FORM 10-K/A

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   (Mark One)
 
(X)   ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR 15(d)  OF THE  SECURITIES
      EXCHANGE ACT OF 1934

                   For the fiscal year ended August 31, 2010.
                                       OR

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


Commission file number:  None

                          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, CO                  80651    
 ----------------------------------------          --------------
 (Address of principal executive offices)            (Zip Code)

Registrant's telephone number, including area code: (970) 737-1073
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. [ ]

Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. [ ]

Indicate by check mark whether the registrant (1) has filed all reports 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 [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

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

Large accelerated filer  [ ]                     Accelerated filer  [ ]

Non-accelerated filer  [ ]   
(Do not check if a smaller reporting company)    Smaller reporting company  [X]

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

The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing sale price of the registrant's common stock
on February 28, 2010, as quoted on the OTC Bulletin Board, was approximately
$11,200,000.

As of November 15, 2010, the Registrant had 13,823,481 issued and outstanding
shares of common stock.

Documents Incorporated by Reference:   None



<PAGE>


                                     PART I

Cautionary Statement Concerning Forward-Looking Statements

     This report contains "forward-looking statements" within the meaning of the
Private  Securities  Litigation Reform Act of 1995. These statements are subject
to risks and  uncertainties  and are based on the  beliefs  and  assumptions  of
management and information  currently available to management.  The use of words
such as "believes", "expects",  "anticipates",  "intends", "plans", "estimates",
"should",   "likely"  or  similar   expressions,   indicates  a  forward-looking
statement.

     The  identification  in this  report of factors  that may affect our future
performance  and the  accuracy  of  forward-looking  statements  is  meant to be
illustrative and by no means exhaustive.  All forward-looking  statements should
be evaluated with the understanding of their inherent uncertainty.

      Factors that could cause our actual results to differ materially from
those expressed or implied by forward-looking statements include, but are not
limited to:

       o The success of our exploration and development efforts; 
       o The price of oil and gas; 
       o The worldwide economic situation; 
       o Any change in interest rates or inflation; 
       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 or 
         may later be amended;
       o Our ability to identify, finance and integrate any future acquisitions;
         and 
       o The volatility of our stock price.


ITEM 1.  BUSINESS

Overview

      We are an oil and gas operator in Colorado and are focused on the
acquisition, development, exploitation, exploration and production of oil and
natural gas properties primarily located in the Wattenberg field in the D-J
Basin in northeast Colorado. As ofNovember 15, 2010 we had 19,792 gross and
13,556 net acres under lease, all of which are located in the D-J Basin. Of this
acreage, 1,507 gross acres are held by production. During the year ended August
31, 2010, we drilled and completed 36 development wells on our acreage. At
August 31, 2010, our estimated net proved oil and gas reserves, as prepared by
our independent reserve engineering firm, Ryder Scott Company, L.P., were 4.5
Bcf of natural gas and 672.8 MBbls of oil and condensate.

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<PAGE>

Business Strategy

      Our primary objective is to enhance shareholder value by increasing our
net asset value, net reserves and cash flow through acquisitions, development,
exploitation, exploration and divestiture of oil and gas properties. We intend
to follow a balanced risk strategy by allocating capital expenditures in a
combination of lower risk development and exploitation activities and higher
potential exploration prospects. Key elements of our business strategy include
the following:

     o   Concentrate on our existing core area in the D-J Basin, where we have
         significant operating experience. All of our current wells and
         undeveloped acreage are located within the D-J Basin. Focusing our
         operations in this area leverages our management, technical and
         operational experience in the basin.

     o   Develop and exploit existing oil and natural gas properties. Since our
         inception our principal growth strategy has been to develop and exploit
         our acquired and discovered properties to add proved reserves. As of
         November 15, 2010, we have identified over sixty development and
         extension drilling locations and over twenty recompletion/workover
         projects on our existing properties and wells.

     o   Complete selective acquisitions. We seek to acquire undeveloped and
         producing oil and gas properties, primarily in the PlaceNameplaceD-J
         PlaceTypeBasin. We will seek acquisitions of undeveloped and producing
         properties that will provide us with opportunities for reserve
         additions and increased cash flow through production enhancement and
         additional development and exploratory prospect generation
         opportunities.

     o   Retain control over the operation of a substantial portion of our
         production. As operator on a majority of our wells and undeveloped
         acreage, we control the timing and selection of new wells to be drilled
         or existing wells to be recompleted. This allows us to modify our
         capital spending as our financial resources allow and market conditions
         support.

     o   Maintain financial flexibility while focusing on controlling the costs
         of our operations. We intend to finance our operations through a
         mixture of debt and equity capital as market conditions allow. Our
         management has historically been a low cost operator in the D-J Basin
         and we continue to focus on operating efficiencies and cost reductions.

Competitive Strengths

        We believe that we are positioned to successfully execute our business
strategy because of the following competitive strengths:

     o   Management experience. Our key management team possesses an average of
         thirty years of experience in the oil and gas industry, primarily
         within the D-J Basin. Members of our management team have drilled,
         participated in drilling, and/or operated over 350 wells in the D-J
         Basin.

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<PAGE>


     o   Balanced oil and natural gas reserves and production. At August 31,
         2010, approximately 48% of our estimated proved reserves were oil and
         condensate and 52% were natural gas. We believe this balanced commodity
         mix will provide diversification of sources of cash flow and will
         lessen the risk of significant and sudden decreases in revenue from
         short-term commodity price movements.

     o   Ability to recomplete D-J Basin wells numerous times throughout the
         life of a well. We have experience with and knowledge of D-J Basin
         wells that have been recompleted up to four times since initial
         drilling. This provides us with numerous high return recompletion
         investment opportunities on our current and future wells and the
         ability to manage the production through the life of a well.

     o   Insider ownership. At November 15, 2010 our directors and executive
         officers beneficially owned approximately 71 % of our outstanding
         shares of common stock, providing a strong alignment of interest
         between management, the board of directors and our outside
         shareholders.

Recent Developments

      On October 7, 2010, we completed the acquisition of oil and gas properties
in the Wattenberg Field within the D-J Basin from Petroleum Management, LLC and
Petroleum Exploration & Management, LLC for approximately $1.0 million. These
properties include 6 producing oil and gas wells (100% working interest/ 80% net
revenue interest), 2 shut in oil wells (100% working interest/ 80% net revenue
interest), 15 drill sites (net 6.25 wells) and miscellaneous equipment. See Item
13 of this report for more information regarding our affiliation with Petroleum
Management and Petroleum Exploration & Management.

      On October 14, 2010, we announced the results of initial 24 hour flow
tests of four wells on our M&T Farms lease. These initial results are listed in
the table below.

                 Primary       SYRG
                Producing     Working
  Well Name     Formation    Interest   Oil (Bbls)  Gas (Mcf)       BOE
  ---------     ---------    --------   ----------  ---------      -----
   #33-10 D      Codell       72.50%       130.0      210.9        165.2
    #10 DD       Codell       72.50%       165.3      353.8        224.3
   #43-10 D      Codell       72.50%       187.9      285.8        235.5
    #10 XD       Codell       36.25%       162.8      390.8        227.9
    #10 TD       J-Sand       36.25%         *          *            *
    #34-10       J-Sand       72.50%         *          *            *

*    Initial results are not available as of November 15, 2010 as the wells were
     in the process of being completed.

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<PAGE>


      "Bbl" refers to one stock tank barrel, or 42 U.S. gallons liquid volume in
reference to crude oil or other liquid hydrocarbons. "Mcf" refers to one
thousand cubic feet. A BOE (i.e. barrel of oil equivalent) combines Bbls of oil
and Mcf of gas by converting each six Mcf of gas to one Bbl of oil.

Well and Production Data

      Since September 2008, we have drilled and completed 36 oil and gas wells.

      During the periods presented, we drilled or participated in the drilling
of the following wells. We did not drill any exploratory wells during these
years.

                                      Years Ended August 31,
                               --------------------------------------
                                    2010                  2009     
                               ---------------       ----------------
                               Gross       Net       Gross        Net
Development Wells:
 Productive:
    Oil                         36        23.8          2         0.75
    Gas                         --          --         --           --
    Nonproductive               --          --         --           --

Total Wells:
 Productive:
    Oil                         36        23.8          2         0.75
    Gas                         --          --         --           --
    Nonproductive               --          --         --           --


     As of  November  15,  2010 two gross  (1.2 net)  wells,  both of which were
located in the D.J. Basin, were in the process of completion.

      The following table shows our net production of oil and gas, average sales
prices and average production costs for the periods presented:

                                        Years Ended August 31, 
                                        ----------------------
                                          2010          2009  
                                          ----          ----
 Production

   Oil (Bbls)                             21,080       1,730
   Gas (Mcf)                             141,154       4,386
 Average sales price
   Oil ($/Bbl)                            $68.38      $45.59
   Gas ($/Mcf)                             $5.08       $3.48

 Average production costs per BOE          $1.94       $0.85

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<PAGE>

      Production costs may vary substantially among wells depending on the
methods of recovery employed and other factors, but generally include severance
taxes, administrative overhead, maintenance and repair, labor and utilities.

      We are not obligated to provide a fixed and determined quantity of oil or
gas to any third party in the future. During the last three fiscal years, we
have not had, nor do we now have, any long-term supply or similar agreement with
any government or governmental authority.

      Prior to September 1, 2008, we did not drill, or participate in the
drilling, of any oil or gas wells, or produce or sell any oil or gas.

Oil and Gas Properties and Proven Reserves

      We evaluate undeveloped oil and gas prospects and participate in drilling
activities on those prospects, which, in the opinion of our 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.

       Our activities are primarily dependent upon available financing.

      Title to properties we acquire may be subject to royalty, overriding
royalty, carried, net profits, working and other similar interests and
contractual arrangements customary in the oil and gas industry, to liens for
current taxes not yet due and to other encumbrances. As is customary in the
industry, in the case of undeveloped properties little investigation of record
title will be made at the time of acquisition (other than a preliminary review
of local records). However, drilling title opinions may be obtained before
commencement of drilling operations.

      The following table shows, as of November 15, 2010, by state, our
producing wells, developed acreage, and undeveloped acreage, excluding service
(injection and disposal) wells:

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<PAGE>


 State          Productive Wells    Developed Acreage    Undeveloped Acreage(1)
 -----         ------------------  -------------------  -----------------------
               Gross         Net    Gross         Net    Gross           Net
               -----         ---    -----         ---    -----           ---
  Colorado        46        32.6     1,387      1,096    15,630        9,685
  Nebraska         -           -         -          -     2,560        2,560
  Wyoming          -           -         -          -       215          215
                  --        ----     -----      -----    ------       ------
     Total        46        32.6     1,387      1,096    18,405       12,460
                  ==        ====     =====      =====    ======       ======

(1)  Undeveloped acreage includes leasehold interests on which wells have not
     been drilled or completed to the point that would permit the production of
     commercial quantities of natural gas and oil regardless of whether the
     leasehold interest is classified as containing proved undeveloped reserves.

      The following table shows, as of November 15, 2010, the status of our
gross acreage.

      State                   Held by Production     Not Held by Production
      -----                   ------------------     ----------------------
      Colorado                       1,507                  15,510
      Nebraska                          --                   2,560
      Wyoming                           --                     215
                                        --                     ---
      Total                          1,507                  18,285
                                     =====                  ======

      Acres that are Held by Production remain in force so long as oil or gas is
produced from the well on the particular lease. Leased acres which are not Held
By Production require annual rental payments to maintain the lease until the
first to occur of the following: the expiration of the lease or the time oil or
gas is produced from one or more wells drilled on the leased acreage. At the
time oil or gas is produced from wells drilled on the leased acreage, the lease
is considered to be Held by Production.

     The  following  table  shows the years  our  leases,  which are not Held By
Production,  will expire,  unless a productive oil or gas well is drilled on the
lease.

           Leased Acres                     Expiration of Lease
           ------------                     -------------------
             1,100                                  2012
               915                                  2013
             4,750                                  2014
            11,520                            After 2014

     We do not own any overriding royalty interests.

     Ryder Scott Company,  L.P.  ("Ryder  Scott")  prepared the estimates of our
proved  reserves,  future  productions and income  attributable to our leasehold
interests  for the year ended  August 31,  2010.  Ryder Scott is an  independent
petroleum engineering firm that has been providing petroleum consulting services
worldwide  for over seventy  years.  The  estimates of proven  reserves,  future
production and income  attributable to certain  leasehold and royalty  interests
are  based  on  technical  analysis  conducted  by teams  of  geoscientists  and
engineers employed at Ryder Scott. The report of Ryder Scott is filed as Exhibit
99 to this report. Ryder Scott was selected by two of our officers,  Ed Holloway
and William E. Scaff, Jr.
 
                                       7

<PAGE>

     Thomas E.  Venglar  was the  technical  person  primarily  responsible  for
overseeing the preparation of the reserve report.  Mr. Venglar earned a Bachelor
of Science  degree in Petroleum  Engineering  from Texas A&M University and is a
registered Professional Engineer in Colorado. Mr. Venglar has more than 30 years
of practical experience in the estimation and evaluation of petroleum reserves.

     Ed  Holloway,  our  President,  oversaw  the  preparation  of  the  reserve
estimates by Ryder Scott.  Mr. Holloway has over thirty years  experience in oil
and gas exploration and development.  We do not have a reserve  committee and we
do not have any  specific  internal  controls  regarding  the  estimates  of our
reserves.

      Our proved reserves include only those amounts which we reasonably expect
to recover in the future from known oil and gas reservoirs under existing
economic and operating conditions, at current prices and costs, under existing
regulatory practices and with existing technology. Accordingly, any changes in
prices, operating and development costs, regulations, technology or other
factors could significantly increase or decrease estimates of proved reserves.

       Estimates of volumes of proved reserves at year end are presented in
barrels (Bbls) for oil and for, natural gas, in millions of cubic feet (Mcf) at
the official temperature and pressure bases of the areas in which the gas
reserves are located.

       The proved reserves attributable to producing wells and/or reservoirs
were estimated by performance methods. These performance methods include decline
curve analysis, which utilized extrapolations of historical production and
pressure data available through August 31, 2010 in those cases where this data
was considered to be definitive. The data used in this analysis obtained from
public data sources and were considered sufficient for calculating producing
reserves.

       The proved non-producing and undeveloped reserves were estimated by the
analogy method. The analogy method uses pertinent well data, obtained
from public data sources that were available through August 2010.

      Below are estimates of our net proved reserves, all of which are located
in Colorado.

     Summary of Oil and Gas Reserves as of August 31, 2010

                              Oil         Gas                BOE
                            ------       -----               ---
                            (Bbls)       (MCF)
      Proved Developed
        Producing           125,159      887,290           273,041
        Non- Producing      270,294    1,461,737           513,917
      Proved Undeveloped    281,232    2,132,024           636,569
                            -------    ---------           -------
                            676,685    4,481,051           1,423,527
                            =======    =========           =========

     Below are estimates of our present  value of estimated  future net revenues
from such reserves based upon the standardized  measure of discounted future net
cash  flows  relating  to proved oil and gas  reserves  in  accordance  with the

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<PAGE>

provisions of Accounting Standards Codification Topic 932, Extractive Activities
- Oil and Gas. The standardized  measure of discounted  future net cash flows is
determined by using  estimated  quantities of proved reserves and the periods in
which  they are  expected  to be  developed  and  produced  based on  period-end
economic  conditions.  The estimated  future  production is based upon benchmark
prices   that    reflect   the    unweighted    arithmetic    average   of   the
first-day-of-the-month  price for oil and gas during the  twelve  months  period
ended  August 31, 2010.  The  resulting  estimated  future cash inflows are then
reduced by  estimated  future  costs to develop  and produce  reserves  based on
period-end cost levels.  No deduction has been made for depletion,  depreciation
or for indirect costs, such as general corporate  overhead.  Present values were
computed by discounting future net revenues by 10% per year.

                                                  Proved                     
                       -------------------------------------------------------
                               Developed                        
                       ---------------------------                   Total
                        Producing    Non-Producing   Undeveloped     Proved 
                        ---------    -------------   -----------     ------
Future gross revenue   $12,323,383    $24,126,662    $28,220,857   $64,670,902
Deductions              (3,591,012)   (10,865,282)   (24,687,877)  (39,144,171)
Future net cash flow   $ 8,732,371    $13,261,380    $ 3,532,980   $25,526,731
Discounted future net
  cash flow            $ 4,813,654    $ 6,846,165    $ 1,362,578   $13,022,397

      In general, the volume of production from our oil and gas properties
declines as reserves are depleted. Except to the extent we acquire additional
properties containing proved reserves or conducts successful exploration and
development activities, or both, our proved reserves will decline as reserves
are produced. Accordingly, volumes generated from our future activities are
highly dependent upon the level of success in acquiring or finding additional
reserves and the costs incurred in doing so.
  
     As of August 31, 2009 our proved developed reserves consisted or 6,430 Bbls
of oil and 25,680 Mcf of gas,  As of August 31,  2009 we did not have any proved
undeveloped  reserves.  Our proved developed and undeveloped  reserves increased
substantially  during the year ended August 31, 2010, primarily as the result of
our drilling and completing 36 gross (23.8) net wells. The technologies  used to
establish the proved  reserves  associated  with these 36 wells were the same as
were used by Ryder Scott to estimate our proved reserves as of August 31, 2010.

Potential Acquisition of Oil and Gas Properties from Petroleum Exploration & 
Management

      We have a nonbinding letter of intent with Petroleum Exploration &
Management LLC, a company owned equally by Ed Holloway and William E. Scaff,
Jr., two of our officers, to potentially acquire oil and gas properties located
in the Wattenberg Field of the D-J Basin.

      The assets which we may acquire consist of the following:

         o  87 producing oil and gas wells;

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<PAGE>

         o  one shut-in well; and
         o  oil and gas leases covering 6,968 gross acres in the D-J Basin.

      PEM's working interest in the wells ranges between 3% and 100%. PEM's net
revenue interest in the wells ranges between 2.44% and 80%.

      Although, as of November 15, 2010, we had not reached any agreement with
Mr. Holloway and Mr. Scaff as to the amount we may pay for PEM's oil and gas
properties, or how the purchase price will be paid (which may include a
combination of cash, shares of our common or preferred stock, or debt), we
estimate the cost of acquiring these assets will range between approximately
$14.0 million and $17.0 million, and will be based on the following:

         o  estimated proved reserves of the oil and gas properties, discounted
            at 10% value of undeveloped leases;
         o  value of undeveloped leases;
         o  value of related oil and gas equipment, including tank batteries,
            compressors, and distribution lines.

      It is our intention not to assume any of PEM's liabilities. However, we
may find it advantageous to assume PEM's liabilities, in which case we would
need to pay the liabilities as they became due, but the price we would pay for
PEM's properties would be reduced.

      In our opinion, it would be advantageous to acquire the oil and gas
properties from PEM since we believe that the future value of the properties,
assuming our efforts to stimulate production from PEM's wells are successful,
will be substantially higher than the price we are ultimately willing to pay for
these properties.

      The completion of the acquisition would be contingent upon the following:

          o  the approval of the transaction by a majority of our disinterested
             directors
          o  the approval of the  transaction,  at a special  meeting of our 
             shareholders,  by the vote of  shareholders  owning a  majority
             of the  shares in  attendance  at the meeting,  whether in person
             or by proxy,  with Mr.  Holloway  and Mr.  Scaff not voting, and
          o  the receipt of "fairness opinion" concerning the price we plan to 
             pay PEM for its oil and gas properties.

Government Regulation

      Various state and federal agencies regulate the production and sale of oil
and natural gas. All states in which we plan to operate impose restrictions on
the drilling, production, transportation and sale of oil and natural gas.

      The Federal Energy Regulatory Commission ("FERC") regulates the interstate
transportation and the sale in interstate commerce for resale of natural gas.

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<PAGE>

FERC's jurisdiction over interstate natural gas sales has been substantially
modified by the Natural Gas Policy Act under which FERC continued to regulate
the maximum selling prices of certain categories of gas sold in "first sales" in
interstate and intrastate commerce.

      FERC has pursued policy initiatives that have affected natural gas
marketing. Most notable are (1) the large-scale divestiture of interstate
pipeline-owned gas gathering facilities to affiliated or non-affiliated
companies; (2) further development of rules governing the relationship of the
pipelines with their marketing affiliates; (3) the publication of standards
relating to the use of electronic bulletin boards and electronic data exchange
by the pipelines to make available transportation information on a timely basis
and to enable transactions to occur on a purely electronic basis; (4) further
review of the role of the secondary market for released pipeline capacity and
its relationship to open access service in the primary market; and (5)
development of policy and promulgation of orders pertaining to its authorization
of market-based rates (rather than traditional cost-of-service based rates) for
transportation or transportation-related services upon the pipeline's
demonstration of lack of market control in the relevant service market. We do
not know what effect FERC's other activities will have on the access to markets,
the fostering of competition and the cost of doing business.

      Our sales of oil and natural gas liquids will not be regulated and will be
at market prices. The price received from the sale of these products will be
affected by the cost of transporting the products to market. Much of that
transportation is through interstate common carrier pipelines.

      Federal, state, and local agencies have promulgated extensive rules and
regulations applicable to our oil and natural gas exploration, production and
related operations. Most states require permits for drilling operations,
drilling bonds and the filing of reports concerning operations and impose other
requirements relating to the exploration of oil and gas. Many states also have
statutes or regulations addressing conservation matters including provisions for
the unitization or pooling of oil and natural gas properties, the establishment
of maximum rates of production from oil and gas wells and the regulation of
spacing, plugging and abandonment of such wells. The statutes and regulations of
some states limit the rate at which oil and gas is produced from our properties.
The federal and state regulatory burden on the oil and natural gas industry
increases our cost of doing business and affects its profitability. Because
these rules and regulations are amended or reinterpreted frequently, we are
unable to predict the future cost or impact of complying with those laws.

      As with the oil and natural gas industry in general, our properties are
subject to extensive and changing federal, state and local laws and regulations
designed to protect and preserve our natural resources and the environment. The
recent trend in environmental legislation and regulation is generally toward
stricter standards, and this trend is likely to continue. These laws and
regulations often require a permit or other authorization before construction or
drilling commences and for certain other activities; limit or prohibit access,
seismic acquisition, construction, drilling and other activities on certain
lands lying within wilderness and other protected areas; impose substantial
liabilities for pollution resulting from our operations; and require the
reclamation of certain lands.

      The permits required for many of our operations are subject to revocation,
modification and renewal by issuing authorities. Governmental authorities have

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<PAGE>

the power to enforce compliance with their regulations, and violations are
subject to fines, injunctions or both. In the opinion of our management, we are
in substantial compliance with current applicable environmental laws and
regulations, and we have no material commitments for capital expenditures to
comply with existing environmental requirements. Nevertheless, changes in
existing environmental laws and regulations or in interpretations thereof could
have a significant impact on us, as well as the oil and natural gas industry in
general. The Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA") and comparable state statutes impose strict and joint and several
liabilities on owners and operators of certain sites and on persons who disposed
of or arranged for the disposal of "hazardous substances" found at such sites.
It is not uncommon for the neighboring landowners and other third parties to
file claims for personal injury and property damage allegedly caused by the
hazardous substances released into the environment. The Resource Conservation
and Recovery Act ("RCRA") and comparable state statutes govern the disposal of
"solid waste" and "hazardous waste" and authorize imposition of substantial
fines and penalties for noncompliance. Although CERCLA currently excludes
petroleum from its definition of "hazardous substance," state laws affecting our
operations impose clean-up liability relating to petroleum and petroleum related
products. In addition, although RCRA classifies certain oil field wastes as
"non-hazardous," such exploration and production wastes could be reclassified as
hazardous wastes, thereby making such wastes subject to more stringent handling
and disposal requirements.

     Federal  regulations require certain owners or operators of facilities that
store or  otherwise  handle  oil,  such as us, to prepare  and  implement  spill
prevention,  control  countermeasure and response plans relating to the possible
discharge  of oil into surface  waters.  The Oil  Pollution  Act of 1990 ("OPA")
contains numerous requirements relating to the prevention of and response to oil
spills into waters of the United  States.  For onshore and  offshore  facilities
that may affect  waters of the United  States,  the OPA  requires an operator to
demonstrate financial responsibility.  Regulations are currently being developed
under  federal and state laws  concerning  oil  pollution  prevention  and other
matters that may impose additional  regulatory  burdens on us. In addition,  the
Clean  Water Act and  analogous  state laws  require  permits to be  obtained to
authorize  discharge into surface  waters or to construct  facilities in wetland
areas. The Clean Air Act of 1970 and its subsequent  amendments in 1990 and 1997
also impose permit  requirements and necessitate  certain  restrictions on point
source  emissions  of  volatile  organic  carbons  (nitrogen  oxides  and sulfur
dioxide)  and  particulates  with respect to certain of our  operations.  We are
required to maintain such permits or meet general permit  requirements.  The EPA
and designated state agencies have in place regulations concerning discharges of
storm water  runoff and  stationary  sources of air  emissions.  These  programs
require covered facilities to obtain individual permits,  participate in a group
or seek coverage under an EPA general permit. Most agencies recognize the unique
qualities of oil and natural gas exploration and production operations. A number
of agencies have adopted regulatory guidance in consideration of the operational
limitations on these types of facilities and their potential to emit pollutants.
We believe that we will be able to obtain,  or be included under,  such permits,
where  necessary,  and to make minor  modifications  to existing  facilities and
operations that would not have a material effect on us.

     The  EPA  recently  amended  the  Underground  Injection  Control,  or UIC,
provisions  of the  federal  Safe  Drinking  Water Act (the  "SDWA")  to exclude
hydraulic fracturing from the definition of "underground injection." However,

                                       12

<PAGE>

the U.S. Senate and House of Representatives are currently  considering the FRAC
Act, which will amend the SDWA to repeal this  exemption.  If enacted,  the FRAC
Act  would  amend  the  definition  of  "underground  injection"  in the SDWA to
encompass  hydraulic  fracturing  activities,   which  could  require  hydraulic
fracturing  operations to meet permitting and financial assurance  requirements,
adhere to certain construction  specifications,  fulfill monitoring,  reporting,
and recordkeeping  obligations,  and meet plugging and abandonment requirements.
The FRAC Act also  proposes to require the  reporting  and public  disclosure of
chemicals used in the fracturing  process,  which could make it easier for third
parties opposing the hydraulic  fracturing process to initiate legal proceedings
based on allegations  that specific  chemicals  used in the  fracturing  process
could adversely affect groundwater.

      On December 15, 2009, the EPA published its findings that emissions of
carbon dioxide, methane and other greenhouse gases present an endangerment to
human health and the environment because emissions of such gases are, according
to the EPA, contributing to the warming of the earth's atmosphere and other
climatic changes. These findings by the EPA allowed the agency to proceed with
the adoption and implementation of regulations that would restrict emissions of
greenhouse gases under existing provisions of the federal Clean Air Act.
Consequently, the EPA proposed two sets of regulations that would require a
reduction in emissions of greenhouse gases from motor vehicles and, also, could
trigger permit review for greenhouse gas emissions from certain stationary
sources. In addition, on October 30, 2009, the EPA published a final rule
requiring the reporting of greenhouse gas emissions from specified large
greenhouse gas emission sources in the United States beginning in 2011 for
emissions occurring in 2010.

     Also,  on June 26,  2009,  the U.S.  House of  Representatives  passed  the
American  Clean  Energy  and  Security  Act of 2009 (the  "ACESA")  which  would
establish  an  economy-wide   cap-and-trade  program  to  reduce  United  States
emissions of  greenhouse  gases  including  carbon  dioxide and methane that may
contribute to the warming of the Earth's  atmosphere and other climatic changes.
If it becomes  law,  ACESA  would  require a 17%  reduction  in  greenhouse  gas
emissions  from  2005  levels  by 2020 and just  over an 80%  reduction  of such
emissions  by 2050.  Under this  legislation,  the EPA would  issue a capped and
steadily  declining  number of tradable  emissions  allowances  to certain major
sources of greenhouse  gas emissions so that such sources could continue to emit
greenhouse  gases into the  atmosphere.  These  allowances  would be expected to
escalate  significantly  in cost over  time.  The net effect of ACESA will be to
impose  increasing  costs on the combustion of  carbon-based  fuels such as oil,
refined  petroleum  products and natural gas. The U.S.  Senate has begun work on
its own  legislation  for  restricting  domestic  greenhouse  gas  emissions and
President  Obama has indicated his support of legislation  to reduce  greenhouse
gas emissions through an emission allowance system.

      Climate change has emerged as an important topic in public policy debate
regarding our environment. It is a complex issue, with some scientific research
suggesting that rising global temperatures are the result of an increase in
greenhouse gases, which may ultimately pose a risk to society and the
environment. Products produced by the oil and natural gas exploration and
production industry are a source of certain greenhouse gases, namely carbon
dioxide and methane, and future restrictions on the combustion of fossil fuels
or the venting of natural gas could have a significant impact on our future
operations.

                                       13

<PAGE>

Competition and Marketing

      We will be faced with strong competition from many other companies and
individuals engaged in the oil and gas business, many are very large, well
established energy companies with substantial capabilities and established
earnings records. We may be at a competitive disadvantage in acquiring oil and
gas prospects since we must compete with these individuals and companies, many
of which have greater financial resources and larger technical staffs. It is
nearly impossible to estimate the number of competitors; however, it is known
that there are a large number of companies and individuals in the oil and gas
business.

      Exploration for and production of oil and gas are affected by the
availability of pipe, casing and other tubular goods and certain other oil field
equipment including drilling rigs and tools. We will depend upon independent
drilling contractors to furnish rigs, equipment and tools to drill its wells.
Higher prices for oil and gas may result in competition among operators for
drilling equipment, tubular goods and drilling crews which may affect our
ability expeditiously to drill, complete, recomplete and work-over wells.

      The market for oil and gas is dependent upon a number of factors beyond
our control, which at times cannot be accurately predicted. These factors
include the proximity of wells to, and the capacity of, natural gas pipelines,
the extent of competitive domestic production and imports of oil and gas, the
availability of other sources of energy, fluctuations in seasonal supply and
demand, and governmental regulation. In addition, there is always the
possibility that new legislation may be enacted, which would impose price
controls or additional excise taxes upon crude oil or natural gas, or both.
Oversupplies of natural gas can be expected to recur from time to time and may
result in the gas producing wells being shut-in. Imports of natural gas may
adversely affect the market for domestic natural gas.

     The  market  price for  crude oil is  significantly  affected  by  policies
adopted by the member nations of Organization of Petroleum  Exporting  Countries
("OPEC").   Members  of  OPEC  establish  prices  and  production  quotas  among
themselves  for  petroleum  products  from  time  to time  with  the  intent  of
controlling  the current  global supply and  consequently  price levels.  We are
unable to predict the effect,  if any, that OPEC or other countries will have on
the amount of, or the prices received for, crude oil and natural gas.

      Gas prices, which were once effectively determined by government
regulations, are now largely influenced by competition. Competitors in this
market include producers, gas pipelines and their affiliated marketing
companies, independent marketers, and providers of alternate energy supplies,
such as residual fuel oil. Changes in government regulations relating to the
production, transportation and marketing of natural gas have also resulted in
significant changes in the historical marketing patterns of the industry.
Generally, these changes have resulted in the abandonment by many pipelines of
long-term contracts for the purchase of natural gas, the development by gas
producers of their own marketing programs to take advantage of new regulations
requiring pipelines to transport gas for regulated fees, and an increasing
tendency to rely on short-term contracts priced at spot market prices.

                                       14

<PAGE>

General

      Our offices are located at 20203 Highway 60, Platteville, CO 80651. Our
office telephone number is (970) 737-1073 and our fax number is (970) 737-1045.

      The Platteville office and equipment yard is rented to us pursuant to a
lease with HS Land & Cattle, LLC, a firm controlled by Ed Holloway and William
E. Scaff, Jr., two of our officers. The lease requires monthly payments of
$10,000 and expires on July 1, 2011.

      As of November 15, 2010, we had seven full time employees.

      Neither we, nor any of our properties, are subject to any pending legal
proceedings.


ITEM 1A.  RISK FACTORS

      Not applicable


ITEM 1B. UNRESOLVED STAFF COMMENTS

      Not applicable


ITEM 2.   PROPERTIES

      See Item 1 of this report.


ITEM 3.   LEGAL PROCEEDINGS

      None.


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

      Not applicable.


ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 
         AND ISSUER PURCHASES OF EQUITY 

      On February 27, 2008, our common stock began trading on the OTC Bulletin
Board under the symbol "BRSH." There was no established trading market for our
common stock prior to that date.

      On September 22, 2008, a 10-for-1 reverse stock split, approved by our
shareholders on September 8, 2008, became effective on the OTC Bulletin Board
and our trading symbol was changed to "SYRG.OB."

      Shown below is the range of high and low closing prices for our common
stock for the periods indicated as reported by the OTC Bulletin Board. The
market quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commissions and may not necessarily represent actual transactions.

                                       15

<PAGE>

      Quarter Ended                                         High     Low
      -------------                                         ----     ---
       November 30, 2008                                   $4.75     $3.10
       February 28, 2009                                   $3.45     $1.25
       May 31, 2009                                        $1.80     $1.45
       August 31, 2009                                     $1.80     $1.10

       November 30, 2009                                   $1.47     $1.00
       February 28, 2010                                   $3.86     $1.35
       May 31, 2010                                        $3.85     $2.40
       August 31, 2010                                     $3.00     $2.25

      As of November 15, 2010, we had 13,823,481 outstanding shares of common
stock and 110 shareholders of record. The number of beneficial owners of our
common stock is substantially higher.

      Holders of our common stock are entitled to receive dividends as may be
declared by our board of directors. Our board of directors is not restricted
from paying any dividends but is not obligated to declare a dividend. No cash
dividends have ever been declared and it is not anticipated that cash dividends
will ever be paid.

        Our articles of incorporation authorize our board of directors to issue
up to 10,000,000 shares of preferred stock. The provisions in the articles of
incorporation relating to the preferred stock allow our directors to issue
preferred stock with multiple votes per share and dividend rights which would
have priority over any dividends paid with respect to the holders of our common
stock. The issuance of preferred stock with these rights may make the removal of
management difficult even if the removal would be considered beneficial to
shareholders generally, and will have the effect of limiting shareholder
participation in certain transactions such as mergers or tender offers if these
transactions are not favored by our management.

      On December 1, 2008, we purchased 1,000,000 shares of our common stock
from the Synergy Energy Trust, one of our initial shareholders, for $1,000,
which was the same amount which we received when the shares were sold to the
Trust. With the exception of that transaction, we have not purchased any of our
securities and no person affiliated with us has purchased any of our securities
for our benefit.

Additional Shares Which May be Issued

      The following table lists additional shares of our common stock, which may
be issued as of November 15, 2010 upon the conversion of outstanding notes,
the exercise of outstanding options or warrants or the issuance of shares for 
oil and gas leases:

                                       16

<PAGE>

                                                            Number of     Note
                                                             Shares    Reference
                                                            ---------  ---------
   Shares issuable upon the conversion of certain
     promissory notes                                       9,630,000       A

   Shares issuable upon the exercise of Series C 
     warrants                                               9,000,000       A

   Shares issuable upon the exercise of placement
     agents' warrants                                       1,125,000       A

   Shares issuable upon exercise of Series A warrants
     that were sold to those persons owning shares of
     our common stock prior to the acquisition of
     Predecessor Synergy                                    1,038,000       B

   Shares issuable upon exercise of Series A warrants
     sold in prior private offering.                        2,060,000       C

   Shares issuable upon exercise of Series A and
     Series B warrants                                      2,000,000       D

   Shares issuable upon exercise of  sales agent
     warrants                                                 126,932       D

   Shares issuable upon exercise of options held 
     by our officers and employees                          4,270,000       E

   Shares which we may issue for oil and gas leases         2,250,000       F
                                                            ---------
         Total                                             31,499,932
                                                           ==========

A. Between December 2009 and March 2010, we sold 180 Units at a price of
$100,000 per Unit to private investors. Each Unit consisted of one $100,000 note
and 50,000 Series C warrants. The notes can be converted into shares of our
common stock, initially at a conversion price of $1.60 per share, at the option
of the holder. Each Series C warrant entitles the holder to purchase one share
of our common stock at a price of $6.00 per share at any time prior to December
31, 2014. As of November 15, 2010, notes in the principal amount of $2,592,000
had been converted into 1,620,000 shares of our common stock.

     We paid Bathgate Capital Partners (now named GVC Capital), the placement
agent for the Unit offering, a commission of 8% of the amount Bathgate Capital
raised in the Unit offering. We also sold to the placement agent, for a nominal
price, warrants to purchase 1,125,000 shares of our common stock at a price of
$1.60 per share. The placement agent's warrants expire on December 31, 2014.

B. Each shareholder of record on the close of business on September 9, 2008
received one Series A warrant for each share which they owned on that date (as
adjusted for a reverse split of our common stock with was effective on September
22, 2008). Each Series A warrant entitles the holder to purchase one share of
our common stock at a price of $6.00 per share at any time prior to December 31,
2012.

                                       17

<PAGE>

C. Prior to our acquisition of Predecessor Synergy, Predecessor Synergy sold
2,060,000 Units to a group of private investors at a price of $1.00 per Unit.
Each Unit consisted of one share of Predecessor Synergy's common stock and one
Series A warrant. In connection with the acquisition of Predecessor Synergy,
these Series A warrants were exchanged for 2,060,000 of our Series A warrants.
The Series A warrants are identical to the Series A warrants described in Note B
above.

D. Between December 1, 2008 and June 30, 2009, we sold 1,000,000 units at a
price of $3.00 per unit. Each unit consisted of two shares of our common stock,
one Series A warrant and one Series B warrant. The Series A warrants are
identical to the Series A warrants described in Note B above. Each Series B
warrant entitles the holder to purchase one share of our common stock at a price
of $10.00 per share at any time prior to December 31, 2012.

     In connection with this unit offering, we paid the sales agent for the
offering a commission of 10% of the amount the sales agent sold in the offering.
We also issued warrants to the sales agent. The warrants allow the sales agent
to purchase 31,733 units (which units were identical to the units sold in the
offering) at a price of $3.60 per unit. The sales agent warrants will expire on
the earlier of December 31, 2012 or twenty days following written notification
from us that our common stock had a closing bid price at or above $7.00 per
share for any ten of twenty consecutive trading days.

E. See Item 11 of this report for information regarding shares issuable upon
exercise of options held by our officers and employees.

F. As of November 15, 2010 we had six non-binding letters of intent relating to
the potential acquisition of leases in exchange for approximately 2,250,000
shares of our common stock. The leases which are the subject of these letters of
intent cover approximately 110,000 acres in the D-J Basin. The acquisition of
any of these leases is subject to a number of conditions, including satisfactory
review of title to the leased acreage.

     We may sell additional shares of our common stock, preferred stock,
warrants, convertible notes or other securities to raise additional capital. We
do not have any commitments or arrangements from any person to purchase any of
our securities and there can be no assurance that we will be successful in
selling any additional securities.


ITEM 6.     SELECTED FINANCIAL DATA

      Not applicable.


                                       18

<PAGE>


ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

Introduction

     The   following   discussion   and  analysis  was  prepared  to  supplement
information  contained in the accompanying  financial statements and is intended
to explain  certain items  regarding  the  financial  condition as of August 31,
2010,  and the results of  operations  for the years ended August 31, 2010,  and
2009. It should be read in conjunction with the audited financial statements and
notes thereto contained in this report.

Overview

      We have undergone significant growth since we began our operations. Since
September 2008 we have drilled and completed 38 oil and gas wells. 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 August 31, 2010, we had:

        o  twenty four producing oil and gas wells; and
        o  fourteen wells which were in the process of completion.

      Since August 31, 2010, we acquired eight additional wells, two of which
were shut-in as of November 15, 2010.

      During the year ended August 31, 2010, we received net cash proceeds of
$16.7 million from the sale of convertible promissory notes and warrants. The
proceeds were used to fund the 2010 drilling program and to provide working
capital.

      We reported net losses for every year since inception and we expect to
report losses until such time, if ever, that we begin to generate significant
revenue from operations.

      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 D-J Basin.

Results of Operations

      Material changes of certain items in our statements of operations included
in our financial statements for the periods presented are discussed below.

      Exploration Stage Company. The Company was considered an exploration stage
company for accounting purposes until September 1, 2009, as we had not commenced
planned principle operations. During the year ended August 31, 2010, the Company
drilled 36 development wells, all of which encountered commercially productive
formations. Accordingly, our financial statements are presented to reflect our
exit from the exploration stage.

For the year ended August 31, 2010, compared to the year ended August 31, 2009

                                       19

<PAGE>

      For the year ended August 31, 2010, we reported a net loss of $10,794,172,
or $0.88 per share, compared to a net loss of $12,351,873, or $1.14 per share
for the period ended August 31, 2009. The comparison between the two years was
primarily influenced by (a) increasing revenues and expenses associated with the
2010 drilling program, (b) cash proceeds and associated costs from the $18
million financing transaction, and (c) the costs of share based compensation.

      Oil and Gas Production and Revenues - For the year ended August 31, 2010,
we recorded total oil and gas revenues of $2,158,444 compared to $94,121 for the
year ended August 31, 2009, as summarized in the following table:

                                  Year Ended August 31,
                              ---------------------------
                                  2010          2009
                              ------------- -------------
Production:
  Oil (Bbls)                     21,080         1,730
  Gas (Mcf)                     141,154         4,386

Total production in BOE          44,606         2,461

Revenues:
  Oil                        $1,441,562      $ 78,872
  Gas                           716,882        15,249
                             ----------      --------
  Total                      $2,158,444      $ 94,121
                             ==========      ========
                             
Average sales price:
  Oil (Bbls)                 $    68.38      $  45.59
  Gas (Mcf)                  $     5.08      $   3.48


     "Bbl" refers to one stock tank barrel,  or 42 U.S. gallons liquid volume in
reference  to crude  oil or  other  liquid  hydrocarbons.  "Mcf"  refers  to one
thousand cubic feet. A BOE (i.e. barrel of oil equivalent)  combines Bbls of oil
and Mcf of gas by converting each six Mcf of gas to one Bbl of oil.

      Net oil and gas production for the year ended August 31, 2010 was 44,606
BOE, or 122 BOE per day. The significant increase in production from the prior
year reflects the additional 22 wells that began production during the year.
Production for the fourth quarter averaged 241 BOE per day. The change in
average sales price is a function of worldwide commodity prices, which currently
trend upward for crude oil (posted price of $82.42 per Bbl as of November 18,
2010) and currently trend downward for natural gas (posted price of $4.18 per
Mcf as of November 18, 2010). We do not currently engage in any commodity
hedging transactions, but may do so in the future.

      Lease Operating Expenses - As summarized in the following table, our lease
expenses include the direct operating costs of producing oil and natural gas and
taxes on production and properties:

                                       20

<PAGE>

                                         Year ended August 31,
                                       --------------------------
                                            2010          2009
                                       -------------  -----------
Production costs                           $ 86,554      $ 2,094
Severance and ad valorem taxes              236,966        9,478
                                       -------------  -----------
    Total production expenses              $323,520      $11,572
                                       =============  ===========
Per BOE:
  Production costs                          $  1.94      $  0.85
  Severance and ad valorem taxes               5.31         3.85
                                       -------------  -----------
     Total per BOE                          $  7.25      $  4.70
                                       =============  ===========

      Production costs tend to increase or decrease primarily in relation to the
number of wells in production, and, to a lesser extent, on fluctuation in oil
field service costs and changes in the production mix of crude oil and natural
gas. Taxes tend to increase or decrease primarily based on the value of oil and
gas sold, and, as a percent of revenues, averaged 11% in 2010 and 12% in 2009.

      Depreciation, Depletion, and Amortization ("DDA") - DDA expense is
summarized in the following table:

                                   Year ended August 31,
                                 -----------------------
                                     2010         2009
                                 ------------  ---------
Depletion expense                 $ 692,274     $97,309
Depreciation and amortization         9,126         296
                                 ----------    ---------
        Total DDA                 $ 701,400     $97,605
                                 ==========    =========
Depletion expense per BOE         $   15.52     $ 39.54

      The determination of depreciation, depletion and amortization expense is
highly dependent on the estimates of the proved oil and natural gas reserves. As
of August 31, 2010, we had 1,423,524 BOE of estimated net proved reserves with a
Standardized Measure of $13,022,397 (based on average prices of $4.76 Mcf and
$69.20 Bbl using the new SEC requirements). As of August 31, 2009, we had 10,710
BOE of estimated net proved reserves with a Standardized Measure of $232,957 (at
year-end prices of $2.05 Mcf and $61.24 Bbl under the former SEC requirements).
This significant increase in reserves resulted in a reduction to the DDA rate.

      Impairment of Oil and Gas Properties - We use the full cost accounting
method, which requires recognition of impairment when the total capitalized
costs of oil and gas properties exceed the "ceiling" amount, as defined in the
full cost accounting literature. During the year ended August 31, 2010, no
impairment was recorded because our capitalized costs subject to the ceiling
test were less than the estimated future net revenues from proved reserves
discounted at 10% plus the lower of cost or market value of unevaluated
properties. During the year ended August 31, 2009, we recorded $945,079 of
non-cash impairment expense as a result of our capitalized costs exceeding
estimated future net revenues from then proved reserves. The ceiling test is
performed each quarter and there is the possibility for impairments to be
recognized in future periods. Once impairment is recognized, it cannot be
reversed.

                                       21

<PAGE>

      General and Administrative - The following table summarizes the components
of general and administration expenses:

                                                 Year Ended August 31,
                                          -----------------------------------
                                               2010               2009
                                          ---------------   -----------------
Share based compensation                    $    581,233        $ 10,296,521
Other general and administrative               1,202,624             752,070
Capitalized general and administrative           (95,475)                 --
                                            ------------        ------------
    Totals                                  $  1,688,382        $ 11,048,591
                                            ============        ============

      The share-based compensation recorded in general and administrative
expenses related to the issuance of stock grants and stock options to officers,
directors, and employees. The expense recorded for stock grants is based on the
market value of the common stock on the date of grant. When stock options are
issued we estimate their fair value using the Black-Scholes-Merton
option-pricing model. The estimated fair value is recorded as an expense on a
pro-rata basis over the vesting period.

      Other general and administrative expenses, which include salaries,
benefits, professional fees, and other corporate overhead, increased
approximately $450,000 as we undertook the 2010 drilling program.

      Certain general and administrative expenses for the year ended August 31,
2010, were directly related to the acquisition and development of oil and gas
properties. Those costs are reclassified from general and administrative expense
into capitalized costs in the full cost pool.

      Other Income (Expense) - The issuance of $18,000,000 convertible
promissory notes and Series C warrants during the year ended August 31, 2010
generated a significant increase in other expenses. The notes bear interest at
8% per year, payable quarterly, and mature on December 31, 2012, unless earlier
converted by the noteholders at $1.60 per share or repaid by the Company, and
each Series C 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. Interest expense
of $551,603, net of capitalized interest of $269,761, was recognized during the
year ended August 31, 2010. At March 12, 2010, the day that we completed the
offering, fair values of the warrant component and the conversion feature were
deemed to be $1,760,048 and $3,455,809, respectively, resulting in a total
discount of $5,215,857, which was recorded as a reduction to the liability on
the balance sheet and is being accreted to the statement of operations over the
36 month life of the notes, resulting in a non-cash expense of $1,333,590 during
the year ended August 31, 2010. A total of $2,041,455 was recorded for issuance
costs, which is being recognized pro-rata in expenses over the 36 month
amortization period, producing an expense of $453,656 for the year ended August
31, 2010.

     A  non-cash  expense  of  $7,678,457  was  reflected  in the  statement  of
operations  for the year ended  August 31, 2010 to  represent  the change in the
fair value of the derivative  conversion  liability since issuance of the notes.
This  conversion  feature,  considered an embedded  derivative and recorded as a
liability  at its  estimated  fair value,  when  marked-to-market,  over time is
reflected  as a non-cash  item in the  statement  of  operations.  As such,  the
periodic  marking-to-market  of the  conversion  feature  may result in non-cash
income or expense in the  statements of operations  of future  periods.  Certain
factors which are beyond our control are used in the  determination  of the fair


                                       22

<PAGE>

value of our  derivative  conversion  liability.  The  estimated  fair  value is
derived  from the Monte  Carlo  Simulation  ("MCS")  model,  which uses  forward
pricing,  volatilities  and credit risk rates for similar  liabilities in active
markets  (namely,  for  commercial  debt  issued  by the  Company's  peer  group
companies,  as such information is published for these peer companies,  where it
is not for Synergy due to our relatively  short history and lack of commercially
originated debt).

     We estimated the fair value of the warrants and the  conversion  feature of
the notes at inception by using the  Black-Scholes-Merton  option pricing model.
The Black-Scholes-Merton  option-pricing model also requires an assumption about
the fair value of our common stock.  It was concluded upon issuance of the notes
that our stock traded in an illiquid  market,  and the reported sales prices may
not represent  fair value.  As a result,  a model that  estimated our enterprise
value  based  upon oil and gas  reserve  estimates  was used to place a value of
$1.39 on our common stock.  Subsequent to the valuation at inception,  the model
used  to  value  the  derivative  conversion  liability  was  changed  from  the
Black-Scholes-Merton  option  pricing  model to the MCS model and the market for
our common stock became more active and orderly.  The year end  valuation  model
used a value of $2.25 for our common stock based upon the quoted closing price.

      The notes contain a conversion feature, at an initial conversion price of
$1.60 and subject to adjustment under certain circumstances, which allow the
noteholders to convert the $18,000,000 principal balance into a maximum of
11,250,000 common shares, plus conversion of accrued and unpaid interest into
common shares, also at $1.60 per share. During the quarter ended August 31,
2010, holders of convertible promissory notes with a face amount of $2,092,000
plus accrued interest of $2,438 elected to convert the notes into 1,309,027
shares of common stock, leaving notes with a principal amount of $15,908,000
outstanding at August 31, 2010. At the time the Notes were converted, the
estimated fair value of the derivative conversion liability apportioned to the
converted Notes totaled $1,809,149, which was reclassified on the balance sheet
from derivative conversion liability to additional paid in capital.

      Between September 1, 2010 through November 15, 2010, holders of notes with
a face amount of $500,000 converted principal into 312,500 shares of the
Company's common stock. After these conversions, notes in the principal amount
of $15,408,000 were outstanding.

      Conversion of notes into common shares accelerates accretion of
unamortized debt discount. As notes are converted, the unamortized discount
apportioned to each note is removed from the balance sheet, approximately
one-third of which is reclassified to equity and two-thirds of which is
recognized as a non-cash expense in the statement of operations, consistent with
the composition of the original discount (approximately one-third was the
derived fair value of the warrants and two-thirds was the derived fair value of
the conversion feature). The unamortized discount apportioned to the notes
converted to common shares in the quarter ended August 31, 2010, totaled
$488,816. The portion applicable to the conversion option summed $323,604 and
was charged to accretion of debt discount in the statement of operations. The
unamortized discount applicable to the warrants ($165,212) was reclassified on
the balance sheet from debt discount to additional paid in capital on shares
issued pursuant to the conversion.

Income Taxes - Our effective tax rate is currently  zero. We have reported a net
loss every year since  inception and for tax purposes have a net operating  loss
carry  forward  ("NOL") of  approximately  $10 million.  The NOL is available to
offset future taxable income, if any. At such time, if ever, that we are able to


                                       23

<PAGE>


demonstrate  that it is more likely than not that we will be able to realize the
benefits of our tax assets,  we will be able to  recognize  the  benefits in our
financial statements.

Liquidity and Capital Resources

      Our sources and (uses) of funds for the years ended August 31, 2010 and
2009, are shown below:

                                                     Year Ended August 31,
                                                     2010             2009
                                                     ----             ----

    Cash used in operations                      $(2,443,059)    $(1,626,139)
    Acquisition of oil and gas properties
       and equipment                              (9,152,175)     (1,558,035)
    Option on oil and gas properties                      --        (100,000)
    Deposit                                               --         (85,000)
    Proceeds from sale of convertible notes,
       net of debt issuance costs                 16,651,023              --
   (Repayment) / proceeds from bank loan          (1,161,811)      1,161,811
    Proceeds from sale of common stock, net
       of offering costs                                  --       2,766,694
    Other                                                 --           2,987
                                                 -----------      ----------
    Net increase in cash                         $ 3,893,978      $  562,318
                                                 ===========      ==========

      Net cash used in operating activities was $2,443,059 and $1,626,139 for
the years ended August 31, 2010 and 2009, respectively. Among other uses, the
increase in cash employed in operations reflects outstanding joint interest
billings to other interest owners for wells in progress.

      Capital expenditures totaled $12,635,259 and $1,697,160 for the years
ended August 31, 2010 and 2009, respectively, which include cash payments of
$9,152,175 and $1,658,035, respectively. Cash paid for acquisition and
development as reflected in the statement of cash flows differs from the amount
reported herein primarily due to the timing of when the capital expenditures are
incurred and when the actual cash payment is made. At August 31, 2010, there
were $3,466,439 of accrued capital expenditures related to the wells in progress
and $16,645 of mineral leases acquired in exchange for common shares of the
Company.

      Between December 2009 and March 2010, we received net proceeds of
approximately $16.7 million from the private sale of 180 Units. 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 Series C 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 Series C
warrant entitles the holder to purchase one share of our common stock at a price
of $6.00 per share at any time on or before December 31, 2014.

                                       24

<PAGE>

     As of November 15, 2010 notes in the principal amount of approximately $2.6
million had been converted into 1,620,000 shares of our common stock.

      The proceeds from the sale of the Units were used to drill and complete
oil and gas wells in the Wattenberg Field located in the D-J Basin. The notes
are secured by the 36 gas wells we drilled during the year ended August 31,
2010.

      In May 2009 we entered into a loan agreement with a commercial bank which
allowed us to borrow up to approximately $1.2 million. The loan was
collateralized primarily by pipe used to drill and complete oil and gas wells.
In April 2010, the remaining outstanding balance was paid in full. We do not
currently have a credit facility with a financial institution.

      Our operating cash requirements currently approximate $300,000 per month,
which amount includes salaries and corporate overhead costs of $150,000, debt
servicing costs of $100,000, and lease operating expenses of $50,000. Through
August 31, 2010, we had not generated meaningful cash flow from operations.
However, the revenue from wells placed into production late in the year ended
August 31, 2010 and early in fiscal 2011 is expected to improve our cash flow
and we expect to meet our operating cash requirements with cash flow from
operations sometime during fiscal 2011.

      Our primary need for cash in fiscal 2011 will be to fund our acquisition
and drilling program. Our tentative capital expenditure budget approximates
$27,000,000, subject to significant adjustment for drilling success, acquisition
opportunities, operating cash flow, and available capital resources. As we do
not currently have access to sufficient capital resources to fund our tentative
expenditures, we will be required to seek additional funding. Our budget is
tentatively allocated to acquisition of proved and unproved properties of
approximately $12,000,000 and drilling activities of approximately $15,000,000,
which include drilling new wells and reworking existing wells. In October 2010,
we acquired eight producing wells for approximately $1.0 million. See additional
details about these wells in Item 13.

      We plan to generate profits by drilling productive oil or gas wells.
However, we will 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 curtail operations. 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
produce oil or gas.

Contractual Obligations

      The following table summarizes our contractual obligations as of August
31, 2010:

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<PAGE>

                                 2011         2012         2013        Total
                                 ----         ----         ----        -----

Employment Agreements       $   600,000   $   600,000  $   600,000   $1,800,000

Principal - Convertible 
  Promissory Notes                    -             -  $15,908,000  $15,908,000
Interest - Convertible 
  Promissory Notes          $ 1,233,000   $ 1,233,000  $   617,000  $ 3,083,000

Off-Balance Sheet Arrangements

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

Outlook

      The factors that will most significantly affect our results of operations
include (i) activities on properties that we do not operate, (ii) the
marketability of our production, (iii) our ability to satisfy our substantial
capital requirements, (iv) completion of acquisitions of additional properties
and reserves, (v) competition from larger companies and (vi) prices for oil and
gas. Our revenues will also be significantly impacted by our ability to maintain
or increase oil or gas production through exploration and development
activities.

      It is expected that our principal source of cash flow will be from the
production and sale of oil and 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.

