----

----

**SECURITIES      AND EXCHANGE COMMISSION**

**WASHINGTON,      D.C. 20549**

**FORM      10-K/A**

|   | [x]                Annual Report Pursuant to Section 13 or 15 (d) of                the Securities Exchange Act of 1934 |
|--------|-------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                    | For                  the fiscal year ended December 31, 2006 |   |

|   | [  ]                Transition Report Pursuant to Section 13 of 15(d) of the Securities                Exchange Act of 1934                                            |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | For                  the transition period from                                                  to_______ |

| Colorado                                                                      |   | 75-2811855                                                     |
|-------------------------------------------------------------------------------|--------|----------------------------------------------------------------|
| (State                or Other Jurisdiction of Incorporation or Organization) |   | (I.R.S.  Employer                Identification No.) |

| 2911                South County Road 1260 Midland, Texas |   | 79706                     |
|-----------------------------------------------------------|--------|---------------------------|
| (Address                of Principal Executive Offices)   |   | (Zip                Code) |

| Title                of Each Class          |   | Name                of Each Exchange on Which Registered |
|---------------------------------------------|--------|----------------------------------------------------------|
| Common                Stock, $.01 par value |   | American                Stock Exchange                   |

----

----

**ITEM      6.                     SELECTED      FINANCIAL DATA**

|                                                                                                                                                                                                                                                                                                                                                                                |   | Year                Ended December 31,                    |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                |   | 2002                                                      |   |   | 2003 |   |   | 2004 |   |   | 2005(1) |   |   | 2006 |   |
|                                                                                                                                                                                                                                                                                                                                                                                |   | *(in                thousands, except per share amounts)* |   |
| CONSOLIDATED                STATEMENTS OF INCOME AND OTHER INFORMATION:                                                                                                                                                                                                                                                                                                             |   |                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenues                                                                                                        |   | $                                                         | 10,297 |   |   | $ | 12,750 |   |   | $ | 15,958 |   |   | $ | 49,311 |   |   | $ | 62,729 |   |
| Costs                of revenue, exclusive of depreciation shown                separately below                                                                                                                                                                                                                                                                               |   |                                                      | 5,572  |   |   |   | 6,057 |   |   |   | 6,951 |   |   |   | 31,338 |   |   |   | 39,308 |   |
| Gross                  margin(2)                                                                                |   |                                                      | 4,725  |   |   |   | 6,693 |   |   |   | 9,007 |   |   |   | 17,973 |   |   |   | 23,421 |   |
| Depreciation                and                amortization                                                     |   |                                                      | 1,166  |   |   |   | 1,726 |   |   |   | 2,444 |   |   |   | 4,224 |   |   |   | 6,020 |   |
| Other                  operating                  expenses                                                      |   |                                                      | 1,718  |   |   |   | 2,292 |   |   |   | 2,652 |   |   |   | 4,890 |   |   |   | 5,270 |   |
| Operating                income                                                                                 |   |                                                      | 1,841  |   |   |   | 2,675 |   |   |   | 3,911 |   |   |   | 8,859 |   |   |   | 12,131 |   |
| Total                  other income (expense)(3)                                                                |   |                                                      | (471   | ) |   |   | (671 | ) |   |   | 603 |   |   |   | (1,798 | ) |   |   | (256 | ) |
| Income                before income                taxes                                                        |   |                                                      | 1,370  |   |   |   | 2,004 |   |   |   | 4,514 |   |   |   | 7,061 |   |   |   | 11,875 |   |
| Income                  tax                  expense                                                            |   |                                                      | 584    |   |   |   | 697 |   |   |   | 1,140 |   |   |   | 2,615 |   |   |   | 4,287 |   |
| Net                income                                                                                       |   |                                                      | 786    |   |   |   | 1,307 |   |   |   | 3,374 |   |   |   | 4,446 |   |   |   | 7,588 |   |
| Preferred                  dividends                                                                            |   |                                                      | 107    |   |   |   | 121 |   |   |   | 53 |   |   | ─ |   |   | ─ |   |
| Net                income available to common stockholders                                                                                                                                                                                                                                                                                                                          |   | $                                                         | 679    |   |   | $ | 1,186 |   |   | $ | 3,321 |   |   | $ | 4,446 |   |   | $ | 7,588 |   |
|                                                                                                                                                                                                                                                                                                                                                                                |   |                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                income per common share:                                                                                                                                                                                                                                                                                                                                         |   |                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                                               |   | $                                                         | 0.19   |   |   | $ | 0.24 |   |   | $ | 0.59 |   |   | $ | 0.59 |   |   | $ | 0.67 |   |
| Diluted                                                                                                                             |   | $                                                         | 0.16   |   |   | $ | 0.23 |   |   | $ | 0.52 |   |   | $ | 0.52 |   |   | $ | 0.66 |   |
| Weighted                  average shares of common stock outstanding:                                                                                                                                                                                                                                                                                                               |   |                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                                               |   |                                                      | 3,649  |   |   |   | 4,947 |   |   |   | 5,591 |   |   |   | 7,564 |   |   |   | 11,405 |   |
| Diluted                                                                                                                             |   |                                                      | 4,305  |   |   |   | 5,253 |   |   |   | 6,383 |   |   |   | 8,481 |   |   |   | 11,472 |   |
| EBITDA(4)                                                                                                                                                                                                                                                                                                                                                                           |   | $                                                         | 3,511  |   |   | $ | 4,397 |   |   | $ | 7,796 |   |   | $ | 13,282 |   |   | $ | 19,541 |   |
|                                                                                                                                                                                                                                                                                                                                                                                |   |                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                |   | As                of December 31,                         |   |
|                                                                                                                                                                                                                                                                                                                                                                                |   | 2002                                                      |   |   | 2003 |   |   | 2004 |   |   | 2005 |   |   | 2006 |   |
|                                                                                                                                                                                                                                                                                                                                                                                |   | *(in                thousands)*                           |   |
| BALANCE                  SHEET INFORMATION:                                                                                                                                                                                                                                                                                                                                         |   |                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current                  assets                                                                                                                                                                                                                                                                                                                                                     |   | $                                                         | 5,084  |   |   | $ | 3,654 |   |   | $ | 7,295 |   |   | $ | 24,642 |   |   | $ | 55,170 |   |
| Total                assets                                                                                                                                                                                                                                                                                                                                                         |   |                                                      | 23,937 |   |   |   | 28,270 |   |   |   | 43,255 |   |   |   | 86,369 |   |   |   | 135,552 |   |
| Long-term                  debt (including current portion)                                                                                                                                                                                                                                                                                                                         |   |                                                      | 8,847  |   |   |   | 10,724 |   |   |   | 15,017 |   |   |   | 28,205 |   |   |   | 18,392 |   |
| Stockholders’                equity                                                                                                                                                                                                                                                                                                                                           |   |                                                      | 13,001 |   |   |   | 14,425 |   |   |   | 22,903 |   |   |   | 45,690 |   |   |   | 101,201 |   |

