<PAGE>

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


                                   FORM 10-Q

(Mark One)
[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001.
          OR
[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO ______.

                          COMMISSION FILE NO. 0-21911


                            SYNTROLEUM CORPORATION
            (Exact name of registrant as specified in its charter)


                 Delaware                                  73-1565725
      (State or other jurisdiction of                   (I.R.S. Employer
      incorporation or organization)                   Identification No.)


                        1350 South Boulder, Suite 1100
                          Tulsa, Oklahoma  74119-3295
              (Address of principal executive offices) (Zip Code)


      Registrant's telephone number, including area code:  (918) 592-7900


                                Not Applicable

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


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


     At April 13, 2001, the number of outstanding shares of the issuer's common
stock was 33,157,834.
<PAGE>

                            SYNTROLEUM CORPORATION
                    INDEX TO QUARTERLY REPORT ON FORM 10-Q
                 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001

<TABLE>
<CAPTION>
                               PART I - FINANCIAL INFORMATION

                                                                                        Page
                                                                                        ----
<S>                                                                            <C>
Item 1.   Financial Statements.
          Unaudited Consolidated Balance Sheets as of  March 31, 2001 and
               December 31, 2000......................................................     1
          Unaudited Consolidated Statements of Operations for the three month
               periods ended March 31, 2001 and 2000..................................     2
          Unaudited Consolidated Statements of Stockholders' Equity for the three
               month period ended March 31, 2001......................................     3
          Unaudited Consolidated Statements of Cash Flows for the three month
               periods ended March 31, 2001 and 2000..................................     4
          Notes to Unaudited Consolidated Financial Statements........................     5
Item 2.   Management's Discussion and Analysis of Financial Condition
               and Results of Operations..............................................     6
Item 3.   Quantitative and Qualitative Disclosures About Market Risk..................    14

                                PART II - OTHER INFORMATION

Item 1.   Legal Proceedings...........................................................    16
Item 2.   Changes in Securities and Use of Proceeds...................................    16
Item 3.   Defaults Upon Senior Securities.............................................    16
Item 4.   Submission of Matters to a Vote of Security Holders.........................    16
Item 5.   Other Information...........................................................    16
Item 6.   Exhibits and Reports on Form 8-K............................................    16
SIGNATURES............................................................................    17
INDEX TO EXHIBITS.....................................................................    18
</TABLE>

                          FORWARD-LOOKING STATEMENTS

     This Quarterly Report on Form 10-Q includes forward-looking statements as
well as historical facts. These forward-looking statements include statements
relating to our gas-to-liquids technology known as the Syntroleum Process and
related technologies, gas-to-liquids plants based on the Syntroleum Process
including the Sweetwater plant, anticipated costs to design, construct and
operate these plants, anticipated costs to make products from these plants, the
timing of commencement and completion of the design and construction of these
plants, obtaining required financing for these plants, anticipated costs to make
products from these plants, the economic construction and operation of gas-to-
liquids plants, the value and markets for plant products, testing,
certification, characteristics and use of plant products, the continued
development of the Syntroleum Process (alone or with partners), anticipated
capital expenditures, use of proceeds from our recent public offering,
anticipated revenues, the sale of and costs associated with our real estate
inventory and any other statements regarding future growth, cash needs,
operations, business plans and financial results. When used in this document,
the words "anticipate," "believe," "estimate," "expect," "intend," "may,"
"plan," "project," "should" and similar expressions are intended to be among the
statements that identify forward-looking statements. Although we believe that
the expectations reflected in these forward-looking statements are reasonable,
these kinds of statements involve risks and uncertainties. Actual results may
not be consistent with these forward-looking statements. Important factors that
could cause actual results to differ from these forward-looking statements
include the risks that the cost of designing, constructing and operating
commercial-scale gas-to-liquids plants will exceed current estimates, the
schedule for construction of commercial-scale GTL plants will extend beyond
current estimated schedules, financing for design and construction of
commercial-scale GTL plants and our other activities may not be available,
commercial-scale gas-to-liquids plants will not achieve the same results as
those demonstrated on a laboratory or pilot basis, gas-to-liquids plants may
experience technological and mechanical problems, improvements to the Syntroleum
Process currently under development may not be successful, markets for gas-to-
liquids plant products may not develop, plant economics may be adversely
impacted by operating conditions, including energy prices, construction risks
and risks associated with investments and operations in foreign countries, our
ability to implement corporate strategies, competition, intellectual property
risks, our ability to obtain financing and other risks described in this
Quarterly Report on Form 10-Q and Syntroleum's Annual Report on Form 10-K for
the year ended December 31, 2000.

     As used in this Quarterly Report on Form 10-Q, the terms "we," "our" or
"us" mean Syntroleum Corporation, a Delaware corporation, and its predecessors
and subsidiaries, unless the context indicates otherwise.
<PAGE>

                        PART I.  FINANCIAL INFORMATION

Item 1.   Financial Statements.

                    SYNTROLEUM CORPORATION AND SUBSIDIARIES
                     UNAUDITED CONSOLIDATED BALANCE SHEETS
                     (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                      March 31,                 December 31,
                                                                                        2001                        2000
                                                                               ----------------------      ----------------------
<S>                                                                            <C>                         <C>
ASSETS

CURRENT ASSETS:
     Cash and cash equivalents..............................................                 $ 70,915                    $ 83,150
     Short-term investments.................................................                    3,445                       3,347
     Accounts and notes receivable..........................................                      682                         572
     Other current assets...................................................                      372                         407
                                                                               ----------------------      ----------------------
          Total current assets..............................................                   75,414                      87,476

REAL ESTATE UNDER DEVELOPMENT...............................................                    3,006                       3,340
INVESTMENTS.................................................................                      971                         959
RESTRICTED CASH.............................................................                   12,205                      13,744
PROPERTY AND EQUIPMENT, net.................................................                   34,395                      31,274
NOTES RECEIVABLE............................................................                    2,353                       2,362
OTHER ASSETS, net...........................................................                      846                         723
                                                                               ----------------------      ----------------------
                                                                                             $129,190                    $139,878
                                                                               ======================      ======================

                                               LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
     Accounts payable.......................................................                 $  2,577                    $  5,178
     Accrued liabilities....................................................                      493                         576
                                                                               ----------------------      ----------------------
          Total current liabilities.........................................                    3,070                       5,754

LONG-TERM DEBT..............................................................                      655                         731
OTHER NONCURRENT LIABILITIES................................................                       28                          29
DEFERRED REVENUE............................................................                   33,643                      35,680
MINORITY INTERESTS..........................................................                    2,986                       2,936
                                                                               ----------------------      ----------------------

          Total liabilities.................................................                   40,382                      45,130
                                                                               ----------------------      ----------------------

