U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB/A

AMENDMENT NO. 1

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

For the quarterly period ended: SEPTEMBER 30, 2000

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

For the transition period from ________ to _________

Commission file number 0-26721
SYNERGY TECHNOLOGIES CORPORATION
(Exact name of small business issuer
as specified in its charter)

335 25^th Street, S.E., Calgary, Alberta Canada T2A 7H8
(403) 269-2274
(Issuer's telephone number)

NOT APPLICABLE
(Former name, former address and former
fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

State the number of shares outstanding of each of the issuer's classes of common equity, as of the last practicable date:

25,714,632 shares of Common Stock, $0.002 par value, as of November 6, 2000. See Note 9 to the accompanying Unaudited Financial Statements.

Transitional Small Business Disclosure Format
(check one): Yes__ No _X_

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SYNERGY TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)

The notes to these unaudited consolidated financial statements should be read in conjunction with the Audited Financial Statements for the fiscal year ended December 31, 1999.

The notes to these unaudited consolidated financial statements should be read in conjunction with the Audited Financial Statements for the fiscal year ended December 31, 1999.

The notes to these unaudited consolidated financial statements should be read in conjunction with the Audited Financial Statements for the fiscal year ended December 31, 1999.

Interim Consolidated Financial Statements - The accompanying condensed consolidated financial statements are unaudited. In the opinion of management, all necessary adjustments (which include only normal, recurring adjustments) have been made to present fairly the financial position, results of operations and cash flows for the periods presented. Certain information and note disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the December 31, 1999 annual report on Form 10-KSB. The results of operations for the three month and nine month period ended September 30, 2000 are not necessarily indicative of the operating results to be expected for the full year.

Nature of Operations - Synergy Technologies Corporation (formerly Automated Transfer Systems Corporation) ("Synergy" or "the Company"), was incorporated in Colorado on February 10, 1997. Stone Canyon Resources, Inc. ("Stone Canyon") was incorporated in Colorado on November 7, 1996. Stone Canyon's operations began in 1997 and it became a wholly owned subsidiary of the Company on November 24, 1997. Both companies were involved in acquiring and developing mineral, oil and gas resources, and technologies related to those resources. The Company's other wholly owned subsidiaries, Carbon Resources Limited, Lanisco Holdings Limited and Syngen Technologies Limited, are Cyprus companies and were organized on April 10, 1998, September 7, 1998 and May 13, 1999, respectively. These companies have been involved in the proving of technology through research and development since their inception.

Reorganization - On October 24, 1997, Synergy entered into a reorganization agreement with Stone Canyon. As a result of the reorganization, the Stone Canyon shareholders became shareholders of the Company whereby each share of Stone Canyon stock was exchanged for one share of Synergy stock. The Company approved a total of 2,901,007 shares for exchange. Of such amount all but 7,143 shares have been exchanged. Subsequent to the quarter ended September 30, 2000, such 7,143 shares were recieved and forwarded to the Company's transfer agent for exchange.

The reorganization agreement has been considered the reorganization of Stone Canyon and the acquisition of Synergy in a purchase business combination. Prior to the reorganization, Synergy had substantially no net assets and no ongoing business; therefore, the 2,549,500 shares of common stock outstanding at the date of the reorganization were recorded at $0. Because Synergy had no net assets and no ongoing business, no pro forma information is presented. For legal purposes, and per the reorganization agreement, Stone Canyon is considered a wholly owned subsidiary of Synergy.

Prior to the reorganization, Stone Canyon owed $453,916 to a related entity. In the reorganization, 4,539,162 shares of common stock were issued at $0.10 per share in full satisfaction of the debt.

Acquisitions - As further discussed in Note 9, in May, 1998, Synergy entered into an agreement with Laxarco Holding Limited ("Laxarco") to acquire a 75% interest in Carbon Resources Limited ("Carbon"), a subsidiary of Laxarco, and in June, 1999 entered into a further agreement with Laxarco for the remaining 25% for 10,000,000 and 3,000,000 shares of Synergy, respectively. Pursuant to these agreements, the shares of Carbon and the shares of Synergy were placed into escrow.

In January 1999, Carbon, through its wholly owned subsidiary, Lanisco Holdings Ltd. ("Lanisco"), obtained the right to acquire the patents for a heavy oil upgrading technology (referred to as "CPJ"). The patents for this technology were placed in trust subject to certain research and development expenditures and the payment of certain royalties to the inventor.

As at June 1999, Carbon held the rights to a gas-to-liquids ("GTL") technology and Lanisco held the option to acquire the patents for the CPJ technology. Synergy organized Syngen Technologies Limited ("Syngen") in June 1999 and transferred the GTL technology from Carbon to Syngen and the shares of Carbon were released from escrow in exchange for the placement of the Syngen shares into escrow. Upon release of the Carbon shares from escrow, Carbon and Lanisco became wholly owned subsidiaries of Synergy. The acquisitions of Carbon and Lanisco have been recorded on the financial statements as a purchase with no value attributed to the net assets. The Syngen shares remain in escrow and the patents to the CPJ technology remain in trust (see "Note - 10 SUBSEQUENT EVENTS"). Synergy, Stone Canyon Resources Ltd. ("Stone Canada"), which is a related company by virtue of common directors, and Texas T Petroleum Ltd. ("Texas T") have been funding the research and development carried out by Syngen, Carbon and Lanisco. Carbon and Lanisco incurred losses in 1999 and 1998 from research activity. Synergy has recognized all of the losses of Carbon and Lanisco in its 1999 and 1998 statements of operations, with no offset to minority interest. All of the research and development activity for both years has been recorded in the consolidation. The Syngen shares are held in escrow for Laxarco and the CPJ patents are held under the trust agreement. Syngen's GTL research and development activity has been recorded as an expense in the consolidated financial statements. Subsequent to the quarter ended September 30, 3000, the parties agreed to release from escrow all of the Laxarco shares and the Syngen shares (see "Note 10 - other events").