----

| (1) | The                information for the periods                presented may not be comparable because of our acquisition of SCS                in                January 2005.  For additional information regarding this                acquisition, you should read the information under “Item 7. Management’s                Discussion and Analysis of Financial Condition and Results of Operations”                and “Item 13. Certain Relationships, Related Transactions and Director                Independence–Acquisition                of Screw                Compression Systems, Inc.” in this Annual Report on Form                10-K. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Gross                margin is defined,                reconciled to net income and discussed further in Part II, Item 6                (“Selected Financial Data-Non-GAAP Financial Measures”) of this                report. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Total                other income (expense) for                the year ended December 31, 2004 includes $1.5 million in life insurance                proceeds paid to us upon the death of our former Chief Executive                Officer. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | EBITDA,                is defined, reconciled to                net income and discussed further in Part II, Item 6 (“Selected Financial                Data-Non-GAAP Financial Measures”) of this                report. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Non-GAAP      Financial Measures*

|   |   |
|--------|--------|

|   | · | it                is widely used by investors in                the energy industry to measure a company’s operating performance without                regard to items excluded from the calculation of EBITDA, which can                vary                substantially from company to company depending upon accounting methods                and book value of assets, capital structure and the method by which                assets                were acquired, among other                factors; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | it                helps investors to more                meaningfully evaluate and compare the results of our operations from                period to period by removing the impact of our capital structure                and asset                base from our operating structure;                and |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | it                is used by our management for                various purposes, including as a measure of operating performance,                in                presentations to our Board of Directors, as a basis for strategic                planning                and forecasting, and as a component for setting incentive                compensation. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                     |   | Year                Ended December 31, |   |
|----------------------------------------------------------|--------|----------------------------------------|--------|
|                                                     |   | 2002                                   |   |   | 2003 |   |   | 2004 |   |   | 2005 |   |   | 2006 |   |
|                                                     |   | *(in                thousands)*        |   |
|                                                     |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  income                              |   | $                                      | 786    |   |   | $ | 1,307 |   |   | $ | 3,374 |   |   | $ | 4,446 |   |   | $ | 7,588 |   |
|   Interest                expense, net         |   |                                   | 975    |   |   |   | 667 |   |   |   | 838 |   |   |   | 1,997 |   |   |   | 1,646 |   |
|   Income                  taxes                |   |                                   | 584    |   |   |   | 697 |   |   |   | 1,140 |   |   |   | 2,615 |   |   |   | 4,287 |   |
|   Depreciation                and amortization |   |                                   | 1,166  |   |   |   | 1,726 |   |   |   | 2,444 |   |   |   | 4,224 |   |   |   | 6,020 |   |
| EBITDA                                                   |   | $                                      | 3,511  |   |   | $ | 4,397 |   |   | $ | 7,796 |   |   | $ | 13,282 |   |   | $ | 19,541 |   |
|   Other                operating expenses      |   |                                   | 1,718  |   |   |   | 2,292 |   |   |   | 2,652 |   |   |   | 4,890 |   |   |   | 5,270 |   |
|   Other                  income (expense)      |   |                                   | (504   | ) |   |   | 4 |   |   |   | (1,441 | ) |   |   | (199 | ) |   |   | (1,390 | ) |
| Gross                Margin                              |   | $                                      | 4,725  |   |   | $ | 6,693 |   |   | $ | 9,007 |   |   | $ | 17,973 |   |   | $ | 23,421 |   |
|                                                     |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

**ITEM      7**
**MANAGEMENT’S      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF      OPERATIONS**

**Overview**

----

|                                   |   | Year                Ended December 31, |
|----------------------------------------|--------|----------------------------------------|
|                                   |   | 2002                                   |   |   | 2003 |   |   | 2004 |   |   | 2005 |   |   | 2006 |
|                                   |   | (in                thousands)          |
|                                   |   |                                   |   |   |   |   |   |   |   |   |   |   |   |   |
| Sales                                  |   | $                                      | 4,336 |   |   | $ | 3,865 |   |   | $ | 3,593 |   |   | $ | 30,278 |   |   | $ | 38,214 |
| Service                and maintenance |   |                                   | 1,563 |   |   |   | 1,773 |   |   |   | 1,874 |   |   |   | 2,424 |   |   |   | 979 |
| Rental                                 |   |                                   | 4,398 |   |   |   | 7,112 |   |   |   | 10,491 |   |   |   | 16,609 |   |   |   | 23,536 |
| Total                                  |   | $                                      | 10,297 |   |   | $ | 12,750 |   |   | $ | 15,958 |   |   | $ | 49,311 |   |   | $ | 62,729 |