STOCKHOLDERS' EQUITY:
     Preferred stock, $0.01 par value, 5,000 shares authorized,
       no shares issued.....................................................                        -                           -
     Common stock, $0.01 par value, 150,000 shares authorized,
      40,833 and 40,812 shares issued in 2001 and 2000,
       respectively, including shares in treasury...........................                      409                         408
     Additional paid-in capital.............................................                  163,990                     163,858
     Notes receivable from sale of common stock.............................                     (599)                       (599)
     Accumulated deficit....................................................                  (74,915)                    (68,842)
                                                                               ----------------------      ----------------------
                                                                                               88,885                      94,825
      Less-treasury stock, 7,675, shares in
        2001 and 2000, respectively.........................................                      (77)                        (77)
                                                                               ----------------------      ----------------------

          Total stockholders' equity........................................                   88,808                      94,748
                                                                               ----------------------      ----------------------
                                                                                             $129,190                    $139,878
                                                                               ======================      ======================
</TABLE>

             The accompanying notes are an integral part of these
                    unaudited consolidated balance sheets.

                                       1
<PAGE>

                    SYNTROLEUM CORPORATION AND SUBSIDIARIES
                UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
                     (in thousands, except per share data)


<TABLE>
<CAPTION>
                                                                            For the Three Months
                                                                               Ended March 31,
                                                             ------------------------------------------------
                                                                      2001                        2000
                                                             --------------------      ----------------------
<S>                                                          <C>                       <C>
REVENUES:
  Joint development revenue..................................             $   256                     $   283
  Real estate sales..........................................               1,137                       3,538
  Other......................................................                   1                          54
                                                             --------------------      ----------------------

    Total revenues...........................................               1,394                       3,875
                                                             --------------------      ----------------------

COST AND EXPENSES:
  Cost of real estate sales..................................                 648                       3,078
  Real estate operating expense..............................                  26                         162
  Pilot plant, engineering and research and
    Development..............................................               4,549                       3,153
  General and administrative.................................               4,022                       3,035
                                                             --------------------      ----------------------

INCOME (LOSS) FROM OPERATIONS................................              (7,851)                     (5,553)

INVESTMENT AND INTEREST INCOME...............................               1,473                         235
FOREIGN EXCHANGE GAIN (LOSS).................................                 442                           -
                                                             --------------------      ----------------------

INCOME (LOSS) BEFORE MINORITY
  INTERESTS AND INCOME TAXES.................................              (5,936)                     (5,318)

MINORITY INTERESTS...........................................                (120)                        (34)
INCOME TAXES.................................................                 (17)                          -
                                                             --------------------      ----------------------

NET INCOME (LOSS)............................................             $(6,073)                    $(5,352)
                                                             ====================      ======================

NET INCOME (LOSS) PER SHARE -
  Basic and diluted..........................................              $(0.18)                     $(0.20)
WEIGHTED AVERAGE COMMON SHARES
  OUTSTANDING................................................              33,148                      27,202
                                                             ====================      ======================
</TABLE>

             The accompanying notes are an integral part of these
                      unaudited consolidated statements.

                                       2
<PAGE>

                    SYNTROLEUM CORPORATION AND SUBSIDIARIES
           UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                (in thousands)

<TABLE>
<CAPTION>

                                 Common Stock                          Notes
                             ---------------------   Additional     Receivable                                       Total
                               Number                 Paid-in      From Sale of     Accumulated     Treasury     Stockholders'
                              of Shares    Amount     Capital      Common Stock       Deficit         Stock          Equity
                             -----------  --------   ---------    --------------   -------------   ----------   --------------

<S>                           <C>          <C>       <C>           <C>              <C>             <C>          <C>
BALANCE, December 31, 2000..     40,812      $408      $163,858           $(599)       $(68,842)        $(77)          $94,748
     STOCK OPTIONS EXERCISED         21         1            85               -               -            -                86
     CONSULTANT OPTIONS               -         -            47               -               -            -                47
      GRANTED...............
     NET INCOME (LOSS)......          -         -             -               -          (6,073)           -            (6,073)
                              ---------  --------     ---------    ------------    ------------    ---------    --------------
BALANCE, March 31, 2001.....     40,833      $409      $163,990           $(599)       $(74,915)        $(77)          $88,808
                              =========  ========     =========    ============    ============    =========    ==============
</TABLE>

             The accompanying notes are an integral part of these
                      unaudited consolidated statements.

                                       3
<PAGE>

                    SYNTROLEUM CORPORATION AND SUBSIDIARIES
                UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (in thousands)


<TABLE>
<CAPTION>
                                                                                For the Three Months
                                                                                  Ended March 31,
                                                                     ---------------------------------------

                                                                             2001                 2000
                                                                     ------------------      ---------------

<S>                                                                    <C>                     <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss).................................................          $ (6,073)             $(5,352)
   Adjustments to reconcile net income (loss)
      to net cash used in operations:
      Minority interest in subsidiaries..............................                50                    1
      Depreciation and amortization..................................               247                  242
      Foreign currency exchange......................................            (2,129)                   -
      Non-cash compensation expense..................................                47                    -
      Equity in affiliates...........................................               (12)                 (51)
      Changes in real estate held for sale and under development.....               334                2,828
      Changes in assets and liabilities--
           Accounts and notes receivable.............................              (101)               1,020
           Other assets..............................................               (97)              (2,277)
           Accounts payable..........................................            (2,597)                 503
           Accrued liabilities and other.............................               (84)                  27
                                                                     ------------------      ---------------

              Net cash used in operating activities..................           (10,415)              (3,059)
                                                                     ------------------      ---------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment................................            (3,345)              (2,561)
   Increase in restricted cash.......................................              (150)                   -
   Changes in investments and distributions from investment funds....               (98)                 124
                                                                     ------------------      ---------------

             Net cash used in investing activities...................            (3,593)              (2,437)
                                                                     ------------------      ---------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from sale of common stock and option exercises...........                86                1,847
   Minority interest investment......................................                 -                2,000
                                                                     ------------------      ---------------

            Net cash provided by financing activities................                86                3,847
                                                                     ------------------      ---------------

FOREIGN EXCHANGE EFFECT ON CASH......................................             1,687                    -
                                                                     ------------------      ---------------
NET DECREASE IN CASH AND CASH
     EQUIVALENTS.....................................................           (12,235)              (1,649)
CASH AND CASH EQUIVALENTS, beginning of period.......................            83,150               20,316
                                                                     ------------------      ---------------

CASH AND CASH EQUIVALENTS, end of period.............................          $ 70,915              $18,667
                                                                     ==================      ===============
</TABLE>

             The accompanying notes are an integral part of these
                      unaudited consolidated statements.

