##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-K


|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|  
|   |  | For the fiscal year ended June 30, 2005                                                     
|  
|OR
|  
|o  |  | 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 0-14183


ENERGY WEST, INCORPORATED


(Exact name of registrant as specified in its charter)


|                                                                                       |  |                                         
|-------------------------------------------------------------------------------------- |  | ----------------------------------------
|Montana                                                                                |  | 81-0141785                              
|(State or other jurisdiction of
    incorporation or organization)                     |  | (I.R.S. Employer
    Identification No.)
|                                                                                      
|1 First Avenue South,
    Great Falls, Montana(Address of principal executive offices) |  | 59401(Zip Code)                         

Registrants telephone number, including area code


(406)-791-7500


Securities to be registered pursuant to Section 12(b) of
the Act:


None


Securities registered pursuant to Section 12(g) of the
Act:


Title of Each Class






þ o


þ


o þ


o þ






DOCUMENTS INCORPORATED BY REFERENCE












---










TABLE OF CONTENTS


|           |          |  |                                                                                                                      |      |  |    | 
|---------- | -------- |  | -------------------------------------------------------------------------------------------------------------------- | ---- |  | -- | 
|Item       |          |  |                                                                                                                      | Page | 
|           |          |  |                                                                                                                      |      | 
|           |          |  |                                                                                                                      |      |  |   
|Part I     |          |  | 3                                                                                                                    |     
|           | Item 1.  |  | Business                                                                                                             |      |  | 3  | 
|           | Item 2.  |  | Properties                                                                                                           |      |  | 10 | 
|           | Item 3.  |  | Legal Proceedings                                                                                                    |      |  | 10 | 
|           | Item 4.  |  | Submission of Matters to a Vote of Security
    Holders                                                              |      |  | 10 | 
|           |          |  |                                                                                                                      |      |  |   
|Part II    |          |  | 11                                                                                                                   |     
|           | Item 5.  |  | Market For Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |      |  | 11 | 
|           | Item 6.  |  | Selected Financial Data                                                                                              |      |  | 12 | 
|           | Item 7.  |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                            |      |  | 13 | 
|           | Item 7A. |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                       |      |  | 34 | 
|           | Item 8.  |  | Financial Statements and Supplementary
    Data                                                                      |      |  | 35 | 
|           | Item 9.  |  | Changes in and Disagreements With
    Accountants on Accounting and Financial Disclosure                             |      |  | 35 | 
|           | Item 9A. |  | Controls and Procedures                                                                                              |      |  | 36 | 
|           | Item 9B. |  | Other Information                                                                                                    |      |  | 36 | 
|           |          |  |                                                                                                                      |      |  |   
|Part III   |          |  | 36                                                                                                                   |     
|           | Item 10. |  | Directors and Executive Officers of the
    Registrant                                                               |      |  | 36 | 
|           | Item 11. |  | Executive Compensation                                                                                               |      |  | 37 | 
|           | Item 12. |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                   |      |  | 37 | 
|           | Item 13. |  | Certain Relationships and Related
    Transactions                                                                   |      |  | 37 | 
|           | Item 14. |  | Principal Accountant Fees and Services                                                                               |      |  | 37 | 
|           |          |  |                                                                                                                      |      |  |   
|Part IV    |          |  | 38                                                                                                                   |     
|           | Item 15. |  | Exhibits and Financial Statement
    Schedules                                                                       |      |  | 38 | 
|Signatures |          |  | 39                                                                                                                   |     
|EX-10.17  
|EX-10.18  
|EX-21     
|EX-23.1   
|EX-23.2   
|EX-31     
|EX-32     



2



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PART I


Forward-Looking Statements













|        |          
|------- | ---------
|ITEM 1. | BUSINESS.

Overview




|  |  |                                                                        |  |                                                                                                                                                                                                                                                                                                                                                             
|- |  | ---------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Natural Gas Operations                                                 |  | Distributes natural gas to approximately 33,000 customers
    through regulated utilities operating in and around Great Falls
    and West Yellowstone Montana, and Cody Wyoming. The approximate
    population of the service territories is 100,000.                                                                                                     
| |  | Propane Operations                                                     |  | Distributes propane to approximately 7,900 customers through
    utilities operating underground vapor systems in and around
    Payson, Pine and Strawberry, Arizona and retail distribution of
    bulk propane to approximately 2,200 customers in the same
    Arizona communities. The approximate population of the service
    territories is 40,000.
| |  | Energy West Resources, Inc. (EWR)                                      |  | Markets approximately 3 billion cubic feet of natural gas
    to commercial and industrial customers in Montana and Wyoming
    and manage midstream supply and production assets for
    transportation customers and utilities. EWR also has an
    ownership interest in production and gathering assets.                                                
| |  | Pipeline Operations (formerly Energy West Development, Inc.
    (EWD)) |  | Owns the Shoshone interstate and the Glacier gathering pipeline
    assets located in Montana and Wyoming. Certain natural gas
    producing wells owned by EWD are being managed and reported in
    EWR.                                                                                                                                                  

See Note 10 to our Consolidated Financial Statements in
Item 8 for financial information for each of our
segments.


3



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Natural Gas Operations




Natural Gas 
Montana Division










Gas Revenue


|               |  |                      |        |  |      |   |        |      |  |   |        | 
|-------------- |  | -------------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|               |  | Years Ended June 30, |       
|               |  |                      |       
|               |  | 2005                 |        |  | 2004 |   |        | 2003 | 
|               |  |                      |        |  |      |   |        |      | 
|               |  | (In thousands)       |       
|Residential    |  | $                    | 18,116 |  |      | $ | 16,427 |      |  | $ | 13,643 | 
|Commercial     |  |                      | 11,437 |  |      |   | 9,918  |      |  |   | 8,383  | 
|Transportation |  |                      | 1,939  |  |      |   | 1,856  |      |  |   | 1,789  | 
|               |  |                      |        |  |      |   |        |      | 
|Total          |  | $                    | 31,492 |  |      | $ | 28,201 |      |  | $ | 23,815 | 
|               |  |                      |        |  |      |   |        |      | 



|      |                                                                                                                                                                                                                                                                                                                                                                               
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note: | Revenue increased in fiscal year 2005 compared to fiscal year
    2004 due to higher gas costs as well as reflecting a full year
    of rate increases related to recovering property taxes. Fiscal
    year 2004 is higher as compared to fiscal year 2003 from
    increases in gas pricing and rate relief from approved rate
    cases in Montana for part of fiscal 2004.

4



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Gas Volumes


|                |  |                      |       |  |      |  |       |      |  |  |       | 
|--------------- |  | -------------------- | ----- |  | ---- |  | ----- | ---- |  |  | ----- | 
|                |  | Years Ended June 30, |      
|                |  |                      |      
|                |  | 2005                 |       |  | 2004 |  |       | 2003 | 
|                |  |                      |       |  |      |  |       |      | 
|                |  | (MMcf)               |      
|Residential     |  |                      | 2,136 |  |      |  | 2,206 |      |  |  | 2,267 | 
|Commercial      |  |                      | 1,267 |  |      |  | 1,317 |      |  |  | 1,359 | 
|Transportation  |  |                      | 1,493 |  |      |  | 1,443 |      |  |  | 1,462 | 
|                |  |                      |       |  |      |  |       |      | 
|Total Gas Sales |  |                      | 4,896 |  |      |  | 4,966 |      |  |  | 5,088 | 
|                |  |                      |       |  |      |  |       |      | 













| |                               
| | ------------------------------
| | Natural Gas  Wyoming Division



5



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Gas Revenue


|            |  |                      |        |  |      |   |        |      |  |   |       | 
|----------- |  | -------------------- | ------ |  | ---- | - | ------ | ---- |  | - | ----- | 
|            |  | Years Ended June 30, |       
|            |  |                      |       
|            |  | 2005                 |        |  | 2004 |   |        | 2003 | 
|            |  |                      |        |  |      |   |        |      | 
|            |  | (In thousands)       |       
|Residential |  | $                    | 4,805  |  |      | $ | 4,149  |      |  | $ | 3,119 | 
|Commercial  |  |                      | 4,434  |  |      |   | 3,606  |      |  |   | 2,591 | 
|Industrial  |  |                      | 4,059  |  |      |   | 3,107  |      |  |   | 2,102 | 
|            |  |                      |        |  |      |   |        |      | 
|Total       |  | $                    | 13,298 |  |      | $ | 10,862 |      |  | $ | 7,812 | 
|            |  |                      |        |  |      |   |        |      | 



|      |                                                                                                                                                                                                                                                                                                   
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note: | Higher revenues were realized in fiscal years 2005 and 2004
    compared to fiscal year 2003 due to higher gas costs and a
    general rate increase approved by Wyoming Public Service
    Commission at the end of fiscal year 2003 as well as higher
    commodity pricing in fiscal year 2004.



Gas Volumes


|                |  |                      |       |  |      |  |       |      |  |  |       | 
|--------------- |  | -------------------- | ----- |  | ---- |  | ----- | ---- |  |  | ----- | 
|                |  | Years Ended June 30, |      
|                |  |                      |      
|                |  | 2005                 |       |  | 2004 |  |       | 2003 | 
|                |  |                      |       |  |      |  |       |      | 
|                |  | (MMcf)               |      
|Residential     |  |                      | 519   |  |      |  | 515   |      |  |  | 541   | 
|Commercial      |  |                      | 582   |  |      |  | 540   |      |  |  | 531   | 
|Industrial      |  |                      | 643   |  |      |  | 568   |      |  |  | 525   | 
|                |  |                      |       |  |      |  |       |      | 
|Total Gas Sales |  |                      | 1,744 |  |      |  | 1,623 |      |  |  | 1,597 | 
|                |  |                      |       |  |      |  |       |      | 







Propane Operations




6



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Propane Revenue


|            |  |                      |       |  |      |   |       |      |  |   |        | 
|----------- |  | -------------------- | ----- |  | ---- | - | ----- | ---- |  | - | ------ | 
|            |  | Years Ended June 30, |      
|            |  |                      |      
|            |  | 2005                 |       |  | 2004 |   |       | 2003 | 
|            |  |                      |       |  |      |   |       |      | 
|            |  | (In thousands)       |      
|Residential |  | $                    | 6,509 |  |      | $ | 5,456 |      |  | $ | 5,155  | 
|Commercial  |  |                      | 2,310 |  |      |   | 2,280 |      |  |   | 7,631  | 
|            |  |                      |       |  |      |   |       |      | 
|Total       |  | $                    | 8,819 |  |      | $ | 7,736 |      |  | $ | 12,786 | 
|            |  |                      |       |  |      |   |       |      | 

Propane Volume


|            |  |                           |       |  |      |  |       |      |  |  |        | 
|----------- |  | ------------------------- | ----- |  | ---- |  | ----- | ---- |  |  | ------ | 
|            |  | Years Ended June 30,      |      
|            |  |                           |      
|            |  | 2005                      |       |  | 2004 |  |       | 2003 | 
|            |  |                           |       |  |      |  |       |      | 
|            |  | (In thousands of gallons) |      
|Residential |  |                           | 4,115 |  |      |  | 3,735 |      |  |  | 3,786  | 
|Commercial  |  |                           | 1,513 |  |      |  | 2,095 |      |  |  | 11,940 | 
|            |  |                           |       |  |      |  |       |      | 
|Total       |  |                           | 5,628 |  |      |  | 5,830 |      |  |  | 15,726 | 
|            |  |                           |       |  |      |  |       |      | 



|      |                                                                                                        
|----- | -------------------------------------------------------------------------------------------------------
|Note: | Decreases in revenues and volumes are a result of the sale of
    certain assets of RMF in August 2003.

EWR




7



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Pipeline Operations




Competition














Governmental Regulation




8



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##### Table of Contents





Seasonality




Environmental Matters












Employees




9



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|        |            
|------- | -----------
|ITEM 2. | PROPERTIES.

Montana 




Wyoming 




Arizona 







|        |                   
|------- | ------------------
|ITEM 3. | LEGAL PROCEEDINGS.








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



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PART II







|        |                                                                                                                       
|------- | ----------------------------------------------------------------------------------------------------------------------
|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
    STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY
    SECURITIES.

Our Common Stock




|                 |  |      |       |  |     |   |      | 
|---------------- |  | ---- | ----- |  | --- | - | ---- | 
|                 |  | High |       |  | Low |  
|                 |  |      |       |  |     |  
|Fiscal Year 2005 |  |      |       |  |     |   |      | 
|First Quarter    |  | $    | 7.10  |  |     | $ | 6.10 | 
|Second Quarter   |  | $    | 6.52  |  |     | $ | 5.41 | 
|Third Quarter    |  | $    | 7.82  |  |     | $ | 6.05 | 
|Fourth Quarter   |  | $    | 12.97 |  |     | $ | 6.20 | 
|Fiscal Year 2004 |  |      |       |  |     |   |      | 
|First Quarter    |  | $    | 7.89  |  |     | $ | 6.00 | 
|Second Quarter   |  | $    | 7.79  |  |     | $ | 5.95 | 
|Third Quarter    |  | $    | 7.60  |  |     | $ | 6.01 | 
|Fourth Quarter   |  | $    | 8.50  |  |     | $ | 6.42 | 

Holders of Record




Dividend Policy




11



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|        |                         
|------- | ------------------------
|ITEM 6. | SELECTED FINANCIAL DATA.



|                                         |                               |      |        |           |      |   |        |           |  |   |         |           |  |      |        |           |  |   |         |           | 
|---------------------------------------- | ----------------------------- | ---- | ------ | --------- | ---- | - | ------ | --------- |  | - | ------- | --------- |  | ---- | ------ | --------- |  | - | ------- | --------- | 
|                                         |                               | 2005 |        |           | 2004 |   |        | 2003(1)   |  |   | 2002(1) |           |  | 2001 |       
|                                         |                               |      |        |           |      |   |        |           |  |   |         |           |  |      |       
|Operating results                        |                               |      |        |           |      |   |        |           |  |   |         |           |  |      |        |           |  |   |         |          
|Operating revenue                        |                               | $    | 76,709 |           |      | $ | 73,291 |           |  | $ | 77,898  |           |  | $    | 89,240 |           |  | $ | 111,612 |          
|Operating expenses                       |                               |      |        |           |      |   |        |           |  |   |         |           |  |      |        |           |  |   |         |          
|                                         | Gas and electric purchases    |      |        | 58,332    |      |   |        | 57,911    |  |   |         | 62,520    |  |      |        | 74,590    |  |   |         | 90,173    | 
|                                         | General and administrative    |      |        | 9,448     |      |   |        | 10,170    |  |   |         | 11,669    |  |      |        | 8,790     |  |   |         | 12,095    | 
|                                         | Maintenance                   |      |        | 596       |      |   |        | 480       |  |   |         | 497       |  |      |        | 466       |  |   |         | 428       | 
|                                         | Depreciation and amortization |      |        | 2,313     |      |   |        | 2,332     |  |   |         | 2,393     |  |      |        | 2,059     |  |   |         | 1,970     | 
|                                         | Taxes other than income(2)    |      |        | 1,654     |      |   |        | 1,210     |  |   |         | 888       |  |      |        | 946       |  |   |         | 723       | 
|                                         |                               |      |        |           |      |   |        |           |  |   |         |           |  |      |       
|                                         | Total operating expenses      |      |        | 72,343    |      |   |        | 72,103    |  |   |         | 77,967    |  |      |        | 86,851    |  |   |         | 105,389   | 
|                                         |                               |      |        |           |      |   |        |           |  |   |         |           |  |      |       
|Operating income                         |                               |      | 4,366  |           |      |   | 1,188  |           |  |   | (69     | )         |  |      | 2,389  |           |  |   | 6,223   |          
|Other income-net                         |                               |      | 445    |           |      |   | 385    |           |  |   | 302     |           |  |      | 658    |           |  |   | 282     |          
|Total interest charges(3)                |                               |      | 2,677  |           |      |   | 2,498  |           |  |   | 1,633   |           |  |      | 1,704  |           |  |   | 2,097   |          
|                                         |                               |      |        |           |      |   |        |           |  |   |         |           |  |      |       
|Income (loss) before taxes               |                               |      | 2,134  |           |      |   | (925   | )         |  |   | (1,400  | )         |  |      | 1,343  |           |  |   | 4,408   |          
|Income tax expense (benefit)             |                               |      | 753    |           |      |   | (369   | )         |  |   | (543    | )         |  |      | 516    |           |  |   | 1,643   |          
|                                         |                               |      |        |           |      |   |        |           |  |   |         |           |  |      |       
|Net Income (Loss)                        |                               | $    | 1,381  |           |      | $ | (556   | )         |  | $ | (857    | )         |  | $    | 827    |           |  | $ | 2,765   |          
|                                         |                               |      |        |           |      |   |        |           |  |   |         |           |  |      |       
|Basic earnings (loss) per common share   |                               | $    | 0.53   |           |      | $ | (0.21  | )         |  | $ | (0.33   | )         |  | $    | (0.32  | )         |  | $ | 1.11    |          
|Diluted earnings (loss) per common share |                               | $    | 0.53   |           |      | $ | (0.21  | )         |  | $ | (0.33   | )         |  | $    | (0.32  | )         |  | $ | 1.10    |          
|Dividends per common share(4)            |                               | $    | 0.00   |           |      | $ | 0.00   |           |  | $ | 0.41    |           |  | $    | 0.52   |           |  | $ | 0.51    |          
|Weighted average common shares           |                               |      |        |           |      |   |        |           |  |   |         |           |  |      |        |           |  |   |         |          
|                                         | Outstanding  diluted         |      |        | 2,630,679 |      |   |        | 2,596,454 |  |   |         | 2,586,487 |  |      |        | 2,558,782 |  |   |         | 2,509,738 | 
|At year end:                             |                               |      |        |           |      |   |        |           |  |   |         |           |  |      |        |           |  |   |         |          
|                                         | Current assets                |      | $      | 14,921    |      |   | $      | 16,739    |  |   | $       | 15,790    |  |      | $      | 18,517    |  |   | $       | 26,621    | 
|                                         | Total assets                  |      | $      | 58,931    |      |   | $      | 61,445    |  |   | $       | 60,027    |  |      | $      | 57,295    |  |   | $       | 62,278    | 
|                                         | Current liabilities           |      | $      | 11,637    |      |   | $      | 16,725    |  |   | $       | 21,833    |  |      | $      | 19,899    |  |   | $       | 24,416    | 
|                                         | Total long-term obligations   |      | $      | 18,677    |      |   | $      | 21,697    |  |   | $       | 14,834    |  |      | $      | 15,367    |  |   | $       | 15,881    | 
|                                         | Total stockholders equity    |      | $      | 17,187    |      |   | $      | 13,401    |  |   | $       | 13,957    |  |      | $      | 15,699    |  |   | $       | 15,613    | 
|                                         |                               |      |        |           |      |   |        |           |  |   |         |           |  |      |       
|                                         | Total capitalization          |      | $      | 35,864    |      |   | $      | 35,098    |  |   | $       | 28,791    |  |      | $      | 31,066    |  |   | $       | 31,494    | 
|                                         |                               |      |        |           |      |   |        |           |  |   |         |           |  |      |       






|    |                                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | These amounts were restated in the prior year. See
    Item 7. Managements Discussion and Analysis of
    Financial Condition and Results of Operations 
    Restatement of Financial Results and Note 15 to the
    consolidated financial statements for a summary of the
    significant effects of the restatement.
|   
|(2) | Taxes other than income include approximately $290,000 in the
    fiscal years 2005 and 2004 for additional personal property
    taxes assessed by the Montana Department of Revenue.                                                                                                                                     
|   
|(3) | Total interest charges reflect the costs associated with the
    addition of $8,000,000 long-term debt incurred by the Company in
    March 2004.                                                                                                                                                                          
|   
|(4) | There have been no cash dividends paid subsequent to March 2003.                                                                                                                                                                                                                                                           

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|        |                                                                                                        
|------- | -------------------------------------------------------------------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
    CONDITION AND RESULTS OF CONSOLIDATED OPERATIONS.