      Other than the foregoing, we do not know of any trends, events or
uncertainties that will have had or are reasonably expected to have a material
impact on our sales, revenues or expenses.


                                       26

<PAGE>

Critical Accounting Policies

     The  discussion  and  analysis of our  financial  condition  and results of
operations are based upon our financial statements,  which have been prepared in
accordance with accounting  principles  generally accepted in the United States.
The preparation of these financial  statements requires us to make estimates and
assumptions that affect the reported amounts of assets,  liabilities,  including
oil and gas reserves, 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.

      We provide expanded discussion of our more significant accounting
policies, estimates and judgments below. We believe these accounting policies
reflect our more significant estimates and assumptions used in preparation of
our consolidated financial statements. See Note 1 of the Notes to the financial
statements for a discussion of additional accounting policies and estimates made
by management.

      Oil and Gas Properties: We use 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. Under the full cost method, no gain or loss is recognized upon the
sale or abandonment of oil and gas properties unless non-recognition of such
gain or loss would significantly alter the relationship between capitalized
costs and proved oil and gas reserves.

      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  and  unproved  oil and gas
properties,  net of accumulated depreciation,  depletion, and amortization,  and
the related  deferred income taxes, 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 cost of
unevaluated properties not being amortized,  plus the lower of cost or estimated
fair value of unevaluated  properties being amortized,  less income tax effects.
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.   Once  impairment  expense  is
recognized,  it cannot be reversed in future periods,  even if increasing prices
raise the ceiling amount.

                                       28

<PAGE>

      For the year ended August 31, 2010, the oil and natural gas prices used to
calculate the full cost ceiling limitation are the 12 month average prices,
calculated as the unweighted arithmetic average of the first day of the month
price for each month within the 12 month period prior to the end of the
reporting period, unless prices are defined by contractual arrangements. Prices
are adjusted for basis or location differentials. Prior to August 31, 2010,
ceiling calculations were based on the spot price on the last day of the
reporting period. This change is a result of the newly approved SEC requirements
for reporting oil and gas activities. The new rule, titled "Modernization of Oil
and Gas Reporting" was effective for annual reporting periods ending on or after
December 31, 2009, and was implemented by us effective August 31, 2010

      Adoption of the new rule impacted depreciation, depletion and amortization
expense for the year ended August 31, 2010, as well as the ceiling test
calculation for oil and gas properties as of August 31, 2010. The new rules
further impacted the oil and gas reserve quantities that were estimated by the
reservoir engineer. For the year ended August 31, 2010, we used estimated prices
of $69.20 per barrel of oil and $4.76 per Mcf of gas. Had the old rules been
applied as of August 31, 2010, the prices would have been $64.43 per barrel of
oil and $4.47 per Mcf of gas.

      The adoption of the new rules is considered a change in accounting
principle inseparable from a change in accounting estimate. We do not believe
that provisions of the new guidance, other than pricing, significantly impacted
the financial statements. We do not believe that it is practicable to estimate
the effect of applying the new rules on net loss or the amount recorded for
depreciation, depletion and amortization for the year ended August 31, 2010.

      Oil and Gas Reserves: The determination of depreciation, depletion and
amortization expense, as well as the ceiling test related to the recorded value
of our 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 our
control. Accordingly, reserve estimates are often different from the quantities
of oil and natural gas ultimately recovered and the corresponding lifting costs
associated with the recovery of these reserves.

      Fair Value Measurements: Effective September 1, 2008, we adopted FASB
Accounting Standards Codification ("ASC") "Fair Value Measurements and
Disclosures", which establishes a framework for assets and liabilities measured
at fair value on a recurring basis included in our balance sheets. Effective
September 1, 2009, similar accounting guidance was adopted for assets and
liabilities measured at fair value on a nonrecurring basis. As defined in the
guidance, fair value is the price that would be received to sell an asset or be
paid to transfer a liability in an orderly transaction between market
participants at the measurement date (exit price).

      We use 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.
Fair value balances are classified based on the observability of the various
inputs.

                                       29

<PAGE>

      Asset Retirement Obligations: Our activities are subject to various laws
and regulations, including legal and contractual obligations to reclaim,
remediate, or otherwise restore properties at the time the asset is permanently
removed from service. The fair value of a liability for the asset retirement
obligation ("ARO") is initially recorded when it is incurred if a reasonable
estimate of fair value can be made. This is typically when a well is completed
or an asset is placed in service. When the ARO is initially recorded, we
capitalize the cost (asset retirement cost or "ARC") by increasing the carrying
value of the related asset. Over time, the liability increases for the change in
its present value (accretion of ARO), while the capitalized cost decreases over
the useful life of the asset. The capitalized ARCs are included in the full cost
pool and subject to depletion, depreciation and amortization. In addition, the
ARCs are included in the ceiling test calculation. Calculation of an ARO
requires estimates about several future events, including the life of the asset,
the costs to remove the asset from service, and inflation factors. The ARO is
initially estimated based upon discounted cash flows over the life of the asset
and is accreted to full value over time using our credit adjusted risk free
interest rate. Estimates are periodically reviewed and adjusted to reflect
changes.

      Derivative Conversion Liability: We account for embedded conversion
features in our 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 conversion 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 conversion liabilities is recognized as a charge or
credit to other income (expense) in the statements of operations.

      Revenue Recognition: Revenue is recognized for the sale of oil and natural
gas when production is sold to a purchaser and title has transferred. Revenues
from production on properties in which we share an economic interest with other
owners are recognized on the basis of our interest. Provided that reasonable
estimates can be made, revenue and receivables are accrued and adjusted upon
settlement of actual volumes and prices, as payment is received often sixty to
ninety days after production.

      Stock Based Compensation: We records stock-based compensation expense in
accordance with the fair value recognition provisions of US GAAP. Stock based
compensation is measured at the grant date based upon the estimated fair value
of the award and the expense is recognized over the required employee service
period, which generally equals the vesting period of the grant. The fair value
of stock options is estimated using the Black-Scholes-Merton option-pricing
model. The fair value of restricted stock grants is estimated on the grant date
based upon the fair value of the common stock.

      Recent Accounting Pronouncements: We evaluate the pronouncements of
various authoritative accounting organizations, primarily the Financial
Accounting Standards Board ("FASB"), the Securities and Exchange Commission
("SEC"), and the Emerging Issues Task Force ("EITF"), to determine the impact of
new pronouncements on US GAAP and the impact on the Company.


                                       30

<PAGE>

We have recently adopted the following new accounting standards:

      Oil and Gas Disclosures - On December 29, 2008, the SEC approved new
requirements for reporting oil and gas reserves. The new rule, titled
"Modernization of Oil and Gas Reporting" was effective for annual reporting
periods ending on or after December 31, 2009, and was implemented by us
effective August 31, 2010. During 2010 the FASB issued ASU No. 2010-03 and ASU
No. 2010-14 to align the ASC with the SEC's revised rules. 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. Accounting for the limitation on
capitalized costs for full cost companies was also revised, including the
provision that subsequent price increases cannot be considered in the ceiling
test calculation.

      Fair value measurements and disclosure - In January 2010 the FASB issued
ASU No. 2010-06, which amends existing disclosure requirements to require
additional disclosures regarding fair value measurements, including the amounts
and reasons for significant transfers between Level 1 and Level 2 of the fair
value hierarchy. Furthermore, the reconciliation for fair value measurements
using significant unobservable inputs now requires separate information about
purchases, sales, issuances, and settlements. Additional disclosure is also
required about the valuation techniques and inputs used to measure fair value
for both recurring and nonrecurring measurements. Adoption of this amendment
required us to disclose additional fair value information, but otherwise did not
have an impact on our financial position, results of operations, or cash flows.

      The following accounting standards updates were recently issued and have
not yet been adopted by us. These standards are currently under review to
determine their impact on our financial position, results of operations, or cash
flows.

      Derivatives and Hedging - ASU No. 2010-11 was issued in March 2010 and
clarifies that the transfer of credit risk that is only in the form of
subordination of one financial instrument to another is an embedded derivative
feature that should not be subject to potential bifurcation and separate
accounting. This ASU will be effective for the first fiscal quarter beginning
after June 15, 2010, with early adoption permitted, and is expected to be
adopted by us effective September 1, 2010.

      Compensation - Stock Compensation - ASU No. 2010-13 was issued in April
2010 and will clarify the classification of an employee share based payment
award with an exercise price denominated in the currency of a market in which
the underlying security trades. This ASU will be effective for the first fiscal
quarter beginning after December 15, 2010, with early adoption permitted.

      There were various other updates recently issued, most of which
represented technical corrections to the accounting literature or were
applicable to specific industries, and are not expected to have a material
impact on our financial position, results of operations or cash flows.


I
TEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

      Not applicable.

                                       31

<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      See the financial statements and accompanying notes included with this
report.


ITEM  9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
         FINANCIAL DISCLOSURE

      The information required by this item was previously disclosed in our 8-K
report dated December 31, 2009.


ITEM 9A. CONTROLS AND PROCEDURES  

     An  evaluation  was  carried  out  under  the   supervision  and  with  the
participation of our management,  including our Principal  Financial Officer and
Principal Executive Officer, of the effectiveness of our disclosure controls and
procedures  as of the end of the  period  covered  by this  report on Form 10-K.
Disclosure controls and procedures are procedures designed with the objective of
ensuring  that  information  required to be disclosed in our reports filed under
the  Securities  Exchange  Act of 1934,  such as this Form  10-K,  is  recorded,
processed,  summarized  and  reported,  within the time period  specified in the
Securities and Exchange  Commission's rules and forms, and that such information
is accumulated and is  communicated  to our management,  including our Principal
Executive Officer and Principal Financial Officer, or persons performing similar
functions,  as  appropriate,   to  allow  timely  decisions  regarding  required
disclosure.  Based on that  evaluation,  our  management  concluded  that, as of
August 31, 2010, our disclosure controls and procedures were effective.

Management's Report on Internal Control Over Financial Reporting

      Our management is responsible for establishing and maintaining adequate
internal control over financial reporting and for the assessment of the
effectiveness of internal control over financial reporting. As defined by the
Securities and Exchange Commission, internal control over financial reporting is
a process designed by, or under the supervision of our principal executive
officer and principal financial officer and implemented by our Board of
Directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of our
financial statements in accordance with U.S. generally accepted accounting
principles.

      Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

     Ed Holloway,  our Principal  Executive  Officer and Frank L. Jennings,  our
Principal Financial Officer, evaluated the effectiveness of our internal control
over financial reporting as of August 31, 2010 based on criteria  established in
Internal  Control - Integrated  Framework  issued by the Committee of Sponsoring
Organizations of the Treadway  Commission,  or the COSO Framework.  Management's
assessment  included an  evaluation  of the design of our internal  control over
financial  reporting  and  testing  of the  operational  effectiveness  of those
controls.

                                       32

<PAGE>
 
       Based on this evaluation, management concluded that our internal control
over financial reporting was effective as of August 31, 2010.

      There was no change in our internal control over financial reporting that
occurred during the period covered by this report that has materially affected,
or is reasonably likely to materially affect, the our internal control over
financial reporting.


ITEM 9B.  OTHER INFORMATION

      None.


ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

      Our officers and directors are listed below. Our directors are generally
elected at our annual shareholders' meeting and hold office until the next
annual shareholders' meeting or until their successors are elected and
qualified. Our executive officers are elected by our directors and serve at
their discretion.

Name                    Age   Position
----                    ---   --------
Edward Holloway         58    President, Chief Executive Officer and  Director
William E. Scaff, Jr.   53    Vice President, Secretary, Treasurer and  Director
Frank L. Jennings       59    Principal Financial and Accounting Officer
Benjamin J. Barton      47    Director
Rick A. Wilber          62    Director
Raymond E. McElhaney    55    Director
Bill M. Conrad          55    Director
R.W. Noffsinger, III    37    Director
George Seward           61    Director


Edward  Holloway - Mr. Holloway has been an officer and director since September
2008 and was an officer and  director of our  predecessor  between June 2008 and
September 2008. Mr. Holloway  co-founded Cache  Exploration Inc., an oil and gas
exploration  and  development  company that drilled over 350 wells. In 1987, Mr.
Holloway sold the assets of Cache  Exploration  to LYCO Energy  Corporation.  He
rebuilt  Cache  Exploration  and sold the entire  company to Southwest  Energy a
decade  later.  In 1997,  Mr.  Holloway  co-founded,  and  since  that  date has
co-managed,  Petroleum  Management,  LLC, a company engaged in the  exploration,
operations,  production  and  distribution  of oil and natural gas. In 2001, Mr.
Holloway co-founded,  and since that date has co-managed,  Petroleum Exploration
and Management,  LLC, a company engaged in the acquisition of oil and gas leases
and the production and sale of oil and natural gas. Mr.  Holloway holds a degree
in Business  Finance  from the  University  of Northern  Colorado  and is a past
president of the Colorado Oil & Gas Association.

William  E.  Scaff,  Jr. - Mr.  Scaff has been an  officer  and  director  since
September 2008 and was an officer and director of our  predecessor  between June
2008 and September 2008.  Between 1980 and 1990, Mr. Scaff oversaw financial and
credit  transactions  for Dresser  Industries,  a Fortune 50 oilfield  equipment
company.  Immediately  after serving as a regional  manager with TOTAL Petroleum
between 1990 and 1997,  Mr. Scaff  co-founded,  and since that date  co-managed,
Petroleum  Management,  LLC, a company engaged in the  exploration,  operations,


                                       33

<PAGE>

production  and  distribution  of oil  and  natural  gas.  In  2001,  Mr.  Scaff
co-founded,  and  since  that date has  co-managed,  Petroleum  Exploration  and
Management,  LLC, a company engaged in the acquisition of oil and gas leases and
the  production  and sale of oil and natural  gas.  Mr.  Scaff holds a degree in
Finance from the University of Colorado.

Frank L. Jennings - Mr. Jennings has been our Principal Financial and Accounting
Officer  since June 2007.  Since  2001,  Mr.  Jennings  has been an  independent
consultant  providing  managing  and  financial  services,  primarily to smaller
public  companies.  From 2000 to 2005, he served as the Chief Financial  Officer
and a director of Global Casinos, Inc., a publicly traded corporation,  and from
2001 to 2005,  he served as Chief  Financial  Officer and a director of OnSource
Corporation,  now known as  Ceragenix  Pharmaceuticals,  Inc.,  also a  publicly
traded corporation.

Benjamin J. Barton - Mr.  Barton has been one of our directors  since  September
2008 and was a director of our predecessor between June 2008 and September 2008.
Between  2003 and 2005,  Mr.  Barton was a private  wealth  manager with Merrill
Lynch.  Since 1986, Mr. Barton has been active in all aspects of venture capital
and public  stock  offerings.  Since  2005,  Mr.  Barton  has been the  Managing
Director  of  Strategic  Capital  Partners,  LLC, a private  investment  company
specializing in energy companies.  Prior to earning an MBA in Finance from UCLA,
Mr.  Barton  received his Bachelor of Science  degree in Political  Science from
Arizona State University.

Rick A. Wilber - Mr. Wilber has been one of our directors  since September 2008.
Since 1984,  Mr.  Wilber has been a private  investor in, and a  consultant  to,
numerous  development  stage  companies.  In 1974,  Mr. Wilber was co-founder of
Champs  Sporting  Goods,  a retail  sporting  goods  chain,  and  served  as its
President from 1974-1984. He has been a Director of Ultimate Software Group Inc.
since  October  2002  and  serves  as a member  of its  audit  and  compensation
committees. Mr. Wilber was a director of Ultimate Software Group between October
1997 and May 2000.  He served  as a  director  of Royce  Laboratories,  Inc.,  a
pharmaceutical  concern, from 1990 until it was sold to Watson  Pharmaceuticals,
Inc. in April 1997 and was a member of its compensation committee.

Raymond E.  McElhaney - Mr.  McElhaney has been one of our  directors  since May
2005, and prior to the acquisition of Predecessor  Synergy was our President and
Chief  Executive  Officer.  Mr.  McElhaney  began his  career in the oil and gas
industry in 1983 as founder and President of Spartan  Petroleum and Exploration,
Inc.  Mr.  McElhaney  also served as a chairman  and  secretary of Wyoming Oil &
Minerals,  Inc., a publicly traded  corporation,  from February 2002 until 2005.
From 2000 to 2003,  he served as vice  president  and  secretary of New Frontier
Energy,  Inc., a publicly traded  corporation.  McElhaney is a co-founder of MCM
Capital  Management  Inc., a privately held financial  management and consulting
company  formed in 1990 and has served as its  president of that  company  since
inception.

Bill M.  Conrad - Mr.  Conrad has been one of our  directors  since May 2005 and
prior to the  acquisition  of  Predecessor  Synergy was our Vice  President  and
Secretary.  Mr.  Conrad has been  involved  in several  aspects of the oil & gas
industry over the past 20 years.  From February 2002 until June 2005, Mr. Conrad
served as  president  and a director of Wyoming Oil & Minerals,  Inc.,  and from
2000  until  April  2003,  he served as vice  president  and a  director  of New
Frontier  Energy,  Inc.  Since June 2006, Mr. Conrad has served as a director of
Gold Resource  Corporation,  a publicly traded corporation engaged in the mining
industry.  In 1990, Mr. Conrad  co-founded MCM Capital  Management  Inc. and has
served as its vice president since that time.

                                       34

<PAGE>

R.W.  "Bud"  Noffsinger,  III - Mr.  Noffsinger  was  appointed  as  one  of our
directors in September 2009. Mr.  Noffsinger has been the President/ CEO of RWN3
LLC,  a company  involved  with  investment  securities,  since  February  2009.
Previously,  Mr.  Noffsinger  was the President  (2005 to 2009) and Chief Credit
Officer (2008 to 2009) of First  Western  Trust Bank in Fort Collins,  Colorado.
Prior to his association with First Western,  Mr.  Noffsinger was a manager with
Centennial  Bank of the West (now  Guaranty  Bank and Trust).  Mr.  Noffsinger's
focus  at  Centennial  was  client  development  and  lending  in the  areas  of
commercial real estate,  agriculture and natural resources.  Mr. Noffsinger is a
graduate of the  University of Wyoming and holds a Bachelor of Science degree in
Economics with an emphasis on natural resources and environmental economics.

George  Seward - Mr.  Seward was  appointed  as one of our  directors on July 8,
2010.  Mr.  Seward  cofounded  Prima Energy in 1980 and served as its  Secretary
until 2004, when Prima was sold to Petro-Canada for $534,000,000. At the time of
the sale,  Prima had 152  billion  cubit  feet of proved  gas  reserves  and was
producing  55  million  cubic  foot of gas daily  from wells in the D-J Basin in
Colorado  and the Powder  River Basin of Wyoming and Utah.  Since March 2006 Mr.
Seward  has been the  President  of Pocito  Oil and Gas,  a  limited  production
company,  with operations in northeast  Colorado,  southwest Nebraska and Barber
County,  Kansas.  Mr. Seward has also operated a diversified  farming operation,
raising  wheat,  corn,  pinto beans,  soybeans  and alfalfa hay in  southwestern
Nebraska and northeast Colorado, since 1982.

      We believe Messrs. Holloway, Scaff, McElhaney, Conrad and Seward are
qualified to act as directors due to their experience in the oil and gas
industry. We believe Messrs. Barton, Wilber and Noffsinger are qualified to act
as directors as result of their experience in financial matters.

      With the exception of Mr. Noffsinger and Mr. Seward, none of our directors
are independent as that term is defined Section 803.A of the NYSE Amex.

      The members of our compensation committee are Rick Wilber, Raymond
McElhaney, Bill Conrad, Ben Barton and R.W. Noffsinger. The members of our Audit
Committee are Raymond McElhaney, Bill Conrad and R.W. Noffsinger. Mr. Noffsinger
acts as the financial expert for the Audit Committee of our board of directors.

      We have adopted a Code of Ethics applicable to our senior executive and
financial officers.


ITEM 11.  EXECUTIVE COMPENSATION

      The following table shows the compensation paid or accrued to our
executive officers during the years ended August 31, 2010 and 2009.


<TABLE>
<S>                        <C>         <C>        <C>        <C>          <C>          <C>          <C>
                                                            Stock        Option     All Other
Name and Principal       Fiscal      Salary      Bonus      Awards       Awards    Compensation
    Position              Year        (1)         (2)         (3)          (4)          (5)         Total
------------------        ----       ------      -----      ------       ------    -------------    -----

Ed Holloway,              2010     $175,000         --          --           --          --       $  175,000
  Principal Executive     2009     $150,000         --          --   $5,092,672          --       $5,242,672
  Officer

                                       35

<PAGE>

William E. Scaff, Jr.     2010     $175,000         --          --           --          --       $  175,000
  Vice President,         2009     $150,000         --          --   $5,092,672          --       $5,242,672
  Secretary and
  Treasurer

Frank L. Jennings,        2010     $106,225         --          --           --          --       $  106,225
Principal Financial       2009     $ 63,716         --          --           --          --       $   63,716
Officer
</TABLE>


(1)  The dollar value of base salary (cash and non-cash) earned. (2) The dollar
     value of bonus (cash and non-cash) earned.
(3)  The fair value of stock issued for services computed in accordance with ASC
     718 on the date of grant.
(4)  The fair value of options granted computed in accordance with ASC 718 on
     the date of grant. (5) All other compensation received that we could not 
     properly report in any other column of the table.

     The  compensation  to be paid to Mr.  Holloway  and Mr. Scaff will be based
upon their  employment  agreements,  which are  described  below.  All  material
elements of the  compensation  paid to these  officers is discussed  below.  The
compensation  we expect to pay to Mr. Jennings will be based upon the time spent
each fiscal year by Mr. Jennings on our business.  During the years ended August
31, 2009 and 2010,  Mr.  Jennings spent  approximately  55% and 35% of his time,
respectively, on our business.

      On June 11, 2008, we signed employment agreements with Ed Holloway and
William E. Scaff Jr. Each employment agreement provided that the employee would
be paid a monthly salary of $12,500 and required the employee to devote
approximately 80% of his time to our business. The employment agreements expired
on June 1, 2010.

      On June 1, 2010, we entered into a new employment agreements with Mr.
Holloway and Mr. Scaff. The new employment agreements, which expire on May 31,
2013, provide that we pay Mr. Holloway and Mr. Scaff each a monthly salary of
$25,000 and require both Mr. Holloway and Mr. Scaff to devote approximately 80%
of their time to our business. In addition, for every 50 wells that begin
producing oil and/or gas after June 1, 2010, whether as the result of our
successful drilling efforts or acquisitions, we will issue, to each of Mr.
Holloway and Mr. Scaff, shares of common stock in an amount equal to $100,000
divided by the average closing price of our common stock for the 20 trading days
prior to the date the fiftieth well begins producing.

      The employment agreements will terminate upon the employee's death, or
disability or may be terminated by us for cause. If the employment agreement is
terminated for any of these reasons, the employee, or his legal representatives
as the case may be, will be paid the salary provided by the employment agreement
through the date of termination.

      For purposes of the employment agreements, "cause" is defined as:

       (i)    the conviction of the employee of any crime or offense involving,
              or of fraud or moral turpitude, which significantly harms us;

                                       36

<PAGE>

       (ii)   the refusal of the employee to follow the lawful directions of our
              board of directors;

      (iii)   the employee's negligence which shows a reckless or willful
              disregard for reasonable business practices and significantly
              harms us; or

       (iv)   a breach of the employment agreement by the employee.

      We had a consulting agreement with Ray McElhaney and Bill Conrad which
provided that Mr. McElhaney and Mr. Conrad would render, on a part-time basis,
consulting services pertaining to corporate acquisitions and development. For
these services, Mr. McElhaney and Mr. Conrad were paid a monthly consulting fee
of $5,000. The consulting agreement expired on September 15, 2009.

      Employee Pension, Profit Sharing or other Retirement Plans. Effective
November 1, 2010 we adopted a defined contribution retirement plan, qualifying
under Section 401(k) of the Internal Revenue Code and covering substantially all
of our employees. We match participant's contributions in cash, not to exceed 4%
of the participant's total compensation. Other than this 401(k) Plan, we do not
have a defined benefit pension plan, profit sharing or other retirement plan.

Stock Option and Bonus Plan

      We have a stock option and a stock bonus plan. A summary description of
each plan follows.

      Non-Qualified Stock Option Plan. Our Non-Qualified Stock Option Plan
authorizes the issuance of shares of our common stock to persons that exercise
options granted pursuant to the Plan. Our employees, directors, officers,
consultants and advisors are eligible to be granted options pursuant to the
Plan, provided however that bona fide services must be rendered by such
consultants or advisors and such services must not be in connection with
promoting our stock or the sale of securities in a capital-raising transaction.
The option exercise price is determined by our directors.

      Stock Bonus Plan. Our Stock Bonus Plan allows for the issuance of shares
of common stock to our employees, directors, officers, consultants and advisors.
However, bona fide services must be rendered by the consultants or advisors and
such services must not be in connection with promoting our stock or the sale of
securities in a capital-raising transaction.

      Summary. The following is a summary of options granted or shares issued
pursuant to the Plans as of November 15, 2010. Each option represents the right
to purchase one share of our common stock.

                              Total
                             Shares   Reserved for    Shares     Remaining
                            Reserved  Outstanding   Issued as   Options/Shares
Name of Plan              Under Plans    Options    Stock Bonus   Under Plans
------------              ----------- ------------  ----------- --------------

Non-Qualified Stock 
  Option Plan              2,000,000     270,000        N/A        1,730,000
Stock Bonus Plan             500,000         N/A         --          500,000

                                       37

<PAGE>
Options

      In connection with the acquisition of Predecessor Synergy, we issued
options to the persons shown below in exchange for options previously issued by
Predecessor Synergy. The terms of the options we issued are identical to the
terms of the Predecessor Synergy options. The options were not granted pursuant
to our Non-Qualified Stock Option Plan. As of November 15, 2010, none of these
options have been exercised.

                            Grant    Shares Issuable Upon  Exercise  Expiration
Name                        Date     Exercise of Options    Price       Date   
----                        -----    --------------------  --------  ----------

Ed Holloway (1)            9-10-08       1,000,000         $  1.00    6-11-13
William E. Scaff, Jr. (2)  9-10-08       1,000,000         $  1.00    6-11-13
Ed Holloway (1)            9-10-08       1,000,000          $10.00    6-11-13
William E. Scaff, Jr. (2)  9-10-08       1,000,000          $10.00    6-11-13

(1)  Options are held of record by a limited liability company controlled by Mr.
     Holloway.

(2)  Options are held of record by a limited liability company controlled by Mr.
     Scaff.

      The following table shows information concerning our outstanding options
as of November 15, 2010.

                       Shares underlying unexercised
                               Option which are:          Exercise  Expiration
Name                    Exercisable   Unexercisable        Price       Date  
----                    -----------   -------------       -------   ----------

Ed Holloway             1,000,000              --         $  1.00    6-11-13
William E. Scaff, Jr.   1,000,000              --         $  1.00    6-11-13
Ed Holloway             1,000,000              --         $ 10.00    6-11-13
William E. Scaff, Jr.   1,000,000              --         $ 10.00    6-11-13
Employees                  10,000(1)      260,000(1)          (1)        (1)

(1)  Options were issued to several employees pursuant to our Non-Qualified
     Stock Option Plan. The exercise price of the options varies between $2.40
     and $3.00 per share. The options expire at various dates between December
     2018 and October 2020.

      The following table shows the weighted average exercise price of the
outstanding options granted pursuant to our Non-Qualified Stock Option Plan or
otherwise as of August 31, 2010. Neither our Non-Qualified Stock Option Plan nor
the issuance of any of our other options have been approved by our shareholders.

<TABLE>
<S>                                   <C>              <C>                 <C>

                                                                   Number of Securities
                                  Number                            Remaining Available
                               of Securities                        For Future Issuance
                                be Issued       Weighted-Average        Under Equity
                               Upon Exercise    Exercise Price of   Compensation Plans,
                              of Outstanding    of Outstanding     Excluding Securities
Plan category                    Options            Options         Reflected in Column
---------------------------------------------------------------------------------------

Non-Qualified Stock Option Plan   220,000             $2.73             1,780,000
Other Options                   4,000,000             $5.50                    -

</TABLE>


                                       38

<PAGE>

Compensation of Directors During Year Ended August 31, 2010

                         Fees Earned 
                           or Paid       Stock         Option
                           in Cash     Awards (1)     Awards (2)      Total

Benjamin Barton                --       $ 88,762          --       $ 88,762
Rick Wilber                    --         88,762          --         88,762
Raymond McElhaney          $2,000         92,763          --         94,763
Bill Conrad                $4,000         92,763          --         96,763
R.W. Noffsinger                --         92,763          --         92,763
George Seward                  --         88,762          --         88,762
                           ------       --------                   --------
                           $6,000       $544,575                   $550,575
                           ======       ========                   ========

(1)  The fair value of stock issued for services computed in accordance with ASC
     718.

(2)  The fair value of options granted computed in accordance with ASC 718 on
     the date of grant.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND 
          RELATED STOCKHOLDER MATTERS

      The following table shows, as of November 15, 2010, information with
respect to those persons owning beneficially 5% or more of our common stock and
the number and percentage of outstanding shares owned by each of our directors
and officers and by all officers and directors as a group. Unless otherwise
indicated, each owner has sole voting and investment powers over his shares of
common stock.

                                               Number            Percent
Name                                         of Shares (1)      of Class(2) 
----                                         -------------      ------------

Ed Holloway                                   4,070,000 (3)        25.7%
William E. Scaff, Jr.                         4,070,000 (4)        25.7%
Frank L. Jennings                                 4,000                *
Benjamin Barton                                 688,762 (5)         5.0%
Rick A. Wilber                                  465,191             3.4%
Raymond E. McElhaney                            304,763             2.2%
Bill M. Conrad                                  319,763             2.3%
R.W. Noffsinger, III                            342,763             2.5%
George Seward                                   526,262             3.8%

All officers and directors as a group 
 (9 persons)                                 10,791,504            70.6%

*   Less than 1%

(1)  Share ownership includes shares issuable upon the exercise of options, all
     of which are currently exercisable, held by the persons listed below.

                                       39

<PAGE>

                             Share Issuable      Option
                             Upon Exercise      Exercise       Expiration
     Name                       of Options        Price           Date
     ----                    --------------    ---------       ----------
     Ed Holloway               1,000,000        $  1.00          6-11-13
     Ed Hollway                1,000,000        $ 10.00          6-11-13
     William E. Scaff, Jr.     1,000,000        $  1.00          6-11-13
     William E. Scaff, Jr.     1,000,000        $ 10.00          6-11-13

(2)  Computed based upon 13,823,481 shares of common stock outstanding as of
     November 15, 2010.

(3)  Shares are held of record by various trusts and limited liability companies
     controlled by Mr. Holloway.

(4)  Shares are held of record by various trusts and limited liability companies
     controlled by Mr. Scaff.

(5)  Shares are held of record by a partnership controlled by Mr. Barton.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Our two  officers,  Ed  Holloway  and William  Scaff,  Jr.,  are  currently
involved in oil and gas exploration and development. Mr. Holloway and Mr. Scaff,
or their affiliates (collectively the "Holloway/Scaff  Parties"), may present us
with  opportunities  to acquire  leases or to participate in drilling oil or gas
wells.  The  Holloway/Scaff  Parties  control three  entities with which we have
entered into agreements.  These entities are Petroleum  Management,  LLC ("PM"),
Petroleum  Exploration and Management,  LLC ("PEM"), and HS Land and Cattle, LLC
("HSLC").

      Any transaction between us and the Holloway/Scaff Parties must be approved
by a majority of our disinterested directors. In the event the Holloway/Scaff
Parties are presented with or become aware of any potential transaction which
they believe would be of interest to us, they are required to provide us with
the right to participate in the transaction. The Holloway/Scaff Parties are
required to disclose any interest they have in the potential transaction as well
as any interest they have in any property which could benefit from our
participation in the transaction, such as by our drilling an exploratory well on
a lease which is in proximity to leases in which the Holloway/Scaff Parties have
an interest. Without our consent, the Holloway/Scaff Parties may participate up
to 25% in a potential transaction on terms which are no different than those
offered to us.

      We had a letter agreement with PM and PEM which provide us with the option
to acquire working interests in oil and gas leases owned by these firms and
covering lands on the D-J basin. The oil and gas leases covered 640 acres in
Weld County, Colorado and, subject to certain conditions, would be transferred
to us for payment of $1,000 per net mineral acre. The working interests in the
leases we could acquire varied, but the net revenue interest in the leases,
could not be less than 75%. Between August 2008 and February 2010, we acquired
leases covering 640 gross, 360 net, acres from PM and PEM for $360,000.

                                       40

<PAGE>

      Between June 11, 2008 and June 30, 2010, and pursuant to the terms of an
Administrative Services Agreement, PM provided us with office space and
equipment storage in Platteville, Colorado, as well as secretarial, word
processing, telephone, fax, email and related services for a fee of $20,000 per
month. Following the termination of the Administrative Services Agreement, and
since July 1, 2010 we have leased the office space and equipment storage yard in
Platteville from HSLC at a rate of $10,000 per month.

      In October 2010, and following the approval of our directors, we acquired
oil and gas properties from PM and PEM, for approximately $1.0 million. The oil
and gas properties we acquired are located in the Wattenberg Field and consisted
of:

        o  six producing oil and gas wells
        o  two shut in oil wells
        o  fifteen drill sites, net 6.25 wells
        o  miscellaneous equipment

      We have a 100% working interest (80% net revenue interest) in the six
producing wells and the two shut in wells.

      In 2009, PM and PEM acquired the same oil and gas properties sold to us
from an unrelated third party for $920,000. The difference in the price we paid
for the properties and the price PM and PEM paid for the properties represents
interest on the amount paid by PM and PEM for the properties, closing costs and
equipment improvements.

      In addition to the above, and as mentioned in Item 1 of this report, we
have a nonbinding letter of intent relating to the potential acquisition of oil
and gas properties from PEM.

      Prior to our acquisition of Predecessor Synergy, Predecessor Synergy made
the following sales of its securities:

Name                          Shares      Series A Warrants       Consideration
----                          ------      -----------------       -------------
Ed Holloway (1)             2,070,000                 --              $2,070
William E. Scaff, Jr. (1)   2,070,000                 --              $2,070
Benjamin Barton (1)           600,000                 --              $  600
John Staiano (1)              600,000                 --              $  600
Synergy Energy Trust        1,900,000 (2)             --              $1,900
Third Parties                 660,000                 --              $  660
Private Investors           1,000,000          1,000,000      $1.00 per Unit (3)
Private Investors           1,060,000          1,060,000      $1.50 per Unit (3)
                            ---------          ---------
   Total                    9,960,000          2,060,000
                            =========          =========

(1)  Shares are held of record by entities controlled by this person. 
(2)  In December 2008, we repurchased 1,000,000 shares from the Synergy 
     Energy Trust.
(3)  Shares and warrants were sold as units, with each unit consisting of one
     share of our common stock and one Series A warrant.

                                       41

<PAGE>

      In connection with our acquisition of Predecessor Synergy, the 9,960,000
shares of Predecessor Synergy, plus the 2,060,000 Series A warrants, were
exchanged for 9,960,000 shares of our common stock, plus 2,060,000 of our Series
A warrants.

      In contemplation of the acquisition of Predecessor Synergy, our directors
declared a dividend of Series A warrants. The dividend provided that each person
owning our shares at the close of business on September 9, 2008 will receive one
Series A warrant for each post-split share which they owned on that date. Mr.
McElhaney and Mr. Conrad, due to their ownership of our common stock on
September 9, 2008, received 271,000 and 247,000 Series A warrants, respectively.

      Each Series A warrant entitles the holder to purchase one share of our
common stock at a price of $6.00 per share. The Series A warrants expire on the
earlier of December 31, 2012 or twenty days following written notification from
us that our common stock had a closing bid price at or above $7.00 for any ten
of twenty consecutive trading days.


ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES

      For the year ended August 31, 2010, Ehrhardt Keefe Steiner Hottman P.C.
("EKS&H") served as our independent registered public accounting firm. Stark
Schenkein LLP (previously Stark Winter Schenkein & Co., LLP) served as our
independent registered public accounting firm for the year ended August 31,
2009. The following table shows the aggregate fees billed to us for these
periods by EKS&H and Stark Schenkein LLP.

                                  Year Ended            Year Ended
                               August 31, 2010       August 31, 2009
                               ---------------       ---------------
      Audit Fees                   $72,213               $53,620
      Audit-Related Fees           $ 7,500               $ 1,688
      Tax Fees                     $ 3,800               $ 5,700
      All Other Fees                    --                    --


      Audit fees represent amounts billed for professional services rendered for
the audit of our annual financial statements and the reviews of the financial
statements included in our Form 10-Q and Form 10-K reports. Audit-related fees
include amounts billed for the review of our registration statement on Form S-1.
Prior to contracting with either EKS&H or Stark Schenkein LLP to render audit or
non-audit services, each engagement was approved by our directors.


ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Exhibits                                           Page Number
--------                                           -----------
3.1.1   Articles of Incorporation                      (1)

3.1.2   Amendment to Articles of Incorporation         (3)

3.1.3   Bylaws                                         (1)

10.1    Employment Agreement with Ed Holloway          (2)

                                       42

<PAGE>

10.2    Employment Agreement with William E.
        Scaff, Jr.                                     (2)

10.3    Administrative Services Agreement              (3)

10.4    Agreement regarding Conflicting Interest
        Transactions                                   (3)

10.5    Consulting Services Agreement with Raymond 
        McElhaney and Bill Conrad

10.6.1  Form of Convertible Note

10.6.2  Form of Subscription Agreement

10.6.3  Form of Series C Warrant
 
10.7    Purchase and Sale Agreement with Petroleum
        Exploration and Management, LLC (wells,
        equipment and well bore leasehold assignments)

10.8    Purchase and Sale Agreement with Petroleum
        Management, LLC (operations and
        leasehold)

10.9    Purchase and Sale Agreement with Chesapeake Energy

10.10   Lease with HS Land & Cattle, LLC

14.     Code of Ethics                                  (3)

31      Rule 13a-14(a) Certifications

32      Section 1350 Certifications

99      Letter regarding oil and gas reserves

(1)  Incorporated  by reference to the same exhibit filed with our  registration
     statement on Form SB-2, File #333-146561.

(2)  Incorporated by reference to the same exhibit filed with our report on Form
     8-K filed June 4, 2010.

(3)  Incorporated  by reference to the same  exhibit  filed with our  transition
     report on Form 10-K for the year ended August 31, 2008.



                                       43

<PAGE>


                          SYNERGY RESOURCES CORPORATION

                          INDEX TO FINANCIAL STATEMENTS




Index to Financial Statements                                           F-1


Report of Independent Registered Public Accounting Firm as of 
    August 31, 2010                                                     F-2
   
Report of Independent Registered Public Accounting Firm as of 
    August 31, 2009                                                     F-3

Balance Sheets as of August 31, 2010 and 2009                           F-4

Statements of Operations for the years ended August 31, 2010 
    and 2009                                                            F-5

Statements of Changes in Shareholders' Equity (Deficit)
    for the years ended August 31, 2010 and 2009                        F-6

Statements of Cash Flows for the years ended August 31, 
    2010 and 2009                                                       F-7

Notes to Financial Statements                                           F-8

                                      F-1

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors and Shareholders
Synergy Resources Corporation


We have audited the accompanying balance sheet of Synergy Resources Corporation
(the "Company") of August 31, 2010, and the related statements of operations,
changes in shareholders' (deficit) equity, and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Synergy Resources Corporation
as of August 31, 2010, and the results of its operations and its cash flows for
the year then ended in conformity with U.S. generally accepted accounting
principles.


                                            Ehrhardt Keefe Steiner & Hottman PC

November 19, 2010

Denver, Colorado

                                      F-2

<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Shareholders and Board of Directors
Synergy Resources Corporation

We have audited the accompanying balance sheet of Synergy Resources Corporation
(an Exploration Stage Company) as of August 31, 2009, and the related statements
of operations, changes in shareholders' equity, and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinions.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Synergy Resources Corporation
(an Exploration Stage Company) as of August 31, 2009, and the results of its
operations, and its cash flows for the for the year then ended, in conformity
with accounting principles generally accepted in the United States of America.


/s/ Stark Schenkein, LLP

Denver, Colorado
November 12, 2009



                                      F-3

<PAGE>

                      SYNERGY RESOURCES CORPORATION
                                 BALANCE SHEETS
                         as of August 31, 2010 and 2009

                                                       2010            2009
                                                     -----------     ----------
                              ASSETS
Current assets:
      Cash and cash equivalents                      $ 6,748,637     $2,854,659
      Accounts receivable:
        Oil and gas sales                                377,675         84,643
        Joint interest billing                         1,930,810              -
        Related party receivable                         867,835              -
      Inventory                                          387,864      1,132,685
      Other current assets                                12,310         21,105
                                                     -----------     ----------
          Total current assets                        10,325,131      4,093,092
                                                     -----------     ----------
Property and equipment:
      Oil and gas properties, full cost 
         method, net                                  12,692,194        653,435
      Other property and equipment, net                  150,789          1,041
                                                     -----------     ----------
          Property and equipment, net
                                                      12,842,983        654,476
                                                     -----------     ----------
Debt issuance costs, net of amortization               1,587,799              -
Other assets                                              86,000         85,000
                                                     -----------     ----------
          Total assets                               $24,841,913     $4,832,568
                                                     ===========     ==========

    LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

Current liabilities:
      Accounts payable:
        Trade                                        $ 3,015,562     $  622,734
        Related party payable                            554,669              -
      Accrued expenses                                   517,921         59,579
      Bank loan payable                                        -      1,161,811
                                                     -----------     ----------
          Total current liabilities                    4,088,152      1,844,124

Asset retirement obligations                             254,648              -
Convertible promissory notes, net of debt discount    12,190,945              -
Derivative conversion liability                        9,325,117              -
                                                     -----------     ----------
          Total liabilities                           25,858,862      1,844,124
                                                     -----------     ----------
Commitments and contingencies (See Note 12)

Shareholders' equity (deficit): 
      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:
          13,510,981 and 11,998,000  shares 
          issued and outstanding as of August
          31, 2010, and 2009, respectively                13,511         11,998
      Additional paid-in capital                      22,308,963     15,521,697
      Accumulated (deficit)                          (23,339,423)   (12,545,251)
                                                     -----------     ----------
          Total shareholders' equity (deficit)        (1,016,949)     2,988,444
                                                     -----------     ----------
          Total liabilities and shareholders' 
             equity (deficit)                        $24,841,913     $4,832,568
                                                     ===========     ==========

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

                                      F-4

<PAGE>


                          SYNERGY RESOURCES CORPORATION
                            STATEMENTS OF OPERATIONS
                  for the years ended August 31, 2010 and 2009




                                                    2010               2009
                                                ------------       ------------


Oil and gas revenues                            $  2,158,444       $     94,121
                                                ------------       ------------
Expenses:
   Lease operating expenses                          323,520             11,572
   Depreciation, depletion, and amortization         701,400             97,605
   Impairment of oil and gas properties                    -            945,079
   General and administrative                      1,688,382         11,048,591
   Services contract - related party                 226,667            240,000
   Consulting fees - related party                         -            120,000
                                                ------------       ------------
            Total expenses                         2,939,969         12,462,847
                                                ------------       ------------
Operating loss                                      (781,525)       (12,368,726)
                                                ------------       ------------
Other income (expense):
       Accretion of debt discount                 (1,333,590)                 -
       Amortization of debt issuance costs          (453,656)                 -
       Change in fair value of derivative
          conversion liability                    (7,678,457)                 -
       Interest expense, net                        (551,603)                 -
       Interest income                                 4,659             16,853
                                                ------------       ------------
            Total other income (expense)         (10,012,647)            16,853
                                                ------------       ------------

Loss before taxes                                (10,794,172)       (12,351,873)

Provision for income taxes                                 -                  -
                                                ------------       ------------
Net loss                                        $(10,794,172)      $(12,351,873)
                                                ============       ============
Net loss per common share:
                Basic and Diluted               $      (0.88)      $      (1.14)
                                                ============       ============
Weighted average shares outstanding:
                Basic and Diluted                 12,213,999         10,831,053
                                                ============       ============



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

                                      F-5

<PAGE>

                          SYNERGY RESOURCES CORPORATION
             STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
                  for the years ended August 31, 2010 and 2009

<TABLE>
                <S>                           <C>           <C>         <C>            <C>           <C>            <C>
                                                                                                                  Total
                                           Number of                 Additional       Stock                    Shareholders'
                                            Common        Common     Paid - In     Subscriptions  Accumulated     Equity
                                            Shares        Stock        Capital      Receivable    (Deficit)     (Deficit)
                                           ----------     --------   -----------   -------------  ------------ -------------
    Balance, September 1, 2008              9,943,571      $ 9,944    $2,477,511      $ (27,650)  $ (193,378)   $ 2,266,427
    Stock subscription received                     -            -             -         27,650            -         27,650
    Shares issued for net assets of
      Brishlin pursuant to September 
      10, 2008 Exchange Agreement           1,038,000        1,038        10,637              -            -         11,675
    Stock options exchanged pursuant
      to September 10, 2008 Exchange
      Agreement                                     -            -    10,185,345              -            -     10,185,345
    Shares issued for cash at $1.50
      per share pursuant to July 16, 
      2008 offering memorandum                 16,429           16        24,628              -            -         24,644
    Shares issued for cash at two
      shares for $3.00 pursuant to 
      December 1, 2008 offering 
      memorandum                            2,000,000        2,000     2,998,000              -            -      3,000,000
    Offering costs                                  -            -      (285,600)                                  (285,600)
    Repurchase of Founder's shares at
      $.001                                (1,000,000)      (1,000)            -              -            -         (1,000)
    Share based compensation                        -            -       111,176              -            -        111,176
    Net (loss)                                      -            -             -              -  (12,351,873)   (12,351,873)
                                           ----------     --------   -----------      ---------  -----------    -----------
    Balance, August 31, 2009               11,998,000       11,998    15,521,697              -  (12,545,251)     2,988,444
    Shares issued pursuant to
      conversion of debt and accrued
      interest at $1.60 per share,
      net of $165,212 unamortized
      debt discount                         1,309,027        1,309     1,927,917              -            -      1,929,226
    Reclassification of derivative
      conversion liability to equity
      pursuant to early conversion of
      debt                                          -            -     1,809,149              -            -      1,809,149
    Shares issued for services                197,988          198       544,377              -            -        544,575
    Shares issued in exchange for
      mineral leases                            5,966            6        16,639              -            -         16,645
    Series C warrants issued in
      connection with sale of convertible
      debt at $100,000 per Unit
      pursuant to November 27, 2009
      offering memorandum                           -            -     1,760,048              -            -      1,760,048
    Series D warrants issued in
      connection with sale of convertible
      debt at $100,000 per Unit
      pursuant to November 27, 2009
      offering memorandum                           -            -       692,478              -            -        692,478
    Share based compensation                        -            -        36,658              -            -         36,658
    Net (loss)                                      -            -             -              -  (10,794,172)   (10,794,172)
                                           ----------     --------   -----------      ---------  -----------    -----------
    Balance, August 31, 2010               13,510,981     $ 13,511   $22,308,963      $       -  (23,339,423)   $(1,016,949)
                                           ==========     ========   ===========      =========  ===========    ===========
</TABLE>


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

                                      F-6

<PAGE>

                          SYNERGY RESOURCES CORPORATION
                            STATEMENTS OF CASH FLOWS
                  for the years ended August 31, 2010 and 2009

                                                  2010              2009
                                              ------------      ------------
 Cash flows from operating activities:
    Net loss                                  $(10,794,172)     $(12,351,873)
                                              ------------      ------------
    Adjustments to reconcile net loss to
        net cash used in operating 
        activities:
      Depreciation, depletion, and
        amortization                               701,400            97,605
      Impairment of oil and gas properties               -           945,079
      Amortization of debt issuance cost           453,656                 -
      Accretion of debt discount                 1,333,590                 -
      Stock-based compensation                     581,233        10,296,521
      Change in fair value of derivative
        liability                                7,678,457                 -
    Changes in operating assets and
        liabilities:
      Accounts receivable                       (3,091,677)          (84,643)
      Inventory                                    744,821        (1,132,685)
      Accounts payable                            (518,942)          610,261
      Accrued expenses                             460,780            18,726
      Effect of merger on operating assets
        (liabilities)                                    -           (31,437)
      Other                                          7,795             6,307
                                              ------------      ------------
    Total adjustments                            8,351,113        10,725,734
                                              ------------      ------------
     Net cash used in operating activities
                                                (2,443,059)       (1,626,139)
                                              ------------      ------------
Cash flows from investing activities:
     Acquisition of property and equipment      (9,152,175)       (1,658,035)
     Performance assurance deposit                       -           (85,000)
     Cash acquired in merger                             -             3,987
                                              ------------      ------------
     Net cash used in investing activities      (9,152,175)       (1,739,048)
                                              ------------      ------------
Cash flows from financing activities:
     Cash proceeds from convertible
       promissory notes                         18,000,000                 -
     Debt issuance costs                        (1,348,977)                -
     Cash proceeds from bank loan payable                -         1,161,811
     Principal repayments                       (1,161,811)                -
     Cash proceeds from sale of stock                    -         3,052,294
     Offering costs                                      -          (285,600)
     Repurchase of shares                                -            (1,000)
                                              ------------      ------------
     Net cash provided by financing
       activities                               15,489,212         3,927,505
                                              ------------      ------------

Net increase in cash and equivalents             3,893,978           562,318

Cash and equivalents at beginning of period      2,854,659         2,292,341
                                              ------------      ------------

Cash and equivalents at end of period         $  6,748,637      $  2,854,659
                                              ============      ============

Supplemental Cash Flow Information (See
   Note 14)


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

                                      F-7

<PAGE>

                          SYNERGY RESOURCES CORPORATION

                          NOTES TO FINANCIAL STATEMENTS
                            August 31, 2010 and 2009

1.     Organization and Summary of Significant Accounting Policies

      Organization: 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. 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.

      Merger Transaction: On September 10, 2008, Predecessor Brishlin
consummated an Agreement to Exchange Common Stock ("Exchange Agreement") with
certain shareholders of Predecessor Synergy to acquire approximately 89% of the
outstanding common stock of Predecessor Synergy. In subsequent transactions, all
the remaining outstanding common shares of Predecessor Synergy were acquired.

      Although the legal form of the transaction reflects the acquisition of
Predecessor Synergy by Predecessor Brishlin, the Company determined that the
accounting form of the transaction is a "reverse merger", in which Predecessor
Synergy is identified as the acquiring company and Predecessor Brishlin is
identified as the acquired company. At the time of the transaction, Predecessor
Brishlin had ceased most of its operations and liquidated most of its assets and
liabilities. In accordance with SEC regulations, the transaction was recorded as
a capital transaction rather than a business combination. The transaction is
equivalent to the issuance of common stock by Predecessor Synergy in exchange
for the net assets of Predecessor Brishlin and a recapitalization of Predecessor
Synergy. The assets and liabilities of Predecessor Brishlin were not restated to
their estimated fair market values and no goodwill or other intangible assets
were recorded.

      Basis of Presentation: The Company prepares its financial statements in
accordance with accounting principles generally accepted in the United States of
America ("US GAAP").

      Exploration Stage Company: Prior to August 31, 2009, the Company was
considered an exploration stage company as it had not commenced its planned
principal operations and its primary activities were related to its initial
organization and other preliminary efforts. Subsequent to August 31, 2009, the
Company commenced its planned principal operations and exited from the
exploration stage.

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

      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, including oil and gas reserves,

                                      F-8

<PAGE>

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.

      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.

      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. Under the full cost method, no gain or loss is recognized upon the
sale or abandonment of oil and gas properties unless non-recognition of such
gain or loss would significantly alter the relationship between capitalized
costs and proved oil and gas reserves.

      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  and  unproved  oil and gas
properties,  net of accumulated depreciation,  depletion, and amortization,  and
the related  deferred income taxes, 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 cost of
unevaluated properties not being amortized,  plus the lower of cost or estimated
fair value of  unevaluated  properties  being  amortized,  less (iv)  income tax
effects. Prices are held constant for the productive life of each

                                      F-9

<PAGE>

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. 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, 2010, the oil and natural gas prices used to
calculate the full cost ceiling limitation are the 12 month average prices,
calculated as the unweighted arithmetic average of the first day of the month
price for each month within the 12 month period prior to the end of the
reporting period, unless prices are defined by contractual arrangements. Prices
are adjusted for basis or location differentials. Prior to August 31, 2010,
ceiling calculations were based on the spot price on the last day of the
reporting period.

      Capitalized Overhead: A portion of the Company's overhead expenses are
directly attributable to acquisition and development activities. Under the full
cost method of accounting, these expenses are capitalized in the full cost pool.
The Company capitalized overhead expenses of approximately $95,475 and nil for
the years ended August 31, 2010 and 2009, respectively.

      Oil and Gas Reserves: The determination of depreciation, depletion and
amortization expense, as well as the ceiling test 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
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 years ended August 31, 2010 and 2009, interest capitalized was $269,761, and
$25,442, respectively.

      Debt Issuance Costs: Debt issuance costs of $2,041,455 were incurred in
connection with executing Convertible Promissory Notes between December 29,
2009, and March 12, 2010. (See Note 7) Amortization expense, which is being
recognized over the stated three year term, of $453,657 was recorded during the
year ended August 31, 2010.

      Fair Value Measurements: Effective September 1, 2008, the company adopted
FASB Accounting Standards Codification ("ASC") "Fair Value Measurements and
Disclosures", which establishes a framework for assets and liabilities measured
at fair value on a recurring basis included in the Company's balance sheets.
Effective September 1, 2009, similar accounting guidance was adopted for assets
and liabilities measured at fair value on a nonrecurring basis. As defined in

                                      F-10

<PAGE>

the guidance, fair value is the price that would be received to sell an asset or
be 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. Fair value balances are classified based on the observability of
the various inputs.

      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 asset is
permanently removed from service. The fair value of a liability for the asset
retirement obligation ("ARO") is initially recorded when it is incurred if a
reasonable estimate of fair value can be made. This is typically when a well is
completed or an asset is placed in service. When the ARO is initially recorded,
the Company capitalizes the cost (asset retirement cost or "ARC") by increasing
the carrying value of the related asset. Over time, the liability increases for
the change in its present value (accretion of ARO), while the capitalized cost
decreases over the useful life of the asset. The capitalized ARCs are included
in the full cost pool and subject to depletion, depreciation and amortization.
In addition, the ARCs are included in the ceiling test calculation. Calculation
of an ARO requires estimates about several future events, including the life of
the asset, the costs to remove the asset from service, and inflation factors.
The ARO is initially estimated based upon discounted cash flows over the life of
the asset and is accreted to full value over time using the Company's credit
adjusted risk free interest rate. Estimates are periodically reviewed and
adjusted to reflect changes.

      Derivative Conversion 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 conversion 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 conversion liabilities is
recognized as a charge or credit to other income (expense) in the statements of
operations.

      Revenue Recognition: Revenue is recognized for the sale of oil and natural
gas when production is sold to a purchaser and title has transferred. Revenues
from production on properties in which the Company shares an economic interest
with other owners are recognized on the basis of the Company's interest.
Provided that reasonable estimates can be made, revenue and receivables are
accrued and adjusted upon settlement of actual volumes and prices, as payment is
received often sixty to ninety days after production.

      Major Customer and Operating Region: The Company operates exclusively
within the United States of America. Except for cash and equivalent instruments,
all of the Company's assets are employed in and all of its revenues are derived
from the oil and gas industry.

                                      F-11

<PAGE>

      The Company's oil and gas production is purchased by a few customers. The
table below presents the percentage of oil and gas revenue that was purchased by
major customers.

                                            Year Ended August 31,
                                           ---------------------
                   Major Customers          2010           2009
                   ---------------         ------         -------
                   Company A                13%             100%
                   Company B                30%               0%
                   Company C                57%               0%

      As there are other purchasers that are capable of and willing to purchase
the Company's oil and gas production and since the Company has the option to
change purchasers on its properties if conditions so warrant, the Company
believes that its oil and gas production can be sold in the market in the event
that it is not sold to the Company's existing customers, but in some
circumstances a change in customers may entail significant transition costs
and/or shutting in or curtailing production for weeks or even months during the
transition to a new customer.

