and abandonment costs associated with your oil & gas wells, and    also any reclamation costs incurred from mining activities.

  EHMANN, VAN DENBERGH, TRAINOR &    SCOTT, P.C.

  Page 2

Answer:

The Company is aware of the provisions of SFAS 143 as they relate to  anticipated oil and gas well plugging and mine reclamation expenditures. The  Company’s position with respect to each of these areas are discussed below:

SFAS 143: Disclosures:

                 22.  An entity shall disclose the following information about its asset retirement  obligations:

                 a.  A general description of the asset retirement obligations and the associated  long-lived assets.

                 b.  The fair value of assets that are legally restricted for purposes of settling  asset retirement obligations.

                 c.  A reconciliation of the beginning and ending aggregate carrying amount of asset  retirement obligations showing separately the changes attributable to (1)  liabilities incurred in the current period, (2) liabilities settled in the current  period, (3) accretion expense, and (4) revisions in estimated cash flows,  whenever there is a significant change in one of more of those four components  during the reporting period.

                 If  the fair value of an asset retirement obligation cannot be reasonably  estimated, that fact and the reasons there for shall be disclosed.

Oil and Gas Well Abandonment Costs

As indicated in the Company’s financial statements, the Company  believes that the projected salvage value of the residual lease and well  equipment on its various properties will be sufficient to cover the various  expenditures associated with well abandonment.   This position is based on the Company’s historical ability to sell off  its marginal properties prior to their eminent abandonment to local operators  and /or to “sell” wells slated for abandonment to equipment salvage operators  for their assumption of all plugging and abandonment obligations.  Over the last several years, the Company has  disposed of numerous wells in this manor.   There is no reason based on the current state of the oil and gas  industry to believe that these types of   “well divestment” opportunities will not continue.  As such, no abandonment obligations have  been recorded on the financial statements. The Company also
maintains/complies  with the various State bonding requirements dealing with future plugging  obligations etc to cover “orphan well” situations.

Mine Site Reclamation Costs

The Company has not accrued on its financial statements any costs  associated with the potential reclamation cost for its mineral extraction  sites.  As indicated in those  statements, the Company typically conducts it mining operations through the use  of site-specific contract operators.   Under its agreements with its operators, the costs associated with the  potential near term (initial year etc) site abandonment and reclamation costs  are the obligation of the operators. Since the Company’s mineral deposits have  just entered or now approaching the startup of significant extraction efforts  the costs associated with any reclamation work is subject to the site

  EHMANN, VAN DENBERGH, TRAINOR &    SCOTT, P.C.

  Page 3

management agreements. As the extraction work expands and extends  beyond the initial operating years, the Company will include information  relative to its percentage of indicated future site reclamation costs in its  financial reports.

Comments #2.

Note 5- Mineral Properties, page 50

  2.

  We note the value assigned to your mineral    properties and your related disclosures. It appears from your filings that    the value assigned to these properties has not changed since your acquisition    in year 2000. We also note from the explanatory paragraph within the Report    of Independent Registered Public Accounting Finn that the Company “has uncertainty    relative to full recoverability of its assets including Clean Age Minerals,    Incorporated”. It also appears from your filing that you have been unable to    move these properties beyond an exploratory stage. Please provide us with a    copy of your impairment analysis prepared in accordance with    SEAS 144, and any supplemental support for your conclusion that the    recoverability for amounts invested in these properties are not impaired.

  Answer:

  As indicated in SFAS 144, for the purpose of our    financial statements, impairment is the condition that exists    when the carrying amount of the long-lived asset (asset group) exceeds its    fair value.  In the case of the book    carrying value of the Clean Age Minerals deposits, the Company “booked” these    assets at their cost. At the time of acquisition the “booked cost basis “ was    calculated to a value equivalent to approximately $0.006 per indicated ton of    resource acquired.  As such, the    Company has a very conservative book value basis for its properties as    compared to the indicated fair value of the various mineral deposits as    identified in the geological reports. Furthermore, based on the apparent    market acceptance of the various products now being offered (Sierra Gold ™    and ReNuGen™) and the margins being realized, there does not appear to be any    basis for
“impairing” the carrying value of the individual properties at this    time.

