UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q
(Mark One)

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

                      For the quarterly period ended February 28, 2010

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

                 For the transition period from _____ to _______

                       Commission File Number: 333-146561

                          SYNERGY RESOURCES CORPORATION
                       ---------------------------------
             (Exact Name of Registrant as Specified in its Charter)

            Colorado                                      20-2835920
-------------------------------                      -------------------
(State or other jurisdiction of                       (I.R.S. Employer
 incorporation or organization)                      Identification No.)

                  20203 Highway 60, Platteville, Colorado 80651
               --------------------------------------------------
               (Address of Principal Executive Offices) (Zip Code)

        Registrant's telephone number including area code: (970) 737-1073

                                       N/A
     ----------------------------------------------------------------------
         Former name, former address, and former fiscal year, if changed
                                since last report

Indicate by check mark whether the registrant (1) filed all reports  required to
be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 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 ___

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
definition of "large accelerated filer", "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.

Larger accelerated filer                        Accelerated filer
Non-accelerated filer                           Smaller reporting company    X

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

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 11,998,000 shares outstanding
as of April 12, 2010.



<PAGE>

                          SYNERGY RESOURCES CORPORATION

                                      Index

                                                                            Page
Part I - FINANCIAL INFORMATION

Item 1.    Financial Statements

           Balance Sheets as of February 28, 2010 (unaudited)
            and August 31, 2009                                               3

           Statements of Operations for the three months ended
           February 28, 2010 and 2009 (unaudited),                            4

           Statements of Operations for the six months ended
           February 28, 2010 and 2009 (unaudited)                             5

           Statements of Cash Flows for the six months ended
           February 28, 2010 and 2009 (unaudited)                             6

           Notes to Financial Statements (unaudited)                          7

Item 2.    Management's Discussion and Analysis of Financial Condition and
           Results of Operations                                             22

Item 4.    Controls and Procedures                                           28

Part II - OTHER INFORMATION

Item 1.    Legal Proceedings                                                 29

Item 2.    Unregistered Sales of Equity Securities and Use of
           Proceeds                                                          29

Item 3.    Defaults Upon Senior Securities                                   29

Item 4.    Submission of Matters to a Vote of Security Holders               29

Item 5.    Other Information                                                 29

Item 6.    Exhibits                                                          29

SIGNATURES                                                                   30



                                      - 2 -


<PAGE>

                           SYNERGY RESOURCES CORPORATION
                                   BALANCE SHEETS

                                                     February 28,    August 31,
                                                         2010           2009
                                                     ------------   ------------
                                                     (unaudited)
                          ASSETS
Current assets:
   Cash and cash equivalents                         $ 8,875,185    $ 2,854,659
                                                     ------------   ------------
   Accounts receivable                                   459,528         84,643

   Accounts receivable, related party                     65,536              -

   Inventory                                             799,570      1,132,685

   Other current assets                                   52,743         21,105
                                                     ------------   ------------
       Total current assets                           10,252,562      4,093,092
                                                     ------------   ------------
Property and equipment:

   Oil and gas properties, full cost method, net       4,471,750        653,435
   Other property and equipment, net                         819          1,041
                                                     ------------   ------------
       Property and equipment, net                     4,472,569        654,476
                                                     ------------   ------------

Debt issuance costs, net of amortization               1,295,038              -
Other assets                                              85,000         85,000
                                                     ------------   ------------
       Total assets                                  $16,105,169    $ 4,832,568
                                                     ============   ============

           LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Accounts payable                                  $   833,570    $   622,734
   Accounts payable, related party                        20,989              -
   Accrued expenses                                      150,786         59,579
   Bank loan payable                                     396,080      1,161,811
                                                     ------------   ------------
       Total current liabilities                       1,401,425      1,844,124

Asset retirement obligation                               51,000              -
Convertible promissory notes, net of discount          8,598,360              -
Derivative conversion liability                        2,257,987              -
                                                     ------------   ------------
       Total liabilities                              12,308,772      1,844,124
                                                     ------------   ------------
Commitments and contingencies (See Note 7)

Shareholders' equity:
   Preferred stock - $0.01 par value, 10,000,000
   shares authorized:
       no shares issued and outstanding                        -              -
   Common stock - $0.001 par value, 100,000,000
   shares authorized:
       11,998,000 shares issued and outstanding           11,998         11,998
   Additional paid-in capital                         17,134,980     15,521,697
   Accumulated (Deficit)                             (13,350,581)   (12,545,251)
                                                     ------------   ------------
       Total shareholders' equity                      3,796,397      2,988,444
                                                     ------------   ------------
       Total liabilities and shareholders' equity    $16,105,169    $ 4,832,568
                                                     ============   ============


   The accompanying notes are an integral part of these financial statements.


                                       3

<PAGE>

                          SYNERGY RESOURCES CORPORATION
                            STATEMENTS OF OPERATIONS
             for the three months ended February 28, 2010 and 2009,
                                   (unaudited)

                                              Three Months        Three Months
                                                 Ended               Ended
                                           February 28, 2010   February 28, 2009
                                           -----------------   -----------------

Oil and gas revenues                         $     335,725       $           -
                                             --------------      --------------
Expenses:
    Lease operating expenses                        47,152               3,176
    Depreciation and depletion                      64,733                   -
    General and administrative                     294,278           3,629,035
    Administrative services contract -
      related party                                 60,000              60,000
    Consulting fees - related party                      -              30,000
                                             --------------      --------------
                    Total expenses                 466,163           3,722,211
                                             --------------      --------------
Operating loss                                    (130,438)         (3,722,211)
                                             --------------      --------------
Other (expense) income:
    Accretion of debt discount                    (245,343)                  -
    Amortization of debt issuance costs           (100,137)                  -
    Interest expense, net                          (68,656)                  -
    Interest income                                    913               4,179
                                             --------------      --------------
           Total other (expense) income           (413,223)              4,179
                                             --------------      --------------
Loss before taxes                                 (543,661)         (3,718,032)

Provision for income taxes                               -                   -
                                             --------------      --------------
Net loss                                     $    (543,661)      $  (3,718,032)
                                             ==============      ==============
Net loss per common share:
     Basic and Diluted                       $       (0.05)      $       (0.36)
                                             ==============      ==============
Weighted average shares outstanding:
     Basic and Diluted                          11,998,000          10,228,393
                                             ==============      ==============


   The accompanying notes are an integral part of these financial statements.


                                       4

<PAGE>

                          SYNERGY RESOURCES CORPORATION
                               STATEMENTS OF OPERATIONS
                 for the six months ended February 28, 2010, and 2009,
                                   (unaudited)

                                              Six Months          Six Months
                                                 Ended              Ended
                                           February 28, 2010  February 28, 2009
                                           -----------------  -----------------

Oil and gas revenues                         $     388,511       $           -
                                             --------------      --------------
Expenses:
    Lease operating expenses                        55,042               5,576
    Depreciation and depletion                      92,939                   -
    General and administrative                     515,410           7,259,034
    Administrative services contract -
      related party                                120,000             120,000
    Consulting fees - related party                      -              60,000
                                             --------------      --------------
                    Total expenses                 783,391           7,444,610
                                             --------------      --------------
Operating loss                                    (394,880)         (7,444,610)
                                             --------------      --------------
Other (expense) income:
    Accretion of debt discount                    (245,343)                  -
    Amortization of debt issuance costs           (100,137)                  -
    Interest expense, net                          (68,656)                  -
    Interest income                                  3,686              11,642
                                             --------------      --------------
            Total other (expense) income          (410,450)             11,642
                                             --------------      --------------
Loss before taxes                                 (805,330)         (7,432,968)

Provision for income taxes                               -                   -
                                             --------------      --------------
Net loss                                     $    (805,330)      $  (7,432,968)
                                             ==============      ==============
Net loss per common share:
    Basic and Diluted                        $       (0.07)      $       (0.70)
                                             ==============      ==============
Weighted average shares outstanding:
    Basic and Diluted                           11,998,000          10,553,073
                                             ==============      ==============

   The accompanying notes are an integral part of these financial statements.