----

**Results      of Operations**

***Year      Ended December 31, 2006 Compared to the Year Ended December 31,      2005***

|                                   | Revenue                                 |   |   | Gross                Margin, Exclusive of Depreciation(1) |   |
|----------------------------------------|-----------------------------------------|--------|--------|-----------------------------------------------------------|--------|
|                                   | Year                Ended December 31,  |   |   | Year                Ended December 31,                    |   |
|                                   | 2005                                    |   |   | 2006                                                      |   |   | 2005 |   |   | 2006 |   |
|                                   | *(dollars                in thousands)* |   |
|                                   |                                    |   |   |                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Sales                                  | $                                       | 30,278 |   |                                                      |   | 61 | % |   | $ | 38,214 |   |   |   | 61 | % |   | $ | 6,947 |   |   |   | 23 | % |   | $ | 8,585 |   |   |   | 23 | % |
| Service                and Maintenance |                                    | 2,424  |   |                                                      |   | 5 | % |   |   | 979 |   |   |   | 1 | % |   |   | 945 |   |   |   | 39 | % |   |   | 244 |   |   |   | 25 | % |
| Rental                                 |                                    | 16,609 |   |                                                      |   | 34 | % |   |   | 23,536 |   |   |   | 38 | % |   |   | 10,081 |   |   |   | 61 | % |   |   | 14,592 |   |   |   | 62 | % |
| Total                                  | $                                       | 49,311 |   |                                                      |   |   |   |   | $ | 62,729 |   |   |   |   |   |   | $ | 17,973 |   |   |   | 36 | % |   | $ | 23,421 |   |   |   | 37 | % |

----

***Year      Ended December 31, 2005 Compared to the Year Ended December 31,      2004***

|   |                                         | Revenue                                 |   |   | Gross                Margin, Exclusive of Depreciation(1) |   |   |
|--------|----------------------------------------------|-----------------------------------------|--------|--------|-----------------------------------------------------------|--------|--------|
|   |                                         | Year                Ended December 31,  |   |   | Year                Ended December 31,                    |   |   |
|   |                                         | 2004                                    |   |   | 2005                                                      |   |   | 2004 |   |   | 2005 |   |   |
|   |                                         | *(dollars                in thousands)* |   |   |
|   |                                         |                                    |   |   |                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   |  Sales                                  | $                                       | 3,593  |   |                                                      |   | 23     | % |   | $ | 30,278 |   |   |   | 61 | % |   | $ | 1,037 |   |   |   | 29 | % |   | $ | 6,947 |   |   |   | 23 | % |   |
|   |  Service                and Maintenance |                                    | 1,874  |   |                                                      |   | 11     | % |   |   | 2,424 |   |   |   | 5 | % |   |   | 517 |   |   |   | 28 | % |   |   | 945 |   |   |   | 39 | % |   |
|   |  Rental                                 |                                    | 10,491 |   |                                                      |   | 66     | % |   |   | 16,609 |   |   |   | 34 | % |   |   | 7,453 |   |   |   | 71 | % |   |   | 10,081 |   |   |   | 61 | % |   |
|   |  Total                                  | $                                       | 15,958 |   |                                                      |   |   |   |   | $ | 49,311 |   |   |   |   |   |   | $ | 9,007 |   |   |   | 56 | % |   | $ | 17,973 |   |   |   | 36 | % |   |

----

**Critical      Accounting Policies and Practices**

|   | · | revenue                recognition; |
|--------|--------|-------------------------------------|

|   | · | estimating                the allowance for                doubtful accounts; |
|--------|--------|-------------------------------------------------------------------------------|

|   | · | accounting                for income                taxes; |
|--------|--------|------------------------------------------------------------|

|   | · | valuation                of long-lived and                intangible assets and goodwill;                and |
|--------|--------|--------------------------------------------------------------------------------------------------------------|

|   | · | valuation                of                inventory |
|--------|--------|------------------------------------------------------|

----

*Revenue      Recognition*

*Allowance      for Doubtful Accounts Receivable*

*Accounting      for Income Taxes*

*Valuation      of Long-Lived and Intangible Assets and Goodwill*

|   | · | significant                underperformance                relative to expected historical or projected future operating                results; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | significant                changes in the manner                of our use of the acquired assets or the strategy for our overall                business; and |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | significant                negative industry or                economic trends. |
|--------|--------|---------------------------------------------------------------------------------|

----

*Inventories*

**Recently      Issued Accounting Pronouncements**

*Share-Based Payment*
*Accounting for Stock-Based      Compensation*
*Accounting      for Stock Issued to Employees*

*Inventory Costs — an Amendment      of ARB No. 43, Chapter 4*

*Accounting for Uncertainty in Income Taxes – an interpretation of FASB      Statement 109*
*Accounting for Income      Taxes*