Forward-Looking Statements








Executive Overview






| |   |                                                                  
| | - | -----------------------------------------------------------------
| |  | We added the following individuals to our senior management team:



| |   |                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------
| |  | David Cerotzke, President/ CEO  32 years
    of gas industry experience.                                                    
|
| |  | Wade Brooksby, Vice President and CFO 
    22 years of energy industry financial/operating and SEC
    reporting experience.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | New rates were put in place in our regulated utilities in Great
    Falls and West Yellowstone. These along with the new rates
    adopted in Cody the year before significantly improved our
    margin (total revenue less gas costs). A vigorous focus on cost
    management led to significant reductions in expenses which
    allowed more of our margin to drop to the bottom line as
    earnings. This was offset somewhat by the accounting and legal
    costs of our restatement but it generated good earnings in
    fiscal 2005 and set the stage for improvements in the future.
|
| |  | We have narrowed the focus of our non-regulated operations
    significantly seeking to capitalize on opportunities where our
    location or expertise give us a unique advantage to add value,
    such as our production properties near Cut Bank, Montana and our
    Shoshone and Glacier pipelines near Cody, Wyoming.                                                                                                                                                                                                                                                                     
|
| |  | On May 26, 2005, we successfully completed a $2,300,000
    sale of 287,500 common shares at a price of $8.00 per share
    (a premium to the market at that time). We were able to complete
    the transaction without engaging an investment banker or broker;
    therefore, the deal costs were                                                                                                                                                                                                                                                                                             

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | negligible. $2,000,000 of the proceeds from the offering were
    used to satisfy our short-term debt obligation to LaSalle Bank.                                                                                                                                                                                                                                                                                                                       
|
| |  | During the third and fourth quarters, our operations provided
    sufficient positive cash flows to enable us to significantly pay
    down the working capital line of credit to its lowest level in
    several years while at the same time building gas storage
    inventories needed for the coming winter season. The increased
    positive cash flow has resulted in better payment terms from
    some of our major gas and propane suppliers.
|
| |  | During the fourth quarter, we successfully negotiated a new
    supply agreement to secure our propane requirements for our
    Arizona operations.                                                                                                                                                                                                                                                                                                     
|
| |  | During the third quarter, we engaged new securities legal
    counsel and independent auditors whose expertise fit well with
    our size and business sector.                                                                                                                                                                                                                                                                                          
|
| |  | At our March 2005 Annual Meeting of Shareholders, the
    shareholders approved changes in the Board of Directors to a
    smaller more efficient size and increased the authorized common
    shares to 5,000,000, both of which we believe will allow us to
    respond to opportunities more quickly.                                                                                                                                                









Critical Accounting Policies and Estimates




14



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| |                      
| | ---------------------
| | Regulatory Accounting









| |                                             
| | --------------------------------------------
| | Accumulated Provisions for Doubtful Accounts





| |                                
| | -------------------------------
| | Unbilled Revenues and Gas Costs



Recoverable/ Refundable Costs of Gas and Propane
Purchases


Derivatives


15



---



##### Table of Contents







| |   |                                                                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | There is variability in mark-to-market earnings due
    to changes in the market price for gas. Our portfolio is valued
    based on current and expected future gas prices. Changes in
    these prices can cause fluctuations in earnings.                                                                                               
|
| |  | We discount derivative assets and liabilities using risk-free
    interest rates adjusted for credit standing in accordance with
    SFAS No. 133, which is more fully described in
    Statement of Financial Accounting Concepts No. 7,
    Using Cash Flow Information and Present Value in
    Accounting Measurement (SFAS Concept 7).



Results of Consolidated Operations






| |                                                                                
| | -------------------------------------------------------------------------------
| | Fiscal Year Ended June 30, 2005 Compared to Fiscal
    Year Ended June 30, 2004

Net Income (Loss)


Revenues


Gross Margin


16



---



##### Table of Contents



Expenses Other Than Costs of Gas and Electricity and Costs of
Goods Sold








Certain Expenses Incurred During Fiscal Years 2003, 2004, and
2005




|                                       |  |      |         |  |      |   |           |      |  |   |           |  |  |   |           | 
|-------------------------------------- |  | ---- | ------- |  | ---- | - | --------- | ---- |  | - | --------- |  |  | - | --------- | 
|                                       |  | 2005 |         |  | 2004 |   |           | 2003 |  |   | Total     | 
|                                       |  |      |         |  |      |   |           |      |  |   |           | 
|Cost of PPLM litigation                |  |      |         |  |      |   |           |      |  | $ | 1,552,000 |  |  | $ | 1,552,000 | 
|Proxy Contest Expenses                 |  |      |         |  |      | $ | 570,000   |      |  |   |           |  |  | $ | 570,000   | 
|Debt Issuance Expenses*                |  | $    | 336,000 |  |      |   | 663,000   |      |  |   | 420,000   |  |  | $ | 1,419,000 | 
|Shareholder Rights Plan                |  |      |         |  |      |   | 227,000   |      |  |   |           |  |  |   | 227,000   | 
|Accounting and legal restatement costs |  |      | 388,000 |  |      |   |           |      |  |   |           |  |  |   | 388,000   | 
|                                       |  |      |         |  |      |   |           |      |  |   |           | 
|Total                                  |  | $    | 724,000 |  |      | $ | 1,460,000 |      |  | $ | 1,972,000 |  |  | $ | 4,156,000 | 
|                                       |  |      |         |  |      |   |           |      |  |   |           | 






|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | In fiscal year 2004, $696,000 of short-term debt issuance costs
    were capitalized. Beginning October 31, 2003 these costs
    began amortizing at $58,000 per month. At June 30,
    2004, $522,000 of amortization had been included as interest
    expense. In addition, $41,000 was included as interest expense
    at June 30, 2004 for amortization of costs totaling
    $830,000 associated with obtaining long-term debt. In fiscal
    year 2004, $100,000 related to obtaining short-term financing
    was recorded in general and administrative expenses compared to
    $420,000 in fiscal year 2003. In fiscal year 2005, the remaining
    $174,000 short-term debt issuance costs were charged to expense.
    In addition, $161,000 was included as interest expense at
    June 30, 2005 for continuing amortization of debt issuance
    costs for the long-term debt.

Other Income


Interest Expense


17



---



##### Table of Contents



Income Tax Benefits (Expense)




| |                                                                                
| | -------------------------------------------------------------------------------
| | Fiscal Year Ended June 30, 2004 Compared to Fiscal
    Year Ended June 30, 2003

Net Loss


Revenues


Gross Margin


Expenses Other Than Costs of Gas and Electricity and Costs of
Goods Sold






18



---



##### Table of Contents





Other Income


Interest Expense


Income Tax Benefits


Operating Results of our Natural Gas Operations


|                       |                                   |                     |   |        |      |  |   |        |   |  |   |        |  
|---------------------- | --------------------------------- | ------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                       |                                   | Years Ended June 30 |  
|                       |                                   |                     |  
|                       |                                   | 2005                |   |        | 2004 |  |   | 2003   |  
|                       |                                   |                     |   |        |      |  |   |        |  
|                       |                                   | (In thousands)      |  
|Natural Gas Operations |                                   |                     |   |        |      |  |   |        |   |  |   |       
|                       | Operating revenues                |                     | $ | 44,792 |      |  | $ | 39,063 |   |  | $ | 31,627 |  
|                       | Gas Purchased                     |                     |   | 32,796 |      |  |   | 27,883 |   |  |   | 21,754 |  
|                       |                                   |                     |   |        |      |  |   |        |  
|                       | Gross Margin                      |                     |   | 11,996 |      |  |   | 11,180 |   |  |   | 9,873  |  
|                       | Operating expenses                |                     |   | 9,666  |      |  |   | 9,843  |   |  |   | 8,542  |  
|                       |                                   |                     |   |        |      |  |   |        |  
|                       | Operating income                  |                     |   | 2,330  |      |  |   | 1,337  |   |  |   | 1,331  |  
|                       | Other (income) loss               |                     |   | (166   | )    |  |   | (97    | ) |  | $ | (94    | )
|                       |                                   |                     |   |        |      |  |   |        |  
|                       | Income before interest and taxes  |                     |   | 2,496  |      |  |   | 1,434  |   |  |   | 1,425  |  
|                       | Interest expense                  |                     |   | 1,775  |      |  |   | 1,623  |   |  |   | 999    |  
|                       |                                   |                     |   |        |      |  |   |        |  
|                       | Income (loss) before income taxes |                     |   | 721    |      |  |   | (189   | ) |  |   | 426    |  
|                       | Income tax benefit (expense)      |                     |   | (216   | )    |  |   | 26     |   |  |   | (245   | )
|                       |                                   |                     |   |        |      |  |   |        |  
|                       | Net income (loss)                 |                     | $ | 505    |      |  | $ | (163   | ) |  | $ | 181    |  
|                       |                                   |                     |   |        |      |  |   |        |  



| |                                                                                
| | -------------------------------------------------------------------------------
| | Fiscal Year Ended June 30, 2005 Compared to Fiscal
    Year Ended June 30, 2004

Natural Gas Revenues and Gross Margins






Natural Gas Operating Expenses


19



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##### Table of Contents





Natural Gas Other Income


Natural Gas Interest Expense


Natural Gas Income Tax Benefit (Expense)




| |                                                                                
| | -------------------------------------------------------------------------------
| | Fiscal Year Ended June 30, 2004 Compared to Fiscal
    Year Ended June 30, 2003

Natural Gas Revenues and Gross Margins






Natural Gas Operating Expenses


Natural Gas Other Income


Natural Gas Interest Expense


Natural Gas Income Tax Benefit (Expense)


20



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##### Table of Contents



Operating Results of our Propane Operations


|                   |                                   |                      |   |       |      |  |   |       |   |  |   |        |  
|------------------ | --------------------------------- | -------------------- | - | ----- | ---- |  | - | ----- | - |  | - | ------ | -
|                   |                                   | Years Ended June 30, |  
|                   |                                   |                      |  
|                   |                                   | 2005                 |   |       | 2004 |  |   | 2003  |  
|                   |                                   |                      |   |       |      |  |   |       |  
|                   |                                   | (In thousands)       |  
|Propane Operations |                                   |                      |   |       |      |  |   |       |   |  |   |       
|                   | Operating revenues                |                      | $ | 8,820 |      |  | $ | 7,736 |   |  | $ | 12,786 |  
|                   | Gas Purchased                     |                      |   | 4,777 |      |  |   | 4,000 |   |  |   | 8,762  |  
|                   |                                   |                      |   |       |      |  |   |       |  
|                   | Gross Margin                      |                      |   | 4,043 |      |  |   | 3,736 |   |  |   | 4,024  |  
|                   | Operating expenses                |                      |   | 2,969 |      |  |   | 3,039 |   |  |   | 3,600  |  
|                   |                                   |                      |   |       |      |  |   |       |  
|                   | Operating income                  |                      |   | 1,074 |      |  |   | 697   |   |  |   | 424    |  
|                   | Other (income) loss               |                      |   | (210  | )    |  |   | (181  | ) |  | $ | (187   | )
|                   |                                   |                      |   |       |      |  |   |       |  
|                   | Income before interest and taxes  |                      |   | 1,284 |      |  |   | 878   |   |  |   | 611    |  
|                   | Interest expense                  |                      |   | 571   |      |  |   | 573   |   |  |   | 403    |  
|                   |                                   |                      |   |       |      |  |   |       |  
|                   | Income (loss) before income taxes |                      |   | 713   |      |  |   | 305   |   |  |   | 208    |  
|                   | Income tax benefit (expense)      |                      |   | (271  | )    |  |   | (2    | ) |  |   | (69    | )
|                   |                                   |                      |   |       |      |  |   |       |  
|                   | Net income (loss)                 |                      | $ | 442   |      |  | $ | 303   |   |  | $ | 139    |  
|                   |                                   |                      |   |       |      |  |   |       |  



| |                                                                                
| | -------------------------------------------------------------------------------
| | Fiscal Year Ended June 30, 2005 Compared to Fiscal
    Year Ended June 30, 2004

Propane Revenue and Gross Margins


Propane Operating Expenses


Propane Other Income


Propane Interest Expense


Propane Income Tax Benefit (Expense)




| |                                                                                
| | -------------------------------------------------------------------------------
| | Fiscal Year Ended June 30, 2004 Compared to Fiscal
    Year Ended June 30, 2003

Propane Revenue and Gross Margins


21



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##### Table of Contents





Propane Operating Expenses


Propane Other Income


Propane Interest Expense


Propane Income Tax Benefit (Expense)


Operating Results of our EWR Operations


|                              |                                   |                      |   |        |      |  |   |        |   |  |   |        |  
|----------------------------- | --------------------------------- | -------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                              |                                   | Years Ended June 30, |  
|                              |                                   |                      |  
|                              |                                   | 2005                 |   |        | 2004 |  |   | 2003   |  
|                              |                                   |                      |   |        |      |  |   |        |  
|                              |                                   | (In thousands)       |  
|Energy West Resources (EWR) |                                   |                      |   |        |      |  |   |        |   |  |   |       
|                              | Operating revenues                |                      | $ | 22,674 |      |  | $ | 26,091 |   |  | $ | 33,035 |  
|                              | Gas Purchased                     |                      |   | 20,760 |      |  |   | 26,028 |   |  |   | 31,717 |  
|                              |                                   |                      |   |        |      |  |   |        |  
|                              | Gross Margin                      |                      |   | 1,914  |      |  |   | 63     |   |  |   | 1,318  |  
|                              | Operating expenses                |                      |   | 1,173  |      |  |   | 1,096  |   |  |   | 3,040  |  
|                              |                                   |                      |   |        |      |  |   |        |  
|                              | Operating income                  |                      |   | 741    |      |  |   | (1,033 | ) |  |   | (1,722 | )
|                              | Other (income) loss               |                      |   | (67    | )    |  |   | 13     |   |  |   | (19    | )
|                              |                                   |                      |   |        |      |  |   |        |  
|                              | Income before interest and taxes  |                      | $ | 808    |      |  | $ | (1,046 | ) |  | $ | (1,703 | )
|                              | Interest expense                  |                      |   | 275    |      |  |   | 253    |   |  |   | 224    |  
|                              |                                   |                      |   |        |      |  |   |        |  
|                              | Income (loss) before income taxes |                      |   | 533    |      |  |   | (1,299 | ) |  |   | (1,927 | )
|                              | Income tax benefit (expense)      |                      |   | (211   | )    |  |   | 444    |   |  |   | 840    |  
|                              |                                   |                      |   |        |      |  |   |        |  
|                              | Net income (loss)                 |                      | $ | 322    |      |  | $ | (855   | ) |  | $ | (1,087 | )
|                              |                                   |                      |   |        |      |  |   |        |  



| |                                                                                
| | -------------------------------------------------------------------------------
| | Fiscal Year Ended June 30, 2005 Compared to Fiscal
    Year Ended June 30, 2004

EWR Revenues and Gross Margins


22



---



##### Table of Contents





EWR Operating Expenses


EWR Other Income (Expense)


EWR Interest Expense


EWR Income Tax Benefit (Expense)




| |                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------
| | Fiscal Year Ended June 30, 2004 (as restated)
    Compared to Fiscal Year Ended June 30, 2003
    (as restated)

EWR Revenues and Gross Margins


EWR Operating Expenses


EWR Other Income (Expense)


EWR Interest Expense


EWR Income Tax Benefit (Expense)


23



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##### Table of Contents



Operating Results of our Pipeline Operations


|                    |                                   |                      |   |     |      |  |   |      |   |  |   |      |  
|------------------- | --------------------------------- | -------------------- | - | --- | ---- |  | - | ---- | - |  | - | ---- | -
|                    |                                   | Years Ended June 30, |  
|                    |                                   |                      |  
|                    |                                   | 2005                 |   |     | 2004 |  |   | 2003 |  
|                    |                                   |                      |   |     |      |  |   |      |  
|                    |                                   | (In thousands)       |  
|Pipeline Operations |                                   |                      |   |     |      |  |   |      |   |  |   |     
|                    | Operating revenues                |                      | $ | 424 |      |  | $ | 401  |   |  | $ | 449  |  
|                    | Gas Purchased                     |                      |   | 0   |      |  |   | 0    |   |  |   | 287  |  
|                    |                                   |                      |   |     |      |  |   |      |  
|                    | Gross Margin                      |                      |   | 424 |      |  |   | 401  |   |  |   | 162  |  
|                    | Operating expenses                |                      |   | 202 |      |  |   | 214  |   |  |   | 265  |  
|                    |                                   |                      |   |     |      |  |   |      |  
|                    | Operating income                  |                      |   | 222 |      |  |   | 187  |   |  |   | (103 | )
|                    | Other (income) loss               |                      |   | (2  | )    |  |   | (121 | ) |  |   | (1   | )
|                    |                                   |                      |   |     |      |  |   |      |  
|                    | Income before interest and taxes  |                      | $ | 224 |      |  | $ | 308  |   |  | $ | (102 | )
|                    | Interest expense                  |                      |   | 56  |      |  |   | 50   |   |  |   | 7    |  
|                    |                                   |                      |   |     |      |  |   |      |  
|                    | Income (loss) before income taxes |                      |   | 168 |      |  |   | 258  |   |  |   | (109 | )
|                    | Income tax benefit (expense)      |                      |   | (55 | )    |  |   | (99  | ) |  |   | 17   |  
|                    |                                   |                      |   |     |      |  |   |      |  
|                    | Net income (loss)                 |                      | $ | 113 |      |  | $ | 159  |   |  | $ | (92  | )
|                    |                                   |                      |   |     |      |  |   |      |  



| |                                                                                
| | -------------------------------------------------------------------------------
| | Fiscal Year Ended June 30, 2005 Compared to Fiscal
    Year Ended June 30, 2004

Pipeline Revenues and Gross Margins




Pipeline Operating Expenses


Pipeline Other Income


Pipeline Interest Expense


Pipeline Income Tax Benefit (Expense)




| |                                                                                
| | -------------------------------------------------------------------------------
| | Fiscal Year Ended June 30, 2004 Compared to Fiscal
    Year Ended June 30, 2003

Pipeline Revenues and Gross Margins


Pipeline Operating Expenses


Pipeline Other Income


24



---



##### Table of Contents



Pipeline Interest Expense


Pipeline Income Tax Benefit (Expense)


Consolidated Cash Flow Analysis




| |                         
| | ------------------------
| | Sources and Uses of Cash









|                                           |  |      |            |   |      |   |            |      |  |   |            |  
|------------------------------------------ |  | ---- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                           |  | 2005 |            |   | 2004 |   |            | 2003 | 
|                                           |  |      |            |   |      |   |            |      | 
|Provided by (used in) operating activities |  | $    | 1,344,000  |   |      | $ | (5,872,000 | )    |  | $ | 4,549,000  |  
|Used in investing activities               |  |      | (2,466,000 | ) |      |   | (1,146,000 | )    |  |   | (4,077,000 | )
|(Used in) provided by financing activities |  |      | (107,000   | ) |      |   | 6,402,000  |      |  |   | 1,099,000  |  
|                                           |  |      |            |   |      |   |            |      | 
|(Decrease) increase in cash                |  | $    | (1,229,000 | ) |      | $ | (616,000   | )    |  | $ | 1,571,000  |  
|                                           |  |      |            |   |      |   |            |      | 