Principals of Consolidation - The accompanying consolidated financial statements include the accounts and transactions of Stone Canyon for all periods presented, and the accounts and transactions of Synergy from October 24, 1997, and the accounts and transactions of Carbon and Lanisco and the activities of Syngen from their inception. Intercompany accounts and transactions have been eliminated in consolidation.

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

Business Condition - The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplates continuation of Synergy as a going concern. However, Synergy has had no significant income and has had negative cash flows from operating activities during the years ended December 31, 1999 and 1998 and cumulatively from inception through September 30, 2000, which conditions raise substantial doubt about Synergy's ability to continue as a going concern. Synergy's continued existence is dependent upon its ability to obtain additional financing. The Company will continue to raise funds from the public and private markets and through arrangements with certain related and unrelated companies with which it is negotiating mutually beneficial agreements for the use of the technologies. However, there is no assurance that additional financing will be realized.

Development Stage Enterprise - Since inception, the Company has spent most of its efforts raising capital and financing the research and development of certain technologies; however, it has not yet had sales sufficient to sustain operations and has relied upon cash flows from financing activities (primarily debt and equity issuances) to sustain operations. Therefore, the Company is considered to be in the development stage.

Technology Development - The amount reported on the Consolidated Statements of Operations for the cumulative period from November 7, 1996 (Date of Inception) to September 30, 2000 reflects expenditures on the development of the technologies, net of certain GTL development costs charged to Stone Canada at the end of fiscal 1998 and 1999 for reimbursement under the terms of a letter agreement between the Company and Stone Canada executed in September 1998 (See Note 2(II) "RELATED PARTY TRANSACTIONS"). The cumulative amount reported to September 30, 2000 is net of expenditures of $426,917 which were invoiced to Stone Canada.

Financial Instruments - The amounts reported as cash, receivables, accounts payable, and accrued liabilities are considered to be reasonable approximations of their fair values. The fair value estimates presented herein were based on market information available to management at the time of preparation of the financial statements. For the purpose of the statement of cash flows, cash and cash equivalents are defined as demand deposits as well as other funds with original maturities of three months or less.

Foreign Currency Translation - Exchange gains and losses from holding foreign currencies and having liabilities paid in foreign currencies are included in the results of operations.

Property and Equipment - Property and equipment are reported at cost. Minor repairs, enhancements, and maintenance costs are expensed when incurred. Depreciation is computed using the straight-line and accelerated methods over the estimated useful lives of the assets. Major categories of property and equipment and estimated useful lives are as follows:

Basic and Diluted Loss Per Share - Basic loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted loss per share is calculated to give effect to potentially issuable common shares except during loss periods when those potentially issuable common shares would decrease the loss per share.

Restatement of Prior Financial Statements - The previously issued December 31, 1999 and 1998 financial statements were restated to consolidate Carbon and its wholly owned subsidiary, Lansico. Carbon is consolidated due to the releasing of the Carbon shares from escrow as further explained in Note 9, "Carbon Resources Limited", at which time Carbon became a wholly owned subsidiary.

Also, the activities of Syngen have been included in the financial statements based on the Company and related parties having funded Syngen since its inception. The Company and related parties may not benefit from that activity until, and unless, certain technology is proven commercially viable. As further described in Note 10, until recently the shares of Syngen have been held in escrow.

During the nine-month period ended September 30, 2000, the Company and its subsidiaries were charged a total of $110,680 in consulting fees by Glidarc Technologies Inc. (a Texas corporation) for process management services. Mr. Thomas Cooley, an officer of Glidarc Technologies, is also a member of the Board of Directors of Carbon Resources Limited, a wholly-owned subsidiary of the Company and, during the quarter ended September 30, 2000, became a member of the Board of Directors of the Company. An amount of $190,720 for services rendered which remained due and payable to Glidarc Technologies at December 31, 1999, was settled during the quarter ended March 31, 2000 for 304,989 shares of common stock of the Company. The amount of $19,116 relating to services provided through September 30, 2000 remained due and payable to Glidarc at the end of this latest quarter.

In September 1998, Stone Canada and Synergy Technologies entered into a letter agreement under which Stone Canada agreed to fund the development of a 4-bbl/day gas to liquids demonstration facility in return for the Canadian marketing and licensing rights to the GTL or Syngen technology. Pursuant to this agreement, from the period September 30, 1998 to the period ended December 31, 1999, invoices totaling $426,917 had been issued to Stone Canada for reimbursement of all costs incurred by the Company or its subsidiaries in respect of the development of the 4-bbl/day facility.

During the nine month period ended September 30, 2000 Synergy made advances to Stone Canada with respect to the development of the 4-bbl/day-demonstration facility. During this same nine month period, Stone Canada has made various payments to reduce these amounts outstanding. As at September 30, 2000, $240,235 in consolidated receivables were due from Stone Canada. In addition, during the quarter ended September 30, 2000, the Company issued 646,400 shares of common stock to certain investors as a result of such investors electing to convert promissary notes from the Company and Stone Canada into units of the Company at $0.50 per unit. See Note 7 "Common Stock" below. Related party receivables also include an amount of $323,200 due from Stone Canada to the Company in connection with the issuance of such shares of common stock.

Loans payable of $516,050 as of September 30, 2000 reflect an amount of $441,456 payable to Texas T Petroleum, a partner in the development of the CPJ process, and various other unrelated payables totaling $74,594.