----

**Environmental      Regulations**

**Liquidity      and Capital Resources**

|                                                                                                                         |   | December                31, 2005 |    |   | December                31, 2006 |    |
|------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|---------|--------|----------------------------------|---------|
| Current                Assets:                                                                                               |   |                             |    |   |                             |    |
|    Cash                  & cash equivalents                                                               |   | $                                | 3,271   |   |                             | $       | 4,391 |   |
|    Short-term                investments                                                                      |   |                                  | ─ |   |                             |    | 25,052 |   |
|    Trade                  accounts receivable, net                                                            |   |                             | 6,192   |   |                             |    | 8,463 |   |
|    Inventory,                net                                                                              |   |                             | 14,723  |   |                             |    | 16,943 |   |
|    Prepaid                  expenses and other                                                                |   |                             | 456     |   |                             |    | 321 |   |
|               Total                current assets      |   |                             | 24,642  |   |                             |    | 55,170 |   |
|                                                                                                                         |   |                             |    |   |                             |    |   |   |
|                                                                                                                         |   |                             |    |   |                             |    |   |   |
| Current                  Liabilities:                                                                                        |   |                             |    |   |                             |    |   |   |
|    Current                portion of long-term debt and subordinated notes                                    |   |                             | 5,680   |   |                             |    | 4,442 |   |
|    Line                  of credit                                                                            |   |                             | 300     |   |                             | ─ |   |
|    Accounts                payable                                                                            |   |                             | 3,180   |   |                             |    | 2,837 |   |
|    Accrued                  liabilities                                                                       |   |                             | 1,737   |   |                             |    | 2,077 |   |
|    Current                portion of tax liability                                                            |   |                             | 207     |   |                             |    | 1,056 |   |
|    Deferred                  income                                                                           |   |                             | 103     |   |                             |    | 225 |   |
|               Total                current liabilities |   |                             | 11,207  |   |                             |    | 10,637 |   |
|                                                                                                                         |   |                             |    |   |                             |    |   |   |
| Total                working capital                                                                                         |   | $                                | 13,435  |   |                             | $       | 44,533 |   |

----

*Cash      flows*

***Contractual      Obligations and Commitments***

|                                          |   | Obligation                Due in Period |   |
|-----------------------------------------------|--------|-----------------------------------------|--------|
|                                          |   |                                    |   |
| Cash                Contractual Obligations   |   | 2007                                    |   |   | 2008 |   |   | 2009 |   |   | 2010 |   |   | 2011 |   |   | Thereafter |   |   | Total |   |
|                                          |   | *(in                thousands)*         |   |
| Credit                  facility (secured)    |   | $                                       | 3,442  |   |   | $ | 3,378 |   |   | $ | 3,378 |   |   | $ | 3,378 |   |   | $ | 2,816 |   |   | $ ─ |   |   | $ | 16,392 |   |
|                                          |   |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  on credit facility  |   |                                    | 1,160  |   |   |   | 865 |   |   |   | 591 |   |   |   | 338 |   |   |   | 211 |   |   | ─ |   |   |   | 3,165 |   |
|                                          |   |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Subordinated                  debt            |   |                                    | 1,000  |   |   |   | 1,000 |   |   | ─ |   |   | ─ |   |   | ─ |   |   | ─ |   |   |   | 2,000 |   |
|                                          |   |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Facilities                  and office leases |   |                                    | 129    |   |   |   | 62 |   |   |   | 29 |   |   |   | 29 |   |   |   | 30 |   |   |   | 76 |   |   |   | 355 |   |
|                                          |   |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Purchase                  obligations         |   | ─                                 |   |   | ─ |   |   | ─ |   |   | ─ |   |   | ─ |   |   | ─ |   |   | ─ |   |
|                                          |   |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                         |   | $                                       | 5,731  |   |   | $ | 5,305 |   |   | $ | 3,998 |   |   | $ | 3,745 |   |   | $ | 3,057 |   |   | $ | 76 |   |   | $ | 21,912 |   |

----

***Senior      Bank Borrowings***

*Revolving      Line of Credit Facility.  *

*$16.9      Million Multiple Advance Term Loan Facility.  *

|   | · | at                the end of each month, a                consolidated current ratio (as defined in the Loan Agreement) of                at least                1.4 to 1.0; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | at                the end of each month,                consolidated tangible net worth (as defined in the Loan Agreement)                of at                least $70.0 million; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | at                the end of each fiscal                quarter, a debt service coverage ratio (as defined in the Loan Agreement)                of at least 1.50 to 1.00;                and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | at                the end of each month, a ratio                of consolidated debt to consolidated tangible net worth (as such                terms are                defined in the Loan Agreement) of less than 2.0 to                1.0. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

***Subordinated      Debt and Related Letters of Credit***

***Components      of Our Principal Capital Expenditures***

|                                                         |   | Actual                          |   |   |   |   |
|--------------------------------------------------------------|--------|---------------------------------|--------|--------|--------|--------|
|                                                         |   |                            |   |   |   |   |   |   |   |   | Budgeted                2007 |   |
| Expenditure                Category                          |   | 2004                            |   |   | 2005   |   |   | 2006 |   |   | (excluding                acquisitions) |   |
|                                                         |   | *(in                thousands)* |   |
| Rental                equipment, vehicles and shop equipment |   | $                               | 11,596 |   |   | $      | 17,708 |   |   | $ | 27,684 |   |   | $ | 30,000                to $35,000 |   |