                                       5

<PAGE>


                             STATEMENTS OF CASH FLOWS
               for the six months ended February 28, 2010 and 2009,
                                   (unaudited)

                                           Six Months Ended   Six Months Ended
                                           February 28, 2010  February 28, 2009
                                           -----------------  -----------------

Cash flows from operating activities:
  Net loss                                   $    (805,330)      $  (7,432,968)
                                             --------------      --------------
  Adjustments to reconcile net loss to
  net cash used in operating activities:
      Depreciation and depletion                    92,939                  74
      Accretion of debt discount                   245,343                   -
      Amortization of debt issuance cost           100,137                   -
      Stock-based compensation                      10,829           6,852,604
  Changes in operating assets and
  liabilities:
      Increase in accounts receivable             (374,885)                  -
      Increase in accounts receivable -
        related party                              (65,536)                  -
      Decrease in inventory                        333,115                   -
      Increase in other current assets             (31,638)            (14,057)
      Increase in accounts payable                  99,722             235,979
      Increase in accounts payable -
        related party                               20,989                   -
      Increase in accrued taxes and
        expenses                                    91,207               5,030
      Effect of merger on operating
        assets (liabilities)                             -             (31,438)
                                             --------------      --------------
    Total adjustments                              522,222           7,048,192
                                             --------------      --------------
    Net cash used in operating activities         (283,108)           (384,776)
                                             --------------      --------------
Cash flows from investing activities:
     Acquisition of property and equipment      (3,748,918)           (640,057)
     Cash acquired in merger                             -               3,987
                                             --------------      --------------
     Net cash used in investing activities      (3,748,918)           (636,070)
                                             --------------      --------------
Cash flows from financing activities:
     Cash proceeds from convertible
       promissory notes                         11,761,000                   -
     Cash proceeds from sale of stock                    -             774,295
     Debt Issuance Costs                          (942,717)           (243,900)
     Debt principal payments                      (765,731)                  -
     Repurchase of shares                                -              (1,000)
                                             --------------      --------------
     Net cash provided by financing
       activities                               10,052,552             529,395
                                             --------------      --------------
Net increase (decrease) in cash and
  equivalents                                    6,020,526            (491,451)

Cash and equivalents at beginning of
  period                                         2,854,659           2,292,341
                                             --------------      --------------
Cash and equivalents at end of period        $   8,875,185       $   1,800,890
                                             ==============      ==============
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
  Net assets acquired in merger              $           -       $      11,675
  Asset Retirement Obligation                       51,000                   -
  Placement Agent Warrants                         452,458                   -
  Accrued Capital Expenditures                     111,114                   -
  Cash paid interest                               124,128                   -

   The accompanying notes are an integral part of these financial statements.


                                       6

<PAGE>

                          SYNERGY RESOURCES CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                February 28, 2010
                                   (Unaudited)

1.     Description of Business and Summary of Significant Accounting Policies

      Basis of Presentation: Synergy Resources Corporation (the "Company")
represents the result of a merger transaction on September 10, 2008 between
Brishlin Resources, Inc. ("Predecessor Brishlin"), a public company, and Synergy
Resources Corporation ("Predecessor Synergy"), a private company. In conjunction
with the transaction, Predecessor Brishlin changed its name to Synergy Resources
Corporation. The Company was organized under the laws of the State of Colorado
and, for accounting purposes, the inception date is deemed to be December 28,
2007, the day that Predecessor Synergy was organized. The Company is engaged in
oil and gas acquisitions, exploration, development and production activities,
primarily in the area known as the Denver-Julesburg Basin. The Company has
adopted August 31st as the end of its fiscal year.

      Interim Financial Information: The interim financial statements included
herein have been prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC") as promulgated
in Item 210 of Regulation S-X. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America ("US GAAP") have
been condensed or omitted pursuant to such SEC rules and regulations. The
Company believes that the disclosures included are adequate to make the
information presented not misleading, and recommends that these financial
statements be read in conjunction with the audited financial statements and
notes thereto for the year ended August 31, 2009.

      In management's opinion, the unaudited financial statements contained
herein reflect all adjustments, consisting solely of normal recurring items,
which are necessary for the fair presentation of the Company's financial
position, results of operations, and cash flows on a basis consistent with that
of its prior audited financial statements. However, the results of operations
for interim periods may not be indicative of results to be expected for the full
fiscal year.

      Exploration Stage Company: As of August 31, 2009, the Company was
considered an exploration stage company for accounting purposes. Subsequent to
August 31, 2009, the Company completed the requirements to exit the exploration
stage.

      Reclassifications: Certain amounts previously presented for prior periods
have been reclassified to conform with the current presentation. The
reclassifications had no effect on net loss, total assets, or total
shareholders' equity.

      Cash and Cash Equivalents: The Company considers cash in banks, deposits
in transit, and highly liquid debt instruments purchased with original
maturities of three months or less to be cash and cash equivalents.

      Inventory: Inventories consist primarily of tubular goods and well
equipment to be used in future drilling operations or repair operations and are
carried at the lower of cost or market.


                                       7
<PAGE>

                          SYNERGY RESOURCES CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                February 28, 2010
                                   (Unaudited)

      Oil and Gas Properties: The Company uses the full cost method of
accounting for costs related to its oil and gas properties. Accordingly, all
costs associated with acquisition, exploration, and development of oil and gas
reserves (including the costs of unsuccessful efforts) are capitalized into a
single full cost pool. These costs include land acquisition costs, geological
and geophysical expense, carrying charges on non-producing properties, costs of
drilling and overhead charges directly related to acquisition and exploration
activities.

      Capitalized costs of oil and gas properties are amortized using the
unit-of-production method based upon estimates of proved reserves. For
amortization purposes, the volume of petroleum reserves and production is
converted into a common unit of measure at the energy equivalent conversion rate
of six thousand cubic feet of natural gas to one barrel of crude oil.
Investments in unevaluated properties and major development projects are not
amortized until proved reserves associated with the projects can be determined
or until impairment occurs. If the results of an assessment indicate that the
properties are impaired, the amount of the impairment is added to the
capitalized costs to be amortized.

      Under the full cost method of accounting, a ceiling test is performed each
quarter. The full cost ceiling test is an impairment test prescribed by SEC
regulations. The ceiling test determines a limit on the book value of oil and
gas properties. The capitalized costs of proved oil and gas properties, net of
accumulated depreciation, depletion, and amortization, the related deferred
income taxes, and the cost of unevaluated properties, may not exceed the
estimated future net cash flows from proved oil and gas reserves, less future
cash outflows associated with asset retirement obligations that have been
accrued plus the lower of cost or estimated fair value of unevaluated properties
not being amortized. Prices are held constant for the productive life of each
well. Net cash flows are discounted at 10%. If net capitalized costs exceed this
limit, the excess is charged to expense and reflected as additional accumulated
depreciation, depletion and amortization. The calculation of future net cash
flows assumes continuation of current economic conditions, including current
prices and costs. The ceiling is highly sensitive to changing prices for oil and
gas. Once impairment expense is recognized, it cannot be reversed in future
periods, even if increasing prices raise the ceiling amount. For the year ended
August 31, 2009, the Company made a provision for impairment of oil and gas
properties of $945,079. For the six months ended February 28, 2010, no provision
for impairment was required.