In November 1998, the Company commenced a private placement of its common stock under Rule 504 of Regulation D at $0.50 per Unit. Each Unit consisted of one share of common stock and one stock warrant exercisable at any time two (2) years from the date of issue at $1.00 per share for each warrant exercised. The Company completed this offering of 1,500,000 Units in April 1999 for a total value of $750,000. The Company issued 957,000 Units for cash of $478,500, 138,000 Units as compensation for services valued at $69,000, and 405,000 Units as conversion of debt from investor deposits in the amount of $202,500. No commission fees or other selling expenses were paid. Subsequent to year end, the Company offered to certain subscribers under the aforementioned Rule 504 private placement the option of canceling the warrant portion of the subscribed for Units and participating in an offering of new Units made pursuant to Regulation S promulgated by the Securities and Exchange Commission under the Securities Act of 1933 ("Regulation S"), with each Unit consisting of a share of common stock and a warrant to purchase an additional share for $3.50, exercisable at any time two (2) years from the time of subscription. The Company has agreed to keep the offering open until either fully subscribed or April 2001 which would be the expiration date of the warrants under the Rule 504 private placement. The price of these new Units is $1.00, which is the same price as the share purchase warrants that have been cancelled. On January 19, 2000, 100,000 of these new Units were subscribed for. During the period ended September 30, 2000, the Company accepted this subscription. As at September 30, 2000 the subscribed for shares remained reserved for issue.

In December 1999, the Company commenced a private placement of its common stock pursuant to Regulation S promulgated by the Securities and Exchange Commission under the Securities Act of 1933 ("Regulation S") at $0.50 per Unit, each Unit consisting of one share of common stock and one warrant exercisable for a period of one year from the date of issuance at $1.00 per share. In January 2000, 10,000 Units were sold for total proceeds of $5,000.

On January 5, 2000 the Company approved the Year 2000 Employees Stock Option and Stock Award Plan, which authorized awards of up to 1,500,000 shares of common stock. As of September 30, 2000 a total of 1,205,763 shares had been issued under the plan as compensation for bonafide services actually rendered with 25,000 options being granted during the three (3) month period ended June 30, 2000.

On January 14, 2000, a Financing and Security Agreement was entered into by and among Stone Canyon Resources Ltd. ("Stone Canada") and the Company (collectively the "Borrowers") and James E. Nielson and Wood River Trust (collectively the "Lenders"), in regard to a loan in the amount of $300,000.00 for allocation towards development of the 4 bbl per day SYNGEN demonstration plant. Stone Canada has agreed to hold in trust an equal amount of funds receivable by way of a refund from Natural Resources Canada as collateral for a period of ninety (90) days following the initial start up of the SYNGEN demonstration plant, at which time the Lenders may choose either (i) to convert the loaned amount into 600,000 Units of Synergy Technologies, at which time an amount of $300,000 would be released to Synergy from the Stone Canada trust as consideration for the units or (ii) a release of the funds held in trust in an amount equal to the principal balance and all accrued interest therein, with any additional trust funds to be released to Stone Canyon. Each Unit would consist of one share of common stock and one warrant to purchase an addition share of common stock for $1.00 per share. As of June 13, 2000, Wood River Trust and James E. Neilson advised the Company of their election to convert the loaned amounts to Synergy Units. As a result 600,000 shares of common stock were issued during the quarter ended September 30, 2000, along with warrants to purchase an additional 600,000 shares.

On January 14, 2000, a second Financing and Security Agreement was entered into by and among Stone Canada and the Company and Caribbean Overseas Investments Ltd. (the "Lender") with the same terms as the above-described financing agreement, except the loan amount was $50,000, convertible into 100,000 Units. During the quarter ended September 30, 2000, the Lender elected to convert $23,200 of this loan into 46,400 units. As a result 46,400 shares of common stock were issued along with a warrant to purchase an additional 46,400 shares.

On January 19, 2000, the Company commenced a private placement of shares of its common stock pursuant to Regulation S. Subsequent to the period ended September 30, 2000, the Company accepted subscriptions to this offering for the sale of 100,000 shares at $1.00 per share. As at September 30, 2000 the subscribed for shares remained reserved for issue.

On May 25, 2000, the Company commenced a private placement of up to $2,250,000 of its convertible promissory notes (the "Notes"). As of June 30, 2000, the Company had received proceeds of $855,000, net of offering costs $45,000. The Notes are convertible into units of the Company, with each unit comprised of one (1) share of common stock, a warrant to purchase one (1) share of common stock at $4.00 per share and another warrant to purchase an additional share of common stock at $8.00 per share (the "Units") at the price of $3.00 per Unit. The net proceeds were allocated between the beneficial conversion feature and the promissory notes based on their relative fair values. The fair value of the Unit was determined using the fair value of the underlying common stock and the warrants on the commitment date. The fair value of the warrants was determined using the Black-Scholes option pricing model with the following assumptions: dividend yield of 0%, volatility of 169%, risk-free interest rate of 6.38% and estimated life of two years. The beneficial conversion feature was allocated all of the net proceeds resulting in a discount on the Notes of $855,000. Since the Notes are convertible upon issuance, the discount was immediately amortized and resulted in amortization expense of $855,000. The private placement was conducted pursuant to Regulation D promulgated by the Securities and Exchange Commission under the Securities Act of 1933 and was offered only to accredited investors or others deemed appropriate by the Company. The private placement was fully subscribed and closed on July 26, 2000. The Company used the services of Belle Haven Investments L.P. as selling agent for the private placement. Belle Haven received a cash commission of five percent (5%) of every Note sold. Belle Haven also received a warrant to purchase up to 52,666 Units at the exercise price of $3.00 per Unit. The Company also issued a warrant for 32,000 Units to other individuals for finders' fees in completing this private placement. Each of such warrants were issued subsequent to the quarter ended September 30, 2000 and are thus not reflected in the accompanying financial statements.