                                       4
<PAGE>

                    SYNTROLEUM CORPORATION AND SUBSIDIARIES

             NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                March 31, 2001


1.   Basis of Reporting

          The primary operations of Syntroleum Corporation (together with its
predecessors and subsidiaries, the "Company" or "Syntroleum") to date have
consisted of the research and development of a proprietary process (the
"Syntroleum Process") designed to convert natural gas into synthetic liquid
hydrocarbons. Synthetic liquid hydrocarbons produced by the Syntroleum Process
can be further processed into high quality liquid fuels such as diesel, kerosene
and naphtha, or high quality specialty products such as synthetic lubricants,
synthetic drilling fluid, waxes, liquid normal paraffins and certain chemical
feedstocks.

          The Company's current focus is to further demonstrate the commercial
viability of its proprietary technology. The Company has sold license agreements
to seven oil companies and the Commonwealth of Australia. In addition to
operating its own pilot plant in Tulsa, Oklahoma, the Company participated in
the operation of a pilot plant located at ARCO's refinery in Cherry Point,
Washington. The Company is developing a commercial-scale specialty products
plant to be located in Western Australia known as the Sweetwater project.

          The consolidated financial statements included in this report have
been prepared by Syntroleum without audit pursuant to the rules and regulation
of the Securities and Exchange Commission ("SEC"). Accordingly, these statements
reflect all adjustments (consisting of normal recurring entries) which are, in
the opinion of management, necessary for a fair statement of the financial
results for the interim periods presented. These financial statements should be
read together with the financial statements and the notes thereto included in
the Company's Annual Report on Form 10-K for the year ended December 31, 2000
filed with the SEC under the Securities Exchange Act of 1934.

          The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts 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. Actual results could differ from those estimates.

2.   Earnings Per Share

          The Company applies the provisions of SFAS No. 128, "Earnings Per
Share." Basic and diluted earnings (losses) per common share were computed by
dividing net income (loss) by the weighted average number of shares of common
stock outstanding during the reporting periods. Options to purchase 3,318,644
shares of common stock at an average exercise price of $10.75 were not included
in the computation of diluted earnings per share for the three months ended
March 31, 2001 because inclusion of these options would be anti-dilutive.
Options to purchase 2,395,496 shares of common stock at an average exercise
price of $7.79 were not included in the computation of diluted earnings per
share for the three months ended March 31, 2000 because inclusion of these
options would be anti-dilutive.

3.   New Accounting Pronouncements

          In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. SFAS No. 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement. Companies must formally document, designate and
assess the effectiveness of transactions that receive hedge accounting
treatment. The Company does not purchase futures contracts nor does it hold
derivative investments. The Company adopted SFAS No. 133 beginning January 1,
2001. The adoption of SFAS No.133 did not have a material effect on its
financial statements.

4.   Footnotes Incorporated by Reference

                                       5
<PAGE>

          Certain footnotes are applicable to the financial statements, but
would be substantially unchanged from the footnotes presented in the audited
financial statements included in the Company's Annual Report on Form 10-K for
the year ended December 31, 2000 as filed with the SEC, and are incorporated
herein by reference as follows:

            Note                              Description
          --------           --------------------------------------------

             1.              Summary of Significant Accounting Policies
             2.              Investments
             3.              Restricted Cash
             4.              Property and Equipment
             5.              Notes Receivable from Sale of Common Stock
             6.              Notes Receivable
             7.              Long-Term Debt
             8.              Minority Interests
             9.              Licensing Activity
             10.             Public Offering
             11.             Income Taxes
             12.             Supplemental Cash Flow Information
             13.             Commitments
             14.             Fair Value of Financial Instruments
             15.             Cash Equivalents and Short-Term Investments
             16.             Stock Options
             17.             Significant Customers
             18.             Stockholder Rights Plan


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

          You should read the following information together with the
information presented elsewhere in this Quarterly Report on Form 10-Q and with
the information presented in our Annual Report on Form 10-K for the year ended
December 31, 2000 (including our audited financial statements and the
accompanying notes).

Our Business

          We are a leading developer and licensor of a proprietary catalytic
process for converting natural gas to synthetic liquid hydrocarbons, generally
known as gas-to-liquids, or GTL, technology. We sell licenses to use our GTL
technology, the Syntroleum Process, for the production of fuels, and we plan to
develop and own GTL plants based on the Syntroleum Process that produce refined
specialty products and fuels. We anticipate that the Syntroleum Process will be
an attractive solution in many cases for companies with natural gas reserves
that are not economic to produce using traditional technology.

          The Syntroleum Process produces synthetic liquid hydrocarbons, also
known as synthetic crude oil, that are substantially free of contaminants
normally found in products made from crude oil and can be further processed into
higher margin products through conventional refining processes. These products
include:

          .  Premium, ultra-clean liquid fuels, such as synthetic diesel,
             kerosene, gasoline, naphtha, and fuel for fuel cells, and

          .  Specialty products, such as synthetic lubricants, process oils,
             high melting point waxes, liquid normal paraffins, drilling fluids,
             and chemical feedstocks.

          We believe that the costs to produce ultra-clean fuels and specialty
products from natural gas using the Syntroleum Process can be competitive with
the costs to produce comparable quality products from crude oil using

                                       6
<PAGE>

conventional refining processes. We also believe that these ultra-clean fuels
meet or exceed new and proposed environmental requirements.

          The key advantages of our technology over competitive GTL technologies
are the use of air in the conversion process (in contrast to the requirement for
pure oxygen in other technologies) and the use of our proprietary catalysts,
which enhance the conversion efficiency of the catalytic reaction. We believe
these advantages will reduce the capital and operating costs of GTL plants based
on the Syntroleum Process, while also permitting smaller unit sizes, including
mobile plants that could be placed on skids, barges and ocean-going vessels.
Based on our demonstrated research, we believe that the Syntroleum Process can
be economically applied in GTL plants with throughput levels from as low as
2,000 to over 100,000 barrels a day. The advantages of our technology combined
with the large worldwide resource base of stranded natural gas provide what we
believe is a significant market opportunity for the use of the Syntroleum
Process by our company and our licensees to develop cost-effective GTL plants.


          We have successfully demonstrated many elements and variations of the
Syntroleum Process in pilot plant operations and laboratory tests, including our
joint participation in a 70 barrel per day GTL demonstration plant with one of
our licensees, ARCO (a subsidiary of BP). While we have not yet built a
commercial-scale GTL plant based on the Syntroleum Process, we are currently
developing a 10,000 barrel per day specialty product GTL plant based on the
Syntroleum Process known as the Sweetwater plant to be constructed in Western
Australia. We have entered into an operation and maintenance contract, a natural
gas supply contract and other contracts for this plant. In addition, we have
signed nonbinding letters of intent for the equity financing for the plant and
retained financial advisors who are attempting to obtain debt financing. We are
also evaluating the potential development of additional GTL plants, including
facilities that will produce synthetic fuels.