      Oil and Gas Reserves: The determination of depreciation, depletion and
amortization expense, as well as ceiling test write-downs related to the
recorded value of the Company's oil and natural gas properties, will be highly
dependent on the estimates of the proved oil and natural gas reserves. Oil and
natural gas reserves include proved reserves that represent estimated quantities
of crude oil and natural gas which geological and engineering data demonstrate
with reasonable certainty to be recoverable in future years from known
reservoirs under existing economic and operating conditions. There are numerous
uncertainties inherent in estimating oil and natural gas reserves and their
values, including many factors beyond the Company's control. Accordingly,
reserve estimates are often different from the quantities of oil and natural gas


                                       8
<PAGE>

                          SYNERGY RESOURCES CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                February 28, 2010
                                   (Unaudited)

ultimately recovered and the corresponding lifting costs associated with the
recovery of these reserves.

      Capitalized Interest: The Company capitalizes interest on expenditures
made in connection with exploration and development projects that are not
subject to current amortization. Interest is capitalized during the period that
activities are in progress to bring the projects to their intended use. During
the six months ended February 28, 2010, interest expense of $55,472 was
capitalized.

      Asset Retirement Obligations. The Company's activities are subject to
various laws and regulations, including legal and contractual obligations to
reclaim, remediate, or otherwise restore properties at the time the property is
removed from service. A liability is initially recorded at the estimated present
value for an obligation associated with the retirement of tangible long-lived
assets in the period in which it is incurred if a reasonable estimate of fair
value can be made. The amount of the liability is accreted each period by the
Company's credit adjusted risk free interest rate. The costs associated with the
obligation are added to the capitalized costs of the property and amortized
using the unit of production method.

      Major Customer and Operating Region: The Company operates exclusively
within the United States. Except for cash investments, all of the Company's
assets are employed in, and all of its revenues are derived from, the oil and
gas industry. For the six months ended February 28, 2010, the Company's sales
were to three customers, all of which exceeded 10% of revenues. As of February
28, 2010, the accounts receivable balance was due from six customers, including
other working interest owners which have been billed for their proportionate
share of wells in progress and each customers' balance exceeded 10% of the
total.

      Derivative Liability: The Company accounts for its embedded conversion
features in its convertible promissory notes in accordance with the guidance for
derivative instruments, which require a periodic valuation of their fair value
and a corresponding recognition of liabilities associated with such derivatives.
The recognition of derivative liabilities related to the issuance of convertible
debt is applied first to the proceeds of such issuance as a debt discount, at
the date of the issuance. Any subsequent increase or decrease in the fair value
of the derivative liabilities is recognized as a charge or credit to operations.

      Revenue Recognition: Revenue is generally recognized for the sale of oil
and gas when there is persuasive evidence of a sale arrangement, delivery has
occurred, the price is determinable, and collection of sales proceeds is
reasonably assured. Revenue is accrued when these four conditions have been
satisfied and reasonable estimates can be made. Revenue estimates are prepared
for the quantity of petroleum product delivered to the customer and the price
that will be received. Payment is received at a later date, often sixty to
ninety days after production. Revenue accruals are adjusted to reflect updated
information as it is received.


                                       9
<PAGE>

                          SYNERGY RESOURCES CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                February 28, 2010
                                   (Unaudited)

      Earnings Per Share Amounts: Basic earnings per share includes no dilution
and is computed by dividing net income (or loss) by the weighted-average number
of shares outstanding during the period. Diluted earnings per share reflect the
potential dilution of securities that could share in the earnings of the
Company. As of February 28, 2010, the Company has outstanding 23,227,654
potentially dilutive securities, (4,100,000 options, 11,777,029 warrants, and
7,350,625 conversion shares) all of which were excluded from the calculation
because they were anti-dilutive. Also as of February 28, 2010, the Company had a
contingent obligation to issue 63,466 potentially dilutive securities, all of
which were excluded from the calculation because the contingency conditions had
not been met.

      Stock-Based Compensation: The Company records stock-based compensation by
estimating the fair value of stock options at their grant date using the
Black-Scholes-Merton option-pricing model and provides for expense recognition
over the service period, if any, of the stock option. The Company accounts for
common stock issued to employees for services based on the fair value of the
equity instruments issued, and accounts for common stock issued to other than
employees based on the fair value of the consideration received or the fair
value of the equity instruments, whichever is more reliably measurable.

      Income Taxes: Deferred income taxes are reported for timing differences
between items of income or expense reported in the financial statements and
those reported for income tax purposes using the asset/liability method of
accounting for income taxes. Deferred income taxes and tax benefits are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases, and for tax loss and credit carry-forwards. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The Company provides for deferred taxes for
the estimated future tax effects attributable to temporary differences and
carry-forwards when realization is more likely than not.

      Use of Estimates: The preparation of financial statements in conformity
with US GAAP requires management to make estimates and assumptions that affect
the reported amount of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Management
routinely makes judgments and estimates about the effects of matters that are
inherently uncertain. Management bases its estimates and judgments on historical
experience and on various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily
apparent from other sources. Estimates and assumptions are revised periodically
and the effects of revisions are reflected in the financial statements in the
period it is determined to be necessary. Actual results could differ from these
estimates.

      Concentration of Credit Risk: The Company's operating cash balances are
maintained in multiple financial institutions and, as of February 28, 2010, did
not exceed federally insured limits. However, federal deposit insurance is
subject to changes in rules and regulations, and the Company's operating cash


                                       10
<PAGE>

                          SYNERGY RESOURCES CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                February 28, 2010
                                   (Unaudited)

balances may exceed coverage limits in the future. The Company reviews the
financial strengths and weaknesses of its depository institutions and attempts
to mitigate the underlying risk of loss. To date, these concentrations of credit
risk have not had a significant impact on the Company's financial position or
results of operations.

      Debt Issuance Costs: Debt issuance costs include issuance costs incurred
in connection with the sale of the Company's Convertible Promissory Notes, as
well as the issuance of warrants to the Placement Agent for the offering, which
are being amortized over the three year term of the Notes (see Note 4). The
Company recorded amortization expense of $100,137 for the period ended February
28, 2010.

      Fair Value Measurements: Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date (exit price).
The Company uses market data or assumptions that market participants would use
in pricing the asset or liability, including assumptions about risk. These
inputs can either be readily observable, market corroborated or generally
unobservable. Given the Company's historical market transactions, its markets
and instruments are not liquid. Therefore, the Company expects that its fair
value estimates will primarily be calculated using unobservable inputs and
comparable market data from other industry participants using the best available
information. Fair value balances are classified based on the observability of
the various inputs.

      A fair value hierarchy was established that prioritizes the inputs used to
measure fair value. The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities (Level 1
measurements) and the lowest priority to unobservable inputs (Level 3
measurements).

      Level 1--Quoted prices are available in active markets for identical
assets or liabilities as of the reporting date. Active markets are those in
which transactions for the asset or liability occur in sufficient frequency and
volume to provide pricing information on an ongoing basis. Level 1 primarily
consists of financial instruments such as exchange-traded derivatives, listed
securities and U.S. government treasury securities.

      Level 2--Pricing inputs are other than quoted prices in active markets
included in Level 1, which are either directly or indirectly observable as of
the reporting date. Level 2 includes those financial instruments that are valued
using models or other valuation methodologies, where substantially all of these
assumptions are observable in the marketplace throughout the full term of the
instrument, can be derived from observable data or are supported by observable
levels at which transactions are executed in the marketplace.