The warrants issued in connection with the private placements undertaken in the fiscal years ended December 31, 1999 and 1998 are exercisable at $1.00 per share, and expire within two years from the date of issue. During the nine month period ended September 30, 2000, the Company issued 426,000 shares of common stock upon the exercise of warrants for cash proceeds of $426,000, or $1.00 per share. The following table summarizes the warrants to purchase common stock issued and outstanding:

As further discussed in Note 9, "Contingent Agreements with Certain Companies", a total of 13,000,000 shares of the Company's common stock under two stock exchange agreements with a Cyprus corporation have been placed into escrow pending the outcome of the technologies reaching "commercial viability" as determined by an independent party. As of September 30, 2000, the shares were still in escrow pending the outcome of this uncertainty. Subsequent to the quarter the Board of Directors approved the release of the 13,000,000 shares from escrow. See Note 9 "Contingent Agreements with Certain Companies" below.

During the quarter ended September 30, 2000, the Company issued to Dr. Pierre Jorgensen 500,000 shares of common stock in connectin with his agreement to reduce his royalty to earnings realized on the CPJ Technology. The Company valued those shares at $2.125 per share for a total of $1,062,500 as of September 25, 2000.

(a) On January 5, 2000, the Company approved the 1998 Directors and Employees Stock Option and Stock Award Plan, which authorized options to purchase 900,000 shares of common stock. The Company's shareholders previously approved the granting of these options on June 5, 1999. During the six month period ended September 30, 2000 options to purchase 400,000 shares were granted to directors, options to purchase 250,000 shares were granted to employees, and options to purchase 250,000 shares were granted to third parties as compensation for services. The plan was fully subscribed and no further options are available for issue under this plan.

(b) On January 5, 2000 the Company also approved the 1999 Directors and Employees Stock Option and Stock Award Plan which authorized options to purchase 1,000,000 shares of common stock. The Company's shareholders previously approved the granting of these options on September 30, 1999. During the nine month period ended September 30, 2000, options to purchase 160,000 common shares were granted to employees and options to purchase 210,000 common shares were granted to third parties as compensation for services. During the quarter ended September 30, 2000, 10,000 of these options were cancelled.

(c) On January 5, 2000, the Company approved the 1999 Directors and Advisory Board Members Stock Option Plan, pursuant to which the Company can grant options to members of the Company's board of directors and advisory board to purchase up to 1,100,000 shares of common stock. During the nine month period ended September 30, 2000 option to purchase 350,000 common shares were granted to directors and options to purchase 500,000 common shares were granted to advisory board members under this plan.

(d) On March 3, 2000, the Company granted stock options to purchase 100,000 shares of common stock at $2.25 per share to a third parties as consideration for the use of certain property. The options vested immediately and expire March 3, 2003. The options granted were valued at their fair value of $394,000.

Pursuant to notes a, b and c above during the nine month period ended September 30, 2000, a total of 1,160,000 options to purchase common shares at $1.00 per share were granted to various employees and directors under the plans described above. These options expire January 2, 2010. The vesting period has not yet been determined. As stated in (b) above, during the quarter ended September 30, 2000, 10,000 of the options were cancelled.

Further, the Company granted stock options to purchase 1,085,000 shares of common stock at $1.00 per share to third parties as compensation for services. Of the options granted, 768,333 options have been treated as being vested immediately. This vesting may be amended on subsequent statements. The options expire January 2, 2010. 316,667 of the options vest according to a schedule over two years and expire January 13, 2005. The options granted were valued at their fair value of $695,000 on the grant date, which amount will be recognized by the Company as the options vest. During the nine months ended September 30, 2000 $561,353 of unearned compensation was amortized as compensation expense. The fair value of the options was determined by using the Black-Scholes option-pricing model with the following assumptions: dividend yield of 0.0%, weighted average expected volatility of 170%, weighted average risk-free interest rate of 6.44% and expected life of 1 year.

A summary of the status of the Company's stock options as of September 30, 2000 and changes during the three month period then ended are presented below:

The following table summarizes information about stock options
outstanding at September 30, 2000:

The Company measures compensation to employees under stock-based options and plans using the intrinsic value method prescribed in Accounting Principles Board Opinion 25, Accounting for Stock Issued to Employees, and related interpretations. Compensation for options to outside directors is measured using the fair value method set forth under Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation. There was no Stock-based compensation charged to operations during the nine months ended September 30, 2000 from options granted to employees and to outside directors, respectively. Had compensation cost for the Company's options granted to employees been determined based on the fair value at the grant dates consistent with the alternative method set forth under Statement of Financial Accounting Standards No. 123, net loss and loss per share would have increased to the pro forma amounts indicated below:

The notes to these unaudited consolidated financial statements should be read in conjunction with the Audited Financial Statements for the fiscal year ended December 31, 1999.

A. Litigation -

Bataa Oil, Inc.

During 1996, Stone Canyon purchased interests in certain leasehold properties. Through December 31, 1997, Stone Canyon paid $458,080 for acquisition costs and development costs associated with such interests. Such amount was paid to Bataa Oil, Inc., by the founding shareholders of Stone Canyon and Stone Canyon paid such amount to the founding shareholders. Bataa Oil, Inc. also served as operator of each lease. Prior to the merger with the Company, Stone Canyon issued a total of 1,700,000 shares of its common stock to certain founders of Stone Canyon, including 411,842 shares to Bataa and its designees and 63,910 shares to Richard and Anita Knight, as part of the consideration for such properties. Such shares were exchanged for an equal number of shares of the Company as part of a share exchange agreement executed in November 1997 between the Company, Stone Colorado and Stone Canada.