Business Strategy

          Our objectives are to rapidly establish the Syntroleum Process as an
industry standard and maximize our market share relative to alternative GTL
technologies. Our business strategy to achieve these objectives involves the
following key elements:

          .  continue broadly licensing our technology for the production of
             synthetic crude oil and liquid fuels,

          .  use our technology to build and own plants designed to make
             specialty products and fuels,

          .  develop alternative markets for the synthetic fuels and specialty
             products of GTL plants based on the Syntroleum Process like ultra-
             clean fuels and fuels for fuel cell applications, and

          .  continue our research and development program alone and with
             strategic partners to lower costs and expand the potential
             applications for our technology.

Operating Revenues

          General. During the periods discussed below, our revenues were
primarily generated from the following:

     -    sales of real estate holdings owned by SLH Corporation prior to the
          merger of Syntroleum Corporation and SLH Corporation,
     -    reimbursement for research and development activities associated with
          the Syntroleum Process, and
     -    other sources, including rent generated by real estate holdings owned
          by SLH prior to the merger.

          Because substantially all of our real estate portfolio has been sold,
we expect to receive lower levels of revenues from these sources in future
periods.

                                       7
<PAGE>

          In the future, we expect to receive revenue relating to the Syntroleum
Process from four principal sources:

     -    licensing,
     -    catalyst sales,
     -    sales of products from GTL plants in which we own an equity interest,
          and
     -    revenues from research and development activities carried out with
          industry partners.

          Until the commencement of commercial operation of GTL plants in which
we own an interest, we expect that cash flow relating to the Syntroleum Process
will consist primarily of license fee deposits, site license fees and revenues
associated with joint development activities. We will not receive any cash flow
from GTL plants in which we own an equity interest until the first of these
plants is constructed. Our future operating revenues will depend on the
successful commercial construction and operation of GTL plants based on the
Syntroleum Process, the success of competing GTL technologies and other
competing uses for natural gas. We expect our results of operations and cash
flows to be affected by changing crude oil, fuel and specialty product prices.
If the price of these products increases (decreases), there could be a
corresponding increase (decrease) in operating revenues.

          License Revenues. The revenue earned from licensing the Syntroleum
Process is expected to be generated through four types of contracts: master
license agreements, volume license agreements, regional license agreements and
site license agreements. Master, volume and regional license agreements provide
the licensee with the right to enter into site license agreements for individual
GTL plants. A master license agreement grants broad geographic and volume
rights, while volume license agreements limit the total production capacity of
all GTL plants constructed under the agreement to specified amounts, and
regional license agreements limit the geographical rights of the licensee.
Master, volume and regional license agreements require an up-front cash deposit
that may offset or partially offset license fees for future plants payable under
site licenses. We have acquired technologies or commitments of funds for joint
development activities, services or other consideration in lieu of the initial
cash deposit in cases where we believed the technologies or commitments had a
greater value.

          Our site license agreements require fees to be paid in increments when
milestones during the plant design and construction process are achieved. The
amount of the license fee under our existing master and volume license
agreements is determined pursuant to a formula based on the present value of the
product of: (1) the yearly maximum design capacity of the plant, (2) an assumed
life of the plant and (3) our per barrel rate, which currently is approximately
$.50 per barrel of daily capacity, regardless of plant capacity. Our licensee
fees may change from time to time based on the size of the plant, improvements
that reduce plant capital cost and competitive market conditions. Our existing
master and volume license agreements allow for the adjustment of fees for new
site licenses under certain circumstances. Our accounting policy is to defer all
up-front deposits under master, volume and regional license agreements and
license fees under site license agreements and recognize 50% of the deposits and
fees as revenue in the period in which the engineering process design package
for a plant licensed under the agreement is delivered and recognize the other
50% of the deposits and fees when the plant has passed the performance tests.
The amount of license revenue we earn will be dependent on the construction of
plants by licensees, as well as the number of licenses we sell in the future.

          Catalyst Revenues. We expect to earn revenue from the sale of our
proprietary catalysts to our licensees. Our license agreements require our
catalyst to be used in the initial fill for the licensee to receive our process
guarantee. After the initial fill, the licensee may use other catalyst vendors
if appropriate catalysts are available. The price for catalysts purchased from
us pursuant to license agreements is equal to our cost plus a specified margin.
We will receive revenue from catalyst sales if and when our licensees purchase
catalysts. We expect that our catalysts will need to be replaced every three to
five years.

          GTL Plant Revenues. We intend to develop several GTL plants and to
retain significant equity interests in these plants. These plants will enable us
to gain experience with the commercial operation of the Syntroleum Process and,
if successful, are expected to provide ongoing revenues. The anticipated
products of these plants, including fuels, synthetic lube base oils, process
oils, waxes, synthetic drilling fluid and liquid normal paraffins, have
historically been sold at premium prices and are expected to result in
relatively high margins for these plants. We anticipate forming several joint
ventures with energy industry and financial partners in order to finance and
operate

                                       8
<PAGE>

these plants. We anticipate that our GTL plants will include partners who have
low-cost gas reserves in strategic locations or have distribution networks in
place for the specialty products to be made in each plant.

          Joint Development Revenue. We continually conduct research and
development activities in order to reduce the capital and operating costs of GTL
plants based on the Syntroleum Process. We conduct our research and development
activities primarily through two initiatives: (1) independent development
utilizing our own resources and (2) formal joint development arrangements with
our licensees and others. Through these joint development agreements, we may
receive revenue as reimbursement for specified portions of our research and
development expenses. Under some of these agreements, the joint development
partner may receive credits against future license fees for dollars spent on
joint research and development.

          Real Estate Sales Revenue. As of March 31, 2001, our real estate
inventory consisted of land in Houston, Texas comprised of 281 acres of
undeveloped land and 51 lots known as the "Houston real estate partnership."
This real estate inventory was owned by SLH Corporation prior to the merger of
Syntroleum Corporation and SLH Corporation and reflects the remaining assets of
a real estate development business that was conducted by SLH's former parent
corporation. Our total real estate inventory had an aggregate carrying value at
March 31, 2001 of approximately $3 million. The Houston real estate partnership
is being developed for commercial and residential use and ultimate sale. The
timing of real estate sales will create variances in period-to-period earnings
recognition. We do not intend to acquire additional real estate holdings for
development or sale outside our core business interests, and real estate sales
revenues should decrease as the current real estate inventory is liquidated.