      Level 3--Pricing inputs include significant inputs that are generally less
observable than objective sources. These inputs may be used with internally
developed methodologies that result in management's best estimate of fair value.
Level 3 includes those financial instruments that are valued using models or
other valuation methodologies, where substantial assumptions are not observable


                                       11
<PAGE>

                          SYNERGY RESOURCES CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                February 28, 2010
                                   (Unaudited)

in the marketplace throughout the full term of the instrument, cannot be derived
from observable data or are not supported by observable levels at which
transactions are executed in the marketplace. At each balance sheet date, the
Company performs an analysis of all applicable instruments and includes in Level
3 all of those whose fair value is based on significant unobservable inputs.

      Recently Adopted Accounting Standards. The Company evaluates the
pronouncements of various authoritative accounting organizations, primarily the
Financial Accounting Standards Board ("FASB"), the SEC, and the Emerging Issues
Task Force ("EITF"), to determine the impact of new pronouncements on US GAAP
and the impact on the Company. The Company has recently adopted the following
new accounting standards:

      Accounting Standards Codification - In June, 2009, FASB established the
Accounting Standards Codification ("ASC") as the single source of authoritative
US GAAP to be applied by nongovernmental entities. Rules and interpretive
releases of the SEC under authority of federal securities laws are also sources
of authoritative US GAAP for SEC registrants. The ASC is a new structure which
took existing accounting pronouncements and organized them by accounting topic.
The ASC did not change current US GAAP, but was intended to simplify user access
to all authoritative US GAAP by providing all the relevant literature related to
a particular topic in one place. All previously existing accounting standards
were superseded and all other accounting literature not included in the ASC is
considered non-authoritative. New accounting standards issued subsequent to June
30, 2009 will be communicated by the FASB through Accounting Standards Updates
(ASUs). The ASC was effective during the period ended September 30, 2009.
Adoption of the ASC did not have an impact on the Company's financial position,
results of operations or cash flows.

      Subsequent Events - In May, 2009, the ASC guidance for subsequent events
was updated to establish accounting and reporting standards for events that
occur after the balance sheet date but before financial statements are issued.
The guidance was amended in February, 2010. ASU 2010-09 sets forth: (i) the
period after the balance sheet date during which management of a reporting
entity should evaluate events or transactions that may occur for potential
recognition or disclosure in the financial statements, (ii) the circumstances
under which an entity should recognize events or transactions occurring after
the balance sheet in its financial statements, and (iii) the disclosures that an
entity should make about events or transactions occurring after the balance
sheet date in its financial statements. The amended ASU was effective
immediately and its adoption had no impact on the Company's financial position,
results of operations or cash flows.

      Business Combinations - In December 2007, the guidance for business
combinations was updated to provide new guidance for recognizing and measuring
identifiable assets and goodwill acquired, liabilities assumed, and any
non-controlling interest in the acquiree. The updated guidance also provides
disclosure requirements to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. The Company
adopted the updated guidance on September 1, 2009 and it will be applied to any
future acquisitions.


                                       12
<PAGE>

                          SYNERGY RESOURCES CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                February 28, 2010
                                   (Unaudited)

      Non-controlling Interests - In December 2007, the guidance for
non-controlling Interests was updated to establish accounting and reporting
standards pertaining to: (i) ownership interests in subsidiaries held by parties
other than the parent ("non-controlling interest"), (ii) the amount of net
income attributable to the parent and to the non-controlling interest, (iii)
changes in a parent's ownership interest, and (iv) the valuation of any retained
non-controlling equity investment when a subsidiary is deconsolidated. If a
subsidiary is deconsolidated, any retained non-controlling equity investment in
the former subsidiary is measured at fair value and a gain or loss is recognized
in net income based on such fair value. For presentation and disclosure
purposes, the guidance requires non-controlling interests (formerly referred to
as minority interest) to be classified as a separate component of equity. The
Company adopted the updated guidance on September 1, 2009. The adoption had no
impact on the Company's financial position, results of operations or cash flows.

      Recent Accounting Pronouncements. The following accounting standards
updates were recently issued and have not yet been adopted by the Company. These
standards are currently under review to determine their impact on the Company's
financial position, results of operations, or cash flows.

      Oil and Gas Disclosures - On December 29, 2008, the SEC announced final
approval of new requirements for reporting oil and gas reserves to be effective
in January 2010. The new disclosure requirements provide for consideration of
new technologies in evaluating reserves, allow companies to disclose their
probable and possible reserves to investors, report oil and gas reserves using
an average price based on the prior 12 month period rather than year-end prices,
and revise the disclosure requirements for oil and gas operations. The
accounting for the limitation on capitalized costs for full cost companies will
also be revised. The new rule is effective for years ending on or after December
31, 2009, and early adoption is not permitted. The Company has not yet evaluated
the effects of these new rules on its financial statements and disclosures.

      In January 2010, the FASB issued ASU 2010-03, Extractive Industries-Oil
and Gas: Oil and Gas Reserve Estimation and Disclosure. This ASU amends the
codification to align the reserve calculation and disclosure requirements with
the requirements in the new SEC Rule, Modernization of Oil and Gas Reporting
Requirements. The ASU is effective for fiscal years ending on or after December
31, 2009.

      ASU 2010-6 amends existing disclosure requirements about fair value
measurements by adding required disclosures about items transferring into and
out of levels 1 and 2 in the fair value hierarchy; adding separate disclosures
about purchase, sales, issuances, and settlements relative to level 3
measurements; and clarifying, among other things, the existing fair value
disclosures about the level of disaggregation. This ASU will be effective for
the third quarter of 2010.



                                       13
<PAGE>

                          SYNERGY RESOURCES CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                February 28, 2010
                                   (Unaudited)

      ASU 2009-17 revises the consolidation guidance for variable-interest
entities. The modifications include the elimination of the exemption for
qualifying special purpose entities, a new approach for determining who should
consolidate a variable-interest entity, and changes to when it is necessary to
reassess who should consolidate a variable-interest entity. This ASU will be
effective for the third quarter of 2010.

      There were various other updates recently issued, most of which
represented technical corrections to the accounting literature or application to
specific industries. None of the updates referred to above are expected to a
have a material impact on the Company's financial position, results of
operations or cash flows.

2.     Management Plan

      The report of the Company's independent registered public accounting firm
on the Company's audited financial statements as of August 31, 2009, contained
an explanatory paragraph expressing significant uncertainty about the Company's
ability to continue as a going concern. Since August 31, 2009, events have
occurred that mitigate the uncertainties.

      During the six months ended February 28, 2010, the Company drilled eleven
wells to total depth and each well encountered commercially productive
formations. Seven of these wells are undergoing completion activities and four
were brought on-stream during the six months ended February 28, 2010. Between
December 29, 2009 and March 12, 2010, the Company received net proceeds of
$16,651,023 from the sale of 180 units in a private offering. It is believed
that the proceeds from this offering are sufficient to fund the completion of
wells in progress and to meet existing obligations for the next twelve months.

      With the additional funding, the Company plans to expand its drilling
program to include 24 new wells and may raise additional capital through the
sale of its common stock and the issuance of debt instruments, and may also seek
other funding or corporate transactions to achieve its business objectives.

3.     Property and Equipment

      Oil and gas property primarily consists of various interests in oil and
gas leases, wells in progress, and producing and non-producing wells.