      Stock Based Compensation: The Company records stock-based compensation
expense in accordance with the fair value recognition provisions of US GAAP.
Stock based compensation is measured at the grant date based upon the estimated
fair value of the award and the expense is recognized over the required employee
service period, which generally equals the vesting period of the grant. The fair
value of stock options is estimated using the Black-Scholes-Merton
option-pricing model. The fair value of restricted stock grants is estimated on
the grant date based upon the fair value of the common stock.

      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 is
equivalent to basic earnings per share as all dilutive securities have an
antidilutive effect on earnings per share.. The following dilutive securities
could dilute the future earnings per share:

                                 2010            2009
                              ----------       ---------
Convertible promissory
   notes                       9,942,500              --
Accrued interest                 135,068              --
Warrants(1)                   15,286,466       5,161,466
Employee stock options         4,220,000       4,100,000
                              ----------       ---------
      Total                   29,584,034       9,261,466
                              ==========       =========

       (1) Also as of August 31, 2010 and 2009, 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.

      Income Taxes: Deferred income taxes are recorded 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

                                      F-12

<PAGE>

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. If the Company
concludes that it is more likely than not that some portion or all of the
deferred tax asset will not be realized, the balance of deferred tax assets is
reduced by a valuation allowance.

      The Company adheres to the provisions of the ASC regarding uncertainty in
income taxes. No significant uncertain tax positions were identified as of any
date on or before August 31. 2010. Given the substantial net operating loss
carry-forwards at both the federal and state levels, neither significant
interest expense nor penalties charged for any examining agents' tax adjustments
of income tax returns prior to and including the year ended August 31, 2010 are
anticipated since such adjustments would very likely simply reduce the net
operating loss carry-forwards.

      Recent Accounting Pronouncements: The Company evaluates the pronouncements
of various authoritative accounting organizations, primarily the Financial
Accounting Standards Board ("FASB"), the Securities and Exchange Commission
("SEC"), and the Emerging Issues Task Force ("EITF"), to determine the impact of
new pronouncements on US GAAP and the impact on the Company.

      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 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,
are communicated by the FASB through Accounting Standards Updates ("ASUs"). The
ASC was effective for the Company on September 1, 2009. Adoption of the ASC did
not have an impact on the Company's financial position, results of operations or
cash flows.

The Company has recently adopted the following new accounting standards:

      Oil and Gas Disclosures - See the discussion in Note 2 regarding the
Company's adoption of revised oil and gas disclosures.

      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 by ASU No. 2010-09. The ASU for subsequent

                                      F-13

<PAGE>

events 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 ASC was
effective immediately and its adoption had no impact on the Company's financial
position, results of operations or cash flows.

      Fair value measurements and disclosure - In January 2010 the FASB issued
ASU No. 2010-06 - "Improving Disclosures about Fair Value Measurements". This
update amends existing disclosure requirements to require additional disclosures
regarding fair value measurements, including the amounts and reasons for
significant transfers between Level 1 and Level 2 of the fair value hierarchy.
Furthermore, the reconciliation for fair value measurements using significant
unobservable inputs now requires separate information about purchases, sales,
issuances, and settlements. Additional disclosure is also required about the
valuation techniques and inputs used to measure fair value for both recurring
and nonrecurring measurements. Adoption of this amendment required the Company
to disclose additional fair value information, but otherwise did not have an
impact on the Company's financial position, results of operations, or cash
flows.

      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.

      Derivatives and Hedging - ASU No. 2010-11 was issued in March 2010 and
clarifies that the transfer of credit risk that is only in the form of
subordination of one financial instrument to another is an embedded derivative
feature that should not be subject to potential bifurcation and separate
accounting. This ASU will be effective for the first fiscal quarter beginning
after June 15, 2010, with early adoption permitted, and is expected to be
adopted by the Company effective September 1, 2010.

      Compensation - Stock Compensation - ASU No. 2010-13 was issued in April
2010 and will clarify the classification of an employee share based payment
award with an exercise price denominated in the currency of a market in which
the underlying security trades. This ASU will be effective for the first fiscal
quarter beginning after December 15, 2010, with early adoption permitted.

      There were various other updates recently issued, most of which
represented technical corrections to the accounting literature or were
applicable to specific industries, and are not expected to have a material
impact on the Company's financial position, results of operations or cash flows.

                                      F-14

<PAGE>

2.      Modernization of Oil and Gas Reporting

      On December 29, 2008, the SEC approved new requirements for reporting oil
and gas reserves. The new rule, titled "Modernization of Oil and Gas Reporting"
was effective for annual reporting periods ending on or after December 31, 2009,
and was implemented by the Company effective August 31, 2010. During 2010 the
FASB issued ASU No. 2010-03 and ASU No. 2010-14 to align the ASC with the SEC's
revised rules. 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. Accounting for the
limitation on capitalized costs for full cost companies was also revised,
including the provision that subsequent price increases cannot be considered in
the ceiling test calculation.

      Adoption of the new rule impacted depreciation, depletion, and
amortization expense for the year ended August 31, 2010, as well as the ceiling
test calculation for oil and gas properties as of August 31, 2010. The new rules
further impacted the oil and gas reserve quantities that were estimated by the
reservoir engineer.

      The Company believes that the most significant change in the rules was the
adoption of a new method to estimate selling prices for oil and gas. Under the
new rules prices are determined as an unweighted arithmetic average of the first
day of the month price for each of the preceding twelve months. Under the old
rules, prices were determined as the spot price on the last day of the reporting
period. For the year ended August 31, 2010, the Company used estimated prices of
$69.20 per barrel of oil and $4.76 per Mcf of gas. Had the old rules been
applied as of August 31, 2010, the prices would have been $64.43 per barrel of
oil and $4.47 per Mcf of gas.

      The adoption of the new rules is considered a change in accounting
principle inseparable from a change in accounting estimate. The Company does not
believe that provisions of the new guidance, other than pricing, significantly
impacted the financial statements. The Company does not believe that it is
practicable to estimate the effect of applying the new rules on net loss or the
amount recorded for depreciation, depletion and amortization for the year ended
August 31, 2010.

3.      Accounts Receivable

      Accounts receivable consist primarily of trade receivables from oil and
gas sales and amounts due from other working interest owners which have been
billed for their proportionate share of wells which the Company operates. For
receivables from joint interest owners, the Company typically has the right to
withhold future revenue disbursements to recover outstanding joint interest
billings. As of August 31, 2010 and 2009, major customers (i.e. those with
balances greater than 10% of total receivables) are shown in the following
table.

                                      F-15

<PAGE>

                                                        As of August 31,
                                                  --------------------------
  Accounts Receivable from Major Customers            2010           2009
  ---------------------------------------         -------------  -----------
   Company A                                            *            100%
   Company D                                           27%             *

*  less than 10%

4.     Property and Equipment

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

                                                     As of August 31,
                                               -----------------------------
                                                    2010           2009
                                               --------------  -------------
Oil and gas properties, full cost method:
   Unevaluated costs, not subject to
     amortization:
      Lease acquisition costs                    $  848,696     $  420,478
                                                                           
   Evaluated costs:
      Producing and non-producing                12,992,594        689,779
                                                -----------     ----------
         Total capitalized costs                 13,841,290      1,110,257 
      Less, accumulated depletion                (1,149,096)      (456,822)
                                                -----------     ----------
            Oil and gas properties, net          12,692,194        653,435

Other property and equipment:
    Vehicles                                         89,527             --
    Leasehold improvements                           32,329             --
    Office equipment                                 36,821          1,337
    Less, accumulated depreciation                   (7,888)          (296)
                                                -----------     ----------
            Other property and equipment, net       150,789          1,041
                                                -----------     ----------
Total property and equipment, net               $12,842,983      $ 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 years ended August 31, 2010 and 2009, depletion of oil
and gas properties was $692,274 and $97,309, respectively, which is equivalent
to $15.52 and $39.54 per barrel of oil, respectively.

      Periodically, the Company reviews its unevaluated properties and its
inventory to determine if the carrying value of either asset exceeds its market
value. The review for the year ended August 31, 2009, indicated that the market
value of tubular goods was less than the carrying value and the excess carrying
value of $585,566 was reclassified to the full cost pool to be amortized and
included in the ceiling test. The review for the year ended August 31, 2010,
indicated that asset carrying values were less than market values and no
reclassification was required.

                                      F-16

<PAGE>

      On a quarterly basis the Company performs the full cost ceiling test. As a
result of the ceiling test performed for the year ended August 31, 2009, the
Company recorded an impairment provision of $945,079, including $585,566 related
to tubular goods and $359,513 related to oil and gas properties. The ceiling
tests performed during the year ended August 31, 2010, did not reveal any
impairments.

      For the years ended August 31, 2010 and 2009, depreciation of other
property and equipment was $7,592 and $296, respectively.

5.     Bank Loan Payable

      In May 2009 the Company arranged a credit facility with a commercial bank
that provided for maximum borrowings up to $1,161,811. Proceeds from the
borrowing were used to purchase pipe used to drill and complete oil and gas
wells and the borrowing was collateralized primarily by the pipe. In April 2010
the outstanding balance was paid in full. The credit facility bore interest at
the prime rate plus 0.5% with a minimum interest rate of 5.5%. Interest costs
related to the credit facility of $30,387 and $25,442 were incurred during the
years ended August 31, 2010 and 2009, respectively.

6.     Asset Retirement Obligations

      During the year ended August 31, 2010, the Company drilled 36 wells and
will have asset removal obligations once the assets are permanently removed from
service. The primary obligations involve the removal and disposal of surface
equipment, plugging and abandoning the wells, and site restoration. For the
purpose of determining the fair value of ARO incurred during the year ended
August 31, 2010, the Company assumed an inflation rate of 5%, an estimated asset
life of 24 years, and a credit adjusted risk free interest rate of 10.53%.

      The following table summarizes the change in asset retirement obligations
for the year ended August 31, 2010:

        Balance, August 31, 2009                   $       --
          Liabilities incurred                        253,114
          Liabilities settled                              --
          Accretion                                     1,534
          Revisions in previous estimates                  --
                                                   -----------
        Balance, August 31, 2010                     $254,648
                                                   ===========

                                      F-17

<PAGE>

7.     Convertible Promissory Notes and Derivative Conversion Liability

      Between December 29, 2009, and March 12, 2010, the Company received gross
proceeds of $18,000,000 from the sale of 180 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 Series C warrants (collectively referenced as a
"Unit"). The Notes bear interest at 8% per year, payable quarterly, and mature
on December 31, 2012, unless earlier converted by the Note holders or repaid by
the Company. Each Series C 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.

      Net cash proceeds of $16,651,023 from the sale of the Units are being used
primarily to drill and complete oil and gas wells in the Wattenburg field,
located in the Denver-Julesburg Basin. The Notes are collateralized by any oil
and gas wells drilled, completed, or acquired with the proceeds from the
offering.

      The Notes are considered hybrid debt instruments containing a detachable
warrant and a conversion feature under which the proceeds of the offering are
allocated to the detachable warrants and the conversion feature based on their
fair values. The warrants were determined to be a component of equity, and the
fair value of the warrants was recorded as additional paid in capital. Since the
warrants were recorded as a component of equity, the fair value of $1,760,048
was estimated at inception and will not be re-measured in future periods. The
Notes contain a conversion feature, at an initial conversion price of $1.60 and
subject to adjustment under certain circumstances, which allow the Note holders
to convert the principal balance into a maximum of 11,250,000 common shares,
plus conversion of accrued and unpaid interest into common shares, also at $1.60
per share. The conversion feature was determined to be an embedded derivative
requiring the conversion option to be separated from the host contract and
measured at its fair value. The conversion option will continue to be recorded
at fair value each reporting period until settlement or conversion, with changes
in the fair value reflected in other income (expense) in the statements of
operations. The fair value of the conversion feature was recorded as derivative
conversion liability.

      As of March 12, 2010, the estimated fair value of the Series C warrants
was $1,760,048. The estimated fair value of the conversion feature was
$3,455,809. Allocation of value to the components upon issuance of the Notes
resulted in a debt discount of $5,215,857, which will be accreted over the 36
month life of the Notes using the effective interest method. The effective
interest rate on the Notes is 19%. The Company recorded accretion expense of
$1,333,590 during the year ended August 31, 2010, which included the effect of
accelerated accretion on early Note conversions. .

      In connection with the sale of the Units, the Company paid fees and
expenses of $1,348,977 and issued 1,125,000 Series D warrants to the placement
agent. The Series D warrants have an exercise price of $1.60 and an expiration
date of December 31, 2014. The warrants were valued at $692,478 using the
Black-Scholes-Merton option pricing model. The Company recorded $2,041,455 of
debt issuance costs, which will be amortized over the three year term of the
Notes. Amortization expense of $453,656 was recorded during the year ended
August 31, 2010.

                                      F-18

<PAGE>

      During the fourth quarter of 2010, holders of Convertible Promissory Notes
with a face amount of $2,092,000 plus accrued interest of $2,438 elected to
convert the Notes into 1,309,027 shares of common stock at the conversion price
of $1.60 per share. At the time the Notes were converted, the estimated fair
value of the derivative conversion liability apportioned to the converted Notes
totaled $1,809,149, which was reclassified from derivative conversion liability
to additional paid in capital. Similarly, the unamortized debt discount
apportioned to the converted Notes totaled $488,816. The unamortized debt
discount of $323,604 applicable to the conversion option was charged to
accretion of debt discount and the unamortized debt discount of $165,212
applicable to the warrants was reclassified from debt discount to additional
paid in capital. As of August 31, 2010, Notes with a principal amount of
$15,908,000 were outstanding and the debt discount balance was $3,717,055.

      The fair value of the derivative conversion liability is adjusted each
quarter to reflect the change in value. The estimated fair value of the
derivative conversion liability as of August 31, 2010, was $9,325,117, an
increase in fair value of $7,678,457, which was recorded as a change in value of
derivative liability since issuance of the Notes.

8.     Fair Value Measurements

      Assets and liabilities are measured at fair value on a recurring basis for
disclosure or reporting, as required by ASC "Fair Value Measurements and
Disclosures".

      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.

                                      F-19

<PAGE>

      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
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.

      For the most part, the Company's financial instruments consisted of cash
and equivalents, accounts receivable, accounts payable, accrued liabilities, and
bank loan. Due to the short original maturities and high liquidity of cash and
equivalents, accounts receivable, accounts payable, and accrued liabilities,
carrying amounts approximated fair values. The $1,161,811 carrying amount of the
bank loan payable at August 31, 2009, approximated fair value since borrowings
bore interest at variable rates.

      During the year ended August 31, 2010, the Company sold Note Units (See
Note 7), that contained fair value elements. As neither the underlying debt nor
the warrants are traded on a public market, the Company developed a methodology
to estimate fair value.

      The Company estimated the fair value of the warrants and the conversion
feature of the Notes at inception by using the Black-Scholes-Merton
option-pricing model. The following assumptions were the same for both
components: volatility of 55%, dividend yield of 0%, and interest rate of 1.5%.
The expected term of the derivative conversion liability is 1.5 years and the
expected term of the warrants is 5 years. The Black-Scholes-Merton option
pricing model also requires an assumption about the fair value of the Company's
common stock. It was concluded upon issuance of the Notes that the Company's
stock traded in an illiquid market, and the reported sales prices may not
represent fair value. As a result, a model that estimated the enterprise value
of the Company based upon oil and gas reserve estimates was used to place a
value of $1.39 on the Company's common stock. As the inputs into this model are
not observable in the marketplace, the results are considered a Level 3
valuation.

      As the warrants were recorded as a component of equity, their derived fair
values of the Series C warrants issued with the Notes were assigned a value of
$1,760,048. The fair values of the Series C warrants were estimated at inception
and will not be re-measured in future periods. The Series D warrants issued to
the placement agent were recorded at their estimated fair value of $692,478. The
estimated fair value of the conversion feature classified as a long-term
liability on the balance sheet was $3,455,809, and is re-measured each reporting
period with the resulting change included as a component of other expense in the
determination of net income (loss).

     Subsequent  to the  valuation  at  inception,  the model  used to value the
derivative conversion liability was changed from the Black-Scholes-Merton option
pricing model to a Monte Carlo Simulation (MCS) model, as permitted by ASC "Fair
Value   Measurements  and  Disclosures"   provided  that  change  results  in  a
measurement  that  is  equally  or more  representative  of  fair  value  in the
circumstances.  The Company believes the MCS model provides a more robust method
to determine estimates of the future share prices of the Company's common stock,
which is a significant input to the calculation. Further, the use of a MCS model
allows the use of stochastic  methodology  which allows for simulations when the


                                      F-20

<PAGE>

payoff  depends upon the path followed by the  underlying  variable,  i.e.,  the
common  stock price.  Payoffs can occur at several  times during the life of the
conversion  feature rather than at the end of its life. Inputs to this valuation
technique include  over-the-counter forward pricing and volatilities for similar
liabilities in active markets as well as credit risk  considerations,  including
the  incorporation  of  published   interest  rates  and  credit  spreads.   The
assumptions  used were:  an expected  term of 2.3 years,  volatility  of 53.07%,
which was derived  from the expected  volatility  of the  Company's  peer group,
dividend  yield of 0%, and a discount rate of 6.64%.  Upon  evaluation of recent
trading of the Company's  common stock during the quarter ended August 31, 2010,
the preponderance of evidence indicated that the market for the Company's common
stock had become  both active and  orderly.  As a result,  the Company  used the
reported  closing  price of the common  stock as a variable  in the MCS model to
value the  derivative  conversion  liability  during the period ended August 31,
2010.  All  of  the  significant  inputs  are  observable,  either  directly  or
indirectly; therefore, the Company's derivative conversion liability is included
within the Level 2 fair value hierarchy.

      The change in valuation technique, which is considered a change in
accounting estimate by the ASC, also represents a change in the categorization
of the valuation from Level 3 to Level 2. The revaluation using this new
technique resulted in an increase in derivative conversion liability by
approximately $300,000, which was included in the change in the fair value of
derivative liability reported as other expense in the statement of operations
for the year ended August 31, 2010.

      The derivative conversion liability is re-measured each quarter to reflect
the change in fair value. The estimated fair value of the derivative conversion
liability as of August 31, 2010, was $9,325,117, an increase in fair value of
$7,678,457 since issuance of the Notes.

      The following table sets forth by level within the fair value hierarchy
the Company's financial assets and financial liabilities as of August 31, 2010,
that were measured at fair value on a recurring basis.

                           As of
                         August 31,
                            2010         Level 1       Level 2        Level 3
                        ------------  ------------  -------------  ------------
Derivative Conversion                   $     --
   Liability            $9,325,117            --      $9,325,117     $     --

      The Company also measures all nonfinancial assets and liabilities that are
not recognized or disclosed on a recurring basis. As discussed in Note 6, the
recognition of asset retirement obligations totaling $254,648 was necessary at
August 31, 2010, the value of which was determined using Level 3 inputs. The
estimated fair value of the obligations was determined using several assumptions
and judgments about the ultimate settlement amounts, inflation factors, credit

                                      F-21

<PAGE>

adjusted discount rates, timing of settlement, and changes in regulations.
Changes in estimates are reflected in the obligations as they occur.

9.     Related Party Transactions and Commitments
 
      The Company's executive officers control three entities that have entered
into agreements to provide various services and office space to the Company as
well as an option to acquire certain oil and gas interests. The entities are
Petroleum Management, LLC ("PM"), Petroleum Exploration and Management, LLC
("PEM"), and HS Land & Cattle, LLC ("HSLC").

      Effective June 11, 2008, the Company entered into an Administrative
Services Agreement with PM. The Company paid $10,000 per month for leasing
office space and an equipment yard located in Platteville, Colorado, and paid
$10,000 per month for office support services including secretarial service,
word processing, communication services, office equipment and supplies. The
Company paid $206,667 and $240,000 under this agreement for the years ended
August 31, 2010 and 2009, respectively. Effective June 30, 2010, the Company
terminated the 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
expired on August 31, 2010. As of August 31, 2010, the Company had exercised its
options on all available leases at a total cost of $360,000.

      Effective July 1, 2010, the Company entered into a lease with HSLC, for
office space and an equipment yard located in Platteville, Colorado. The lease
requires monthly payments of $10,000 and terminates on June 30, 2011. The
Company paid $20,000 under this agreement for the year ended August 31, 2010.

       On June 1, 2008, the Company entered into an agreement with Energy
Capital Advisors, an entity related through common ownership interests. Energy
Capital Advisors provided certain services directly related to raising
additional capital for the Company. Compensation under the agreement was $30,000
per month through December 31, 2008, and $10,000 per month from January 1, 2009
to May 31, 2009, when the agreement terminated. During the year ended August 31,
2009, the Company paid $170,000 related to this agreement.

      During the year ended August 31, 2009, the Company had a consulting
agreement with two directors under which the Company paid $120,000.

      In addition to the transactions described above, the Company undertook
various activities with PM and PEM that are related to the development and
operation of oil and gas properties. The Company purchased certain oil and gas
equipment, such as tubular goods and surface equipment, from PM. The Company
reimbursed PM for the original cost of the equipment. PEM is a joint working

                                      F-22

<PAGE>

interest owner of certain wells operated by the Company. PEM is charged for
their pro-rata share of costs and expenses incurred on their behalf by the
Company, and similarly PEM is credited for their pro-rata share of revenues
collected on their behalf. The following table summarizes the transactions with
PM and PEM during each of the two years ended August 31, 2010 and 2009:

                                           Year Ended August 31,
                                      -----------------------------
                                           2010            2009
                                      --------------  -------------
Purchase of equipment from PM            $1,070,495    $ 1,718,967
Payments to PM for equipment               (531,797)    (1,718,967)
                                      -------------    -----------
Balance due to PM for equipment          $  538,698    $        --
                                      =============    ===========

Joint interest costs billed to PEM        1,629,895    $        --
Amounts collected from PEM                 (762,060)            --
                                      -------------    -----------
Joint  interest  billing  due from
  PEM                                    $  867,835    $        --
                                      =============    ===========
Revenues  collected  on  behalf of
  PEM                                    $  167,499    $        --
Payments to PEM                            (151,528)            --
                                      -------------    -----------
Balance due to PEM for revenues          $   15,971    $        --
                                      =============    ===========

10.     Shareholders' Equity

      Preferred Stock: The Company has authorized 10,000,000 shares of preferred
stock with a par value of $0.01 per share. These shares may be issued in series
with such rights and preferences as may be determined by the Board of Directors.
Since inception, the Company has not issued any preferred shares.

      Common Stock: The Company has authorized 100,000,000 shares of common
stock with a par value of $0.001 per share.

      Issued and Outstanding: The total issued and outstanding common stock at
August 31, 2010, is 13,510,981 common shares, as follows:

     i.   Effective June 11, 2008, the Company issued 7,900,000 common shares to
          its founders at $0.001 per share, for aggregate proceeds of $7,900.

     ii.  Pursuant to a Private Offering Memorandum dated June 20, 2008, the
          Company sold 1,000,000 units at $1.00 per unit. Each unit consists of
          one share of restricted common stock and one Series A warrant that
          entitles the holder to purchase one share of common stock at $6.00 per
          share through December 31, 2012.

     iii.Pursuant to a Private Offering Memorandum dated July 16, 2008, the
         Company sold 1,060,000 units at $1.50 per unit for total cash proceeds
         of $1,590,000. Each unit consists of one share of restricted common
         stock and one Series A warrant that entitles the holder to purchase one
         share of common stock at $6.00 per share through December 31, 2012.

                                      F-23

<PAGE>

     iv. Effective September 10, 2008, the Company agreed to issue 1,038,000
         common shares to the shareholders of Predecessor Brishlin, on an
         exchange basis of one share of Synergy common stock for each share of
         Brishlin common stock. In addition, the shareholders of Predecessor
         Brishlin received 1,038,000 Series A warrants that entitle the holder
         to purchase one share of common stock at $6.00 per share through
         December 31, 2012.

     v.  Effective December 1, 2008, the Company repurchased 1,000,000 shares of
         its common stock from one of the original Predecessor Synergy
         shareholders for $1,000, the price at which the shares were originally
         sold to the shareholder.

     vi. Pursuant to a Private Offering Memorandum dated December 1, 2008, the
         Company sold 1,000,000 units at $3.00 per unit for total cash proceeds
         of $3,000,000. Offering costs associated with the offering aggregated
         $285,600, resulting in net cash proceeds of $2,714,400. Each unit
         consists of two shares of common stock, one Series A warrant and one
         Series B warrant. 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. 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.

     vii.During the quarter ended August 31, 2010, the Company issued 1,309,027
         common shares pursuant to the conversion of Notes in the principal
         amount of $2,092,000 plus accrued interest of $2,438. The contractual
         conversion price is $1.60 per share.

     viii. Pursuant to an agreement dated June 25, 2010, the Company issued
          5,966 common shares in exchange for mineral leases. The transaction
          was recorded at a value of $16,645 based upon the closing price of the
          Company's common stock on June 25, 2010.

     ix.  As partial compensation to its Directors, the Company issued 197,988
          common shares on July 12, 2010. The transaction was recorded at a
          value of $544,575 based upon the closing price of the Company's common
          stock on July 12, 2010.

      In addition to the warrant issuances described in the preceding
paragraphs, 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,
described in item vi. above) at a price of $3.60. Each unit consisted 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 Company presents the placement agent warrants as 63,466 shares at an

                                      F-24

<PAGE>

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 Note 12.

      Pursuant to an Offering Memorandum dated November 27, 2009, the Company
sold 180 convertible promissory note units at $100,000 per unit. (See Note 7.)
Each unit consists of one convertible promissory note and 50,000 Series C
warrants. Each Series C warrant entitles the holder to purchase one share of
common stock at a price of $6.00 per share and warrants were issued to purchase
an aggregate of 9,000,000 common shares. The Series C warrants expire on
December 31, 2014. In connection with this transaction, the Company issued
1,125,000 Series D warrants to the placement agent. The Series D warrants are
exercisable at a price of $1.60 per share and expire on December 31, 2014.

      The following table summarizes activity for common stock warrants for each
of the two years ended August 31, 2010:

                                    Number of      Weighted average
                                    warrants        exercise price
                                   ----------      ----------------
Outstanding, August 31, 2008        2,043,571            $6.00
Granted                             3,117,895            $7.20
Exercised                                  --
                                   ----------
Outstanding, August 31, 2009        5,161,466            $6.72
Granted                            10,125,000            $5.51
Exercised                                  --
                                   ----------
Outstanding, August 31, 2010       15,286,466            $5.92
                                   ==========

      The following table summarizes information about the Company's issued and
outstanding common stock warrants as of August 31, 2010:


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

   $ 1.60              1,125,000           4.3                 $ 1,800,000
   $ 1.80                 63,466           2.3                     114,239
   $ 6.00              4,098,000           2.3                  24,588,000
   $ 6.00              9,000,000           4.3                  54,000,000
   $10.00              1,000,000           2.3                  10,000,000
                      ----------                            --------------
                      15,286,466           3.7                 $90,502,239
                    ================                        ==============

11.     Stock Based Compensation

      The Company accounts for stock option activities as provided by ASC "Stock
Compensation," which requires the Company to expense as compensation the value

                                      F-25

<PAGE>

of grants and options as determined in accordance with the fair value based
method prescribed in the guidance. The Company estimates the fair value of each
stock option at the grant date by using the Black-Scholes-Merton option-pricing
model.

      The Company recorded stock-based compensation expense of $581,233 and
$10,296,521 for the years ended August 31, 2010 and 2009, respectively. The
components of the expense for the year ended August 31, 2010 include stock
grants of $544,575 to directors and option-based compensation of $36,658.

      During June 2008 stock options were granted to purchase 4,000,000 shares
of common stock. Effective June 11, 2008, grants covering 2,000,000 shares were
issued to the executive officers at an exercise price of $10.00 and a term of
five years, and these options will vest over a one year period. The fair value
of these options was determined to be nil based upon the following assumptions:
expected life of 2.5 years, stock price of $1.00 at date of grant, nominal
volatility, dividend yield of 0%, and interest rate of 2.63%. Effective June 30,
2008, grants covering an additional 2,000,000 shares were issued to the
executive officers at an exercise price of $1.00 and a term of five years, and
these options will vest over a one year period. Based upon a fair value
calculation, these options were determined to have a value of $127,000 using the
following assumptions: expected life of 2.5 years, stock price of $1.00 at date
of grant, nominal volatility, dividend yield of 0%, and interest rate of 2.63%.
Stock option compensation expense of $98,800 was recorded for the year ended
August 31, 2009.

      In connection with the merger, the Company agreed to issue stock option
grants covering 4,000,000 shares to replace the similar options described in the
preceding paragraph. Using the Black-Scholes-Merton option-pricing model, the
Company estimated that the fair value of the replacement options exceeded the
fair value of the options surrendered by $10,185,345. The assumptions used in
the model were: expected life of 2.5 years, stock price of $3.50 at date of
grant, volatility of 166%, dividend yield of 0%, and interest rate of 2.63%. The
incremental expense of $10,185,345 was recorded as stock option compensation
expense for the year ended August 31, 2009.

      Effective December 31, 2008, the Company granted stock options to an
employee to purchase 100,000 shares of common stock at an exercise price of
$3.00 and a term of ten years. These options vest over a five year period. Based
on a fair value calculation, these options were determined to have a value of
$185,640 using the following assumptions: expected life of 5 years, stock price
of $2.00 at date of grant, volatility of 166%, dividend yield of 0%, and
interest rate of 3.13%. Stock option compensation expense of $24,768 and $12,376
were recorded for the years ended August 31, 2010 and 2009, respectively, based
on a pro-ration of the fair value over the vesting period.

      Effective July 1, 2010, the Company granted stock options to employees to
purchase 120,000 shares of common stock at an exercise price of $2.50 and a term
of ten years. The options vest over various periods ranging from two to five
years. Based on a fair value calculation, these options were determined to have
a value of $155,544 using the following assumptions: expected life of 5.875
years, stock price of $2.52 at date of grant, volatility of 53.18%, dividend

                                      F-26

<PAGE>

yield of 0%, and interest rate of 2.08%. Stock option compensation expense of
$11,890 was recorded for the year ended August 31, 2010, based on a pro-ration
of the fair value over the vesting period.

      The estimated unrecognized compensation cost from unvested stock options
as of August 31, 2010, was approximately $292,000, substantially all of which
will be recognized during the next two years.

      The following table summarizes activity for stock options for each of the
two years ended August 31, 2010:

                                            Number          Weighted average
                                           of shares         Exercise price
                                           ---------       ----------------
      Outstanding August 31, 2008          4,000,000            $5.50
      Granted                                100,000            $3.00
      Exercised                                   --
                                           ---------
      Outstanding August 31, 2009          4,100,000            $5.44
      Granted                                120,000            $2.50
      Exercised                                   --
                                           ---------
      Outstanding, August 31, 2010         4,220,000            $5.36
                                           =========

      The following table summarizes information about outstanding stock options
as of August 31, 2010:

                             Remaining     Weighted
                            Contractual    Average                    Aggregate
  Exercise      Number        Life (in     Exercise    Number         Intrinsic
   Prices       of Shares      years)        Price     Exercisable      Value
-------------   ----------  -------------  ----------  -------------------------

   $10.00       2,000,000       2.8         $10.00      2,000,000             --
   $1.00        2,000,000       2.8          $1.00      2,000,000     $2,500,000
   $3.00          100,000       8.3          $3.00         10,000             --
                                                                              --
   $2.50          120,000       9.8          $2.50             --
                ----------                             -----------   -----------
                4,220,000       3.1          $5.36      4,010,000     $2,500,000
                ==========                             ===========   ===========

12.     Commitments and Contingencies

      On June 1, 2010, Synergy entered into new employment agreements with its
executive officers. The employment agreements, which expire on May 31, 2013,
provide that Synergy will pay each executive officer a monthly salary of
$25,000. As additional consideration, the officers will receive shares of the
Company's common stock valued at $100,000 based on the average closing price of
our stock for the previous 20 trading days for every 50 wells that begin
production after June 1, 2010.

                                      F-27

<PAGE>

      The placement agent warrants issued in connection with the Private
Offering Memorandum dated December 1, 2008, entitle the holder to purchase units
consisting of common stock and warrants. 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.

13.     Income Taxes

      The components of the provision for income tax expense (benefit) consist
of the following:

                               Years Ended August 31,
                             ---------------------------
                                 2010          2009
                             -------------  ------------
Current income taxes         $        --    $        --
Deferred income taxes         (3,994,000)    (4,572,000)
Valuation allowance            3,994,000      4,572,000
                             -----------    -----------
  Total tax benefit          $        --    $        --
                             ===========    ===========


      The change in the valuation allowance from August 31, 2009 to August 31,
2010, includes, as a reconciling item, the $1,515,000 tax effect of amounts
reclassified to equity from the liability as part of the allocation of fair
value from the proceeds of the financing transaction and the corresponding
offset benefit from the release of the valuation allowance.

      The tax effects of temporary differences that give rise to significant
components of the deferred tax assets and deferred tax liabilities at August 31,
2010 and 2009, are presented below:

                                                    As of August 31,
                                              -----------------------------
                                                  2010            2009
                                              -------------   -------------
      Deferred tax assets:
          Net operating loss carry-forward     $3,838,000     $    481,000
          Stock-based compensation              3,834,000        3,820,000
          Convertible promissory notes          1,876,000               --
          Basis of oil and gas properties              --          357,000
          Other                                    10,000           10,000
          Less: valuation allowance            (7,147,000)      (4,668,000)
                                              -----------     ------------
              Subtotal                          2,411,000               --
                                              -----------     ------------

      Deferred tax liabilities:
          Basis of oil and gas properties      (2,411,000)              --
                                              -----------     ------------
              Subtotal                         (2,411,000)              --
                                              -----------     ------------
                      Total                   $        --     $         --
                                              ===========     ============

                                      F-28

<PAGE>

      A reconciliation of expected federal income taxes on income from
continuing operations at statutory rates with the expense (benefit) for income
taxes is follows:

                                         Years Ended August 31,
                                      -----------------------------
                                          2010            2009
                                      -------------   -------------
Pre-tax book net income               $ (3,670,000)   $ (4,200,000)
State taxes                               (324,000)       (372,000)
Change in valuation allowance            3,994,000       4,572,000
                                      ------------    ------------
                                      $         --    $         --
                                      ============    ============

      At August 31, 2010, the Company has a net operating loss carry-forward for
federal and state tax purposes of approximately $10,374,000 that could be
utilized to offset taxable income of future years. Substantially all of the
carry-forward will expire in 2029 and 2030.

      The realization of the deferred tax assets related to the net operating
loss carryforward is dependent upon the Company's ability to generate future
taxable income. Given the Company's history of operating losses since inception,
it cannot be assumed that the generation of future taxable income is more likely
than not. The ability of the Company to utilize net operating loss
carry-forwards may be further limited by other provisions of the Internal
Revenue Code. The utilization of such carry-forwards may be limited upon the
occurrence of certain ownership changes, including the purchase or sale of stock
by 5% shareholders and the offering of stock by the Company during any
three-year period resulting in an aggregate change of more than 50% in the
beneficial ownership of the Company. In the event of an ownership change,
Section 382 of the Code imposes an annual limitation on the amount of a
Company's taxable income that can be offset by these carry-forwards.

      Accordingly, the Company has established a full valuation allowance
against the deferred tax assets.

14.     Supplemental Schedule of Information to the Statements of Cash Flows

      The following table supplements the cash flow information presented in the
financial statements for the years ended August 31, 2010 and 2009:

                                                Year Ended August 31,
                                               -------------------------
                                                  2010         2009
                                               ------------ ------------
Supplemental cash flow information:
    Interest paid                               $  617,017      $ 5,325
    Income taxes paid                                   --           --

Non-cash investing and financing activities:
    Conversion of promissory notes into
      common stock                              $2,092,000      $    --
    Accrued capital expenditures                 3,446,439           --
    Warrants issued to placement agent             692,478           --
    Asset retirement costs and obligations         253,114           --
    Shares issued for mineral leases                16,645           --
    Net assets acquired in merger                       --       11,675

                                      F-29

<PAGE>


15.     Supplemental Oil and Gas Information (unaudited)

      Costs Incurred: Costs incurred in oil and gas property acquisition,
exploration and development activities for the years ended August 31, 2010 and
2009, were:

                                   Years Ended August 31,
                               --------------------------
                                   2010           2009
                               -----------    -----------
Acquisition of Property:
    Unproved                   $ 1,530,221    $   420,478
    Proved                              --             --
Exploration costs                       --             --
Development costs               10,360,516      2,408,030
Capitalized internal costs          95,475             --
                               -----------    -----------
  Total Costs Incurred         $11,986,212    $ 2,828,508
                               ===========    ===========

      Capitalized Costs Excluded from Amortization: The following table
summarizes costs related to unevaluated properties that have been excluded from
amounts subject to depletion, depreciation, and amortization at August 31, 2010.
There were no individually significant properties or significant development
projects included in the Company's unevaluated property balance. The Company
regularly evaluates these costs to determine whether impairment has occurred.
The majority of these costs are expected to be evaluated and included in the
amortization base within three years.

                                           Period Incurred          As of
                                        Year Ended August 31,    August 31,
                                        -----------------------  ------------
                                          2010         2009         2010
                                        ----------  -----------  ------------
       Unproved leasehold acquisition
          costs                         $  554,739  $  293,957    $  848,696
       Unevaluated development costs            --          --            --
                                        ----------  -----------  ------------
           Total                        $  554,739  $  293,957    $  848,696
                                        ==========  ===========  ============

      Oil and Natural Gas Reserve Information: Proved reserves are the estimated
quantities of crude oil, natural gas, and natural gas liquids which geological
and engineering data demonstrate with reasonable certainty to be recoverable in
future years from known reservoirs under existing economic and operating
conditions (prices and costs held constant as of the date the estimate is made).
Proved developed reserves are reserves that can be expected to be recovered
through existing wells with existing equipment and operating methods. Proved
undeveloped reserves are reserves that are expected to be recovered from new
wells on undrilled acreage, or from existing wells where a relatively major
expenditure is required for recompletion.

                                      F-30

<PAGE>

      Proved oil and natural gas reserve information at August 31, 2010 and
2009, and the related discounted future net cash flows before income taxes are
based on estimates prepared by Ryder Scott Company LP. Reserve information for
the properties was prepared in accordance with guidelines established by the
SEC.

      The reserve estimates as of August 31, 2010, were prepared in accordance
with "Modernization of Oil and Gas Reporting" published by the SEC. The new
guidance included updated definitions of proved developed and proved undeveloped
oil and gas reserves, oil and gas producing activities and other terms. Proved
oil and gas reserves as of August 31, 2010, were calculated based on the prices
for oil and gas during the 12 month period before the reporting date, determined
as the unweighted arithmetic average of the first day of the month price for
each month within such period, rather than the year-end spot prices, which had
been used in prior years. This average price is also used in calculating the
aggregate amount and changes in future cash inflows related to the standardized
measure of discounted future cash flows. Undrilled locations can be classified
as having proved undeveloped reserves only if a development plan has been
adopted indicating that they are scheduled to be drilled within five years. The
new guidance broadened the types of technologies that may be used to establish
reserve estimates. Prior period data presented throughout Note 15 is not
required to be, nor has it been, updated based upon the new guidance.

      The following table sets forth information regarding the Company's net
ownership interests in estimated quantities of proved developed and undeveloped
oil and gas reserve quantities and changes therein for the years ended August
31, 2010 and 2009:

                                             Oil (Bbl)       Gas (Mcf)
                                           -----------      ----------
Balance, August 31, 2008                            --              --
  Revision of previous estimates                    --              --
  Purchase of reserves in place                     --              --
  Extensions, discoveries, and other
    additions                                    8,160          30,066
  Sale of reserves in place                         --              --
  Production                                    (1,730)         (4,386)
                                         --------------  --------------
Balance, August 31, 2009                         6,430          25,680
  Revision of previous estimates                 4,318          24,844
  Purchase of reserves in place                     --              --
  Extensions, discoveries, and other
    additions                                  687,017       4,571,680
  Sale of reserves in place                         --              --
  Production                                   (21,080)       (141,154)
                                         --------------  --------------
Balance, August 31, 2010                       676,685       4,481,051
                                         ==============  ==============

Proved developed and undeveloped reserves:
  Developed at August 31, 2009                   6,430          25,680
  Developed at August 31, 2010                 395,453       2,349,027
  Undeveloped at August 31, 2010               281,232       2,132,024


                                      F-31

<PAGE>

      Standardized Measure of Discounted Future Net Cash Flows: The following
analysis is a standardized measure of future net cash flows and changes therein
related to estimated proved reserves. Future oil and gas sales have been
computed by applying average prices of oil and gas for August 31, 2010, and the
year-end spot prices for August 31, 2009. Future production and development
costs were computed by estimating the expenditures to be incurred in developing
and producing the proved oil and gas reserves at the end of the year, based on
year-end costs. The calculation assumes the continuation of existing economic
conditions, including the use of constant prices and costs. Future income tax
expenses were calculated by applying year-end statutory tax rates, with
consideration of future tax rates already legislated, to future pretax cash
flows relating to proved oil and gas reserves, less the tax basis of properties
involved and tax credits and loss carry-forwards relating to oil and gas
producing activities. All cash flow amounts are discounted at 10% annually to
derive the standardized measure of discounted future cash flows. Actual future
cash inflows may vary considerably, and the standardized measure does not
necessarily represent the fair value of the Company's oil and gas reserves.
Actual future net cash flows from oil and gas properties will also be affected
by factors such as actual prices the Company receives for oil and gas, the
amount and timing of actual production, supply of and demand for oil and gas,
and changes in governmental regulations or taxation.

      The following table sets forth the Company's future net cash flows
relating to proved oil and gas reserves based on the standardized measure
prescribed in the ASC:

                                                   Year Ended August 31,
                                           ----------------------------------
                                                  2010               2009
                                           ---------------      -------------
    Future cash inflows                      $ 68,167,917       $   446,485
    Future production costs                   (19,877,331)         (141,134)
    Future development costs                  (15,836,965)               --
    Future income tax expense                  (6,926,890)               --
                                             ------------       -----------
    Future net cash flows                      25,526,731           305,351
      10% annual discount for
      estimated timing of cash
      flows                                   (12,504,334)          (72,394)
                                             ------------       -----------
    Standardized measure of
      discounted future net cash
      flows                                  $ 13,022,397       $   232,957
                                             ============       ===========


      There have been significant fluctuations in the posted prices of oil and
natural gas during the last two years. Prices actually received from purchasers
of the Company's oil and gas are adjusted from posted prices for location
differentials, quality differentials, and BTU content. Estimates of the
Company's reserves are based on realized prices. The following table presents
the prices used to prepare the estimates, based upon average prices for the year
ended August 31, 2010, and year-end spot prices for the year ended August 31,
2009:

                                      F-32

<PAGE>

                                            Natural Gas          Oil
                                              (Mcf)             (Bbl)
                                            -----------         -----
          August 31, 2009 (Spot Price)        $2.05            $61.24
          August 31, 2010 (Average)           $4.76            $69.20


      Changes in the Standardized Measure of Discounted Future Net Cash Flows:
The principle sources of change in the standardized measure of discounted future
net cash flows are:

                                                    Year Ended August 31,
                                               --------------------------------
                                                    2010               2009
                                               -------------      -------------
Standardized measure, beginning of year         $   232,957        $       --
Sale and transfers, net of production
   costs                                         (1,834,924)          (82,549)
Net changes in prices and production
   costs                                            131,153                --
Extensions, discoveries, and improved
   recovery                                      17,785,154           315,506
Changes in estimated future development
   costs                                                 --                --
Development costs incurred during the
   period                                                --                --
Revision of quantity estimates                      212,851                --
Accretion of discount                                30,535                --
Net change in income taxes                       (3,535,329)               --
Purchase of reserves in place                            --                --
Sale of reserves in place                                --                --
Other                                                    --                --
                                                -----------     -------------
Standardized measure, end of year               $13,022,397        $  232,957
                                                ============    =============

15.     Subsequent Events

      The Company evaluated all events subsequent to the balance sheet date of
August 31, 2010, through the date of issuance of these financial statements and
has determined that except as set forth below, there are no subsequent events
that require disclosure.

      On October 1, 2010, the Company acquired certain oil and gas properties
from PM and PEM for $1,017,435. As more fully discussed in Note 9, both entities
are controlled by Ed Holloway and William E. Scaff, Jr., both officers and
directors of the Company.

      The oil and gas properties consist of:

       o 6 producing oil and gas wells (100% working interest/ 80% net revenue
         interest) 
       o 2 shut in oil wells (100% working interest/ 80% net revenue interest) 
       o 15 drill sites (net 6.25 wells) 
       o Miscellaneous equipment. 

     The oil and gas properties are located in the  Wattenberg  field,  which is
part of the Denver-Julesburg Basin.

                                      F-33

<PAGE>

      During the period subsequent to August 31, 2010, holders of convertible
promissory notes in the face amount of $500,000, converted principal into
312,500 shares of the Company's common stock. After these conversions, notes in
the principal amount of $15,408,000 were outstanding.


                                      F-34

<PAGE>


 
                              SIGNATURES

      In accordance with Section 13 or 15(a) of the Exchange Act, the Registrant
has caused this Report to be signed on its behalf by the undersigned, thereunto
duly authorized on the 2nd day of June, 2011.
                                     
                                     SYNERGY RESOURCES CORPORATION

                                     By: /s/ Ed Holloway                    
                                         ------------------------------------
                                         Ed Holloway, President


      Pursuant to the requirements of the Securities Exchange Act of l934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

Signature                        Title                            Date
---------                        -----                            ----

/s/ Ed Holloway                President, Chief Executive     June 2, 2011
----------------------         Officer and Director
Ed Holloway


/s/ Frank L. Jennings          Principal Financial and        June 2, 2011
----------------------         Accounting Officer
Frank L. Jennings


/s/ William E. Scaff Jr.       Director                       June 2, 2011
------------------------
William E. Scaff, Jr.


/s/ Benjamin Barton            Director                       June 2, 2011
----------------------
Benjamin Barton


/s/ Rick Wilber                Director                       June 2, 2011
----------------------
Rick Wilber

 
/s/ Raymond E. McElhaney       Director                       June 2, 2011
------------------------
Raymond E. McElhaney


/s/ Bill M. Conrad             Director                       June 2, 2011
----------------------
Bill M. Conrad


                               Director                       
-----------------------
R. W. Noffsinger, III


/s/ George Seward              Director                       June 2, 2011
----------------------
George Seward



<PAGE>

                          SYNERGY RESOURCES CORPORATION
                                    FORM 10-K
                                    EXHIBITS

                                       

<PAGE>


                          SYNERGY RESOURCES CORPORATION

                                   FORM 10-K/A

                                    EXHIBITS

<PAGE>




                                  EXHIBIT 10.5



<PAGE>


                          CONSULTING SERVICES AGREEMENT

CONSULTING SERVICES AGREEMENT (this "Agreement") is entered into as of September
15th, 2008 by and between Synergy Resources  Corporation,  a  placeplaceColorado
corporation  (the  "Company"),  and  Raymond E.  McElhaney  and Bill M.  Conrad,
collectively ("Consultants").

                                    RECITALS

     A. The Company  desires to be assured of the  association  and  services of
Consultants and to avail itself of Consultant's experience,  skills,  abilities,
knowledge and background and is therefore willing to engage Consultants upon the
terms and conditions set forth herein; and

     B.  Consultants  agree to be engaged and  retained by the Company  upon the
terms and conditions set forth herein.

                                    AGREEMENT

     NOW,  THEREFORE,  in  consideration  of the  premises  and  the  covenants,
agreements  and  obligations  set forth  herein and for other good and  valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby covenant and agree as follows:

     1. Consulting  Services.  Consultants shall, on a part-time basis,  provide
corporate  development  and  strategic  management  consulting  services  to the
Company (the "Consulting  Services"),  including but not limited to:  evaluation
and due
 diligence of potential business  opportunities,  target acquisitions and
assistance  with  all  applicable  guidelines  and  responsibilities  of being a
publically traded company.

     2. Term.  The term of this  Agreement  shall commence as of the date hereof
and shall be effective for a period of one year (the "Term"). This agreement may
be extended under the same terms by mutual agreement between Consultants and the
Company.

     3.  Direction,  Control and  Coordination.  Consultants  shall  perform the
Consulting  Services  under  the sole  direction  and with the  approval  of the
Company's Board of Directors. Since the Consultants are members of the Company's
Board of Directors,  Consultants shall perform the consulting services under the
direction  of an officer of the  Company to whom such  direction  is delegate by
resolution of the remaining Board of Directors.

     4. Dedication of Resources.  Consultants shall devote such time,  attention
and  energy  as  is   necessary  to  perform  and   discharge   the  duties  and
responsibilities   under  this  Agreement  in  an  efficient,   trustworthy  and
professional manner.

     5. Standard of  Performance.  Consultants  shall use their best  reasonable
efforts to perform  the  consulting  services as an advisor to the Company in an
efficient,  trustworthy and professional manner. Consultants shall perform their
consulting  services  to  the  sole  satisfaction  of,  and in  conjunction  and
cooperation with, the Company.

<PAGE>

     6.  Compensation.  The  Company  shall  pay to  Consultants  a total of ten
thousand  dollars  per month in advance on the  fifteen  day of each month (five
thousand dollars each per month) in exchange for the Consulting Services.

     7. Confidential Information.  Consultants recognize and acknowledge that by
reason of performance of  Consultant's  services and duties to the Company (both
during the Term and before or after it)  Consultants  have and will  continue to
have access to  confidential  information  of the  Company  and its  affiliates,
including,   without  limitation,   information  and  knowledge   pertaining  to
innovations,  designs,  ideas,  plans, trade secrets,  proprietary  information,
advertising,  distribution  and sales  methods and  systems,  and  relationships
between the Company and its  affiliates and  customers,  clients,  suppliers and
others  who  have  business   dealings  with  the  Company  and  its  affiliates
("Confidential  Information").  Consultants  acknowledge that such  Confidential
Information  is a valuable  and  unique  asset and  covenants  that it will not,
either during or for three (3) years after the term of this Agreement,  disclose
any such Confidential Information to any person for any reason whatsoever or use
such  Confidential  Information  (except as its duties  hereunder  may  require)
without the prior written authorization of the Company,  unless such information
is in the public domain through no fault of the  Consultants or except as may be
required by law. Upon the Company's  request,  the  Consultants  will return all
tangible  materials  containing  Confidential  Information  to the Company.  The
Consultants also realize that as members of the Board of Directors,  they have a
fiduciary  duty  to keep  confidential  any and  all  matters  sensitive  to the
Company.

     8. Relationship.  The only relationship that exists is that Consultants are
members of the Board of Directors and this agreement does not create,  and shall
not be  construed  to create,  any joint  venture  or  partnership  between  the
parties,  and may not be  construed  as an  employment  agreement.  No  officer,
employee,  agent,  servant,  or independent  contractor of  Consultants  nor its
affiliates  shall at any time be deemed to be an employee,  agent,  servant,  or
broker of the  Company  for any  purpose  whatsoever  solely as a result of this
Agreement,  and Consultants shall have no right or authority to assume or create
any obligation or liability,  express or implied, on the Company's behalf, or to
bind the Company in any manner or thing whatsoever.

     9. Notices. Any notice required or desired to be given under this Agreement
shall be in writing and shall be deemed given when personally delivered, sent by
an overnight  courier  service,  or sent by certified or registered  mail to the
following  addresses,  or such  other  address  as to which  one  party may have
notified the other in such manner:

If to the Company:      Synergy Resource Corporation
                        600 17th Street, 2800 South
                        Denver, Colorado 80202
                        720-359-1591
                        719-260-8516 (fax)

If to the Consultants:  Bill M. Conrad
                        5415 Widgeon Point
                        Colorado Springs, CO 80918
                        719-491-0058

                                       2

<PAGE>

                        Raymond E. McElhaney
                        7345 Palmer Divide Ave.
                        Larkspur, Colorado 80118
                        719-491-0057

     10.  Applicable Law. The validity,  interpretation  and performance of this
Agreement  shall be controlled  by and construed  under the laws of the State of
placeplaceColorado.

     11.  Severability.  The  invalidity  or  unenforceability  of any provision
hereof  shall in no way  affect  the  validity  or  enforceability  of any other
provisions of this Agreement.

     12.  Waiver  of  Breach.  The  waiver  by  either  party of a breach of any
provision of this  Agreement by the other shall not operate or be construed as a
waiver of any subsequent  breach by such party.  No waiver shall be valid unless
in writing and signed by an authorized officer of the Company or Consultant.

     13. Assigns and  Assignment.  This Agreement  shall extend to, inure to the
benefit of and be binding upon the parties hereto and their respective permitted
successors  and  assigns;  provided,  however,  that this  Agreement  may not be
assigned or transferred, in whole or in part, by the Consultants except with the
prior written consent of the Company.

     14. Entire Agreement.  This Agreement contains the entire  understanding of
the parties with respect to its subject matter. It may not be changed orally but
only by an agreement in writing signed by the party against whom  enforcement of
any waiver, change, modification, extension, or discharge is sought.

     15.  Counterparts.  This  Agreement  may be  executed by  facsimile  and in
counterparts  each of which shall constitute an original  document,  and both of
which together shall constitute the same document.


                   Remainder of Page Left Blank Intentionally

                                       3

<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year
first above written.


      The Company:                  SYNERGY RESOURCE CORPORATION



                                    By:  /s/ Ed Holloway
                                         --------------------------------------
                                         Ed Holloway, Chief Executive Officer


      The Consultants:              RAYMOND E. MCELHANEY



                                    By:  /s/ Raymond E. McElhaney
                                         --------------------------------------
                                         Raymond E. McElhaney


      The Consultants:              BILL M. CONRAD



                                    By:  /s/ Bill M. Conrad     
                                         --------------------------------------
                                         Bill M. Conrad

                                       4

<PAGE>



                                 EXHIBIT 10.6.1


                   Form of Convertible Note used in Company's
                      Private Offering of Convertible Notes
                              and Series C Warrants


<PAGE>


                                 8% SECURED NOTE

                                                          Platteville, CO 80651
                                                              December 31, 2009


     FOR VALUE RECEIVED,  Synergy Resources Corporation, a Colorado corporation,
and its successors  and assigns,  (the  "Company")  promises to pay to the order
of_______________  (the "Holder") or, the principal sum of One Hundred  Thousand
Dollars  ($100,000)  in lawful money of the United  States of America,  together
with  interest on so much of the  principal  balance  thereof as is from time to
time  outstanding at the rate hereinafter  provided,  and payable as hereinafter
provided.

     This Note is one of a series of Notes,  designated the 8% Convertible Notes
(individually referred to herein as a "Note," the series of notes is referred to
herein collectively as the "Notes"), aggregating up to $18,000,000 issued by the
Company.  All the Notes shall rank pari passu in respect to payment of principal
and interest and upon any dissolution, liquidation or winding-up of the Company.
Any action  permitted by this Note that is taken by one holder will be deemed to
have been taken by all holders in  proportion  to the  Principal  Amount of each
Holder's  Note as  compared  to the total  Principal  Amount  of
 the Notes  then
outstanding.

     1. Interest  Rate.  The unpaid  balance of this Note shall bear interest at
the rate of eight percent (8%) per annum,  simple  interest.  Interest  shall be
calculated on a 365-day year and the actual number of days in each month.

     2. Payment/Maturity Date. Interest on the Note shall be paid quarterly,  on
the last day of March,  June,  September  and  December in each year,  beginning
March 31,  2010,  and  continuing  until  the Note is  finally  paid.  The total
outstanding principal balance hereof, together with accrued and unpaid interest,
shall be paid on December 31, 2012. Interest must be paid in cash.

     3. Conversion.

          (a) The Holder shall have the option to convert all or any part of the
     principal  amount of this Note,  together with all accrued interest thereon
     in  accordance  with  the  provisions  of  and  upon  satisfaction  of  the
     conditions  contained  in this Note,  into  fully  paid and  non-assessable
     shares of the  Company's  common stock as is  determined  by dividing  that
     portion of the  outstanding  principal  balance and accrued  interest under
     this  Note as of such  date  that  the  Holder  elects  to  convert  by the
     Conversion Price. The initial Conversion Price is $1.60.