Stone Canyon and the Company contend that Bataa represented to Stone Canyon and/or its affiliates that the price for these properties was set at the price paid by Bataa for the same. Stone Canyon and the Company have since learned that Bataa's costs for these properties were far less than the amount charged. The Company has questioned the form of legal title taken for the properties as well as adequate documentation and disclosure of all underlying obligations, liabilities and arrangements relating to the properties between Bataa Oil, Inc. and the vendors. The Company has also learned that some of these leases have been forfeited due to a failure to meet a drilling obligation imposed by one of the vendors. Stone Canyon was not appraised of such obligation prior to the acquisition of its interest in the leases. The Company has been advised by legal counsel that the issuance of the shares to Bataa Oil and its designees was without the kind, amount or form of consideration as authorized by the Board of Directors and could therefore be deemed to be an invalid issuance. In order to protect the interests of all shareholders, the Company has placed a "stop transfer" with the transfer company against all of the founders shares including 411,842 shares of its common stock owned by Bataa Oil and its designees and 63,910 shares owned by Richard and Anita Knight.

As a result of this dispute, Bataa, Richard and Anita Knight and certain others, filed a complaint in the District Court, County of Denver, in the State of Colorado against the Company, its wholly-owned subsidiary, Stone Canyon and Stone Canada, which was previously the Company's sole controlling shareholder. The original complaint asserted only one claim (Breach of Fiduciary Duty and mandatory injunction) against the Company to compel it to remove restrictive legends from the plaintiffs shares of the Company's common stock. The plaintiffs have amended their complaint twice, and as a result, have named additional defendants to this lawsuit, including certain members of the Company's Board of Directors, the Company's transfer agent (Holladay Stock Transfer Inc.), founding shareholders of Stone Canyon and other individuals. The plaintiffs second complaint also includes causes of action for conversion, civil conspiracy and unjust enrichment. The Company's Answer and Counterclaims denied all material allegations, asserted numerous affirmative defenses and asserted counterclaims against Plaintiffs Bataa Oil, David Calvin and/or Richard and Anita Knight for an accounting, fraud, intentional misrepresentation, breach of fiduciary duty, damages and punitive damages.

The Company disputes the allegations made by the plaintiffs, claims they are untrue and is vigorously defending this lawsuit.

On January 27, 2000, the Company and Texas T Resources, Inc., a Canadian corporation, filed an action in Boulder County District Court, Colorado, (Case No. 2000 CV 131) against Bataa Oil, its owner Mr. David Calvin and other individuals, asserting claims for defamation (Libel or Slander Per Se and Libel or Slander Per Quod), civil conspiracy, international interference with prospective business or economic advantage, injunction and punitive damages. With regards to the Company, these claims are based on events that occurred primarily in December 1999, in which the named Defendants, acting on their own behalf or on behalf of Bataa Oil, Inc., made several false and defamatory statements concerning the Company and/or individuals identified by them as "principals" of Synergy to market analysts, government agencies, elected officials and private entities such as the NASD. The Company believes the purpose of these statements were in general to interfere with and damage the business of the Company and in particular to convince at least one market analyst to reverse his "buy" recommendation to a "sell" recommendation on Synergy stock.

The Company sought, and received on February 8, 2000, a Temporary Restraining Order against Defendant David J. Calvin and Defendant Bataa Oil, Inc., as well as, by applicable rule, anyone acting on behalf of Bataa Oil, Inc. to stop any further publication of such false and defamatory statements. By stipulation between the parties and subsequent Order of the Court dated February 23, 2000, such Temporary Restraining Order became a Preliminary Injunction, which will remain in effect until the trial in this matter.

On September 13, 2000, the Company, Stone Canyon, Texas T Petroleum Ltd., Texas T. Resources Inc. and other individuals and entities entered into a Settlement Agreement with Bataa Oil and its employees and related entities that resolved and dismissed the pending lawsuits in each of the aforementioned cases. Pursuant to such Settlement Agreement, Bataa Oil, its employees and its related entities disclaimed all rights to and interest in 411,842 shares of the Company's common stock. The Company paid no damages, attorneys fees or other remuneration, either directly or indirectly in connection with such Settlement Agreement. As a result of such Settlement Agreement, the only pending litigation that involves the Company is in the Denver County District Court (case #99 CV 3842) against the remaining named plaintiffs, Richard and Anita Knight and Tedd and Mary Duncan.

B.  Licensing and Consulting Agreements - Effective September 30, 1998, Synergy Technologies entered into an agreement with Stone Canada, whereby Stone Canada committed to fund the design and construction of a 4 bbl per day demonstration facility in the Province of Alberta in exchange for the Canadian marketing and licensing rights to Synergy's proprietary Gas to Liquids technology.

C. Operating Lease - Effective September 1, 2000, the Company entereed into a five year non-cancelable lease which provided for monthly lease payments, including operating costs, of $17,309. Minimun future rental payments under this lease with remaining terms in excess of one year are as follows:

2001  207,708
2002  207,708
2003  207,708
2004  207,708

The Company has entered into certain agreements which were contingent upon certain technology reaching commercial viability. The financial accounting effect of these agreements have not been recorded pending the outcome of the contingency, which subsequent to the quarter ended September 30, 2000, has been removed. A summary of the agreements with the various companies follows:

Carbon Resources Limited - Carbon Resources Limited ("Carbon") is a private Cyprus corporation, a wholly owned subsidiary of Synergy, and the 100% shareholder of Lanisco Holdings Limited (a private Cyprus corporation), which holds the rights to acquire the CPJ Process, a proprietary and patented technology for the upgrading of heavy crudes to conventional light oils.