25



---



##### Table of Contents





Governmental Regulation




Liquidity and Capital Resources






26



---



##### Table of Contents





|                         |                   |         |   |            |         |  |   |            |  |  |         |            |  |  |   |           | 
|------------------------ | ----------------- | ------- | - | ---------- | ------- |  | - | ---------- |  |  | ------- | ---------- |  |  | - | --------- | 
|                         |                   | First   |   |            | Second  |  |   | Third      |  |  | Fourth  |           
|                         |                   | Quarter |   |            | Quarter |  |   | Quarter    |  |  | Quarter |           
|                         |                   |         |   |            |         |  |   |            |  |  |         |           
|Year Ended June 30, 2005 |                   |         |   |            |         |  |   |            |  |  |         |            |  |  |   |          
|                         | Minimum borrowing |         | $ | 7,729,000  |         |  | $ | 12,688,000 |  |  | $       | 3,500,000  |  |  | $ | 2,700,000 | 
|                         | Maximum borrowing |         | $ | 13,129,000 |         |  | $ | 14,629,000 |  |  | $       | 13,929,000 |  |  | $ | 3,900,000 | 
|                         | Average borrowing |         | $ | 10,196,000 |         |  | $ | 13,982,000 |  |  | $       | 8,110,000  |  |  | $ | 3,167,000 | 
|Year Ended June 30, 2004 |                   |         |   |            |         |  |   |            |  |  |         |            |  |  |   |          
|                         | Minimum borrowing |         | $ | 6,105,000  |         |  | $ | 12,102,000 |  |  | $       | 9,229,000  |  |  | $ | 4,729,000 | 
|                         | Maximum borrowing |         | $ | 8,602,000  |         |  | $ | 12,629,000 |  |  | $       | 13,229,000 |  |  | $ | 6,729,000 | 
|                         | Average borrowing |         | $ | 7,482,000  |         |  | $ | 12,277,000 |  |  | $       | 10,563,000 |  |  | $ | 5,563,000 | 
|Year Ended June 30, 2003 |                   |         |   |            |         |  |   |            |  |  |         |            |  |  |   |          
|                         | Minimum borrowing |         | $ | 5,452,000  |         |  | $ | 9,726,000  |  |  | $       | 5,694,000  |  |  | $ | 5,628,000 | 
|                         | Maximum borrowing |         | $ | 9,020,000  |         |  | $ | 10,642,000 |  |  | $       | 8,031,000  |  |  | $ | 6,105,000 | 
|                         | Average borrowing |         | $ | 6,988,000  |         |  | $ | 10,155,000 |  |  | $       | 6,538,000  |  |  | $ | 5,946,000 | 









27



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##### Table of Contents









Contractual Obligations






Payments Due by Period


|                                         |  |       |            |        |         |   |           |           |  |   |            |  |  |         |            |  |  |   |            | 
|---------------------------------------- |  | ----- | ---------- | ------ | ------- | - | --------- | --------- |  | - | ---------- |  |  | ------- | ---------- |  |  | - | ---------- | 
|                                         |  |       |            | 1 Year |         |   |           |           |  |   | After      | 
|Contractual Obligations                  |  | Total |            |        | or Less |   |           | 2-3 Years |  |   | 4-5 Years  |  |  | 5 Years |           
|                                         |  |       |            |        |         |   |           |           |  |   |            |  |  |         |           
|Interest payments(a)                     |  |       | 8,387,090  |        |         |   | 1,459,234 |           |  |   | 2,697,910  |  |  |         | 2,143,967  |  |  |   | 2,085,979  | 
|Long Term Debt(b)                        |  | $     | 19,690,286 |        |         | $ | 1,013,089 |           |  | $ | 2,158,213  |  |  | $       | 4,540,000  |  |  | $ | 11,978,984 | 
|Operating Lease Obligations              |  |       | 330,447    |        |         |   | 142,599   |           |  |   | 181,248    |  |  |         | 6,600      |  |  |   |           | 
|Funding of retiree health plan(c)        |  |       | 116,000    |        |         |   | 21,000    |           |  |   | 42,000     |  |  |         | 42,000     |  |  |   | 11,000     | 
|Transportation and Storage Obligation(d) |  | $     | 20,010,872 |        |         |   | 4,367,715 |           |  |   | 8,544,997  |  |  |         | 7,098,160  |  |  |   |           | 
|                                         |  |       |            |        |         |   |           |           |  |   |            |  |  |         |           
|Total Obligations                        |  | $     | 48,534,695 |        |         | $ | 7,003,637 |           |  | $ | 13,624,368 |  |  | $       | 13,830,727 |  |  | $ | 14,075,963 | 
|                                         |  |       |            |        |         |   |           |           |  |   |            |  |  |         |           






|    |  |                                                                                                                                                                                                                                  
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Our long-term debt, notes payable and customers deposits
    all require interest payments. Interest payments are projected
    based on actual interest payments incurred in fiscal 2005 until
    the underlying debts mature.

28



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##### Table of Contents





|    |  |                                                                                                                                                                                                                                                                          
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) |  | See Note 7 of the Notes to Consolidated Financial
    Statements for a description of this debt. The cash obligations
    represent the maximum annual amount of redemptions to be made to
    certain holders or their beneficiaries through the debt maturity
    date.
|   
|(c) |  | For the purpose of this calculation, we have assumed that our
    obligation is limited to a maximum of $125 per month for
    each of our 14 retired persons for the remainder of their
    expected life.                                                              
|   
|(d) |  | Transportation and Storage Obligations represent annual
    commitments with suppliers for periods extending up to four
    years. These costs are recoverable in customer rates.                                                                                        



Capital Expenditures






|                           |  |                |       |             |              |   |       | 
|-------------------------- |  | -------------- | ----- | ----------- | ------------ | - | ----- | 
|                           |  |                |       | Estimated   |             
|                           |  |                |       | Future Cash |             
|                           |  | Actual         |       |             | Requirements |  
|                           |  |                |       |             |              |  
|                           |  | 2005           |       |             | 2006         |  
|                           |  |                |       |             |              |  
|                           |  | (In thousands) |      
|Natural Gas Operations     |  | $              | 1,946 |             |              | $ | 1,587 | 
|Propane Operations         |  |                | 613   |             |              |   | 712   | 
|Energy West Resources      |  |                | 194   |             |              |   |      | 
|Pipeline Operations        |  |                | 43    |             |              |   | 57    | 
|                           |  |                |       |             |              |  
|Total capital expenditures |  | $              | 2,796 |             |              | $ | 2,356 | 
|                           |  |                |       |             |              |  

New Accounting Pronouncements


Accounting for Stock-Based Compensation.




29



---



##### Table of Contents







Risk Factors






| |                                                                                               
| | ----------------------------------------------------------------------------------------------
| | Our quarterly results of operations could fluctuate due to
    factors outside of our control.





| |   |                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Fluctuating energy commodity prices, including prices for fuel
    and purchased power;                                                                                                                                             
|
| |  | The possibility that regulators may not permit us to pass
    through all increased costs to customers;                                                                                                                             
|
| |  | Fluctuations in wholesale margins due to uncertainty in the
    wholesale propane and power markets;                                                                                                                                
|
| |  | Changes in general economic conditions in the United States and
    changes in the industries in which we conduct business;                                                                                                         
|
| |  | Changes in federal or state laws and regulations to which we are
    subject, including tax, environmental and employment laws and
    regulations;                                                                                 
|
| |  | The impact of the Federal Energy Regulatory Commission
    (FERC) and state public service commission statutes,
    regulations, and actions, including allowed rates of return, and
    the resolution of other regulatory matters;
|
| |  | Our ability to obtain governmental and regulatory approval of
    various expansion or other projects;                                                                                                                              
|
| |  | The costs and effects of legal and administrative claims and
    proceedings against us or our subsidiaries;                                                                                                                        
|
| |  | Conditions of the capital markets we utilize to access capital
    to finance operations;                                                                                                                                           
|
| |  | The ability to raise capital in a cost-effective way;                                                                                                                                                                               
|
| |  | The ability to meet financial covenants imposed by lenders to be
    able to draw down on revolving lines of credit;                                                                                                                
|
| |  | The effect of changes in accounting policies, if any;                                                                                                                                                                               
|
| |  | The ability to manage our growth;                                                                                                                                                                                                   
|
| |  | The ability to control costs;                                                                                                                                                                                                       
|
| |  | The ability of each business unit to successfully implement key
    systems, such as service delivery systems;                                                                                                                      

30



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| |   |                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our ability to develop expanded markets and product offerings
    and our ability to maintain existing markets;                                                                                                                                                                                
|
| |  | The ability of customers of the energy marketing and trading
    business to obtain financing for various projects;                                                                                                                                                                            
|
| |  | The ability of customers of the energy marketing and trading
    business to obtain governmental and regulatory approval of
    various projects;                                                                                                                                              
|
| |  | Future utilization of pipeline capacity, which can depend on
    energy prices, competition from alternative fuels, the general
    level of natural gas and propane demand, decisions by customers
    not to renew expiring natural gas or propane contracts, and
    weather conditions; and
|
| |  | Global and domestic economic repercussions from terrorist
    activities and the governments response thereto.                                                                                                                                                                                



| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | We are subject to complex government regulation, which may
    have a negative impact on our business and our results of
    operations.







| |                                                                                                               
| | --------------------------------------------------------------------------------------------------------------
| | Recent events in the energy markets that are beyond our
    control may have negative impacts on our business.



31



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| |                                                                           
| | --------------------------------------------------------------------------
| | Our results of operations can be adversely affected by
    milder weather.





| |                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The use of derivative contracts in the normal course of
    our business and changing interest rates and market conditions
    could result in financial losses that negatively impact our
    results of operations.







| |                                                                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We are subject to numerous environmental laws and
    regulations which may increase our cost of operations, impact
    our business plans, or expose us to environmental
    liabilities.









| |                                                             
| | ------------------------------------------------------------
| | We depend upon our executive officers and key
    personnel.



32



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| |                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Failure to achieve and maintain effective internal
    controls in accordance with Section 404 of the
    Sarbanes-Oxley Act could have a material adverse effect on our
    business and stock price.









| |                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Certain provisions in our charter, under applicable
    Montana law, as well as our Shareholder Rights Plan, may prevent
    or delay a change of control of our company.





33



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| |                                                                                         
| | ----------------------------------------------------------------------------------------
| | Actual results could differ from estimates used to prepare
    our financial statements.





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Regulatory Accounting  Regulatory accounting
    allows for the actions of regulators, such as the MPSC, and
    FERC, to be reflected in the financial statements. Their actions
    may cause us to capitalize costs that would otherwise be
    included as an expense in the current period by unregulated
    companies. If future recovery of costs ceases to be probable,
    the assets would be written off as a charge in current period
    earnings.                                                                                   
|
| |  | Derivative Accounting  Derivative accounting
    requires evaluation of rules that are complex and subject to
    varying interpretations. Our evaluation of these rules, as they
    apply to our contracts, will determine whether we use accrual
    accounting or fair value (mark-to-market) accounting.
    Mark-to-market accounting requires that changes in fair value be
    recorded in earnings or, if certain hedge accounting criteria
    are met, in common stock equity (as a component of other
    comprehensive income (loss)).
|
| |  | Mark-to-Market Accounting  The market value of
    our derivative contracts is not always readily determinable. In
    some cases, we use models and other valuation techniques to
    determine fair value. The use of these models and valuation
    techniques sometimes requires subjective and complex judgment.
    Actual results could differ from the results estimated through
    application of these methods.                                                                                                                         






|         |                                                               
|-------- | --------------------------------------------------------------
|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    RISK



Commodity Price Risk




Interest Rate Risk




34



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Credit Risk









|        |                                             
|------- | --------------------------------------------
|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.








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











35



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|         |                         
|-------- | ------------------------
|ITEM 9A. | CONTROLS AND PROCEDURES.












|         |                  
|-------- | -----------------
|ITEM 9B. | OTHER INFORMATION






PART III









|         |                                                   
|-------- | --------------------------------------------------
|ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT



Code of Ethics




36



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|         |                       
|-------- | ----------------------
|ITEM 11. | EXECUTIVE COMPENSATION








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



Equity Compensation Plan




|                                                          |  |                            |         |  |                               |                                |                               |                             |  |  |         |    
|--------------------------------------------------------- |  | -------------------------- | ------- |  | ----------------------------- | ------------------------------ | ----------------------------- | --------------------------- |  |  | ------- | ---
|                                                          |  |                            |         |  |                               | Number of Securities Remaining |                              
|                                                          |  | Number of Securities to be |         |  |                               |                                | Available for Future Issuance |                            
|                                                          |  | Issued Upon Exercise of    |         |  | Weighted-Average Exercise     |                                |                               | Under Equity Compensation   | 
|                                                          |  | Outstanding Options,       |         |  | Price of Outstanding Options, |                                |                               | Plans (Excluding Securities | 
|Plan Category                                             |  | Warrants and Rights.       |         |  | Warrants and Rights.          |                                |                               | Reflected in Column (a))    | 
|                                                          |  |                            |         |  |                               |                                |                               |                             | 
|                                                          |  | (a)                        |         |  | (b)                           |                                |                               | (c)                         | 
|Equity compensation plans approved by security holders    |  |                            | 126,000 |  |                               | $                              | 7.68                          |                             |  |  | 100,669 | (1)
|Equity compensation plan not approved by security holders |  |                            |        |  |                               |                                |                              |                             |  |  |        |    
|                                                          |  |                            |         |  |                               |                                |                               |                             | 
|Total                                                     |  |                            | 126,000 |  |                               | $                              | 7.68                          |                             |  |  | 100,669 |    
|                                                          |  |                            |         |  |                               |                                |                               |                             | 






|    |                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes 100,000 shares available for future issuance under
    our Deferred Compensation Plan for Directors, 73,331 shares
    of which have been issued or allocated for issuance under terms
    of the plan.




ITEM 13.     CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS







ITEM 14.     PRINCIPAL ACCOUNTING
FEES AND SERVICES




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PART IV







|         |                                           
|-------- | ------------------------------------------
|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES



|                                                                                      |  |      |     | 
|------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                      |  | Page |    
|                                                                                      |  |      |    
|Report of Independent Registered Public Accounting
    Firm  Hein & Associates LLP   |  |      | F-1 | 
|Report of Independent Registered Public Accounting
    Firm  Deloitte and Touche LLP |  |      | F-2 | 
|Consolidated Balance Sheets                                                           |  |      | F-3 | 
|Consolidated Statements of Operations                                                 |  |      | F-4 | 
|Consolidated Statements of Stockholders Equity                                       |  |      | F-5 | 
|Consolidated Statements of Cash Flows                                                 |  |      | F-6 | 
|Notes to Consolidated Financial Statements                                            |  |      | F-7 | 



Exhibits.


Schedule II


Valuation and Qualifying Accounts


Energy West, Incorporated


June 30, 2005


|                         |  |            |         |  |            |   |         |            |  |   |            |   |  |   |         | 
|------------------------ |  | ---------- | ------- |  | ---------- | - | ------- | ---------- |  | - | ---------- | - |  | - | ------- | 
|                         |  | Balance at |         |  | Charged to |   |         | Write-Offs |  |   | Balance at |  
|                         |  | Beginning  |         |  | Costs &    |   |         | Net of     |  |   | End of     |  
|Description              |  | of Period  |         |  | Expenses   |   |         | Recoveries |  |   | Period     |  
|                         |  |            |         |  |            |   |         |            |  |   |            |  
|Allowance for bad debts  |  |            |         |  |            |   |         |            |  |   |            |   |  |   |         | 
|Year Ended June 30, 2003 |  | $          | 154,251 |  |            | $ | 164,499 |            |  | $ | (105,737   | ) |  | $ | 213,013 | 
|Year Ended June 30, 2004 |  | $          | 213,013 |  |            | $ | 163,041 |            |  | $ | (75,240    | ) |  | $ | 300,814 | 
|Year Ended June 30, 2005 |  | $          | 300,814 |  |            | $ | 168,369 |            |  | $ | (174,537   | ) |  | $ | 294,646 | 

38



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SIGNATURES






| |                                      
| | -------------------------------------
| | ENERGY WEST, INCORPORATED            
|
| | /s/ DAVID A. CEROTZKE                
| |                                      
| | David A. Cerotzke                    
| | President and Chief Executive Officer
| | (principal executive officer)        







|                                           |  |                                                                                       |  |                    |  | 
|------------------------------------------ |  | ------------------------------------------------------------------------------------- |  | ------------------ |  | 
|                                          
|/s/ DAVID A. CEROTZKEDavid
    A. Cerotzke |  | President, Chief Executive Officer
    and Director
    (principal executive officer) |  | September 27, 2005
|                                          
|/s/ WADE F. BROOKSBYWade F. Brooksby       |  | Chief Financial Officer
    (principal accounting officer)                            |  | September 27, 2005
|                                          
|/s/ W.E. ARGOW.E. Argo                     |  | Director                                                                              |  | September 27, 2005
|                                          
|/s/ ANDREW I. DAVIDSONAndrew I. Davidson   |  | Director                                                                              |  | September 27, 2005
|                                          
|/s/ MARK D. GROSSIMark D. Grossi           |  | Director                                                                              |  | September 27, 2005
|                                          
|/s/ RICHARD M. OSBORNERichard M. Osborne   |  | Director                                                                              |  | September 27, 2005

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|                                         |  |          |  |                    |  | 
|---------------------------------------- |  | -------- |  | ------------------ |  | 
|                                        
|/s/ TERRY M. PALMERTerry M. Palmer       |  | Director |  | September 27, 2005
|                                        
|/s/ RICHARD J. SCHULTERichard J. Schulte |  | Director |  | September 27, 2005
|                                        
|/s/ THOMAS SMITHThomas Smith             |  | Director |  | September 27, 2005

40



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##### Table of Contents



ENERGY WEST INCORPORATED AND SUBSIDIARIES


TABLE OF CONTENTS


|                                                                                                                     |  |      |     | 
|-------------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                                     |  | Page |    
|                                                                                                                     |  |      |    
|Report of Independent Registered Public
    Accounting Firm  Hein & Associates LLP                                  |  |      | F-1 | 
|Report of Independent Registered Public
    Accounting Firm  Deloitte and Touche LLP                                |  |      | F-2 | 
|Consolidated Balance Sheets as of
    June 30, 2005 and 2004                                                         |  |      | F-3 | 
|Consolidated Statements of Operations for
    the Years Ended June 30, 2005, 2004, and 2003                          |  |      | F-4 | 
|Consolidated Statements of Changes in
    Stockholders Equity for the Years Ended June 30,
    2005, 2004, and 2003 |  |      | F-5 | 
|Consolidated Statements of Cash Flows for
    the Years Ended June 30, 2005, 2004, and 2003                          |  |      | F-6 | 
|Notes to Consolidated Financial
    Statements                                                                       |  |      | F-7 | 