                   To    assure that the commercialization efforts for the various mineral deposits    are moved forward, the Company has entered into various operating    arrangements with third party entities involved in the mining and/or    marketing of industrial minerals. The execution of these various arrangements    has been reported in the Company’s financial statements and in other required    filings. (See Form 8-K dated December 3, 2004, Form 8-K dated February 17,    2005 and Form 8-K dated March 16, 2005.)
    For reference, the following table is provided which reflects the company’s    current internal assessment of the properties’ value versus their book carry    values. The assessment takes into consideration the terms of the company’s    various operating agreements (see above), expected cost structure and the    targeted development
and marketing plans for the various minerals deposits.

  EHMANN, VAN DENBERGH, TRAINOR &    SCOTT, P.C.

  Page 4

  Carrying    Value

  Projected    Value

  Property

  Original

  Current

  Cum CF

  NPV@10%

  CaCO3

  $

  2,731,972

  $

  2,479,972

  $

  8,807,400

  $

  3,000,043

  Kaolin

  $

  3,572,578

  $

  3,560,578

  $

  92,967,994

  $

  28,308,079

  Zeolite

  $

  6,304,550

  $

  6,268,550

  $

  307,439,675

  $

  92,484,030

  As indicated no impairment is indicated at this    time.

Note 6— Patents and Technology,  page 51

  3.

  We note your disclosure relative to your subsidiary    “16/6 Inc.” and its patent application denial in 2003. Please tell us and    disclose the amount of assets included within you financial statements    associated with this subsidiary and the related technology for all    years presented We note within your subsequent event disclosures the sale of    this technology for an undisclosed amount. Please modify your disclosures to    indicate the value of the subsequent transaction and any expected gain or    loss on sale. Please note, to date, we are unable to locate a registration    statement filed in the name of the acquiring entity as anticipated by your    disclosures.

  Answer.

  Under the terms of an Asset Acquisition Agreement    (“AAA”) dated December 1, 2004 by and among PSNet Communications (Later    merged with Ostara Corporation) and Daleco Resources Corporation, Daleco sold    its I-Squared and I-Top information technologies to PSNet for 3,000,000    unrestricted common shares and the warrant rights to acquire an additional    15,000,000 shares.  The warrants    rights are for a period of one year and have an escalating exercise price    starting at $2.00 per share and rising to $8.00 per share on a quarterly    basis.  That transaction had a    targeted closing date of March 2005.     At the time of the signing on the AAA PSNet was a private entity that    was targeting a public offering and registration of its securities in March    2005.  As such the no specific value    could be placed on the PSNet securities.     Subsequent to the PSNet/Daleco transaction PSNet was acquired
by/merged with Ostara Corporation (“Ostara”) a publicly traded entity with    Ostara assuming the obligations of PSNet as the successor entity.

  Ostara initiated the actual transfer of securities    (Ostara Common Stock & Warrants) commenced on March 31, 2005.

  In December 2004, the Daleco assets subject to the    terms of the transaction had a Book Value Basis (“BVB”) of $542,621.  Since PSNet’s securities were not    registered under the ‘33 Act, but subject to a demand registration, Daleco    treated the transaction as “swap” of assets of equivalent value.  It therefore transferred the BVB of the IT    assets divested to the securities it received for book purposes.  No value was assigned to the warrant    rights since they were priced significantly “out-of-the-money” market wise    compared to the near term trading value of the stock received.  2,000,050 shares of the Ostara common

  EHMANN, VAN DENBERGH, TRAINOR &    SCOTT, P.C.

  Page 5

  stock and equivalent warrant rights were delivered    to Daleco’s shareholders as a special dividend in accordance with the    AAA.  This Distribution also commenced    on March 31, 2005 and was managed directly by Ostara’s stock transfer agent,    PacWest Transfer.