On May 1, 1998 Carbon and Laxarco Holdings Ltd. ("Laxarco") (the previous sole shareholder of Carbon) entered into agreements granting Carbon the rights to acquire the patented SYNGEN technology contingent upon Carbon fulfilling certain terms and conditions outlined in a technology transfer agreement. On May 5, 1998, Carbon and Laxarco entered into a share exchange agreement with Synergy and Stone Canyon Resources Ltd., (its then major shareholder), granting Synergy the rights to acquire 75% of the issued shares of Carbon (and thereby a 75% interest in the SYNGEN technology). Under the exchange agreement, Synergy would exchange 10,000,000 shares of common stock for 75% of the shares of Carbon. The share exchange was contingent upon Synergy assuming the terms and conditions agreed to by Carbon in the original technology transfer agreement. 3,750 common shares of Carbon (75% of the issued shares) and 10,000,000 shares of Synergy were placed in escrow subject to the terms of the agreement.

On January 6, 1999, Carbon acquired all issued and outstanding shares of Lanisco Holdings Limited, making Lanisco a wholly owned subsidiary, which held the rights to a second patent pending technology, the CPJ process, subject to funding commitments.

On January 8, 1999, Synergy reached a verbal agreement with Texas T Petroleum Ltd., a Colorado oil and gas corporation, ("Texas T Petroleum"), whereby Texas T Petroleum received an option to negotiate the acquisition of up to 50% of the shares of Carbon in exchange for the payment of $100,000 cash and the expenditure of an additional $100,000 towards development of the CPJ technology. Synergy advanced $100,000 of such funds to Lanisco for the purchase of 1,000,000 Units of Texas T Petroleum. Each Unit is comprised of one (1) share of common stock and one stock warrant to acquire an additional share for a period of three years from the date of issue at $1.00 per share.

Effective June 25, 1999, Carbon, Laxarco Holding and Synergy agreed to amend the original share exchange agreement and Synergy was granted the right to acquire the remaining 25% of the shares of Carbon. Under the exchange agreement, Synergy would exchange 3,000,000 shares of common stock for the remaining 1,250 shares of Carbon. The 3,000,000 shares of the Company and 1,250 shares of Carbon were placed with the escrow agent.

To facilitate an agreement with respect to the CPJ process, Carbon, Laxarco Holding and Synergy agreed to amend the original share exchange agreements to transfer the SYNGEN technology from Carbon to a newly incorporated subsidiary of Synergy. Effective June 25, 1999, Synergy incorporated Syngen Limited and the SYNGEN technology was transferred from Carbon to Syngen. The shares of Syngen, the newly incorporated subsidiary, were placed in escrow subject to the terms of the original technology transfer agreement executed between Carbon and Laxarco, the shares of Carbon were released from escrow and Carbon became a wholly-owned subsidiary of Synergy. The CPJ technology is held in escrow subject to funding and development commitments by Synergy.

On June 26, 1999, Synergy executed a share exchange agreement with Texas T Petroleum whereby Texas T Petroleum will acquire fifty percent (50%) of the issued and organized shares of Carbon in exchange for the issuance of 2,000,000 Units of Texas T Petroleum, each Unit consisting of one share of common stock and one stock warrant entitling the holder to purchase one (1) additional share of Texas T Petroleum at $1.00 per share within two years of June 26, 1999, and the payment of $900,000 by Texas T for the development of the CPJ technology. The 2,000,000 Units of Texas T Petroleum and 5,000 shares of Carbon are reserved for issue upon fulfillment by Texas T Petroleum of the terms of the agreement.

During the course of fiscal 1999, Carbon has continued to develop the CPJ technology held by its wholly owned subsidiary, Lanisco Holdings Limited, under the financial support of Texas T Petroleum Ltd. Carbon intends to carry-on with development of the CPJ Process in co-operation with Lanisco Holdings and Texas T Petroleum during fiscal 2000.

Syngen Technologies Limited - Syngen Technologies Limited ("Syngen") incorporated June 25, 1999 is a private Cyprus corporation and a 100% owned subsidiary of Synergy contingent upon the terms of two share exchange agreements dated May 5, 1998 and June 25, 1999, respectively.

Syngen holds the rights to a proprietary and patented technology called "SYNGEN" which converts natural gas to synthesis gas. (See Carbon Resources Limited above, paragraph 6.) The shares of Syngen remain in trust with an escrow agent until the fulfillment of the terms and conditions of the agreements. Subsequent to the quarter ended September 30, 2000, Synergy and Laxarco agreed to the release of the Syngen shares from escrow.

Lanisco Holdings Limited and Texas T Petroleum, Ltd. - Lanisco Holdings Limited ("Lanisco"), is a private Cyprus corporation and a 100% owned subsidiary of Carbon Resources Limited (a private Cyprus corporation).

Lanisco holds the rights to acquire proprietary and patented technology called "CPJ" which converts so called heavy oils into lighter oils.

Lanisco entered into agreements January 6, 1999 whereby it was granted the rights to acquire the CPJ technology from the inventor, in return for expending $1,000,000 to commercialize the technology, and payment of a royalty of 65% of the net proceeds received from any license fees, royalties or any such other revenues earned until payment of a total of $1,000,000 to the Inventor, at which time the royalty would revert to 35% of any net proceeds received from any revenue generated by the technology. (Net proceeds to be defined as gross revenues less reasonable operating expenses including R&D expenses).

Two further agreements entered into in January 1999 and June 1999, between Synergy (the 100% shareholder of Carbon Resources Limited) and Texas T Petroleum granted Texas T Petroleum the right to acquire 50% of the shares of Carbon (and thereby acquire a 50% interest in the CPJ technology). Please refer to Carbon Resources Limited above, paragraphs 4 and 7 for a detailed explanation of these agreements.