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##### Table of Contents






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM














HEIN &
ASSOCIATES LLP






F-1



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##### Table of Contents






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM






















F-2



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ENERGY WEST INCORPORATED AND SUBSIDIARIES





CONSOLIDATED BALANCE SHEETS, JUNE 30, 2005 AND 2004


|                                        |                                                                                                                                                       |                            |            |           |            |   |            |           |            | 
|--------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ---------- | --------- | ---------- | - | ---------- | --------- | ---------- | 
|                                        |                                                                                                                                                       | 2005                       |            |           | 2004       |  
|                                        |                                                                                                                                                       |                            |            |           |            |  
|ASSETS                                 
|Current Assets:                         |                                                                                                                                                       |                            |            |           |            |   |            |          
|                                        | Cash                                                                                                                                                  |                            | $          | 93,606    |            |   | $          | 1,322,702 |           
|                                        | Accounts receivable less $294,646 and $300,814, respectively,
    allowance for bad debt                                                              |                            |            | 5,791,888 |            |   |            | 4,995,819 |           
|                                        | Unbilled gas                                                                                                                                          |                            |            | 1,092,320 |            |   |            | 1,733,201 |           
|                                        | Derivative assets                                                                                                                                     |                            |            | 119,069   |            |   |            | 199,248   |           
|                                        | Natural gas and propane inventories                                                                                                                   |                            |            | 3,711,033 |            |   |            | 5,183,046 |           
|                                        | Materials and supplies                                                                                                                                |                            |            | 440,959   |            |   |            | 350,764   |           
|                                        | Prepayment and other                                                                                                                                  |                            |            | 386,306   |            |   |            | 370,379   |           
|                                        | Deferred income taxes                                                                                                                                 |                            |            |          |            |   |            | 526,899   |           
|                                        | Income tax receivable                                                                                                                                 |                            |            | 1,924,648 |            |   |            | 1,268,243 |           
|                                        | Recoverable cost of gas purchases                                                                                                                     |                            |            | 1,863,475 |            |   |            | 788,407   |           
|                                        |                                                                                                                                                       |                            |            |           |            |  
|                                        |                                                                                                                                                       | Total current assets       |            |           | 15,423,304 |   |            |           | 16,738,708 | 
|Property, Plant and Equipment, Net      |                                                                                                                                                       |                            | 38,942,123 |           |            |   | 38,605,644 |          
|Note Receivable                         |                                                                                                                                                       |                            | 174,561    |           |            |   | 407,538    |          
|Deferred Charges                        |                                                                                                                                                       |                            | 4,725,924  |           |            |   | 5,488,415  |          
|Other Assets                            |                                                                                                                                                       |                            | 167,481    |           |            |   | 204,772    |          
|                                        |                                                                                                                                                       |                            |            |           |            |  
|TOTAL ASSETS                            |                                                                                                                                                       | $                          | 59,433,393 |           |            | $ | 61,445,077 |          
|                                        |                                                                                                                                                       |                            |            |           |            |  
|                                       
|LIABILITIES AND CAPITALIZATION         
|Current Liabilities:                    |                                                                                                                                                       |                            |            |           |            |   |            |          
|                                        | Current portion of long-term debt                                                                                                                     |                            | $          | 1,013,089 |            |   | $          | 972,706   |           
|                                        | Line of credit                                                                                                                                        |                            |            | 3,900,000 |            |   |            | 6,729,304 |           
|                                        | Accounts payable                                                                                                                                      |                            |            | 2,651,047 |            |   |            | 3,611,080 |           
|                                        | Derivative liabilities                                                                                                                                |                            |            | 114,237   |            |   |            | 1,684,676 |           
|                                        | Deferred income taxes                                                                                                                                 |                            |            | 96,214    |            |   |            |          |           
|                                        | Accrued and other current liabilities                                                                                                                 |                            |            | 3,750,177 |            |   |            | 3,726,982 |           
|                                        |                                                                                                                                                       |                            |            |           |            |  
|                                        |                                                                                                                                                       | Total current liabilities  |            |           | 11,524,764 |   |            |           | 16,724,748 | 
|                                        |                                                                                                                                                       |                            |            |           |            |  
|Other Obligations:                      |                                                                                                                                                       |                            |            |           |            |   |            |          
|                                        | Deferred income taxes                                                                                                                                 |                            |            | 6,267,858 |            |   |            | 4,529,381 |           
|                                        | Deferred investment tax credits                                                                                                                       |                            |            | 313,282   |            |   |            | 334,344   |           
|                                        | Other long-term liabilities                                                                                                                           |                            |            | 5,463,667 |            |   |            | 4,758,893 |           
|                                        |                                                                                                                                                       |                            |            |           |            |  
|                                        |                                                                                                                                                       | Total                      |            |           | 12,044,807 |   |            |           | 9,622,618  | 
|                                        |                                                                                                                                                       |                            |            |           |            |  
|Long-Term Debt                          |                                                                                                                                                       |                            | 18,677,197 |           |            |   | 21,697,286 |          
|                                        |                                                                                                                                                       |                            |            |           |            |  
|Commitments and Contingencies (note 12) |                                                                                                                                                       |                            |            |           |            |   |            |          
|Stockholders Equity:                   |                                                                                                                                                       |                            |            |           |            |   |            |          
|                                        | Preferred stock; $.15 par value, 1,500,000 shares
    authorized, no shares outstanding                                                               |                            |            |           |            |   |            |           |           
|                                        | Common stock; $.15 par value, 5,000,000 shares
    authorized, 2,912,564 and 2,598,506 shares outstanding at
    June 30, 2005 and 2004, respectively |                            |            | 436,892   |            |   |            | 389,783   |           
|                                        | Capital in excess of par value                                                                                                                        |                            |            | 7,435,309 |            |   |            | 5,077,687 |           
|                                        | Retained earnings                                                                                                                                     |                            |            | 9,314,424 |            |   |            | 7,932,955 |           
|                                        |                                                                                                                                                       |                            |            |           |            |  
|                                        |                                                                                                                                                       | Total stockholders equity |            |           | 17,186,625 |   |            |           | 13,400,425 | 
|                                        |                                                                                                                                                       |                            |            |           |            |  
|TOTAL CAPITALIZATION                    |                                                                                                                                                       |                            | 35,863,822 |           |            |   | 35,097,711 |          
|                                        |                                                                                                                                                       |                            |            |           |            |  
|TOTAL LIABILITIES AND CAPITALIZATION    |                                                                                                                                                       | $                          | 59,433,393 |           |            | $ | 61,445,077 |          
|                                        |                                                                                                                                                       |                            |            |           |            |  



F-3



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##### Table of Contents



ENERGY WEST INCORPORATED AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF OPERATIONS


FOR THE YEARS ENDED JUNE 30, 2005, 2004, AND 2003


|                                            |                                           |                |            |            |            |   |            |            |            |   |            |            |            | 
|------------------------------------------- | ----------------------------------------- | -------------- | ---------- | ---------- | ---------- | - | ---------- | ---------- | ---------- | - | ---------- | ---------- | ---------- | 
|                                            |                                           | 2005           |            |            | 2004       |   |            | 2003       |           
|                                            |                                           |                |            |            |            |   |            |            |           
|REVENUES:                                   |                                           |                |            |            |            |   |            |            |            |   |            |           
|                                            | Natural gas operations                    |                | $          | 44,791,564 |            |   | $          | 39,062,689 |            |   | $          | 31,627,242 |           
|                                            | Propane operations                        |                |            | 8,819,980  |            |   |            | 7,736,379  |            |   |            | 12,786,918 |           
|                                            | Gas and electric  wholesale              |                |            | 22,673,382 |            |   |            | 26,090,845 |            |   |            | 33,035,024 |           
|                                            | Pipeline operations                       |                |            | 424,038    |            |   |            | 401,269    |            |   |            | 448,681    |           
|                                            |                                           |                |            |            |            |   |            |            |           
|                                            |                                           | Total revenues |            |            | 76,708,964 |   |            |            | 73,291,182 |   |            |            | 77,897,865 | 
|                                            |                                           |                |            |            |            |   |            |            |           
|EXPENSES:                                   |                                           |                |            |            |            |   |            |            |            |   |            |           
|                                            | Gas purchased                             |                |            | 37,572,841 |            |   |            | 31,883,566 |            |   |            | 30,803,655 |           
|                                            | Gas and electric  wholesale              |                |            | 20,759,637 |            |   |            | 26,027,876 |            |   |            | 31,506,102 |           
|                                            | Cost of goods sold                        |                |            |            |            |   |            |            |            |   |            | 210,661    |           
|                                            | Distribution, general, and administrative |                |            | 9,446,567  |            |   |            | 10,169,560 |            |   |            | 11,669,029 |           
|                                            | Maintenance                               |                |            | 596,312    |            |   |            | 480,086    |            |   |            | 496,717    |           
|                                            | Depreciation and amortization             |                |            | 2,313,238  |            |   |            | 2,332,073  |            |   |            | 2,392,368  |           
|                                            | Taxes other than income                   |                |            | 1,653,936  |            |   |            | 1,209,916  |            |   |            | 888,281    |           
|                                            |                                           |                |            |            |            |   |            |            |           
|                                            |                                           | Total expenses |            |            | 72,342,531 |   |            |            | 72,103,077 |   |            |            | 77,966,813 | 
|                                            |                                           |                |            |            |            |   |            |            |           
|OPERATING INCOME                            |                                           |                | 4,366,433  |            |            |   | 1,188,105  |            |            |   | (68,948    | )         
|NON-OPERATING INCOME                        |                                           |                | 445,207    |            |            |   | 385,277    |            |            |   | 302,110    |           
|INTEREST EXPENSE                            |                                           |                | (2,677,298 | )          |            |   | (2,498,623 | )          |            |   | (1,633,042 | )         
|                                            |                                           |                |            |            |            |   |            |            |           
|INCOME (LOSS) BEFORE INCOME TAXES           |                                           |                | 2,134,342  |            |            |   | (925,241   | )          |            |   | (1,399,880 | )         
|INCOME TAX BENEFIT (EXPENSE)                |                                           |                | (752,873   | )          |            |   | 368,921    |            |            |   | 542,880    |           
|                                            |                                           |                |            |            |            |   |            |            |           
|NET INCOME (LOSS)                           |                                           | $              | 1,381,469  |            |            | $ | (556,320   | )          |            | $ | (857,000   | )         
|                                            |                                           |                |            |            |            |   |            |            |           
|EARNINGS (LOSS) PER COMMON SHARE:           |                                           |                |            |            |            |   |            |            |            |   |            |           
|                                            | Basic                                     |                | $          | 0.53       |            |   | $          | (0.21      | )          |   | $          | (0.33      | )         
|                                            |                                           |                |            |            |            |   |            |            |           
|                                            | Diluted                                   |                | $          | 0.53       |            |   | $          | (0.21      | )          |   | $          | (0.33      | )         
|                                            |                                           |                |            |            |            |   |            |            |           
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: |                                           |                |            |            |            |   |            |            |            |   |            |           
|                                            | Basic                                     |                |            | 2,630,679  |            |   |            | 2,596,454  |            |   |            | 2,586,487  |           
|                                            |                                           |                |            |            |            |   |            |            |           
|                                            | Diluted                                   |                |            | 2,630,679  |            |   |            | 2,596,454  |            |   |            | 2,586,487  |           
|                                            |                                           |                |            |            |            |   |            |            |           



F-4



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##### Table of Contents



ENERGY WEST INCORPORATED AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS
EQUITY


FOR THE YEARS ENDED JUNE 30, 2005, 2004, AND 2003


|                                                                                                         |  |        |           |  |        |            |         |           |  |   |           |  |  |       |            |   |  |   |            |  
|-------------------------------------------------------------------------------------------------------- |  | ------ | --------- |  | ------ | ---------- | ------- | --------- |  | - | --------- |  |  | ----- | ---------- | - |  | - | ---------- | -
|                                                                                                         |  |        |           |  |        | Capital in |         |           |  |   |          
|                                                                                                         |  | Common |           |  | Common |            |         | Excess of |  |   | Retained  |  |  |      
|                                                                                                         |  | Shares |           |  | Stock  |            |         | Par Value |  |   | Earnings  |  |  | Total |           
|                                                                                                         |  |        |           |  |        |            |         |           |  |   |           |  |  |       |           
|BALANCE AT JULY 1, 2002                                                                                  |  |        | 2,573,046 |  |        | $          | 385,964 |           |  | $ | 4,863,113 |  |  | $     | 10,449,673 |   |  | $ | 15,698,750 |  
|Sales of common stock at $6.01 to $9.72 per share under the
    Companys dividend reinvestment plan     |  |        | 9,820     |  |        |            | 1,473   |           |  |   | 77,114    |  |  |       |            |   |  |   | 78,587     |  
|Issuance of common stock to ESOP at estimated fair value of
    $9.533 per share                         |  |        | 12,384    |  |        |            | 1,858   |           |  |   | 116,198   |  |  |       |            |   |  |   | 118,056    |  
|Net loss                                                                                                 |  |        |           |  |        |            |         |           |  |   |           |  |  |       | (857,000   | ) |  |   | (857,000   | )
|Dividends and 401k stock match                                                                           |  |        |          |  |        |            |        |           |  |   |          |  |  |       | (1,081,648 | ) |  |   | (1,081,648 | )
|                                                                                                         |  |        |           |  |        |            |         |           |  |   |           |  |  |       |           
|BALANCE AT JUNE 30, 2003                                                                                 |  |        | 2,595,250 |  |        |            | 389,295 |           |  |   | 5,056,425 |  |  |       | 8,511,025  |   |  |   | 13,956,745 |  
|Sales of common stock at $5.95 to $7.25 per share under the
    Companys dividend reinvestment plan     |  |        | 3,256     |  |        |            | 488     |           |  |   | 21,262    |  |  |       |            |   |  |   | 21,750     |  
|Net loss                                                                                                 |  |        |           |  |        |            |         |           |  |   |           |  |  |       | (556,320   | ) |  |   | (556,320   | )
|401k stock match                                                                                         |  |        |          |  |        |            |        |           |  |   |          |  |  |       | (21,750    | ) |  |   | (21,750    | )
|                                                                                                         |  |        |           |  |        |            |         |           |  |   |           |  |  |       |           
|BALANCE AT JUNE 30, 2004                                                                                 |  |        | 2,598,506 |  |        |            | 389,783 |           |  |   | 5,077,687 |  |  |       | 7,932,955  |   |  |   | 13,400,425 |  
|Stock contributions to 401(k) plan and deferred board stock
    compensation at $6.10 to $8.58 per share |  |        | 26,558    |  |        |            | 3,984   |           |  |   | 197,791   |  |  |       |            |   |  |   | 201,775    |  
|Sale of common stock at $8.00 per share, net of issuance
    costs                                       |  |        | 287,500   |  |        |            | 43,125  |           |  |   | 2,159,831 |  |  |       |            |   |  |   | 2,202,956  |  
|Net income                                                                                               |  |        |          |  |        |            |        |           |  |   |          |  |  |       | 1,381,469  |   |  |   | 1,381,469  |  
|                                                                                                         |  |        |           |  |        |            |         |           |  |   |           |  |  |       |           
|BALANCE AT JUNE 30, 2005                                                                                 |  |        | 2,912,564 |  |        | $          | 436,892 |           |  | $ | 7,435,309 |  |  | $     | 9,314,424  |   |  | $ | 17,186,625 |  
|                                                                                                         |  |        |           |  |        |            |         |           |  |   |           |  |  |       |           