          Our other assets at March 31, 2001 included an investment in a
privately owned developer of proprietary bone substitute technology, which had a
carrying value of approximately $534,000; an investment in a privately held
venture capital limited partnership, which had a carrying value of $476,000 a
49.9% interest in a community retail shopping center in Gillette, Wyoming and an
equity investment in a recently renovated hotel in Tulsa, Oklahoma. We plan to
liquidate all of these investments in an orderly manner to maximize their value.

Operating Expenses

          Our operating expenses historically have consisted primarily of pilot
plant, engineering and research and development expenses and general and
administrative expenses, which include costs associated with general corporate
overhead, compensation expense, legal and accounting expense and expenses
associated with other related administrative functions. Our policy is to expense
pilot plant, engineering and research and development costs as incurred. All of
these research and development expenses are associated with our development of
the Syntroleum Process. We have also recognized depreciation and amortization
expense primarily related to office and computer equipment and patents. Our
operating expenses have also included costs of real estate sold and real estate
operating expense. Our general and administrative expenses have increased
substantially as we have expanded our research and development, engineering and
commercial staffing levels. These expenses are expected to continue to increase.
We also expect to continue to incur pilot plant, engineering and research and
development expenses as we continue to develop and improve our GTL technology.

          We expect to incur significant expenses in connection with the start-
up of our GTL plants. For example, we expect that our expenses will increase at
the time of commencement of construction of GTL plants in which we own an
interest. Upon the commencement of commercial operation of GTL plants in which
we own an equity interest, we will incur cost of sales expenses relating
primarily to the cost of natural gas feedstocks for our specialty plants and
operating expenses relating to these plants, including labor, supplies and
maintenance. Due to the substantial capital expenditures associated with the
construction of GTL plants, we expect to incur significant depreciation and
amortization expense in the future. Our policy is to expense costs associated
with the development of GTL plants until financial close unless they have future
economic value for future projects. Engineering costs are capitalized once an
engineering contract leading to a firm lump sum price has been signed.

Results Of Operations

Overview

                                       9
<PAGE>

          During the first quarter of 2001, we continued our efforts to
commercialize our GTL technology on several fronts. We continued our activities
to confirm catalyst performance and reactor designs for our proposed Sweetwater
plant. These activities included operation of new pilot scale Fischer-Tropsch
reactors at our pilot plant in Tulsa, Oklahoma. Operation of these reactors
allowed us to complete a battery of confirmation tests and detailed engineering
of our proposed Sweetwater plant during the year 2000 and into the first quarter
of 2001. To date our pilot plant operations have met or exceeded our Sweetwater
plant design targets. Pilot plant testing activities with respect to the
Sweetwater plant are continuing. We also completed construction of a product
upgrading pilot plant located at our technology center which is currently in
start up operations. This facility processes synthetic crude oil into the fuel
and specialty products that we plan to produce at our Sweetwater plant.

          We also continued our efforts to advance numerous other aspects of the
Sweetwater project, including completion of our port facilities and services
contract which is discussed in more detail below under "Liquidity and Capital
Resources - Sweetwater Plant."

          During the first quarter we also continued negotiations with the U.S.
Department of Energy to participate in one of eight teams of companies that have
been identified as potential participants in the DOE's program to help pioneer a
new generation of ultra-clean transportation fuels and tailpipe emission
controls. Our team will use our GTL technology to demonstrate the effective
production, testing, adaptation and use of ultra-clean synthetic fuels that can
be delivered by existing fuel infrastructures. The DOE has not yet selected the
final participants, and we can give no assurance that our team will be selected
for a DOE grant for this project. In addition, neither the DOE nor Congress has
given final approval to the budget for this program and the terms and conditions
of our participation have not yet been finalized.

          Subsequent to the end of the first quarter, we entered into a letter
of intent with Petroleum Geo-Services ASA to form a joint venture to develop,
market and operate mobile, marine-based production facilities that use the
Syntroleum Process. If the transaction is completed, the joint venture will be a
separate operating company offering contract GTL services to gas producers to
convert natural gas from offshore fields into synthetic hydrocarbon products.
Use of these services could enable monetization of gas that is normally flared
or otherwise wasted. Under the letter of intent, the planned joint venture will
have its initial operations in Aberdeen, Scotland and will be the exclusive
means by which we and PGS offer mobile, marine-based contract GTL services to
third parties. Formation of the joint venture is subject to negotiation and
execution of definitive agreements by the parties. We cannot assure you that the
joint venture will be formed or commence actual business operations.

          Three Months Ended March 31, 2001 Compared to Three Months Ended March
31, 2000

          Joint Development Revenue. Revenues from our joint research and
development and pilot plant operations were $256,000 in the first quarter of
2001, down $27,000 from the first quarter of 2000 when they were $283,000. The
decrease was primarily due to reduced funding received under our joint
development agreement with ARCO relating to the construction of the pilot plant
at ARCO's Cherry Point refinery in Washington. Construction of this pilot plant
was completed in 1999 and we received funding that related to our participation
in the operation of this pilot plant through June 2000. The one-year process
testing and pilot operation program under our agreement was successfully
completed and the plant was shut down in early July 2000. Joint development
revenue for the first quarter of 2001 was from a licensee for feasibility
studies.

          Real Estate Sales Revenue. Revenues from the sale of real estate were
$1,137,000 in the first quarter of 2001, down $2,401,000 from the first quarter
of 2000 when they were $3,538,000. The decrease resulted from the sale of 57
lots from our Houston real estate partnership during the first quarter of 2001
compared to the sale of our Reno parking garage to Fitzgeralds Reno, Inc. during
February 2000. Real estate sales revenues should continue to decrease in the
future as the remaining real estate inventory is sold.

          Other Revenue. Other revenues were $1,000 in the first quarter of
2001, down $53,000 from the first quarter of 2000 when they were $54,000. The
decrease resulted from the absence of parking and retail rentals from our
parking garage in Reno, Nevada, which we sold in February 2000.

          Cost of Real Estate Sold and Real Estate Operating Expense. The cost
of real estate sold was $648,000 in the first quarter of 2001, down $2,430,000
from $3,078,000 in the first quarter of 2000. This decrease resulted from the
sale of 57 lots from our Houston real estate partnership during the first
quarter of 2001 compared to the sale of our Reno parking garage to Fitzgeralds
Reno, Inc. during February 2000.

          Pilot Plant, Engineering and R&D. Expenses from pilot plant,
engineering and research and development activities were $4,549,000 in the first
quarter of 2001, up $1,396,000 from the first quarter of 2000 when these
expenses were $3,153,000. The increase was primarily the result of the continued
expansion of our Tulsa, Oklahoma pilot plant facility, the construction of a
product upgrading pilot plant at our technology center, higher research and
development spending and higher consulting expense associated with the design
and engineering of the Sweetwater plant.