      Capitalized costs of property and equipment at February 28, 2010 and
August 31, 2009, consisted of the following:



                                       14
<PAGE>

                          SYNERGY RESOURCES CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                February 28, 2010
                                   (Unaudited)

Oil and Gas Properties, full
cost method:
                                             February 28, 2010  August 31, 2009
                                             -----------------  ---------------
Unevaluated costs, not subject to
amortization:
 Acquisition and other costs                    $   1,352,046    $     420,478
 Wells in progress                                  1,811,032               --
                                                --------------   --------------
         Subtotal, unevaluated costs                3,163,078          420,478
                                                --------------   --------------
   Evaluated costs:
      Producing and non-producing                   1,858,211          689,779
           Less, accumulated depletion               (549,539)        (456,822)
                                                --------------   --------------
         Subtotal, evaluated costs                  1,308,672          232,957
                                                --------------   --------------
      Oil and gas properties, net                   4,471,750          653,435
                                                --------------   --------------
   Other property and equipment:
      Office equipment                                  1,337            1,337
           Less, accumulated depreciation                (518)            (296)
                                                --------------   --------------
      Other property and equipment, net                   819            1,041
                                                --------------   --------------
Total Property and Equipment, net               $   4,472,569    $     654,476
                                                ==============   ==============

     The  capitalized  costs of evaluated  oil and gas  properties  are depleted
using  the  unit-of-production  method  based  on  estimated  reserves  and  the
calculation  is  performed  quarterly.  Production  volumes  for the quarter are
compared  to  beginning  of quarter  estimated  total  reserves  to  calculate a
depletion rate. For the six months ended February 28, 2010, depletion of oil and
gas  properties  was  $92,717  or  $5.04  per  barrel  of  oil  equivalent,  and
depreciation of other property and equipment was $222.

4.      Bank Loan Payable

     The Company has a credit  facility  with a commercial  bank.  The borrowing
arrangement   provides  for  maximum   borrowings  up  to   $1,161,811   and  is
collateralized by tubular goods and certain other assets.  The maximum allowable
borrowing  amount may be reduced by a  reduction  in the  collateral.  Effective
November 1, 2009, terms of the agreement were modified to provide for 24 monthly
payments of $16,738,  including principal and interest.  The loan bears interest
at the prime  rate plus 1/2%,  with a minimum  interest  rate of 5.5%.  The loan
maturity date is November 1, 2011 at which time the entire  remaining  principal
balance  will be due.  Interest  costs of $27,473 were  incurred  and  principal
payments of $765,731 were made during the period ended  February 28, 2010. As of
February 28, 2010, the outstanding principal balance was $396,080. The loan is


                                       15
<PAGE>

                          SYNERGY RESOURCES CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                February 28, 2010
                                   (Unaudited)

classified as a current liability because the outstanding principal balance will
be reduced as the tubular goods are utilized, which is expected to occur during
the next twelve months.

5.     Convertible Promissory Notes and Derivative Conversion Liability

      During the six months ended February 28, 2010, the Company received gross
proceeds of $11,761,000 for the sale of 117.61 Units at $100,000 per Unit. Each
Unit consists of one Convertible Promissory Note ("Note") in the principal
amount of $100,000 and 50,000 warrants. The Notes bear interest at 8% per year,
payable quarterly, and mature on December 31, 2012. Each warrant entitles the
holder to purchase one share of common stock at a price of $6.00 per share and
expires on December 31, 2014.

      With the proceeds from the offering, the Company plans to drill and
complete oil and gas wells in the Wattenburg field, located in the
Denver-Julesburg Basin. The Notes will be collateralized by any oil and gas
wells drilled, completed, or acquired with the proceeds from the offering.

      Subsequent to February 28, 2010, the Company sold an additional 62.39
Units for gross proceeds of $6,239,000. In the aggregate, the Company sold 180
Units at $100,000 per Unit and received net proceeds of $16,651,023 after
deducting commissions and offering costs.

      Proceeds received from sale of the Units have been allocated to the
components of the Units based upon their estimated fair values. The estimated
fair value of the warrants was $1,149,996, which was credited to additional paid
in capital. The Notes contain an initial conversion price of $1.60, subject to
adjustment under certain circumstances. The conversion feature was evaluated and
is deemed to be an embedded derivative liability. The estimated fair value of
the conversion feature was $2,257,987, which was credited to derivative
conversion liability.

      Allocation of value to the components resulted in a debt discount of
$3,407,983, which will be amortized over the 36 month life of the Notes. Certain
details of the value allocation are presented in the following table:

                                              Derivative
                                  Warrants     Liability      Promissory Note
                                 ---------    -----------    ----------------

  Face value of debt                                            $11,761,000
  Allocation of value to       $  1,149,996   $ 2,257,987        (3,407,983)
  components
  Accretion of debt                                                 245,343
  discount
                               ------------   -----------       -----------
  Carrying value at
  February 28, 2010            $  1,149,996   $ 2,257,987       $ 8,598,360
                               ============   ===========       ===========

                                     16
<PAGE>

                          SYNERGY RESOURCES CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                February 28, 2010
                                   (Unaudited)

6.     Asset Retirement Obligations

      During the six months ended February 28, 2010, the Company incurred
obligations for its oil and gas operations which include estimated reclamation,
remediation and closure costs. The estimated present value of the obligation is
$51,000. There were no other liability additions, liability settlements,
revision in estimated cash flows or accretion expense for the current period.

7.     Shareholders' Equity

      As of February 28, 2010, there were various warrants outstanding to
purchase 11,777,029 shares of common stock. Each Series A warrant entitles the
holder to purchase one share of common stock at a price of $6.00 per share. The
Series A warrants expire on December 31, 2012, or earlier under certain
conditions. As of February 28, 2010, there were Series A warrants outstanding to
purchase 4,098,000 shares of common stock. Each Series B warrant entitles the
holder to purchase one share of common stock at a price of $10.00 per share. The
Series B warrants expire on December 31, 2012, or earlier under certain
conditions. As of February 28, 2010, there were Series B warrants outstanding to
purchase 1,000,000 shares of common stock. In addition to the Series A and B
warrants, the Company issued 31,733 placement agent warrants in connection with
the Private Offering Memorandum dated December 1, 2008. Each placement agent
warrant entitles the holder to purchase one Unit (which Unit is identical to the
Units sold under the Private Offering Memorandum dated December 1, 2008) at a
price of $3.60. Each Unit consists of two shares of common stock, one Series A
warrant, and one Series B warrant. To maintain comparability of the placement
agent warrants with the other warrants, the placement agent warrants are
presented as 63,466 shares at an exercise price of $1.80. The Series A and
Series B warrants issuable upon exercise of the placement agent warrants are not
considered outstanding for accounting purposes until such time, if ever, that
the placement agent warrants are exercised, and are disclosed as a commitment in
the Related Party Transactions and Commitments footnote.

      In connection with the Units sold during the six months ended February 28,
2010, the Company issued warrants to purchase common stock at a price of $6.00
per share. As of February 28, 2010, there were warrants outstanding to purchase
5,880,500 shares of common stock. In addition to the $6.00 warrants issued as
part of the Units, the Company issued 735,063 Placement Agent warrants to the
offering placement agent. The Placement Agent warrants are exercisable at a
price of $1.60 per share.


                                       17
<PAGE>

                          SYNERGY RESOURCES CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                February 28, 2010
                                   (Unaudited)

      The following table summarizes activity for common stock warrants for the
period from August 31, 2009 to February 28, 2010:
                                                              Weighted
                                            Number of          average
                                            warrants        exercise price
                                           ----------       --------------

           Outstanding, August 31, 2009     5,161,466           $6.72
           Granted                          6,615,563           $5.51
           Exercised                               --              --
                                            ---------        --------

           Outstanding, February 28, 2010  11,777,029           $6.04
                                           ==========           =====

         The following table summarizes information about the Company's issued
and outstanding common stock warrants as of February 28, 2010:

                                 Remaining       Exercise
                                Contractual     Price times
                    Number of    Life (in       Number of
Exercise Price        Shares       years)         Shares
--------------      ---------   ------------    ------------

     $1.60           735,063        4.8         $ 1,176,101
     $1.80            63,466        2.8         $   114,239
     $6.00         4,098,000        2.8         $24,588,000
     $6.00         5,880,500        4.8         $35,283,000
    $10.00         1,000,000        2.8         $10,000,000

8.     Stock-Based Compensation

      The Company recorded stock-based compensation expense of $10,829 and
$6,852,604 for the six months ended February 28, 2010 and 2009, respectively.