          (b) No  fractional  shares  of  common  stock  shall  be  issued  upon
     conversion of this Note, and in lieu thereof the number of shares of common
     stock to be issued upon each conversion  shall be rounded up to the nearest
     whole number of shares of common stock.  (c) The Holder's  conversion right
     set forth in this  Section  may be  exercised  at any time and from time to
     time but prior to payment in full of the principal and accrued  interest on
     this Note.

<PAGE>

          (d) The Holder may exercise the right to convert all or any portion of
     this Note only by delivery of a properly  completed  conversion notice on a
     Business Day to the Company's principal executive offices.  Such conversion
     shall be  deemed  to have  been  made  immediately  prior  to the  close of
     business on the Business Day of such delivery of the conversion notice (the
     "Conversion Date"), and the Holder shall be treated for all purposes as the
     record  holder of the  shares  of  common  stock  into  which  this Note is
     converted as of such date. For purposes of this Note, a Business Day is any
     day the Federal Reserve Bank is open.

          (e) As promptly as practicable  after the Conversion Date, the Company
     at its  expense  shall issue and deliver to the Holder of this Note a stock
     certificate  or  certificates  representing  the number of shares of common
     stock into which this Note has been converted.

          (f) Upon the full conversion of this Note the Company shall be forever
     released from all of its obligations and liabilities under this Note.

          (g) Holder  acknowledges that the shares of common stock issuable upon
     conversion  of this  note  are  "restricted  securities,"  as such  term is
     defined  under the  Securities  Act.  Holder  agrees  that  Holder will not
     attempt to pledge,  transfer,  convey or  otherwise  dispose of such shares
     except in a  transaction  that is the subject of either:  (i) an  effective
     registration  statement  under the Securities Act and any applicable  state
     securities  laws;  or (ii) an opinion of counsel  rendered by legal counsel
     satisfactory to the Company, which opinion of counsel shall be satisfactory
     to the Company,  to the effect that such registration is not required.  The
     Company  may rely on such an opinion  of  Holder's  counsel in making  such
     determination.  Holder  consents to the placement of a legend on the shares
     of common  stock  issuable  upon the exercise of this Note stating that the
     shares  represented by the certificate  have not been registered  under the
     Securities  Act and  setting  forth or  referring  to the  restrictions  on
     transferability and sale thereof.

          (h) Except for Exempt  Issuances,  if the Company sells any additional
     shares of common stock, or any securities convertible into common stock, at
     a price below the then applicable  Conversion  Price,  the Conversion Price
     will be lowered  to the price at which the  shares  were sold or the lowest
     price at which the  securities  are  convertible,  as the case may be.  The
     Conversion Price will also be proportionately  adjusted in the event of any
     stock splits.

                                       2

<PAGE>

          (i) The term Exempt Issuance means the sale or issuance of:

               i. shares of common  stock or options to officers or directors of
          the Company,  not to exceed  1,000,000  shares or options per year for
          any single  officer or  director  (not to exceed  5,000,000  shares or
          options  per year  total),  pursuant  to any stock or option plan duly
          adopted by the directors of the Company;

               ii. shares of common stock or options to employees or independent
          consultants of the Company,  not to exceed 5,000,000 shares or options
          per year,  pursuant  to any stock or option  plan duly  adopted by the
          directors of the Company;

               iii.  shares in  connection  with an  acquisition  of oil and gas
          properties,  the acquisition of an unaffiliated company, joint venture
          or similar  strategic  transaction where the primary purpose is not to
          raise cash;

               iv.  securities  upon the conversion of the Notes or the exercise
          of options or warrants  issued and  outstanding  on November 15, 2009,
          provided  that the  securities  have not been  amended to increase the
          number of such  securities  or to decrease the  exercise,  exchange or
          conversion prices of the securities.

          (j) If the common stock to be issued on  conversion of this Note shall
     be changed  into any other  class or  classes of stock,  whether by capital
     reorganization,  reclassification,  or  otherwise,  the holder of this Note
     shall,  upon its  conversion be entitled to receive,  in lieu of the common
     stock which the Holder  would have become  entitled to receive but for such
     change,  a number of shares of such  other  class or  classes of stock that
     would have been  subject to receipt by the Holder if it had  exercised  its
     rights of conversion immediately before such changes.

          (k) If at any time  there  shall be a  capital  reorganization  of the
     Company's   common   stock   (other   than  a   subdivision,   combination,
     reclassification  or  exchange of shares  provided  for  elsewhere  in this
     Section 3) or merger of the Company into another  corporation,  or the sale
     of the Company's properties and assets as, or substantially as, an entirety
     to any other  person,  then,  as a part of such  reorganization,  merger or
     sale,  lawful  provision shall be made so that the Holder of this Note will
     be entitled to receive the number of shares of stock or other securities or
     property from the successor corporation resulting from such merger to which
     the  Holder  would  have  been   entitled  as  a  result  of  such  capital
     reorganization,  merger or sale if this Note had been converted immediately
     before such capital reorganization, merger or sale.

          (l)  The  Company   will  not,  by   amendment   of  its  Articles  of
     Incorporation or through any reorganization,  recapitalization, transfer of
     assets, merger,  dissolution,  or any other voluntary action, avoid or seek
     to avoid the  observance or  performance of any of the terms to be observed

                                       3

<PAGE>

     or performed hereunder by the Company,  but will at all times in good faith
     assist in the carrying out of all the provisions of this Section and in the
     taking of all such action as may be  necessary or  appropriate  in order to
     protect  the  conversion   rights  of  the  holder  of  this  Note  against
     impairment.

          (m) Upon the occurrence of each adjustment or readjustment pursuant to
     any provision  hereof,  the Company at its expense shall  promptly  compute
     such  adjustment or  readjustment  in accordance  with the terms hereof and
     prepare and furnish to the Holder of this Note a certificate  setting forth
     such adjustment or readjustment  and showing in detail the facts upon which
     such adjustment or readjustment is based.

     4. Reservation of Shares. At all times while this Note shall be convertible
into shares of common stock, the Company shall reserve and keep available out of
its  authorized  but  unissued  shares of common stock solely for the purpose of
effecting  the  conversion of this Note such number of its shares of such common
stock as shall from time to time be sufficient to effect the  conversion of this
Note in full. In the event that the number of authorized but unissued  shares of
such common stock shall not be sufficient to effect the conversion of the entire
outstanding  principal  amount of this  Note,  then in  addition  to such  other
remedies  as shall be  available  to the  Holder,  the  Company  shall take such
corporate  action as may be necessary to increase  its  authorized  but unissued
shares of such common stock to such number of shares as shall be sufficient  for
such purpose.

     5. Prepayment. The Company may prepay the Notes without penalty at any time
after ____________.  Nothwithstanding the above, the Company may repay the Note,
without penalty upon ten days written notice to the Holder if, during any twenty
trading days within a period of thirty  consecutive  trading  days,  the closing
price of the Company's common stock is $3.25 or greater and the Company's common
stock has an average trading volume of 200,000 shares or more per day.

     6. Default  Interest  and  Attorney  Fees.  Upon  declaration  of a default
hereunder,  the balance of the  principal  remaining  unpaid,  interest  accrued
thereon,  and all other costs, and fees shall be immediately due and payable. In
the  event of  default,  the  Company  agrees  to pay all  costs  of  collection
including reasonable attorney's fees.

     7. Security.  This Note is secured by the Company's  interests in any wells
drilled or completed with the proceeds from the sale of this Note.

     8. Default.  At the option of Holder,  the unpaid principal balance of this
Note and all accrued interest thereon shall become immediately due, payable, and
collectible, without notice or demand, upon the occurrence at any time of any of
the  following  events,  each of which shall be deemed to be an event of default
hereunder.

          (a) The Company  fails to make any payment of interest or principal on
     the date on which such payment becomes due and payable under this Note;

          (b) The Company breaches any  representation,  warranty or covenant or
     defaults  in  the  timely  performance  of  any  other  obligation  in  its
     agreements  with the Note  holders  and the  breach  or  default  continues

                                       4

<PAGE>

     uncured for a period of five  Business  Days after the date on which notice
     of the breach or default is first given to the Company, or ten trading days
     after the Company  becomes,  or should have become  aware of such breach or
     default;

          (c) The Company  files for  protection  from its  creditors  under the
     federal  bankruptcy  code or a third party files an involuntary  bankruptcy
     petition against the Company;

          (d) The Company's common stock is not listed on the OTC Bulletin Board
     or other public trading market, or;

          (e) The Company fails for any reason to deliver a  certificate  within
     five Business Days after delivery of the  certificate is required  pursuant
     to any agreement with the Holder.

Upon the occurrence of any event which might, upon notice or the passage of time
constitute an Event of Default,  the Company shall notify the Holder of the Note
and the  Holders of all other  Notes of the  occurrence  of the event of default
within ten (10) days.

     9.  Representations,  Warranties and Covenants of the Company.  The Company
represents, warrants and covenants with the Holder as follows:

          (a)  Authorization;  Enforceability.  All  action  on the  part of the
     Company,  necessary for the  authorization,  execution and delivery of this
     Note and the  performance of all  obligations of the Company  hereunder has
     been  taken,  and  this  Note  constitutes  a  valid  and  legally  binding
     obligation of the Company,  enforceable in accordance with its terms except
     (i)  as  limited  by  applicable  bankruptcy,  insolvency,  reorganization,
     moratorium and other laws of general application  affecting  enforcement of
     creditors'  rights  generally,  and (ii) as limited by laws relating to the
     availability of specific performance,  injunctive relief or other equitable
     remedies.

          (b) Governmental Consents. No consent, approval, qualification,  order
     or  authorization  of,  or  filing  with,  any  local,   state  or  federal
     governmental authority is required on the part of the Company in connection
     with the Company's valid execution, delivery or performance of this Note.

          (c) No  Violation.  The  execution,  delivery and  performance  by the
     Company of this Note and the  consummation of the obligations  contemplated
     hereby  will not  result in a  violation  in any  material  respect  of its
     Articles of Incorporation or By-Laws,  or of any provision of any mortgage,
     agreement,  instrument or contract to which it is a party or by which it is
     bound or, to the best of its knowledge,  of any federal or state  judgment,
     order, writ, decree,  statute, rule or regulation applicable to the Company
     or be in material conflict with or constitute,  with or without the passage
     of time or giving  of  notice,  either a  material  default  under any such
     provision or an event that  results in the  creation of any material  lien,

                                       5

<PAGE>

     charge or  encumbrance  upon any assets of the  Company or the  suspension,
     revocation,  impairment,  forfeiture or nonrenewal of any material  permit,
     license,  authorization or approval applicable to the Company, its business
     or operations, or any of its assets.

          (d) Covenants. So long as any Note is outstanding the Company will not
     pay any  dividends or other  distributions  to the holders of any shares of
     its  preferred  stock or common stock unless all payments have been made to
     the Holders on a current basis.

     10. Assignment of Note. This Note may not be assigned by Company.  The Note
may be assigned by Holder with the express written consent of the Company.

     11.  Loss of Note.  Upon  receipt  by the  Company of  evidence  reasonably
satisfactory to it of the loss,  theft,  destruction or mutilation of this Note,
and in case of  loss,  theft  or  destruction  of  indemnification  in form  and
substance  acceptable  to the  Company in its  reasonable  discretion,  and upon
surrender and cancellation of this Note, if mutilated, the Company shall execute
and deliver a new Note of like tenor and date.

     12.  Non-Waiver.  No delay or omission on the part of Holder in  exercising
any rights or remedy hereunder shall operate as a waiver of such right or remedy
or of any other  right or remedy  under this  Note.  A waiver on any one or more
occasion  shall not be  construed as a bar to or waiver of any such right and/or
remedy on any future occasion.

     13.  Maximum  Interest.  In no event  whatsoever  shall the amount paid, or
agreed to be paid, to Holder for the use, forbearance, or retention of the money
to be loaned hereunder  ("Interest") exceed the maximum amount permissible under
applicable  law. If the performance or fulfillment of any provision  hereof,  or
any agreement between Company and Holder shall result in Interest  exceeding the
limit for Interest  prescribed by law, then the amount of such Interest shall be
reduced to such  limit.  If, from any  circumstance  whatsoever,  Holder  should
receive as Interest an amount  which would exceed the highest  lawful rate,  the
amount which would be excessive  Interest  shall be applied to the  reduction of
the principal balance owing hereunder (or, at the option of Holder, be paid over
to Company) and not to the payment of Interest.

     14. Purpose of Loan. Company certifies that the loan evidenced by this Note
is obtained for business or  commercial  purposes and that the proceeds  thereof
will not be used  primarily  for  personal,  family,  household or  agricultural
purposes.

     15. Waiver of Presentment.  Company and the endorsers, sureties, guarantors
and all  persons  who may become  liable for all or any part of this  obligation
shall be jointly and severally liable for such obligation and hereby jointly and
severally waive presentment and demand for payment, notice of dishonor,  protest
and notice of protest, and any and all lack of diligence or delays in collection
or enforcement  hereof. Said parties consent to any modification or extension of
time (whether one or more) of payment hereof,  the release of all or any part of
the  security  for the payment  hereof,  and the release of any party liable for
payment of this  obligation.  Any  modification,  extension,  or release  may be
without notice to any such party and shall not discharge said party's  liability
hereunder.  16. Governing Law. As an additional  consideration for the extension
of credit, Company and each endorser,  surety,  guarantor,  and any other person
who may become  liable  for all or any part of this  obligation  understand  and
agree that the loan  evidenced by this Note is made in the State of Colorado and
the provisions hereof will be construed in accordance with the laws of the State
of Colorado.

                                       6

<PAGE>

     17.  Arbitration.  Any  controversy or claim arising out of, or relating to
this Note,  or the making,  performance,  or  interpretation  thereof,  shall be
settled by arbitration in Denver,  Colorado in accordance  with the rules of the
American Arbitration  Association then existing, and judgment on the arbitration
award may be entered in any court having jurisdiction over the subject matter of
the controversy.

     18.  Binding  Effect.  The term  "Company" as used herein shall include the
original Company of this Note and any party who may  subsequently  become liable
for the payment  hereof as an assumer  with the consent of the Holder,  provided
that Holder may, at its option, consider the original Company of this Note alone
as Company unless Holder has consented in writing to the substitution of another
party as Company.

     19.  Relationship of Parties.  Nothing herein  contained shall create or be
deemed or construed to create a joint venture or partnership between Company and
Holder, Holder is acting hereunder as a lender only.

     20. Severability.  Invalidation of any of the provisions of this Note or of
any paragraph,  sentence,  clause,  phrase,  or word herein,  or the application
thereof  in any  given  circumstance,  shall  not  affect  the  validity  of the
remainder of this Note.

     21. Amendment.  This Note may not be amended,  modified, or changed, except
only by an instrument in writing signed by both of the parties.

     22. Time of the Essence. Time is of the essence for the performance of each
and every obligation of Company hereunder.

     23. Notices. All notices, consents, approvals,  requests, demands and other
communications  which are required or may be given hereunder shall be in writing
and shall be duly given if personally  delivered,  sent by overnight  courier or
posted by U.S.  registered or certified mail, return receipt requested,  postage
prepaid and addressed to the other parties at the addresses set forth below.

      If to the Company:

            Synergy Resources Corporation
            20203 Highway 60
            Platteville, CO 80651
            ATTN: Ed Holloway, President and Principal Executive Officer

                                       7

<PAGE>

     If to the Holder, at the address as shown on the register maintained by the
Company for such purpose.

     The Company or the Holder may change  their  address  for  purposes of this
Section  by  giving  to the  other  addressee  notice  of such  new  address  in
conformance  with this Section.  If the Company  receives any notice pursuant to
this  Note or any  other  Note of this  series,  it must,  not  later  than five
business days  thereafter,  dispatch a copy of such notice to the Holder of this
Note and to each  other  Holder of any Note as  reflected  in the  current  Note
Register.


      IN WITNESS WHEREOF, the undersigned has executed this Note as of the
_____________ ___, 20__.

                                    Synergy Resources Corporation



                                    By:
                                       -----------------------------------------
                                       Ed Holloway, President and Principal 
                                       Executive Officer

                                       8

<PAGE>


                                 EXHIBIT 10.6.2


                Form of Subscription Agreement used in Company's
                      Private Offering of Convertible Notes
                              and Series C Warrants

<PAGE>

                IMPORTANT: PLEASE READ CAREFULLY BEFORE SIGNING.
               SIGNIFICANT REPRESENTATIONS ARE CALLED FOR HEREIN.

                             SUBSCRIPTION AGREEMENT
                                       and
                           LETTER OF INVESTMENT INTENT


Synergy Resources Corporation
20203 Highway 60
Platteville, CO 80651

Gentlemen:

     The undersigned (the "Subscriber") hereby tenders this subscription for the
purchase  of  units  ("Units"  or  "Securities")  issued  by  Synergy  Resources
Corporation  (the  "Company").  Each  Unit  consists  of  one  $100,000  Secured
Convertible  Promissory Note ("Note") and 50,000 common stock purchase  warrants
("Warrants").  The Units are being  offered at a price of $100,000 per Unit (the
"Offering"). By execution below, the Subscriber acknowledges that the Company is
relying upon the accuracy and completeness of the representations and warranties
contained herein in complying with its obligations  under applicable  securities
laws.

     1.  Subscription  Commitment.  The  Subscriber  hereby  subscribes  for the
purchase of ____ Units at an aggregate  purchase  price of  $_______________  as
full payment therefor. The purchase price shall be paid to by cashier's check or
by wire transfer to "Synergy
 Resources Escrow Account".

     The Subscriber  understands  that this  subscription  is not binding on the
Company  until  accepted  by  the  Company,  which  acceptance  is at  the  sole
discretion of the Company and is to be evidenced by the  Company's  execution of
this  Subscription  Agreement where indicated.  If the subscription is rejected,
the Company shall return to the Subscriber,  without interest or deduction,  any
payment  tendered by the  Subscriber,  and the Company and the Subscriber  shall
have no further obligation to each other hereunder. Unless and until rejected by
the Company, this subscription shall be irrevocable by the Subscriber.

     2. Representations and Warranties. In order to induce the Company to accept
this  subscription,  the  Subscriber  hereby  represents  and  warrants  to, and
covenants with, the Company as follows:

     (a)  Receipt  of  Document;  Access  to  Information.  Subscriber  has been
provided  with a copy of the Company's  Confidential  Offering  Memorandum  (the
"Memorandum")  and the attachments  thereto The Memorandum and this Subscription
Agreement  are  referred  to  herein  as the  "Documents."  The  Subscriber  has
carefully  reviewed  and is  familiar  with all of the  terms of the  Documents,
including the Risk Factors contained in the Memorandum.  The Subscriber has been
given  access to full and  complete  information  regarding  the Company and has
utilized  such  access  to the  Subscriber's  satisfaction  for the  purpose  of
obtaining  such  information   regarding  the  Company  as  the  Subscriber  has
reasonably  requested;   and,  particularly,   the  Subscriber  has  been  given
reasonable   opportunity  to  ask  questions  of,  and  receive   answers  from,
representatives  of the  Company  concerning  the  terms and  conditions  of the
offering of the  Securities  and to obtain any  additional  information,  to the
extent reasonably available. The Subscriber acknowledges that the Subscriber has
had an  opportunity  to  review  all of the  Company's  SEC  filings,  which are
publicly available at www.SEC.gov.

<PAGE>

     (b) Reliance. The Subscriber has relied on nothing other than the Documents
(including  any  exhibits  thereto)  and the  Company's  SEC filings in deciding
whether  to make an  investment  in the  Company.  Except  as set  forth  in the
Documents,  no representations or warranties have been made to the Subscriber by
the  Company,  any selling  agent of the  Company,  or any agent,  employee,  or
affiliate of the Company or such selling agent.

     (c) Economic  Loss.  The  Subscriber  believes  that an  investment  in the
Securities is suitable for the Subscriber based upon the Subscriber's investment
objectives  and  financial  needs.  The  Subscriber  (i) has adequate  means for
providing   for  the   Subscriber's   current   financial   needs  and  personal
contingencies;  (ii) has no need for liquidity in this investment;  (iii) at the
present time, can afford a complete loss of such  investment;  and (iv) does not
have overall  commitments  to investments  which are not readily  marketable and
disproportionate to the Subscriber's net worth, and the Subscriber's  investment
in the Securities will not cause such overall commitments to become excessive.

     (d)  Sophistication.  The Subscriber,  in reaching a decision to subscribe,
has such  knowledge and  experience  in financial and business  matters that the
Subscriber  is capable of reading  and  interpreting  financial  statements  and
evaluating  the merits and risk of an investment in the  Securities  and has the
net worth to undertake  such risks.  The investment  contemplated  hereby is the
result of arm's length negotiation between the Subscriber and the Company.

     (e) No General  Solicitation.  The  Subscriber  was not offered or sold the
Securities,  directly or indirectly, by means of any form of general advertising
or general solicitation,  including,  but not limited to, the following: (1) any
advertisement,   article,   notice  or  other  communication  published  in  any
newspaper, magazine, or similar medium of or broadcast over television or radio;
or (2) to the  knowledge  of the  undersigned,  any  seminar  or  meeting  whose
attendees had been invited by any general solicitation or general advertising.

     (f) Seek Advice. The Subscriber has obtained,  to the extent the Subscriber
deems necessary,  the Subscriber's own personal professional advice with respect
to the risks inherent in the investment in the  securities,  and the suitability
of an  investment  in the  Securities  in  light of the  Subscriber's  financial
condition and investment needs;

     (g) Investment  Risks. The Subscriber  recognizes that the Securities as an
investment  involves a high degree of risk,  including those set forth under the
risk factors contained in the Documents.

     (h) Effect and Time of  Representations.  The  information  provided by the
Subscriber  contained  in this  Subscription  Agreement  is true,  complete  and
correct  in  all  material  respects  as of  the  date  hereof.  The  Subscriber
understands  that  the  Company's  determination  that  the  exemption  from the
registration  provisions  of  the  Securities  Act  of  1933,  as  amended  (the
"Securities  Act"),  which is based upon non-public  offerings and applicable to
the  offer  and  sale  of  the   Securities,   is  based,   in  part,  upon  the
representations,  warranties,  and agreements made by the Subscriber herein. The
Subscriber  consents to the  disclosure of any such  information,  and any other
information  furnished  to  the  Company,  to  any  governmental   authority  or
self-regulatory  organization,  or, to the extent  required by law, to any other
person.

     (i)  Restrictions  on Transfer;  No Market for  Securities.  The Subscriber
acknowledges that (i) the purchase of the Securities is a long-term  investment;
(ii) the Subscriber  must bear the economic risk of investment for an indefinite
period  of time  because  the  Securities  have not been  registered  under  the
Securities Act or under the  securities  laws of any state and,  therefore,  the
Securities  cannot be resold unless they are subsequently  registered under said
laws or  exemptions  from  such  registrations  are  available;  (iii)  there is
presently no public market for the  Securities  and the Subscriber may be unable
to liquidate the Subscriber's investment in the event of an emergency, or pledge

                                       2

<PAGE>

the  Securities as collateral for a loan;  and (iv) the  transferability  of the
Securities  is  restricted  and (A) requires  conformity  with the  restrictions
contained  in  paragraph  3  below  and  (B)  legends  will  be  placed  on  the
certificate(s)   representing   the  Securities   referring  to  the  applicable
restrictions on transferability.

     (j) No Backup  Withholding.  The Subscriber  certifies,  under penalties of
perjury, that the Subscriber is NOT subject to the backup withholding provisions
of Section 3406(a)(i)(C) of the Internal Revenue Code.

     (k) Restrictive Legend. Stop transfer  instructions will be placed with the
transfer agent for the Securities, and a legend may be placed on any certificate
representing the Securities substantially to the following effect:

          THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
          COMMISSION  UNDER THE  SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
          IN RELIANCE UPON THE EXEMPTIONS FROM REGISTRATION  PROVIDED IN THE ACT
          AND REGULATION D UNDER THE ACT AND HAVE NOT BEEN REGISTERED  UNDER ANY
          STATE  SECURITIES  LAWS.  AS SUCH,  THE PURCHASE OF THIS  SECURITY WAS
          NECESSARILY  WITH THE  INTENT  OF  INVESTMENT  AND NOT WITH A VIEW FOR
          DISTRIBUTION.  THEREFORE,  ANY SUBSEQUENT TRANSFER OF THIS SECURITY OR
          ANY INTEREST  THEREIN WILL BE UNLAWFUL  UNLESS IT IS REGISTERED  UNDER
          THE ACT AND ANY STATE  SECURITIES  LAWS OR UNLESS  AN  EXEMPTION  FROM
          REGISTRATION IS AVAILABLE. FURTHERMORE, IT IS UNLAWFUL TO CONSUMMATE A
          SALE OR TRANSFER OF THIS SECURITY OR ANY INTEREST THEREIN, WITHOUT THE
          OPINION  OF  COUNSEL  ACCEPTABLE  TO THE  COMPANY  THAT  THE  PROPOSED
          TRANSFER  OR SALE DOES NOT AFFECT THE  EXEMPTIONS  RELIED  UPON BY THE
          COMPANY IN ORIGINALLY  DISTRIBUTING THE SECURITY AND THAT REGISTRATION
          IS NOT REQUIRED.

     (l) Placement  Agent.  The  Subscriber  understands  that Bathgate  Capital
Partners  LLC is acting as  placement  agent  (the  "Placement  Agent")  on this
transaction.  The Company will pay the Placement Agent a sales  commission of 8%
of the gross  proceeds of this  Offering (2% for sales to persons  introduced to
the  Placement   Agent  by  the  Company's   officers  and   directors)   and  a
non-accountable  expense  allowance of 2% of the gross  proceeds.  The Placement
Agent may re-allow a portion of the commission to participating  selling agents.
The Company will also sell to the Placement  Agent,  for nominal  consideration,
warrants to purchase  6,250  shares of Common  Stock for every Unit sold in this
Offering.  The Warrants will be exercisable at a price of $1.60 per share at any
time on or before December 31, 2014.

     (m) Notice of Change. The Subscriber agrees that it will notify the Company
in  writing  promptly  (but in all  events  within  thirty  (30) days  after the
applicable  change)  of  any  actual  or  anticipated  change  in any  facts  or
circumstances, which change would make any of the representations and warranties
in this  Subscription  Agreement  untrue  if made as of the date of such  change
(after giving effect thereto).

     3. Restricted Nature of the Securities;  Investment  Intent. The Subscriber
has  been  advised  and  understands  that  (a) the  Securities  have  not  been
registered under the Securities Act or applicable state securities laws and that
the securities are being offered and sold pursuant to exemptions from such laws;
(b) the  Documents  may not have been filed with or  reviewed  by certain  state
securities administrators because of the limited nature of the offering; (c) the
Company is under no obligation to register the  Securities  under the Act or any
state securities laws, or to take any action to make any exemption from any such
registration  provisions available.  The Subscriber represents and warrants that

                                       3

<PAGE>

the  Securities  are being  purchased for the  Subscriber's  own account and for
investment   purposes   only,   and  without  the   intention  of  reselling  or
redistributing  the same;  the  Subscriber  has made no  agreement  with  others
regarding any of the Securities;  and the  Subscriber's  financial  condition is
such that it is not likely that it will be  necessary  to dispose of any of such
Securities in the foreseeable  future. The Subscriber is aware that, in the view
of the SEC, a purchase of such  securities with an intent to resell by reason of
any foreseeable  specific  contingency or anticipated change in market value, or
any change in the condition of the Company, or in connection with a contemplated
liquidation  settlement  of any  loan  obtained  for  the  acquisition  of  such
securities and for which such securities were pledged, would represent an intent
inconsistent with the  representations  set forth above. The Subscriber  further
represents  and  agrees  that if,  contrary  to the  foregoing  intentions,  the
Subscriber  should later desire to dispose of or transfer any of such Securities
in any  manner,  the  Subscriber  shall  not do so  unless  and  until  (i) said
Securities  shall have first been  registered  under the Act and all  applicable
securities  laws;  or (ii) the  Subscriber  shall  have first  delivered  to the
Company a written  notice  declaring  such  holder's  intention  to effect  such
transfer and describe in sufficient  detail the manner and  circumstances of the
proposed transfer, which notice shall be accompanied either by a written opinion
of legal  counsel who shall be  reasonably  satisfactory  to the Company,  which
opinion shall be addressed to the Company and  reasonably  satisfactory  in form
and substance to the Company's counsel,  to the effect that the proposed sale or
transfer  is  exempt  from  the  registration  provisions  of the  Act  and  all
applicable state securities laws, or by a "no action" letter from the SEC to the
effect that the transfer of the Securities without  registration will not result
in  recommendation  by the staff of the  Commission  that  action be taken  with
respect thereto.

     4. Residence. The Subscriber represents and warrants that the Subscriber is
a bona fide  resident  of, is  domiciled  in and received the offer and made the
decision  to invest in the  Securities  in the state set forth on the  signature
page hereof,  and the  Securities  are being  purchased by the Subscriber in the
Subscriber's name solely for the Subscriber's own beneficial interest and not as
nominee  for, or on behalf of, or for the  beneficial  interest  of, or with the
intention to transfer to, any other  person,  trust or  organization,  except as
specifically set forth in this Subscription Agreement.

     5. Investor Qualification.  The Subscriber represents and warrants that the
Subscriber is an  "accredited  investor" as that term is defined in Regulation D
under the  Securities  Act  because  the  Subscriber  comes  within at least one
category marked below. The Subscriber  further  represents and warrants that the
information set forth below is true and correct.  ALL INFORMATION IN RESPONSE TO
THIS PARAGRAPH WILL BE KEPT STRICTLY CONFIDENTIAL EXCEPT AS REQUIRED BY LAW. The
Subscriber agrees to furnish any additional  information which the Company deems
necessary in order to verify the answers set forth below. (Please check all that
apply.)

Category I                 The Subscriber is an individual (not a partnership,
              ------       corporation, etc.) whose individual net worth, or
                           joint net worth with the Subscriber's spouse,
                           presently exceeds $1,000,000.

                           Explanation. In calculation of net worth the
                           Subscriber may include equity in personal property
                           and real estate, including the Subscriber's principal
                           residence, cash, short term investments, stocks and
                           securities. Equity in personal property and real
                           estate should be based on the fair market value of
                           such property less debt secured by such property.

Category II                The Subscriber is an individual (not a
              ------       partnership, corporation, etc.) who had an individual
                           net income in excess of $200,000 in each of the last
                           two years, or joint income with his/her spouse in
                           excess of $300,000 in each of the last two years, and
                           has a reasonable expectation of reaching the same
                           income level in the current year.

                                       4

<PAGE>

Category III The Subscriber is an executive officer or director of the Company.

Category IV                The Subscriber is a bank as defined in Section  3(a)
              ------       (2) of the Securities  Act; a savings and loan as 
                           defined in Section  3(a)(5)(A) of the Securities  
                           Act; an insurance  company as defined in Section 
                           2(13) of the Securities  Act; a broker or dealer 
                           registered  pursuant  to the  Securities  Exchange 
                           Act of 1934,  as amended (the  "Exchange  Act");  an
                           investment  company  registered  under the Investment
                           Company Act of 1940, as amended (the "Investment  
                           Company Act"), or a  business   development  company
                           as  defined  in  Section  2(a)(48)  of  the
                           Investment  Company Act; a Small Business  Investment
                           Company  licensed by the U.S.  Small  Business  
                           Administration  under Section 301(c) or (d) of the 
                           Small Business  Investment Act of 1958; a plan 
                           established and maintained by a state, its political
                           subdivisions,  or any agency or instrumentality of a
                           state or its political  subdivisions,  for the 
                           benefit of its  employees,  if such plan has total 
                           assets in excess of  $5,000,000;  an  employee  
                           benefit  plan within the meaning of the Employee  
                           Retirement  Income  Security  Act of 1974, as amended
                           ("ERISA"),  if the investment decision is made by a 
                           plan fiduciary,  as defined in  Section  3(21)  of  
                           ERISA,  which  is  either a  bank, savings  and loan
                           association,  insurance company,  or registered  
                           investment  adviser, or if the employee  benefit 
                           plan has total  assets in  excess  of  $5,000,000, 
                           or, if a self-directed  plan, with investment  
                           decisions made solely by persons that are accredited
                           investors (this includes IRAs).  (Note: If you check
                           this category, the Company may request  additional
                           information  regarding  investment company and ERISA 
                           issues.)

                           ----------------------------------------------------
                                                                       
                           ----------------------------------------------------
                           (describe entity)

Category V                 The Subscriber is a private business development 
             ------        company as defined in Section 202(a)(22) of the 
                           Investment Advisers Act of 1940, as amended.

                           ----------------------------------------------------
                                                                            
                           ----------------------------------------------------
                           (describe entity)

Category VI                The Subscriber is an entity with total assets in
                           excess of $5,000,000 which was not formed for the
                           purpose of investing in the Securities and which is
                           one of the following:

                                       a corporation; or
                           -------

                                       a partnership; or
                           -------

                                       a business trust; or
                           -------

                                       a tax-exempt organization described in 
                           -------     Section 501(c)(3) of the Internal Revenue
                                       Code of 1986, as amended.

                                       5

<PAGE>

                           ----------------------------------------------------
                                                                           
                           ----------------------------------------------------
                           (describe entity)

Category VII               The Subscriber is an entity all the equity owners
               ------      of which are "accredited investors" within one or
                           more of the above categories. If relying upon this
                           category alone, each equity owner must complete a
                           separate copy of this Agreement.

                           ----------------------------------------------------
                                                                            
                           ----------------------------------------------------
                           (describe entity)

Category VIII              The Subscriber is a trust with total assets in
               ------      excess of $5,000,000, not formed for the specific
                           purpose of acquiring the Securities, whose purchase
                           is directed by a person who has such knowledge and
                           experience in financial and business matters that he
                           is capable of evaluating the merits and risks of the
                           prospective investment.

     6. FINRA Questionnaire.

     (a) Are you a member  of  FINRA(1),  a person  associated  with a member of
FINRA(2), or an affiliate of a member?

           Yes                        No                
               --------                  --------

     If "Yes," please list any members of FINRA with whom you are  associated or
affiliated.

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
 
(1)  FINRA  defines a "member" as being either any broker or dealer  admitted to
     membership  in FINRA or any  officer or  partner  of such a member,  or the
     executive  representative  of such a  member  or the  substitute  for  such
     representative.

(2)  FINRA  defines a "person  associated  with a member"  as being  every  sole
     proprietor, general or limited partner, officer, director or branch manager
     or such  member,  or any  natural  person  occupying  a  similar  status or
     performing  similar  functions,  or  any  natural  person  engaged  in  the
     investment  banking or  securities  business who is directly or  indirectly
     controlling  or  controlled  by such member (for  example,  any  employee),
     whether or not any such person is  registered  or exempt from  registration
     without FINRA.  Thus,  "person  associated  with a member"  includes a sole
     proprietor, general or limited partner, officer, director or branch manager
     or an organization of any kind (whether a corporation, partnership or other
     business entity) which itself is a "member" or a "person  associated with a
     member." In addition,  an organization of any kind is a "person  associated
     with a member" if its sole  proprietor  or anyone of its general or limited
     partners,  officers,  director or branch  managers is a "member" or "person
     associated with a member."

                                       6

<PAGE>

     (b) If you are a  corporation,  are any of your  officers,  directors or 5%
shareholders a member of FINRA, a person  associated  with a member of FINRA, or
an affiliate of a member?

          Yes                        No                
               --------                  --------

     If "Yes," please list the name of the respective officer,  director,  or 5%
shareholder  and  any  members  of  FINRA  with  whom  they  are  associated  or
affiliated.
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

     7.  Authority.  The  undersigned,  if other than an  individual,  makes the
following additional representations:

     (a) The Subscriber was not organized for the specific  purpose of acquiring
the Securities;

     (b) The Subscriber is fully authorized,  empowered and qualified to execute
and deliver  this  Subscription  Agreement,  to  subscribe  for and purchase the
Securities  and  to  perform  its  obligations  under,  and  to  consummate  the
transactions that are contemplated by the Subscription Agreement; and

     (c) This  Subscription  Agreement has been duly authorized by all necessary
action on the part of the  Subscriber,  has been duly  executed by an authorized
officer or representative of the Subscriber,  and is a legal,  valid and binding
obligation of the Subscriber enforceable in accordance with its terms.

     8. Use of Proceeds. The Subscriber  acknowledges that any proceeds from the
sale of the Units will be used by the Company for working  capital and  research
and development expenses as further described in the Memorandum.

     9.  Compliance  with Laws;  No Conflict.  The execution and delivery of the
Subscription  Agreement by or on behalf of the Subscriber and the performance of
the  Subscriber's  obligations  under,  and the consummation of the transactions
contemplated by, the Subscription Agreement do not and will not conflict with or
result in any  violation  of, or default  under,  any  provision of any charter,
bylaws,  trust agreement,  partnership  agreement or other governing  instrument
applicable  to the  Subscriber,  or other  agreement or  instrument to which the
Subscriber is a party,  or by which the Subscriber is, or any of its assets are,
bound, or any permit, franchise,  judgment, decree, statute, rule, regulation or
other  law  applicable  to the  Subscriber  or the  business  or  assets  of the
Subscriber.

     10. Reliance on Representations. The Subscriber understands the meaning and
legal consequences of the representations,  warranties,  agreements,  covenants,
and confirmations set out above and agrees that the subscription made hereby may
be accepted in reliance  thereon.  The Subscriber  acknowledges that the Company
has  relied  and  will  rely  upon the  representations  and  warranties  of the
Subscriber in this  Subscription  Agreement.  The Subscriber agrees to indemnify
and hold harmless the Company and any selling agent  (including for this purpose
their employees,  and each person who controls either of them within the meaning
of Section 20 of the  Exchange  Act) from and against any and all loss,  damage,
liability  or  expense,  including  reasonable  costs  and  attorney's  fees and
disbursements,  which the Company, or such other persons may incur by reason of,
or in connection  with,  any  representation  or warranty made herein not having
been true when made, any misrepresentation made by the Subscriber or any failure

                                       7

<PAGE>

by the  Subscriber  to fulfill  any of the  covenants  or  agreements  set forth
herein, or in any other document provided by the Subscriber to the Company.

     11. Transferability and Assignability.  Neither this Subscription Agreement
nor any of the rights of the Subscriber hereunder may be transferred or assigned
by the  Subscriber.  The  Subscriber  agrees that the Subscriber may not cancel,
terminate,  or  revoke  this  Subscription  Agreement  or any  agreement  of the
Subscriber made hereunder (except as otherwise specifically provided herein) and
that this  Subscription  Agreement  shall survive the death or disability of the
Subscriber  and  shall  be  binding  upon  the  Subscriber's  heirs,  executors,
administrators, successors, and assigns.

     12.  Survival.  The  representations  and  warranties of the Subscriber set
forth  herein  shall  survive  the  sale  of the  Securities  pursuant  to  this
Subscription Agreement.

     13.  Notices.  All notices or other  communications  hereunder  shall be in
writing and shall be deemed to have been duly given if delivered  personally  or
mailed by  certified or  registered  mail,  return  receipt  requested,  postage
prepaid, as follows:  if to the Subscriber,  to the address set forth below; and
if to the  Company  to  the  address  at  the  beginning  of  this  Subscription
Agreement,  or to such other address as the Company or the Subscriber shall have
designated to the other by like notice.

     14.  Counterparts.  This  Subscription  Agreement may be executed in one or
more counterparts,  each of which shall be deemed an original,  but all of which
together shall constitute one and the same document.

     15.  Governing Law. This  Subscription  Agreement  shall be governed by and
construed in accordance with the internal laws (and not the law of conflicts) of
the  State  of  Colorado.  The  parties  hereby  consent  to  the  non-exclusive
jurisdiction  of the courts of the State of  Colorado  and any  federal or state
court  located  in  Denver,   Colorado  for  any  action  arising  out  of  this
Subscription Agreement.

     16. Entire  Agreement.  This  Agreement,  including the appendices  hereto,
constitutes  the  entire  agreement,  and  supersedes  all prior  agreements  or
understandings,  among the  parties  hereto with  respect to the subject  matter
hereof.

IN NO EVENT WILL THE COMPANY, THE PLACEMENT AGENT, OR ANY OF THEIR AFFILIATES OR
THE  PROFESSIONAL  ADVISORS  ENGAGED  BY THEM BE  LIABLE IF FOR ANY  REASON  THE
COMPANY'S  OIL AND GAS  DRILLING  PROGRAM OR THE  RESULTS OF  OPERATIONS  OF THE
COMPANY ARE NOT AS PROJECTED IN THE  MEMORANDUM.  INVESTORS MUST LOOK SOLELY TO,
AND RELY ON, THEIR OWN ADVISORS  WITH  RESPECT TO THE  FINANCIAL,  TAX AND OTHER
CONSEQUENCES OF INVESTING IN THE SECURITIES.

     17. Title. Manner in Which Title is To Be Held.

                  Place an "X" in one space below:

                  (a)          Individual Ownership
                      ------ 

                  (b)          Community Property
                      ------

                  (c)          Joint Tenant with Right of Survivorship 
                      ------   (both parties must sign)

                  (d)          Partnership
                      ------

                  (e)          Tenants in Common
                      ------

                  (f)          Corporation
                      ------

                  (g)          Trust
                      ------

                  (h)          Other (Describe):
                      ------

                                       8

<PAGE>
                   -------------------------------------------------------------

                   -------------------------------------------------------------

                   -------------------------------------------------------------
                   Please print above the exact name(s) in which the Securities
                   are to be held.


     18. State of Residence.  The Subscriber's  state of residence and the state
in which the  Subscriber  received  the offer to invest and made the decision to
invest in the Securities is                     .
                           ---------------------

     19. Date of Birth. (If an individual) The Subscriber's date of birth is:

----------------------------

                                       9

<PAGE>

                                   SIGNATURES

The  Subscriber  hereby  represents  that it has read this  entire  Subscription
Agreement.

                                                     Dated:                    
                                                           ---------------------


   INDIVIDUAL (includes Community Property, Joint Tenants, Tenants-in-Common)


                                            Address to Which Correspondence
                                            Should be Directed


-----------------------------------------   ------------------------------------
Signature (Individual)


-----------------------------------------   ------------------------------------
Signature (All record holders should sign)  City, State and Zip Code

-----------------------------------------   ------------------------------------
Name(s) Typed or Printed                    Tax Identification or Social 
                                            Security Number

                                            (   )
-----------------------------------------   ------------------------------------
                                            Telephone Number


        COPY OF DRIVER'S LICENSE OR PASSPORT REQUIRED IF NON-BCP CUSTOMER
        -----------------------------------------------------------------
Customer Identification Program Notice: To help the government fight the funding
of terrorism and money  laundering  activities,  federal law requires  financial
institutions  to obtain,  verify,  and record  information  that identifies each
client.   This  means  that  we  will  require  you  to  provide  the  following
information: name, date of birth, address, identification number, and a piece of
documentary identification.  If you are an individual and do not have an account
with Bathgate Capital  Partners,  please include a copy of your driver's license
or passport.  If you are an entity,  please  provide a copy of your  articles of
incorporation,  trust document, or other identifying document. If you are unable
to  produce  the  information  required,  we may not be able  to  complete  your
investment transaction.

                                       10

<PAGE>

       CORPORATION, PARTNERSHIP, TRUST, RETIREMENT ACCOUNT OR OTHER ENTITY


-----------------------------------------   ------------------------------------
Name of Entity                              Address  to Which  Correspondence
                                            Should be Directed
By:                                                                  
   --------------------------------------   ------------------------------------
   *Signature                               City, State and Zip Code

Its:                                                               
    -------------------------------------   ------------------------------------
    Title                                   Tax Identification or Social 
                                            Security Number

                                            (   )
-----------------------------------------   ------------------------------------
Name Typed or Printed                       Telephone Number

*If  Securities  are being  subscribed  for by an  entity,  the  Certificate  of
Signatory must also be completed.


                            CERTIFICATE OF SIGNATORY

      To be completed if Securities are being subscribed for by an entity.

      I,                                   , am the                          
        -----------------------------------         ----------------------------
of
                                                                 (the "Entity").
-----------------------------------------------------------------

     I certify that I am empowered and duly  authorized by the Entity to execute
and carry out the terms of the  Subscription  Agreement and Letter of Investment
Intent  and  to  purchase  and  hold  the  Securities,   and  certify  that  the
Subscription Agreement and Letter of Investment Intent has been duly and validly
executed on behalf of the Entity and constitutes a legal and binding  obligation
of the Entity.

     IN WITNESS WHEREOF,  I have hereto set may hand this ______ day of _______,
2009.

                                                --------------------------------
                                                Signature


        COPY OF DRIVER'S LICENSE OR PASSPORT REQUIRED IF NON-BCP CUSTOMER
        -----------------------------------------------------------------
Customer Identification Program Notice: To help the government fight the funding
of terrorism and money  laundering  activities,  federal law requires  financial
institutions  to obtain,  verify,  and record  information  that identifies each
client.   This  means  that  we  will  require  you  to  provide  the  following
information: name, date of birth, address, identification number, and a piece of
documentary identification.  If you are an individual and do not have an account
with Bathgate Capital  Partners,  please include a copy of your driver's license
or passport.  If you are an entity,  please  provide a copy of your  articles of
incorporation,  trust document, or other identifying document. If you are unable
to  produce  the  information  required,  we may not be able  to  complete  your
investment transaction.

                                       11

<PAGE>

                                   ACCEPTANCE


This Subscription Agreement is accepted as of                              
                                              ----------------------------------

                                             Synergy Resources Corporation


                                             By:                               
                                                -------------------------------
                                                Ed Holloway
                                                President and CEO


                                             Date:          
                                                  ------------------------------


                                       12

<PAGE>



                                 EXHIBIT 10.6.3

                        Form of Warrant used in Company's
                      Private Offering of Convertible Notes
                              and Series C Warrants

<PAGE>

                          SYNERGY RESOURCES CORPORATION
                                TERMS OF WARRANTS

     Section 1 Definitions

     The following terms used in this document shall have the following meanings
(unless otherwise expressly provided herein):

     The "Act." The Securities Act of 1933, as amended.

     The "Commission." The Securities and Exchange Commission.

     The "Company." Synergy Resources Corporation, a Colorado corporation.

     "Shares."  The Shares of the  Company's  common stock or any other class of
stock resulting from successive  changes or  reclassifications  of the Company's
common stock consisting  solely of changes in par value, or from par value to no
par value, or from no par value to par value.

     "Current Market Price." The price of the Company's  common stock on the OTC
Bulletin  Board or any other  market in the United  States  where the  Company's
common stock is publicly traded.

     "Exercise Period." The period extending to and through the Expiration Date.

     "Exercise  Price." $6.00 per Share,  as modified in accordance with Section
8, below.

     "Expiration Date." 5:00 p.m. Mountain time on December 31, 2014;  provided,
however,  if such date shall be a holiday or a day on which banks are authorized

to close in Colorado,  the Expiration Date shall mean 5:00 p.m. Mountain Time on
the next  following  day which in  Colorado  is not a holiday  or a day on which
banks are authorized to close.

     "Holder" or "Warrant  Holder." The person to whom a warrant  certificate is
issued, and any valid transferee thereof pursuant to Section 9 below.

     "OTC  Bulletin  Board." An  electronic  quotation  medium  operated  by the
Financial Regulatory Authority.

     "Termination  of  Business."  Any  sale,  lease  or  exchange  of  all,  or
substantially  all, of the  Company's  assets or  business  or any  dissolution,
liquidation or winding up of the Company.

     "Warrants."  The  Warrants  issued  in  accordance  with the  terms of this
Agreement and any Warrants  issued in  substitution  for or  replacement of such
Warrants, or any Warrants into which such Warrants may be divided or exchanged.

     "Warrant  Agent." The Company will be the Warrant  Agent unless the Company
appoints a transfer agent that is registered  under the Securities  Exchange Act
of 1934 to act as Warrant Agent, upon notice to all Warrant Holders.

<PAGE>

     "Warrant  Shares." The Shares acquired upon exercise of a Warrant,  and the
Shares underlying the unexercised portion of a Warrant.

     Section 2 Warrants and Issuance of Warrant Certificates

     2.1  Description  of Warrants.  Each Warrant  shall  initially  entitle the
Warrant  Holder  to  purchase  one  Share  on  exercise   thereof,   subject  to
modification  and adjustment as  hereinafter  provided in Section 8. The Company
shall deliver Warrant Certificates in required whole number denominations to the
person  entitled  thereto in  connection  with the original  issuance of Warrant
Certificates or any transfer or exchange permitted under this Agreement.

     2.2 Warrant  Shares.  Share  Certificates  representing  the Warrant Shares
shall be issued  only upon the  exercise  of the  Warrants  or upon  transfer or
exchange of the Warrant Shares following exercise of the Warrants.

     2.3 Form of Certificates.  The Warrant  Certificates shall be substantially
in the form attached  hereto as Attachment 1 and may have such letters,  numbers
or other marks of  identification  and such legends,  summaries or  endorsements
printed,  lithographed or engraved  thereon as the Company may deem  appropriate
and as are not inconsistent  with the provisions of this Agreement.  The Warrant
Certificates  shall  be dated as of the date of  issuance,  whether  on  initial
issuance,  transfer, exchange or in lieu of mutilated, lost, stolen or destroyed
Warrant Certificates.

     2.4 Execution of Certificates.The Warrant Certificates shall be executed on
behalf of the Company by its President and Secretary, by manual signatures or by
facsimile  signatures printed thereon.  If any person whose facsimile  signature
has been placed upon any Warrant  Certificate  as the signature of an officer of
the Company shall have ceased to be such officer before such Warrant Certificate
is  countersigned,  issued  and  delivered,  such  Warrant  Certificate  may  be
countersigned,  issued and delivered  with the same effect as if such person had
not ceased to be such officer.  Any Warrant Certificate may be signed by, or may
bear the  facsimile  signature  of, any  person  who at the  actual  date of the
preparation of such Warrant Certificate shall be a proper officer of the Company
to sign such Warrant Certificate even though such person was not such an officer
upon the date of this Agreement.

     2.5  Mutilated,  Lost,  Stolen,  or  Destroyed  Certificate.  In  case  the
certificate or  certificates  evidencing the Warrants shall be mutilated,  lost,
stolen or destroyed,  the Company shall,  at the request of the Warrant  Holder,
issue and deliver in exchange and substitution for and upon  cancellation of the
mutilated  certificate or  certificates,  or in lieu of and substitution for the
certificate or certificates lost, stolen or destroyed, a new Warrant Certificate
or Certificates of like tenor and  representing an equivalent right or interest,
but only upon  receipt of  evidence  satisfactory  to the  Company of such loss,
theft or destruction of such Warrant and a bond of indemnity, if requested, also
satisfactory in form and amount,  at the applicant's  cost.  Applicants for such
substitute  Warrant  Certificate  shall also comply  with such other  reasonable
regulations and pay such other reasonable charges as the Company may prescribe.

                                       2

<PAGE>

     Section 3 Term of Warrants Exercise of Warrant

     3.1  Exercise  of  Warrant.  Subject  to the terms of this  Agreement,  the
Warrant Holder shall have the right, at any time during the Exercise Period,  to
purchase  from the  Company  up to the  number of fully  paid and  nonassessable
Shares to which the  Warrant  Holder  may at the time be  entitled  to  purchase
pursuant to this  Agreement,  upon  surrender to the Company,  at its  principal
office,  of the  certificate  evidencing the Warrants to be exercised,  together
with the purchase form on the reverse  thereof,  duly filled in and signed,  and
upon  payment to the Company of the  Exercise  Price for the number of Shares in
respect of which such Warrants are then exercised, but in no event for less than
100 Shares  (unless  fewer than an aggregate of 100 shares are then  purchasable
under all outstanding Warrants held by a Warrant Holder).

     3.2 Payment of Exercise  Price.  Payment of the  aggregate  Exercise  Price
shall be made in cash or by check, or any combination thereof.

     3.3 Delivery of Warrant Certificate.  Subject to Section 3.6 and to Section
10, upon receipt of a Warrant  Certificate  with the exercise  form thereon duly
executed,  together  with payment in full of the Exercise  Price for the Warrant
Shares being  purchased by such  exercise,  the Warrant Agent shall  requisition
from any transfer  agent for the Warrant  Shares,  and upon  receipt  shall make
delivery of certificates evidencing the total number of whole Warrant Shares for
which Warrants are then being exercised. The certificates shall be in such names
and  denominations  as are required for delivery to, or in  accordance  with the
instructions  of the  Warrant  Holder;  provided  that if fewer than all Warrant
Shares issuable on exercise of a Warrant Certificate are purchased,  the Warrant
Agent (if so requested) shall issue a new Warrant Certificate for the balance of
the Warrant Shares.  Such certificates for the Warrant Shares shall be deemed to
be issued, and the person to whom such Warrant Shares are issued of record shall
be deemed to have become a holder of record of such  Warrant  Shares,  as of the
date of the  surrender  of such  Warrant  Certificate  and  the  payment  of the
Exercise Price,  whichever shall last occur;  provided further that if the books
of the Company  with  respect to the Warrant  Shares  shall be closed as of such
date, the certificates for such Warrant Shares shall be deemed to be issued, and
the person to whom such  Warrant  Shares are issued of record shall be deemed to
have become a record holder of such Warrant  Shares as of the date on which such
books shall next be open (whether before, on or after the applicable  Expiration
Date) but at the Exercise Price and upon the other conditions in effect upon the
date of surrender of the Warrant Certificate and, if the Warrants are exercised,
payment  of the  Exercise  Price,  whichever  shall have last  occurred,  to the
Company.

     3.4 Cancellation of Certificates. All Warrant Certificates surrendered upon
exercise of Warrants shall be canceled.

     3.5  Fractional  Shares.  On the exercise of the Warrants the Company shall
not be required to deliver fractions of Shares; and any fractional share will be
rounded to the nearest  whole  share.  By accepting a Warrant  Certificate,  the
holder  thereof  expressly  waives  any right to  receive a Warrant  Certificate
evidencing  any fraction of a Warrant or to receive any  fractional  shares upon
the exercise of a Warrant.

                                       3

<PAGE>

     Section 4. Reservation of Warrant Shares

     There has been  reserved,  and the Company shall at all times keep reserved
so long as the Warrants remain  outstanding,  out of its authorized and unissued
Shares, such number of Shares as shall be subject to purchase under the Warrants
multiplied by 150%.  Every transfer agent for the Shares and other securities of
the Company  issuable  upon the  exercise of the  Warrants  will be  irrevocably
authorized and directed at all times to reserve such number of authorized shares
and other  securities as shall be requisite  for such purpose.  The Company will
supply  every  such  transfer   agent  with  duly   executed   stock  and  other
certificates, as appropriate, for such purpose.

     Section 5. Payment of Taxes

         The Company will pay all documentary stamp taxes, if any, attributable
to the initial issuance of the Warrants or the securities comprising the Warrant
Shares and any tax (except federal or state income tax) which may be payable in
respect of any transfer or exercise of the Warrants or the securities comprising
the Warrant Shares.

     Section 6. Warrant Shares to be Fully Paid

     The  Company  covenants  that all  Warrant  Shares  that may be issued  and
delivered to a Holder of this Warrant upon the exercise of this Warrant will be,
upon such delivery,  validly and duly issued,  fully paid and  nonassessable and
free from all taxes, liens and charges with respect to the issuance thereof.

     Section 7. Registration of Transfer

     7.1.  Exchange of Certificate.  A Warrant  Certificate may be exchanged for
another  certificate or certificates  entitling the Warrant Holder to purchase a
like  aggregate  number of Warrant  Shares as the  certificate  or  certificates
surrendered  then entitled such Warrant  Holder to purchase.  Any Warrant Holder
desiring to exchange a Warrant  Certificate  shall make such  request in writing
delivered  to  the  Company,  and  shall  surrender,   properly  endorsed,  with
signatures  guaranteed,  the Warrant Certificate to be so exchanged.  Thereupon,
the  Company  shall  execute and  deliver to the person  entitled  thereto a new
Warrant Certificate as so requested.