F-5



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##### Table of Contents



ENERGY WEST INCORPORATED AND SUBSIDIARIES





CONSOLIDATED STATEMENTS OF CASH FLOWS


FOR THE YEARS ENDED JUNE 30, 2005, 2004, AND 2003


|                                                                         |                                                                                                        |                                                                                   |                                              |                                                     |           |            |            |             |           |            |            |             |           |            |            |  
|------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------- | -------------------------------------------- | --------------------------------------------------- | --------- | ---------- | ---------- | ----------- | --------- | ---------- | ---------- | ----------- | --------- | ---------- | ---------- | -
|                                                                         |                                                                                                        | 2005                                                                              |                                              |                                                     | 2004      |            |            | 2003        |          
|                                                                         |                                                                                                        |                                                                                   |                                              |                                                     |           |            |            |             |          
|CASH FLOWS FROM OPERATING ACTIVITIES:                                    |                                                                                                        |                                                                                   |                                              |                                                     |           |            |            |             |           |            |            |            
|                                                                         | Net income (loss)                                                                                      |                                                                                   | $                                            | 1,381,469                                           |           |            | $          | (556,320    | )         |            | $          | (857,000    | )        
|                                                                         | Adjustments to reconcile net income (loss) to net cash provided
    by (used in) operating activities: |                                                                                   |                                              |                                                     |           |            |            |             |           |            |            |             |          
|                                                                         |                                                                                                        | Depreciation and amortization, including deferred charges and
    financing costs |                                              |                                                     | 3,016,716 |            |            |             | 3,467,774 |            |            |             | 2,594,141 |           
|                                                                         |                                                                                                        | Derivative assets                                                                 |                                              |                                                     | 80,179    |            |            |             | 424,387   |            |            |             | 1,312,016 |           
|                                                                         |                                                                                                        | Derivative liabilities                                                            |                                              |                                                     | (331,674  | )          |            |             | 819,747   |            |            |             | 864,930   |           
|                                                                         |                                                                                                        | Deferred gain                                                                     |                                              |                                                     | (269,903  | )          |            |             |           |            |            |             |           |           
|                                                                         |                                                                                                        | Gain on sale of assets                                                            |                                              |                                                     | (9,201    | )          |            |             | (333,987  | )          |            |             | (23,657   | )         
|                                                                         |                                                                                                        | Investment tax credit                                                             |                                              |                                                     | (21,062   | )          |            |             | (21,062   | )          |            |             | (21,062   | )         
|                                                                         |                                                                                                        | Deferred gain on sale of assets                                                   |                                              |                                                     | (23,628   | )          |            |             | (23,628   | )          |            |             | (23,628   | )         
|                                                                         |                                                                                                        | Deferred income taxes                                                             |                                              |                                                     | 1,772,533 |            |            |             | 209,612   |            |            |             | 1,039,449 |           
|                                                                         |                                                                                                        | Changes in assets and liabilities:                                                |                                              |                                                     |           |            |            |             |           |            |            |             |           |           
|                                                                         |                                                                                                        |                                                                                   | Accounts and notes receivable                |                                                     |           | 77,789     |            |             |           | 1,090,118  |            |             |           | 275,907    |           
|                                                                         |                                                                                                        |                                                                                   | Natural gas and propane inventories          |                                                     |           | 1,472,013  |            |             |           | (4,144,356 | )          |             |           | 4,601,970  |           
|                                                                         |                                                                                                        |                                                                                   | Accounts payable                             |                                                     |           | (500,217   | )          |             |           | (5,230,702 | )          |             |           | (711,004   | )         
|                                                                         |                                                                                                        |                                                                                   | Recoverable/refundable cost of gas purchases |                                                     |           | (1,075,068 | )          |             |           | 278,702    |            |             |           | (3,091,268 | )         
|                                                                         |                                                                                                        |                                                                                   | Prepayments and other                        |                                                     |           | (15,926    | )          |             |           | (17,397    | )          |             |           | 92,670     |           
|                                                                         |                                                                                                        |                                                                                   | Other assets                                 |                                                     |           | (21,924    | )          |             |           | 539,349    |            |             |           | (4,751,472 | )         
|                                                                         |                                                                                                        |                                                                                   | Other liabilities                            |                                                     |           | (4,187,677 | )          |             |           | (2,374,106 | )          |             |           | 3,247,477  |           
|                                                                         |                                                                                                        |                                                                                   |                                              |                                                     |           |            |            |             |          
|                                                                         |                                                                                                        |                                                                                   |                                              | Net cash provided by (used in) operating activities |           |            | 1,344,419  |             |           |            | (5,871,869 | )           |           |            | 4,549,469  |  
|                                                                         |                                                                                                        |                                                                                   |                                              |                                                     |           |            |            |             |          
|CASH FLOWS FROM INVESTING ACTIVITIES:                                    |                                                                                                        |                                                                                   |                                              |                                                     |           |            |            |             |           |            |            |            
|                                                                         | Construction expenditures                                                                              |                                                                                   |                                              | (2,795,565                                          | )         |            |            | (2,316,695  | )         |            |            | (4,040,286  | )        
|                                                                         | Acquisition of producing natural gas reserves                                                          |                                                                                   |                                              |                                                     |           |            |            |             |           |            |            | (90,113     | )        
|                                                                         | Proceeds from sale of assets                                                                           |                                                                                   |                                              | 32,605                                              |           |            |            | 946,233     |           |            |            | 23,958      |          
|                                                                         | Customer advances received (refunded) for construction                                                 |                                                                                   |                                              | 74,348                                              |           |            |            | 65,579      |           |            |            | (2,131      | )        
|                                                                         | Increase (decrease) from contributions in aid of construction                                          |                                                                                   |                                              | 221,909                                             |           |            |            | 158,735     |           |            |            | 31,360      |          
|                                                                         |                                                                                                        |                                                                                   |                                              |                                                     |           |            |            |             |          
|                                                                         |                                                                                                        |                                                                                   |                                              | Net cash (used in) investing activities             |           |            | (2,466,703 | )           |           |            | (1,146,148 | )           |           |            | (4,077,212 | )
|                                                                         |                                                                                                        |                                                                                   |                                              |                                                     |           |            |            |             |          
|CASH FLOWS FROM FINANCING ACTIVITIES:                                    |                                                                                                        |                                                                                   |                                              |                                                     |           |            |            |             |           |            |            |            
|                                                                         | Repayments of long-term debt                                                                           |                                                                                   |                                              | (2,979,706                                          | )         |            |            | (696,831    | )         |            |            | (502,673    | )        
|                                                                         | Proceeds from lines of credit                                                                          |                                                                                   |                                              | 10,100,000                                          |           |            |            | 32,932,346  |           |            |            | 40,032,623  |          
|                                                                         | Repayments of lines of credit                                                                          |                                                                                   |                                              | (12,930,062                                         | )         |            |            | (32,307,630 | )         |            |            | (37,428,035 | )        
|                                                                         | Proceeds from long-term debt                                                                           |                                                                                   |                                              |                                                     |           |            |            | 8,000,000   |           |            |            |             |          
|                                                                         | Proceeds from other short-term borrowing                                                               |                                                                                   |                                              | 3,500,000                                           |           |            |            |             |           |            |            |             |          
|                                                                         | Debt issuance cost                                                                                     |                                                                                   |                                              |                                                     |           |            |            | (1,525,934  | )         |            |            |             |          
|                                                                         | Sale of common stock                                                                                   |                                                                                   |                                              | 2,202,956                                           |           |            |            |             |           |            |            | 78,587      |          
|                                                                         | Dividends paid                                                                                         |                                                                                   |                                              |                                                    |           |            |            |            |           |            |            | (1,081,648  | )        
|                                                                         |                                                                                                        |                                                                                   |                                              |                                                     |           |            |            |             |          
|                                                                         |                                                                                                        |                                                                                   |                                              | Net cash provided by (used in) financing activities |           |            | (106,812   | )           |           |            | 6,401,951  |             |           |            | 1,098,854  |  
|                                                                         |                                                                                                        |                                                                                   |                                              |                                                     |           |            |            |             |          
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                     |                                                                                                        |                                                                                   | (1,229,096                                   | )                                                   |           |            | (616,066   | )           |           |            | 1,571,111  |            
|CASH AND CASH EQUIVALENTS:                                               |                                                                                                        |                                                                                   |                                              |                                                     |           |            |            |             |           |            |            |            
|                                                                         | Beginning of year                                                                                      |                                                                                   |                                              | 1,322,702                                           |           |            |            | 1,938,768   |           |            |            | 367,657     |          
|                                                                         |                                                                                                        |                                                                                   |                                              |                                                     |           |            |            |             |          
|                                                                         | End of year                                                                                            |                                                                                   | $                                            | 93,606                                              |           |            | $          | 1,322,702   |           |            | $          | 1,938,768   |          
|                                                                         |                                                                                                        |                                                                                   |                                              |                                                     |           |            |            |             |          
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                       |                                                                                                        |                                                                                   |                                              |                                                     |           |            |            |             |           |            |            |            
|                                                                         | Cash paid during the period for interest                                                               |                                                                                   | $                                            | 2,290,133                                           |           |            | $          | 1,858,023   |           |            | $          | 1,490,265   |          
|                                                                         | Cash paid during the period for income taxes                                                           |                                                                                   |                                              | 447,000                                             |           |            |            |            |           |            |            |            |          
|SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
    ACTIVITIES: |                                                                                                        |                                                                                   |                                              |                                                     |           |            |            |             |           |            |            |            
|                                                                         | Shares issued to satisfy liability to the ESOP                                                         |                                                                                   |                                              |                                                    |           |            |            |            |           |            |            | 118,056     |          
|                                                                         | Assets acquired for debt issued and liabilities assumed                                                |                                                                                   |                                              |                                                    |           |            |            |            |           |            |            | 834,667     |          
|                                                                         | Assets sold for notes receivable issued                                                                |                                                                                   |                                              |                                                    |           |            |            | 620,333     |           |            |            |            |          
|                                                                         | Shares issued to satisfy deferred board compensation                                                   |                                                                                   |                                              | 201,775                                             |           |            |            |            |           |            |            |            |          
|                                                                         | Reclass of derivative liability to deferred gain                                                       |                                                                                   |                                              | 1,238,765                                           |           |            |            |            |           |            |            |            |          
|                                                                         | Shares issued under the Companys 401k reinvestment plan                                               |                                                                                   |                                              | 20,185                                              |           |            |            | 21,750      |           |            |            | 31,417      |          
|                                                                         | Capitalized interest                                                                                   |                                                                                   |                                              | 34,160                                              |           |            |            | 24,602      |           |            |            | 25,947      |          



F-6



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##### Table of Contents



ENERGY WEST, INCORPORATED AND SUBSIDIARIES





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


For the years ended June 30, 2005, 2004, and 2003




|   |                                                        
|-- | -------------------------------------------------------
|1. | Summary of Business and Significant Accounting Policies

Nature of Business




Basis of Presentation




Principles of Consolidation


Segments


Use of Estimates in Preparing Financial
Statements


Natural Gas and Propane Inventories


Recoverable/ Refundable Costs of Gas and Propane
Purchases


F-7



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##### Table of Contents



ENERGY WEST, INCORPORATED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Property, Plant, and Equipment


Construction in Aid and Advances Received for
Construction


Natural Gas Reserves


Impairment of Long-Lived Assets


Stock-Based Compensation


F-8



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##### Table of Contents



ENERGY WEST, INCORPORATED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                                                                                                    |                       |      |           |      |      |   |          |       |   |   |          |       |  
|--------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------- | ---- | --------- | ---- | ---- | - | -------- | ----- | - | - | -------- | ----- | -
|                                                                                                                                                    |                       | 2005 |           |      | 2004 |   |          | 2003  |  
|                                                                                                                                                    |                       |      |           |      |      |   |          |       |  
|Net income (loss), as reported                                                                                                                      |                       | $    | 1,381,469 |      |      | $ | (556,320 | )     |   | $ | (857,000 | )    
|Deduct: Total stock-based employee compensation expense
    determined under fair value based method for all awards, net of
    related tax effects |                       |      | (51,450   | )    |      |   | (19,160  | )     |   |   | (22,793  | )    
|                                                                                                                                                    |                       |      |           |      |      |   |          |       |  
|Pro forma net income (loss)                                                                                                                         |                       | $    | 1,330,019 |      |      | $ | (575,480 | )     |   | $ | (879,793 | )    
|                                                                                                                                                    |                       |      |           |      |      |   |          |       |  
|Earnings per share:                                                                                                                                 |                       |      |           |      |      |   |          |       |   |   |          |      
|                                                                                                                                                    | Basic  as reported   |      | $         | 0.53 |      |   | $        | (0.21 | ) |   | $        | (0.33 | )
|                                                                                                                                                    |                       |      |           |      |      |   |          |       |  
|                                                                                                                                                    | Basic  pro forma     |      | $         | 0.51 |      |   | $        | (0.22 | ) |   | $        | (0.34 | )
|                                                                                                                                                    |                       |      |           |      |      |   |          |       |  
|                                                                                                                                                    | Diluted  as reported |      | $         | 0.53 |      |   | $        | (0.21 | ) |   | $        | (0.33 | )
|                                                                                                                                                    |                       |      |           |      |      |   |          |       |  
|                                                                                                                                                    | Diluted  pro forma   |      | $         | 0.51 |      |   | $        | (0.22 | ) |   | $        | (0.34 | )
|                                                                                                                                                    |                       |      |           |      |      |   |          |       |  







| |                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------
| | 1) risk-free interest rate of 3.9 percent;                                                                                               
|
| | 2) no dividends in the fiscal years 2005 and 2004 and a
    dividend yield of 6.6 percent prior to third quarter of
    fiscal year 2003;
|
| | 3) no discount for lack of marketability;                                                                                                
|
| | 4) expected life of 5 to 10 years; and                                                                                                   
|
| | 5) a volatility factor of the expected market price of our
    common stock of 54 percent.                                               

Comprehensive Income


Revenue Recognition


Derivatives


F-9



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##### Table of Contents



ENERGY WEST, INCORPORATED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Debt Issuance and Reacquisition Costs


Cash and Cash Equivalents


Earnings Per Share


Credit Risk


Effects of Regulation


Income Taxes


Financial Instruments


F-10



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##### Table of Contents



ENERGY WEST, INCORPORATED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Asset Retirement Obligations
(ARO)






|                        |  |   |         | 
|----------------------- |  | - | ------- | 
|Balance  July 1, 2004  |  | $ | 586,229 | 
|Accretion               |  |   | 32,244  | 
|                        |  |   |        
|Balance  June 30, 2005 |  | $ | 618,473 | 
|                        |  |   |        

New Accounting Pronouncements


Accounting for Stock-Based Compensation.






F-11



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##### Table of Contents



ENERGY WEST, INCORPORATED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Reclassifications




|   |                  
|-- | -----------------
|2. | Natural Gas Wells











F-12



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##### Table of Contents



ENERGY WEST, INCORPORATED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                              
|-- | -----------------------------
|3. | Property, Plant and Equipment



|                                                      |  |      |             |   |      |   |             |  
|----------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                                      |  | 2005 |             |   | 2004 |  
|                                                      |  |      |             |   |      |  
|Gas transmission and distribution facilities          |  | $    | 53,943,812  |   |      | $ | 51,612,893  |  
|Land                                                  |  |      | 332,506     |   |      |   | 332,386     |  
|Buildings and leasehold improvements                  |  |      | 3,250,007   |   |      |   | 3,242,240   |  
|Transportation equipment                              |  |      | 2,237,542   |   |      |   | 2,238,774   |  
|Computer equipment                                    |  |      | 4,939,845   |   |      |   | 4,765,726   |  
|Other equipment                                       |  |      | 4,643,354   |   |      |   | 4,436,516   |  
|Construction work-in-progress                         |  |      | 188,048     |   |      |   | 428,036     |  
|Producing natural gas properties                      |  |      | 2,046,352   |   |      |   | 1,969,567   |  
|                                                      |  |      |             |   |      |  
|                                                      |  |      | 71,581,466  |   |      |   | 69,026,138  |  
|Accumulated depreciation, depletion, and amortization |  |      | (32,639,343 | ) |      |   | (30,420,494 | )
|                                                      |  |      |             |   |      |  
|Total                                                 |  | $    | 38,942,123  |   |      | $ | 38,605,644  |  
|                                                      |  |      |             |   |      |  



|   |                 
|-- | ----------------
|4. | Deferred Charges



|                                                               |  |      |           |  |      |   |           | 
|-------------------------------------------------------------- |  | ---- | --------- |  | ---- | - | --------- | 
|                                                               |  | 2005 |           |  | 2004 |  
|                                                               |  |      |           |  |      |  
|Regulatory asset for property tax                              |  | $    | 2,561,265 |  |      | $ | 2,806,660 | 
|Regulatory asset for income taxes                              |  |      | 458,753   |  |      |   | 458,753   | 
|Regulatory assets for deferred environmental remediation costs |  |      | 413,218   |  |      |   | 485,066   | 
|Other regulatory assets                                        |  |      | 52,198    |  |      |   | 77,858    | 
|Unamortized debt issue costs                                   |  |      | 1,240,490 |  |      |   | 1,660,078 | 
|                                                               |  |      |           |  |      |  
|Total                                                          |  | $    | 4,725,924 |  |      | $ | 5,488,415 | 
|                                                               |  |      |           |  |      |  





F-13



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##### Table of Contents



ENERGY WEST, INCORPORATED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                                      
|-- | -------------------------------------
|5. | Accrued and Other Current Liabilities



|                                          |  |      |           |  |      |   |           | 
|----------------------------------------- |  | ---- | --------- |  | ---- | - | --------- | 
|                                          |  | 2005 |           |  | 2004 |  
|                                          |  |      |           |  |      |  
|Property tax settlement  current portion |  | $    | 243,000   |  |      | $ | 243,000   | 
|Payable to employee benefit plans         |  |      | 481,514   |  |      |   | 545,375   | 
|Accrued vacation                          |  |      | 267,859   |  |      |   | 394,219   | 
|Customer deposits                         |  |      | 418,148   |  |      |   | 407,635   | 
|Accrued incentives                        |  |      | 12,246    |  |      |   | 524,642   | 
|Accrued interest                          |  |      | 97,987    |  |      |   | 103,047   | 
|Accrued taxes other than income           |  |      | 507,288   |  |      |   | 520,536   | 
|Deferred short-term gain                  |  |      | 399,760   |  |      |   |          | 
|Deferred payments from levelized billing  |  |      | 459,814   |  |      |   | 496,897   | 
|Other                                     |  |      | 862,561   |  |      |   | 491,631   | 
|                                          |  |      |           |  |      |  
|Total                                     |  | $    | 3,750,177 |  |      | $ | 3,726,982 | 
|                                          |  |      |           |  |      |  



|   |                            
|-- | ---------------------------
|6. | Other Long-Term Liabilities



|                                          |  |      |           |  |      |   |           | 
|----------------------------------------- |  | ---- | --------- |  | ---- | - | --------- | 
|                                          |  | 2005 |           |  | 2004 |  
|                                          |  |      |           |  |      |  
|Asset retirement obligation               |  | $    | 618,473   |  |      | $ | 586,229   | 
|Contribution in aid of construction       |  |      | 1,447,448 |  |      |   | 1,225,539 | 
|Customer advances for construction        |  |      | 677,936   |  |      |   | 603,589   | 
|Accumulated postretirement obligation     |  |      | 342,900   |  |      |   | 269,100   | 
|Deferred gain on sale leaseback of assets |  |      | 23,639    |  |      |   | 47,267    | 
|Deferred gain  long-term*                |  |      | 569,102   |  |      |   |          | 
|Regulatory liability for income taxes     |  |      | 83,161    |  |      |   | 83,161    | 
|Property tax settlement                   |  |      | 1,701,008 |  |      |   | 1,944,008 | 
|                                          |  |      |           |  |      |  
|Total                                     |  | $    | 5,463,667 |  |      | $ | 4,758,893 | 
|                                          |  |      |           |  |      |  






|  |                                                                                                                                                                                                                                                             
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | In January 2005, two long-term contracts were designated as
    normal purchases and sales. The derivative liability
    as of January 2005 will now be amortized over the remaining
    monthly volumes of the contract at a rate of $1.21 per
    MMBtu.



|   |                                   
|-- | ----------------------------------
|7. | Lines of Credit and Long-Term Debt

Lines of Credit


F-14



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##### Table of Contents



ENERGY WEST, INCORPORATED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Long-term Debt


|                                                        |  |      |            |   |      |   |            |  
|------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                                        |  | 2005 |            |   | 2004 |  
|                                                        |  |      |            |   |      |  
|Series 1997 notes payable                               |  | $    | 7,853,984  |   |      | $ | 7,860,984  |  
|Series 1993 notes payable                               |  |      | 5,355,000  |   |      |   | 5,835,000  |  
|Series 1992B industrial development revenue obligations |  |      | 975,000    |   |      |   | 1,065,000  |  
|Term loan                                               |  |      | 5,500,000  |   |      |   | 7,900,000  |  
|Capital lease                                           |  |      | 6,302      |   |      |   | 9,008      |  
|                                                        |  |      |            |   |      |  
|Total long-term debt                                    |  |      | 19,690,286 |   |      |   | 22,669,992 |  
|Less current portion of long-term debt                  |  |      | (1,013,089 | ) |      |   | (972,706   | )
|                                                        |  |      |            |   |      |  
|Long-term debt                                          |  | $    | 18,677,197 |   |      | $ | 21,697,286 |  
|                                                        |  |      |            |   |      |  



Series 1997 Notes Payable


Series 1993 Notes Payable


Series 1992B Industrial Development Revenue
Obligations


Term Loan


F-15



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##### Table of Contents



ENERGY WEST, INCORPORATED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Aggregate Annual Maturities


|                     |            |      |           |           |        |   |           |           |  |   |           |           |  |         |         |         |           |   |       |       |  |   |            |            | 
|-------------------- | ---------- | ---- | --------- | --------- | ------ | - | --------- | --------- |  | - | --------- | --------- |  | ------- | ------- | ------- | --------- | - | ----- | ----- |  | - | ---------- | ---------- | 
|                     |            |      |           |           |        |   |           |           |  |   |           | Total     | 
|                     |            | Term |           |           | Series |   |           | Series    |  |   | Series    |           |  | Capital |         |         | Long-Term |  
|                     |            | Loan |           |           | 1997   |   |           | 1993      |  |   | 1992B     |           |  | Lease   |         |         | Debt      |  
|                     |            |      |           |           |        |   |           |           |  |   |           |           |  |         |         |         |           |  
|Year ending June 30: |            |      |           |           |        |   |           |           |  |   |           |           |  |         |         |         |           |   |       |       |  |   |            |           
|                     | 2006       |      | $         | 400,000   |        |   | $         |          |  |   | $         | 515,000   |  |         | $       | 95,000  |           |   | $     | 3,089 |  |   | $          | 1,013,089  | 
|                     | 2007       |      | $         | 400,000   |        |   |           |          |  |   |           | 550,000   |  |         |         | 105,000 |           |   |       | 3,213 |  |   |            | 1,058,213  | 
|                     | 2008       |      | $         | 400,000   |        |   |           |          |  |   |           | 590,000   |  |         |         | 110,000 |           |   |       |      |  |   |            | 1,100,000  | 
|                     | 2009       |      | $         | 4,300,000 |        |   |           |          |  |   |           |          |  |         |         | 115,000 |           |   |       |      |  |   |            | 4,415,000  | 
|                     | 2010       |      | $         |          |        |   |           |          |  |   |           |          |  |         |         | 125,000 |           |   |       |      |  |   |            | 125,000    | 
|                     | Thereafter |      | $         |          |        |   |           | 7,853,984 |  |   |           | 3,700,000 |  |         |         | 425,000 |           |   |       |      |  |   |            | 11,978,984 | 
|                     |            |      |           |           |        |   |           |           |  |   |           |           |  |         |         |         |           |  
|Total                |            | $    | 5,500,000 |           |        | $ | 7,853,984 |           |  | $ | 5,355,000 |           |  | $       | 975,000 |         |           | $ | 6,302 |       |  | $ | 19,690,286 |           
|                     |            |      |           |           |        |   |           |           |  |   |           |           |  |         |         |         |           |  