At December 31, 1999, Lanisco, Carbon and Texas T Petroleum worked in co-operation to re-construct the 2 bbl/day pilot CPJ unit at laboratory facilities in Calgary, Alberta to permit testing of various heavy crude samples for potential licensees.

In addition, Lanisco, Carbon Resources and Texas T Petroleum have commissioned and received a detailed cost estimate for the construction of a 100 bbl/day pilot unit expected to commence construction in the Province of Alberta in fiscal year 2000.

Lanisco intends to generate annual revenues through the licensing of the CPJ technology to a variety of international corporations and host countries, and by the generation of royalty revenues from operational CPJ facilities.

During to the quarter ended September 30, 2000, the Company and Laxarco Holding Limited agreed to release from escrow the shares of the Company's common stock and shares of Syngen Technologies Limited. An escrow had been set up to hold 13,000,000 shares issued in the name of Laxarco Holding Limited and the shares of Syngen pursuant to various agreements involving the Company, Laxarco Holding and other entities and to assure each party that certain covenants and undertakings related to the development of the Technologies were completed. The Company and Laxarco Holding have determined that there is no further need for the respective shares of the Company and Syngen to be held in escrow due to the progress to date of such development. In addition, Laxarco has committed to the Company to continue to provide the technical personnel necessary to manage completion of the Technologies. Therefore, the Company's Board of Directors resolved to authorize and direct the release of 13,000,000 shares from escrow to Laxarco Holding Limited but only upon delivery to the Company of the outstanding shares of Syngen Technologies Limited and delivery of the written undertaking. The Company anticipates that it will formalize its agreement with Laxarco Holding by entering into amendments to the aforementioned agreements during the next thrty (30) days. Upon completion of these agreements Synergy, by way of 100% ownership in Syngen Technologies Limited will hold all the rights to a proprietary and patented technology called "SYNGEN".

1. During the quarter ended September 30, 2000, the Company announced that it had completed a $2.25 million convertible note financing led by Belle Haven Investments of Greenwich, Connecticut. Refer to Note 7 - "COMMON STOCK" above.

2. On September 25, 2000, the Company along with its subsidiaries, Carbon Resources Limited and Lanisco Holdings Limited and also Capital Reserve Corporation, entered into an Amended and Restated Technology Transfer Agreement with Dr. Pierre Jorgensen. Dr. Jorgensen is the inventor of the CPJ Technology. The terms of the original acquisition of this technology provided Dr. Jorgensen with sixty-five percent of the royalties earned on the technology until he recieved an aggregate of $1 million US at shich time the rate would be reduced to thirty-five percent. Also, title to the technology was to remain in trust and not be delivered to the Company intil Dr. Jorgensen had reached the $1 million payout. The terms of this amended and restated agreement period Dr. Jorgensen with only five percent of the net proceeds realized from the licensing and/or sublicensing of the technology, along with 500,000 shares of common stock of the Company and 500,000 shares of common stock of Capital Reserve Corporation. Moreover, the title to the technology was immediately released to Lanisco Holding Limited.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND CHANGES IN FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Statements included in Management's Discussion and Analysis of Financial Conditions and Results of Operations, which are not historical in nature are intended to be, and are hereby identified as, forward looking statements for purposes of the Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995. The Company cautions readers that forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated in the forward looking statements.

In connection with the Company's audit of its financial statements for the period ended December 31, 1999, the Company's financial statements for the periods ended prior to 1999 were restated to exclude certain contracts for the acquisition of two proprietary and patented technologies due to the fact that the issuance of shares in connection with such acquisitions were contingent upon verification that the Company's technologies have reached specific levels of commercial viability. As a result, previously recorded assets and liabilities associated with the technologies have also been excluded from the financial statements. See Notes 9 and 10 to the Unaudited Consolidated Financial Statements included herewith for a discussion of these contingent agreements.

The Company's business is the development and licensing of technologies related to the oil and gas industry. Capital from equity issues or borrowings or partnering with industry is necessary to fund the Company's future operations and technology development. Therefore the financial statements included in this report for the nine month periods ended September 30, 2000 and 1999 are not necessarily indicative of the Company's future operations.

Plan of Operation

The Company, as of September 30, 2000, had limited cash resources. The Company needs to raise additional funds to meet its cash requirements for the next twelve (12) months. The Company intends to raise such funds from the sale of equity securities through private placements, borrowings, government grants and partnering with industry in the development of its technologies.

The Company has advanced funds during the quarter ended September 30, 2000 to its subsidiaries, Carbon Resources Limited, Lanisco Holdings Limited, and Syngen Technologies Limited, to fund research and development on its patented and proprietary heavy oil upgrading technology known as the "CPJ Technology" and its patented and proprietary gas-to-liquids technology referred to as the "SYNGEN Technology". Syngen Technologies Limited will become a wholly-owned subsidiary of the Company upon the release from escrow of all of the outstanding shares of Syngen Technologies Limited. The amounts advanced were for (a) the design, development and marketing of a 1/2 barrel per day CJ unit in Calgary, Alberta to test client oils; and (b) the design, development and marketing of a 4 barrel per day demonstration facility in the Province of Alberta utilizing the SYNGEN Technology. See below "Results of Operations".

The Company completed installation of its 1/2 barrel per day CPJ Technology test unit in its laboratory in Calgary in the first quarter of 2000. In April 2000, it commenced testing heavy oil samples in the CPJ Technology test unit and commenced testing client samples after completing its own internal testing to optimize operating conditions. The Company expects that $500,000 will be expended by the end of March 2001 towards the operation and testing of the 1/2 barrel per day CPJ demonstration unit. The Company expects to receive one-half of such amount from its CPJ Technology joint venture partner.