                                       10
<PAGE>

          General and Administrative Expense. General and administrative
expenses were $4,022,000 in the first quarter of 2001, up $987,000 from the
first quarter of 2000 when these expenses were $3,035,000. The increase is
attributable primarily to increased spending on outside consultants and
increased staffing levels.

          Investment, Interest and Other Income (Expense). Investment, interest
and other income was $1,795,000 in the first quarter of 2001, up $1,594,000 from
the first quarter of 2000 when this income was $201,000. The increase was
primarily attributable to increased interest income from higher cash balances
resulting from our 2000 common stock offering and foreign currency exchange
gains relating to the Sweetwater project.

          Provision for Income Taxes. Income tax expense was $17,000 in the
first quarter of 2001, up from zero in the first quarter of 2000. This tax
expense was an Australian withholding tax on interest that we earned in foreign
bank accounts. We expect to incur similar withholding tax expense with respect
to any future interest payments to us from these foreign bank accounts. We
incurred a loss in both the first quarter of 2001 and the first quarter of 2000
and did not recognize an income tax benefit for these losses.

          Net Income. In the first quarter of 2001, we experienced a loss of
$6,073,000. The loss was $721,000 higher than in the first quarter of 2000 when
we experienced a loss of $5,352,000. The increase in the loss is a result of the
factors described above.

Liquidity and Capital Resources

General

          As of March 31, 2001, we had $74,360,000 in cash and short-term
investments and $3,070,000 in current liabilities. Our long-term debt as of
March 31, 2001 was $655,000, and that debt matures in 2025. The long-term debt
amount reflects cash loan proceeds received in escrow (AUD$12 million which is
approximately U.S.$6.8 million) discounted over the remaining term of the loan
using an imputed interest rate of 9%. The difference between the cash received
and the discounted long-term debt amount of $655,000 has been recorded as a
reduction in the costs of the related Sweetwater project. The long term debt
amount reflected for these proceeds will, excluding the effect of currency
exchange rate fluctuations, increase over time as the remaining term of the loan
declines. As of March 31, 2001, we had $3,035,000 in accounts and notes
receivable outstanding. As of March 31, 2001, we also had short-term investments
of approximately $3.4 million, which secure a 49.9% of a letter of credit for
the Gillette, Wyoming shopping center in which we are 49.9% investor. We also
had $12,205,000 in restricted investments as of March 31, 2001 that were held in
escrow representing funds received from the Commonwealth of Australia under our
loan and license agreements with the Commonwealth.

          Cash flows used in operations were $10,415,000 in the first three
months of 2001 compared to $3,059,000 during the first three months of 2000.
This increase in cash flows used in operations was primarily the result of
increased staffing, consulting and costs associated with the development of
section four of the Houston real estate partnership, net of working capital
changes. Cash flows used in investment activities were $3,593,000 in the first
three months of 2001 compared to $2,437,000 in the first three months of 2000.
The increase resulted primarily from the increased capitalized costs for our
Sweetwater project.

          Cash flows provided by financing activities were $86,000 in the first
three months of 2001 compared to $3,847,000 in the first three months of 2000.
The decrease was primarily due to the minority interest investment in the
Sweetwater project by Ivanhoe Energy and the exercise of employee stock options
during 2000.

          The construction of our GTL plants will require significant capital
expenditures. Our other efforts to commercialize the Syntroleum Process will
also involve significant expenditures. We have an effective registration
statement for the proposed offering from time to time of shares of our common
stock for an aggregate initial offering price of $21,125,000. We intend to
obtain additional funding through joint ventures, partnerships, license
agreements and other strategic alliances, as well as various other financing
arrangements. We may also seek debt or additional equity financing in the
capital markets. In the event such capital resources are not available to us,
our GTL

                                       11
<PAGE>

plant development, research and development activities and other activities may
be curtailed. Additionally, we estimate that construction and disposal costs to
complete real estate projects in development will be approximately $1.5 million,
although the actual amount could be materially different than this estimated
amount.

               We have sought and intend to continue to temporarily invest our
assets, pending their use, so as to avoid becoming subject to the registration
requirements of the Investment Company Act of 1940. These investments are likely
to result in lower yields on the funds invested than might be available in the
securities market generally. If we were required to register as an investment
company under the Investment Company Act, we would become subject to substantial
regulation that would materially adversely affect us.

Sweetwater Plant

          We are developing a 10,000 barrel per day specialty product plant in
Australia that we call the Sweetwater plant. We currently anticipate that this
plant will produce synthetic lube oil, normal paraffins, process oils and light
paraffins. The plant will use a fixed tube reactor design which produces a high
yield of the desired products with high wax content and has lower scale-up risks
than other reactor designs and will include additional refining equipment
necessary to produce the targeted specialty products. We plan to construct this
plant through a joint venture. After receiving a financial commitment from the
Commonwealth of Australia, we selected a site for the plant about four
kilometers from the North West Shelf liquid natural gas facility on the Burrup
Peninsula of Western Australia. We have applied for and received most necessary
permits for the plant.

          In November 1999, we signed a project development agreement with
Tessag, a wholly owned subsidiary of RWE AG, to provide us with a fixed price
for the design and construction of the Sweetwater plant. Tessag also agreed to
pay liquidated damages up to certain levels in the event certain process and
product specifications are not achieved. We currently expect that Tessag will
complete the plant design and, subject to completion of plant financing, begin
construction in 2001. We expect the plant to be operational in late 2003 or
early 2004, although construction of the plant will be subject to the risk of
delay inherent in any large construction project.

          The State of Western Australia has announced its intention to assist
the Sweetwater project with an AUD $30 million (approximately U.S. $17 million)
common use infrastructure package, including a desalinization plant to which our
plant will supply steam and from which our plant will receive cooling water. In
addition, we have entered into a gas purchase agreement with the North West
Shelf Gas Partners, whose members include affiliates of BHP Petroleum, BP,
Chevron, Mitsui, Mitsubishi, Royal Dutch Shell and Woodside Energy Ltd. Subject
to certain conditions, North West Shelf Gas Partners have agreed to supply the
Sweetwater plant with the natural gas required to operate the plant at full
capacity for 20 years. The agreement provides fixed purchase prices for the gas,
subject to fixed periodic escalation provisions.