     7.2. Assignment or Transfer.  Any assignment or transfer of a Warrant shall
be made by the  presentation  and  surrender of the Warrant  Certificate  to the
Company,  accompanied by a duly executed  Assignment Form. Upon the presentation
and  surrender of these items to the Company,  the Company,  at its own expense,
shall execute and deliver to the new Holder or Holders a new Warrant Certificate
or  Warrant  Certificates,  in the name of the new Holder or Holders as named in
the Assignment Form, and the Warrant Certificate  presented or surrendered shall
at that time be canceled.

     7.3 Ownership Records.  The Warrant Agent shall keep books for registration
of  ownership  and transfer of Warrant  Certificates.  Such books shall show the
names and addresses of the respective  holders of the Warrant  Certificates  and
the number of Warrants evidenced by each such Warrant Certificate.

                                       4

<PAGE>

     7.4  Ownership  Prior  to   Presentment.   Prior  to  due  presentment  for
registration  of transfer  thereof,  the Company may treat the Warrant Holder as
the  absolute  owner  thereof  (notwithstanding  any  notations  of ownership or
writing  thereon made by anyone  other than the Company) and the parties  hereto
shall not be affected by any notice to the contrary.

     Section 8 Adjustment of Exercise Price and Shares

     The number and kind of  securities  purchasable  upon the  exercise  of the
Warrants and the Exercise Price shall be subject to adjustment from time to time
upon the happening of certain events, as follows:

     8.1 Adjustments. The number of Warrant Shares purchasable upon the exercise
of the Warrants shall be subject to adjustments as follows:

     (a) In case the Company  shall (i) pay a dividend  in Shares or  securities
convertible  into Shares or make a distribution to its stockholders in Shares or
securities convertible into Shares; (ii) subdivide its outstanding Shares; (iii)
combine its outstanding Shares into a smaller number of Shares; or (iv) issue by
reclassification of its Shares other securities of the Company;  then the number
of Warrant Shares  purchasable upon exercise of the Warrants  immediately  prior
thereto  shall be  adjusted  so that the  Warrant  Holder  shall be  entitled to
receive the kind and number of Warrant Shares or other securities of the Company
which it would  have owned or would have been  entitled  to receive  immediately
after the happening of any of the events described above, had such Warrants been
exercised or converted  immediately  prior to the happening of such event or any
record  date  with  respect  thereto.  Any  adjustment  made  pursuant  to  this
subsection 8.1(a) shall become effective immediately after the effective date of
such event retroactive to the record date, if any, for such event.

     (b) If,  prior to the  expiration  of the Warrants by exercise or, by their
terms, or by redemption, the Company shall reclassify its outstanding Shares, or
in the  event of any  other  material  change of the  capital  structure  of the
Company  or of any  successor  corporation  by reason  of any  reclassification,
recapitalization or conveyance,  prompt,  proportionate,  equitable,  lawful and
adequate  provision  shall be made whereby any Warrant  Holder shall  thereafter
have the right to purchase,  on the basis and the terms and conditions specified
in this Agreement,  in lieu of the Warrant Shares theretofore purchasable on the
exercise of any Warrant,  such  securities or assets as may be issued or payable
with  respect to or in  exchange  for the number of Warrant  Shares  theretofore
purchasable  on  exercise  of the  Warrants  had  the  warrants  been  exercised
immediately prior to such reclassification,  recapitalization or conveyance; and
in any such event,  the rights of any Warrant  Holder to any  adjustment  in the
number of Warrant Shares  purchasable on exercise of such Warrant,  as set forth
above,  shall  continue to be preserved in respect of any stock,  securities  or
assets which the Warrant Holder becomes entitled to purchase.

     (c)  In  case  the  Company  shall  issue  rights,  options,  warrants,  or
convertible  securities  to all or  substantially  all  holders  of its  Shares,
without any charge to such holders,  entitling them to subscribe for or purchase
Shares at a price per  share  which is lower at the  record  date  described  in
Section 12 than the then Current Market Price,  the number of Shares  thereafter
purchasable upon the exercise of each Warrant shall be determined by multiplying
the number of Shares theretofore  purchasable upon exercise of the Warrants by a
fraction,  of which the  numerator  shall be the  number  of Shares  outstanding

                                       5

<PAGE>

immediately  prior  to  the  issuance  of  such  rights,  options,  warrants  or
convertible  securities  plus  the  number  of  additional  Shares  offered  for
subscription or purchase,  and of which the  denominator  shall be the number of
Shares  outstanding  immediately prior to the issuance of such rights,  options,
warrants,  or  convertible  securities  plus the  number  of  shares  which  the
aggregate offering price of the total number of shares offered would purchase at
such Current Market Price.  Such adjustment  shall be made whenever such rights,
options,  warrants,  or  convertible  securities  are issued,  and shall  become
effective immediately and retroactively to the record date for the determination
of  shareholders  entitled  to  receive  such  rights,  options,   warrants,  or
convertible securities.

     (d) In case  the  Company  shall  distribute  to all or  substantially  all
holders of its Shares  evidences of its  indebtedness or assets  (excluding cash
dividends or distributions  out of earnings) or rights,  options,  warrants,  or
convertible  securities containing the right to subscribe for or purchase Shares
(excluding those referred to in subsection 8.1(b) above),  then in each case the
number  of  Warrant  Shares  thereafter  purchasable  upon the  exercise  of the
Warrants  shall be  determined  by  multiplying  the  number of  Warrant  Shares
theretofore  purchasable  upon exercise of the Warrants by a fraction,  of which
the  numerator  shall  be the  then  Current  Market  Price  on the date of such
distribution, and of which the denominator shall be such Current Market Price on
such date  minus the then fair  value  (determined  as  provided  in  subsection
8.1(g)(y)  below) of the portion of the assets or evidences of  indebtedness  so
distributed or of such subscription rights,  options,  warrants,  or convertible
securities  applicable to one share.  Such adjustment shall be made whenever any
such distribution is made and shall become effective on the date of distribution
retroactive to the record date for the determination of stockholders entitled to
receive such distribution.

     (e) Except for Exempt Issuances, if the Company sells any additional shares
of common  stock,  or any  securities  convertible  into common stock at a price
below the then applicable  Exercise Price of the Warrants,  the Warrant Exercise
Price will be  lowered to the price at which the shares  were sold or the lowest
price at which the securities are convertible, as the case may be.

     (f) No adjustment in the number of Warrant Shares  purchasable  pursuant to
the Warrants shall be required unless such adjustment  would require an increase
or  decrease  of at least one  percent  in the  number of  Warrant  Shares  then
purchasable  upon the  exercise of the Warrants or, if the Warrants are not then
exercisable,  the number of Warrant Shares  purchasable upon the exercise of the
Warrants on the first date  thereafter  that the  Warrants  become  exercisable;
provided,  however,  that any adjustments which by reason of this subsection are
not  required  to be made  immediately  shall be carried  forward and taken into
account in any subsequent adjustment.

     (g) Whenever the number of Warrant Shares  purchasable upon the exercise of
the Warrant is adjusted,  as herein  provided,  the Exercise  Price payable upon
exercise of the Warrant shall be adjusted by  multiplying  such  Exercise  Price
immediately prior to such adjustment by a fraction, of which the numerator shall
be the number of Warrant  Shares  purchasable  upon the  exercise of the Warrant
immediately prior to such adjustment,  and of which the denominator shall be the
number of Warrant Shares so purchasable immediately thereafter.

                                       6

<PAGE>

     (h) In the  event  that at any  time,  as a result  of an  adjustment  made
pursuant to this Section,  the Warrant Holder shall become  entitled to purchase
any securities of the Company other than Shares,  if the Warrant  Holder's right
to  purchase  is on any other  basis than that  available  to all holders of the
Company's  Shares,  the  Company  shall  obtain  an  opinion  of an  independent
investment banking firm valuing such other securities; and thereafter the number
of such other  securities so purchasable  upon exercise of the Warrants shall be
subject  to  adjustment  from  time to time in a manner  and on terms as  nearly
equivalent as practicable  to the provisions  with respect to the Warrant Shares
contained in this Section.

     (i) Upon the  expiration of any rights,  options,  warrants,  or conversion
privileges,  if such shall have not been  exercised or converted,  the number of
Shares  purchasable  upon exercise of the  Warrants,  to the extent the Warrants
have not then been  exercised or  converted,  shall,  upon such  expiration,  be
readjusted  and shall  thereafter  be such as they would have been had they been
originally  adjusted (or had the original  adjustment not been required,  as the
case may be) on the  basis of (i) the fact that the only  Shares so issued  were
the Shares,  if any,  actually  issued or sold upon the exercise of such rights,
options, warrants, or conversion privileges, and (ii) the fact that such Shares,
if any,  were  issued or sold for the  consideration  actually  received  by the
Company upon such exercise plus the consideration,  if any, actually received by
the  Company  for the  issuance,  sale or  grant of all  such  rights,  options,
warrants, or conversion privileges whether or not exercised;  provided, however,
that no such  readjustment  shall  have the effect of  decreasing  the number of
Shares  purchasable  upon exercise of the Warrants by an amount in excess of the
amount of the  adjustment  initially  made in respect of the issuance,  sale, or
grant of such rights, options, warrants, or conversion rights.

     8.2 No Adjustment for Dividends.  Except as provided in subsection  8.1, no
adjustment in respect of any dividends or distributions out of earnings shall be
made during the term of the Warrants or upon the exercise of the Warrants.

     8.3 No Adjustment in Certain Cases.  No adjustments  shall be made pursuant
to this Section in connection with an Exempt Issuance.

     "Exempt Issuance" means the sale or issuance of:

          o    shares of common stock or options to officers or directors of the
               Company,  not to exceed  1,000,000  shares or options  per fiscal
               year for any single officer or director (not to exceed  5,000,000
               shares or options  per year in total),  pursuant  to any stock or
               option plan duly adopted by the directors of the Company.

          o    shares of common  stock or options to  employees  or  independent
               consultants  of the Company,  not to exceed  5,000,000  shares or
               options  per year,  pursuant  to any  stock or  option  plan duly
               adopted by the directors of the Company.

          o    shares issued in connection  with an  acquisition  of oil and gas
               properties,  the acquisition of an unaffiliated  company, a joint
               venture  or  similar  strategic  transaction  where  the  primary
               purpose is not to raise cash.

          o    securities  upon the  conversion  of the Notes  (issued with this
               warrant)  or  the  exercise  of the  Warrants  held  by the  note
               holders.

                                       7

<PAGE>

          o    securities  upon  the  conversion  of notes  or the  exercise  of
               options or  warrants  issued by the Company  and  outstanding  on
               November 15, 2009,  provided  that the  securities  have not been
               amended to increase the number of such  securities or to decrease
               the exercise, exchange or conversion price of the securities.

     8.4 Preservation of Purchase Rights upon  Reclassification,  Consolidation,
etc. In case of any  consolidation  of the Company with or merger of the Company
into  another  corporation,  or in case of any  sale or  conveyance  to  another
corporation of the property,  assets,  or business of the Company as an entirety
or  substantially  as an entirety,  the Company or such  successor or purchasing
corporation,  as the case may be, shall  execute an  agreement  that the Warrant
Holder shall have the right  thereafter  upon  payment of the Exercise  Price in
effect  immediately  prior to such  action to  purchase,  upon  exercise  of the
Warrants,  the kind and amount of shares and other securities and property which
it would have owned or have been entitled to receive after the happening of such
consolidation,  merger,  sale, or conveyance  had the Warrants been exercised or
converted  immediately  prior to such action. In the event of a merger described
in Section  368(a)(2)(E)  of the  Internal  Revenue  Code of 1986,  in which the
Company is the surviving corporation, the right to purchase Warrant Shares under
the  Warrants  shall  terminate  on the date of such  merger and  thereupon  the
Warrants  shall become null and void,  but only if the  controlling  corporation
shall agree to  substitute  for the  Warrants,  its Warrants  which  entitle the
holder thereof to purchase upon their exercise the kind and amount of shares and
other  securities  and  property  which it would have owned or been  entitled to
receive had the Warrants been exercised or converted  immediately  prior to such
merger. Any such agreements referred to in this subsection 8.4 shall provide for
adjustments,  which shall be as nearly  equivalent as may be  practicable to the
adjustments  provided for in this Section.  The  provisions  of this  subsection
shall  similarly  apply  to  successive   consolidations,   mergers,  sales,  or
conveyances.

     8.5  Independent  Public  Accountants.  The  Company  may  retain a firm of
independent public accountants of recognized national standing (which may be any
such firm regularly  employed by the Company) to make any  computation  required
under this Section,  and a  certificate  signed by such firm shall be conclusive
evidence of the correctness of any computation made under this Section.

     8.6 Statement on Warrant  Certificates.  Irrespective of any adjustments in
the  number of  securities  issuable  upon  exercise  of the  Warrants,  Warrant
Certificates  theretofore or thereafter  issued may continue to express the same
number of securities as are stated in the similar Warrant Certificates initially
issuable  pursuant to this Agreement.  However,  the Company may, at any time in
its sole discretion (which shall be conclusive),  make any change in the form of
Warrant  Certificate  that it may deem  appropriate and that does not affect the
substance thereof; and any Warrant Certificate  thereafter issued,  whether upon
registration of transfer of, or in exchange or substitution  for, an outstanding
Warrant Certificate, may be in the form so changed.

     8.7  Officers'  Certificate.  Whenever the Exercise  Price or the aggregate
number of Warrant Shares purchasable  pursuant to this Warrant shall be adjusted
as required by the  provisions  of this  Section,  the  Company  shall  promptly
prepare  an  officers'  certificate  executed  by the  Company's  President  and
Secretary or Assistant  Secretary,  describing the adjustment and setting forth,
in reasonable  detail, the facts requiring such adjustment and the basis for and

                                       8

<PAGE>

calculation  of such  adjustment  in  accordance  with  the  provisions  of this
document. Each such officers' certificate shall be made available to the Holders
for  inspection  at all  reasonable  times,  and the  Company,  after  each such
adjustment,  shall promptly deliver a copy of the officers' certificate relating
to that adjustment to the Holders. The officers'  certificate  described in this
subsection  shall  be  deemed  to be  conclusive  as to the  correctness  of the
adjustment  reflected therein if, and only if, no Holder delivers written notice
to the  Company  of an  objection  to the  adjustment  within 30 days  after the
officers'  certificate  is delivered  to the Holders.  The Company will make its
books and records  available for inspection  and copying during normal  business
hours by the Holder so as to permit a determination as to the correctness of the
adjustment.  If written  notice of an  objection is delivered by a Holder to the
Company and the parties cannot reconcile the dispute, the Holder and the Company
shall submit the dispute to  arbitration  pursuant to the  provisions of Section
(15) below.  Failure to prepare or provide the officers'  certificate  shall not
modify the parties' rights hereunder.

     Section 9. Restrictions on Transfer; Registration Rights.

     9.1.  Restrictions  on Transfer.  The Warrant  Holder  agrees that prior to
making any disposition of the Warrants or the Warrant Shares, the Warrant Holder
shall give written notice to the Company  describing briefly the manner in which
any such proposed  disposition is to be made; and no such  disposition  shall be
made if the  Company  has  notified  the  Warrant  Holder that in the opinion of
counsel reasonably  satisfactory to the Warrant Holder a registration  statement
or  other   notification  or  post-effective   amendment  thereto   (hereinafter
collectively a "Registration  Statement") under the Act is required with respect
to such  disposition  and no such  Registration  Statement has been filed by the
Company with, and declared effective, if necessary, by, the Commission.

     9.2.  Registration  Rights. Prior to June 12, 2010, the Company will file a
registration  statement with the Securities and Exchange Commission to register,
at the Company's sole expense, the Warrant Shares.

     The Company shall comply with the  requirements of this Section 9.2 and the
related  requirements  of Section 9.5 at its own  expense.  That  expense  shall
include, but not be limited to, legal, accounting, consulting, printing, federal
and state filing fees,  out-of-pocket expenses incurred by counsel,  accountants
and consultants  retained by the Company,  and  miscellaneous  expenses directly
related to the  registration  statement or offering  statement and the offering.
However,  this  expense  shall  not  include  the  portion  of any  underwriting
commissions,  transfer taxes and any underwriter's accountable or nonaccountable
expense allowances attributable to the offer and sale of the Warrant Shares, all
of which  expenses shall be borne by the Holder or Holders of the Warrant Shares
registered or qualified.

     9.3.   Inclusion  of   Information.   The  Company  shall  include  in  the
registration  statement or qualification,  and the prospectus  included therein,
all  information  and  materials  necessary  or  advisable  to  comply  with the
applicable  statutes  and  regulations  so as to permit the  public  sale of the
Warrant Shares.  As used in Section 9.3,  reference to the Company's  securities
shall  include,  but not be  limited  to,  any  class  or type of the  Company's
securities or the securities of any of the Company's subsidiaries or affiliates.

                                       9

<PAGE>

     9.4 Condition of Company's Obligations.  As to each registration statement,
the Company's  obligations contained in this Section 9 shall be conditioned upon
a timely receipt by the Company in writing of the following:

          (a)  Information as to the terms of the  contemplated  public offering
     furnished  by and on behalf of each  Holder or holder  intending  to make a
     public distribution of the Warrant Shares or; and

          (b) Such other information as the Company may reasonably  require from
     such Holders or holders,  or any underwriter for any of them, for inclusion
     in the registration statement or offering statement.

     (9.5) Additional Requirements.  In each instance in which the Company shall
take any action to  register  or qualify  the  Warrant  Shares  pursuant to this
Section the Company shall do the following:

          (a)  supply  to the  Holders  of  the  of  Warrant  Shares  are  being
     registered  or qualified,  if requested by such  Holders,  one copy of each
     registration  statement or offering statement,  and all amendments thereto,
     and a  reasonable  number  of  copies  of the  preliminary,  final or other
     prospectus, all prepared in conformity with the requirements of the Act and
     the rules and regulations promulgated thereunder,  and such other documents
     as the Holders shall reasonably request;

          (b) cooperate  with respect to (i) all necessary or advisable  actions
     relating to the preparation and the filing of any  registration  statements
     or  offering  statements,  and all  amendments  thereto,  arising  from the
     provisions of this  Section,  (ii) all  reasonable  efforts to establish an
     exemption  from the  provisions  of the Act or any other  federal  or state
     securities  statutes,  (iii) all necessary or advisable actions to register
     or qualify  the public  offering at issue  pursuant  to federal  securities
     statutes and the state "blue sky" securities  statutes of each jurisdiction
     that the  Holders  of the  Warrant  or  holders  of  Warrant  Shares  shall
     reasonably  request,  and (iv) all other necessary or advisable  actions to
     enable the  Holders of the  Warrant  Shares to  complete  the  contemplated
     disposition of their securities in each reasonably requested  jurisdiction;
     and

          (c) keep all registration  statements or offering  statements to which
     this Section applies,  and all amendments thereto,  effective under the Act
     for a period of at least 9 months after their  initial  effective  date and
     cooperate with respect to all necessary or advisable  actions to permit the
     completion  of the  public  sale or  other  disposition  of the  securities
     subject to a registration statement or offering statement.

     9.6 Reciprocal Indemnification.  In each instance in which pursuant to this
Section  the  Company  shall take any action to  register or qualify the Warrant
Shares,  prior to the effective date of any  registration  statement or offering
statement,  the  Company  and each  Holder  or holder of  Warrant  Shares  being
registered or qualified shall enter into reciprocal indemnification  agreements,
in the form  customarily  used by reputable  investment  bankers with respect to
public  offerings of securities.  These  indemnification  agreements  also shall
contain an agreement by the Holder or shareholder at issue to indemnify and hold

                                       10

<PAGE>

harmless the Company,  its officers and  directors  from and against any and all
losses,  claims,  damages and  liabilities,  including,  but not limited to, all
expenses reasonably incurred in investigating,  preparing, defending or settling
any claim,  directly  resulting from any untrue statements of material facts, or
omissions to state a material fact necessary to make a statement not misleading,
contained  in a  registration  statement  or  offering  statement  to which this
Section  applies,  if, and only if, the untrue  statement  or omission  directly
resulted from information provided in writing to the Company by the indemnifying
Holder  or  shareholder  expressly  for  use in the  registration  statement  or
offering statement at issue.

     9.7  Survival.  The Company's  obligations  described in this Section shall
continue  in full  force and  effect  regardless  of the  exercise,  conversion,
surrender, cancellation or expiration of this Warrant.

     Section (10) Merger or Consolidation of the Company

     The  Company  will  not  merge  or  consolidate  with  or  into  any  other
corporation  or  sell  all  or  substantially  all of its  property  to  another
corporation, unless the provisions of Section 8.4 are complied with.

     Section (11) Modification of Agreement.

     The Company may by  supplemental  agreement make any changes or corrections
in this Agreement it shall deem  appropriate to cure any ambiguity or to correct
any defective or  inconsistent  provision or mistake or error herein  contained.
Additionally,  the Company may make any changes or corrections  deemed necessary
which shall not adversely affect the interests of the Warrant Holders, including
lowering the exercise  price or extending  the Exercise  Period of the Warrants;
provided, however, this Agreement shall not otherwise be modified,  supplemented
or altered in any  respect  except  with the  consent in writing of the  Warrant
Holders who hold not less than a majority of the Warrants then  outstanding  and
provided further that no such amendment shall accelerate the Warrant  Expiration
Date or increase the Exercise  Price  without the approval of all the holders of
all outstanding Warrants.

     Section (12) Notices to Warrant Holders

     12.1 Declaration of Dividend; Reorganization;  Dissolutions; Etc. If, prior
to the  expiration  of this  Warrant  either by its terms or by its  exercise in
full, any of the following shall occur:

          (i)  the  Company  shall  declare a dividend  or  authorize  any other
               distribution on its Shares; or

          (ii) the Company shall  authorize the granting to the  stockholders of
               its Shares of rights to subscribe for or purchase any  securities
               or any other similar rights; or

          (iii) any  reclassification,  reorganization  or similar change of the
               Shares,  or any consolidation or merger to which the Company is a
               party, or the sale, lease, or exchange of any significant portion
               of the assets of the Company; or

                                       11

<PAGE>

          (iv) the voluntary or involuntary dissolution,  liquidation or winding
               up of the Company; or

          (v)  any  purchase,  retirement  or  redemption  by the Company of its
               Shares;

     then,  and in any such case,  the  Company  shall  deliver to the Holder or
Holders written notice thereof at least 30 days prior to the earliest applicable
date specified  below with respect to which notice is to be given,  which notice
shall state the following:

          (u)  the purpose for which a record of stockholders is to be taken;

          (w)  the  number,  amount,  price,  and  nature of the Shares or other
               stock, securities, or assets which will be deliverable on Warrant
               Shares following exercise of the Warrants if such exercise occurs
               prior to the record date for such action;

          (x)  the date on which a record is to be taken for the purpose of such
               dividend,  distribution  or rights,  or, if a record is not to be
               taken,  the date as of which the stockholders of Shares of record
               to be entitled to such dividend, distribution or rights are to be
               determined;

          (y)  the  date  on  which   such   reclassification,   reorganization,
               consolidation, merger, sale, transfer, dissolution,  liquidation,
               winding up or purchase,  retirement  or redemption is expected to
               become effective, and the date, if any, as of which the Company's
               stockholders  of Shares of record  shall be  entitled to exchange
               their Shares for  securities or other property  deliverable  upon
               such  reclassification,  reorganization,  consolidation,  merger,
               sale, transfer, dissolution,  liquidation,  winding up, purchase,
               retirement or redemption; and

          (z)  if any matters  referred to in the foregoing  clauses (x) and (y)
               are to be voted upon by  stockholders  of Shares,  the date as of
               which  those  stockholders  to be  entitled  to  vote  are  to be
               determined.

     12.2 Failure to Give Notice. Without limiting the obligation of the Company
hereunder to provide notice to each Warrant Holder, it is agreed that failure of
the Company to give notice shall not  invalidate  corporate  action taken by the
Company.

     Section 13 No Rights as Shareholder

     Nothing  contained in this  Agreement or in the Warrants shall be construed
as  conferring  upon the  Warrant  Holder  or its  transferees  any  rights as a
shareholder  of the Company,  including  the right to vote,  receive  dividends,
consent  or  receive  notices as a  shareholder  in  respect  to any  meeting of
shareholders  for the election of directors of the Company or any other  matter.
The Company  covenants,  however,  that for so long as this  Warrant is at least
partially unexercised, it will furnish any Holder of this Warrant with copies of
all reports and communications  furnished to the shareholders of the Company. In
addition,  if at any time prior to the  expiration  of the Warrants and prior to
their exercise, any one or more of the following events shall occur:

          (a) any action which would require an  adjustment  pursuant to Section
     8.1 or 8.4; or

                                       12

<PAGE>

          (b) a  dissolution,  liquidation,  or winding up of the Company (other
     than in connection with a consolidation,  merger,  or sale of its property,
     assets,  and business as an entirety or substantially as an entirety) shall
     be proposed:

then the  Company  shall give  notice in  writing  of such event to the  Warrant
Holder,  as  provided  in Section 12 hereof,  at least 20 days prior to the date
fixed as a  record  date or the  date of  closing  the  transfer  books  for the
determination   of  the   stockholders   entitled  to  any  relevant   dividend,
distribution,  subscription  rights or other rights or for the  determination of
stockholders  entitled to vote on such  proposed  dissolution,  liquidation,  or
winding up. Such notice  shall  specify  such record date or the date of closing
the transfer books, as the case may be. Failure to mail or receive notice or any
defect  therein  shall not affect the  validity of any action taken with respect
thereto.

          Section (14) Notices

     14.1 The  Company.  All  notices,  demands,  claims,  elections,  opinions,
requests or other communications  hereunder (however characterized or described)
shall be in  writing  and  shall be deemed  duly  given or made if (and then two
business  days after) sent by  registered  or  certified  mail,  return  receipt
requested,  postage  prepaid  and  addressed  to, in the case of the  Company as
follows:

         Synergy Resources Corporation
         20203 Highway 60
         Platteville, CO  80651

     14.2 The Warrant Holders.  Any  distribution,  notice or demand required or
authorized  by this  Agreement  to be given or made by the  Company to or on the
Warrant  Holders  shall be  sufficiently  given  or made if sent by mail,  first
class,  certified  or  registered,  postage  prepaid,  addressed  to the Warrant
Holders at their last known  addresses as they shall appear on the  registration
books for the Warrant Certificates maintained by the Company.

     14.3  Effectiveness  of Notice.  The Company  may send any notice,  demand,
claim,  election,  opinion,  request or communication  hereunder to the intended
recipient  at the  address  set forth  above  using any other  means  (including
personal delivery, expedited courier, messenger service, telecopy, ordinary mail
or electronic  mail),  but no such notice,  demand,  claim,  election,  opinion,
request or other  communication  shall be deemed to have been duly given or made
unless and until it actually is received by the intended recipient.  The Company
may change the address to which notices, demands, claims,  elections,  opinions,
requests and other  communications  hereunder  are to be delivered by giving the
Warrant Holders notice in the manner herein set forth.

     Section (15) Arbitration

     The Company and the Holder, and by receipt of a Warrant  Certificate or any
Warrant Shares,  all subsequent  Holders or holders of Warrant Shares,  agree to
submit all  controversies,  claims,  disputes  and  matters of  difference  with
respect to this  Agreement  and the  Warrant  Certificates,  including,  without
limitation, the application of this Section, to arbitration in Denver, Colorado,

                                       13

<PAGE>

according to the rules and  practices of the  American  Arbitration  Association
from time to time in force.  This agreement to arbitrate  shall be  specifically
enforceable.  Arbitration  may  proceed in the absence of any party if notice of
the proceeding  has been given to that party.  The parties agree to abide by all
awards rendered in any such proceeding.  These awards shall be final and binding
on all  parties to the extent and in the manner  provided  by the rules of civil
procedure  enacted in Colorado.  All awards may be filed, as a basis of judgment
and of the issuance of execution  for its  collection,  with the clerk of one or
more courts, state or federal, having jurisdiction over either the party against
whom that award is rendered or its  property.  No party shall be  considered  in
default  hereunder  during the pendency of arbitration  proceedings  relating to
that default.

     Section (16) Miscellaneous Provisions

     16.1 Persons Benefiting.  This Agreement shall be binding upon and inure to
the benefit of the Company,  the Warrant Agent and their  respective  successors
and assigns and the Warrant Holders. By acceptance of a Warrant Certificate, the
Holder accepts and agrees to comply with all of the terms and provisions hereof.
Nothing in this  Agreement  is intended or shall be  construed  to confer on any
other  person  any right,  remedy or claim or to impose on any other  person any
duty, liability or obligation.

     16.2 Severability.  If any term contained herein shall be held, declared or
pronounced void, voidable, invalid,  unenforceable or inoperative for any reason
by any court of competent jurisdiction,  government authority or otherwise, such
holding, declaration or pronouncement shall not affect adversely any other term,
which shall  otherwise  remain in full force and effect,  and the effect of such
holding,  declaration  or  pronouncement  shall be limited to the  territory  or
jurisdiction in which made.

     16.3  Termination.  This  Agreement  shall  terminate  as of the  close  of
business on the  Expiration  Date,  or such earlier date upon which all Warrants
shall have been exercised or converted or redeemed;  except that the exercise of
a Warrant in full or the  Expiration  Date shall not terminate the provisions of
this Agreement as it relates to holders of Warrant Shares.

     16.4  Governing  Law.  These  terms  and each  Warrant  Certificate  issued
hereunder  shall be deemed to be a contract  under the laws of Colorado  and for
all  purposes  shall be  construed  in  accordance  with the laws of said  state
without giving effect to conflicts of laws provisions of such state.

     16.5 Agreement Available to Warrant Holders. A copy of these terms shall be
available  at all  reasonable  times at the  office  of the  Warrant  Agent  for
inspection by any Warrant Holder. As a condition of such inspection, the Company
may require any Warrant  Holder to submit a Warrant  Certificate  held of record
for inspection.

     16.6  Failure  to  Perform.  If the  Company  fails to  perform  any of its
obligations hereunder, it shall be liable to the Warrant Holder for all damages,
costs and expenses  resulting from the failure,  including,  but not limited to,
all reasonable attorney's fees and disbursements.

     16.7 Paragraph  Headings.  Paragraph  headings used in this Warrant are for
convenience  only and shall not be taken or  construed to define or limit any of

                                       14

<PAGE>

the terms or provisions of this Warrant.  Unless otherwise  provided,  or unless
the context shall otherwise  require,  the use of the singular shall include the
plural and the use of any gender shall include all genders.

                                       15

<PAGE>

                                  ATTACHMENT 1

                          [FORM OF WARRANT CERTIFICATE]

The Warrant and the underlying  Shares  represented by this Certificate have not
been  registered  under  the  Securities  Act  of  1933  (the  "Act"),  and  are
"restricted  securities"  as that term is defined in Rule144  under the Act. The
securities  may not be offered for sale,  sold or otherwise  transferred  except
pursuant to an effective registration statement under the Act, or pursuant to an
exemption from  registration  under the Act, the  availability of which is to be
established to the satisfaction of the Company. Additionally,  Warrants are only
exercisable  or  convertible  when  such  exercise,  and  the  issuance  of  the
underlying   Shares,  can  be  affected  in  compliance  with  applicable  state
securities laws.

                                SERIES C WARRANT

                               WARRANT CERTIFICATE

Synergy Resources Corporation

                              ____________Warrants

This Warrant  Certificate  certifies  that or  registered  assigns (the "Warrant
Holder"),  is the  registered  owner of the  above-indicated  number of Warrants
("Warrants")  expiring at 5:00 p.m.,  Mountain  time,  on December 31, 2014 (the
"Expiration  Date").  Each Warrant  entitles the Warrant Holder to purchase from
Synergy Resources Corporation (the "Company"),  a Colorado  corporation,  at any
time  commencing on the date it is issued but before the  Expiration  Date,  one
fully paid and non-assessable share ("Share") of the Company's common stock at a
purchase price of $6.00 per Share (the "Exercise  Price") upon surrender of this
Warrant Certificate,  with the exercise form hereon duly completed and executed,
with payment of the Exercise Price, at the principal office of the Company,  but
only  subject to the  conditions  set forth  herein and in the Terms of Warrants
("Warrant  Terms").  The Exercise Price,  the number of Shares  purchasable upon
exercise of each Warrant,  and the number of Warrants outstanding are subject to
adjustments  upon the  occurrence  of certain  events  set forth in the  Warrant
Terms.  Reference  is  hereby  made to the  other  provisions  of  this  Warrant
Certificate  and the  provisions of the Warrant  Terms,  all of which are hereby
incorporated by reference herein and made a part of this Warrant Certificate and
which shall for all  purposes  have the same effect as though fully set forth at
this place.

     Upon  due  presentment  for   registration  of  transfer  of  this  Warrant
Certificate  at the office of the Company a new Warrant  Certificate  or Warrant
Certificates  of like tenor and  evidencing  in the  aggregate  a like number of
Warrants,  subject to any adjustments made in accordance with the Warrant Terms,
shall be issued to the  transferee  in exchange  for this  Warrant  Certificate,
subject to the limitations provided in the Warrant Terms.

                                       16

<PAGE>

     The Warrant Holder  evidenced by this Warrant  Certificate may exercise all
or any whole  number of such  Warrants  in the manner  stated  hereon and in the
Warrant Terms. The Exercise Price shall be payable in lawful money of the United
States of  America  in cash or by  certified  or  cashier's  check or bank draft
payable to the order of the Company. Upon any exercise of any Warrants evidenced
by this  Warrant  Certificate  in an amount  less than the number of Warrants so
evidenced, there shall be issued to the Warrant Holder a new Warrant Certificate
evidencing  the number of Warrants not so exercised or converted.  No adjustment
shall be made for any  dividends  on any shares  issued  upon  exercise  of this
Warrant.

     No  Warrant  may be  exercised  after  5:00  p.m.,  Mountain  time,  on the
Expiration Date, and any Warrant not exercised by such time shall become void.

     COPIES OF THE WARRANT TERMS, WHICH DEFINES THE RIGHTS, RESPONSIBILITIES AND
OBLIGATIONS  OF THE  COMPANY  AND THE  WARRANT  HOLDERS,  ARE ON FILE  WITH  THE
COMPANY.  ANY  WARRANT  HOLDER MAY OBTAIN A COPY OF THE WARRANT  TERMS,  FREE OF
CHARGE, BY WRITTEN A REQUEST TO THE PRINCIPAL OFFICE OF THE COMPANY.

     This Warrant Certificate,  when surrendered to the Company, in person or by
attorney duly authorized in writing, may be exchanged, in the manner and subject
to the limitations  provided in the Warrant Terms,  without payment of a charge,
except for any tax or other governmental  charge imposed in connection with such
exchange,  for another Warrant Certificate or Warrant Certificates of like tenor
and  evidencing a like number of  Warrants,  subject to any  adjustment  made in
accordance with the Warrant Terms.

     The Company may deem and treat the registered holder hereof as the absolute
owner of this Warrant Certificate  (notwithstanding any notation of ownership or
other writing  hereon made by anyone) for all purposes and the Company shall not
be affected by any notice to the contrary.  No Warrant  Holder,  as such,  shall
have the rights of a stockholder of the Company, either at law or in equity, and
the rights of the Warrant Holder, as such, are limited to those rights expressly
provided in the Warrant Terms and in the Warrant Certificates.

     The Company  shall not be required to issue  fractions of Warrants upon any
such  adjustment  or to issue  fractions  of  shares  upon the  exercise  of any
Warrants after any such adjustment, but the Company, in lieu of issuing any such
fractional  interest,  shall pay an amount in cash equal to such fraction  times
the  current  market  value of one  Warrant  or one  share,  as the case may be,
determined in accordance with the Warrant Terms.

     Unless the  amendment  is able to be effected by the Company in  accordance
with the Warrant Terms, the Warrant Terms are subject to amendment only upon the
approval  of holders of not less than a majority  of the  outstanding  Warrants,
except that no such amendment  shall  accelerate the Expiration Date or increase
the Exercise  Price  without the approval of all the holders of all  outstanding
Warrants.

     IMPORTANT:  The  Warrants  represented  by  this  Certificate  may  not  be
exercised or converted  by a Warrant  Holder  unless at the time of exercise the
underlying  Shares are qualified for sale, by registration or otherwise,  in the
state  where the  Warrant  Holder  resides or unless the  issuance of the Shares

                                       17

<PAGE>

would  be  exempt  under  the  applicable  state  securities  laws.  Further,  a
registration  statement  under the Securities Act of 1933, as amended,  covering
the  exercise  of the  Warrants  must be in effect  and  current  at the time of
exercise  unless the  issuance  of Shares  upon any  exercise is exempt from the
registration   requirements   of  the   Securities  Act  of  1933,  as  amended.
Notwithstanding  the provisions hereof,  unless such registration  statement and
qualification  are in effect  and  current  at the time of  exercise,  or unless
exemptions are available,  the Company may decline to permit the exercise of the
Warrants  and the  holder  hereof  would  then  only  have the  choice of either
attempting to sell the Warrants,  if a market existed  therefor,  or letting the
Warrants expire.

     IN WITNESS WHEREOF,  the Company has caused this Warrant  Certificate to be
signed  by its  President  and by its  Secretary,  each by a  facsimile  of said
officers'  signatures,  and has caused a facsimile of its  corporate  seal to be
imprinted hereon.

Dated:                                    Synergy Resources Corporation
         

By:                                       By:                         
   -------------------------------            --------------------------------
            Secretary                         Chief Executive Officer



                                       18

<PAGE>



                                  EXHIBIT 10.7



<PAGE>


                           PURCHASE AND SALE AGREEMENT
             (Wells, Equipment, and Well Bore Leasehold Assignments)


THIS PURCHASE AND SALE AGREEMENT  ("Agreement") is dated October 1, 2010, and is
entered into by and between PETROLEUM EXPLORATION AND MANAGEMENT, LLC ("PEM"), a
Colorado  limited   liability   company  whose  address  is  20203  Highway  60,
Platteville,  Colorado  80651 and SYNERGY  RESOURCES  CORPORATION  ("Synergy") a
Colorado  corporation whose address is 20203 Highway 60,  Platteville,  Colorado
80651.

                                    RECITALS

A.    PEM wishes to transfer the wells and equipment described in Exhibit 1
      attached hereto, and its respective 100% working interest and 80% net
      revenue interest in the oil and gas leases described in Exhibit 2 attached
      hereto, insofar and only insofar as such leases pertain to the wells bores
      listed in such Exhibit 1.

B.    Synergy has conducted an independent investigation of the nature and
      extent of these oil and gas leasehold interests, wells and equipment and
      wishes to purchase the interests of PEM in these assets.

C.    By this instrument, Synergy and PEM set forth their agreement concerning
      the purchase and sale of these oil and gas leasehold interests, wells and
      equipment.

                                    AGREEMENT

In consideration of the mutual promises
 contained herein, PEM and the Synergy
agree as follows:

                                    ARTICLE I
                         PURCHASE AND SALE OF THE ASSETS

1.1   Purchase and Sale. PEM hereby agrees to sell and Synergy hereby agrees to
      purchase the Assets pursuant to the terms of this Agreement.

1.2   The Assets.  As used herein,  the term  "Assets"  refers to all of PEM's 
      right,  title and interest in and to the following:

     (a)  The oil and gas wells and equipment  specifically described in Exhibit
          1 (collectively,  the "Wells"),  together with all personal  property,
          fixtures,  improvements,  permits, rights-of-way and easements used or
          held  for  use  in   connection   with  the   production,   treatment,
          compression,  storing,  sale or  disposal  of  Hydrocarbons  or  water
          produced  from the  properties  and  interests  described  in  Section
          1.2(b).

     (b)  The leasehold  estates created by the oil and gas leases  specifically
          described  in Exhibit 2,  insofar and only  insofar as they pertain to
          the well bores  described in Exhibit 1  (collectively,  the "Leases"),

                                       1

<PAGE>

          and the oil,  gas,  coalbed  gas and all  other  hydrocarbons  whether
          liquid, solid or gaseous (collectively,  the "Hydrocarbons")  produced
          or to be produced through such well bores, and all contract rights and
          privileges,  surface,  reversionary  or remainder  interests and other
          interests  associated  with the  Leases,  insofar  as they  pertain to
          production of Hydrocarbons through such well bores.

     (c)  The pooling and communitization  agreements,  declarations and orders,
          and the  units  created  thereby  (including  all units  formed  under
          orders,  regulations,  rules or other  acts of any  federal,  state or
          other governmental agency having  jurisdiction),  as well as all other
          such agreements  relating to the properties and interests described in
          Sections 1.2(a) and (b) and to the production of Hydrocarbons, if any,
          attributable to said Leases and Wells.

     (d)  All existing  and  effective  sales,  purchase,  exchange,  gathering,
          transportation  and  processing   contracts,   operating   agreements,
          balancing  agreements,  farmout agreements,  service  agreements,  and
          other contracts, agreements and instruments, insofar as they relate to
          the Leases and Wells  described in Sections  1.2(a) through (c) above,
          with the exception of any agreements  pertaining to the remediation of
          the  Environmental  Defects  listed on  Exhibit 4  (collectively,  the
          "Contracts"), and which Contracts are shown on Exhibit 3.

     (e)  The  files,  records  and data  relating  to the  items  described  in
          Sections  1.2(a)  through (d)  maintained  by PEM and  relating to the
          interests  described in Sections  1.2(a) through (d) above  (including
          without   limitation,   all  lease  files,  land  files,  well  files,
          accounting  records,  drilling reports,  abstracts and title opinions,
          seismic data,  geophysical  data and other  geologic  information  and
          data), but only to the extent not subject to unaffiliated  third party
          contractual  restrictions  on  disclosure  or transfer and only to the
          extent related to the Assets (the "Records").

1.3   Purchase Price. The purchase price (the "Purchase Price"), for the Assets
      shall be $830,093.69. The parties agree that PEM will transfer the ad
      valorem taxes referred to in Section 1.4. If the ad valorem taxes payable
      by PEM are more than the transferred amount, PEM will promptly pay the
      additional amount to Synergy. If the ad valorem taxes payable by PEM are
      less than the transferred amount, Synergy will promptly remit to PEM the
      difference.

1.4   Effective Time and Date. The purchase and sale of the Assets shall become
      effective at 7:00 a.m. on October 1, 2010. Revenues and expenses shall be
      prorated as of the Effective Date; provided, however, that the rights to
      any amounts withheld from previous production proceeds for the purpose of
      paying then unpaid ad valorem taxes for 2009 production assessed in 2010
      (due in 2011) or for 2010 production assessed in 2010 (due in 2012) will
      be assigned to Synergy at Closing. If any purchaser of production has not
      withheld any amounts from 2009 production proceeds for the purpose of
      paying ad valorem taxes assessed in 2010 (due in 2011) or for 2010

                                       2

<PAGE>

      production assessed in 2011 (due in 2011), then (i) the actual amount
      necessary to pay the then unpaid 2009 and 2010 ad valorem taxes and (ii)
      the estimated amount that should have been withheld based upon
      pre-Effective Date production for 2009 and 2010 ad valorem taxes (at the
      rate indicated by Weld County, being an approximately 9% rate) will be
      determined, and both amounts will be credited to Synergy at closing. The
      assignment of, and credit for, these amounts shall serve as a final
      settlement for ad valorem taxes. PEM shall pay all severance taxes on
      production obtained from the Assets prior to the Effective Date and
      Synergy shall pay all severance taxes on production obtained from the
      Assets after the Effective Date.

1.5   Excluded Assets. The parties agree that the Assets will not include any
      claim that the Eddy Oil Company has against Kerr-McGee or any other party
      with respect to the Wolfson 26-6 well, specifically but without
      limitation, any claim that another party was responsible for "sanding in"
      the Well, and thus reducing its value.

                                   ARTICLE II
                      PEM'S REPRESENTATIONS AND WARRANTIES

2.1   General  Representations.  With respect to itself, and/or the Assets which
      it owns and has  agreed to sell under this  Agreement,  PEM,  makes the  
      following  representations  and warranties:

     (a)  Incorporation/Qualification.  PEM  represents  that  it is a  Colorado
          limited  liability  compan y, duly organized,  validly existing and in
          good standing under the laws of the State of Colorado.

     (b)  Power and Authority.  PEM has all requisite power and authority to own
          its interest in the Assets,  to carry on its  businesses  as presently
          conducted,  to execute and deliver this Agreement,  and to perform its
          obligations under this Agreement.

     (c)  No Lien,  No Violation.  The execution and delivery of this  Agreement
          does not, and the  fulfillment  of and  compliance  with the terms and
          conditions  hereof  will  not,  as of  Closing,  (i)  create a lien or
          encumbrance on the Assets or trigger an outstanding  security interest
          in the  Assets  that will  remain in  existence  after  Closing,  (ii)
          violate,  or be in  conflict  with,  any  material  provision  of  any
          statute,  rule or  regulation  applicable  to PEM, or any agreement or
          instrument to which PEM is a party or by which it is bound,  or, (iii)
          to its knowledge,  violate, or be in conflict with any statute,  rule,
          regulation, judgment, decree or order applicable to PEM.

     (d)  Authorization and  Enforceability.  This Agreement is duly and validly
          authorized and constitutes the legal,  valid and binding obligation of
          PEM,  enforceable in accordance with its terms,  subject,  however, to
          the effects of bankruptcy, insolvency, reorganization,  moratorium and
          other  laws for the  protection  of  creditors,  as well as to general
          principles  of  equity,  regardless  whether  such  enforceability  is
          considered in a proceeding in equity or at law.

     (e)  Liability  for Brokers'  Fees.  PEM has not  incurred  any  liability,
          contingent or otherwise, for brokers' or finders' fees relating to the
          transactions  contemplated  by this  Agreement for which Synergy shall
          have any responsibility whatsoever.

                                       3

<PAGE>

     (f)  No  Bankruptcy.  There are no bankruptcy  proceedings  pending,  being
          contemplated by or threatened against PEM.

     (g)  Litigation.   There  are  no  actions,   suits,  ongoing  governmental
          investigations,  written governmental inquiries or proceedings pending
          against  PEM, or the Assets in any court or by or before any  federal,
          state,  municipal or other  governmental  agency that would affect any
          PEM's ability to consummate the transaction  contemplated  hereby,  or
          materially adversely affect the Assets or PEM's ownership or operation
          of the Assets.

2.2   PEM's Representations and Warranties with Respect to the Assets. PEM makes
      the following representations and warranties regarding the Assets to be
      sold and assigned hereunder:

     (a)  Liens. Except for the Permitted  Encumbrances,  or as otherwise agreed
          to in writing by Synergy,  the Assets will be conveyed to Synergy free
          and clear of all liens,  restrictions  and  encumbrances  created  by,
          through  or  under  PEM.  As  used  in  this   Agreement,   "Permitted
          Encumbrances"  means any of the  following  matters  to the extent the
          same are valid and subsisting and affect the Assets:

          (1)  all  matters  not  created  by,  through or under PEM,  including
               without limitation any matters created by, through or under their
               predecessors in title;

          (2)  any liens for taxes and  assessments  not yet  delinquent  or, if
               delinquent,  that  are  being  contested  in  good  faith  in the
               ordinary  course of business  and for which PEM has agreed to pay
               pursuant to the terms hereof or which have been prorated pursuant
               to the terms hereof;

          (3)  the terms, conditions,  restrictions,  exceptions,  reservations,
               limitations  and  other  matters  contained  in  the  agreements,
               instruments  and  documents  that  create or  reserve  to PEM its
               interests  in the  Assets,  provided  the same do not result in a
               decrease in the Net Revenue Interest associated with the Wells or
               Leases;

          (4)  any obligations or duties to any municipality or public authority
               with respect to any franchise,  grant, license or permit, and all
               applicable  laws,  rules,  regulations  and  orders of the United
               States and the state, county, city and political  subdivisions in
               which the Assets are located and that exercises jurisdiction over
               such  Assets,  and  any  agency,   department,   board  or  other
               instrumentality  thereof that  exercises  jurisdiction  over such
               Assets (collectively, "Governmental Authority");

          (5)  any (i) easements,  rights-of-way,  servitudes,  permits, surface
               leases  and  other  rights  in  respect  of  surface  operations,
               pipelines, grazing, hunting, logging, canals, ditches, reservoirs
               or the like and (ii)  easements  for streets,  alleys,  highways,

                                       4

<PAGE>

               pipelines,  telephone  lines,  power  lines,  railways  and other
               similar rights-of-way;

          (6)  all  landowner  royalties,   overriding  royalties,  net  profits
               interests, carried interests,  production payments,  reversionary
               interests and other burdens on or deductions from the proceeds of
               production relating to the Assets if the net cumulative effect of
               such burdens does not operate to reduce the Net Revenue  Interest
               of the PEM in any Asset to less than an 80% net revenue interest;
               (7) all rights to consent by, required  notices to, filings with,
               or other actions by  Governmental  Authorities in connection with
               the sale or conveyance of oil and gas leases or interests therein
               that  are  customarily   obtained  subsequent  to  such  sale  or
               conveyance;

          (8)  all  defects  and  irregularities   affecting  the  Assets  which
               individually or in the aggregate do not operate to reduce the net
               revenue  interests of PEM,  increase the  proportionate  share of
               costs and expenses of leasehold operations  attributable to or to
               be borne by the working  interest of PEM, or otherwise  interfere
               materially with the operation, value or use of the Assets.

     (b)  Wells, Leases and Equipment.  To the best of the PEM's knowledge,  (i)
          the Leases  are in full force and effect and are valid and  subsisting
          covering the entire estates that they purport to cover; (ii) they have
          not been advised by the lessor of any Lease of a default under a Lease
          or of any  demand to drill an  additional  well on a Lease;  (iii) all
          royalties,  rentals and other  payments due under the Leases have been
          fully,  properly  and  timely  paid;  (iv)  PEM  has  a  100%  Working
          Interest/80% Net Revenue Interest in the Wells and Leases, and (v) the
          equipment  associated with the Wells is functional and in good working
          order, with the exception of the Wolfson 26-6 well, which is sanded-in
          and not currently  capable of  production.  PEM will use  commercially
          reasonable  efforts to take all action necessary to keep the Leases in
          force and effect until the Closing.


     (c)  Prepayments and Wellhead Imbalances.  PEM is not obligated,  by virtue
          of a production payment, prepayment arrangement under any contract for
          the sale of  Hydrocarbons  and  containing  a "take  or pay,"  advance
          payment or similar  provision,  gas  balancing  agreement or any other
          arrangement  to deliver  Hydrocarbons  produced from the Assets at any
          time after the  Effective  Time without then or  thereafter  receiving
          full payment therefor.  None of the Wells have been produced in excess
          of applicable laws, regulations or rulings.

     (d)  Taxes. All due and payable production, severance and similar taxes and
          assessments based on or measured by the ownership of the Assets or the
          production of  Hydrocarbons or the receipt of proceeds from the Assets
          have been fully paid.

                                       5

<PAGE>

     (e)  Maintenance of Interests.  PEM has maintained,  and will continue from
          date of this  Agreement  until the Closing  maintain,  the Assets in a
          reasonable and prudent manner,  in full compliance with applicable law
          and orders of any governmental authority,  and will maintain insurance
          and bonds now in force with respect to the Assets, to pay when due all
          costs and  expenses  coming  due and  payable in  connection  with the
          Asset, and to perform all of the covenants and conditions contained in
          the  Leases,  Contracts  and  all  related  agreements.   The  parties
          understand and acknowledge  that the Wells are currently shut for lack
          of a gas sales contract,  and such fact shall not be construed to be a
          breach of this paragraph or this Agreement.

     (f)  Access.  To the same extent PEM has such right,  at all times prior to
          the Closing,  Synergy and the  employees  and agents of Synergy  shall
          have access to the Assets at Synergy's sole risk,  cost and expense at
          all reasonable  times,  and shall have the right to conduct  equipment
          inspections,  environmental audits, and any other investigation of the
          Assets on one day's prior notice to PEM and upon agreement with PEM as
          to time and place of such actions.

     (g)  Environmental  Matters.  Except as shown on  Exhibit  4, to PEM's best
          knowledge,  it is not in material  violation of any Environmental Laws
          applicable to the Assets, or any material  limitations,  restrictions,
          conditions,  standards,  obligations  or  timetables  contained in any
          Environmental  Laws. No notice or action  alleging  such  violation is
          pending or, to PEM's  knowledge,  threatened  against the Assets.  For
          purposes of this  Agreement  "Environmental  Laws" means any  federal,
          state, local, or foreign statute,  code, ordinance,  rule, regulation,
          policy,  guidelines,  permit, consent,  approval,  license,  judgment,
          order, writ, decree, injunction, or other authorization, including the
          requirement to register  underground  storage  tanks,  relating to (a)
          emissions,  discharges,  releases, or threatened releases of Hazardous
          Materials  into the natural  environment,  including into ambient air,
          soil, sediments, land surface or subsurface,  buildings or facilities,
          surface water,  groundwater,  pub1icly owned treatment  works,  septic
          systems, or land, (b) the generation,  treatment,  storage,  disposal,
          use, handling, manufacturing, transportation, or shipment of Hazardous
          Materials,   or  (c)  otherwise  relating  to  the  pollution  of  the
          environment, solid waste handling treatment, or disposal, or operation
          or reclamation of mines or oil and gas wells.

            "Hazardous Material" means (a) any "hazardous substance," as defined
            by CERCLA, (b) any "hazardous waste," as defined by the Resource
            Conservation and Recovery Act, as amended, (c) any hazardous,
            dangerous, or toxic chemical, material, waste, or substance within
            the meaning of and regulated by any Environmental Law, (d) any
            radioactive material, including any naturally occurring radioactive
            material, and any source, special, or byproduct material as defined
            in 42 U.S.C. ss.2011 et seq. and any amendments or authorizations
            thereof, (e) any asbestos-containing materials in any form or
            condition, or (f) any polychlorinated biphenyls in any form or
            condition.

                                       6

<PAGE>

     (h)  Obligation  to Close.  PEM shall take or cause to be taken all actions
          necessary or advisable to consummate the transactions  contemplated by
          this  Agreement  and to assure  that as of the  Closing it will not be
          under any material,  corporate,  legal,  governmental  or  contractual
          restriction  that would prohibit or delay the timely  consummation  of
          such transactions.

     (i)  No Third Party Options. There are no existing agreements,  options, or
          commitments with, of or to any person to acquire the Assets.

     (j)  Production Sale Contracts. To the best of PEM's knowledge,  and except
          as shown on Exhibit 3, no  Hydrocarbons  produced  from the Assets are
          subject to an oil or natural  gas sales  contract  or other  agreement
          relating to the  production,  gathering,  transportation,  processing,
          treating or marketing of Hydrocarbons and no person has any call upon,
          option to purchase or similar  rights with respect to production  from
          the Assets.

     (k)  Material Contracts. To the best knowledge of PEM, it is not in default
          under any material  Contract  related to ownership or operation of the
          Assets.

     (l)  Accuracy of Data.  To PEM's best  knowledge,  it has provided  Synergy
          with accurate  information  relating to the Assets including,  without
          limitation, production history and characteristics,  operating revenue
          and prices currently being received for production.

     (m)  Preferential  Purchase Rights and Consents.  There are no preferential
          purchase rights in respect of any of the Assets.

                                   ARTICLE III
                    SYNERGY'S REPRESENTATIONS AND WARRANTIES

Synergy makes the following representations and warranties:

3.1   Organization and Standing. Synergy is a Colorado corporation duly
      organized, validly existing and in good standing under the laws of the
      State of Colorado.

3.2   Power. Synergy has all requisite power and authority to carry on its
      business as presently conducted and to execute and deliver this Agreement
      and perform its obligations under this Agreement. The execution and
      delivery of this Agreement and consummation of the transactions
      contemplated hereby and the fulfillment of and compliance with the terms
      and conditions hereof will not violate, or be in conflict with, any
      material provision of its governing documents or any material provision of
      any agreement or instrument to which it is a party or by which it is
      bound, or, to its knowledge, any judgment, decree, order, statute, rule or
      regulation applicable to it.

3.3   Authorization and Enforceability. The execution, delivery and performance
      of this Agreement and the transaction contemplated hereby have been duly
      and validly authorized by all requisite corporate action on behalf of

                                       7

<PAGE>

      Synergy. This Agreement constitutes Synergy's legal, valid and binding
      obligation, enforceable in accordance with its terms, subject, however, to
      the effects of bankruptcy, insolvency, reorganization, moratorium and
      similar laws for the protection of creditors, as well as to general
      principles of equity, regardless whether such enforceability is considered
      in a proceeding in equity or at law.