During the fiscal year 2001, the Company intends to begin the detailed engineering of a heavy oil commercial plant, with a capacity of between 1,000 and 5,000 barrels per day, with construction to begin sometime in 2001. The total cost of this commercial plant is approximated at $25  million. The Company and its joint venture partner will look to potential users of the technology and government grants and/or loans to assist in funding the costs of construction of this commercial plant.

The Company has completed the construction and installation of its 4 barrel per day SYNGEN demonstration plant. The plant is presently in commissioning and the Company will be conducting various tests of the demonstration plant throughout the current fiscal year. The Company will also build a Fischer-Tropsch system, which will be installed next to the SYNGEN demonstration plant to create a gas-to-liquids system. The Company and its funding partner, Stone Canyon Canada, expect to expend $1.9 million on the construction of the Fischer-Tropsch system and operation of the completed 4 barrel per day gas-to-liquids demonstration plant during the next twelve (12) months.

During the next twelve (12) months, the Company expects to complete the detailed engineering and commence construction of a 500 barrel per day SYNGEN reactor at the estimated cost of $1.5 million, to be placed at a site to be determined.

The Company expects that the total number of people employed by the Company and its subsidiaries will increase as the above-described pilot plants and demonstration units are completed and are in operation.

Liquidity

Cash flows from continued operations during the period ended September 30, 2000 and 1999 reflect new cash used of $(2,839,754) and $(163,100) respectively, while cash flows provided by investing activities for the same periods were $(52,679) and $(276,154) and cash flows provided by financing activities were $3,604,081 and $449,909, respectively.

At September 30, 2000 and 1999, the Company had working capital of $587,530 and $(984,590), respectively. The Company's working capital will decrease during fiscal year 2000, unless additional equity and/or debt financing is obtained. The Company hopes to obtain such financing and also hopes to receive funding from potential users of its technologies. If either of the foregoing are obtained, the Company believes it will have sufficient resources to meet its operating expenses for the next twelve months. The Company has recieved preliminary inquiries from possible funding sources, but no indication of commitment or firm interest has been recieved. Moreover, the Company has held preliminary discussions with potential users of its technologies, but none of such discussions have progressed to the point that it would be reasonable to conclude that funding from such potential users will occur prior to the end of the current fiscal year or during the next twelve (12) months.

Assets

As at September 30, 2000 the Company had total assets of $2,993,188 compared to total assets of $232,256 at September 30, 1999. This represents an increase of $2,760,862, which is attributable to an increase in cash due to deposits from a private placement conducted by the Company (see "Part II, Item 2. Changes in Securities") and an increase to accounts receiveable and the addition of a royalty reduction valued at $1,062,500. Total assets as at September 30, 2000 consist of $685,987 in cash, related party receivables of $563,435, other receivables of $472,204, prepaid expenses of $63,606, and office equipment net of accumulated depreciation of $9,330, of $45,456.

Results of Operations

As of the date of this filing the Company has limited sources of income. During the quarter ended September 30, 2000, the Company relied primarily upon the sale of securities to pay its operating expenses. See "Part II, Item 2. Changes in Securities" below. The Company also relied upon funds from its technology funding partners to pay for most of the research and development costs incurred during the nine (9) month period ended September 30, 2000. (See the last paragraph of this Section below). Management expects to earn some income from testing of heavy oil samples for clients, however the amount of the fees charged will be minimal as compared to the funds which will be required for the ongoing development of the Company's technologies.

The Company has a joint venture partner for the CPJ Technology who is obligated to fund $900,000 towards the development of the Technology to earn its fifty percent 50% interest therein. At the end of the quarter ended September 30, 2000, only $215,977 remained to fulfill the obligation and subsequent to such quarter end, the obligation was fully funded. The joint venture partner is committed to funding fifty percent (50%) of the ongoing development costs of the CPJ Technology after earning its fifty percent (50%) interest. The Company must be able to raise additional funds for development of both technologies by way of borrowings, equity financings, licensing agreements or joint ventures to continue to fund the development of its' technologies.

The Company's net operating loss for the nine (9) months ended September 30, 2000 of $2,570,933, as compared to the net operating loss for the nine (9) months ended September 30,1999 of $1,448,634 increased by 77.5% due to an increase in the Company's general and administrative expenses and amortization of charges related to stock option compensation granted in the first quarter of the year 2000 of $658,438 (see Note 7 to the Unaudited Financial Statements for the period ended September 30, 2000, included herewith). The Company had dry-well expenses in the first quarter of 1999 of $551,095 with no such expenses in the first quarter of this fiscal year. The Company's net loss from continuing operations during first nine (9) months of this fiscal year was $4,820,933, compared to a loss of $1,448,634 for the same period in the preceding year.

The Company's operating expenses for the nine (9) months ended September 30, 2000, were comprised of general and administrative expenses of $1,289,344, stock option compensation of 784,333 and technology development of $516,013 for a total of $2,589,780. While the Company's total expenses for the nine(9) months ended September 30, 2000, increased by 57% from the same period from the preceeding year, general and administrative expenses for the same periods increased by 149% due to increased personnel and investor relation activities.

The Company's present business does not generate sufficient revenues to cover its operating expenses. The Company may not be able to continue unless it can raise additional funds or source industry partners.

As of September 30, 2000, a total of $4,007,546, has been expended in the development of the Company's two proprietary and patented technologies by the Company, its subsidiaries and its joint venture partners. Of the total amount expended, Texas T Petroleum Ltd., the Company's joint venture partner in the CPJ technology has advanced $884,023 and $1,763,255, has been advanced by Stone Canyon Resources Ltd., a related corporation, for the SYNGEN technology, which amount includes a loan in the amount of $563,435 from the Company.

PART II