      The estimated unrecognized compensation cost from unvested stock options
as of February 28, 2010, was approximately $165,000, which will be recognized
ratably through December 31, 2013.

      The following table summarizes activity for options for the period from
August 31, 2009 to February 28, 2010:

                                                             Weighted
                                          Number of          average
                                           options        exercise price
                                          ---------       --------------

       Outstanding August 31, 2009        4,100,000            $ 5.44
       Granted                                   --                --
       Exercised                                 --                --
                                          ---------           -------

       Outstanding, February 28, 2010     4,100,000            $ 5.44
                                          =========            ======

                                       18
<PAGE>


      The following table summarizes information about outstanding stock options
as of February 28, 2010:
                             Remaining     Weighted
                            Contractual    Average                  Aggregate
  Exercise     Number of      Life (in     Exercise    Number       Intrinsic
   Prices        Shares        years)        Price     Exercisable    Value
-------------  -----------  -------------  ----------  ------------------------

   $10.00       2,000,000       3.3         $10.00      2,000,000           --
   $1.00        2,000,000       3.3          $1.00      2,000,000   $3,200,000
   $3.00          100,000       8.8          $3.00         10,000           --
               ----------                             -----------
                4,100,000                    $5.44      4,010,000
               ==========                             ===========

9.     Related Party Transactions and Commitments

      The Company's executive officers control two entities that have entered
into agreements with the Company. The entities are Petroleum Management, LLC
("PM") and Petroleum Exploration and Management, LLC ("PEM"). One agreement
provides various administrative services to the Company and the other agreement
provides an option to acquire certain oil and gas interests.

      Effective June 11, 2008, the Company entered into an Administrative
Services Agreement with PM. The Company pays $10,000 per month for leasing
office space and an equipment yard located in Platteville, Colorado, and pays
$10,000 per month for office support services including secretarial service,
word processing, communication services, office equipment and supplies.
Additional goods or services provided to the Company by PM, such as employees,
independent contractors or oil and gas professionals, and equipment, are
reimbursed at actual cost. Either party may terminate the agreement with 30 days
notice. For each of the six month periods ended February 28, 2010 and 2009, the
Company paid $120,000 under the administrative services agreement.

      Effective August 7, 2008, the Company entered into a letter of intent with
the related entities that provides an option to acquire working interests in oil
and gas leases which are owned by PM and/or PEM. The oil and gas leases cover
640 acres in Weld County, Colorado, and subject to certain conditions, will be
transferred to the Company for payment of $1,000 per net mineral acre. The
working interests in the leases vary but the net revenue interest in the leases,
if acquired by the Company, will not be less than 75%. The letter of intent had
an original expiration date of November 1, 2008, but has been extended by mutual
agreement to August 31, 2010. As of February 28, 2010, the Company had exercised
its options on all available leases at a total cost of $360,000.\


                                       19
<PAGE>


     During the six months  ended  February  28,  2010,  the  Company  agreed to
purchase  certain oil and gas equipment  with an aggregate cost of $356,278 from
PM. As of February 28, 2010, accounts payable of $20,988 was due to PM. PEM is a
joint working interest owner of certain wells in progress. During the six months
ended February 28, 2010, costs of $792,563 were incurred on behalf of PEM. As of
February  28,  2010,  PEM was  indebted  to the  Company  for  $65,536 for costs
incurred on their behalf.

      On June 11, 2008, the Company entered into two year employment agreements
with its executive officers. For each of the six month periods ended February
28, 2010 and 2009, the Company paid $150,000 under these agreements.

      The Company issued 31,733 placement agent warrants in connection with the
Private Offering Memorandum dated December 1, 2008. Each placement agent warrant
entitles the holder to purchase one Unit (which Unit is identical to the Units
sold under the Private Offering Memorandum dated December 1, 2008) at a price of
$3.60. Each Unit consists of two shares of common stock, one Series A warrant,
and one Series B warrant. The Series A and Series B warrants issuable upon
exercise of the placement agent warrants are not considered outstanding for
accounting purposes until such time, if ever, that the placement agent warrants
are exercised. In the event that the placement agent warrants are exercised, the
Company will be obligated to issue 31,733 Series A warrants and 31,733 Series B
warrants.

10.      Fair Value Measurements

      The following table sets forth by level within the fair value hierarchy
the Company's financial assets and financial liabilities as of February 28,
2010, that were measured at fair value. Assets and liabilities are classified in
their entirety based on the lowest level of input that is significant to the
fair value measurement. The Company's assessment of the significance of a
particular input to the fair value measurement requires judgment and may affect
the valuation of assets and liabilities and their placement within the fair
value hierarchy levels.

                                 Level    Level 2     Level 3         Total
                               ---------  -------    ---------     -----------

    None                       $    --    $    --   $       --     $       --
Liabilities
    Derivative Conversion           --         --    2,257,987       2,257,987
Equity
    Warrants                         --        --    1,602,454       1,602,454

      The following methods and assumptions were used to estimate the fair
values of the assets and liabilities in the table above.

      Level 1 Fair Value Measurements--As of February 28, 2010, the Company did
not have assets or liabilities measured under a Level 1 fair value hierarchy.

      Level 2 Fair Value Measurements--As of February 28, 2010, the Company did
not have assets or liabilities measured under a Level 2 fair value hierarchy.


                                       20
<PAGE>

     Level  3  Fair  Value  Measurements--The  fair  values  of  the  derivative
conversion  liability and the warrants were estimated at their  inception  using
assumptions with respect to the Company's reserves, interest rates, and expected
term of the instruments. The expected term, as opposed to the contract term, was
used to determine  the fair value of the  derivative  liability  relating to the
Notes since certain  provisions in the Notes will likely cause the expected term
to be less than the contract term. The contractual  terms were used to determine
the fair value of the  warrants  (see Note 5).  Certain of the values were based
upon  industry  benchmarks  about the value of in-ground  reserves,  and are not
readily  observable.  As neither the warrants nor the  derivative  liability are
currently  traded,  and as the Company's common stock is not actively traded, it
is  believed  that  a  Level  3  measurement   represents   the  best  available
information.

11.   Subsequent Events

      Subsequent to February 28, 2010, the Company received net proceeds of
$5,832,740 from the sale of 62.39 Units at $100,000 per Unit in a private
offering. The terms of the offering and the units are described in Note 4.



                                       21
<PAGE>

Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operation

      We evaluate undeveloped oil and gas prospects and participate in drilling
activities on those prospects, which, in the opinion of management, are
favorable for the production of oil or gas. If, through our review, a
geographical area indicates geological and economic potential, we will attempt
to acquire leases or other interests in the area. We may then attempt to sell
portions of our leasehold interests in a prospect to third parties, thus sharing
the risks and rewards of the exploration and development of the prospect with
the other owners. One or more wells may be drilled on a prospect, and if the
results indicate the presence of sufficient oil and gas reserves, additional
wells may be drilled on the prospect.

      We may also:

     o    acquire a working  interest in one or more  prospects  from others and
          participate with the other working interest owners in drilling, and if
          warranted, completing oil or gas wells on a prospect, or

     o    purchase producing oil or gas properties.

      We are approved as an oil and gas operator in Colorado.