3.4   Liability for Brokers' Fees. Synergy has not incurred any liability,
      contingent or otherwise, for brokers' or finders' fees relating to the
      transactions contemplated by this Agreement for which PEM shall have any
      responsibility whatsoever.

3.5   Litigation. There is no action, suit, proceeding, claim or investigation
      by any person, entity, administrative agency or governmental body pending
      against Synergy before any governmental authority that impedes or is
      likely to impede its ability (i) to consummate the transactions
      contemplated by this Agreement or (ii) to assume the liabilities to be
      assumed by it under this Agreement.

3.6   Evaluation. In entering into this Agreement, Synergy acknowledges and
      affirms that it has relied and will rely solely on the terms of this
      Agreement and upon its independent analysis, evaluation and investigation
      of, and judgment with respect to, the business, economic, legal, tax or
      other consequences of this transaction, including without limitation, its
      own estimate and appraisal of the extent and value of the Assets, and the
      petroleum, natural gas and other reserves associated with the Assets.

                                   ARTICLE IV
                                  TITLE MATTERS

4.1   Examination of Files and Records. PEM has made available to Synergy its
      existing Lease, Well and title files, accounting records, production
      records, easements, Contracts, division orders and other information, to
      the extent not subject to confidentiality agreements, available in its
      files relating to the Assets. If Closing does not occur, Synergy shall
      promptly return all such data and other to PEM.

4.2   Title Review. Synergy has reviewed title to the Assets; has agreed to
      accept title in its current condition; and has decided to proceed with
      Closing.

                                    ARTICLE V
                              ENVIRONMENTAL MATTERS

Synergy  has had access to and the  opportunity  to  inspect  the Assets for all
purposes,  including  without  limitation,  for the  purposes of  detecting  the
presence of hazardous or toxic  substances,  pollutants  or other  contaminants,
environmental  hazards,  naturally  occurring  radioactive  materials  ("NORM"),
produced water,  air emissions,  contamination of the surface and subsurface and
any other  Environmental  Defects.  PEM understands  that its is responsible for
notifying  appropriate  government  agencies of any Environmental  Defects,  and
potentionally  for any clean-up or remediation with respect to any Environmental
Defects.  Nothing  contained in this Article V limits the  provisions of Section
9.1 of this Agreement.

                                       8

<PAGE>

                                   ARTICLE VI
                        COVENANTS OF PEM PRIOR TO CLOSING

6.1   Affirmative Covenants.  Until Closing, PEM, shall do the following:

      (a)   Continue to pay any shut in royalties which may be due and take any
            and all other actions necessary to keep the Leases in full force and
            effect;

      (b)   Maintain insurance now in force with respect to the Assets;

      (c)   Comply with all other terms of all Leases and Contracts;

      (d)   Notify Synergy of any claim or demand which might materially
            adversely affect title to or operation of the Assets; and

      (e)   Pay costs and expenses attributable to the Assets as they become
            due.

6.2  Negative  Covenants.  Until Closing,  PEM shall not do any of the following
     with  regard to the  Assets  it has  agreed  to sell and  assign  hereunder
     without first notifying Synergy:

      (a)   Abandon any Well unless required to by a regulatory agency;

      (b)   Release all or any portion of a Lease, Contract or easement;

      (c)   Commence an operation in a Well if the estimated cost of the
            operation exceeds $7,500 net to PEM's interest, except such
            operations for which Synergy may provide its consent;

      (d)   Create a lien, security interest or other encumbrance on the Assets;

      (e)   Remove or dispose of any of the Assets;

      (f)   Amend a Lease, Contract or easement or enter into any new contracts
            affecting the Assets; or

      (g)   Waive, comprise or settle any claim that would  materially  affect
            ownership, operation or value of any of the Assets exceeding  $3,500
            net to PEM's interest.

                                   ARTICLE VII
                                     CLOSING

7.1   Date of Closing. Closing of the transactions contemplated hereby shall be
      held at 20203 Highway 60, Platteville, CO at 4:00 p.m. on October 1, 2010.
      Absent a timely closing or a written extension signed by both parties,
      this Agreement shall conclusively terminate. Time is of the essence in
      respect of the Closing.

                                       9

<PAGE>

7.2   Place of Closing. The Closing shall be held at the offices of Synergy, or
      at such other time and place mutually agreed by the parties.

7.3   Closing Obligations. At the Closing, the following shall occur:

      (a)   PEM shall, execute, acknowledge and deliver an Assignment and Bill
            of Sale in the form attached as Exhibit 5, conveying the Assets to
            Synergy, and

      (b)   Synergy shall pay to PEM $830,093.69 (or the Adjusted Purchase
            Price) by bank check payable to PEM.

7.4   Simultaneous Closings. An additional condition of the closing of this
      Agreement is the simultaneous closing of the separate Purchase and Sale
      Agreement (Operations and Leaseholds) of even date between Petroleum
      Management, LLC and Synergy. Such other Purchase and Sale Agreement is and
      shall remain separate and distinct from this Agreement, but the parties
      agree that they may be read together for purposes of interpretation and
      determination of the intent of the parties.

                                  ARTICLE VIII
                            POST-CLOSING OBLIGATIONS

8.1   Delivery of Records. PEM agrees to make the Records available for pick up
      by Synergy as soon as is reasonably practical, but in any event on or
      before seven (7) days after Closing. PEM may retain copies of the Records
      and PEM shall have the right to review and copy the Records during
      standard business hours upon reasonable notice for so long as Synergy
      retains the Records. PEM at all times will maintain the confidential
      nature of the Records in accordance with Article X. Synergy agrees that
      the Records will be maintained in compliance with all applicable laws
      governing document retention. Synergy will not destroy or otherwise
      dispose of Records after Closing, unless Synergy first gives the PEM
      reasonable notice and an opportunity to copy the Records to be destroyed.
      If and to the extent certain portions of the Records are subject to
      unaffiliated third party contractual restrictions on disclosure or
      transfer, PEM agrees to use reasonable efforts to obtain the waiver of
      such contractual restrictions; provided, however, that they shall not be
      required to expend any money in connection with obtaining such waivers.

8.2   Proceeds and Invoices For Property Expenses Received After Closing. PEM
      shall be responsible for the payment of all its costs, liabilities and
      expenses (including severance taxes) incurred in the ownership and
      operation of the Assets prior to the Effective Time and not yet paid or
      satisfied. Synergy shall be responsible for payment (at Closing or
      thereafter if not reflected on the Closing Settlement Statement) of all
      costs, liabilities and expenses (including severance taxes) incurred in
      the ownership and operation of the Assets after the Effective Time. After
      the Closing, those proceeds attributable to the Assets received by a
      party, or invoices for expenses attributable to the Assets, shall be
      settled as follows:

     (a)  Proceeds.  Proceeds  received  by  Synergy  with  respect  to sales of
          Hydrocarbons produced prior to the Effective Time shall be immediately

                                       10

<PAGE>

          remitted or forwarded to PEM. Proceeds received by PEM with respect to
          sales of  Hydrocarbons  produced  after the  Effective  Time  shall be
          immediately forwarded to Synergy.

     (b)  Property  Expenses.  Invoices  received  by  Synergy  that  relate  to
          operation of the Assets prior to the Effective Time shall be forwarded
          to PEM by Synergy, or if already paid by Synergy,  invoiced by Synergy
          to PEM.  Invoices  received  by PEM that  relate to  operation  of the
          Assets  after the  Effective  Time shall be  immediately  forwarded to
          Synergy  by  PEM,  or if  already  paid by  PEM,  invoiced  by them to
          Synergy.

8.3   Plugging Liability. From and after the Closing, Synergy will assume the
      expenses and costs of plugging and abandoning the Wells and restoration of
      operation sites, all in accordance with the applicable laws, regulations
      and contractual provisions. Notwithstanding the above, Synergy will not be
      responsible for the remediation of the Environmental Defects listed on
      Exhibit 4 or reporting the Environmental Defects to any state or federal
      agency.

8.4   Assumption of Contracts. From and after the Effective Time, Synergy
      assumes, will be bound by, and agrees to perform all express and implied
      covenants and obligations of PEM relating to the Assets, whether arising
      under (i) the Leases, prior assignments of the Leases, the Contracts, the
      easements, the permits or any other contractually-binding arrangements to
      which the Assets (or any component thereof) may be subject and which will
      be binding on PEM and/or the Assets (or any component thereof) after the
      Closing or (ii) any applicable laws, ordinances, rules and regulations of
      any governmental or quasi-governmental authority having jurisdiction over
      the Assets.

8.5   Access. Synergy shall have the right following Closing to make such
      nonexclusive use of roads and other access improvements as may now or
      hereafter exist on the Lands as it believes convenient in connection with
      its operations on the Leases, subject to its compliance with the Leases or
      other instruments creating the rights-of way or easements and its payment
      of an appropriate share of maintenance costs based upon its use of such
      road or access improvements.

8.6   Further Assurances. From time to time after Closing, PEM and Synergy shall
      each execute, acknowledge and deliver to the other such further
      instruments and take such other action as may be reasonably requested in
      order to accomplish more effectively the purposes of the transactions
      contemplated by this Agreement.

                                   ARTICLE IX
                                 INDEMNIFICATION

9.1   By the PEM. Except as otherwise provided herein, PEM shall be responsible
      for and shall indemnify and hold harmless Synergy, its officers,
      directors, employees and agents, from all claims, losses, costs,
      liabilities, damages and expenses, including reasonable attorneys' fees
      and costs, (collectively, "Claims") arising out of or resulting from (i)
      PEM's ownership or operation of the Assets prior to Closing, including

                                       11

<PAGE>

      Claims arising under Environmental Laws, (ii) PEM's disbursement of
      production proceeds from the Assets accruing prior to the Effective Time,
      and (iii) any breach of any surviving representations, warranties,
      covenants or conditions of PEM contained in this Agreement, subject,
      however, to the limitations set forth in Sections 11.9 and 11.10.

9.2   By Synergy. Except as otherwise provided herein, Synergy shall be
      responsible for and shall indemnify and hold harmless PEM, its officers,
      directors, employees and agents, from all Claims arising out of or
      resulting from (i) Synergy's ownership or operation of the Assets after
      Closing, including Claims arising under Environmental Laws, and (ii) any
      breach of any representation, warranties, covenants or conditions of
      Synergy contained in this Agreement, subject, however, to the limitations
      set forth in Section 11.10.

                                    ARTICLE X
                                 CONFIDENTIALITY

If the Closing does not occur, Synergy will use its best efforts to keep all the
information  furnished by PEM to Synergy  hereunder or in  contemplation  hereof
strictly  confidential  including,  without  limitation,  the Purchase Price and
other  terms of this  Agreement,  and will  not use any of such  information  to
Synergy's  advantage  or in  competition  with PEM,  except to the  extent  such
information (i) was already in the public domain,  not as a result of disclosure
by Synergy,  (ii) was already  known to Synergy,  (iii) is  developed by Synergy
independently  from the  information  supplied by PEM, or (iv) is  furnished  to
Synergy by a third party  independently of Synergy's  investigation  pursuant to
the transaction contemplated by this Agreement.

                                   ARTICLE XI
                                  MISCELLANEOUS

11.1  Exhibits. The exhibits to this Agreement are hereby incorporated into this
      Agreement by reference and constitute a part of this Agreement.

11.2  Notices. All notices and communications required or permitted under this
      Agreement shall be in writing and addressed as set forth below. Any
      communication or delivery hereunder shall be deemed to have been duly made
      and the receiving party charged with notice (i) if personally delivered,
      when received, (ii) if sent by facsimile transmission or electronic mail,
      when received (iii) if mailed, five (5) business days after mailing,
      certified mail, return receipt requested, or (iv) if sent by overnight
      courier, one day after sending. All notices shall be addressed as follows:

      If to the Synergy:    Synergy Resources Corporation
                            20203 Highway 60
                            Platteville, Colorado 80651
                            Telephone:  (970) 737-1073

      If to PEM:            Petroleum Exploration and Management, LLC
                            20203 Highway 60
                            Platteville, CO 80651
                            Telephone:  (970) 737-1090

                                       12

<PAGE>

     Any party may, by written notice so delivered to the other parties,  change
the address or individual to which delivery shall thereafter be made.

11.3  Amendments. Except for waivers specifically provided for in this
      Agreement, this Agreement may not be amended nor any rights hereunder
      waived except by an instrument in writing signed by the party to be
      charged with such amendment or waiver and delivered by such party to the
      party claiming the benefit of such amendment or waiver.

11.4  Assignment. Synergy and PEM shall not assign all or any portion of their
      respective rights or delegate all or any portion of their respective
      duties hereunder unless they continue to remain liable for the performance
      of their obligations hereunder. Synergy may not assign the benefits of
      PEM's indemnity obligations contained in this Agreement, and any permitted
      assignment shall not include such benefits. No such assignment or
      obligation shall increase the burden on PEM or impose any duty on it to
      communicate with or report to any transferee, and PEM may continue to look
      to Synergy for all purposes under this Agreement.

11.5  Counterparts; Fax Signatures. This Agreement may be executed by Synergy
      and PEM in any number of counterparts, each of which shall be deemed an
      original instrument, but all of which together shall constitute but one
      and the same instrument. Facsimile signatures shall be considered binding.

11.6  Governing Law. This Agreement and the transactions contemplated hereby and
      any arbitration or dispute resolution conducted pursuant hereto shall be
      construed in accordance with, and governed by, the laws of the State of
      Colorado without reference to the conflict of laws principles thereof.

11.7  Entire Agreement. This Agreement, together with the Purchase and Sale
      Agreement (Operations and Leaseholds) of even date, constitute the entire
      understanding among the parties, their respective partners, members,
      trustees, shareholders, officers, directors and employees with respect to
      the subject matter hereof, superseding all negotiations, prior discussions
      and prior agreements and understandings relating to such subject matter.

11.8  Binding Effect. This Agreement shall be binding upon, and shall inure to
      the benefit of, the parties hereto, and their respective successors and
      assigns.

11.9   Survival. The representations and warranties of the parties hereto
       contained in Article II (except Section 2.2(a), (b) and (g)) and Article
       III and the indemnification of the parties hereto contained in Article
       IX, and all claims, causes of action and damages with respect thereto,
       and the provision of paragraph 1.5, shall survive the Closing for a
       period of twenty-four months thereafter, and then expire and terminate.
       The representations and warranties contained in Section 2.2(a), (b) and
       (g) shall not survive the Closing, but shall expire and terminate at the
       Closing.

                                       13

<PAGE>

11.10 Limitation on Damages; Provision for Recovery of Costs and Attorney's
      Fees. The parties expressly waive any and all rights to consequential,
      special, incidental, punitive or exemplary damages, or loss of profits
      resulting from breach of this Agreement. The prevailing party in any
      litigation seeking a remedy for the breach of this Agreement shall,
      however, be entitled to recover all attorneys' fees and costs incurred in
      such litigation.

11.11 No Third-Party Beneficiaries. This Agreement is intended to benefit only
      the parties hereto and their respective permitted successors and assigns.

11.12 Severability. If at any time subsequent to the date hereof, any provision
      of this Agreement shall be held by any court of competent jurisdiction to
      be illegal, void or unenforceable, such provision shall be of no force and
      effect, but the illegality or unenforceability of such provision shall
      have no effect upon and shall not impair the enforceability of any other
      provision of this Agreement.

11.13 Waiver. No consent or waiver, express of implied, to or of any breach or
      default in the performance of any obligation or covenant hereunder shall
      constitute a consent or waiver to or of any other breach or default in the
      performance of the same or any other obligations hereunder.

                                       14

<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first-above written.

PETROLEUM EXPLORATION AND MANAGEMENT, LLC       SYNERGY RESOURCES CORPORATION


By: /s/ Ed Holloway                             By: /s/ William E. Scaff Jr.
    ------------------------------------            ----------------------------
    Ed Holloway, Manager                            William E Scaff Jr., Vice
                                                    President
      

                                       15

<PAGE>


                                    EXHIBIT 1
                                       TO
                           PURCHASE AND SALE AGREEMENT
              (Wells, Equipment and Well Bore Leasehold interests)




1. Bowen 25-10 (NWSE of Section 25, 4N-67W-Weld County, CO)

   Equipment:           Separator - J&S 250# - Built 1/87 - SN 3009

                        Wellhead - Lubricator ASM

                        Controller - EDI/TCS JR SN 13-69831107

                        Tank - NELCO 300# - Built 1985 - SN 3920-F

                        Pit - Aguilar 1250 BBL





2. Wolfson 23-15 (SWSE of Section 23, 4N-67W-Weld County, CO)

   Equipment:           Separator - NATCO 250# - Built 1983 - SN 25122

                        Wellhead - Lubricator ASM

                        Controller - Ferguson Beauragard SN LIQ98A10

                        Tank - NELCO 400 BBL - SN 3102 - Built 1988

                        Pit - Erie 1000 gallon

                        Other - Line heater



3. Wolfson 23-16 (SESE of Section 23, 4N-67W-Weld County, CO)

    Equipment:          Separator - NATCO 250# - Built 1983 - SN 25523

                        Wellhead - Lubricator ASM

                        Controller - EDI/TSC JR - SN B620004

                        Tank - NELCO 400 BBL - SN 3423-F - Built 1984

                        Pit - Aguilar 1000 gallon


<PAGE>

4. Wolfson 26-1 (NENE of Section 26, 4N-67W-Weld County, CO)

   Equipment:           Separator - American 250# SN 19056 - Built 1985

                        Wellhead - Lubricator ASM

                        Controller - EDI/TSC JR - SN 23861202

                        Tank - D&L 300 BBL - SN RM7644 - Built 1984

                        Pit - Erie 1000 gallon





5. Wolfson 26-2 (NWNE of Section 26, 4N-67W-Weld County, CO)

   Equipment:           Separator - No ID plate - 250#

                        Wellhead - Lubricator ASM

                        Controller - Ferguson Beauragard SN 004921

                        Tank - NELCO 300 BBL - SN 205781

                        Pit - Erie 1000 gallon

                        Flare Stack - LIBCO - no ID plate



6. Wolfson 26-10 (NWSE of Section 26, 4N-67W-Weld County, CO)

   Equipment:           Separator - NATCO 250# - Built 1/81 - SN 7-376901-48

                        Wellhead - Lubricator ASM

                        Controller - EDI-DCSXT JR - No SN

                        Tank - NELCO 300# - SN 205681

                        Pit - Erie 1000 gallon

                                       2

<PAGE>


7. Wolfson 26-16 (SESE of Section 26, 4N-67W-Weld County, CO) 

   Equipment:           Separator - Weatherford 250# - Built 3/86 - SN 3714

                        Wellhead - Lubricator ASM

                        Controller - Ferguson Beauragard SN 4791

                        Tank - NELCO 300# - SN 42377

                        Pit - Erie 1000 gallon





8. Wolfson 26-6 (SENW of Section 26, 4N-67W-Weld County, CO) 

   Equipment:           Separator - National 1000# HLP 13 - SN 37365

                        Wellhead - Lubricator ASM - No Controller

                        Tank - Union 400 BBL - Built 3/56 - SN 3477

                        Pit - Erie 1000 gallon

                        Other - Line heater


                                       3

<PAGE>



                                    EXHIBIT 2
                                       TO
                           PURCHASE AND SALE AGREEMENT
              (Wells, Equipment and Well Bore Leasehold interests)


Bowen 25-10

Date:        September 5, 1984
Recorded:    Book 1044 under Rec. 1981056
Lessor:      Ralph L. Bowen & Josephine L. Bowen
Lessee:      Mission Oil Corporation
Description: Township 4 North, Range 67 West
Section 25:  NW1/4SE1/4 only

Date:        September 5, 1984
Recorded:    Book 1044 under Rec. 1981055
Lessor:      Donald W. Bowen & Beverly A. Bowen
Lessee:      Mission Oil Corporation
Description: Township 4 North, Range 67 West
Section 25:  NW1/4SE1/4 only

Date:        September 5, 1984
Recorded:    Book 1044 under Rec. 1981056
Lessor:      Betty J. L. Bowen
Lessee:      Mission Oil Corporation
Description: Township 4 North, Range 67 West
Section 25:  NW1/4SE1/4 only


Wolfson 23-15 and 16

Date:        April 7, 1970
Recorded:    Book 628 under Rec. No. 1549946
Lessor:      Helen Marie Purse
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 23:  S1/2SE1/4 except 2 railroad strips

Date:        April 7, 1970
Recorded:    Book 633 under Rec. No. 1554837
Lessor:      Albert Wolfson & Alvin J. Johnson, dba Scottsdale Ranch
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 23:  S1/2SE1/4 except 2 railroad strips

                                       

<PAGE>

Date:        October 20, 1981
Recorded:    Book 954 under Rec. No. 1876285
Lessor:      Marjorie H. Williams, P.R. of Est. of M. E. Hagen, deceased
Lessee:      Aeon Energy Co.
Description: Township 4 North, Range 67 West, 6th P.M.
Section 23:  S1/2SE1/4 except 2 railroad strips

Date:        April 1, 19921
Recorded:    Book 1299 under Rec. No. 2250760
Lessor:      Union Pacific Resources Company
Lessee:      Eddy Oil Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 23:  UPRR ROW strip in S1/2SE1/4

Date:        June 1, 19921
Recorded:    Book 1312 under Rec. No. 2264693
Lessor:      Amoco Production Company
Lessee:      Eddy Oil Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 23:  Abandoned UPRR ROW strip in S1/2SE1/4

Wolfson 26-1

Date:        April 7, 1970
Recorded:    Book 628 under Rec. No. 1549946
Lessor:      Helen Marie Purse
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NE1/4NE1/4 only

Date:        April 7, 1970
Recorded:    Book 633 under Rec. No. 1554837
Lessor:      Albert Wolfson & Alvin J. Johnson, dba Scottsdale Ranch
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NE1/4NE1/4 only

Date:        October 20, 1981
Recorded:    Book 954 under Rec. No. 1876285
Lessor:      Marjorie H. Williams, P.R. of the Estate of M. E. Hagen, deceased
Lessee:      Aeon Energy Co.
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NE1/4NE1/4 only

                                       2

<PAGE>


Wolfson 26-2

Date:        April 7, 1970
Recorded:    Book 628 under Rec. No. 1549946
Lessor:      Helen Marie Purse
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4NE1/4 only

Date:        April 7, 1970
Recorded:    Book 633 under Rec. No. 1554837
Lessor:      Albert Wolfson & Alvin J. Johnson, dba Scottsdale Ranch
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4NE1/4 only

Date:        October 20, 1981
Recorded:    Book 954 under Rec. No. 1876285
Lessor:      Marjorie H. Williams, P.R. of Est. of M. E. Hagen, deceased
Lessee:      Aeon Energy Co.
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4NE1/4 only

Date:        February 12, 1991
Recorded:    Book 1290 under Rec. No. 2241811
Lessor:      Union Pacific Resources Company
Lessee:      Eddy Oil Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  UPRR ROW strip in NW1/4NE1/4 only

Date:        October 1, 1990
Recorded:    Book 1291 under Rec. No. 2242790
Lessor:      Moco Production Company
Lessee:      Eddy Oil Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  Abandoned UPRR ROW strip in NW1/4NE1/4 only


Wolfson 26-6

Date:        April 7, 1970
Recorded:    Book 628 under Rec. No. 1549946
Lessor:      Helen Marie Purse
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  SE3/3NW1/3 only

                                       3

<PAGE>

Date:        April 7, 1970
Recorded:    Book 633 under Rec. No. 1554837
Lessor:      Albert Wolfson & Alvin J. Johnson, dba Scottsdale Ranch
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  SE1/4NW1/4  only

Date:        October 20, 1981
Recorded:    Book 954 under Rec. No. 1876285
Lessor:      Marjorie H. Williams, P.R. of Est. of M. E. Hagen, deceased
Lessee:      Aeon Energy Co.
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  SE1/4NW1/4 only

Date:        September 11, 1991
Recorded:    Book 1323 under Rec. No. 2275064
Lessor:      Union Pacific Resources Company
Lessee:      Eddy Oil Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  UPRR ROW strip in SE1/4NW1/4 only


Wolfson 26-10

Date:        April 7, 1970
Recorded:    Book 628 under Rec. No. 1549946
Lessor:      Helen Marie Purse
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4SE1/4 only

Date:        April 7, 1970
Recorded:    Book 633 under Rec. No. 1554837
Lessor:      Albert Wolfson & Alvin J. Johnson, dba Scottsdale Ranch
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4SE1/4 only

Date:        October 26, 1981
Recorded:    Book 954 under Rec. No. 1876288
Lessor:      Paul M. Andrews
Lessee:      Aeon Energy Co.
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4SE1/4 only


                                       4

<PAGE>

Date:        November 5, 1981
Recorded:    Book 954 under Rec. No. 1876289
Lessor:      Harry M. & Dora F. Andrews
Lessee:      Aeon Energy Co.
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4SE1/4 only

Date:        November 5, 1981
Recorded:    Book 954 under Rec. No. 1876290
Lessor:      Ethel V. & Herman H. Rediess
Lessee:      Aeon Energy Co.
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4SE1/4 only

Date:        October 1, 1990
Recorded:    Book 1292 under Rec. No. 2243412
Lessor:      Amoco Production Company
Lessee:      Eddy Oil Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4SE1/4 only

Date:        September 6, 1989
Recorded:    Book 1243 under Rec. No. 2191647
Lessor:      Weld County, Colorado
Lessee:      Eddy Oil Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4SE1/4 only


Wolfson 26-16

Date:        April 7, 1970.
Recorded:    June 25, 1970 in Book 628 at Reception No. 1549946.
Lessor:      Helen Marie Purse, a widow
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  SE1/4SE1/4

Date:        April 7, 1970
Recorded:    September 18, 1970 in Book 633 at Reception No. 1554837.
Lessors:     Albert Wolfson and Alvin J. Johnson, d/b/a Scottsdale Ranch
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
             Section 26: SE1/4SE1/4

                                       5

<PAGE>


Date:        October 26, 1981.
Recorded:    December 7, 1981 in Book 954 at Reception No. 1876288.
Lessors:     Paul M. Andrews, a single man
Lessee:      Aeon Energy Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  SE1/4SE1/4

Date:        March 21, 1991
Recorded:    December 7, 1981 in Book 954 at Reception No. 1876289.
Lessors:     Harry M. Andrews and Dora F. Andrews, husband and wife
Lessee:      Aeon Energy Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  SE1/4SE1/4

Date:        November 5, 1981.
Recorded:    December 7, 1981 in Book 954 at Reception No. 1876290.
Lessors:     Ethel V. Rediess and Herman H. Rediess, wife and husband
Lessee:      Aeon Energy Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  SE1/4SE1/4


                                 End of Exhibit


                                       6

<PAGE>


                                    EXHIBIT 3
                                    CONTRACTS


DCP gas contract

Suncor Energy crude oil contract



<PAGE>


                                    EXHIBIT 4
                              ENVIRONMENTAL DEFECTS


     Any and all  environmental  defects  prior to the date of closing  were the
responsibility  of Eddy  Oil  Company  under  that  certain  Purchase  and  Sale
Agreement, dated June 19, 2009, between PM and Eddy Oil Company, Inc.



<PAGE>

                                    EXHIBIT 5


                     ASSIGNMENT, BILL OF SALE AND CONVEYANCE
              (Wells, Equipment and Well Bore Leasehold Interests)

     THIS  ASSIGNMENT,  BILL OF SALE AND CONVEYANCE (the  "Assignment")  is made
this  1st day of  October,  2010,  by and  between,  PETROLEUM  EXPLORATION  AND
MANAGEMENT,  LLC  ("Assignor"),  a Colorado  limited  liability  company,  whose
address is 20203 Highway 60, Platteville,  Colorado 80651, and Synergy Resources
Corporation, (" Assignee") a Colorado Corporation whose address is 20203 Highway
60, Platteville, Colorado, 80651.

                              W I T N E S S E T H:

     WHEREAS,  Assignor and Assignee  entered into a Purchase And Sale Agreement
dated October 1, 2010 (the  "Agreement"),  pursuant to which Assignor  agreed to
sell and Assignee agreed to purchase all of the Assignor's  interests as defined
herein and as described below.

     WHEREAS,  this  Assignment,  Bill Of Sale and Conveyance is to evidence the
transfer  of  title  necessary  to  consummate  the sale  and  purchase  of such
interests in accordance with and pursuant to the Agreement.  Terms not otherwise
defined herein shall have the meanings ascribed thereto in the Agreement.

     NOW, THEREFORE, Assignor, for good and valuable consideration,  the receipt
and sufficiency of which are hereby acknowledged,  has bargained, sold, granted,
transferred,  assigned  and  conveyed  and does  hereby  BARGAIN,  SELL,  GRANT,
TRANSFER, ASSIGN and CONVEY unto ASSIGNEE the following:

     1. Assignment.  Assignor  assigns,  sells and quitclaims to Assignee all of
Assignor's  right,  title and interest in the Assets.  As used herein,  the term
"Assets" refers to all of the Assignee's right, title and interest in and to the
following:

          (a) The oil and gas  wells and  equipment  specifically  described  in
     Exhibit 1 (the  "Wells"),  together with all personal  property,  fixtures,
     improvements,  permits, rights-of-way and easements used or held for use in
     connection with the production,  treatment,  compression,  storing, sale or
     disposal  of  Hydrocarbons  or  water  produced  from  the  properties  and
     interests described in Section 1.2(b).

          (b)  The  leasehold   estates  created  by  the  oil  and  gas  leases
     specifically  described  in Exhibit  2,  insofar  and only  insofar as they
     pertain to the well bores  described in Exhibit 1 (the  "Leases"),  and the
     oil, gas, coalbed gas and all other hydrocarbons  whether liquid,  solid or
     gaseous  (collectively,  the  "Hydrocarbons")  produced  or to be  produced
     through such well bores,  and all contract rights and privileges,  surface,
     reversionary or remainder interests and other interests associated with the
     Leases,  insofar as they pertain to production of Hydrocarbons through such
     well bores.

          (c) The  pooling  and  communitization  agreements,  declarations  and
     orders,  and the units created  thereby  (including  all units formed under
     orders,  regulations,  rules or other acts of any  federal,  state or othe

<PAGE>

     governmental  agency  having  jurisdiction),  as  well  as all  other  such
     agreements  relating to the properties and interests  described in Sections
     1(a)  and  (b)  above,  and to the  production  of  Hydrocarbons,  if  any,
     attributable to said Leases and Wells.

          (d) All existing and effective sales, purchase,  exchange,  gathering,
     transportation and processing contracts,  operating  agreements,  balancing
     agreements,  farmout agreements,  service agreements,  and other contracts,
     agreements and instruments,  insofar as they relate to the Leases and Wells
     described   in  Sections   1(a)  through  (c)  above   (collectively,   the
     "Contracts").

          (e) The files,  records and data  relating to the items  described  in
     Sections 1 (a)  through (d)  maintained  by  Assignor  and  relating to the
     interests  described in Sections 1(a) through (d) above (including  without
     limitation,  all lease files, land files, well files,  accounting  records,
     drilling reports,  abstracts and title opinions,  seismic data, geophysical
     data and other geologic  information and data),  but only to the extent not
     subject to unaffiliated third party contractual  restrictions on disclosure
     or transfer and only to the extent related to the Assets (the "Records").

     2. Limited Warranty.  The Assignor warrants that it is transferring 100% of
the  leasehold/80%  net  revenue  interest,  in the Leases  which  appear on the
annexed  Exhibit 2,  insofar and only  insofar as the Leases  relate to the well
bores  of the  Wells  described  in  Exhibit  1,  free and  clear of all  liens,
restrictions and encumbrances  created by, through or under Assignor.  Except as
provided  in the  Agreement,  Assignor  makes no  warranty  of title  whatsover,
express or implied,  as to any of the items being  assigned or sold  pursuant to
this  instrument.  In  addition,  THE  ASSIGNOR  MAKES NO  WARRANTY,  EXPRESS OR
IMPLIED,  CONCERNING THE  MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OF ANY
OF THE  EQUIPMENT  OR  OTHER  PERSONAL  PROPERTY  BEING  SOLD  PURSUANT  TO THIS
INSTRUMENT.

     3.  Effective  Date.  Assignor  shall be entitled  to receive all  revenues
attributable to Assignor's  proportionate interest in production from the Assets
through  September  30, 2010 and shall pay its  proportionate  share of expenses
relating to such Assets  including  severance  taxes and ad valorem  taxes which
shall be prorated through the Effective Date (i.e., any amounts now due or shall
become due which are associated with production through the effective date shall
be paid by  Assignor or credited to  Assignee).  Thereafter,  Assignee  shall be
entitled to such  revenue and assume and be  responsible  for such  expenses and
taxes.

     4. Further  Assurances.  Assignor agrees to execute and deliver or cause to
be executed and delivered,  upon the reasonable request of Assignee,  such other
Assignments,  Bills of Sale,  Certificates  of Title and other matters which are
appropriate to transfer the Assets to Assignee.

     5. Indemnification. Except as otherwise provided in the Agreement, Assignor
shall be responsible for and shall indemnify and hold harmless the Assignee, its
officers,  directors,  employees  and agents,  from all claims,  losses,  costs,
fines, liabilities,  damages and expenses,  including reasonable attorneys' fees
and costs,  (collectively,  "Claims")  arising out of or resulting  from (i) the
Assignor's  ownership  or  operation  of the  Assets  prior  to the date of this
Assignment, including Claims arising under Environmental Laws, as defined in the
Agreement,  (ii) Assignor's  disbursement of production proceeds from the Assets
accruing  prior to  October  1,  2010,  and  (iii) any  breach of any  surviving

                                       2

<PAGE>

representations,  warranties,  covenants or conditions of the Assignor contained
in this  Agreement,  subject,  however,  to the  limitations  set  forth  in the
Agreement.  Except as otherwise  provided herein,  Assignee shall be responsible
for and shall indemnify and hold harmless the Assignor, its officers, directors,
employees  and  agents,  from all Claims  arising out of or  resulting  from (i)
Assignee's  ownership  or  operation  of the  Assets  after  the  date  of  this
Assignment,  including Claims arising under Environmental Laws as defined in the
Agreement,  and rules of the Colorado Oil and Gas Conservation  Commission,  and
(ii) any breach of any  representation,  warranty,  covenants or  conditions  of
Assignee contained in the Agreement,  subject,  however,  to the limitations set
forth in the Agreement.

     6.  Miscellaneous.  Exhibits  1 and  2  attached  to  this  Assignment  are
incorporated  herein and shall be considered a part of this  Assignment  for all
purposes.  The provisions of this Assignment  shall be binding upon and inure to
the benefit of the parties hereto, and their respective  successors and assigns.
This  Assignment  is made  further  subject to the terms and  conditions  of the
Agreement which are incorporated  herewith by reference.  If there is a conflict
between the terms and conditions of this Assignment and the Agreement, the terms
and conditions of this Assignment shall control to the extent of such conflict.



                      (Signatures appear on following page)

                                       3

<PAGE>

     IN WITNESS WHEREOF,  the Assignor has executed this Agreement as of the day
and year first-above written.

                                    ASSIGNOR:



                                    PETROLEUM EXPLORATION AND MANAGEMENT, LLC.



                                    By: /s/ Ed Holloway
                                        --------------------------------------
                                        Ed Holloway, Manager




STATE OF COLORADO                   )
                                    ) ss.
WELD COUNTY OF DENVER               )

     The  foregoing  instrument  was  acknowledged  before  me  this  1st day of
October,  2010,  by Ed  Holloway,  the  Manager  of  Petroleum  Exploration  and
Management, LLC.

     My commission expires 11-20-2011


                                    /s/ Rhonda L. Sandquist
                                    -------------------------------------
                                    Notary Public

                                       4

<PAGE>


                                    EXHIBIT 1
                                       TO

                     ASSIGNMENT, BILL OF SALE AND CONVEYANCE
              (Wells, Equipment and Well Bore Leasehold interests)

                             Cherokee Joint Venture


9. Bowen 25-10 (NWSE of Section 25, 4N-67W-Weld County, CO)

   Equipment:           Separator - J&S 250# - Built 1/87 - SN 3009

                        Wellhead - Lubricator ASM

                        Controller - EDI/TCS JR SN 13-69831107

                        Tank - NELCO 300# - Built 1985 - SN 3920-F

                        Pit - Aguilar 1250 BBL



                               Osage Joint Venture



10. Wolfson 23-15 (SWSE of Section 23, 4N-67W-Weld County, CO)

    Equipment:          Separator - NATCO 250# - Built 1983 - SN 25122

                        Wellhead - Lubricator ASM

                        Controller - Ferguson Beauragard SN LIQ98A10

                        Tank - NELCO 400 BBL - SN 3102 - Built 1988

                        Pit - Erie 1000 gallon

                        Other - Line heater



11. Wolfson 23-16 (SESE of Section 23, 4N-67W-Weld County, CO)

    Equipment:          Separator - NATCO 250# - Built 1983 - SN 25523

                        Wellhead - Lubricator ASM

                        Controller - EDI/TSC JR - SN B620004

                        Tank - NELCO 400 BBL - SN 3423-F - Built 1984

                        Pit - Aguilar 1000 gallon

                                       

<PAGE>

                          Pawnee Buttes Joint Venture 



12. Wolfson 26-1 (NENE of Section 26, 4N-67W-Weld County, CO)

    Equipment:          Separator - American 250# SN 19056 - Built 1985

                        Wellhead - Lubricator ASM

                        Controller - EDI/TSC JR - SN 23861202

                        Tank - D&L 300 BBL - SN RM7644 - Built 1984

                        Pit - Erie 1000 gallon



                              Apache Joint Venture



13. Wolfson 26-2 (NWNE of Section 26, 4N-67W-Weld County, CO)

    Equipment:          Separator - No ID plate - 250#

                        Wellhead - Lubricator ASM

                        Controller - Ferguson Beauragard SN 004921

                        Tank - NELCO 300 BBL - SN 205781

                        Pit - Erie 1000 gallon

                        Flare Stack - LIBCO - no ID plate



14. Wolfson 26-10 (NWSE of Section 26, 4N-67W-Weld County, CO)

    Equipment:          Separator - NATCO 250# - Built 1/81 - SN 7-376901-48

                        Wellhead - Lubricator ASM

                        Controller - EDI-DCSXT JR - No SN

                        Tank - NELCO 300# - SN 205681

                        Pit - Erie 1000 gallon

                                       2

<PAGE>


                           Gilcrest West Joint Venture



15. Wolfson 26-16 (SESE of Section 26, 4N-67W-Weld County, CO) 

    Equipment:          Separator - Weatherford 250# - Built 3/86 - SN 3714

                        Wellhead - Lubricator ASM

                        Controller - Ferguson Beauragard SN 4791

                        Tank - NELCO 300# - SN 42377

                        Pit - Erie 1000 gallon



                              Shawnee Joint Venture



16. Wolfson 26-6 (SENW of Section 26, 4N-67W-Weld County, CO) 

    Equipment:          Separator - National 1000# HLP 13 - SN 37365

                        Wellhead - Lubricator ASM - No Controller

                        Tank - Union 400 BBL - Built 3/56 - SN 3477

                        Pit - Erie 1000 gallon

                        Other - Line heater


                                       3

<PAGE>

                                    EXHIBIT 2
                                       TO

                     ASSIGNMENT, BILL OF SALE AND CONVEYANCE
              (Wells, Equipment and Well Bore Leasehold interests)

Bowen 25-10

Date:        September 5, 1984
Recorded:    Book 1044 under Rec. 1981056
Lessor:      Ralph L. Bowen & Josephine L. Bowen
Lessee:      Mission Oil Corporation
Description: Township 4 North, Range 67 West
Section 25:  NW1/4SE1/4 only

Date:        September 5, 1984
Recorded:    Book 1044 under Rec. 1981055
Lessor:      Donald W. Bowen & Beverly A. Bowen
Lessee:      Mission Oil Corporation
Description: Township 4 North, Range 67 West
Section 25:  NW1/4SE1/4 only

Date:        September 5, 1984
Recorded:    Book 1044 under Rec. 1981056
Lessor:      Betty J. L. Bowen
Lessee:      Mission Oil Corporation
Description: Township 4 North, Range 67 West
Section 25:  NW1/4SE1/4 only


Wolfson 23-15 and 16

Date:        April 7, 1970
Recorded:    Book 628 under Rec. No. 1549946
Lessor:      Helen Marie Purse
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 23:  S1/2SE1/4 except 2 railroad strips

Date:        April 7, 1970
Recorded:    Book 633 under Rec. No. 1554837
Lessor:      Albert Wolfson & Alvin J. Johnson, dba Scottsdale Ranch
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 23:  S1/2SE1/4 except 2 railroad strips

                                       1

<PAGE>

Date:        October 20, 1981
Recorded:    Book 954 under Rec. No. 1876285
Lessor:      Marjorie H. Williams, P.R. of Est. of M. E. Hagen, deceased
Lessee:      Aeon Energy Co.
Description: Township 4 North, Range 67 West, 6th P.M.
Section 23:  S1/2SE1/4 except 2 railroad strips

Date:        April 1, 19921
Recorded:    Book 1299 under Rec. No. 2250760
Lessor:      Union Pacific Resources Company
Lessee:      Eddy Oil Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 23:  UPRR ROW strip in S1/2SE1/4

Date:        June 1, 19921
Recorded:    Book 1312 under Rec. No. 2264693
Lessor:      Amoco Production Company
Lessee:      Eddy Oil Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 23:  Abandoned UPRR ROW strip in S1/2SE1/4


Wolfson 26-1

Date:        April 7, 1970
Recorded:    Book 628 under Rec. No. 1549946
Lessor:      Helen Marie Purse
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NE1/4NE1/4 only

Date:        April 7, 1970
Recorded:    Book 633 under Rec. No. 1554837
Lessor:      Albert Wolfson & Alvin J. Johnson, dba Scottsdale Ranch
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
             Section 26: NE1/4NE1/4 only

Date:        October 20, 1981
Recorded:    Book 954 under Rec. No. 1876285
Lessor:      Marjorie H. Williams, P.R. of the Estate of M. E. Hagen, deceased
Lessee:      Aeon Energy Co.
Description: Township 4 North, Range 67 West, 6th P.M.
             Section 26: NE1/4NE1/4 only

                                       2

<PAGE>

Wolfson 26-2

Date:        April 7, 1970
Recorded:    Book 628 under Rec. No. 1549946
Lessor:      Helen Marie Purse
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4NE1/4 only

Date:        April 7, 1970
Recorded:    Book 633 under Rec. No. 1554837
Lessor:      Albert Wolfson & Alvin J. Johnson, dba Scottsdale Ranch
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4NE1/4 only

Date:        October 20, 1981
Recorded:    Book 954 under Rec. No. 1876285
Lessor:      Marjorie H. Williams, P.R. of Est. of M. E. Hagen, deceased
Lessee:      Aeon Energy Co.
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4NE1/4 only

Date:        February 12, 1991
Recorded:    Book 1290 under Rec. No. 2241811
Lessor:      Union Pacific Resources Company
Lessee:      Eddy Oil Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  UPRR ROW strip in NW1/4NE1/4 only

Date:        October 1, 1990
Recorded:    Book 1291 under Rec. No. 2242790
Lessor:      moco Production Company
Lessee:      Eddy Oil Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  Abandoned UPRR ROW strip in NW1/4NE1/4 only


Wolfson 26-6

Date:        April 7, 1970
Recorded:    Book 628 under Rec. No. 1549946
Lessor:      Helen Marie Purse
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  SE1/4NW1/4 only

                                       3

<PAGE>

Date:        April 7, 1970
Recorded:    Book 633 under Rec. No. 1554837
Lessor:      Albert Wolfson & Alvin J. Johnson, dba Scottsdale Ranch
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  SE1/4NW1/4  only

Date:        October 20, 1981
Recorded:    Book 954 under Rec. No. 1876285
Lessor:      Marjorie H. Williams, P.R. of Est. of M. E. Hagen, deceased
Lessee:      Aeon Energy Co.
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  SE1/4NW1/4 only

Date:        September 11, 1991
Recorded:    Book 1323 under Rec. No. 2275064
Lessor:      Union Pacific Resources Company
Lessee:      Eddy Oil Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  UPRR ROW strip in SE1/4NW1/4 only


Wolfson 26-10

Date:        April 7, 1970
Recorded:    Book 628 under Rec. No. 1549946
Lessor:      Helen Marie Purse
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4SE1/4 only

Date:        April 7, 1970
Recorded:    Book 633 under Rec. No. 1554837
Lessor:      Albert Wolfson & Alvin J. Johnson, dba Scottsdale Ranch
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4SE1/4 only

Date:        October 26, 1981
Recorded:    Book 954 under Rec. No. 1876288
Lessor:      Paul M. Andrews
Lessee:      Aeon Energy Co.
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4SE1/4 only

                                       4

<PAGE>

Date:        November 5, 1981
Recorded:    Book 954 under Rec. No. 1876289
Lessor:      Harry M. & Dora F. Andrews
Lessee:      Aeon Energy Co.
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4SE1/4 only

Date:        November 5, 1981
Recorded:    Book 954 under Rec. No. 1876290
Lessor:      Ethel V. & Herman H. Rediess
Lessee:      Aeon Energy Co.
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4SE1/4 only

Date:        October 1, 1990
Recorded:    Book 1292 under Rec. No. 2243412
Lessor:      Amoco Production Company
Lessee:      Eddy Oil Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4SE1/4 only

Date:        September 6, 1989
Recorded:    Book 1243 under Rec. No. 2191647
Lessor:      Weld County, Colorado
Lessee:      ddy Oil Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4SE1/4 only

Wolfson 26-16

Date:        April 7, 1970.
Recorded:    June 25, 1970 in Book 628 at Reception No. 1549946.
Lessor:      Helen Marie Purse, a widow
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  SE1/4SE1/4

Date:        April 7, 1970
Recorded:    September 18, 1970 in Book 633 at Reception No. 1554837.
Lessors:     Albert Wolfson and Alvin J. Johnson, d/b/a Scottsdale Ranch
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  SE1/4SE1/4

                                       5

<PAGE>

Date:        October 26, 1981.
Recorded:    December 7, 1981 in Book 954 at Reception No. 1876288.
Lessors:     Paul M. Andrews, a single man
Lessee:      Aeon Energy Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  SE1/4SE1/4

Date:        March 21, 1991
Recorded:    December 7, 1981 in Book 954 at Reception No. 1876289.
Lessors:     Harry M. Andrews and Dora F. Andrews, husband and wife
Lessee:      Aeon Energy Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  SE1/4SE1/4

Date:        November 5, 1981.
Recorded:    December 7, 1981 in Book 954 at Reception No. 1876290.
Lessors:     Ethel V. Rediess and Herman H. Rediess, wife and husband
Lessee:      Aeon Energy Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  SE1/4SE1/4

                                       6

<PAGE>



                                  EXHIBIT 10.8



<PAGE>


                           PURCHASE AND SALE AGREEMENT
                           (Operations and Leaseholds)


     THIS PURCHASE AND SALE  AGREEMENT  ("Agreement")  is dated October 1, 2010,
and is entered into by and between PETROLEUM MANAGEMENT,  LLC ("PM"), a Colorado
limited  liability  company  whose  address is 20203  Highway  60,  Platteville,
Colorado  80651  and  SYNERGY  RESOURCES  CORPORATION   ("Synergy")  a  Colorado
corporation whose address is 20203 Highway 60, Platteville, Colorado 80651.

                                    RECITALS

A.    PM wishes to transfer operations of the wells described in Exhibit 1
      attached hereto;

B.    PM wishes to transfer its respective 100% working interest and 80% net
      revenue interest in the oil and gas leases described in Exhibit 2 attached
      hereto, except and excluding such leases as they pertain to the wells
      bores of wells listed in Exhibit 1 and Exhibit 3 attached hereto;

C.    Synergy has conducted an independent investigation of the nature and
      extent of these oil and gas leasehold interests and wells and wishes to
      purchase the interests of PM in these assets.

D.    By this instrument, Synergy and PM set forth their agreement concerning
      the purchase and sale of these oil and gas leasehold interests and wells.

                                    AGREEMENT

In consideration of the mutual promises contained
 herein, PM and the Synergy
agree as follows:

                                    ARTICLE I
                         PURCHASE AND SALE OF THE ASSETS

1.1  Purchase and Sale.  PM hereby  agrees to sell and Synergy  hereby agrees to
     purchase the Assets pursuant to the terms of this Agreement.

1.3  The Assets. As used herein,  the term "Assets" refers to all of PM's right,
     title and interest in and to the following:

     (a)  The leasehold  estates created by the oil and gas leases  specifically
          described  in the annexed  Exhibit 2,  insofar as they  pertain to the
          lands described therein with respect to each such Lease (collectively,
          the  "Leases"),   and  the  oil,  gas,   coalbed  gas  and  all  other
          hydrocarbons   (liquid,   solid   or   gaseous)   (collectively,   the
          "Hydrocarbons") attributable to the Leases and all contract rights and
          privileges,  surface,  reversionary  or remainder  interests and other
          interests  associated  with the Leases,  EXCEPTING  AND  RESERVING the
          Leases as they apply to  Hydrocarbons  produced or to be produced from

                                       1

<PAGE>

          the well bores of the Wells  described  in the  annexed  Exhibit 1 and
          Exhibit 3. The parties  agree that as to the Leases  listed in Exhibit
          1, PM has agreed to acquire the well bore leasehold  interests under a
          separate  Purchase  and Sale  Agreement  of even date,  between PM and
          Synergy.  The  parties  further  agree  that after  closing,  Eddy Oil
          Company,  Inc.  shall except and reserve,  and shall retain all of its
          right, title and interest in, the leases with respect to and only with
          respect to the well bores of the existing Rule 318A(e) wells described
          on Exhibit 3, and all related working interests and rights.

     (b)  The operating rights to the wells specifically  described on Exhibit 1
          (collectively, the "Wells").

     (c)  The pooling and communitization  agreements,  declarations and orders,
          and the  units  created  thereby  (including  all units  formed  under
          orders,  regulations,  rules or other  acts of any  federal,  state or
          other governmental agency having  jurisdiction),  as well as all other
          such agreements  relating to the properties and interests described in
          Sections 1.2(a) and (b) and to the production of Hydrocarbons, if any,
          attributable to said Leases and Wells.

     (d)  All existing  and  effective  sales,  purchase,  exchange,  gathering,
          transportation  and  processing   contracts,   operating   agreements,
          balancing  agreements,  farmout agreements,  service  agreements,  and
          other contracts, agreements and instruments, insofar as they relate to
          the Leases and Wells  described in Sections  1.2(a) through (c) above,
          with the exception of any agreements  pertaining to the remediation of
          the  Environmental  Defects  listed on  Exhibit 5  (collectively,  the
          "Contracts"), and which Contracts are shown on Exhibit 4.

     (e)  The  files,  records  and data  relating  to the  items  described  in
          Sections  1.2(a)  through  (d)  maintained  by PM and  relating to the
          interests  described in Sections  1.2(a) through (d) above  (including
          without   limitation,   all  lease  files,  land  files,  well  files,
          accounting  records,  drilling reports,  abstracts and title opinions,
          seismic data,  geophysical  data and other  geologic  information  and
          data), but only to the extent not subject to unaffiliated  third party
          contractual  restrictions  on  disclosure  or transfer and only to the
          extent related to the Assets (the "Records").

1.3  Purchase Price. The purchase price (the "Purchase  Price"),  for the Assets
     shall be  $187,341.16.  The parties  agree that all of the  purchase  price
     shall  conclusively  be deemed  allocated to the leasehold  interests.  The
     Purchase Price may be further adjusted in accordance with the terms of this
     Agreement,  and, if adjusted, will be referred to as the "Adjusted Purchase
     Price."  Payment of the Purchase  Price shall be made by bank check payable
     to PM.

1.4  Effective  Time and Date.  The purchase and sale of the Assets shall become
     effective at 7:00 a.m. on October 1, 2010.  Revenues and expenses  shall be
     prorated as of the Effective Date;  provided,  however,  that the rights to
     any amounts withheld from previous  production  proceeds for the purpose of
     paying then unpaid ad valorem  taxes for 2009  production  assessed in 2010
     (due in 2011) or for 2010 production assessed in 2010 (due in 2012) will be

                                       2

<PAGE>

     assigned to Synergy at Closing.  If any  purchaser  of  production  has not
     withheld  any  amounts  from 2009  production  proceeds  for the purpose of
     paying  ad  valorem  taxes  assessed  in 2010  (due in  2011)  or for  2010
     production  assessed  in 2011 (due in  2011),  then (i) the  actual  amount
     necessary  to pay the then unpaid  2009 and 2010 ad valorem  taxes and (ii)
     the   estimated   amount  that  should  have  been   withheld   based  upon
     pre-Effective  Date  production  for 2009 and 2010 ad valorem taxes (at the
     rate  indicated by Weld  County,  being an  approximately  9% rate) will be
     determined,  and both amounts  will be credited to Synergy at closing.  The
     assignment  of,  and  credit  for,  these  amounts  shall  serve as a final
     settlement  for ad  valorem  taxes.  PEM shall pay all  severance  taxes on
     production obtained from the Assets prior to the Effective Date and Synergy
     shall pay all severance taxes on production  obtained from the Assets after
     the Effective Date.

1.5  Transfer of  Operations.  Synergy  will take over as Operator of the Leases
     and Wells upon Closing.  Synergy will  reasonably  cooperate with PM in its
     efforts to accomplish the releases of PM's bonds (should there by any) with
     the COGCC, insofar as they pertain to the Wells.

1.6  First Right of Refusal.  PM does, by this Agreement,  assign to Synergy its
     rights pursuant to Section 1.6 of that certain Purchase and Sale Agreement,
     dated June 19, 2009, between PM and Eddy Oil Company, Inc.


1.7  Option to Participate in Infill and/or Boundary Wells.

     (a)  The parties recognize that by virtue of COGCC Rule 318A(e), the Leases
          assigned  hereunder  shall enable Synergy to drill certain  "infill or
          boundary"  wells to units  which  include  the  Lease  lands and other
          adjacent lands.  Should Synergy or other operator propose to drill any
          infill and/or  boundary  wells,  as defined in COGCCon Rule 318A(e) on
          the  Leases to be  assigned  hereunder,  then no later than sixty (60)
          days prior to spudding  Synergy shall  provide Eddy Oil Company,  Inc.
          ("EOC")  with an AFE for such well and shall  offer to assign to EOC a
          15%  working  interest  in such well,  proportionately  reduced to the
          extent the acerage  which is subject to the Lease bears to the acreage
          assigned  to Rule  318A(e)  unit on which such well is  proposed to be
          drilled.  EOC shall have thirty (30) days in which to agree in writing
          to take such  assignment  and agree to pay its  pro-rata  share of the
          costs of drilling and compeltion. If EOC agrees to take assignment and
          pay its  pro-rata  share of such  costs,  Synergy  shall  assign  such
          working  interest to EOC prior to spudding the well, and EOC shall pay
          its pro-rata share of such costs upon invoicing.  Synergy will use its
          best efforts to drill two infill or boundary wells within two years of
          Closing.

     (b)  If EOC elects not to participate in the drilling,  Synergy will assign
          a 1% overriding  royalty  proportionately  reduced to the extent which
          the acreage subject to the lease bears to the acreage  assigned to the
          rule 318 A(e) unit.  Overriding royalty will be a wellbore assignment.
          EOC's  right to  participate,  or in the  alternative  to  receive  an
          overriding  royalty, in the wellbore under this paragraph shall not be
          assignable,  except to a parent, subsidiary or affiliate of EOC, or to
          Eddy and/or Vivian  Morgigno  individually.  The rights of EOC and the
          obligations of Synergy under this Section 1.8 is supported by and form
          a part of the consideration for this Agreement.

                                       3

<PAGE>

                                   ARTICLE II
                       PM'S REPRESENTATIONS AND WARRANTIES

2.1  General Representations. With respect to itself, and/or the Assets which it
     owns and has agreed to sell under this  Agreement,  PM, makes the following
     representations and warranties:

     (a)  Incorporation/Qualification.  PM  represents  that  it  is a  Colorado
          limited  liability  company,  duly organized,  validly existing and in
          good standing under the laws of the State of Colorado.

     (b)  Power and Authority.  PM has all requisite  power and authority to own
          its interest in the Assets,  to carry on its  businesses  as presently
          conducted,  to execute and deliver this Agreement,  and to perform its
          obligations under this Agreement.