Debt Covenants










F-16



---



##### Table of Contents



ENERGY WEST, INCORPORATED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










|   |                       
|-- | ----------------------
|8. | Employee Benefit Plans





F-17



---



##### Table of Contents



ENERGY WEST, INCORPORATED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                            |                                                |                                         |          |         |         |   |          |         |         |  
|------------------------------------------- | ---------------------------------------------- | --------------------------------------- | -------- | ------- | ------- | - | -------- | ------- | ------- | -
|                                            |                                                | 2005                                    |          |         | 2004    |  
|                                            |                                                |                                         |          |         |         |  
|Change in benefit obligation:               |                                                |                                         |          |         |         |   |          |        
|                                            | Projected benefit obligation                   |                                         |          |         |         |   |          |         |        
|                                            |                                                | Benefit obligation at beginning of year |          | $       | 776,600 |   |          | $       | 782,300 |  
|                                            |                                                | Service costs                           |          |         | 37,600  |   |          |         | 33,200  |  
|                                            |                                                | Interest costs                          |          |         | 45,600  |   |          |         | 41,300  |  
|                                            |                                                | Actuarial (gains) losses                |          |         | 170,100 |   |          |         | (65,000 | )
|                                            |                                                | Benefits paid                           |          |         | (88,700 | ) |          |         | (15,200 | )
|                                            |                                                |                                         |          |         |         |  
|Benefit obligation at end of year           |                                                |                                         | 941,200  |         |         |   | 776,600  |        
|                                            |                                                |                                         |          |         |         |  
|Change in plan assets:                      |                                                |                                         |          |         |         |   |          |        
|                                            | Fair value of plan assets at beginning of year |                                         |          | 444,500 |         |   |          | 456,800 |        
|                                            | Actual return on plan assets                   |                                         |          | 4,100   |         |   |          | 2,900   |        
|                                            | Benefits paid                                  |                                         |          | (88,700 | )       |   |          | (15,200 | )      
|                                            |                                                |                                         |          |         |         |  
|Fair value of plan assets at end of year    |                                                |                                         | 359,900  |         |         |   | 444,500  |        
|                                            |                                                |                                         |          |         |         |  
|Benefit obligation in excess of plan assets |                                                |                                         | 581,300  |         |         |   | 332,100  |        
|Unrecognized transition obligation          |                                                |                                         | (157,000 | )       |         |   | (176,600 | )      
|Unrecognized prior service cost             |                                                |                                         | (108,700 | )       |         |   | (126,600 | )      
|Unrecognized gains                          |                                                |                                         | 27,300   |         |         |   | 240,200  |        
|                                            |                                                |                                         |          |         |         |  
|Net liability recognized                    |                                                | $                                       | 342,900  |         |         | $ | 269,100  |        
|                                            |                                                |                                         |          |         |         |  

|                                                 |  |      |         |   |      |   |         |      |  |   |         |  
|------------------------------------------------ |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                 |  | 2005 |         |   | 2004 |   |         | 2003 | 
|                                                 |  |      |         |   |      |   |         |      | 
|Components of net periodic benefit cost:         |  |      |         |   |      |   |         |      |  |   |         |  
|Service costs                                    |  | $    | 37,600  |   |      | $ | 33,200  |      |  | $ | 31,100  |  
|Interest costs                                   |  |      | 45,600  |   |      |   | 41,300  |      |  |   | 44,300  |  
|Expected return on plan assets                   |  |      | (36,400 | ) |      |   | (37,500 | )    |  |   | (39,000 | )
|Amortization of transition obligation            |  |      | 19,600  |   |      |   | 19,600  |      |  |   | 19,600  |  
|Amortization of unrecognized prior service costs |  |      | 17,900  |   |      |   | 17,900  |      |  |   | 17,900  |  
|Actuarial gains                                  |  |      | (10,500 | ) |      |   | (15,200 | )    |  |   | (21,400 | )
|                                                 |  |      |         |   |      |   |         |      | 
|Postretirement benefit expense                   |  | $    | 73,800  |   |      | $ | 59,300  |      |  | $ | 52,500  |  
|                                                 |  |      |         |   |      |   |         |      | 

|                                            |                                |      |                 |       |      |  |                 |        | 
|------------------------------------------- | ------------------------------ | ---- | --------------- | ----- | ---- |  | --------------- | ------ | 
|                                            |                                | 2005 |                 |       | 2004 | 
|                                            |                                |      |                 |       |      | 
|Weighted-average assumptions as of June 30: |                                |      |                 |       |      |  |                 |       
|                                            | Discount rate                  |      |                 | 5.00% |      |  |                 | 6.00%  | 
|                                            | Expected return on plan assets |      |                 | 8.50% |      |  |                 | 8.50%  | 
|                                            | Health care inflation rate     |      |                 | 9.50% |      |  |                 | 10.00% | 
|                                            |                                |      | Grading to 5.5% |       |      |  | Grading to 5.5% |       



F-18



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##### Table of Contents



ENERGY WEST, INCORPORATED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|   |             
|-- | ------------
|9. | Income Taxes



|                                     |                                           |         |         |         |           |   |            |           |  |   |           |         |  |   |            |           | 
|------------------------------------ | ----------------------------------------- | ------- | ------- | ------- | --------- | - | ---------- | --------- |  | - | --------- | ------- |  | - | ---------- | --------- | 
|                                     |                                           | 2005    |         |         | 2004      |  
|                                     |                                           |         |         |         |           |  
|                                     |                                           | Current |         |         | Long-Term |   |            | Current   |  |   | Long-Term |        
|                                     |                                           |         |         |         |           |   |            |           |  |   |           |        
|Deferred tax asset:                  |                                           |         |         |         |           |   |            |           |  |   |           |         |  |   |            |          
|                                     | Allowances for doubtful accounts          |         | $       | 119,181 |           |   | $          |          |  |   | $         | 114,983 |  |   | $          |          | 
|                                     | Unamortized investment tax credit         |         |         |        |           |   |            | 23,351    |  |   |           |        |  |   |            | 35,208    | 
|                                     | Contributions in aid of construction      |         |         |        |           |   |            | 359,936   |  |   |           |        |  |   |            | 270,053   | 
|                                     | Other nondeductible accruals              |         |         | 160,411 |           |   |            |          |  |   |           | 159,515 |  |   |            |          | 
|                                     | Deferred gain (loss) on sale of assets    |         |         |        |           |   |            | 9,692     |  |   |           |        |  |   |            | 18,179    | 
|                                     | Recoverable purchase gas costs            |         |         | 20,344  |           |   |            |          |  |   |           | 40,378  |  |   |            |          | 
|                                     | Derivatives                               |         |         | 395,253 |           |   |            |          |  |   |           | 571,296 |  |   |            |          | 
|                                     | Deferred incentive and pension accrual    |         |         |        |           |   |            |          |  |   |           |        |  |   |            | 3,461     | 
|                                     | NOL and charitable contribution carryover |         |         |         |           |   |            |           |  |   |           |         |  |   |            | 1,054,253 | 
|                                     | Other                                     |         |         | 5,177   |           |   |            | 437,112   |  |   |           | 9,526   |  |   |            | 548,954   | 
|                                     |                                           |         |         |         |           |   |            |           |  |   |           |        
|                                     | Total                                     |         |         | 700,366 |           |   |            | 830,091   |  |   |           | 895,698 |  |   |            | 1,930,108 | 
|                                     |                                           |         |         |         |           |   |            |           |  |   |           |        
|Deferred tax liabilities:            |                                           |         |         |         |           |   |            |           |  |   |           |         |  |   |            |          
|                                     | Recoverable purchase gas costs            |         |         | 796,118 |           |   |            |          |  |   |           | 368,799 |  |   |            |          | 
|                                     | Property, plant, and equipment            |         |         |        |           |   |            | 6,468,105 |  |   |           |        |  |   |            | 5,812,245 | 
|                                     | Debt issue costs                          |         |         |        |           |   |            | 88,769    |  |   |           |        |  |   |            | 97,255    | 
|                                     | Deferred rate case costs                  |         |         |        |           |   |            | 28,607    |  |   |           |        |  |   |            | 29,226    | 
|                                     | Covenant not to compete                   |         |         |        |           |   |            | 50,859    |  |   |           |        |  |   |            | 55,101    | 
|                                     | Other                                     |         |         | 462     |           |   |            | 461,609   |  |   |           |        |  |   |            | 465,662   | 
|                                     |                                           |         |         |         |           |   |            |           |  |   |           |        
|                                     | Total                                     |         |         | 796,580 |           |   |            | 7,097,949 |  |   |           | 368,799 |  |   |            | 6,459,489 | 
|                                     |                                           |         |         |         |           |   |            |           |  |   |           |        
|Net deferred tax asset (liabilities) |                                           | $       | (96,214 | )       |           | $ | (6,267,858 | )         |  | $ | 526,899   |         |  | $ | (4,529,381 | )        
|                                     |                                           |         |         |         |           |   |            |           |  |   |           |        



F-19



---



##### Table of Contents



ENERGY WEST, INCORPORATED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                   |                             |      |         |            |      |   |          |          |   |   |          |            |  
|---------------------------------- | --------------------------- | ---- | ------- | ---------- | ---- | - | -------- | -------- | - | - | -------- | ---------- | -
|                                   |                             | 2005 |         |            | 2004 |   |          | 2003     |  
|                                   |                             |      |         |            |      |   |          |          |  
|Current income taxes:              |                             |      |         |            |      |   |          |          |   |   |          |           
|                                   | Federal                     |      | $       | (1,226,388 | )    |   | $        | (453,156 | ) |   | $        | (1,474,595 | )
|                                   | State                       |      |         | (361,267   | )    |   |          | (104,315 | ) |   |          | (86,672    | )
|                                   |                             |      |         |            |      |   |          |          |  
|                                   | Total current income taxes  |      |         | (1,587,655 | )    |   |          | (557,471 | ) |   |          | (1,561,267 | )
|                                   |                             |      |         |            |      |   |          |          |  
|Deferred income taxes:             |                             |      |         |            |      |   |          |          |   |   |          |           
|                                   | Federal                     |      |         | 1,938,492  |      |   |          | 138,344  |   |   |          | 1,124,103  |  
|                                   | State                       |      |         | 423,098    |      |   |          | 71,268   |   |   |          | (84,654    | )
|                                   |                             |      |         |            |      |   |          |          |  
|                                   | Total deferred income taxes |      |         | 2,361,590  |      |   |          | 209,612  |   |   |          | 1,039,449  |  
|                                   |                             |      |         |            |      |   |          |          |  
|Total income taxes before credits  |                             |      | 773,935 |            |      |   | (347,859 | )        |   |   | (521,818 | )         
|Investment tax credit, net         |                             |      | (21,062 | )          |      |   | (21,062  | )        |   |   | (21,062  | )         
|                                   |                             |      |         |            |      |   |          |          |  
|Total income tax expense (benefit) |                             | $    | 752,873 |            |      | $ | (368,921 | )        |   | $ | (542,880 | )         
|                                   |                             |      |         |            |      |   |          |          |  



|                                                |  |      |         |   |      |   |          |      |  |   |          |  
|----------------------------------------------- |  | ---- | ------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                |  | 2005 |         |   | 2004 |   |          | 2003 | 
|                                                |  |      |         |   |      |   |          |      | 
|Tax expense at statutory rate of 34%            |  | $    | 743,846 |   |      | $ | (323,834 | )    |  | $ | (489,958 | )
|State income tax, net of federal tax benefit    |  |      | 97,575  |   |      |   | (41,266  | )    |  |   | (62,435  | )
|Amortization of deferred investment tax credits |  |      | (21,062 | ) |      |   | (21,062  | )    |  |   | (21,062  | )
|Other                                           |  |      | (67,486 | ) |      |   | 17,241   |      |  |   | 30,575   |  
|                                                |  |      |         |   |      |   |          |      | 
|Total                                           |  | $    | 752,873 |   |      | $ | (368,921 | )    |  | $ | (542,880 | )
|                                                |  |      |         |   |      |   |          |      | 



|    |                       
|--- | ----------------------
|10. | Segments of Operations





F-20



---



##### Table of Contents



ENERGY WEST, INCORPORATED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                |                         |             |            |            |            |   |            |           |  |          |            |            |  |              |           |         |              |   |             |             |   |   |            |            | 
|----------------------------------------------- | ----------------------- | ----------- | ---------- | ---------- | ---------- | - | ---------- | --------- |  | -------- | ---------- | ---------- |  | ------------ | --------- | ------- | ------------ | - | ----------- | ----------- | - | - | ---------- | ---------- | 
|                                                |                         | Natural Gas |            |            | Propane    |   |            |           |  | Pipeline |            |            |  |              |          
|Year Ended June 30, 2005                        |                         | Operations  |            |            | Operations |   |            | EWR       |  |          | Operations |            |  | Eliminations |           |         | Consolidated |  
|                                                |                         |             |            |            |            |   |            |           |  |          |            |            |  |              |           |         |              |  
|Operating revenue:                              |                         |             |            |            |            |   |            |           |  |          |            |            |  |              |           |         |              |   |             |             |   |   |            |           
|                                                | Natural gas operations  |             | $          | 45,091,564 |            |   | $          |          |  |          | $          |           |  |              | $         |        |              |   | $           | (300,000    | ) |   | $          | 44,791,564 | 
|                                                | Propane operations      |             |            |            |            |   |            | 9,056,729 |  |          |            |            |  |              |           |         |              |   |             | (236,749    | ) |   |            | 8,819,980  | 
|Marketing and wholesale                         |                         |             |            |            |            |   |            |           |  |          | 38,352,126 |            |  |              |           |         |              |   | (15,678,744 | )           |   |   | 22,673,382 |           
|Pipeline operations                             |                         |             |            |            |            |   |            |           |  |          |            |            |  |              | 424,038   |         |              |   |             |             |   |   | 424,038    |           
|                                                |                         |             |            |            |            |   |            |           |  |          |            |            |  |              |           |         |              |  
|                                                | Total operating revenue |             |            | 45,091,564 |            |   |            | 9,056,729 |  |          |            | 38,352,126 |  |              |           | 424,038 |              |   |             | (16,215,493 | ) |   |            | 76,708,964 | 
|                                                |                         |             |            |            |            |   |            |           |  |          |            |            |  |              |           |         |              |  
|Gas purchased                                   |                         |             | 33,095,465 |            |            |   | 5,014,125  |           |  |          |            |            |  |              |           |         |              |   | (536,749    | )           |   |   | 37,572,841 |           
|Gas and electric  wholesale                    |                         |             |            |            |            |   |            |           |  |          | 36,438,381 |            |  |              |           |         |              |   | (15,678,744 | )           |   |   | 20,759,637 |           
|Distribution, general, and administrative       |                         |             | 6,242,841  |            |            |   | 2,152,870  |           |  |          | 937,314    |            |  |              | 113,542   |         |              |   |             |             |   |   | 9,446,567  |           
|Maintenance                                     |                         |             | 518,686    |            |            |   | 77,430     |           |  |          | 196        |            |  |              |           |         |              |   |             |             |   |   | 596,312    |           
|Depreciation and amortization                   |                         |             | 1,488,353  |            |            |   | 550,452    |           |  |          | 220,845    |            |  |              | 53,588    |         |              |   |             |             |   |   | 2,313,238  |           
|Taxes other than income                         |                         |             | 1,416,037  |            |            |   | 188,553    |           |  |          | 14,711     |            |  |              | 34,635    |         |              |   |             |             |   |   | 1,653,936  |           
|                                                |                         |             |            |            |            |   |            |           |  |          |            |            |  |              |           |         |              |  
|Operating expenses                              |                         |             | 42,761,382 |            |            |   | 7,983,430  |           |  |          | 37,611,447 |            |  |              | 201,765   |         |              |   | (16,215,493 | )           |   |   | 72,342,531 |           
|                                                |                         |             |            |            |            |   |            |           |  |          |            |            |  |              |           |         |              |  
|Operating income (loss)                         |                         |             | 2,330,182  |            |            |   | 1,073,299  |           |  |          | 740,679    |            |  |              | 222,273   |         |              |   |             |             |   |   | 4,366,433  |           
|Other income                                    |                         |             | 165,806    |            |            |   | 210,477    |           |  |          | 67,064     |            |  |              | 1,860     |         |              |   |             |             |   |   | 445,207    |           
|Interest (expense)                              |                         |             | (1,774,989 | )          |            |   | (571,321   | )         |  |          | (274,885   | )          |  |              | (56,103   | )       |              |   |             |             |   |   | (2,677,298 | )         
|                                                |                         |             |            |            |            |   |            |           |  |          |            |            |  |              |           |         |              |  
|Income (loss) before income taxes               |                         |             | 720,999    |            |            |   | 712,455    |           |  |          | 532,858    |            |  |              | 168,030   |         |              |   |             |             |   |   | 2,134,342  |           
|Income taxes benefit (expense)                  |                         |             | (216,073   | )          |            |   | (270,652   | )         |  |          | (210,712   | )          |  |              | (55,436   | )       |              |   |             |             |   |   | (752,873   | )         
|                                                |                         |             |            |            |            |   |            |           |  |          |            |            |  |              |           |         |              |  
|Net income (loss)                               |                         | $           | 504,926    |            |            | $ | 441,803    |           |  | $        | 322,146    |            |  | $            | 112,594   |         |              | $ |            |             |   | $ | 1,381,469  |           
|                                                |                         |             |            |            |            |   |            |           |  |          |            |            |  |              |           |         |              |  
|Capital expenditures and natural gas properties |                         | $           | 1,945,601  |            |            | $ | 613,447    |           |  | $        | 193,881    |            |  | $            | 42,636    |         |              |   |             |             |   | $ | 2,795,565  |           
|Total assets                                    |                         | $           | 39,628,060 |            |            | $ | 12,026,924 |           |  | $        | 6,965,714  |            |  | $            | 1,136,303 |         |              | $ | (323,608    | )           |   | $ | 59,433,393 |           