**Off-Balance      Sheet Arrangements**

----

**PART      IV**

**ITEM      15.                   EXHIBITS      AND FINANCIAL STATEMENT SCHEDULES**

| 3.1 | Articles                of Incorporation, as                amended (Incorporated by reference to Exhibit 3.1 of the 10QSB filed                and                dated November 10, 2004) |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.2 | Bylaws                (Incorporated by reference                to Exhibit 3.4 of the Registrant's Registration Statement on Form                SB-2,                No.  333-88314) |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.1 | Form                of warrant certificate                (Incorporated by reference to Exhibit 4.1 of the Registrant's Registration                Statement on Form SB-2,                No.  333-88314) |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.2 | Form                of warrant agent agreement                (Incorporated by reference to Exhibit 4.2 of the Registrant's Registration                Statement on Form SB-2,                No.  333-88314) |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.3 | Form                of representative's option                for the purchase of common stock (Incorporated by reference to Exhibit                4.4                of the Registrant's Registration Statement on Form SB-2,                No.  333-88314) |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.4 | Form                of representative's option                for the purchase of warrants (Incorporated by reference to Exhibit                4.5 of                the Registrant's Registration Statement on Form SB-2,                No.  333-88314) |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.5 | Stockholders                Agreement, dated                January 3, 2005 among Paul D. Hensley, Tony Vohjesus, Jim Hazlett                and                Natural Gas Services Group, Inc.  (Incorporated by reference to                Exhibit 4.3 of the Registrant's From 8-K Report, dated January 3,                2005, as                filed with the Securities and Exchange Commission on January 7,                2005) |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Executive                Compensation Plans and                Arrangements (Exhibits 10.1, 10.14, 10.15, 10.16, 10.23, 10.24, 10.26                and                10.27) |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.1 | 1998                Stock Option Plan, as                amended (Incorporated by reference to Exhibit 10.1 of the Registrant’s                Form 8-K Report dated June 20, 2006 on file with the SEC June 26,                2006) |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.2 | Form                of Series A 10% Subordinated                Notes due December 31, 2006 (Incorporated by reference to Exhibit                10.8 of                the Registrant's Registration Statement on Form SB-2,                No.  333-88314) |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.3 | Form                of Five-Year Warrants to                Purchase Common Stock (Incorporated by reference to Exhibit 10.9                of the                Registrant's Registration Statement on Form SB-2,                No.  333-88314) |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.4 | Warrants                issued to Berry-Shino                Securities, Inc.  (Incorporated by reference to Exhibit 10.10 of                the Registrant's Registration Statement on Form SB-2,                No.  333-88314) |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Exhibit                No. | Description |
|----------------------------|-------------|

| 10.5 | Warrants                issued to Neidiger,                Tucker, Bruner, Inc.  (Incorporated by reference to Exhibit                10.11 of the Registrant's Registration Statement on Form SB-2,                No.  333-88314) |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.6 | Form                of warrant issued in March                2001 for guaranteeing debt (Incorporated by reference to Exhibit                10.12 of                the Registrant's Registration Statement on Form SB-2,                No.  333-88314) |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.7 | Form                of warrant issued in April                2002 for guaranteeing debt (Incorporated by reference to Exhibit10.13                of                the Registrant's Registration Statement on Form SB-2,                No.  333-88314) |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.8 | First                Amended and Restated Loan                Agreement between the Registrant and Western National Bank (Incorporated                by reference to Exhibit 10.1 of the Registrant's Current Report on                Form                8-K, dated March 27, 2003 and filed with the Securities and Exchange                Commission on April 14,                2003) |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.9 | Lease                Agreement, dated March 1,                2004, between the Registrant and the City of Midland, Texas (Incorporated                by reference to Exhibit 10.19 of the Registrant's Form 10-QSB for                the                fiscal quarter ended June 30,                2004) |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.10 | Second                Amended and Restated Loan                Agreement, dated November 3, 2003, between the Registrant and Western                National Bank (Incorporated by reference to Exhibit 10.20 of the                Registrant's Form 10-QSB for the fiscal quarter ended June 30,                2004) |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.11 | Securities                Purchase Agreement,                dated July 20, 2004, between the Registrant and CBarney Investments,                Ltd.  (Incorporated by reference to Exhibit 4.1 of the                Registrant's Current Report on Form 8-K dated July 20, 2004 and filed                with                the Securities and Exchange Commission on July 27,                2004) |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.12 | Stock                Purchase Agreement, dated                October 18, 2004, by and among the Registrant, Screw Compression                Systems,                Inc., Paul D. Hensley, Jim Hazlett and Tony Vohjesus (Incorporated                by                reference to Exhibit 4.1 of the Registrant's Current Report on Form                8-K                dated October 18, 2004 and filed with the Securities and Exchange                Commission on October 21,                2004) |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.13 | Third                Amended and Restated Loan                Agreement, dated as of January 3, 2005, among Natural Gas Services                Group,                Inc., Screw Compression Systems, Inc.  and Western National Bank                (Incorporated by reference to Exhibit 10.1 of the Registrant’s Current                Report on Form 8-K, dated January 3, 2005, and filed with the Securities                and Exchange Commission on January 7,                2005) |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.14 | Employment                Agreement between Paul                D. Hensley and Natural Gas Services Group, Inc.  (Incorporated                by reference to Exhibit 10.1 of the Registrants Form 8-K Report,                dated                January 3, 2005, as filed with the Securities and Exchange Commission                on                January 7, 2005) |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.15 | Employment                Agreement between                William R. Larkin and Natural Gas Services Group,                Inc.  (Incorporated by reference to Exhibit 10.25 of the                Registrant's Form 10-KSB for the fiscal year ended December 31, 2004,                and                filed with the Securities and Exchange Commission on March 30,                2005) |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.16 | Promissory                Note, dated January 3,                2005, in the original principal amount of $2.1 million made by Natural                Gas                Services Group, Inc.  payable to Paul D. Hensley (Incorporated                by reference to Exhibit 10.26 of the Registrant's Form 10-KSB for                the                fiscal year ended December 31, 2004, and filed with the Securities                and                Exchange Commission on March 30,                2005) |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.17 | Fourth                Amended and Restated Loan                Agreement (Incorporated by reference to Exhibit 10.1 of the Registrant’s                Current Report on Form 8-K, dated March 14, 2005, and filed with the                Securities and Exchange Commission on March 18,                2005) |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.18 | Modification                Agreement, dated as                of  January 3, 2005, by and between Natural Gas Services Group,                Inc.  and Western National Bank  (Incorporated by                reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K,                dated January 3, 2005, and filed with the Securities and Exchange                Commission on January 7,                2005) |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Exhibit                No. | Description |
|----------------------------|-------------|