     (c)  No Lien,  No Violation.  The execution and delivery of this  Agreement
          does not, and the  fulfillment  of and  compliance  with the terms and
          conditions  hereof  will  not,  as of  Closing,  (i)  create a lien or
          encumbrance on the Assets or trigger an outstanding  security interest
          in the  Assets  that will  remain in  existence  after  Closing,  (ii)
          violate,  or be in  conflict  with,  any  material  provision  of  any
          statute,  rule or  regulation  applicable  to PM, or any  agreement or
          instrument  to which PM is a party or by which it is bound,  or, (iii)
          to its knowledge,  violate, or be in conflict with any statute,  rule,
          regulation, judgment, decree or order applicable to PM.

     (d)  Authorization and  Enforceability.  This Agreement is duly and validly
          authorized and constitutes the legal,  valid and binding obligation of
          PM, enforceable in accordance with its terms, subject, however, to the
          effects of  bankruptcy,  insolvency,  reorganization,  moratorium  and
          other  laws for the  protection  of  creditors,  as well as to general
          principles  of  equity,  regardless  whether  such  enforceability  is
          considered in a proceeding in equity or at law.

     (e)  Liability  for  Brokers'  Fees.  PM has not  incurred  any  liability,
          contingent or otherwise, for brokers' or finders' fees relating to the
          transactions  contemplated  by this  Agreement for which Synergy shall
          have any responsibility whatsoever.

     (f)  No  Bankruptcy.  There are no bankruptcy  proceedings  pending,  being
          contemplated by or threatened against PM.

     (g)  Litigation.   There  are  no  actions,   suits,  ongoing  governmental
          investigations,  written governmental inquiries or proceedings pending
          against  PM, or the Assets in any court or by or before  any  federal,
          state,  municipal or other  governmental  agency that would affect any
          PM's ability to consummate the  transaction  contemplated  hereby,  or
          materially  adversely affect the Assets or PM's ownership or operation
          of the Assets.

                                       4

<PAGE>

2.2  PM's  Representations  and Warranties with Respect to the Assets.  PM makes
     the following  representations  and  warranties  regarding the Assets to be
     sold and assigned hereunder:

     (a)  Liens. Except for the Permitted  Encumbrances,  or as otherwise agreed
          to in writing by Synergy,  the Assets will be conveyed to Synergy free
          and clear of all liens,  restrictions  and  encumbrances  created  by,
          through   or  under  PM.  As  used  in  this   Agreement,   "Permitted
          Encumbrances"  means any of the  following  matters  to the extent the
          same are valid and subsisting and affect the Assets:

          (1)  all  matters  not  created  by,  through  or under PM,  including
               without limitation any matters created by, through or under their
               predecessors in title;

          (2)  any liens for taxes and  assessments  not yet  delinquent  or, if
               delinquent,  that  are  being  contested  in  good  faith  in the
               ordinary  course of  business  and for which PM has agreed to pay
               pursuant to the terms hereof or which have been prorated pursuant
               to the terms hereof;

          (3)  the terms, conditions,  restrictions,  exceptions,  reservations,
               limitations  and  other  matters  contained  in  the  agreements,
               instruments  and  documents  that  create  or  reserve  to PM its
               interests  in the  Assets,  provided  the same do not result in a
               decrease in the Net Revenue Interest associated with the Wells or
               Leases;

          (4)  any obligations or duties to any municipality or public authority
               with respect to any franchise,  grant, license or permit, and all
               applicable  laws,  rules,  regulations  and  orders of the United
               States and the state, county, city and political  subdivisions in
               which the Assets are located and that exercises jurisdiction over
               such  Assets,  and  any  agency,   department,   board  or  other
               instrumentality  thereof that  exercises  jurisdiction  over such
               Assets (collectively, "Governmental Authority");

          (5)  any (i) easements,  rights-of-way,  servitudes,  permits, surface
               leases  and  other  rights  in  respect  of  surface  operations,
               pipelines, grazing, hunting, logging, canals, ditches, reservoirs
               or the like and (ii)  easements  for streets,  alleys,  highways,
               pipelines,  telephone  lines,  power  lines,  railways  and other
               similar rights-of-way;

          (6)  all  landowner  royalties,   overriding  royalties,  net  profits
               interests, carried interests,  production payments,  reversionary
               interests and other burdens on or deductions from the proceeds of
               production relating to the Assets if the net cumulative effect of
               such burdens does not operate to reduce the Net Revenue  Interest
               of the PM in any Asset to less than an 80% net revenue interest;

                                       5

<PAGE>

          (7)  all rights to consent by,  required  notices to, filings with, or
               other actions by Governmental  Authorities in connection with the
               sale or  conveyance  of oil and gas leases or  interests  therein
               that  are  customarily   obtained  subsequent  to  such  sale  or
               conveyance;

          (8)  all  defects  and  irregularities   affecting  the  Assets  which
               individually or in the aggregate do not operate to reduce the net
               revenue  interests  of PM,  increase the  proportionate  share of
               costs and expenses of leasehold operations  attributable to or to
               be borne by the working  interest of PM, or  otherwise  interfere
               materially with the operation, value or use of the Assets.

     (b)  Leases.  To PM's best knowledge,  (i) the Leases are in full force and
          effect  and are valid and  subsisting  documents  covering  the entire
          estates  that they  purport to cover;  (ii) PM has not been advised by
          the lessor of any Lease of a default under a Lease or of any demand to
          drill an additional well on a Lease; and (iii) all royalties,  rentals
          and other payments due under the Leases have been fully,  properly and
          timely paid, and PM owns,  and will transfer to Synergy at Closing,  a
          100% Working Interest/80% Net Revenue interest in the Leases, with the
          exception  of the  Leases  as  they  pertain  only to the  well  bores
          described on Exhibits 1 and 3. PM will use its commercially reasonable
          efforts to take all action  necessary  to keep the Leases in force and
          effect until the Closing.

     (c)  Prepayments and Wellhead Imbalances. PM is not obligated, by virtue of
          a production  payment,  prepayment  arrangement under any contract for
          the sale of  Hydrocarbons  and  containing  a "take  or pay,"  advance
          payment or similar  provision,  gas  balancing  agreement or any other
          arrangement  to deliver  Hydrocarbons  produced from the Assets at any
          time after the  Effective  Time without then or  thereafter  receiving
          full payment therefor.  None of the Wells have been produced in excess
          of applicable laws, regulations or rulings.

     (d)  Taxes. All due and payable production, severance and similar taxes and
          assessments based on or measured by the ownership of the Assets or the
          production of  Hydrocarbons or the receipt of proceeds from the Assets
          have been fully paid.

     (e)  Maintenance of Interests.  PM has  maintained,  and will continue from
          date of this  Agreement  until the Closing  maintain,  the Assets in a
          reasonable and prudent manner,  in full compliance with applicable law
          and orders of any governmental authority,  and will maintain insurance
          and bonds now in force with respect to the Assets, to pay when due all
          costs and  expenses  coming  due and  payable in  connection  with the
          Asset, and to perform all of the covenants and conditions contained in
          the  Leases,  Contracts  and  all  related  agreements.   The  parties
          understand and acknowledge  that the Wells are currently shut for lack
          of a gas sales contract,  and such fact shall not be construed to be a
          breach of this paragraph or this Agreement.

                                       6

<PAGE>

     (f)  Access.  To the same extent PM has such  right,  at all times prior to
          the Closing,  Synergy and the  employees  and agents of Synergy  shall
          have access to the Assets at Synergy's sole risk,  cost and expense at
          all reasonable  times,  and shall have the right to conduct  equipment
          inspections,  environmental audits, and any other investigation of the
          Assets on one day's prior notice to PM and upon  agreement  with PM as
          to time and place of such actions.

     (g)  Environmental  Matters. To PM's best knowledge,  it is not in material
          violation of any  Environmental  Laws applicable to the Assets, or any
          material limitations, restrictions, conditions, standards, obligations
          or timetables contained in any Environmental Laws. No notice or action
          alleging such violation is pending or, to PM's  knowledge,  threatened
          against the Assets.  For  purposes  of this  Agreement  "Environmental
          Laws" means any  federal,  state,  local,  or foreign  statute,  code,
          ordinance,  rule, regulation,  policy,  guidelines,  permit,  consent,
          approval, license, judgment, order, writ, decree, injunction, or other
          authorization,  including  the  requirement  to  register  underground
          storage tanks,  relating to (a) emissions,  discharges,  releases,  or
          threatened   releases  of   Hazardous   Materials   into  the  natural
          environment, including into ambient air, soil, sediments, land surface
          or subsurface,  buildings or facilities,  surface water,  groundwater,
          pub1icly  owned  treatment  works,  septic  systems,  or land, (b) the
          generation,    treatment,    storage,    disposal,    use,   handling,
          manufacturing,  transportation, or shipment of Hazardous Materials, or
          (c)  otherwise  relating to the  pollution of the  environment,  solid
          waste handling treatment,  or disposal, or operation or reclamation of
          mines or oil and gas wells.

            "Hazardous Material" means (a) any "hazardous substance," as defined
            by CERCLA, (b) any "hazardous waste," as defined by the Resource
            Conservation and Recovery Act, as amended, (c) any hazardous,
            dangerous, or toxic chemical, material, waste, or substance within
            the meaning of and regulated by any Environmental Law, (d) any
            radioactive material, including any naturally occurring radioactive
            material, and any source, special, or byproduct material as defined
            in 42 U.S.C. ss.2011 et seq. and any amendments or authorizations
            thereof, (e) any asbestos-containing materials in any form or
            condition, or (f) any polychlorinated biphenyls in any form or
            condition.

     (h)  Obligation  to Close.  PM shall take or cause to be taken all  actions
          necessary or advisable to consummate the transactions  contemplated by
          this  Agreement  and to assure  that as of the  Closing it will not be
          under any material,  corporate,  legal,  governmental  or  contractual
          restriction  that would prohibit or delay the timely  consummation  of
          such transactions.

     (i)  No Third Party Options. There are no existing agreements,  options, or
          commitments with, of or to any person to acquire the Assets.

     (j)  Production Sale Contracts.  To the best of PM's knowledge,  and except
          as shown on  Exhibit 4 no  Hydrocarbons  produced  from the Assets are
          subject to an oil or natural  gas sales  contract  or other  agreement

                                       7

<PAGE>

          relating to the  production,  gathering,  transportation,  processing,
          treating or marketing of Hydrocarbons and no person has any call upon,
          option to purchase or similar  rights with respect to production  from
          the Assets.

     (k)  Material Contracts.  To the best knowledge of PM, it is not in default
          under any material  Contract  related to ownership or operation of the
          Assets.

     (l)  Accuracy of Data. To PM's best knowledge, it has provided Synergy with
          accurate  information  relating  to  the  Assets  including,   without
          limitation, production history and characteristics,  operating revenue
          and prices currently being received for production.

     (m)  Preferential  Purchase Rights and Consents.  There are no preferential
          purchase rights in respect of any of the Assets.

                                   ARTICLE III
                    SYNERGY'S REPRESENTATIONS AND WARRANTIES

Synergy makes the following representations and warranties:

3.2  Organization  and  Standing.   Synergy  is  a  Colorado   corporation  duly
     organized,  validly  existing  and in good  standing  under the laws of the
     State of Colorado.

3.2  Power.  Synergy  has all  requisite  power  and  authority  to carry on its
     business as presently  conducted and to execute and deliver this  Agreement
     and  perform  its  obligations  under this  Agreement.  The  execution  and
     delivery  of  this   Agreement  and   consummation   of  the   transactions
     contemplated  hereby and the  fulfillment of and compliance  with the terms
     and  conditions  hereof  will not  violate,  or be in  conflict  with,  any
     material provision of its governing  documents or any material provision of
     any agreement or instrument to which it is a party or by which it is bound,
     or,  to its  knowledge,  any  judgment,  decree,  order,  statute,  rule or
     regulation applicable to it.

3.3  Authorization and Enforceability.  The execution,  delivery and performance
     of this Agreement and the  transaction  contemplated  hereby have been duly
     and  validly  authorized  by all  requisite  corporate  action on behalf of
     Synergy.  This Agreement  constitutes  Synergy's  legal,  valid and binding
     obligation,  enforceable in accordance with its terms, subject, however, to
     the  effects of  bankruptcy,  insolvency,  reorganization,  moratorium  and
     similar  laws  for the  protection  of  creditors,  as  well as to  general
     principles of equity,  regardless whether such enforceability is considered
     in a proceeding in equity or at law.

3.4  Liability  for  Brokers'  Fees.  Synergy has not  incurred  any  liability,
     contingent  or  otherwise,  for brokers' or finders'  fees  relating to the
     transactions  contemplated  by this  Agreement  for which PM shall have any
     responsibility whatsoever.

3.5  Litigation. There is no action, suit, proceeding, claim or investigation by
     any person,  entity,  administrative  agency or  governmental  body pending

                                       8

<PAGE>

     against Synergy before any governmental authority that impedes or is likely
     to impede its ability (i) to consummate the  transactions  contemplated  by
     this Agreement or (ii) to assume the  liabilities to be assumed by it under
     this Agreement.

3.6  Evaluation.  In entering  into this  Agreement,  Synergy  acknowledges  and
     affirms  that it has  relied  and will  rely  solely  on the  terms of this
     Agreement and upon its independent  analysis,  evaluation and investigation
     of, and judgment with respect to, the  business,  economic,  legal,  tax or
     other consequences of this transaction,  including without limitation,  its
     own estimate and  appraisal of the extent and value of the Assets,  and the
     petroleum, natural gas and other reserves associated with the Assets.

                                   ARTICLE IV
                                  TITLE MATTERS

4.1  Examination  of Files and  Records.  PM has made  available  to Synergy its
     existing  Lease,  Well and  title  files,  accounting  records,  production
     records,  easements,  Contracts,  division orders and other information, to
     the extent not  subject to  confidentiality  agreements,  available  in its
     files  relating to the Assets.  If Closing  does not occur,  Synergy  shall
     promptly return all such data and other to PM.

4.2  Title  Review.  Synergy has  reviewed  title to the  Assets;  has agreed to
     accept  title in its current  condition;  and has  decided to proceed  with
     Closing.

                                    ARTICLE V
                              ENVIRONMENTAL MATTERS

Synergy  has had access to and the  opportunity  to  inspect  the Assets for all
purposes,  including  without  limitation,  for the  purposes of  detecting  the
presence of hazardous or toxic  substances,  pollutants  or other  contaminants,
environmental  hazards,  naturally  occurring  radioactive  materials  ("NORM"),
produced water,  air emissions,  contamination of the surface and subsurface and
any other  Environmental  Defects.  PM understands  that its is responsible  for
notifying  appropriate  government  agencies of any Environmental  Defects,  and
potentionally  for any clean-up or remediation with respect to any Environmental
Defects.  Nothing  contained in this Article V limits the  provisions of Section
9.1 of this Agreement.

                                       9

<PAGE>

                                   ARTICLE VI
                        COVENANTS OF PM PRIOR TO CLOSING

6.1  Affirmative Covenants. Until Closing, PM, shall do the following:

     (a)  Continue  to pay any shut in  royalties  which may be due and take any
          and all other  actions  necessary to keep the Leases in full force and
          effect;

     (b)  Maintain insurance now in force with respect to the Assets;

     (c)  Comply with all other terms of all Leases and Contracts;

     (d)  Notify Synergy of any claim or demand which might materially adversely
          affect title to or operation of the Assets; and

     (e)  Pay costs and expenses attributable to the Assets as they become due.

6.2  Negative  Covenants.  Until  Closing,  PM shall not do any of the following
     with  regard to the  Assets  it has  agreed  to sell and  assign  hereunder
     without first notifying Synergy:

     (a)  Abandon any Well unless required to by a regulatory agency;

     (b)  Release all or any portion of a Lease, Contract or easement;

     (c)  Commence an operation in a Well if the estimated cost of the operation
          exceeds $7,500 net to PM's interest,  except such operations for which
          Synergy may provide its consent;

     (d)  Create a lien, security interest or other encumbrance on the Assets;

     (e)  Remove or dispose of any of the Assets;

     (f)  Materially  amend a Lease,  Contract or easement or enter into any new
          contracts affecting the Assets; or

     (g)  Waive,  comprise  or settle  any claim that  would  materially  affect
          ownership,  operation or value of any of the Assets  exceeding  $3,500
          net to PM's interest.

                                   ARTICLE VII
                                     CLOSING

7.1  Date of Closing.  Closing of the transactions  contemplated hereby shall be
     held at 20203 Highway 60, Platteville, CO, at 4:00 p.m. on October 1, 2010.
     Absent a timely closing or a written extension signed by both parties, this
     Agreement shall conclusively  terminate.  Time is of the essence in respect
     of the Closing.

                                       10

<PAGE>

7.2  Place of Closing.  The Closing shall be held at the offices of Synergy,  or
     at such other time and place mutually agreed by the parties.

7.3  Closing Obligations. At the Closing, the following shall occur:

     (a)  PM shall execute, acknowledge and deliver the following:

          (i)  an Assignment  in the form  attached as Exhibit 6,  conveying the
               Assets to PM;

          (ii) letters in lieu of transfer  orders  addressed to each production
               purchaser,  if any, authorizing PM to receive the proceeds of oil
               and gas  produced  from the Wells  from and  after the  Effective
               Time; and

          (iii) such  certifications  and other documents as may be necessary to
               transfer operations of the Leases by PM to Synergy.

     (b)  Synergy shall pay to PM $187,341.16  (or the Adjusted  Purchase Price)
          by bank check payable to PM.

7.4  Simultaneous  Closings.  An  additional  condition  of the  closing of this
     Agreement is the  simultaneous  closing of the  separate  Purchase and Sale
     Agreement (Wells,  Equipment,  and Well Bore Leasehead Assignments) of even
     date between Petroleum  Exploration and Management,  LLC and Synergy.  Such
     other Purchase and Sale Agreement is and shall remain separate and distinct
     from this  Agreement,  but the parties agree that they may be read together
     for  purposes  of  interpretation  and  determination  of the intent of the
     parties.

                                  ARTICLE VIII
                            POST-CLOSING OBLIGATIONS

8.1  Delivery of Records. PM agrees to make the Records available for pick up by
     Synergy as soon as is reasonably  practical,  but in any event on or before
     seven (7) days after  Closing.  PM may retain  copies of the Records and PM
     shall  have the  right to  review  and copy  the  Records  during  standard
     business hours upon  reasonable  notice for so long as Synergy  retains the
     Records.  PM at all times  will  maintain  the  confidential  nature of the
     Records in accordance  with Article X. Synergy agrees that the Records will
     be maintained in compliance  with all applicable  laws  governing  document
     retention.  Synergy will not destroy or otherwise  dispose of Records after
     Closing,  unless  Synergy  first  gives  the PM  reasonable  notice  and an
     opportunity  to copy the  Records  to be  destroyed.  If and to the  extent
     certain  portions of the Records  are subject to  unaffiliated  third party
     contractual  restrictions  on  disclosure  or  transfer,  PM  agrees to use
     reasonable  efforts to obtain the waiver of such contractual  restrictions;
     provided,  however,  that they shall not be required to expend any money in
     connection with obtaining such waivers.

8.2  Proceeds and Invoices For Property  Expenses  Received  After  Closing.  PM
     shall be  responsible  for the  payment of all its costs,  liabilities  and
     expenses  (including   severance  taxes)  incurred  in  the  ownership  and
     operation  of the Assets  prior to the  Effective  Time and not yet paid or

                                       11

<PAGE>

     satisfied.  Synergy  shall  be  responsible  for  payment  (at  Closing  or
     thereafter  if not  reflected on the Closing  Settlement  Statement) of all
     costs, liabilities and expenses (including severance taxes) incurred in the
     ownership and operation of the Assets after the Effective  Time.  After the
     Closing,  those proceeds attributable to the Assets received by a party, or
     invoices  for  expenses  attributable  to the  Assets,  shall be settled as
     follows:

     (a)  Proceeds.  Proceeds  received  by  Synergy  with  respect  to sales of
          Hydrocarbons produced prior to the Effective Time shall be immediately
          remitted or forwarded to PM.  Proceeds  received by PM with respect to
          sales of  Hydrocarbons  produced  after the  Effective  Time  shall be
          immediately forwarded to Synergy.

     (b)  Property  Expenses.  Invoices  received  by  Synergy  that  relate  to
          operation of the Assets prior to the Effective Time shall be forwarded
          to PM by Synergy,  or if already paid by Synergy,  invoiced by Synergy
          to PM. Invoices  received by PM that relate to operation of the Assets
          after the Effective Time shall be immediately  forwarded to Synergy by
          PM, or if already paid by PM, invoiced by them to Synergy.

8.3  Plugging  Liability.  From and after the  Closing,  Synergy will assume the
     expenses and costs of plugging and abandoning the Wells and  restoration of
     operation sites,  all in accordance with the applicable  laws,  regulations
     and contractual provisions.  Notwithstanding the above, Synergy will not be
     responsible  for the  remediation  of the  Environmental  Defects listed on
     Exhibit 5 or reporting  the  Environmental  Defects to any state or federal
     agency.

8.4  Assumption  of  Contracts.  From and  after  the  Effective  Time,  Synergy
     assumes,  will be bound by, and agrees to perform  all  express and implied
     covenants and  obligations  of PM relating to the Assets,  whether  arising
     under (i) the Leases,  prior assignments of the Leases, the Contracts,  the
     easements, the permits or any other  contractually-binding  arrangements to
     which the Assets (or any  component  thereof) may be subject and which will
     be binding on PM and/or the  Assets (or any  component  thereof)  after the
     Closing or (ii) any applicable laws,  ordinances,  rules and regulations of
     any governmental or  quasi-governmental  authority having jurisdiction over
     the Assets.

8.5  Access.  Synergy  shall  have the  right  following  Closing  to make  such
     nonexclusive  use of roads  and  other  access  improvements  as may now or
     hereafter  exist on the Lands as it believes  convenient in connection with
     its operations on the Leases,  subject to its compliance with the Leases or
     other  instruments  creating the rights-of way or easements and its payment
     of an  appropriate  share of  maintenance  costs based upon its use of such
     road or access improvements.

8.6  Further  Assurances.  From time to time after Closing, PM and Synergy shall
     each execute, acknowledge and deliver to the other such further instruments
     and take such  other  action  as may be  reasonably  requested  in order to
     accomplish more effectively the purposes of the  transactions  contemplated
     by this Agreement.

                                       12

<PAGE>

                                   ARTICLE IX
                                 INDEMNIFICATION

9.1  By the PM. Except as otherwise provided herein, PM shall be responsible for
     and shall  indemnify and hold harmless  Synergy,  its officers,  directors,
     employees and agents, from all claims, losses, costs, liabilities,  damages
     and   expenses,   including   reasonable   attorneys'   fees   and   costs,
     (collectively,  "Claims")  arising  out  of  or  resulting  from  (i)  PM's
     ownership or operation  of the Assets  prior to Closing,  including  Claims
     arising under  Environmental  Laws,  (ii) PM's  disbursement  of production
     proceeds from the Assets  accruing  prior to the Effective  Time, and (iii)
     any  breach of any  surviving  representations,  warranties,  covenants  or
     conditions  of PM contained in this  Agreement,  subject,  however,  to the
     limitations set forth in Sections 11.9 and 11.10.

9.2  By  Synergy.   Except  as  otherwise  provided  herein,  Synergy  shall  be
     responsible  for and shall  indemnify  and hold  harmless PM, its officers,
     directors,  employees  and  agents,  from  all  Claims  arising  out  of or
     resulting  from (i)  Synergy's  ownership  or operation of the Assets after
     Closing,  including Claims arising under  Environmental  Laws, and (ii) any
     breach  of any  representation,  warranties,  covenants  or  conditions  of
     Synergy contained in this Agreement,  subject,  however, to the limitations
     set forth in Section 11.10.

                                    ARTICLE X
                                 CONFIDENTIALITY

If the Closing does not occur, Synergy will use its best efforts to keep all the
information  furnished  by PM to Synergy  hereunder or in  contemplation  hereof
strictly  confidential  including,  without  limitation,  the Purchase Price and
other  terms of this  Agreement,  and will  not use any of such  information  to
Synergy's  advantage  or in  competition  with PM,  except  to the  extent  such
information (i) was already in the public domain,  not as a result of disclosure
by Synergy,  (ii) was already  known to Synergy,  (iii) is  developed by Synergy
independently  from the  information  supplied  by PM, or (iv) is  furnished  to
Synergy by a third party  independently of Synergy's  investigation  pursuant to
the transaction contemplated by this Agreement.

                                   ARTICLE XI
                                  MISCELLANEOUS

11.1 Exhibits.  The exhibits to this Agreement are hereby incorporated into this
     Agreement by reference and constitute a part of this Agreement.

11.2 Notices.  All notices and  communications  required or permitted under this
     Agreement  shall be in  writing  and  addressed  as set  forth  below.  Any
     communication or delivery  hereunder shall be deemed to have been duly made
     and the receiving  party  charged with notice (i) if personally  delivered,
     when received,  (ii) if sent by facsimile  transmission or electronic mail,
     when  received  (iii) if mailed,  five (5)  business  days  after  mailing,
     certified  mail,  return  receipt  requested,  or (iv) if sent by overnight
     courier, one day after sending. All notices shall be addressed as follows:

                                       13

<PAGE>

      If to the Synergy:    Synergy Resources Corporation
                            20203 Highway 60
                            Platteville, Colorado 80651
                            Telephone:  (970) 737-1073

      If to PM:             Petroleum Management, LLC
                            20203 Highway 60
                            Platteville, CO 80651
                            Telephone:  (970) 737-1090

     Any party may, by written notice so delivered to the other parties,  change
the address or individual to which delivery shall thereafter be made.

11.3 Amendments. Except for waivers specifically provided for in this Agreement,
     this Agreement may not be amended nor any rights hereunder waived except by
     an  instrument  in  writing  signed  by the party to be  charged  with such
     amendment or waiver and  delivered by such party to the party  claiming the
     benefit of such amendment or waiver.

11.4 Assignment.  Synergy  and PM shall not assign  all or any  portion of their
     respective rights or delegate all or any portion of their respective duties
     hereunder  unless they  continue to remain  liable for the  performance  of
     their  obligations  hereunder.  Synergy may not assign the benefits of PM's
     indemnity  obligations  contained  in this  Agreement,  and  any  permitted
     assignment  shall  not  include  such  benefits.   No  such  assignment  or
     obligation  shall  increase  the  burden on PM or impose  any duty on it to
     communicate  with or report to any transferee,  and PM may continue to look
     to Synergy for all purposes under this Agreement.

11.5 Counterparts; Fax Signatures. This Agreement may be executed by Synergy and
     PM in any number of counterparts, each of which shall be deemed an original
     instrument, but all of which together shall constitute but one and the same
     instrument. Facsimile signatures shall be considered binding.

11.6 Governing Law. This Agreement and the transactions  contemplated hereby and
     any arbitration or dispute  resolution  conducted  pursuant hereto shall be
     construed  in  accordance  with,  and governed by, the laws of the State of
     Colorado without reference to the conflict of laws principles thereof.

11.7 Entire  Agreement.  This  Agreement,  together  with the  Purchase and Sale
     Agreement  (Wells,  Equipment and Well Bore Leasehold  Assignments) of even
     date,  constitute  the  entire  understanding  among  the  parties,   their
     respective partners, members, trustees,  shareholders,  officers, directors
     and employees with respect to the subject matter  hereof,  superseding  all
     negotiations,  prior  discussions and prior  agreements and  understandings
     relating to such subject matter.

11.8 Binding  Effect.  This Agreement  shall be binding upon, and shall inure to
     the benefit of, the parties  hereto,  and their  respective  successors and
     assigns.

                                       14

<PAGE>

11.9 Survival.   The  representations  and  warranties  of  the  parties  hereto
     contained in Article II (except  Section  2.2(a),  (b) and (g)) and Article
     III and the  indemnification of the parties hereto contained in Article IX,
     and all claims,  causes of action and damages with respect  thereto,  shall
     survive the Closing for a period of twenty-four months thereafter, and then
     expire and  terminate.  The  representations  and  warranties  contained in
     Section 2.2(a), (b) and (g) shall not survive the Closing, but shall expire
     and terminate at the Closing.

11.10 Limitation  on Damages;  Provision  for  Recovery of Costs and  Attorney's
     Fees.  The  parties  expressly  waive any and all rights to  consequential,
     special,  incidental,  punitive or  exemplary  damages,  or loss of profits
     resulting  from  breach  of this  Agreement.  The  prevailing  party in any
     litigation  seeking  a  remedy  for the  breach  of this  Agreement  shall,
     however,  be entitled to recover all attorneys'  fees and costs incurred in
     such litigation.

11.11 No Third-Party  Beneficiaries.  This Agreement is intended to benefit only
     the parties hereto and their respective permitted successors and assigns.

11.12 Severability.  If at any time subsequent to the date hereof, any provision
     of this Agreement  shall be held by any court of competent  jurisdiction to
     be illegal, void or unenforceable,  such provision shall be of no force and
     effect, but the illegality or unenforceability of such provision shall have
     no  effect  upon and  shall  not  impair  the  enforceability  of any other
     provision of this Agreement.

11.13 Waiver. No consent or waiver,  express of implied,  to or of any breach or
     default in the  performance of any obligation or covenant  hereunder  shall
     constitute  a consent or waiver to or of any other breach or default in the
     performance of the same or any other obligations hereunder.

                                       15

<PAGE>

      IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first-above written.


PETROLEUM MANAGEMENT, LLC              SYNERGY RESOURCES CORPORATION

By: /s/ Ed Holloway                    By: /s/ William E. Scaff
    ---------------------------            -----------------------------------
    Ed Holloway, Manager                   William E Scaff Jr., Vice President

                                       16

<PAGE>


                                    EXHIBIT 1
                                       TO

                     ASSIGNMENT, BILL OF SALE AND CONVEYANCE
                           (Operations and Leaseholds)


      1. Bowen 25-10 (NWSE of Section 25, 4N-67W-Weld County, CO)

      2. Wolfson 23-15 (SWSE of Section 23, 4N-67W-Weld County, CO)

      3. Wolfson 23-16 (SESE of Section 23, 4N-67W-Weld County, CO)

      4. Wolfson 26-1 (NENE of Section 26, 4N-67W-Weld County, CO)

      5. Wolfson 26-2 (NWNE of Section 26, 4N-67W-Weld County, CO)

      6. Wolfson 26-10 (NWSE of Section 26, 4N-67W-Weld County, CO)

      7. Wolfson 26-16 (SESE of Section 26, 4N-67W-Weld County, CO)

      8. Wolfson 26-6 (SENW of Section 26, 4N-67W-Weld County, CO)

<PAGE>

                                    EXHIBIT 2
                                       TO
                     ASSIGNMENT, BILL OF SALE AND CONVEYANCE
                           (Operations and Leaseholds)

Bowen 25-10

Date:        September 5, 1984
Recorded:    Book 1044 under Rec. 1981056
Lessor:      Ralph L. Bowen & Josephine L. Bowen
Lessee:      Mission Oil Corporation
Description: Township 4 North, Range 67 West
Section 25:  NW1/4SE1/4 only

Date:        September 5, 1984
Recorded:    Book 1044 under Rec. 1981055
Lessor:      Donald W. Bowen & Beverly A. Bowen
Lessee:      Mission Oil Corporation
Description: Township 4 North, Range 67 West
Section 25:  NW1/4SE1/4 only

Date:        September 5, 1984
Recorded:    Book 1044 under Rec. 1981056
Lessor:      Betty J. L. Bowen
Lessee:      Mission Oil Corporation
Description: Township 4 North, Range 67 West
Section 25:  NW1/4SE1/4 only

Wolfson 23-15 and 16

Date:        April 7, 1970
Recorded:    Book 628 under Rec. No. 1549946
Lessor:      Helen Marie Purse
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 23:  S1/2SE4 except 2 railroad strips

Date:        April 7, 1970
Recorded:    Book 633 under Rec. No. 1554837
Lessor:      Albert Wolfson & Alvin J. Johnson, dba Scottsdale Ranch
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 23:  S1/2SE4 except 2 railroad strips

                                       1

<PAGE>

Date:        October 20, 1981
Recorded:    Book 954 under Rec. No. 1876285
Lessor:      Marjorie H. Williams, P.R. of Est. of M. E. Hagen, deceased
Lessee:      Aeon Energy Co.
Description: Township 4 North, Range 67 West, 6th P.M.
Section 23:  S1/2SE1/4 except 2 railroad strips

Date:        April 1, 19921
Recorded:    Book 1299 under Rec. No. 2250760
Lessor:      Union Pacific Resources Company
Lessee:      Eddy Oil Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 23:  UPRR ROW strip in S1/2SE1/4

Date:        June 1, 19921
Recorded:    Book 1312 under Rec. No. 2264693
Lessor:      Amoco Production Company
Lessee:      Eddy Oil Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 23:  Abandoned UPRR ROW strip in S1/2SE1/4


Wolfson 26-1

Date:        April 7, 1970
Recorded:    Book 628 under Rec. No. 1549946
Lessor:      Helen Marie Purse
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NE1/4NE1/4 only

Date:        April 7, 1970
Recorded:    Book 633 under Rec. No. 1554837
Lessor:      Albert Wolfson & Alvin J. Johnson, dba Scottsdale Ranch
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NE1/4NE1/4 only

                                       2

<PAGE>

Date:        October 20, 1981
Recorded:    Book 954 under Rec. No. 1876285
Lessor:      Marjorie H. Williams, P.R. of the Estate of M. E. Hagen, deceased
Lessee:      Aeon Energy Co.
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NE1/4NE1/4 only


Wolfson 26-2

Date:        April 7, 1970
Recorded:    Book 628 under Rec. No. 1549946
Lessor:      Helen Marie Purse
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4NE1/4 only

Date:        April 7, 1970
Recorded:    Book 633 under Rec. No. 1554837
Lessor:      Albert Wolfson & Alvin J. Johnson, dba Scottsdale Ranch
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4NE1/4 only

Date:        October 20, 1981
Recorded:    Book 954 under Rec. No. 1876285
Lessor:      Marjorie H. Williams, P.R. of Est. of M. E. Hagen, deceased
Lessee:      Aeon Energy Co.
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4NE1/4 only

Date:        February 12, 1991
Recorded:    Book 1290 under Rec. No. 2241811
Lessor:      Union Pacific Resources Company
Lessee:      Eddy Oil Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  UPRR ROW strip in NW1/4NE1/4 only

Date:        October 1, 1990
Recorded:    Book 1291 under Rec. No. 2242790
Lessor:      Amoco Production Company
Lessee:      Eddy Oil Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  Abandoned UPRR ROW strip in NW1/4NE1/4 only


Wolfson 26-6

Date:        April 7, 1970
Recorded:    Book 628 under Rec. No. 1549946
Lessor:      Helen Marie Purse
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  SE1/4NW1/4  only

                                       3

<PAGE>

Date:        April 7, 1970
Recorded:    Book 633 under Rec. No. 1554837
Lessor:      Albert Wolfson & Alvin J. Johnson, dba Scottsdale Ranch
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  SE1/4NW1/4 only

Date:        October 20, 1981
Recorded:    Book 954 under Rec. No. 1876285
Lessor:      Marjorie H. Williams, P.R. of Est. of M. E. Hagen, deceased
Lessee:      Aeon Energy Co.
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  SE1/4NW1/4  only

Date:        September 11, 1991
Recorded:    Book 1323 under Rec. No. 2275064
Lessor:      Union Pacific Resources Company
Lessee:      Eddy Oil Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26: UPRR ROW strip in SE1/4NW1/4 only


Wolfson 26-10

Date:        April 7, 1970
Recorded:    Book 628 under Rec. No. 1549946
Lessor:      Helen Marie Purse
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4SE1/4 only

Date:        April 7, 1970
Recorded:    Book 633 under Rec. No. 1554837
Lessor:      Albert Wolfson & Alvin J. Johnson, dba Scottsdale Ranch
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4SE1/4 only

Date:        October 26, 1981
Recorded:    Book 954 under Rec. No. 1876288
Lessor:      Paul M. Andrews
Lessee:      Aeon Energy Co.
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4SE1/4 only

                                       4

<PAGE>

Date:        November 5, 1981
Recorded:    Book 954 under Rec. No. 1876289
Lessor:      Harry M. & Dora F. Andrews
Lessee:      Aeon Energy Co.
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4SE1/4 only

Date:        November 5, 1981
Recorded:    Book 954 under Rec. No. 1876290
Lessor:      Ethel V. & Herman H. Rediess
Lessee:      Aeon Energy Co.
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4SE1/4 only

Date:        October 1, 1990
Recorded:    Book 1292 under Rec. No. 2243412
Lessor:      Amoco Production Company
Lessee:      Eddy Oil Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4SE1/4 only

Date:        September 6, 1989
Recorded:    Book 1243 under Rec. No. 2191647
Lessor:      Weld County, Colorado
Lessee:      Eddy Oil Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26: NW1/4SE1/4 only


Wolfson 26-16

Date:        April 7, 1970
Recorded:    June 25, 1970 in Book 628 at Reception No. 1549946.
Lessor:      Helen Marie Purse, a widow
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  SE1/4SE1/4

Date:        April 7, 1970
Recorded:    September 18, 1970 in Book 633 at Reception No. 1554837.
Lessors:     Albert Wolfson and Alvin J. Johnson, d/b/a Scottsdale Ranch
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  SE1/4SE1/4

                                       5

<PAGE>


Date:        October 26, 1981.
Recorded:    December 7, 1981 in Book 954 at Reception No. 1876288.
Lessors:     Paul M. Andrews, a single man
Lessee:      Aeon Energy Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  SE1/4SE1/4

Date:        March 21, 1991
Recorded:    December 7, 1981 in Book 954 at Reception No. 1876289.
Lessors:     Harry M. Andrews and Dora F. Andrews, husband and wife
Lessee:      Aeon Energy Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  SE1/4SE1/4

Date:        November 5, 1981.
Recorded:    December 7, 1981 in Book 954 at Reception No. 1876290.
Lessors:     Ethel V. Rediess and Herman H. Rediess, wife and husband
Lessee:      Aeon Energy Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  SE1/4SE1/4


                                       6

<PAGE>

                                    EXHIBIT 3
                                       TO

                     ASSIGNMENT, BILL OF SALE AND CONVEYANCE
                           (Operations and Leaseholds)


     The  following  wells are excluded  from  transaction.  Each is a currently
existing  Rule 318A or 318A(e)  well in which EOC is a WI owner.  All  locations
below are surface locations taken from the COGCC website.  All wells are located
in Township 4 North, Range 67 West of the 6th P.M., Weld County, Colorado.



      Boos 20-25       SWSE  Section 25 

      Farmer 31-25    NWNW  Section 25 

      Platte 23-26    NESW  Section 26 

      Platte 27-35    NWNE  Section 35 

      Gray 26-19       NWNW  Section 26 

                                       

<PAGE>


                                    EXHIBIT 4
                                    CONTRACTS



      DCP gas contract
      Suncor Energy crude oil contract


<PAGE>


                                    EXHIBIT 5
                              ENVIRONMENTAL DEFECTS

     Any and all  Environmental  defects  prior to the date of closing  were the
responsibility  of Eddy  Oil  Company  under  that  certain  Purchase  and  Sale
Agreement, dated June 19, 2009 between PM and Eddy Oil Company, Inc.



<PAGE>
                                    EXHIBIT 6

                     ASSIGNMENT, BILL OF SALE AND CONVEYANCE


     THIS  ASSIGNMENT,  BILL OF SALE AND CONVEYANCE (the  "Assignment")  is made
this  1st  day of  October,  2010,  by and  between  PETROLEUM  MANAGEMENT,  LLC
("Assignor"),  a  Colorado  limited  liability  company  whose  address is 20203
Highway 60,  Platteville,  Colorado  80651,  and SYNERGY  RESOURCES  CORPORATION
("Assignee),   a  Colorado  corporation  whose  address  is  20203  Highway  60,
Platteville, Colorado 80651.

                              W I T N E S S E T H:

     WHEREAS,  Assignor and Assignee  entered into a Purchase And Sale Agreement
dated October 1, 2010 (the  "Agreement"),  pursuant to which Assignor  agreed to
sell and Assignee agreed to purchase all of the Assignor's  interests as defined
herein and as described below.

     WHEREAS,  this  Assignment,  Bill Of Sale and Conveyance is to evidence the
transfer  of  title  necessary  to  consummate  the sale  and  purchase  of such
interests in accordance with and pursuant to the Agreement.  Terms not otherwise
defined herein shall have the meanings ascribed thereto in the Agreement.

     NOW, THEREFORE, Assignor, for good and valuable consideration,  the receipt
and sufficiency of which are hereby acknowledged,  has bargained, sold, granted,
transferred,  assigned  and  conveyed  and does  hereby  BARGAIN,  SELL,  GRANT,
TRANSFER, ASSIGN and CONVEY unto ASSIGNEE the following:

     1. Assignment.  Assignor  assigns,  sells and quitclaims to Assignee all of
Assignor's right, title and interest in and to the following:

          (a)  The  leasehold   estates  created  by  the  oil  and  gas  leases
     specifically described in the annexed Exhibit 2, insofar as they pertain to
     the lands described therein with respect to each such Lease (the "Leases"),
     and the oil, gas, coalbed gas and all other hydrocarbons (liquid,  solid or
     gaseous) (collectively,  the "Hydrocarbons") attributable to the Leases and
     all contract  rights and  privileges,  surface,  reversionary  or remainder
     interests and other  interests  associated  with the Leases,  EXCEPTING AND
     RESERVING  the  Leases  as they  apply to  Hydrocarbons  produced  or to be
     produced from the well bores of the Wells  described in the annexed Exhibit
     1 and Exhibit 3. The parties  agree that as to the Leases listed in Exhibit
     2, Assignee has agreed to acquire the well bore leasehold interests under a
     separate   Purchase  and  Sale  Agreement  of  even  date,  with  Petroleum
     Exploration  and  Management,  LLC. The parties further agree that Eddy Oil
     Company,  Inc. ("EOC") shall retain all of its right, title and interest in
     the Leases  with  respect to the well bores of the  existing  Rule  318A(e)
     Wells described on Exhibit 3, and all related working interests and rights.

          (b) The  operating  rights  to the  wells  specifically  described  on
     Exhibit 1 (collectively, the "Wells").

                                       

<PAGE>

          (c) The  pooling  and  communitization  agreements,  declarations  and
     orders,  and the units created  thereby  (including  all units formed under
     orders,  regulations,  rules or other acts of any  federal,  state or other
     governmental  agency  having  jurisdiction),  as  well  as all  other  such
     agreements  relating to the properties and interests  described in Sections
     1(a)  and  (b)  above,  and to the  production  of  Hydrocarbons,  if  any,
     attributable to said properties and interests.

          (d) All existing and effective sales, purchase,  exchange,  gathering,
     transportation and processing contracts,  operating  agreements,  balancing
     agreements,  farmout agreements,  service agreements,  and other contracts,
     agreements  and  instruments,  insofar as they relate to the properties and
     interests described in Sections 1(a) through (c) above  (collectively,  the
     "Contracts").

          (e) The files,  records and data  relating to the items  described  in
     Sections 1(a) through (d) above  maintained by Assignor and relating to the
     interests  described  in  Sections  1(a)  through  (d)  (including  without
     limitation,  all lease files, land files, well files,  accounting  records,
     drilling reports,  abstracts and title opinions,  seismic data, geophysical
     data and other geologic  information and data),  but only to the extent not
     subject to unaffiliated third party contractual  restrictions on disclosure
     or transfer and only to the extent related to the Assets (the "Records").

     2. Limited Warranty.  Assignor warrants that it is transferring 100% of the
leashold/80%  net  revenue  interest,  in the Leases  described  on the  annexed
Exhibit 2,  EXCEPTING  AND  RESERVING  the Leases as they apply to  Hydrocarbons
produced or to be  produced  from the well bores of the Wells  described  in the
annexed Exhibit 1 and Exhibit 3, free and clear of all liens,  restrictions  and
encumbrances  created by, through or under  Assignor.  Except as provided in the
Agreement, Assignor makes no warranty of title whatsover, express or implied, as
to any of the items being  assigned  or sold  pursuant  to this  instrument.  In
addition,  ASSIGNOR  MAKES NO  WARRANTY,  EXPRESS  OR  IMPLIED,  CONCERNING  THE
MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OF ANY OF THE EQUIPMENT OR OTHER
PERSONAL PROPERTY BEING SOLD PURSUANT TO THIS INSTRUMENT.

     3.  Effective  Date.  Assignor  shall be entitled  to receive all  revenues
attributable to Assignor's  proportionate interest in production from the assets
through  September  30, 2010 and shall pay its  proportionate  share of expenses
relating to such assets  including  severance  taxes and ad valorem  taxes which
shall be prorated through the Effective Date (i.e., any amounts now due or shall
become due which are associated with production through the effective date shall
be paid by Assignors or credited to  Assignee).  Thereafter,  Assignee  shall be
entitled to such  revenue and assume and be  responsible  for such  expenses and
taxes.

     4. Further  Assurances.  Assignor agrees to execute and deliver or cause to
be executed and delivered,  upon the reasonable request of Assignee,  such other
Assignments,  Bills of Sale,  Certificates  of Title and other matters which are
appropriate to transfer the assets to Assignee.

     5. Indemnification. Except as otherwise provided in the Agreement, Assignor
shall be responsible for and shall indemnify and hold harmless the Assignee, its
officers,  directors,  employees  and agents,  from all claims,  losses,  costs,
fines, liabilities,  damages and expenses,  including reasonable attorneys' fees
and costs,  (collectively,  "Claims")  arising out of or resulting  from (i) the
Assignor's  ownership  or  operation  of the  Assets  prior  to the date of this

                                       2

<PAGE>

Assignment, including Claims arising under Environmental Laws, as defined in the
Agreement,  and (ii) any breach of any  surviving  representations,  warranties,
covenants or conditions  of the Assignor  contained in the  Agreement,  subject,
however,  to the  limitations  set forth in the  Agreement.  Except as otherwise
provided herein,  Assignee shall be responsible for and shall indemnify and hold
harmless the Assignor, its officers,  directors,  employees and agents, from all
Claims arising out of or resulting from (i) Assignee's ownership or operation of
the Assets after the date of this  Assignment,  including  Claims  arising under
Environmental  Laws as defined in the  Agreement,  and rules of the Colorado Oil
and Gas  Conservation  Commission,  and (ii) any  breach of any  representation,
warranties,  covenants or  conditions  of Assignee  contained in the  Agreement,
subject, however, to the limitations set forth in the Agreement.

     6. Option to Participate in Infill and/or Boundary Wells.

          (a) The parties  recognize  that by virtue of COGCC Rule 318A(e),  the
     Leases assigned hereunder shall enable Assignee to drill certain "infill or
     boundary"  wells to units which include the Lease lands and other  adjacent
     lands. Should Assignee or other operator propose to drill any infill and/or
     boundary  wells,  as defined in  COGCCon  Rule  318A(e) on the Leases to be
     assigned  hereunder,  then no later than sixty (60) days prior to  spudding
     Assignee  shall  provide  EOC with an AFE for such well and shall  offer to
     assign to EOC a 15% working interest in such well,  proportionately reduced
     to the  extent  the  acerage  which is  subject  to the Lease  bears to the
     acreage  assigned to Rule 318A(e) unit on which such well is proposed to be
     drilled.  EOC shall have  thirty  (30) days in which to agree in writing to
     take such  assignment  and agree to pay its pro-rata  share of the costs of
     drilling  and  compeltion.  If EOC  agrees to take  assignment  and pay its
     pro-rata share of such costs,  Assignee shall assign such working  interest
     to EOC prior to spudding the well,  and EOC shall pay its pro-rata share of
     such costs upon invoicing.  Assignee will use its best efforts to drill two
     infill or boundary wells within two years of Closing.

          (b) If EOC elects not to  participate  in the drilling,  Assignee will
     assign to EOC a 1% overriding royalty proportionately reduced to the extent
     which the acreage subject to the lease bears to the acreage assigned to the
     rule 318 A(e) unit. Overriding royalty will be a wellbore assignment. EOC's
     right to  participate,  or in the  alternative  to  receive  an  overriding
     royalty,  in the wellbore  under this  paragraph  shall not be  assignable,
     except to a parent,  subsidiary or affiliate of Assingor, or to Eddy and/or
     Vivian Morgigno individually.

     7.  Miscellaneous.  Exhibits  1 and  2  attached  to  this  Assignment  are
incorporated  herein and shall be considered a part of this  Assignment  for all
purposes.  The provisions of this Assignment  shall be binding upon and inure to
the benefit of the parties hereto, and their respective  successors and assigns.
This  Assignment  is made  further  subject to the terms and  conditions  of the
Agreement which are incorporated  herewith by reference.  If there is a conflict
between the terms and conditions of this Assignment and the Agreement, the terms
and conditions of this Assignment shall control to the extent of such conflict.

     IN WITNESS WHEREOF,  the Assignor has executed this Agreement as of the day
and year first-above written.

                                       3

<PAGE>

                                    ASSIGNOR:

                                    PETROLEUM MANAGEMENT, LLC


                                    By: /s/ Ed Holloway
                                        --------------------------
                                        Ed Holloway, Manager

STATE OF COLORADO             )
                              ) ss.
COUNTY OF WELD                )

     The  foregoing  instrument  was  acknowledged  before  me  this  1st day of
October, 2010, by Ed Holloway,  Manager of Petroleum Management,  LLC, on behalf
of that limited liability company.

     My commission expires 11-20-2011



                                    /s/ Rhonda L. Sandquist
                                    -----------------------------------
                                    Notary Public

                                       4

<PAGE>


                                    EXHIBIT 1
                                       TO


                     ASSIGNMENT, BILL OF SALE AND CONVEYANCE
                           (Operations and Leaseholds)


      1. Bowen 25-10 (NWSE of Section 25, 4N-67W-Weld County, CO)

      2. Wolfson 23-15 (SWSE of Section 23, 4N-67W-Weld County, CO)

      3. Wolfson 23-16 (SESE of Section 23, 4N-67W-Weld County, CO)

      4. Wolfson 26-1 (NENE of Section 26, 4N-67W-Weld County, CO)

      5. Wolfson 26-2 (NWNE of Section 26, 4N-67W-Weld County, CO)

      6. Wolfson 26-10 (NWSE of Section 26, 4N-67W-Weld County, CO)

      7. Wolfson 26-16 (SESE of Section 26, 4N-67W-Weld County, CO)

      8. Wolfson 26-6 (SENW of Section 26, 4N-67W-Weld County, CO)


                                    EXHIBIT 2
                                       TO
                     ASSIGNMENT, BILL OF SALE AND CONVEYANCE
                           (Operations and Leaseholds)

Bowen 25-10

Date:        September 5, 1984
Recorded:    Book 1044 under Rec. 1981056
Lessor:      Ralph L. Bowen & Josephine L. Bowen
Lessee:      Mission Oil Corporation
Description: Township 4 North, Range 67 West
Section 25:  NW1/4SE1/4 only

Date:        September 5, 1984
Recorded:    Book 1044 under Rec. 1981055
Lessor:      Donald W. Bowen & Beverly A. Bowen
Lessee:      Mission Oil Corporation
Description: Township 4 North, Range 67 West
Section 25:  NW1/4SE1/4 only

                                       1

<PAGE>

Date:        September 5, 1984
Recorded:    Book 1044 under Rec. 1981056
Lessor:      Betty J. L. Bowen
Lessee:      Mission Oil Corporation
Description: Township 4 North, Range 67 West
Section 25:  NW1/4SE1/4 only

Wolfson 23-15 and 16

Date:        April 7, 1970
Recorded:    Book 628 under Rec. No. 1549946
Lessor:      Helen Marie Purse
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 23:  S1/2SE1/4 except 2 railroad strips

Date:        April 7, 1970
Recorded:    Book 633 under Rec. No. 1554837
Lessor:      Albert Wolfson & Alvin J. Johnson, dba Scottsdale Ranch
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 23:  S1/2SE1/4 except 2 railroad strips

Date:        October 20, 1981
Recorded:    Book 954 under Rec. No. 1876285
Lessor:      Marjorie H. Williams, P.R. of Est. of M. E. Hagen, deceased
Lessee:      Aeon Energy Co.
Description: Township 4 North, Range 67 West, 6th P.M.
Section 23:  S1/2SE1/4 except 2 railroad strips

Date:        April 1, 19921
Recorded:    Book 1299 under Rec. No. 2250760
Lessor:      Union Pacific Resources Company
Lessee:      Eddy Oil Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 23:  UPRR ROW strip in S1/2SE1/4

Date:        June 1, 19921
Recorded:    Book 1312 under Rec. No. 2264693
Lessor:      Amoco Production Company
Lessee:      Eddy Oil Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 23:  Abandoned UPRR ROW strip in S1/2SE1/4

                                       2

<PAGE>

Wolfson 26-1

Date:        April 7, 1970
Recorded:    Book 628 under Rec. No. 1549946
Lessor:      Helen Marie Purse
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NE1/4NE1/4 only

Date:        April 7, 1970
Recorded:    Book 633 under Rec. No. 1554837
Lessor:      Albert Wolfson & Alvin J. Johnson, dba Scottsdale Ranch
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NE1/4NE1/4 only

Date:        October 20, 1981
Recorded:    Book 954 under Rec. No. 1876285
Lessor:      Marjorie H. Williams, P.R. of the Estate of M. E. Hagen, deceased
Lessee:      Aeon Energy Co.
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NE1/4NE1/4 only


Wolfson 26-2

Date:        April 7, 1970
Recorded:    Book 628 under Rec. No. 1549946
Lessor:      Helen Marie Purse
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4NE1/4 only

Date:        April 7, 1970
Recorded:    Book 633 under Rec. No. 1554837
Lessor:      Albert Wolfson & Alvin J. Johnson, dba Scottsdale Ranch
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4NE1/4 only

Date:        October 20, 1981
Recorded:    Book 954 under Rec. No. 1876285
Lessor:      Marjorie H. Williams, P.R. of Est. of M. E. Hagen, deceased
Lessee:      Aeon Energy Co.
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4NE1/4 only

                                       3

<PAGE>

Date:        February 12, 1991
Recorded:    Book 1290 under Rec. No. 2241811
Lessor:      Union Pacific Resources Company
Lessee:      Eddy Oil Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  UPRR ROW strip in NW1/4NE1/4 only

Date:        October 1, 1990
Recorded:    Book 1291 under Rec. No. 2242790
Lessor:      Amoco Production Company
Lessee:      Eddy Oil Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  Abandoned UPRR ROW strip in NW1/4NE1/4 only


Wolfson 26-6

Date:        April 7, 1970
Recorded:    Book 628 under Rec. No. 1549946
Lessor:      Helen Marie Purse
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  SE1/4NW1/4  only

Date:        April 7, 1970
Recorded:    Book 633 under Rec. No. 1554837
Lessor:      Albert Wolfson & Alvin J. Johnson, dba Scottsdale Ranch
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  SE1/4NW1/4 only

Date:        October 20, 1981
Recorded:    Book 954 under Rec. No. 1876285
Lessor:      Marjorie H. Williams, P.R. of Est. of M. E. Hagen, deceased
Lessee:      Aeon Energy Co.
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  SE1/4NW1/4  only

Date:        September 11, 1991
Recorded:    Book 1323 under Rec. No. 2275064
Lessor:      Union Pacific Resources Company
Lessee:      Eddy Oil Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26: UPRR ROW strip in SE1/4NW1/4 only

                                       4

<PAGE>

Wolfson 26-10

Date:        April 7, 1970
Recorded:    Book 628 under Rec. No. 1549946
Lessor:      Helen Marie Purse
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4SE1/4 only

Date:        April 7, 1970
Recorded:    Book 633 under Rec. No. 1554837
Lessor:      Albert Wolfson & Alvin J. Johnson, dba Scottsdale Ranch
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4SE1/4 only

Date:        October 26, 1981
Recorded:    Book 954 under Rec. No. 1876288
Lessor:      Paul M. Andrews
Lessee:      Aeon Energy Co.
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4SE1/4 only


Date:        November 5, 1981
Recorded:    Book 954 under Rec. No. 1876289
Lessor:      Harry M. & Dora F. Andrews
Lessee:      Aeon Energy Co.
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4SE1/4 only

Date:        November 5, 1981
Recorded:    Book 954 under Rec. No. 1876290
Lessor:      Ethel V. & Herman H. Rediess
Lessee:      Aeon Energy Co.
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4SE1/4 only

Date:        October 1, 1990
Recorded:    Book 1292 under Rec. No. 2243412
Lessor:      Amoco Production Company
Lessee:      Eddy Oil Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  NW1/4SE1/4 only

                                       5

<PAGE>

Date:        September 6, 1989
Recorded:    Book 1243 under Rec. No. 2191647
Lessor:      Weld County, Colorado
Lessee:      Eddy Oil Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26: NW1/4SE1/4 only


Wolfson 26-16

Date:        April 7, 1970
Recorded:    June 25, 1970 in Book 628 at Reception No. 1549946.
Lessor:      Helen Marie Purse, a widow
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  SE1/4SE1/4

Date:        April 7, 1970
Recorded:    September 18, 1970 in Book 633 at Reception No. 1554837.
Lessors:     Albert Wolfson and Alvin J. Johnson, d/b/a Scottsdale Ranch
Lessee:      T.S. Pace
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  SE1/4SE1/4


Date:        October 26, 1981.
Recorded:    December 7, 1981 in Book 954 at Reception No. 1876288.
Lessors:     Paul M. Andrews, a single man
Lessee:      Aeon Energy Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  SE1/4SE1/4

Date:        March 21, 1991
Recorded:    December 7, 1981 in Book 954 at Reception No. 1876289.
Lessors:     Harry M. Andrews and Dora F. Andrews, husband and wife
Lessee:      Aeon Energy Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  SE1/4SE1/4

Date:        November 5, 1981.
Recorded:    December 7, 1981 in Book 954 at Reception No. 1876290.
Lessors:     Ethel V. Rediess and Herman H. Rediess, wife and husband
Lessee:      Aeon Energy Company
Description: Township 4 North, Range 67 West, 6th P.M.
Section 26:  SE1/4SE1/4

                                       6

<PAGE>

                                    EXHIBIT 3
                                       TO

                     ASSIGNMENT, BILL OF SALE AND CONVEYANCE
                           (Operations and Leaseholds)


     The following wells are excluded from this transaction. Each is a currently
existing  Rule 318A or 318A(e)  well in which EOC is a WI owner.  All  locations
below are surface locations taken from the COGCC website.  All wells are located
in Township 4 North, Range 67 West of the 6th P.M., Weld County, Colorado.