      Our first oil and gas well began producing in February, 2009. Prior to
that time we did not have any revenue from the sale of oil or gas. As of March
31, 2010, we had:

     o    six producing oil and gas wells; and

     o    seven wells which were in the process of completion.

      Our future plans will be dependent upon the amount of capital we are able
to raise and the cash flow from our producing properties. We expect that most of
our wells will be drilled in the Denver - Julesburg ("D-J") Basin in northeast
Colorado.

      The following discussion analyzes our financial condition at February 28,
2010 and summarizes the results of our operations for the three months and six
months ended February 28, 2010 and 2009. This discussion and analysis should be
read in conjunction with the financial statements included as part of this
report and with our audited financial statements for the period ended August 31,
2009, including footnotes thereto, and the discussion and analysis included in
our Form 10-K report filed with the SEC.

      Exploration Stage Company. We were considered an exploration stage company
for accounting purposes until August 31, 2009. During the six months ended
February 28, 2010, we drilled 11 development wells which have either commenced
production or are expected to begin generating revenue during the next several
months. Accordingly, our financial statements are presented to reflect our exit
from the exploration stage.

                                       22
<PAGE>

      Going Concern. The report of our independent registered public accounting
firm on our audited financial statements as of August 31, 2009 contained an
explanatory paragraph expressing significant uncertainty about our ability to
continue as a going concern. The factors that contributed to this uncertainty
include our status as an exploration stage company, our need to raise
significant additional capital to fund our business plan, and the operating
losses that we have incurred since inception. Since August 31, 2009, events have
occurred that mitigate the uncertainties.

      During the six months ended February 28, 2010, we drilled eleven wells to
total depth and each well encountered commercially productive formations. Four
of these wells were completed and brought on-stream and the remaining seven
wells are in progress and expected to be brought on-stream during the next
several months. Between December 29, 2009 and March 12, 2010, we received net
proceeds of $16,651,023 from the sale of 180 units in a private offering. It is
believed that the proceeds from this offering are sufficient to fund the
completion of wells in progress and to meet existing obligations for the next
twelve months.

RESULTS OF OPERATIONS

For the three months ended February 28, 2010 and February 28, 2009

      Material changes of certain items in our Statements of Operations for the
three months ended February 28, 2010 and 2009 are discussed below.

      Oil and gas revenues and related expenses increased during the three
months ended February 28, 2010. Our first wells began producing in February,
2009. In addition to the first two wells, four wells were brought on-stream
during the three months ended February 28, 2010.

      Oil and gas sales for the three months ended February 28, 2010 are
summarized in the following table:

                                 Oil         Gas          Total
                               -------     -------       -------
                                (bbl)       (mcf)         (boe)

      Revenues               $ 198,392    $ 137,333     $ 335,725
      Average sales price    $   69.44    $    7.05     $   55.01


     General  and   administrative   expenses   decreased   during  the  current
three-month period, primarily because of a decrease in stock based compensation.
In connection with our acquisition of predecessor  Synergy in September 2008, we
issued  options  covering  4,000,000  shares of common stock to replace  similar
options that had  previously  been issued by predecessor  Synergy.  The pro-rata
portion of the fair value of the options  allocated  to the three  months  ended
February 28, 2009 was  $3,427,849.  During the three  months ended  February 28,
2010,  we  recognized a pro-rata  portion  ($6,188) of the fair value of 100,000
options which were issued in December 2008.

                                       23
<PAGE>

      Other expenses increased in 2010 as a result of the accretion of the debt
discount and offering costs associated with the private sale of 180 units. In
future periods, we expect to also report a change in the estimated fair value of
the derivative conversion liability.

For the six months ended February 28, 2010 and February 28, 2009

      Material changes of certain items in our Statements of Operations for the
six months ended February 28, 2010 and 2009 are discussed below.

      Oil and gas revenues and related expenses increased during the six months
ended February 28, 2010. Our first wells began producing in February, 2009. In
addition to the first two wells, four wells were brought on-stream during the
six months ended February 28, 2010.

      Oil and gas sales for the six months ended February 28, 2010 are
summarized in the following table:

                                 Oil         Gas          Total
                               -------     -------       -------
                                (bbl)       (mcf)         (boe)

      Revenues              $ 244,596     $ 143,915     $ 388,511
      Average sales price   $   70.06     $    6.78     $   55.28

      General and administrative expenses decreased during the current six-month
period, primarily because of a decrease in stock based compensation. In
connection with our acquisition of predecessor Synergy in September 2008, we
issued options covering 4,000,000 shares of common stock to replace similar
options that had previously been issued by predecessor Synergy. The pro-rata
portion of the fair value of the options allocated to the six months ended
February 28, 2009 was $6,852,604. During the six months ended February 28, 2010,
we recognized a pro-rata portion ($10,829) of the fair value of 100,000 options
which were issued in December 2008.

      Other expenses increased in 2010 as a result of the accretion of the debt
discount and offering costs associated with the private sale of 180 units. In
future periods, we expect to also report a change in the estimated fair value of
the derivative conversion liability.

Trend and Outlook

      The factors that will most significantly affect our results of operations
will be (i) the sales prices of crude oil and natural gas, (ii) the amount of
production from oil or gas wells in which we have an interest, and (iii) and
lease operating expenses. Our revenues will also be significantly impacted by
our ability to maintain or increase oil or gas production through exploration
and development activities. Other than the foregoing, we do not know of any
trends, events or uncertainties that will have or are reasonably expected to
have a material impact on our sales, revenues or expenses.

                                       24
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

      Our sources and (uses) of funds for the six months ended February 28, 2010
and 2009 are shown below:
                                                  Six Months Ended
                                          --------------------------------------
                                          February 28, 2010    February 28, 2009
                                          -----------------    -----------------
Cash (used in) operating
 activities                                  $ (283,108)          $ (384,776)
Acquisition of oil and gas properties,
 equipment, drilling and completion costs    (3,748,918)            (640,057)
Proceeds from sale of stock, net of
 offering costs                                      --               529,395
Proceeds from sale of convertible notes,
  net of debt issuance costs                 10,818,283                    --
Debt principal payments                        (765,731)                   --
Other                                                --                 3,987
Cash on hand at beginning of period                               $   491,451


      In May 2009 we borrowed $1,161,811 from a commercial bank. The loan
proceeds were used to purchase, and the loan is collateralized primarily by,
pipe used to drill and complete oil and gas wells. We expect to use the pipe
during our 2010 drilling program and to reduce the outstanding principal balance
of this borrowing as the pipe is used.

      Between December 29, 2009 and March 12, 2010, we received net proceeds of
$16,651,023 from the private sale of 180 Units in six tranches. The Units were
sold at a price of $100,000 per Unit. Each Unit consisted of one Promissory Note
in the principal amount of $100,000 and 50,000 warrants. The Notes bear interest
at 8% per year, payable quarterly, and mature on December 31, 2012. At any time
after May 31, 2010 the Notes can be converted into shares of our common stock,
initially at a conversion price of $1.60 per share. Each warrant entitles the
holder to purchase one share of our common stock at a price of $6.00 per share.
The warrants expire December 31, 2014.

      With the proceeds from the sale of the Units we plan to drill and complete
oil and gas wells in the Wattenburg field located in the Denver-Julesburg Basin.
The Notes will be secured by any oil or gas wells drilled, completed or acquired
with the proceeds from the offering.