| 10.19 | Guaranty                Agreement, dated as of                January 3, 2005, made by Natural Gas Service Group, Inc., for the                benefit                of Western National Bank (Incorporated by reference to Exhibit 10.3                of the                Registrant’s Current Report on Form 8-K, dated January 3, 2005, and filed                with the Securities and Exchange Commission on January 7,                2005) |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.20 | Guaranty                Agreement, dated as of                January 3, 2005, made by Screw Compression Systems, Inc., for the                benefit                of Western National Bank (Incorporated by reference to Exhibit 10.4                of the                Registrant’s Current Report on Form 8-K, dated January 3, 2005, and filed                with the Securities and Exchange Commission on January 7,                2005) |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.21 | Fifth                Amended and Restated Loan                Agreement (Incorporated by reference to Exhibit 10.2 of the Registrant’s                Form 8-K dated January 3, 2006 and filed with the Securities and                Exchange                Commission January 6, 2006) |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.22 | First                Modification to Fourth                Amended and Restated Loan Agreement (Incorporated by reference Exhibit                10.1 of the Registrant’s Form 8-K dated May 1, 2005 and filed with                Securities and Exchange Commission May 13,                2005) |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.23 | Employment                Agreement between                Stephen C. Taylor and Natural Gas Services Group,                Inc.  (Incorporated by reference to Exhibit 10.1 of the                Registrant’s Form 8-K Report, dated August 24, 2005, and filed with the                Securities and Exchange Commission on August 30,                2005) |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.24 | Employment                Agreement between                James R. Hazlett and Natural Gas Services Group,                Inc.  (Incorporated by reference to Exhibit 10.1 of the                Registrant’s Form 8-K Report, dated June 14, 2005, and filed with the                Securities and Exchange Commission on November 14,                2005) |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.25 | Stockholders                Agreement, dated                January 3, 2005 among Paul D. Hensley, Tony Vohjesus, Jim Hazlett                and                Natural Gas Services Group, Inc.  (Incorporated by reference to                Exhibit 4.3 of the Registrant’s Form 8-K Report, dated January 3, 2005,                and filed with the Securities and Exchange Commission on January                7,                2005) |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.26 | Promissory                Note, dated January 3,                2005, in the original principal amount of $300 thousand made by Natural                Gas Services Group, Inc.  payable to Jim Hazlett (Incorporated                by reference to Exhibit 10.3 of the Registrant’s Form 8-K Report, dated                June 14, 2005, and filed with the Securities and Exchange Commission                on                November 14, 2005) |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.27 | Retirement                Agreement, dated                December 14, 2005, between Wallace C. Sparkman and Natural Gas Services                Group, Inc.  (Incorporated by reference to Exhibit 10.1 of the                Registrant’s Form 8-K Report, dated December 14, 2005, and filed with the                Securities and Exchange Commission on December 15,                2005) |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.28 | Sixth                Amended and Restated Loan                Agreement, dated as of January 3, 2006 (Incorporated by reference                to                Exhibit 10.3 of the Registrant’s Current Report on Form 8-K, dated January                3, 2006, and filed with the Securities and Exchange Commission on                January                6, 2006) |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.29 | Guaranty                Agreement, dated as of                January 3, 2006, and made by Screw Compression Systems,                Inc.  for the benefit of Western National Bank (Incorporated by                reference to Exhibit 10.4 of the Registrant’s Current Report on Form 8-K,                dated January 3, 2006, and filed with the Securities and Exchange                Commission on January 6,                2006) |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.30 | Seventh                Amended and Restated Loan                Agreement (Incorporated by reference to Exhibit 10.1 of the Registrant’s                Form 8-K dated October 26, 2006 and filed with the Securities and                Exchange                Commission on November 1,                2006 |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 14.0 | Code                of Ethics (Incorporated by                reference to Exhibit 14.0 of the Registrant's Form 10-KSB for the                fiscal                year ended December 31, 2004, and filed with the Securities and Exchange                Commission on March 30,                2005) |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 21.0 | Subsidiaries                (Incorporated by                reference to Exhibit 21.0 of the Registrant's Form 10-KSB for the                fiscal                year ended December 31, 2004, and filed with the Securities and Exchange                Commission on March 30,                2005) |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Exhibit                No. | Description |
|----------------------------|-------------|

| *23.1 | Consent                of Hein & Associates                LLP |
|-------|--------------------------------------------------------------------|

| *31.1 | Certifications |
|-------|----------------|

| *31.2 | Certifications |
|-------|----------------|

| *32.1 | Certification                required by Section                906 of the Sarbanes-Oxley Act of                2002 |
|-------|----------------------------------------------------------------------------------------------------------------------|

| *32.2 | Certification                required by Section                906 of the Sarbanes-Oxley Act of                2002 |
|-------|----------------------------------------------------------------------------------------------------------------------|

----

**SIGNATURES**

|                                         | **Natural                Gas Service Group, Inc.** |                                                                                                                                 |
|----------------------------------------------|----------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------|
|                                         |                                               |                                                                                                                                 |   |
| Date:  June                8, 2007 | By:                                                | /s/ Stephen                C. Taylor                                                                                            |   |
|                                         |                                               | Stephen                C. Taylor                                                                                                     |   |
|                                         |                                               | Chairman                of the Board of Directors, Chief Executive Officer andPresident                (Principal Executive Officer) |   |
|                                         |                                               |                                                                                                                                 |   |

| Signature                            |   | Title                                                                                                   |   | Date                             |
|--------------------------------------|--------|---------------------------------------------------------------------------------------------------------|--------|----------------------------------|
|                                 |   |                                                                                                    |   |                             |
| /s/                Stephen C. Taylor |   | Chairman                of the Board of                Directors, Chief Executive Officer and President |   | June 8,                2007 |
| Stephen                C. Taylor     |   | (Principal                Executive Officer)                                                            |   |                             |
|                                 |   |                                                                                                    |   |                             |
| /s/                Earl R. Wait      |   | Vice                President – Accounting                                                        |   | June 8,                2007 |
| Earl                R. Wait          |   | (Principal                Financial Officer)                                                            |   |                             |
|                                 |   |                                                                                                    |   |                             |