      Boos 20-25       SWSE  Section 25 

      Farmer 31-25    NWNW  Section 25 

      Platte 23-26    NESW  Section 26 

      Platte 27-35    NWNE  Section 35 

      Gray 26-19       NWNW  Section 26 

                                       

<PAGE>



                                  EXHIBIT 10.9



<PAGE>

Chesapeake Energy

 January 11, 2011

 Mr. Edward Holloway
 Synergy Resources Corporation
 20203 Highway 60
 Platteville, CO. 80651

 Re:  Assignment of Oil and Gas Leases
      Weld and Morgan Counties, Colorado and Laramie County, Wyoming

 Dear Mr. Holloway:

This letter  ("Agreement")  shall  memorialize  the  agreement  between  Synergy
Resources Corporation (hereinafter referred to as ("Synergy"),  as Assignor, and
Chesapeake Exploration, L.L.C. ("Chesapeake"), as Assignee. Subject to the terms
and conditions  ,contained herein,  Synergy agrees to sell and Chesapeake agrees
to buy all of Synergy' right, title and interest in and to those certain oil and
gas leases  covering  lands n Weld and Morgan  Counties,  Colorado  and  Laramie
County,  Wyoming, more particularly described on Exhibit "A" attached hereto and
made a part hereof (hereinafter collectively referred to as the "Leases"), which
Leases cover approximately  2,570.17543 net mineral acres of land, more or less,
such lands more particularly described in the Leases (hereinafter referred to as
the "Subject Lands").

This letter  agreement shall evidence the mutual  agreement  between Synergy and
Chesapeake  whereby  Synergy  shall sell,  assign and convey to  Chesapeake  the
Leases,
 subject to the terms, provisions and conditions hereinafter contained:

     1.   Subject to a review of Synergy's title and  Chesapeake's  satisfaction
          that Synergy owns  Marketable  Title,  as defined below, in and to the
          Leases,  Chesapeake  agrees to purchase all of Synergy's right,  title
          and interest in and to the Leases. Upon Closing,  Chesapeake shall pay
          Synergy $5,654,438.59 (hereinafter referred to as the "Purchase Price"
          and which sum is calculated  by  multiplying  $2,200.00  times the net
          mineral acres covered by the interest in the Leases to be sold),  such
          Purchase  Price  to be  adjusted  for  title  defects  for  all  acres
          delivered with Marketable Title.

     2.   Chesapeake  agrees,   contemporaneous   with  the  execution  of  this
          agreement, to wire transfer to Synergy the total sum of $565,438.59 as
          earnest money (hereinafter  referred to as the ("Earnest Money") to be
          applied to the Purchase  Price.  The Earnest Money shall be refundable
          in the event that Synergy  violates the terms of this  Agreement or in

<PAGE>

          the event Chesapeake or Synergy fails to close this  transaction.  If,
          at  Closing  the  Earnest  Money  exceeds  the  Purchase  Price,   the
          difference shall be refunded to Chesapeake. The wire transfer shall be
          made as follows:

                 Wells Fargo Bank N.A.
                 5801 W. 11th. Street, Suite 202
                 Greeley, CO 80634
                 ABA 121000248
                 Credit Account: 1226619979
                 Credit Account Name: Synergy Resources Corporation
                                      20202 Highway 60
                                      Platteville, CO 89651
                 EIN: 20-2835920

     3.   Synergy represents to Chesapeake the following:

          (a)  The  Assignment  covers all of  Synergy's  interest in and to the
               Leases (which Synergy warrants,  by through or under Synergy, but
               not  otherwise,  to be a  100%  interest  of  the  net  acres  as
               identified on Exhibit A).

          (b)  There are no third party  consents or  approvals  necessary to be
               obtained prior to Synergy  executing this  Agreement.  Except for
               necessary  consents or approvals  contained in the Leases,  there
               are no third party consents or approvals necessary to be obtained
               prior  to  Synergy's  closing  of  the  transaction  contemplated
               herein.

          (c)  The Leases are not subject to any claims, liens,  investigations,
               or litigation  concerning  Synergy's  title thereto or concerning
               any  environmental  matter  known or  should  have  known  with a
               reasonable investigation by Synergy.

          (d)  There are no contracts, conveyances,  assignments,  agreements or
               encumbrances  pertaining to the Leases known or should have known
               with a reasonable  investigation by Synergy that would materially
               and adversely affect full rights of ownership or operation of the
               leasehold estate to be assigned by Synergy.

          (e)  It is the  intent  of  Synergy  to convey  to  Chesapeake  all of
               Synergy's  right,  title, and interest in and to the Leases as to
               all depths covered thereby.

     4.   Upon execution of this Agreement the following shall occur:

          (a)  Chesapeake  will begin a due  diligence  and title  review of the
               Leases and the Subject Lands covered by the Leases.

<PAGE>


          (b)  Synergy  shall  make  available  and  give  complete   access  to
               Chesapeake  all  records  relating  to the Leases and the Subject
               Lands covered thereby in its possession or control  including but
               not  limited to proof of payment  and  ownership  of the  Leases,
               contracts, agreements, mineral files, well files, lease and title
               runsheets and data,  regulatory work, and title opinions.  All of
               such information will be deemed  confidential and subject to item
               (d) below.

          (c)  Only for so long as this  Agreement  remains in  effect,  Synergy
               shall not  contract to sell  and/or  assign to any third party or
               otherwise burden the Leases and/or lands covered by the Leases or
               any interest  other than those  existing of record as of the date
               of this Agreement.

          (d)  Both parties shall maintain the  confidentiality of the existence
               of this  Agreement,  the  terms of the  transaction  contemplated
               hereby   and  shall   disclose   it  only  to  those   employees,
               representatives  and attorneys who need to know such  information
               in order to directly assist in consummating the transaction.

     5.   "Marketable  Title" shall  constitute  title to the Leases and mineral
          estate  underlying  the Leases which is free of any  existing  defect,
          lawsuit,  claim,  demand,  mortgage,  lien, or encumbrance  that would
          result in Chesapeake  receiving less than the net revenue  interest as
          depicted  in Exhibit  A, and the full and  complete  enjoyment  of the
          leasehold.

            The Leases will be delivered subject the royalties provided for in
            the leases, together with any other royalty and overriding royalty
            interests burdening the Leases as of the date of this Agreement. It
            is Chesapeake's intent to acquire all or such portions of the Leases
            to which Synergy owns Marketable Title. However until Closing,
            Chesapeake shall have the right to decline to purchase any Leases
            which Chesapeake determines in its good faith opinion are subject to
            a title defect or defects rendering title less than Marketable. In
            the event Chesapeake discovers a title defect or defects, it shall
            give written notice thereof to Synergy stating the particulars of
            such defect and at Chesapeake's option, the affected lands shall no
            longer be subject to this Agreement ("Excluded leases"). Thereafter,
            the parties shall endeavor to reach mutual agreement as to how to
            cure the title defect(s) to Chesapeake's reasonable satisfaction and
            if Synergy cures such to Chesapeake's reasonable satisfaction prior
            to Closing, such Excluded Leases shall then be part of this
            Agreement and assigned at Closing. If such Excluded eases is not
            cured by Closing, an agreement shall be reached to cure the Excluded
            Leases and such Excluded Leases will be the subject of a separate
            purchase agreement at the purchase price provided for herein. In the
            event that more than twenty percent (20%) of net mineral acres
            recited in this Agreement is determined by Chesapeake to not have
            Marketable Title, either party hereto shall have the right to
            terminate this Agreement without liability or obligation to the
            other party. Notwithstanding the foregoing, if less than twenty
            percent (20%) is determined to not have Marketable Title both
            parties shall be obligated to close on the balance of the Leases
            determined to have Marketable title. Any matter that would otherwise
            constitute a title defect for which Chesapeake has failed to deliver
            notice prior to closing of the transaction contemplated herein will
            be deemed irrevocably waived (other than failure to obtain consent
            to assign any Leases).

<PAGE>

     6.   Assignment  of the  Leases  will  be made  on the  form of  assignment
          attached hereto as Exhibit "B" ("Assignment").

     7.   From and after the effective date of this Agreement, Synergy will seek
          to secure any consents and/or waivers from lessors under the Leases as
          may be necessary to deliver the  Assignment.  In the event all of such
          consents  and/or  waivers  have not been  obtained  as of Closing  (as
          defined  below),  Chesapeake  will tender that portion of the Purchase
          Price attributable to the net mineral acres for which such consents or
          waivers are  pending to a mutually  acceptable  escrow  agent under an
          escrow  agreement  promulgated by such agent.  Likewise,  Synergy will
          tender the  Assignment of the affected  Lease or Leases to such escrow
          agent.  The escrow  agent will be  instructed  to hold the  applicable
          funds and Assignment until receipt of joint written  instructions from
          both Synergy and  Chesapeake  authorizing  the release of same. In the
          event the  necessary  consent  and/or  waivers have not been  obtained
          within sixty (60) days of closing, Chesapeake may terminate the escrow
          agreement and this Agreement as to the affected lands. In the event of
          such termination, the escrow agent will return the escrowed Assignment
          to Chesapeake,  and will deliver the escrowed funds to Chesapeake, and
          neither  party  will have any  further  obligation  to the other  with
          respect  to  such  funds  or the  lease(s)  covered  by  the  escrowed
          Assignment.

     8.   Closing  ("Closing")  shall  occur at the earlier of March 31, 2011 or
          within  five  business  days after  receipt by  Chesapeake  of written
          confirmation  from Chesapeake that its title due diligence is complete
          and all representations of Synergy are true and correct as of the date
          of Closing. At Closing, the following shall occur simultaneously:

          (a)  Synergy shall deliver the Leases  (excluding any Excluded Leases)
               to  Chesapeake   along  with  a  fully   executed  and  notarized
               Assignment of the Leases.

          (b)  Chesapeake  shall pay to Synergy by wire transfer in  immediately
               available funds the Purchase Price covered by the assigned Leases
               adjusted for any Excluded Leases and less the Earnest Money.

          (c)  Chesapeake shall file the Assignment in the real property records
               of Weld and Morgan County, Colorado and Laramie County, Wyoming.

     9.   Chesapeake  and Synergy agree that a signed fax copy of this Agreement
          shall be binding.

     10.  This Agreement  constitutes the entire  agreement  between the parties
          and  supersedes  any prior  agreements or  negotiations  regarding the
          subject matter herein, whether oral or written.

<PAGE>

     11.  Chesapeake is not  responsible  nor shall incur any third party broker
          or other fees associated with this  transaction  which may be incurred
          by Synergy.

     12.  This  Agreement may not be amended  except by an instrument in writing
          signed by the parties hereto.

     13.  All terms and provisions of this  instrument  and attached  assignment
          shall inure to the benefit of and shall be binding on the  successors,
          heirs, executors, administrators,  representatives and assigns of each
          of the parties to this Agreement.

     If the foregoing  accurately reflects our agreement,  please so indicate by
     executing  this  Agreement in the space  provided  below and return a fully
     executed copy by fax to the undersigned with the original to follow at your
     earliest convenience.

      Very truly yours,

      /s/ Steve McMillen
      Steve McMillen

     
      Attachment


      By /s/ Henry J. Hood
         ----------------------------------------
           Henry J. Hood, Senior Vice President -
           Land & Legal and General Counsel
           Chesapeake Operating, Inc., General Partner

      Agreed to and effective this 13th day of January, 2011.

      Synergy Resources Corporation:


      By /s/ Edward Holloway
         -----------------------------------------
           Edward Holloway, CEO & President

<PAGE>


                                   EXHIBIT "A"

     Attached  to and  made a part of  that  certain  Assignment  of Oil and Gas
Leases  from  Synergy  Resources   Corporation,   as  Assignor,   to  Chesapeake
Exploration,  L.L.C., as Assignee, dated the 10th day of January, 2011, covering
lands located described below.

<TABLE>
<S>                        <C>           <C>     <C>        <C>         <C>           <C>       <C>   <C>    <C>    <C>    <C>  

------------------------------------------------------------------------------------------------------------------------------------
                                      Lease     County.                               Gross    Net          Annual        Purchase
      Lessor             Lessee       Date      State      Entry     Description      Acres   Acres   Term  Rental  NRI     Info
------------------------------------------------------------------------------------------------------------------------------------
State of Colorado   Synergy          11/20/08  Weld, CO      9819.8 All of Section    640.00  640.00   5 Yr  960   87.50%  
State Board of      Resources Corp                                  36-8N-65W        
Land Commissioners
------------------------------------------------------------------------------------------------------------------------------------
State of Colorado   Synergy          11/20/08   Weld,C0      9820.8 W/2 of Section    320.00  320.00   5 Yr  480   87.50%  
State Board of      Resources Corp                                  36-8N-67W         
Land Commissioners
------------------------------------------------------------------------------------------------------------------------------------
US Dept of          Synergy          02/12/09  Morgan,     C0073441 SE/4 NW/4         120.00  120.00  10 Yr  180   87.50%
Interior, Bureau    Resources Corp                 CO               (40.0  nma)         
of Land Management                                                  of  Section  
                                                                    1-4N-60W; 
                                                                    SW/4    NW/4
                                                                    (40.0 nma)of
                                                                    Section 2-
                                                                    4N-60W  & SE/4
                                                                    NE/4 (40.0 nma)
                                                                    of Section
                                                                    3-4N-60W
------------------------------------------------------------------------------------------------------------------------------------
US Dept of          Synergy          02/12/09  Weld, CO    COC73442 N/2 SE/4 of       80.00   80.00  10 Yr  120   87.50%
Interior, Bureau    Resources Corp                                  Section              
of Land Management                                                  4-6N-62W               

------------------------------------------------------------------------------------------------------------------------------------
US Dept of          Synergy          02/12/09  Weld, CO    COC73444 SE/4 of Section   160.00  160.00  10 Yr  240   87.50%  
Interior, Bureau    Resources Corp                                  2-7N-67W          
of Land Management
------------------------------------------------------------------------------------------------------------------------------------
US Dept of          Synergy          02/12/09  Weld, CO    C0073443 NW/4 NE/4 &       120.00  120.00  10 Yr  180   87.50%  
Interior, Bureau    Resources Corp                                  N/2 NW/4          
of Land Management                                                  of Section 
                                                                    28-7N-63W   
------------------------------------------------------------------------------------------------------------------------------------
Longs Peak Dairy,   Synergy          02/16/10  Weld, CO     3677222 NE/4; N/2         520.00  378.00   3 Yr  n/a   82.00% 2 year
LLC                 Resources Corp                                  SE/4; N/2                                             option @
                                                                    SW/4; SE/4                                            $50/acre,
                                                                    SW/4; NW/4                                            81% NRI 
                                                                    of Section                                            
                                                                    18-8N-65W                            
------------------------------------------------------------------------------------------------------------------------------------
Longs Peak Dairy,   Synergy          02/16/10  Weld, CO     3677223 NE/4 of Section   160.00  40.00    3 Yr  n/a   82.00% 2 year 
LLC                 Resources Corp                                  20-8N-65W                                             option @
                                                                                                                          $50/acre,
                                                                                                                          81% NRI
------------------------------------------------------------------------------------------------------------------------------------
Nancy Morris        Synergy          02/10/10  Weld, CO     3679379 W/2 & SE/4 of     478.00  119.50   3 Yr  n/a   83.33% 2 year
                    Resources Corp                                  Section                                               option @
                                                                    34-9N-65W                                             $100/acre
                                                                                                  
------------------------------------------------------------------------------------------------------------------------------------
Marlene D. Harding  Synergy          02/25/10  Weld, CO     3679380 W/2 & SE/4 of     478.00  119.50   3 Yr  n/a   83.33% 2 year 
                    Resources Corp                                  Section                                               option @
                                                                    34-9N-65W                                             $100/acre
------------------------------------------------------------------------------------------------------------------------------------
Susan Marie         Synergy          03/29/10  Weld, CO     3689440 NW/4 NW/4;        240.00  80.00    3 Yr  n/a   83.00% 2 year 
Wheeler Trust       Resources Corp                                  S/2 NE/4;                                             option @
dated February 25,                                                  SE/4 NW/4;                                            $300/acre
2010                                                                N/2 SE/4                                 
                                                                    of Section 
                                                                    28-8N-67W
------------------------------------------------------------------------------------------------------------------------------------
Sally C. Hays       Synergy          03/29/10  Weld, CO      689441 NW/4 NW/4;        240.00  80.00                83.00% 2 year 
                    Resources Corp                                  S/2 NE/4;                                             option @
                                                                    SE/4 NW/4;                                            $300/acre
                                                                    N/2 SE/4                                                
                                                                    of Section 
                                                                    28-8N-67W
------------------------------------------------------------------------------------------------------------------------------------
DSK Ranch,, LLC      Synergy         06/25/10  Laramie,  Bk 2172 Pg N/2 NW/4 of       55.48   55.48    3 Yr  n/a   82.00% 2 year
                     Resources Corp                 WY              Section                                               option @
                                                                    26-14N-64W                                            $175/acre
------------------------------------------------------------------------------------------------------------------------------------
Jeanne W. Ragsdale  Synergy          07/23/10  Weld, CO     3712608 All that part     77.00   24.06    3 Yr  n/a   82.00% 2 year 
                    Resources Corp                                  of SW/4                                               option @
                                                                    lying South of                                        $250/acre
                                                                    Larimer and 
                                                                    Weld
                                                                    Irrigation 
                                                                    Co Ditch
                                                                    of Section 
                                                                    2-7N-65W
------------------------------------------------------------------------------------------------------------------------------------
Janet K. Slater     Synergy          07/23/10  Weld, CO     3712607 All that part     77.00   24.06   3 Yr  n/a    85.00% 2 year
                    Resources Corp                                  of SW/4                                               option @
                                                                    lying South of                                        $250/acre
                                                                    Larimer and 
                                                                    Weld
                                                                    Irrigation 
                                                                    Co Ditch
                                                                    of Section 
                                                                    2-7N-65W
------------------------------------------------------------------------------------------------------------------------------------
Richard A. Whitney  Synergy          10/11/10  Weld, CO             All that part     77.00   4.81    3 Yr  n/a    85.00% 2 year
                    Resources Corp                                  of SW/4                                               option @
                                                                    lying South of                                        $250/acre
                                                                    Larimer and 
                                                                    Weld
                                                                    Irrigation 
                                                                    Co Ditch
                                                                    of Section 
                                                                    2-7N-65W
------------------------------------------------------------------------------------------------------------------------------------
Linda J. McGarr     Synergy          08/04/10  Weld, CO     3712610 All that part     77.00   4.81     3 Yr  n/a   85.00% 2 year
                    Resources Corp                                  of SW/4                                               option @
                                                                    lying South of                                        $250/acre
                                                                    Larimer and 
                                                                    Weld
                                                                    Irrigation 
                                                                    Co Ditch
                                                                    of Section 
                                                                    2-7N-65W
------------------------------------------------------------------------------------------------------------------------------------
Charles Rollin      Synergy          07/29/10  Weld, CO     3712611 N/2 of Section    320.00  8.89     3 Yr  n/a   85.00% 2 year 
                                                                                                                          option @
Powell              Resources Corp                                  26-10N-59W                                            $100/acre
------------------------------------------------------------------------------------------------------------------------------------
Charles Rollin      Synergy          07/29/10  Weld, CO     3712609 W/2 E/2 of        160.00  8.89     3 Yr  n/a   85.00% 2 year
Powell              Resources Corp                                  Section                                               option @
                                                                    8-7N-63W                                              $100/acre
------------------------------------------------------------------------------------------------------------------------------------
Charles Rollin      Synergy          07/29/10  Weld, CO     3712612 W/2 of Section    320.00  4.44     3 Yr  n/a   85.00% 2 year 
Powell              Resources Corp                                  18-9N-67W                                             option @
                                                                                                                          $100/acre
------------------------------------------------------------------------------------------------------------------------------------
Cherie Jeanne       Synergy          12/28/10  Weld, CO             W/2 of Section    320.00  4.44     3 Yr  n/a   85.00% 2 year 
Spence              Resources Corp                                  18-9N-67W                                             option @
                                                                                                                          $100/acre
------------------------------------------------------------------------------------------------------------------------------------
Charla Jeanne       Synergy          12/28/10  Weld, CO             N/2 of Section    320.00  8.89     3 Yr  n/a   85.00% 2 year 
Spence              Resources Corp                                  26-10N-59W                                            option @
                                                                                                                          $100/acre
------------------------------------------------------------------------------------------------------------------------------------
Cherie Jeanne       Synergy          12/28/10  Weld, CO             W/2 E/2 of        160.00  8.89     3 Yr  n/a   85.00% 2 year
Spence              Resources Corp                                  Section                                               option @
                                                                    8-7N-63W                                              $100/acre
------------------------------------------------------------------------------------------------------------------------------------
Charles J. Wheeler  Synergy          12/20/10  Weld, CO             W/2 E/2 of        160.00  8.89     3 Yr  n/a   85.00% 2 year 
                    Resources Corp                                  Section                                               option @
                                                                    8-7N-63W                                              $100/acre
------------------------------------------------------------------------------------------------------------------------------------
Charles J. Wheeler  Synergy          12/20/10  Weld, CO             N/2 of Section    320.00  8.89     3 Yr  n/a   85.00% 2 year 
                                                                                                                          option @
                    Resources Corp                                  26-10N-59W                                            $100/acre
------------------------------------------------------------------------------------------------------------------------------------
Charles J. Wheeler  Synergy          12/20/10  Weld, CO             W/2 of Section    320.00  4.44     3 Yr  n/a   85.00% 2 year 
                    Resources Corp                                  18-9N-67W                                             option @
                                                                                                                          $100/acre
------------------------------------------------------------------------------------------------------------------------------------
John W. Wheeler     Synergy          12/20/10  Weld, CO             W/2 of Section    320.00  4.44     3 Yr  n/a   85.00% 2 year 
                    Resources Corp                                  18-9N-67W                                             option @
                                                                                                                          $100/acre
------------------------------------------------------------------------------------------------------------------------------------
John W. Wheeler     Synergy          12/20/10  Weld, CO             W/2 of Section    160.00  8.89     3 Yr  n/a   85.00% 2 year 
                                                                                                                          option @
                    Resources Corp                                  8-7N-63W                                              $100/acre
------------------------------------------------------------------------------------------------------------------------------------
John W. Wheeler     Synergy          12/20/10  Weld, CO             N/2 of Section    320.00  8.89     3 Yr  n/a   85.00% 2 year 
                    Resources Corp                                  26-10N-59W                                            option @
                                                                                                                          $100/acre
------------------------------------------------------------------------------------------------------------------------------------
Great Northern      Synergy          08/18/10  Weld, CO             N/2 of Section    320.00  13.32    3 Yr  n/a   85.00% 2 year 
Properties, LLC     Resources Corp                                  26-10N-59W                                            option @
                                                                                                                          $100/acre
------------------------------------------------------------------------------------------------------------------------------------
Great Northern      Synergy          08/18/10  Weld, CO             W/2 of Section    320.00  26.64    3 Yr  n/a   85.00% 2 year 
Properties, LLC     Resources Corp                                  18-9N-67W                                             option @
                                                                                                                          $100/acre
------------------------------------------------------------------------------------------------------------------------------------
Great Northern      Synergy          08/18/10  Weld, CO             W/2 E/2 of        160.00  26.64    3 Yr  n/a   85.00% 2 year 
Properties, LLC     Resources Corp                                  Section                                               option @
                                                                    8-7N-63W                                              $100/acre
------------------------------------------------------------------------------------------------------------------------------------
Sharon Lynn         Synergy          01/07/10  Weld, CO             W/2 E/2 of        160.00  8.89     3 Yr  n/a   85.00% 2 year
Campbell            Resources Corp                                  Section                                               option @
                                                                    8-7N-63W                                              $100/acre
------------------------------------------------------------------------------------------------------------------------------------
Sharon Lynn         Synergy          01/07/10  Weld, CO             W/2 of Section    320.00  4.44     3 Yr  n/a   85.00% 2 year 
Campbell            Resources Corp                                  18-9N-67W                                             option @
                                                                                                                          $100/acre
------------------------------------------------------------------------------------------------------------------------------------
Sharon Lynn         Synergy          01/07/10  Weld, CO             N/2 of Section    320.00  8.89     3 Yr  n/a   85.00% 2 year 
Campbell            Resources Corp                                  26-10N-59W                                            option @
                                                                                                                          $100/acre
------------------------------------------------------------------------------------------------------------------------------------
Marylin Zelle       Synergy                    Weld, CO             W/2 E/2 of        160.00  8.89     3 Yr  n/a   85.00% 2 year 
                    Resources Corp                                  Section                                               option @
                                                                    8-7N-63W                                              $100/acre
------------------------------------------------------------------------------------------------------------------------------------
Marylin Zelle       Synergy                    Weld, CO             W/2 of Section    320.00  4.44     3 Yr  n/a   85.00% 2 year 
                    Resources Corp                                  18-9N-67W                                             option @
                                                                                                                          $100/acre
------------------------------------------------------------------------------------------------------------------------------------
Marylin Zelle       Synergy                    Weld, CO             N/2 of Section    320.00  8.89     3 Yr  n/a   85.00% 2 year 
                    Resources Corp                                  26-10N-59W                                            option @
                                                                                                                          $100/acre
------------------------------------------------------------------------------------------------------------------------------------
                                                                            Total:  9,519.48  2,570.16
</TABLE>


     It is Assignors intent to convey to Assignee all of Assignor's right, title
and interest in and to the above described lands,  regardless of the omission of
any particular  lease or leases,  error in description,  incorrect or misspelled
names or incorrect recording references.

                               END OF EXHIBIT "A"

<PAGE>




                                  EXHIBIT 10.10



<PAGE>


                                      LEASE

     THIS LEASE is effective  as of July 1, 2010  between HS Land & Cattle,  LLC
(the "Lessor") and Synergy Resources Corporation (the "Lessee").

     In  consideration  of the  payment of the rent and the  performance  of the
covenants and  agreements by the Lessee set forth below,  the Lessor does hereby
lease to the Lessee the following described property:

                        20203 Highway 60, Platteville, CO

     TO HAVE  AND TO HOLD  the same  with  all the  appurtenances  unto the said
Lessee from twelve  o'clock noon on the 1st day of July,  2010, and until twelve
o'clock noon on the 1st day of July, 2011, at and for a rental for the full term
of $120,000,  payable  $10,000 each month on the 1st day of each calendar  month
during the term of this lease at the office of the Lessor.

     The Lessee agrees:

          1.   To pay the rent for the premises above-described.
          2.   To allow the Lessor to enter upon the premises at any  reasonable
               hour.
          3.   To pay its prorata share of taxes and utilities, as determined by
               Lessor, with respect to the building located on said premises.
          4.   Not to sub-lease said premises without consent of Lessor.
     The Lessor agrees:
          5.   To keep all  sidewalks on and around the premises  free and clear
               of ice and snow,  and to keep the entire  exterior  premises free
               form all  litter,  dirt,
  debris  and  obstructions;  to keep the
               premises  in a clean and  sanitary  condition  as required by the
               ordinances  of the  city and  county  in which  the  property  is
               situate
          6.   To keep the  improvements  upon  the  premises,  including  sewer
               connections,  plumbing,  wiring and glass in good repair,  all at
               Lessor's expense.
     IT IS EXPRESSLY UNDERSTOOD AND AGREED BETWEEN LESSOR AND LESSEE AS FOLLOWS:
          7.   No assent,  express or implied,  to any breach of any one or more
               of the agreements  hereof shall be deemed or taken to be a waiver
               of any  succeeding  or other  breach.  Any payment by Lessee,  or
               acceptance  by  Lessor,  of a lesser  amount  than  due  shall be
               treated only as a payment on account.
          8.   If, after the  expiration of this lease,  the Lessee shall remain
               in  possession of the premises and continue to pay rent without a
               written agreement as to such possession,  then such tenancy shall
               be regarded as a  month-to-month  tenancy,  at a monthly  rental,
               payable in  advance,  equivalent  to the last  month's  rent paid
               under this lease,  and subject to all the terms and conditions of
               this lease.
     THIS LEASE supersedes all prior agreements  between the parties relating to
     the subject matter of this lease and shall be binding on the parties, their
     personal representatives, successors and assigns.


      HS LAND & CATTLE, LLC                     SYNERGY RESOURCES CORPORATION

      By /s/ William E. Scaff                   By /s/ Ed Holloway
         ------------------------------            ---------------------------
         William E. Scaff, Jr., Manager            Ed Holloway, Chief
                                                   Executive Officer

<PAGE>



                                   EXHIBIT 31

<PAGE>

                                 CERTIFICATIONS

I, Ed Holloway, certify that:

1. I have reviewed this annual report on Form 10-K/A of Synergy Resources
Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15 and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:

      a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information
 relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

      b) designed such internal control over financial reporting, or cause such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;

      c) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

      d) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and

5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of the internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):

      a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

      b) any fraud, whether or not material, that involves management or other
employees who have significant role in the registrant's internal control over
financial reporting.


June 2, 2011                          /s/ Ed Holloway                     
                                     ------------------------------------
                                     Ed Holloway,
                                     Principal Executive Officer



<PAGE>


                                 CERTIFICATIONS

I, Frank L. Jennings, certify that:

1. I have reviewed this annual report on Form 10-K/A of Synergy Resources
Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15 and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:

      a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

      b) designed such internal control over financial reporting, or cause such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;

      c) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

      d) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and

5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of the internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):

      a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

      b) any fraud, whether or not material, that involves management or other
employees who have significant role in the registrant's internal control over
financial reporting.


June 2, 2011                         /s/ Frank L. Jennings               
                                     ------------------------------------
                                     Frank L. Jennings,
                                     Principal Financial Officer



<PAGE>



                                   EXHIBIT 32



<PAGE>


     In connection with the Annual Report of Synergy Resources  Corporation (the
"Company")  on Form 10-K/A for the period  ending  August 31, 2010 as filed with
the  Securities  and  Exchange  Commission  (the  "Report"),  Ed  Holloway,  the
Company's  Principal  Executive and Frank L. Jennings,  the Company's  Principal
Financial  Officer,  certify,  pursuant to 18 U.S.C.  Section  1350,  as adopted
pursuant to Section 906 of the  Sarbanes-Oxley  Act of 2002, that to the best of
their knowledge:

     (1) The Report fully  complies  with the  requirements  of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

     (2)  The  information  contained  in the  Report  fairly  presents,  in all
material respects, the financial condition and results of the Company.


June 2, 2011                         By: /s/ Ed Holloway                      
                                        -------------------------------------
                                        Ed Holloway, Principal Executive Officer



June 2, 2011                         By: /s/ Frank L. Jennings            
                                        ---------------------------------
                                        Frank L. Jennings, Principal Financial 
                                        Officer

<PAGE>






                                   EXHIBIT 99



<PAGE>

                                                             FAX (303) 623-4258

621 SEVENTEENTH STREET SUITE 1550 DENVER, COLORADO 80293 TELEPHONE (303)623-9147

                                October 22, 2010



Synergy Resources Corporation
20203 Highway 60
Platteville, Colorado 80651

Gentlemen:

     At your request,  Ryder Scott Company,  L.P.  (Ryder Scott) has prepared an
estimate of the proved reserves,  future production,  and income attributable to
certain  leasehold  and  royalty  interests  of  Synergy  Resources  Corporation
(Synergy) as of August 31, 2010. The subject properties are located in the state
of  Colorado.  The  reserves  and  income  data  were  estimated  based  on  the
definitions  and  disclosure  guidelines  of the United  States  Securities  and
Exchange  Commission  (SEC) contained in Title 17, Code of Federal  Regulations,
Modernization of Oil and Gas Reporting,  Final Rule released January 14, 2009 in
the Federal  Register  (SEC  regulations).  Our third party study,  completed on
October 22, 2010 and  presented  herein,  was prepared for public  disclosure by
Synergy  in  filings  made  with  the  SEC in  accordance  with  the  disclosure
requirements set forth in the SEC regulations. The properties evaluated by Ryder
Scott represent 100 percent of the total net proved liquid hydrocarbon  reserves
and 100
 percent of the total net proved gas reserves of Synergy.

     The  estimated  reserves  and future net income  amounts  presented in this
report,  as  of  August  31,  2010,  are  related  to  hydrocarbon  prices.  The
hydrocarbon  prices  used in the  preparation  of this  report  are based on the
average prices during the 12-month period prior to the ending date of the period
covered in this report,  determined  as  unweighted  arithmetic  averages of the
prices  in effect  on the  first-day-of-the-month  for each  month  within  such
period, unless prices were defined by contractual  arrangements,  as required by
the SEC regulations. Actual future prices may vary significantly from the prices
required by SEC regulations;  therefore,  volumes of reserves actually recovered
and the amounts of income actually  received may differ  significantly  from the
estimated  quantities  presented in this  report.  The results of this study are
summarized below.

                                 SEC PARAMETERS
                     Estimated Net Reserves and Income Data
                   Certain Leasehold and Royalty Interests of
                          Synergy Resources Corporation
                              As of August 31, 2010
          -------------------------------------------------------------

                                                  Proved
                          ------------------------------------------------------
                                  Developed                             Total
                          ---------------------------
                           Producing    Non-Producing  Undeveloped      Proved
                          ------------  -------------  ------------  -----------
Net Remaining Reserves
  Oil/Condensate -            125,159        270,294       281,232       676,685
Barrels
  Gas - MCF                   887,290      1,461,737     2,132,024     4,481,051

<PAGE>

Income Data
  Future Gross Revenue    $12,323,383    $24,126,662   $28,220,857   $64,670,902
  Deductions                2,955,552      8,942,579    20,319,150    32,217,281
                          -----------    -----------   -----------   -----------
                                                        
  Future Net Income        $9,367,831    $15,184,083    $7,901,707   $32,453,621
(FNI)

  Discounted FNI @ 10%     $6,120,468     $8,704,767    $1,732,491   $16,557,726

     Liquid  hydrocarbons  are expressed in standard 42 gallon barrels.  All gas
volumes are reported on an "as sold" basis  expressed in thousands of cubic feet
(MCF) at the official  temperature  and pressure bases of the areas in which the
gas reserves are located.

     The estimates of reserves,  future  production and income  attributable  to
properties  in this report were  prepared  using the economic  software  package
PHDWin Petroleum  Economic  evaluation  Software,  a copyrighted  program of TRC
Consultants, L.C. Ryder Scott has found this program to be generally acceptable,
but notes that certain  summaries and  calculations may vary due to rounding and
may not exactly match the sum of the properties being  summarized.  Furthermore,
one line  economic  summaries may vary slightly from the more detailed cash flow
projections  of  the  same  properties,  also  due  to  rounding.  The  rounding
differences are not material.

     The future gross revenue is after the deduction of  production  taxes.  The
deductions  incorporate  the normal  direct  costs of  operating  the wells,  ad
valorem taxes,  recompletion  costs and development costs. The future net income
is  before  the  deduction  of  state  and  federal  income  taxes  and  general
administrative  overhead,  and has not been adjusted for outstanding  loans that
may exist nor does it include any adjustment  for cash on hand or  undistributed
income. Liquid hydrocarbon reserves account for approximately 69 percent and gas
reserves account for the remaining 31 percent of total future gross revenue from
proved reserves.

     The  discounted  future  net  income  shown  above was  calculated  using a
discount rate of 10 percent per annum compounded annually. Future net income was
discounted at four other  discount  rates which were also  compounded  annually.
These results are shown in summary form as follows.


                                      Discounted Future Net Income
                                         As of August 31, 2010
                                     -------------------------------
                Discount Rate                     Total
                   Percent                      Proved $
               ----------------               --------------

                      5                        $22,548,419
                      8                        $18,635,524
                     12                        $14,798,470
                     15                        $12,619,788


     The results shown above are presented for your  information  and should not
be construed as our estimate of fair market value.

Reserves Included in This Report

     The proved reserves  included herein conform to the definition as set forth
in the Securities and Exchange  Commission's  Regulations  Part 210.4-10 (a). An
abridged  version of the SEC  reserves  definitions  from  210.4-10(a)  entitled
"Petroleum Reserves Definitions" is included as an attachment to this report.

<PAGE>

     The various  reserve  status  categories  are defined under the  attachment
entitled  "Petroleum  Reserves   Definitions"  in  this  report.  The  developed
non-producing  reserves  included  herein consist of the Shut-In and Behind Pipe
categories.

     No attempt was made to quantify or  otherwise  account for any  accumulated
gas production imbalances that may exist. The gas volumes included herein do not
attribute gas consumed in operations as reserves.

     Reserves are those  estimated  remaining  quantities of petroleum  that are
anticipated  to be  economically  producible,  as of a given  date,  from  known
accumulations  under  defined  conditions.  All  reserve  estimates  involve  an
assessment of the uncertainty  relating the likelihood that the actual remaining
quantities  recovered  will be  greater  or less than the  estimated  quantities
determined as of the date the estimate is made. The uncertainty  depends chiefly
on the amount of reliable geologic and engineering data available at the time of
the  estimate  and the  interpretation  of these data.  The  relative  degree of
uncertainty  may be  conveyed  by  placing  reserves  into one of two  principal
classifications,  either proved or unproved.  Unproved reserves are less certain
to be  recovered  than proved  reserves,  and may be further  sub-classified  as
probable and possible reserves to denote progressively increasing uncertainty in
their  recoverability.  At Synergy's  request,  this report  addresses  only the
proved reserves attributable to the properties evaluated herein.

     Proved oil and gas reserves are those  quantities of oil and gas which,  by
analysis of geoscience and  engineering  data, can be estimated with  reasonable
certainty to be economically  producible  from a given date forward.  The proved
reserves  included  herein  were  estimated  using  deterministic   methods.  If
deterministic  methods are used,  the SEC has defined  reasonable  certainty for
proved  reserves as a "high degree of  confidence  that the  quantities  will be
recovered."

     Proved  reserve  estimates  will  generally be revised  only as  additional
geologic or engineering data become available or as economic  conditions change.
For  proved  reserves,  the  SEC  states  that  "as  changes  due  to  increased
availability  of  geoscience   (geological,   geophysical,   and   geochemical),
engineering, and economic data are made to the estimated ultimate recovery (EUR)
with time,  reasonably  certain  EUR is much more  likely to  increase or remain
constant  than to  decrease."  Moreover,  estimates  of proved  reserves  may be
revised as a result of future operations,  effects of regulation by governmental
agencies or  geopolitical  or economic  risks.  Therefore,  the proved  reserves
included in this report are estimates  only and should not be construed as being
exact quantities, and if recovered, the revenues therefrom, and the actual costs
related thereto, could be more or less than the estimated amounts.

     Synergy's  operations  may be  subject to  various  levels of  governmental
controls and  regulations.  These controls and regulations may include,  but may
not be limited to, matters relating to land tenure and leasing, the legal rights
to produce  hydrocarbons  including the granting,  extension or  termination  of
production  sharing  contracts,  the fiscal terms of various  production sharing
contracts,   drilling  and  production  practices,   environmental   protection,
marketing and pricing  policies,  royalties,  various taxes and levies including
income  tax and are  subject  to  change  from  time to time.  Such  changes  in
governmental  regulations  and  policies  may cause  volumes of proved  reserves
actually  recovered  and amounts of proved  income  actually  received to differ
significantly from the estimated quantities.

     The  estimates  of proved  reserves  presented  herein  were  based  upon a
detailed study of the properties in which Synergy owns an interest;  however, we
have not made any field  examination of the  properties.  No  consideration  was
given in this report to potential  environmental  liabilities that may exist nor
were any costs  included  for  potential  liabilities  to  restore  and clean up
damages, if any, caused by past operating practices.

<PAGE>

Estimates of Reserves

     The estimation of reserves involves two distinct determinations.  The first
determination results in the estimation of the quantities of recoverable oil and
gas and the second  determination  results in the estimation of the  uncertainty
associated  with those  estimated  quantities in accordance with the definitions
set  forth  by  the  Securities  and  Exchange  Commission's   Regulations  Part
210.4-10(a). The process of estimating the quantities of recoverable oil and gas
reserves relies on the use of certain generally accepted analytical  procedures.
These  analytical  procedures fall into three broad  categories or methods:  (1)
performance-based  methods; (2) volumetric-based methods; and (3) analogy. These
methods may be used singularly or in combination by the reserve evaluator in the
process of estimating the quantities of reserves. Reserve evaluators must select
the method or  combination  of methods which in their  professional  judgment is
most  appropriate  given the  nature  and  amount  of  reliable  geoscience  and
engineering  data  available at the time of the  estimate,  the  established  or
anticipated performance characteristics of the reservoir being evaluated and the
stage of development or producing maturity of the property.

     In many cases,  the analysis of the available  geoscience  and  engineering
data and the  subsequent  interpretation  of this data may  indicate  a range of
possible  outcomes in an estimate,  irrespective  of the method  selected by the
evaluator. When a range in the quantity of reserves is identified, the evaluator
must determine the uncertainty associated with the incremental quantities of the
reserves.  If the  reserve  quantities  are  estimated  using the  deterministic
incremental approach,  the uncertainty for each discrete incremental quantity of
the  reserves is addressed by the reserve  category  assigned by the  evaluator.
Therefore,  it is the categorization of reserve  quantities as proved,  probable
and/or  possible  that  addresses  the  inherent  uncertainty  in the  estimated
quantities reported.  For proved reserves,  uncertainty is defined by the SEC as
reasonable  certainty wherein the "quantities  actually  recovered are much more
likely than not to be  achieved."  The SEC states that  "probable  reserves  are
those  additional  reserves  that are less certain to be  recovered  than proved
reserves but which,  together with proved  reserves,  are as likely as not to be
recovered." The SEC states that "possible reserves are those additional reserves
that are less  certain to be  recovered  than  probable  reserves  and the total
quantities  ultimately  recovered  from  a  project  have a low  probability  of
exceeding  proved plus  probable  plus  possible  reserves."  All  quantities of
reserves within the same reserve category must meet the SEC definitions as noted
above.

     Estimates of reserves  quantities and their associated  reserve  categories
may be revised in the future as additional geoscience or engineering data become
available.  Furthermore,  estimates of reserves  quantities and their associated
reserve  categories  may also be revised due to other factors such as changes in
economic  conditions,  results of future  operations,  effects of  regulation by
governmental  agencies or  geopolitical  or economic  risks as previously  noted
herein.

     The proved  reserves for the properties  included  herein were estimated by
performance  methods or by analogy.  One hundred percent of the proved producing
reserves  attributable  to producing  wells and/or  reservoirs were estimated by
performance  methods.  These performance  methods include decline curve analysis
which  utilized  extrapolations  of  historical  production  and  pressure  data
available through August, 2010 in those cases where such data were considered to
be  definitive.  The data utilized in this analysis were supplied to Ryder Scott
by Synergy or obtained from public data sources and were  considered  sufficient
for the purpose thereof.

     One hundred percent of the proved  non-producing  and undeveloped  reserves
included  herein were  estimated  by the  analogy  method.  The  analogy  method
utilized pertinent well data supplied to Ryder Scott by Synergy or which we have
obtained from public data sources that were available through August, 2010.

     To  estimate  economically  recoverable  proved  oil and gas  reserves  and
related  future  net cash  flows,  we  consider  many  factors  and  assumptions
including,  but not limited to, the use of  reservoir  parameters  derived  from
geological,  geophysical and engineering data that cannot be measured  directly,

<PAGE>

economic  criteria  based on current  costs and SEC  pricing  requirements,  and
forecasts   of   future   production   rates.    Under   the   SEC   regulations
210.4-10(a)(22)(v)   and  (26),  proved  reserves  must  be  anticipated  to  be
economically  producible  from a given date forward  based on existing  economic
conditions including the prices and costs at which economic producibility from a
reservoir is to be determined.  While it may reasonably be anticipated  that the
future prices  received for the sale of production  and the operating  costs and
other costs  relating to such  production  may  increase or decrease  from those
under existing economic conditions,  such changes were, in accordance with rules
adopted by the SEC, omitted from consideration in making this evaluation.

     Synergy has  informed us that they have  furnished  us all of the  material
accounts,  records,  geological and engineering data, and reports and other data
required  for this  investigation.  In preparing  our forecast of future  proved
production  and  income,  we have  relied upon data  furnished  by Synergy  with
respect to property  interests  owned,  production  and well tests from examined
wells, normal direct costs of operating the wells or leases, other costs such as
transportation   and/or  processing  fees,  ad  valorem  and  production  taxes,
recompletion and development costs,  product prices based on the SEC regulations
and adjustments or  differentials  to product prices.  Ryder Scott reviewed such
factual  data  for  its  reasonableness;  however,  we  have  not  conducted  an
independent  verification  of the data  furnished  by Synergy.  We consider  the
factual data used in this report  appropriate  and sufficient for the purpose of
preparing the estimates of reserves and future net revenues herein.

     In summary,  we consider  the  assumptions,  data,  methods and  analytical
procedures used in this report  appropriate for the purpose hereof,  and we have
used all such methods and procedures that we consider  necessary and appropriate
to prepare the estimates of reserves herein. The proved reserves included herein
were  determined in conformance  with the United States  Securities and Exchange
Commission (SEC) Modernization of Oil and Gas Reporting;  Final Rule,  including
all  references  to  Regulation  S-X and  Regulation  S-K,  referred  to  herein
collectively  as the "SEC  Regulations."  In our  opinion,  the proved  reserves
presented in this report comply with the definitions,  guidelines and disclosure
requirements as required by the SEC regulations.

Future Production Rates

     For wells currently on production, our forecasts of future production rates
are based on historical  performance  data.  If no production  decline trend has
been established,  future  production rates were held constant,  or adjusted for
the  effects of  curtailment  where  appropriate,  until a decline in ability to
produce  was  anticipated.  An  estimated  rate of decline  was then  applied to
depletion of the reserves.  If a decline trend has been established,  this trend
was used as the basis for estimating future production rates.

     Offset  analogies and other related  information  were used to estimate the
anticipated  initial  production rates for those wells or locations that are not
currently producing. For reserves not yet on production, sales were estimated to
commence at an anticipated  date  furnished by Synergy.  Wells or locations that
are  not  currently   producing  may  start  producing  earlier  or  later  than
anticipated in our estimates due to unforeseen  factors  causing a change in the
timing to initiate  production.  Such factors may include delays due to weather,
the  availability  of  rigs,  the  sequence  of  drilling,   completing   and/or
recompleting wells and/or constraints set by regulatory bodies.

     The future  production rates from wells currently on production or wells or
locations  that are not currently  producing may be more or less than  estimated
because  of  changes  including,  but not  limited  to,  reservoir  performance,
operating  conditions related to surface facilities,  compression and artificial
lift,  pipeline  capacity and/or operating  conditions,  producing market demand
and/or allowables or other constraints set by regulatory bodies.

Hydrocarbon Prices

     The hydrocarbon  prices used herein are based on SEC price parameters using
the average  prices  during the 12-month  period prior to the ending date of the
period covered in this report,  determined as the unweighted arithmetic averages

<PAGE>

of the prices in effect on the first-day-of-the-month for each month within such
period, unless prices were defined by contractual arrangements.  For hydrocarbon
products  sold  under  contract,  the  contract  prices,   including  fixed  and
determinable  escalations,  exclusive of inflation adjustments,  were used until
expiration of the contract.  Upon contract expiration,  the prices were adjusted
to the 12-month unweighted arithmetic average as previously described.

     Ryder  Scott  determined  the 1st day of the  month  unweighted  arithmetic
average price.  Synergy  furnished us with their monthly data to determine their
"average  realized  prices'  in effect on August 31,  2010.  These  initial  SEC
hydrocarbon    prices   were    determined    using   the    12-month    average
first-day-of-the-month benchmark prices appropriate to the geographic area where
the  hydrocarbons  are sold. These benchmark prices are prior to the adjustments
for  differentials  as described  herein.  The table below summarizes the "price
reference",  the "average  benchmark  prices" and the "average  realized prices"
used for the geographic area included in the report.

     The product  prices that were  actually  used to determine the future gross
revenue  for each  property  reflect  adjustments  to the  benchmark  prices for
gravity,  quality,  local conditions,  and/or distance from market,  referred to
herein as  "differentials."  The actual  product  prices used to  determine  the
differentials  used in the  preparation  of this report were  furnished to us by
Synergy.

     In addition,  the table below summarizes the net volume weighted  benchmark
prices  adjusted  for  differentials  and  referred  to herein  as the  "average
realized  prices."  The average  realized  prices  shown in the table below were
determined from the total future gross revenue before  production  taxes and the
total net reserves for the geographic  area and presented in accordance with SEC
disclosure requirements for each of the geographic areas included in the report.

                                                       Average         Average
                                       Price          Benchmark        Realized
 Geographic Area      Product        Reference          Prices          Prices
 ---------------      -------        ---------        ---------        ---------
  North America
  United States   Oil/Condensate    WTI Cushing       $76.85/Bbl      $69.53/Bbl
                        Gas          Henry Hub       $4.30/MMBTU      $4.95/MCF


     The effects of derivative instruments designated as price hedges of oil and
gas quantities are not reflected in our individual property evaluations.

Costs

     Operating  costs for the leases  and wells in this  report are based on the
operating  expense  reports of Synergy  and include  only those  costs  directly
applicable  to the leases or wells.  The  operating  costs  include a portion of
general and administrative costs allocated directly to the leases and wells. The
operating  costs for  non-operated  properties  include the COPAS overhead costs
that are  allocated  directly to the leases and wells  under terms of  operating
agreements.  The  operating  costs  furnished by Synergy were reviewed by us for
their  reasonableness using information supplied by Synergy for this purpose. No
deduction was made for loan repayments,  interest  expenses,  or exploration and
development prepayments that were not charged directly to the leases or wells.

     Development  costs  were  furnished  to us by  Synergy  and  are  based  on
authorizations for expenditure for the proposed work or actual costs for similar
projects.  The  development  costs  furnished by Synergy were reviewed by us for
their  reasonableness  using  information  supplied by Synergy for this purpose.
Synergy's  estimates of zero  abandonment  costs after salvage value for onshore
properties  were used in this report.  Ryder Scott has not  performed a detailed
study of the  abandonment  costs or the salvage  value and makes no warranty for
Synergy's estimate.

<PAGE>

     The proved  non-producing and undeveloped reserves in this report have been
incorporated herein in accordance with Synergy's plans to develop these reserves
as of August 31, 2010.  The  implementation  of Synergy's  development  plans as
presented  to us and  incorporated  herein is  subject to the  approval  process
adopted by Synergy's management. As the result of our inquires during the course
of  preparing  this  report,  Synergy  has  informed  us  that  the  development
activities  included  herein have been  subjected  to and  received the internal
approvals required by Synergy's  management at the appropriate  local,  regional
and/or corporate level. In addition to the internal approvals as noted,  certain
development  activities may still be subject to specific  partner AFE processes,
Joint Operating Agreement (JOA) requirements or other  administrative  approvals
external to Synergy.

     Current costs used by Synergy were held constant throughout the life of the
properties.

Standards of Independence and Professional Qualification

     Ryder Scott is an independent  petroleum  engineering  consulting firm that
has been providing  petroleum  consulting services throughout the world for over
seventy years.  Ryder Scott is employee- owned and maintains offices in Houston,
Texas;  Denver,  Colorado;  and Calgary,  Alberta,  Canada.  We have over eighty
engineers and geoscientists on our permanent staff. By virtue of the size of our
firm and the large  number of clients for which we provide  services,  no single
client or job  represents a material  portion of our annual  revenue.  We do not
serve as officers or directors  of any  publicly  traded oil and gas company and
are separate and independent  from the operating and investment  decision-making
process  of  our  clients.  This  allows  us  to  bring  the  highest  level  of
independence and objectivity to each engagement for our services.

     Ryder  Scott  actively   participates  in  industry  related   professional
societies  and  organizes  an annual  public  forum  focused  on the  subject of
reserves  evaluations  and SEC  regulations.  Many of our staff have authored or
co-authored  technical  papers on the subject of  reserves  related  topics.  We
encourage  our  staff to  maintain  and  enhance  their  professional  skills by
actively participating in ongoing continuing education.

     Prior to becoming an officer of the  Company,  Ryder  Scott  requires  that
staff engineers and geoscientists  have received  professional  accreditation in
the form of a  registered  or  certified  professional  engineer's  license or a
registered or certified professional  geoscientist's  license, or the equivalent
thereof,   from  an   appropriate   governmental   authority   or  a  recognized
self-regulating professional organization.

     We are independent petroleum engineers with respect to Synergy.  Neither we
nor any of our employees have any interest in the subject properties and neither
the  employment  to do this  work  nor the  compensation  is  contingent  on our
estimates of reserves for the properties which were reviewed.

     The  results  of this  study,  presented  herein,  are  based on  technical
analysis conducted by teams of geoscientists and engineers from Ryder Scott. The
professional  qualifications of the undersigned,  the technical person primarily
responsible for preparing the reserves information discussed in this report, are
included as an attachment to this letter.

<PAGE>

Terms of Usage

     The results of our third party study, presented in report form herein, were
prepared in accordance  with the  disclosure  requirements  set forth in the SEC
regulations  and  intended for public  disclosure  as an exhibit in filings made
with the SEC by Synergy.

     We have provided Synergy with a digital version of the original signed copy
of this  report  letter.  In the event  there are any  differences  between  the
digital  version  included in filings  made by Synergy and the  original  signed
report letter, the original signed report letter shall control and supersede the
digital version.

     The  data  and work  papers  used in the  preparation  of this  report  are
available for examination by authorized  parties in our offices.  Please contact
us if we can be of further service.

                                          Very truly yours,

                                          RYDER SCOTT COMPANY, L.P.
                                          TBPE Firm Registration No. F-1580



                                          \s\ Thomas E. Venglar
  [SEAL]    Thomas E. Venglar, P.E. 
            Colorado License No. 28846 
            Senior Petroleum Engineer


Approved:



\s\ James L. Baird
James L. Baird, P.E.
Senior Vice President

<PAGE>