     For financial statement purposes, we allocated a portion of the $18,000,000
gross proceeds to the value of the warrants and valued the conversion feature at
fair value as it was an embedded derivative  requiring  separation and reporting
as a liability. As of March 12, 2010, the day that we completed the offering, we
estimated  that  the  value  of the  warrants  was  $1,760,048,  which  will  be
reclassified  from debt to  additional  paid in capital.  We estimated  that the


                                       25
<PAGE>

value of the conversion  feature was $3,455,809,  which will be classified as an
embedded derivative  liability.  In future reporting periods, the carrying value
of the derivative conversion liability will be adjusted to reflect the then fair
value condition and the value may fluctuate significantly. As of March 12, 2010,
the amounts  allocated to the warrants and the derivative  conversion  liability
are recorded as a debt discount of $5,215,857,  which will be amortized over the
36 month life of the Notes.

      Our operating expenses requiring cash currently approximate $98,000 per
month which amount includes salaries and other corporate overhead. This amount
is expected to increase as we drill and operate additional wells. Our capital
requirements for the next twelve months include participation in 35 gross wells
(in which our interest will approximate 28 net wells) and various other projects
for total costs of approximately $15,000,000 to $18,000,000. As future capital
expenditure plans may exceed our available capital resources, it may be
necessary to seek additional funding. Our capital expenditure plans are subject
to periodic revision based upon the availability of funds and expected return on
investment.

      It is expected that our principal source of cash will be from the
production and sale of crude oil and natural gas reserves which are depleting
assets. Cash flow from the sale of oil and gas production depends upon the
quantity of production and the price obtained for the production. An increase in
prices will permit us to finance our operations to a greater extent with
internally generated funds, may allow us to obtain equity financing more easily
or on better terms, and lessens the difficulty of obtaining financing. However,
price increases heighten the competition for oil and gas prospects, increase the
costs of exploration and development, and, because of potential price declines,
increase the risks associated with the purchase of producing properties during
times that prices are at higher levels.

      A decline in oil and gas prices (i) will reduce our cash flow which in
turn will reduce the funds available for exploring for and replacing oil and gas
reserves, (ii) will increase the difficulty of obtaining equity and debt
financing and worsen the terms on which such financing may be obtained, (iii)
will reduce the number of oil and gas prospects which have reasonable economic
terms, (iv) may cause us to permit leases to expire based upon the value of
potential oil and gas reserves in relation to the costs of exploration, (v) may
result in marginally productive oil and gas wells being abandoned as
non-commercial, and (vi) may increase the difficulty of obtaining financing.
However, price declines reduce the competition for oil and gas properties and
correspondingly reduce the prices paid for leases and prospects.

      We plan to generate profits by drilling productive oil or gas wells. We
may need to raise the funds required to drill new wells through the sale of our
securities, from loans from third parties or from third parties willing to pay
our share of drilling and completing the wells. We do not have any commitments
or arrangements from any person to provide us with any additional capital. If
additional financing is not available when needed, we may need to modify our
operations and future plans. We may not be successful in raising the capital
needed to drill oil or gas wells. Any wells which may be drilled by us may not
be productive of oil or gas.


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<PAGE>

MISCELLANEOUS

      In addition to the amounts recorded as current liabilities as of February
28, 2010, we have contractual obligations for service contracts totaling
$135,000 all of which are expected to be satisfied during the next twelve
months.

      We do not have any off-balance sheet arrangements that have or are
reasonable likely to have a current or future effect on our financial condition,
changes in financial condition, results of operations, liquidity or capital
resources.

      We do not currently engage in any commodity hedging activities, although
we may do so in the future.

Forward-Looking Statements

      This Form 10-Q contains or incorporates by reference "forward-looking
statements," as that term is used in federal securities laws, concerning our
financial condition, results of operations and business. These statements
include, among others:

      -  statements concerning the benefits that we expect will result from our
         business activities and results of exploration that we contemplate or
         have completed, such as increased revenues; and

      -  statements of our expectations, beliefs, future plans and strategies,
         anticipated developments and other matters that are not historical
         facts.

     These  statements  may  be  made  expressly  in  this  document  or  may be
incorporated by reference to other documents that we will file with the SEC. You
can find many of these  statements  by  looking  for words  such as  "believes,"
"expects," "anticipates," "estimates" or similar expressions used in this report
or incorporated by reference in this report.

     These forward-looking statements are subject to numerous assumptions, risks
and uncertainties  that may cause our actual results to be materially  different
from any future results  expressed or implied in those  statements.  Because the
statements  are subject to risks and  uncertainties,  actual  results may differ
materially  from those  expressed  or  implied.  We caution you not to put undue
reliance on these  statements,  which speak only as of the date of this  report.
Further,  the information  contained in this document or incorporated  herein by
reference is a statement of our present  intention and is based on present facts
and assumptions, and may change at any time and without notice, based on changes
in such facts or assumptions.

      The important factors that could prevent us from achieving our stated
goals and objectives include, but are not limited to, the following:

     o    The worldwide economic situation;

     o    Volatility in the price of oil and gas;

     o    Any change in interest rates or inflation;


                                       27
<PAGE>

     o    The   willingness   and  ability  of  third  parties  to  honor  their
          contractual commitments;

     o    Our  ability to raise  additional  capital,  as it may be  affected by
          current  conditions in the stock market and competition in the oil and
          gas industry for risk capital;

     o    Our capital costs, as they may be affected by delays or cost overruns;

     o    Our costs of production;

     o    Environmental and other  regulations,  as the same presently exist and
          may hereafter be amended;

     o    Our ability to identify, finance and integrate other acquisitions; and

     o    Volatility of our stock price.

      We undertake no responsibility or obligation to update publicly these
forward-looking statements, but may do so in the future in written or oral
statements. Investors should take note of any future statements made by or on
our behalf.

Item 4.  Controls and Procedures.

     We maintain a system of  controls  and  procedures  designed to ensure that
information  required to be  disclosed  by us in reports  that we file or submit
under the Securities Exchange Act of 1934, as amended ("1934 Act"), is recorded,
processed,  summarized and reported,  within time periods specified in the SEC's
rules and forms and to ensure that information required to be disclosed by us in
the  reports  that we file or  submit  under the 1934 Act,  is  accumulated  and
communicated to our management,  including our Principal  Executive  Officer and
Principal  Financial Officer, as appropriate to allow timely decisions regarding
required disclosure. As of February 28, 2010, under the supervision and with the
participation  of  our  Principal  Executive  Officer  and  Principal  Financial
Officer,  management has evaluated the effectiveness of the design and operation
of our  disclosure  controls  and  procedures.  Based  on that  evaluation,  the
Principal  Executive Officer and Principal  Financial Officer concluded that our
disclosure controls and procedures were effective.

      There were no changes in our internal control over financial reporting
during the quarter ended February 28, 2010 that materially affected or are
reasonably likely to materially affect, our internal control over financial
reporting.


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<PAGE>

                                     PART II

Item 1.  Legal Proceedings.

            None.

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

            None

Item 3.  Default Upon Senior Securities.

            None.

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

            None.

Item 5.  Other Information.

            None.

Item 6.  Exhibits

a.  Exhibits

31.1      Certification  pursuant  to Section 302 of the  Sarbanes-Oxley  Act of
          2002 for Edward Holloway.

31.2      Certification  pursuant  to Section 302 of the  Sarbanes-Oxley  Act of
          2002 for Frank L. Jennings.

32        Certification  pursuant  to Section 906 of the  Sarbanes-Oxley  Act of
          2002 for Edward Holloway and Frank L. Jennings.



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<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.




                                  SYNERGY RESOURCES CORPORATION

Date:  April 12, 2010
                                  By: /s/ Edward Holloway
                                     ----------------------------------
                                     Edward Holloway, President and Principal
                                       Executive Officer


Date:  April 12, 2010
                                  By: /s/ Frank L. Jennings
                                      -----------------------------------
                                      Frank L. Jennings, Principal Financial and
                                        Accounting Officer



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