F-21



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##### Table of Contents



ENERGY WEST, INCORPORATED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                                |                         |             |            |            |            |   |            |           |  |          |            |            |  |              |           |         |              |   |             |             |   |   |            |            | 
|----------------------------------------------- | ----------------------- | ----------- | ---------- | ---------- | ---------- | - | ---------- | --------- |  | -------- | ---------- | ---------- |  | ------------ | --------- | ------- | ------------ | - | ----------- | ----------- | - | - | ---------- | ---------- | 
|                                                |                         | Natural Gas |            |            | Propane    |   |            |           |  | Pipeline |            |            |  |              |          
|Year Ended June 30, 2004                        |                         | Operations  |            |            | Operations |   |            | EWR       |  |          | Operations |            |  | Eliminations |           |         | Consolidated |  
|                                                |                         |             |            |            |            |   |            |           |  |          |            |            |  |              |           |         |              |  
|Operating revenue:                              |                         |             |            |            |            |   |            |           |  |          |            |            |  |              |           |         |              |   |             |             |   |   |            |           
|                                                | Natural gas operations  |             | $          | 39,362,689 |            |   | $          |          |  |          | $          |           |  |              | $         |        |              |   | $           | (300,000    | ) |   | $          | 39,062,689 | 
|                                                | Propane operations      |             |            |            |            |   |            | 7,963,609 |  |          |            |            |  |              |           |         |              |   |             | (227,230    | ) |   |            | 7,736,379  | 
|                                                | Marketing and wholesale |             |            |            |            |   |            |           |  |          |            | 51,097,486 |  |              |           |         |              |   |             | (25,006,641 | ) |   |            | 26,090,845 | 
|                                                | Pipeline operations     |             |            |            |            |   |            |           |  |          |            |            |  |              |           | 401,269 |              |   |             |             |   |   |            | 401,269    | 
|                                                |                         |             |            |            |            |   |            |           |  |          |            |            |  |              |           |         |              |  
|                                                | Total operating revenue |             |            | 39,362,689 |            |   |            | 7,963,609 |  |          |            | 51,097,486 |  |              |           | 401,269 |              |   |             | (25,533,871 | ) |   |            | 73,291,182 | 
|                                                |                         |             |            |            |            |   |            |           |  |          |            |            |  |              |           |         |              |  
|Gas purchased                                   |                         |             | 28,183,288 |            |            |   | 4,227,508  |           |  |          |            |            |  |              |           |         |              |   | (527,230    | )           |   |   | 31,883,566 |           
|Gas and electric  wholesale                    |                         |             |            |            |            |   |            |           |  |          | 51,034,517 |            |  |              |           |         |              |   | (25,006,641 | )           |   |   | 26,027,876 |           
|Distribution, general, and administrative       |                         |             | 6,996,914  |            |            |   | 2,165,617  |           |  |          | 860,425    |            |  |              | 146,604   |         |              |   |             |             |   |   | 10,169,560 |           
|Maintenance                                     |                         |             | 395,572    |            |            |   | 84,514     |           |  |          |            |            |  |              |           |         |              |   |             |             |   |   | 480,086    |           
|Depreciation and amortization                   |                         |             | 1,538,546  |            |            |   | 547,234    |           |  |          | 213,172    |            |  |              | 33,121    |         |              |   |             |             |   |   | 2,332,073  |           
|Taxes other than income                         |                         |             | 911,496    |            |            |   | 241,379    |           |  |          | 22,260     |            |  |              | 34,781    |         |              |   |             |             |   |   | 1,209,916  |           
|                                                |                         |             |            |            |            |   |            |           |  |          |            |            |  |              |           |         |              |  
|Operating expenses                              |                         |             | 38,025,816 |            |            |   | 7,266,252  |           |  |          | 52,130,374 |            |  |              | 214,506   |         |              |   | (25,533,871 | )           |   |   | 72,103,077 |           
|                                                |                         |             |            |            |            |   |            |           |  |          |            |            |  |              |           |         |              |  
|Operating income (loss)                         |                         |             | 1,336,873  |            |            |   | 697,357    |           |  |          | (1,032,888 | )          |  |              | 186,763   |         |              |   |             |             |   |   | 1,188,105  |           
|Other income                                    |                         |             | 96,354     |            |            |   | 180,748    |           |  |          | (12,678    | )          |  |              | 120,853   |         |              |   |             |             |   |   | 385,277    |           
|Interest (expense)                              |                         |             | (1,622,797 | )          |            |   | (572,522   | )         |  |          | (253,601   | )          |  |              | (49,703   | )       |              |   |             |             |   |   | (2,498,623 | )         
|                                                |                         |             |            |            |            |   |            |           |  |          |            |            |  |              |           |         |              |  
|Income (loss) before income taxes               |                         |             | (189,570   | )          |            |   | 305,583    |           |  |          | (1,299,167 | )          |  |              | 257,913   |         |              |   |             |             |   |   | (925,241   | )         
|Income taxes benefit (expense)                  |                         |             | 26,386     |            |            |   | (2,475     | )         |  |          | 444,322    |            |  |              | (99,312   | )       |              |   |             |             |   |   | 368,921    |           
|                                                |                         |             |            |            |            |   |            |           |  |          |            |            |  |              |           |         |              |  
|Net income (loss)                               |                         | $           | (163,184   | )          |            | $ | 303,108    |           |  | $        | (854,845   | )          |  | $            | 158,601   |         |              | $ |            |             |   | $ | (556,320   | )         
|                                                |                         |             |            |            |            |   |            |           |  |          |            |            |  |              |           |         |              |  
|Capital expenditures and natural gas properties |                         | $           | 1,631,549  |            |            | $ | 515,213    |           |  | $        | 74,634     |            |  | $            | 95,299    |         |              |   |             |             |   | $ | 2,316,695  |           
|Total assets                                    |                         | $           | 47,260,442 |            |            | $ | 12,434,754 |           |  | $        | 8,880,950  |            |  | $            | 1,117,398 |         |              | $ | (8,248,467  | )           |   | $ | 61,445,077 |           

F-22



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##### Table of Contents



ENERGY WEST, INCORPORATED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                                |                         |             |            |            |            |   |            |            |  |          |            |            |  |              |           |         |              |   |             |             |   |   |            |            | 
|----------------------------------------------- | ----------------------- | ----------- | ---------- | ---------- | ---------- | - | ---------- | ---------- |  | -------- | ---------- | ---------- |  | ------------ | --------- | ------- | ------------ | - | ----------- | ----------- | - | - | ---------- | ---------- | 
|                                                |                         | Natural Gas |            |            | Propane    |   |            |            |  | Pipeline |            |            |  |              |          
|Year Ended June 30, 2003                        |                         | Operations  |            |            | Operations |   |            | EWR        |  |          | Operations |            |  | Eliminations |           |         | Consolidated |  
|                                                |                         |             |            |            |            |   |            |            |  |          |            |            |  |              |           |         |              |  
|Operating revenue:                              |                         |             |            |            |            |   |            |            |  |          |            |            |  |              |           |         |              |   |             |             |   |   |            |           
|                                                | Natural gas operations  |             | $          | 31,927,242 |            |   | $          |           |  |          | $          |           |  |              | $         |        |              |   | $           | (300,000    | ) |   | $          | 31,627,242 | 
|                                                | Propane operations      |             |            |            |            |   |            | 12,984,676 |  |          |            |            |  |              |           |         |              |   |             | (197,758    | ) |   |            | 12,786,918 | 
|                                                | Marketing and wholesale |             |            |            |            |   |            |            |  |          |            | 49,123,253 |  |              |           |         |              |   |             | (16,088,229 | ) |   |            | 33,035,024 | 
|                                                | Pipeline operations     |             |            |            |            |   |            |            |  |          |            |            |  |              |           | 448,681 |              |   |             |             |   |   |            | 448,681    | 
|                                                |                         |             |            |            |            |   |            |            |  |          |            |            |  |              |           |         |              |  
|                                                | Total operating revenue |             |            | 31,927,242 |            |   |            | 12,984,676 |  |          |            | 49,123,253 |  |              |           | 448,681 |              |   |             | (16,585,987 | ) |   |            | 77,897,865 | 
|                                                |                         |             |            |            |            |   |            |            |  |          |            |            |  |              |           |         |              |  
|Gas purchased                                   |                         |             | 22,054,365 |            |            |   | 8,959,974  |            |  |          |            |            |  |              | 287,074   |         |              |   | (497,758    | )           |   |   | 30,803,655 |           
|Gas and electric  wholesale                    |                         |             |            |            |            |   |            |            |  |          | 47,594,331 |            |  |              |           |         |              |   | (16,088,229 | )           |   |   | 31,506,102 |           
|Cost of goods sold                              |                         |             |            |            |            |   |            |            |  |          | 210,661    |            |  |              |           |         |              |   |             |             |   |   | 210,661    |           
|Distribution, general, and administrative       |                         |             | 6,006,710  |            |            |   | 2,693,842  |            |  |          | 2,827,550  |            |  |              | 140,927   |         |              |   |             |             |   |   | 11,669,029 |           
|Maintenance                                     |                         |             | 410,829    |            |            |   | 85,888     |            |  |          |            |            |  |              |           |         |              |   |             |             |   |   | 496,717    |           
|Depreciation and amortization                   |                         |             | 1,486,754  |            |            |   | 622,156    |            |  |          | 168,537    |            |  |              | 114,921   |         |              |   |             |             |   |   | 2,392,368  |           
|Taxes other than income                         |                         |             | 637,635    |            |            |   | 198,369    |            |  |          | 43,977     |            |  |              | 8,300     |         |              |   |             |             |   |   | 888,281    |           
|                                                |                         |             |            |            |            |   |            |            |  |          |            |            |  |              |           |         |              |  
|Operating expenses                              |                         |             | 30,596,293 |            |            |   | 12,560,229 |            |  |          | 50,845,056 |            |  |              | 551,222   |         |              |   | (16,585,987 | )           |   |   | 77,966,813 |           
|                                                |                         |             |            |            |            |   |            |            |  |          |            |            |  |              |           |         |              |  
|Operating income (loss)                         |                         |             | 1,330,949  |            |            |   | 424,447    |            |  |          | (1,721,803 | )          |  |              | (102,541  | )       |              |   |             |             |   |   | (68,948    | )         
|Other income                                    |                         |             | 93,850     |            |            |   | 187,329    |            |  |          | 19,632     |            |  |              | 1,299     |         |              |   |             |             |   |   | 302,110    |           
|Interest (expense)                              |                         |             | (998,650   | )          |            |   | (403,160   | )          |  |          | (224,052   | )          |  |              | (7,180    | )       |              |   |             |             |   |   | (1,633,042 | )         
|                                                |                         |             |            |            |            |   |            |            |  |          |            |            |  |              |           |         |              |  
|Income (loss) before income taxes               |                         |             | 426,149    |            |            |   | 208,616    |            |  |          | (1,926,223 | )          |  |              | (108,422  | )       |              |   |             |             |   |   | (1,399,880 | )         
|Income taxes benefit (expense)                  |                         |             | (245,182   | )          |            |   | (68,833    | )          |  |          | 839,931    |            |  |              | 16,964    |         |              |   |             |             |   |   | 542,880    |           
|                                                |                         |             |            |            |            |   |            |            |  |          |            |            |  |              |           |         |              |  
|Net income (loss)                               |                         | $           | 180,967    |            |            | $ | 139,783    |            |  | $        | (1,086,292 | )          |  | $            | (91,458   | )       |              | $ |            |             |   | $ | (857,000   | )         
|                                                |                         |             |            |            |            |   |            |            |  |          |            |            |  |              |           |         |              |  
|Capital expenditures and natural gas properties |                         | $           | 2,570,675  |            |            | $ | 878,356    |            |  | $        | 80,776     |            |  | $            | 510,479   |         |              |   |             |             |   | $ | 4,040,286  |           
|Total assets                                    |                         | $           | 47,031,703 |            |            | $ | 12,624,539 |            |  | $        | 10,067,276 |            |  | $            | 2,587,576 |         |              | $ | (12,284,474 | )           |   | $ | 60,026,620 |           



|    |                                          
|--- | -----------------------------------------
|11. | Stock Option and Shareholder Rights Plans

2002 Stock Option Plan


F-23



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##### Table of Contents



ENERGY WEST, INCORPORATED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




SFAS No. 123 Disclosures




|                          |  |           |         |          |                |   |      | 
|------------------------- |  | --------- | ------- | -------- | -------------- | - | ---- | 
|                          |  |           |         | Weighted |               
|                          |  | Number of |         |          | Average        |  
|                          |  | Shares    |         |          | Exercise Price |  
|                          |  |           |         |          |                |  
|Outstanding July 1, 2002  |  |           | 32,420  |          |                | $ | 9.09 | 
|Granted                   |  |           | 114,500 |          |                |   | 8.49 | 
|Exercised                 |  |           |        |          |                |   |     | 
|Expired                   |  |           | (16,500 | )        |                |   | 8.61 | 
|                          |  |           |         |          |                |  
|Outstanding July 1, 2003  |  |           | 130,420 |          |                | $ | 8.62 | 
|Granted                   |  |           |        |          |                |   |      | 
|Exercised                 |  |           |        |          |                |   |      | 
|Expired                   |  |           | (53,420 | )        |                | $ | 8.82 | 
|                          |  |           |         |          |                |  
|Outstanding June 30, 2004 |  |           | 77,000  |          |                | $ | 8.49 | 
|Granted                   |  |           | 70,000  |          |                | $ | 7.02 | 
|Exercised                 |  |           |        |          |                |   |      | 
|Expired                   |  |           | (21,000 | )        |                | $ | 8.49 | 
|                          |  |           |         |          |                |  
|Outstanding June 30, 2005 |  |           | 126,000 |          |                | $ | 7.68 | 
|                          |  |           |         |          |                |  



F-24



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##### Table of Contents



ENERGY WEST, INCORPORATED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                        |  |             |         |          |          |          |             |         |  |  |             |          |  |          |        |  |  |   |      | 
|----------------------- |  | ----------- | ------- | -------- | -------- | -------- | ----------- | ------- |  |  | ----------- | -------- |  | -------- | ------ |  |  | - | ---- | 
|                        |  |             |         |          |          | Weighted |             |         |  |  |            
|                        |  |             |         |          |          | Average  |             |         |  |  |            
|                        |  |             |         | Weighted |          |          | Remaining   |         |  |  |             | Weighted | 
|                        |  |             |         | Average  |          |          | Contractual |         |  |  |             | Average  | 
|                        |  | Number      |         |          | Exercise |          |             | Life    |  |  | Number      |          |  | Exercise |       
|Range of Exercise Price |  | Outstanding |         |          | Price    |          |             | (Years) |  |  | Exercisable |          |  | Price    |       
|                        |  |             |         |          |          |          |             |         |  |  |             |          |  |          |       
|$8.49                   |  |             | 56,000  |          |          | $        | 8.49        |         |  |  | 2.4         |          |  |          | 56,000 |  |  | $ | 8.49 | 
|$6.47 to $8.25          |  |             | 70,000  |          |          | $        | 7.02        |         |  |  | 9.5         |          |  |          | 17,500 |  |  | $ | 7.02 | 
|                        |  |             |         |          |          |          |             |         |  |  |             |          |  |          |       
|                        |  |             | 126,000 |          |          | $        | 7.68        |         |  |  | 6.3         |          |  |          | 73,500 |  |  | $ | 8.14 | 
|                        |  |             |         |          |          |          |             |         |  |  |             |          |  |          |       

Shareholder Rights




|    |                              
|--- | -----------------------------
|12. | Commitments and Contingencies

Commitments


|                     |      |   |            |           | 
|-------------------- | ---- | - | ---------- | --------- | 
|Year ending June 30: |      |   |            |          
|                     | 2006 |   | $          | 4,367,715 | 
|                     | 2007 |   |            | 4,286,101 | 
|                     | 2008 |   |            | 4,258,896 | 
|                     | 2009 |   |            | 4,258,896 | 
|                     | 2010 |   |            | 2,839,264 | 
|                     |      |   |           
|Total                |      | $ | 20,010,872 |          
|                     |      |   |           

Environmental Contingency






F-25



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##### Table of Contents



ENERGY WEST, INCORPORATED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








Derivative Contingencies


Litigation










F-26



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##### Table of Contents



ENERGY WEST, INCORPORATED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Operating Leases


|                    |      |   |         |         | 
|------------------- | ---- | - | ------- | ------- | 
|Year ended June 30: |      |   |         |        
|                    | 2006 |   | $       | 142,599 | 
|                    | 2007 |   |         | 90,624  | 
|                    | 2008 |   |         | 90,624  | 
|                    | 2009 |   |         | 6,600   | 
|                    | 2010 |   |         |        | 
|                    |      |   |        
|Total               |      | $ | 330,447 |        
|                    |      |   |        



Letters of Credit




|    |                                          
|--- | -----------------------------------------
|13. | Financial Instruments and Risk Management

Management of Risks Related to Derivatives






F-27



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##### Table of Contents



ENERGY WEST, INCORPORATED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                                       |  |        |         |  |             |   |         | 
|------------------------------------------------------ |  | ------ | ------- |  | ----------- | - | ------- | 
|                                                       |  | Assets |         |  | Liabilities |  
|                                                       |  |        |         |  |             |  
|Contracts maturing during fiscal year 2006             |  | $      | 113,885 |  |             | $ | 114,237 | 
|Contracts maturing during fiscal years 2007 and 2008   |  |        |         |  |             |   |         | 
|Contracts maturing during fiscal years 2009 and beyond |  |        | 5,184   |  |             |   |        | 
|                                                       |  |        |         |  |             |  
|Total                                                  |  | $      | 119,069 |  |             | $ | 114,237 | 
|                                                       |  |        |         |  |             |  



|    |                  
|--- | -----------------
|14. | Subsequent Events







|    |                                                                
|--- | ---------------------------------------------------------------
|15. | Prior Year Restatement of Consolidated Financial
    Statements









F-28



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##### Table of Contents



ENERGY WEST, INCORPORATED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|                                      |  |                    |            |   |               |   |            |  
|------------------------------------- |  | ------------------ | ---------- | - | ------------- | - | ---------- | -
|                                      |  | For the Year Ended |           
|                                      |  | June 30, 2003      |           
|                                      |  |                    |           
|                                      |  | As Originally      |            |   |              
|                                      |  | Reported           |            |   | As Restated   |  
|                                      |  | in Prior Year      |            |   | in Prior Year |  
|                                      |  |                    |            |   |               |  
|Consolidated Statements of Operations |  |                    |            |   |               |   |            |  
|Revenues:                             |  |                    |            |   |               |   |            |  
|Gas and electric  wholesale          |  | $                  | 34,283,190 |   |               | $ | 33,035,024 |  
|Total Revenues                        |  |                    | 79,146,031 |   |               |   | 77,897,865 |  
|Operating Income (Loss)               |  |                    | 1,179,218  |   |               |   | (68,948    | )
|Income (loss) before income taxes     |  |                    | (151,714   | ) |               |   | (1,399,880 | )
|Income tax benefit (expense)          |  |                    | 62,835     |   |               |   | 542,880    |  
|Net income (loss)                     |  |                    | (88,879    | ) |               |   | (857,000   | )
|Earnings (loss) per common share:     |  |                    |            |   |               |   |            |  
|Basic                                 |  | $                  | (0.03      | ) |               | $ | (0.33      | )
|Diluted                               |  | $                  | (0.03      | ) |               | $ | (0.33      | )

|                               |  |                     |            |  |               |   |            | 
|------------------------------ |  | ------------------- | ---------- |  | ------------- | - | ---------- | 
|                               |  | As of June 30, 2003 |           
|                               |  |                     |           
|                               |  | As Originally       |            |  |              
|                               |  | Reported            |            |  | As Restated   |  
|                               |  | in Prior Year       |            |  | in Prior Year |  
|                               |  |                     |            |  |               |  
|Consolidated Balance Sheet     |  |                     |            |  |               |   |            | 
|Assets                         |  |                     |            |  |               |   |            | 
|Derivative assets              |  | $                   | 2,719,640  |  |               | $ | 623,635    | 
|Total current assets           |  |                     | 18,171,898 |  |               |   | 15,790,223 | 
|Liabilities and capitalization |  |                     |            |  |               |   |            | 
|Derivative liabilities         |  |                     | 780,703    |  |               |   | 864,929    | 
|Total current liabilities      |  |                     | 21,568,695 |  |               |   | 21,832,786 | 
|Deferred income taxes          |  |                     | 5,460,083  |  |               |   | 4,335,896  | 
|Long Term Liabilities          |  |                     | 10,706,689 |  |               |   | 9,402,637  | 
|Retained earnings              |  |                     | 9,852,739  |  |               |   | 8,511,025  | 