                 We  believe that the expected gain is the same subject as contingent gain discussed  under FAS 5, paragraph 17 which prohibits the recognition and disclosure of  contingent gain.

                 17.  The board has not reconsidered ARB 50 with respect to gain contingencies.  Accordingly, the following provisions of paragraphs 3 and 5 of that Bulletin  shall continue in effect:

                           a.  Contingencies that might result in gains usually are not reflected in the  accounts since to do so might be to recognize revenue prior to its realization.

                           b.  Adequate disclosure shall be made of contingencies that might result in gains,  but care shall be exercised to avoid misleading implications as to the  likelihood of realization.

Report of Independent Registered Public Accounting Firm on Supplemental  Financial information, page 65

  4.

  We note the additional opinion included within your    filing but are unclear as to the information to which it opines. It would    appear the report is intended for the information included within pages 66-71    of your filing; however, the report refers to pages 70-75.  Also, to the extent the opinion covers    pages 66-71 of your filing, tell us how your independent registered    accountants are able to opine on the fairness of quantities presented for oil    and gas reserves.

  Answer:

  The Opinion was intended to refer to Schedules V, VI    and X of the Registrant’s 10-K. Future filings will only contain a reference    to the Schedules and not pages.

Measure of Discounted Future Net Cash Flow from  Estimated Production Proved Oil and Gas Reserves Standardized, page 70.

  5.

  We note within your presentation of the standardized    measure the absence of any expected future income taxes. Please note, that    only loss carry forwards pertaining to oil and gas activities can be considered    for the determination of future income taxes for this measure. Please refer    to paragraph 30c. of SFAS 69. If your measure considers loss carry forwards    that are the result of non-oil & gas activities, please modify your    presentation accordingly.

  Answer:

  The net loss carry forward reported in the financial    statements relates to the Company’s oil and gas activities and therefore is    applicable to the calculation.  We    will clarify in future reports that the NOL is available only against Oil and    Gas revenues and activities.

  EHMANN, VAN DENBERGH, TRAINOR &    SCOTT, P.C.

  Page 6

Petroleum Engineering Comments

Description of Business, page 1

  Proved Reserves, page 9

  6.

  We note the statement that your reserve estimates    for your in-house staff computed your Appalachian properties based on    internally generated decline curves for each well. Please provide us with    these internally generated decline curves showing the well’s actual    production and your estimate of future production for the well on the same    graph.

  Answer:

  The requested production curves for the various    wells have been included. (See attached). By way of further answer, the State    of West Virginia tax assessment on select wells have also been attached for    reference. Note that the assessments are based on the reserve value assigned    for each well by the State of West, Virginia.

  7.

  Supplementary describe the qualifications of the    in-house staff that performed the Appalachian reserve estimates. We may have    further comments.

  Answer:

  Mr. Novinskie is a 1972 graduate of Pennsylvania    State University with a degree in Petroleum and Natural Gas Engineering. Mr.    Novinskie worked with Amoco Oil Company as a Petroleum Engineer for    approximately 10 years. While with Amoco and holding the position of    reservoir engineering supervisor, he worked as one on the Company’s    representatives on the industry panel for the development of initial reserve    recognition accounting guidelines. In 1981, Mr. Novinskie left Amoco to work    for Omni Exploration a small, public independent oil and gas exploration and    production Company. Mr. Novinskie rose from the position of a regional    Petroleum Engineer to President of the Company. In 1987 Omni was sold to    Carin Energy. Mr. Novinskie then was employed by the Huntington Bank, in    Columbus, Ohio as a Vice President in the Energy Lending Department and Chief    Oil and Gas Technical Officer. In this capacity, Mr. Novinskie and his
technical staff were responsible for the direct and oversight evaluations of    several thousand Ohio, Pennsylvania and West Virginia wells comprising the    bank’s loan portfolio.  Wh