----

**INDEX      TO FINANCIAL STATEMENTS**

|                                                                                                                                                           |   |  **Page** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------|
|                                                                                                                                                           |   |           |
|  Report                  of Independent Registered Public Accounting Firm                                                                                 |   |  F-2      |
|                                                                                                                                                           |   |           |
|  Consolidated                  Balance Sheets as of December 31, 2005 and 2006                                                                            |   |  F-3      |
|                                                                                                                                                           |   |           |
|  Consolidated                  Statements of Income for the Years Ended December 31, 2004, 2005                  and                  2006                |   |  F-4      |
|                                                                                                                                                           |   |           |
|  Consolidated                  Statements of Stockholders' Equity for the Years Ended December                  31, 2004,                  2005, and 2006 |   |  F-5      |
|                                                                                                                                                           |   |           |
|  Consolidated                  Statements of Cash Flows for the Years Ended December 31, 2004,                  2005 and                  2006            |   |  F-6      |
|                                                                                                                                                           |   |           |
|  Notes                  to Consolidated Financial Statements                                                                                              |   |  F-7      |

----

**REPORT      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

* criteria established in Internal      Control—Integrated Framework issued by the Committee of Sponsoring Organizations      of the Treadway Commission (COSO)*

***/s/HEIN**&      ASSOCIATES LLP*

----

**NATURAL      GAS SERVICES GROUP, INC. AND SUBSIDIARIES**

**CONSOLIDATED      BALANCE SHEETS**

|                                                                                                                                                                           |   | **December                31,** |    |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|---------|
|                                                                                                                                                                           |   | **2005**                        |    |   | **2006** |   |
| **ASSETS**                                                                                                                                                                     |   |                            |    |   |   |   |
| **Current                Assets:**                                                                                                                                             |   |                            |    |   |   |   |
|   Cash                  and cash equivalents                                                                                                                         |   | $                               | 3,271   |   |   | $ | 4,391 |   |
|   Short-term                investments                                                                                                                              |   |                            | — |   |   |   | 25,052 |   |
|   Trade                  accounts receivable, net of doubtful accounts of $75 and $110,                  respectively                                                |   |                            | 6,192   |   |   |   | 8,463 |   |
|   Inventory,                net of allowance for obsolescence of $361 and $347,                respectively                                                          |   |                            | 14,723  |   |   |   | 16,943 |   |
|   Prepaid                  expenses and other                                                                                                                        |   |                            | 456     |   |   |   | 321 |   |
|      Total                current assets                                                                                                              |   |                            | 24,642  |   |   |   | 55,170 |   |
|                                                                                                                                                                           |   |                            |    |   |   |   |   |   |
| Rental                equipment**,**net of accumulated depreciation of $7,598 and                $11,320, respectively                                                         |   |                            | 41,201  |   |   |   | 59,866 |   |
| Property                  and equipment**,** net of accumulated depreciation of $2,458                  and $3,679, respectively                                               |   |                            | 6,424   |   |   |   | 6,714 |   |
| Goodwill**,**                net of accumulated amortization of $325                                                                                                           |   |                            | 10,039  |   |   |   | 10,039 |   |
| Intangibles,                  net of accumulated amortization of $492 and $819,                  respectively                                                                  |   |                            | 3,978   |   |   |   | 3,650 |   |
| Other                assets                                                                                                                                                    |   |                            | 85      |   |   |   | 113 |   |
|      Total                  assets                                                                                                                    |   | $                               | 86,369  |   |   | $ | 135,552 |   |
|                                                                                                                                                                           |   |                            |    |   |   |   |   |   |
| **LIABILITIES                  AND STOCKHOLDERS' EQUITY**                                                                                                                      |   |                            |    |   |   |   |   |   |
|                                                                                                                                                                           |   |                            |    |   |   |   |   |   |
| **Current                  Liabilities:**                                                                                                                                      |   |                            |    |   |   |   |   |   |
|   Current                  portion of long-term debt and subordinated notes                                                                                          |   | $                               | 5,680   |   |   | $ | 4,442 |   |
|   Line                of credit                                                                                                                                      |   |                            | 300     |   |   |   | — |   |
|   Accounts                  payable                                                                                                                                  |   |                            | 3,180   |   |   |   | 2,837 |   |
|   Accrued                liabilities                                                                                                                                 |   |                            | 1,737   |   |   |   | 2,077 |   |
|   Current                  income tax liability                                                                                                                      |   |                            | 207     |   |   |   | 1,056 |   |
|   Deferred                income                                                                                                                                     |   |                            | 103     |   |   |   | 225 |   |
|      Total                  current liabilities                                                                                                       |   |                            | 11,207  |   |   |   | 10,637 |   |
|                                                                                                                                                                           |   |                            |    |   |   |   |   |   |
| Long                  term debt, less current portion                                                                                                                          |   |                            | 20,225  |   |   |   | 12,950 |   |
| Subordinated                notes-related parties, less current portion                                                                                                        |   |                            | 2,000   |   |   |   | 1,000 |   |
| Deferred                  income tax payable                                                                                                                                   |   |                            | 7,247   |   |   |   | 9,764 |   |
| Commitments                (Note 11)                                                                                                                                           |   |                            |    |   |   |   |   |   |
| Stockholders’                  equity:                                                                                                                                   |   |                            |    |   |   |   |   |   |
|   Common                stock, 30,000 shares authorized, par value $0.01; 9,022 and 12,046                shares                issued and outstanding, respectively |   |                            | 90      |   |   |   | 120 |   |
|   Additional                  paid-in capital                                                                                                                        |   |                            | 34,667  |   |   |   | 82,560 |   |
|   Retained                earnings                                                                                                                                   |   |                            | 10,933  |   |   |   | 18,521 |   |
|      Total                  stockholders’ equity                                                                                                |   |                            | 45,690  |   |   |   | 101,201 |   |
|      Total                liabilities and stockholders’ equity                                                                                  |   | $                               | 86,369  |   |   | $ | 135,552 |   |
|                                                                                                                                                                           |   |                            |    |   |   |   |   |   |