          In August 2000, we entered into a license agreement with the
Commonwealth of Australia to license the Syntroleum Process as part of a program
designed to unlock the value of Australia's energy reserves and improve the
quality of the environment. Under the license agreement, the Commonwealth made
an AUD $30 million (approximately U.S. $17 million) deposit, of which AUD $15
million (approximately U.S. $8 million) is held in escrow pending satisfaction
of conditions relating to the construction of the Sweetwater project. AUD $20
million (approximately U.S. $11 million) of the license fee may be credited
against future site license fees. At the same time, we entered into a loan
agreement with the Commonwealth under which the Commonwealth will make a non-
amortizing, interest-free loan to us in the amount of AUD $40 million
(approximately U.S. $22 million) with a 25-year maturity to support the further
development and commercialization of GTL technologies in Australia and under
which we have agreed to conduct a feasibility study on constructing a large-
scale GTL fuels plant in Australia. Loan proceeds are to be made available to us
in three successive advances. Pending satisfaction of conditions relating to the
financing, construction and completion of the Sweetwater project, loan proceeds
will be held in escrow. Should the conditions not be fully satisfied by August
2004, any license and loan proceeds remaining in escrow will be returned to the
Commonwealth.

          In October 2000, we entered into a non-binding letter of intent with
Ivanhoe Energy Inc. with respect to its contemplated contribution of $21 million
in exchange for a 13% equity investment in the Sweetwater plant. Upon execution
of the letter of intent, Ivanhoe funded $2 million of its contemplated
contribution for front-end engineering

                                       12
<PAGE>

and other project development costs. Under certain circumstances, Ivanhoe Energy
would have the right to receive additional cash flow distributions (subject to a
cap of 23% of the total equity distributions) if the plant does not meet
specified performance targets.

          In June 2000, we entered into a non-binding letter of intent with a
subsidiary of Enron with respect to its contemplated contribution of $21 million
in exchange for a 13% equity investment in the Sweetwater project. Under the
letter of intent, Enron would receive a $1 million credit toward its investment
in the Sweetwater project as a result of its prior contribution toward the
development of the project, resulting in net equity funding to be received from
Enron of $20 million. Under certain circumstances, Enron would have the right to
receive additional cash flow distributions (subject to a cap of 23% of the total
equity distributions) if the plant does not meet specified performance targets.

          Upon Enron's funding of its net capital contribution, it would become
entitled to convert its interest in the Sweetwater project into a maximum of
1,500,000 shares of our common stock during a period beginning one year after
the date on which the project completes successful performance testing and
ending on the tenth anniversary of execution of definitive agreements relating
to the transaction contemplated in the letter of intent. In addition, upon
Enron's funding of its net capital contribution, it would receive a warrant to
acquire no more than 1,500,000 additional shares of our common stock at an
exercise price equal to $21.00 per share.

          Consummation of the transactions contemplated by the letters of intent
with Ivanhoe and Enron requires the satisfaction of a number of conditions, some
of which are not within our control, including Ivanhoe and Enron management
approvals, satisfactory completion of due diligence by Ivanhoe and Enron,
funding of debt and equity financing and the negotiation and execution of
definitive agreements. As a result, the transactions contemplated by the letters
of intent may not be realized or may only be realized under terms and conditions
that differ materially from those contemplated by the letters of intent.

          In addition to the $2 million contributed by Ivanhoe, the $1 million
contributed by Enron and $2 million contributed by Methanex Corporation prior to
its withdrawal from the project in May 2000, we have made a substantial
financial contribution directly toward the development of the Sweetwater project
through December 31, 2000, and we expect to continue to make additional
financial contributions in the future.

          Tessag recently completed front end engineering and design and has
provided us a price quote of $506 million for the engineering, procurement and
construction of the Sweetwater plant. The quote includes provisions for expanded
refining capabilities that will give the plant greater flexibility for a wider
range of products than originally contemplated. The quote does not include
interest during construction and other owner's costs, which include proprietary
catalysts to be supplied by Syntroleum. These costs are yet to be finalized, but
could represent a substantial portion of total plant costs. Tessag's price quote
may change due to fluctuations in currency exchange rates, but will be converted
into a firm, lump sum, dollar denominated contract upon final closing of the
financing for the plant. With the quote completed, we are working with Tessag
toward finalizing the fixed price EPC contract. However, we cannot assure you
that the contract will be finalized. If finalized, the contract may be on terms
materially different than the terms currently anticipated. Upon execution of the
EPC contract, we can then proceed with completing the debt and equity financing
for the project.

          In April 2001, we entered into an agreement with Clough-PGS Joint
Venture to provide operating and maintenance services for the Sweetwater plant
during the construction and provisional acceptance phases and for 10 operating
years thereafter. Clough-PGS is a joint venture between Clough Engineering Ltd.,
an Australian company that is part of Clough Ltd., and PGS Production Pty. Ltd.,
an Australian subsidiary of Petroleum Geo-Services ASA. The agreement provides
for total payments to Clough-PGS of approximately AUD$350 million (approximately
U.S.$175 million) over the ten year operations phase of the agreement. In
addition, we will pay Clough-PGS on a monthly basis for services provided to us
during the construction and provisional acceptance phases of the Sweetwater
project, as well as reimburse Clough-PGS for additional services not otherwise
within the scope of the contracted services. The agreement also provides for
additional financial incentives for the operator to maximize revenues and
financial penalties for underperformance.

          We also entered into multiple agreements with the Dampier Port
Authority in April 2001. These 30-year agreements provide us with access to the
Dampier port facilities and services for shipping products produced at the
Sweetwater plant. The port facilities agreement provides us with priority
loading of vessels carrying products from the plant. Under that agreement, the
port will construct additional facilities that will enable accommodation of
increased traffic at the port. The lease agreement provides us with a small
parcel of land adjacent to the wharf that

                                       13
<PAGE>

will be used for loading equipment, pumps and storage tanks. The easement
agreement provides us with right of way access on Dampier Port Authority land
for laying and operating product pipelines from the plant to the port.

          We currently expect the capital costs of the Sweetwater project to be
funded primarily by non-recourse senior and subordinated debt at the project
level, as well as the equity financing discussed above, together with our own
equity contribution. We are currently seeking to finalize the equity investment
transactions discussed above and we have retained financial advisors who are
attempting to obtain debt financing to fund final design and construction.
However, we cannot assure you that we will obtain the necessary capital for this
project.


Currency Risk

          We expect to conduct a portion of our business in currencies other
than the United States dollar. We may attempt to minimize our currency exchange
risk by seeking international contracts payable in local currency or we may
choose to convert our currency position into United States dollars. For example,
our funding plan with the Commonwealth of Australia is in Australian dollars.
Our engineering, procurement and construction contract for the Sweetwater plant
is primarily in Australian dollars and Euros but will be denominated in United
States dollars on the closing of the debt and equity financing for the plant.
Until then, the contract subjects us to risks associated with exchange rate
fluctuations. In addition, we expect to seek contractual purchase price
adjustments based on an exchange rate formula related to United States dollars.
In the future, we may also have significant investments in countries other than
the United States. The functional currency of these foreign operations may be
the local currency, and accordingly, financial statement assets and liabilities
may be translated at prevailing exchange rates and may result in gains or losses
in current income. Currently, all of our subsidiaries use the U.S. dollar for
their functional currency. Monetary assets and liabilities are translated into
U.S. dollars at the rate of exchange in effect at the balance sheet date.
Transaction gains and losses that arise from exchange rate fluctuations
applicable to transactions denominated in a currency other than the U.S. dollar
are included in the results of operations as incurred.