F-29



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##### Table of Contents



ENERGY WEST, INCORPORATED AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                  
|--- | ---------------------------------
|16. | Quarterly Information (Unaudited)



|                                       |  |               |        |   |                |  |            |               |  |   |                |            |  |  |  |  |            |   |        |  |  |  |  |  |  |   |        |  
|-------------------------------------- |  | ------------- | ------ | - | -------------- |  | ---------- | ------------- |  | - | -------------- | ---------- |  |  |  |  | ---------- | - | ------ |  |  |  |  |  |  | - | ------ | -
|                                       |  | First Quarter |        |   | Second Quarter |  |            | Third Quarter |  |   | Fourth Quarter |           
|                                       |  |               |        |   |                |  |            |               |  |   |                |           
|                                       |  | Originally    |        |   |                |  | Originally |               |  |   |                | Originally |  |  |  |  | Originally |  
|Year Ended June 30, 2005               |  | Reported      |        |   |                |  | Reported   |               |  |   |                | Reported   |  |  |  |  | Reported   |  
|                                       |  |               |        |   |                |  |            |               |  |   |                |            |  |  |  |  |            |   |        |  | 
|Revenues                               |  | $             | 11,867 |   |                |  |            |               |  | $ | 22,888         |            |  |  |  |  |            | $ | 27,838 |  |  |  |  |  |  | $ | 14,116 |  
|Operating income (loss)                |  | $             | (1,182 | ) |                |  |            |               |  | $ | 1,536          |            |  |  |  |  |            | $ | 4,082  |  |  |  |  |  |  | $ | (70    | )
|Net income (loss)                      |  | $             | (1,122 | ) |                |  |            |               |  | $ | 566            |            |  |  |  |  |            | $ | 2,186  |  |  |  |  |  |  | $ | (249   | )
|Basic earnings (loss) per common share |  | $             | (0.43  | ) |                |  |            |               |  | $ | 0.22           |            |  |  |  |  |            | $ | 0.84   |  |  |  |  |  |  | $ | (0.10  | )
|Diluted earnings (loss) per share      |  | $             | (0.43  | ) |                |  |            |               |  | $ | 0.22           |            |  |  |  |  |            | $ | 0.84   |  |  |  |  |  |  | $ | (0.10  | )

|                                       |  |               |        |   |                |   |            |               |  |   |                |            |  |          |        |  |            |   |        |          |  |   |        |  |  |   |        |  
|-------------------------------------- |  | ------------- | ------ | - | -------------- | - | ---------- | ------------- |  | - | -------------- | ---------- |  | -------- | ------ |  | ---------- | - | ------ | -------- |  | - | ------ |  |  | - | ------ | -
|                                       |  | First Quarter |        |   | Second Quarter |   |            | Third Quarter |  |   | Fourth Quarter |           
|                                       |  |               |        |   |                |   |            |               |  |   |                |           
|                                       |  | Originally    |        |   |                |   | Originally |               |  |   |                | Originally |  |          |        |  | Originally |  
|Year Ended June 30, 2004               |  | Reported      |        |   | Restated       |   |            | Reported      |  |   | Restated       |            |  | Reported |        |  | Restated   |   |        | Reported | 
|                                       |  |               |        |   |                |   |            |               |  |   |                |            |  |          |        |  |            |   |        |          | 
|Revenues                               |  | $             | 12,280 |   |                | $ | 12,488     |               |  | $ | 22,812         |            |  | $        | 22,626 |  |            | $ | 24,581 |          |  | $ | 24,447 |  |  | $ | 13,730 |  
|Operating income (loss)                |  | $             | (716   | ) |                | $ | (508       | )             |  | $ | 1,079          |            |  | $        | 893    |  |            | $ | 1,695  |          |  | $ | 1,561  |  |  | $ | (758   | )
|Net income (loss)                      |  | $             | (622   | ) |                | $ | (494       | )             |  | $ | 313            |            |  | $        | 199    |  |            | $ | 669    |          |  | $ | 586    |  |  | $ | (847   | )
|Basic earnings (loss) per common share |  | $             | (0.24  | ) |                | $ | (0.19      | )             |  | $ | 0.12           |            |  | $        | 0.08   |  |            | $ | 0.26   |          |  | $ | 0.23   |  |  | $ | (0.33  | )
|Diluted earnings (loss) per share      |  | $             | (0.24  | ) |                | $ | (0.19      | )             |  | $ | 0.12           |            |  | $        | 0.08   |  |            | $ | 0.26   |          |  | $ | 0.23   |  |  | $ | (0.33  | )

F-30



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##### Table of Contents



EXHIBIT INDEX


|        |    |             |  |                                                                                                                                                                                                                                                                                                                     |  |                                                                                  |  |            |           |  |  |  |            | 
|------- | -- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------- |  | ---------- | --------- |  |  |  | ---------- | 
|        |    |             |  |                                                                                                                                                                                                                                                                                                                     |  |                                                                                  |  | Date      
|Exhibit |    |             |  |                                                                                                                                                                                                                                                                                                                     |  |                                                                                  |  | Previously
|Number  |    | Description |  | Previously Filed as Exhibit                                                                                                                                                                                                                                                                                         |  | File Number                                                                      |  | Filed     
|        |    |             |  |                                                                                                                                                                                                                                                                                                                     |  |                                                                                  |  |           
|        | 3  | .1          |  | Restated Articles of Incorporation                                                                                                                                                                                                                                                                                  |  | Exhibit 3.1 to Amendment #1 to the Registrants Annual
    Report on Form 10-K/A |  |            | 000-14183 |  |  |  | 7/9/1997   | 
|       
|        | 3  | .2          |  | Amended and Restated Bylaws                                                                                                                                                                                                                                                                                         |  | Exhibit 3.2 to the Registrants Current Report on
    Form 8-K                   |  |            | 000-14183 |  |  |  | 3/5/2004   | 
|       
|        | 4  | .1          |  | Form of Indenture (including form of Note) relating to our
    Series 1997 Notes                                                                                                                                                                                                                                    |  | Exhibit 4.1 to the Registrants Registration Statement
    on Form S-2.          |  |            | 333-31907 |  |  |  | 7/23/1997  | 
|       
|        | 4  | .2          |  | Form of Indenture (including form of Note) relating to our
    Series 1993 Notes                                                                                                                                                                                                                                    |  | Exhibit 4.1 to the Registrants Registration Statement
    on Form S-2           |  |            | 33-62680  |  |  |  | 5/13/1993  | 
|       
|        | 4  | .3          |  | Loan Agreement, dated as of September 1, 1992, relating to
    our Series 1992A and Series 1992B Industrial
    Development Revenue Bonds                                                                                                                                                                           |  | Exhibit 4.2 to the Registrants Registration Statement
    on Form S-2           |  |            | 33-62680  |  |  |  | 5/13/1993  | 
|       
|        | 4  | .4          |  | Preferred Stock Rights Agreement, dated as of June 3, 2004,
    between Registrant and Computershare Trust Company, Inc.,
    including the Terms of Series A Participating Preferred
    Stock, the form of Rights Certificate and the Summary of Rights
    attached thereto as Exhibits A, B and C, respectively |  | Exhibit 4.1 to the Registrants Registration Statement
    on Form 8-A           |  |            | 000-14183 |  |  |  | 6/3/2004   | 
|       
|        | 10 | .1(a)       |  | Amended and Restated Credit Agreement, dated March 31, 2004
    , by and among Registrant, its subsidiaries and LaSalle Bank
    National Association.                                                                                                                                                              |  | Exhibit 10.1 to the Registrants Current Report on
    Form 8-K                  |  |            | 000-14183 |  |  |  | 4/1/2004   | 
|       
|        | 10 | .1(b)       |  | Waiver and First Amendment to Credit Agreement dated as of
    August 30, 2004 by and among the Company, its subsidiaries
    and LaSalle                                                                                                                                                                           |  | Exhibit 10.1 to the Registrants Current Report on
    Form 8-K                  |  |            | 000-14183 |  |  |  | 9/3/2004   | 
|       
|        | 10 | .1(c)       |  | Second Amendment to Credit Agreement dated as of
    September 10, 2004 by and among the Company, its
    subsidiaries and LaSalle                                                                                                                                                                                  |  | Exhibit 10.1 to the Registrants Current Report on
    Form 8-K filed            |  |            | 000-14183 |  |  |  | 9/16/2004  | 
|       
|        | 10 | .1(d)       |  | Letter Agreement to Credit Agreement entered into on
    October 20, 2004, by and among the Company, its
    subsidiaries and LaSalle                                                                                                                                                                               |  | Exhibit 10.1 to the Registrants Current Report on
    Form 8-K                  |  |            | 000-14183 |  |  |  | 10/21/2004 | 

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##### Table of Contents



|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                                                                                   |  |            |           |  |  |  |            | 
|------- | -- | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------- |  | ---------- | --------- |  |  |  | ---------- | 
|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                                                                                   |  | Date      
|Exhibit |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                                                                                   |  | Previously
|Number  |    | Description |  | Previously Filed as Exhibit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | File Number                                                                       |  | Filed     
|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                                                                                   |  |           
|       
|        | 10 | .1(e)       |  | Letter Agreement to Credit Agreement entered into on
    November 2, 2004, by and among the Company, its
    subsidiaries and LaSalle                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | Exhibit 10.1 to the Registrants Current Report on
    Form 8-K                   |  |            | 000-14183 |  |  |  | 11/5/2004  | 
|       
|        | 10 | .1(f)       |  | Third Amendment to Credit Agreement dated as of November 2,
    2004, by and among the Company, its subsidiaries and LaSalle                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  | Exhibit 10.2 to the Registrants Current Report on
    Form 8-K                   |  |            | 000-14183 |  |  |  | 11/5/2004  | 
|       
|        | 10 | .1(g)       |  | Fourth Amendment to Credit Agreement dated as of
    November 30, 2004, by and among the Company, its
    subsidiaries and LaSalle                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | Exhibit 10.1 to the Registrants Current Report on
    Form 8-K filed             |  |            | 000-14183 |  |  |  | 12/6/2004  | 
|       
|        | 10 | .2          |  | Energy West, Incorporated 2002 Stock Option Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | Appendix A to the Registrants Proxy Statement on Schedule
    14A                |  |            | 000-14183 |  |  |  | 10/30/2002 | 
|       
|        | 10 | .3          |  | Delivered Gas Purchase Contract dated February 23, 1997, as
    amended by that Letter Amendment Amending Gas Purchase Contract
    dated March 9, 1982; that Amendment to Delivered Gas
    Purchase Contract applicable as of March 20, 1986; that
    Letter Agreement dated December 18, 1986; that Letter
    Agreement dated April 12, 1988; that Letter Agreement dated
    April 28, 1992; that Letter Agreement dated March 14,
    1996; that Letter Agreement dated April 15, 1996; a second
    Letter Agreement dated April 15, 1996; that Letter dated
    February 18, 1997; and that Letter dated April 1,
    1997, transmitting a Notice of Assignment effective
    February 26, 1993 |  | Exhibit 10.6 to Amendment #1 to the Registrants
    Annual Report on Form 10-K/A |  |            | 000-14183 |  |  |  | 7/9/1997   | 

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|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                    |  |            |           |  |  |  |            | 
|------- | -- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------- |  | ---------- | --------- |  |  |  | ---------- | 
|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                    |  | Date      
|Exhibit |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                    |  | Previously
|Number  |    | Description |  | Previously Filed as Exhibit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | File Number                                                                        |  | Filed     
|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                    |  |           
|       
|        | 10 | .4          |  | Delivered Gas Purchase Contract dated December 1, 1985, as
    amended by that Letter Agreement dated July 1, 1986; that
    Letter Agreement dated November 19, 1987; that Letter
    Agreement dated December 1, 1988; that Letter Agreement
    dated July 30, 1992; that Assignment Conveyance and Bill of
    Sale effective as of January 1, 1993; that Letter Agreement
    dated March 8, 1993; that Letter Agreement dated
    October 21, 1993; that Letter Agreement dated
    October 18, 1994; that Letter Agreement dated
    January 30, 1995; that Letter Agreement dated
    August 30, 1995; that Letter Agreement dated
    October 3, 1995; that Letter Agreement dated
    October 31, 1995; that Letter Agreement dated
    December 21, 1995; that Letter Agreement dated
    April 25, 1996; that Letter Agreement dated
    January 29, 1997; and that Letter dated April 11, 1997 |  | Exhibit 10.7 to Amendment #1 to the Registrants
    Annual Report on Form 10-K/A  |  |            | 000-14183 |  |  |  | 7/9/1997   | 
|       
|        | 10 | .5          |  | Natural Gas Sale and Purchase Agreement dated July 20, 1992
    between Shell Canada Limited and the Company, as amended by that
    Letter Agreement dated August 23, 1993; that Amending
    Agreement effective as of November 1, 1994; and that
    Schedule A Incorporated Into and Forming a part of That
    Natural Gas Sale and Purchase Agreement, effective as of
    November 1, 1996                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | Exhibit 10.8 to Amendment #1 to the Registrants
    Annual Report on Form 10-K/A  |  |            | 000-14183 |  |  |  | 7/9/1997   | 
|       
|        | 10 | .6          |  | Employee Stock Ownership Plan Trust Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | Exhibit 10.2 to the Registrants Registration
    Statement on Form S-1            |  |            | 33-1672   |  |  |  | 11/20/1985 | 
|       
|        | 10 | .7          |  | Management Incentive Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | Exhibit 10.12 to Amendment #1 to the Registrants
    Annual Report on Form 10-K/A |  |            | 000-14183 |  |  |  | 7/9/1997   | 
|       
|        | 10 | .8          |  | Energy West Senior Management Incentive Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | Exhibit 10.19 to the Registrants Annual Report on
    Form 10-K                   |  |            | 000-14183 |  |  |  | 9/30/2002  | 

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|        |    |             |  |                                                                                                                                                                                                                                             |  |                                                                  |  |            |           |  |  |  |            | 
|------- | -- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------- |  | ---------- | --------- |  |  |  | ---------- | 
|        |    |             |  |                                                                                                                                                                                                                                             |  |                                                                  |  | Date      
|Exhibit |    |             |  |                                                                                                                                                                                                                                             |  |                                                                  |  | Previously
|Number  |    | Description |  | Previously Filed as Exhibit                                                                                                                                                                                                                 |  | File Number                                                      |  | Filed     
|        |    |             |  |                                                                                                                                                                                                                                             |  |                                                                  |  |           
|       
|        | 10 | .9          |  | Energy West Incorporated Deferred Compensation Plan for Directors                                                                                                                                                                           |  | Exhibit 10.20 to the Registrants Annual Report on
    Form 10-K |  |            | 000-14183 |  |  |  | 9/30/2002  | 
|       
|        | 10 | .10         |  | Amended and Restated Advisory Agreement, dated October 3,
    2003, by and among Energy West, Incorporated, D.A.
    Davidson & Co. and DAMG Capital LLC                                                                                    |  | Exhibit 10.11 to the Registrants Annual Report on
    Form 10-K |  |            | 000-14183 |  |  |  | 10/9/2003  | 
|       
|        | 10 | .11         |  | Letter Agreement dated June 5, 2003 between DAMG Capital
    LLC and the Company                                                                                                                                                            |  | Exhibit 10.12 to the Registrants Annual Report on
    Form 10-K |  |            | 000-14183 |  |  |  | 10/9/2003  | 
|       
|        | 10 | .12         |  | Letter Agreement dated June 5, 2003 between D.A.
    Davidson & Co. and the Company                                                                                                                                                         |  | Exhibit 10.13 to the Registrants Annual Report on
    Form 10-K |  |            | 000-14183 |  |  |  | 10/9/2003  | 
|       
|        | 10 | .13         |  | Agreement dated November 20, 2003 between and among J.
    Michael Gorman, Lawrence P. Haren, Richard M. Osborne, Thomas J.
    Smith, Turkey Vulture Fund XIII, Ltd., an Ohio limited
    liability company and, Energy West, Incorporated |  | Exhibit 10.1 to the Registrants Current Report on
    Form 8-K  |  |            | 000-14183 |  |  |  | 11/21/2003 | 
|       
|        | 10 | .14         |  | Separation Agreement, Release and Waiver of Claims between
    Energy West, Incorporated and Edward J. Bernica dated
    October 24, 2003                                                                                                   |  | Exhibit 10.1 to the Registrants Current Report on
    Form 8-K  |  |            | 000-14183 |  |  |  | 10/27/2003 | 
|       
|        | 10 | .15         |  | Employment Agreement entered into as of June 23, 2004,
    between the Company and David Cerotzke                                                                                                                                           |  | Exhibit 10.16 to the Registrants Annual Report on
    Form 10-K |  |            | 000-14183 |  |  |  | 12/17/2004 | 
|       
|        | 10 | .16         |  | Employment Agreement entered into as of June 23, 2004,
    between the Company and John Allen                                                                                                                                               |  | Exhibit 10.17 to the Registrants Annual Report on
    Form 10-K |  |            | 000-14183 |  |  |  | 12/17/2004 | 
|       
|        | 10 | .17         |  | Form of option agreements used to grant options under the 2002
    Stock Option Plan                                                                                                                                                        |  | Filed herewith                                                   |  |            |           |  |  |  |            | 
|       
|        | 10 | .18         |  | Propane Supply Agreement dated April 1, 2005 between
    Semstream, L.P. and Energy West Propane, Inc.                                                                                                                                      |  | Filed herewith                                                   |  |            |           |  |  |  |            | 
|       
|        | 21 |             |  | Company Subsidiaries                                                                                                                                                                                                                        |  | Filed herewith                                                   |  |            |           |  |  |  |            | 
|       
|        | 23 | .1          |  | Consent of Hein & Associates LLP                                                                                                                                                                                                            |  | Filed herewith                                                   |  |            |           |  |  |  |            | 
|       
|        | 23 | .2          |  | Consent of Deloitte & Touche LLP                                                                                                                                                                                                            |  | Filed herewith                                                   |  |            |           |  |  |  |            | 

44



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##### Table of Contents



|        |    |             |  |                                                                                                                                  |  |                |  |            |  |  |  |  |  | 
|------- | -- | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------- |  | -------------- |  | ---------- |  |  |  |  |  | 
|        |    |             |  |                                                                                                                                  |  |                |  | Date      
|Exhibit |    |             |  |                                                                                                                                  |  |                |  | Previously
|Number  |    | Description |  | Previously Filed as Exhibit                                                                                                      |  | File Number    |  | Filed     
|        |    |             |  |                                                                                                                                  |  |                |  |           
|       
|        | 31 |             |  | Certifications pursuant to SEC Release No. 33-8238, as
    adopted pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002 |  | Filed herewith |  |            |  |  |  |  |  | 
|       
|        | 32 |             |  | Certifications pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002  |  | Filed herewith |  |            |  |  |  |  |  | 

45