New Accounting Pronouncements

     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or liability
measured at its fair value. SFAS No. 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement. Companies must formally document, designate and
assess the effectiveness of transactions that receive hedge accounting
treatment. The Company does not purchase futures contracts nor does it hold
derivative investments. We adopted SFAS No. 133 beginning January 1, 2001. The
adoption of SFAS No.133 did not have a material effect on our financial
statements.


Item 3.   Quantitative and Qualitative Disclosures about Market Risk

          We had $74,360,000 in cash equivalents and short-term investments in
the form of money market instruments and U.S. Treasury securities as of March
31, 2001. The majority of these securities mature in less than 90 days. Our
policy is to hold short-term securities to maturity, which minimizes interest
rate risk. The average interest rate on these investments at March 31, 2001 was
approximately 5%. We also hold restricted funds in the form of Australian escrow
accounts. These funds earn interest at approximately 5% and are marked to market
at the end of each reporting period. These accounts can have fluctuating
balances relating to the foreign currency exchange rate between the U.S. and
Australian Dollar.

          We expect to conduct a portion of our business in currencies other
than the United States dollar. We may attempt to minimize our currency exchange
risk by seeking international contracts payable in local currency or we may
choose to convert our currency position into United States dollars. For example,
our proposed funding plan with

                                       14
<PAGE>

the Commonwealth of Australia will be in Australian dollars. In addition, we
expect to seek contractual purchase price adjustments based on an exchange rate
formula related to United States dollars. In the future, we may also have
significant investments in countries other than the United States. The
functional currency of these foreign operations may be the local currency and,
accordingly, financial statement assets and liabilities may be translated at
prevailing exchange rates. Currently, the functional currency of all our
subsidiaries is U.S. dollars and our only foreign currency risk results from
transaction gains and losses that will flow through the income statement.
Foreign exchange risk currently relates to two escrow accounts held in
Australian dollars in the amount of U.S.$12,205,000 at the end of the reporting
period, and to long-term debt held in Australian dollars in the amount of
U.S.$655,000 at the end of the reporting period. This long term debt matures in
2025 and has been discounted using an imputed interest rate of 9%. We also have
deferred revenue that is denominated in Australian dollars. This deferred
revenue was U.S.$14,643,000 at the end of the reporting period. These restricted
funds, long-term debt and associated discount and deferred revenue will be
converted to U.S. dollars for financial reporting at the end of every reporting
period. To the extent that there are gains or losses, these will be shown in our
income statement.

          We have not purchased futures contracts nor have we purchased any
derivative financial instruments.

                                       15
<PAGE>

                          PART II - OTHER INFORMATION

Item 1.   Legal Proceedings.

          Not applicable.

Item 2.   Changes in Securities and Use of Proceeds.

          Our Registration Statement on Form S-3 (Registration No. 333-32968),
as amended (the "Registration Statement"), in connection with the registration
of shares of our common stock with an aggregate offering price of up to
$120,000,000 was declared effective by the Securities and Exchange Commission on
April 25, 2000. As described in a prospectus supplement dated June 29, 2000, an
offering commenced on June 29, 2000 pursuant to the Registration Statement, and
resulted in (i) the sale by us of 5,250,000 shares of common stock on July 6,
2000 and (ii) the sale by us of 400,000 shares of common stock on July 19, 2000
pursuant to the exercise of the underwriters' over-allotment option.

          The net proceeds to use from the offering were approximately $92
million. To date, we have used approximately $21 million in such net proceeds
for the development of our Sweetwater project. The remaining net proceeds from
the offering are currently invested in short-term cash and cash equivalents.
None of such payments were direct or indirect payments to our directors or
officers or their associates, to persons owning ten percent or more of any class
of our equity securities or to our affiliates.

Item 3.   Defaults Upon Senior Securities.

          Not applicable.

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

          Not applicable.

Item 5.   Other Information.

          Not applicable.

Item 6.   Exhibits and Reports on Form 8-K.

          Reports on Form 8-K. Not applicable.

          Exhibits. The following exhibits are filed as part of this quarterly
          report:

*10.1     Form of Employment Agreement between Syntroleum and its executive
          officers dated June 17, 1999 (incorporated by reference to Exhibit
          10.1 to the Company's Quarterly Report on Form 10-Q for the period
          ended June 30, 1999 filed with the Securities and Exchange Commission
          on August 12, 1999).

*10.2     Form of Indemnification Agreement between Syntroleum and its directors
          and executive officers dated June 17, 1999 (incorporated by reference
          to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the
          period ended June 30, 1999 filed with the Securities and Exchange
          Commission on August 12, 1999).

*10.3     Syntroleum Corporation 1993 Stock Option and Incentive Plan First
          Amendment and Restatement (incorporated by reference to Appendix B to
          the Company's Proxy Statement filed with the Securities and Exchange
          Commission on April 18, 2001).

_____________________
*Incorporated by reference as indicated.

                                       16
<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.

                                   SYNTROLEUM CORPORATION, a Delaware
                                   corporation (Registrant)


Date: May 11, 2001                 By:   /s/ Mark A. Agee
                                      ------------------------------
                                      Mark A. Agee
                                      President and Chief Operating Officer


Date:  May 11, 2001                By:   /s/ Randall M. Thompson
                                      ------------------------------
                                      Randall M. Thompson
                                      Chief Financial Officer (Principal
                                      Financial Officer)

                                       17
<PAGE>

                               INDEX TO EXHIBITS
     Exhibit
        No.                       Description of Exhibit
     -------                      ----------------------

      *10.1  Form of Employment Agreement between Syntroleum and its executive
             officers dated June 17, 1999 (incorporated by reference to Exhibit
             10.1 to the Company's Quarterly Report on Form 10-Q for the period
             ended June 30, 1999 filed with the Securities and Exchange
             Commission on August 12, 1999).

      *10.2  Form of Indemnification Agreement between Syntroleum and its
             directors and executive officers dated June 17, 1999 (incorporated
             by reference to Exhibit 10.2 to the Company's Quarterly Report on
             Form 10-Q for the period ended June 30, 1999 filed with the
             Securities and Exchange Commission on August 12, 1999).

      *10.3  Syntroleum Corporation 1993 Stock Option and Incentive Plan First
             Amendment and Restatement (incorporated by reference to Appendix B
             to the Company's Proxy Statement filed with the Securities and
             Exchange Commission on April 18, 2001).


_____________________
*Incorporated by reference as indicated.

                                       18