----

**NATURAL      GAS SERVICES GROUP, INC. AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF INCOME**

|                                                                                                             |   | **For                the Years Ended December 31,** |   |
|------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|--------|
|                                                                                                             |   | **2004**                                            |   |   | **2005** |   |   | **2006** |   |
| **Revenue:**                                                                                                     |   |                                                |   |   |   |   |   |   |   |
|   Sales,                  net                                                                          |   | $                                                   | 3,593  |   |   | $ | 30,278 |   |   | $ | 38,214 |   |
|   Service                and maintenance income                                                        |   |                                                | 1,874  |   |   |   | 2,424 |   |   |   | 979 |   |
|   Rental                  income                                                                       |   |                                                | 10,491 |   |   |   | 16,609 |   |   |   | 23,536 |   |
|      Total                revenue                                                       |   |                                                | 15,958 |   |   |   | 49,311 |   |   |   | 62,729 |   |
| **Operating                  costs and expenses:**                                                               |   |                                                |   |   |   |   |   |   |   |   |   |   |
|   Cost                of sales, exclusive of depreciation stated separately                below       |   |                                                | 2,556  |   |   |   | 23,331 |   |   |   | 29,629 |   |
|   Cost                  of service, exclusive of depreciation stated separately                  below |   |                                                | 1,357  |   |   |   | 1,479 |   |   |   | 735 |   |
|   Cost                of rental, exclusive of depreciation stated separately                below      |   |                                                | 3,038  |   |   |   | 6,528 |   |   |   | 8,944 |   |
|   Selling                  expenses                                                                    |   |                                                | 875    |   |   |   | 1,034 |   |   |   | 1,273 |   |
|   General                and administrative                                                            |   |                                                | 1,777  |   |   |   | 3,856 |   |   |   | 3,997 |   |
|   Depreciation                  and amortization                                                       |   |                                                | 2,444  |   |   |   | 4,224 |   |   |   | 6,020 |   |
|      Total                operating costs and expenses                                  |   |                                                | 12,047 |   |   |   | 40,452 |   |   |   | 50,598 |   |
|                                                                                                             |   |                                                |   |   |   |   |   |   |   |   |   |   |
| **Operating                income**                                                                              |   |                                                | 3,911  |   |   |   | 8,859 |   |   |   | 12,131 |   |
|                                                                                                             |   |                                                |   |   |   |   |   |   |   |   |   |   |
| **Other                income (expense):**                                                                       |   |                                                |   |   |   |   |   |   |   |   |   |   |
|   Interest                  expense                                                                    |   |                                                | (838   | ) |   |   | (1,997 | ) |   |   | (1,646 | ) |
|   Other                income                                                                          |   |                                                | 1,441  |   |   |   | 199 |   |   |   | 1,390 |   |
|      Total                  other income (expense)                                      |   |                                                | 603    |   |   |   | (1,798 | ) |   |   | (256 | ) |
|                                                                                                             |   |                                                |   |   |   |   |   |   |   |   |   |   |
| **Income                  before provision for income taxes**                                                    |   |                                                | 4,514  |   |   |   | 7,061 |   |   |   | 11,875 |   |
|                                                                                                             |   |                                                |   |   |   |   |   |   |   |   |   |   |
|   Provision                  for income taxes:                                                         |   |                                                |   |   |   |   |   |   |   |   |   |   |
|     Current                                                                                  |   |                                                | 20     |   |   |   | 207 |   |   |   | 1,743 |   |
|     Deferred                                                                                 |   |                                                | 1,120  |   |   |   | 2,408 |   |   |   | 2,544 |   |
|        Total                income tax expense                                |   |                                                | 1,140  |   |   |   | 2,615 |   |   |   | 4,287 |   |
|                                                                                                             |   |                                                |   |   |   |   |   |   |   |   |   |   |
| **Net                income**                                                                                    |   |                                                | 3,374  |   |   |   | 4,446 |   |   |   | 7,588 |   |
|   Preferred                  dividends                                                                 |   |                                                | 53     |   |   |   | — |   |   |   | — |   |
|                                                                                                             |   |                                                |   |   |   |   |   |   |   |   |   |   |
| **Income                  available to common stockholders**                                                     |   | $                                                   | 3,321  |   |   | $ | 4,446 |   |   | $ | 7,588 |   |
|                                                                                                             |   |                                                |   |   |   |   |   |   |   |   |   |   |
| **Earnings                  per common share:**                                                                  |   |                                                |   |   |   |   |   |   |   |   |   |   |
|   Basic                                                                                                |   | $                                                   | 0.59   |   |   | $ | 0.59 |   |   | $ | 0.67 |   |
|   Diluted                                                                                              |   | $                                                   | 0.52   |   |   | $ | 0.52 |   |   | $ | 0.66 |   |
| **Weighted                average common shares outstanding:**                                                   |   |                                                |   |   |   |   |   |   |   |   |   |   |
|   Basic                                                                                                |   |                                                | 5,591  |   |   |   | 7,564 |   |   |   | 11,405 |   |
|   Diluted                                                                                              |   |                                                | 6,383  |   |   |   | 8,481 |   |   |   | 11,472 |   |

----

**NATURAL      GAS SERVICES GROUP, INC. AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF STOCKHOLDERS’ EQUITY**

**For      the Years Ended December 31, 2004, 2005 and 2006**

|                                                                                                      |   | **Preferred                Stock** |    |   | **Common                Stock** |   |    | **Additional** |   |   |       |   |   | **Total**   |    |
|-----------------------------------------------------------------------------------------------------------|--------|------------------------------------|---------|--------|---------------------------------|--------|---------|----------------|--------|--------|------------|--------|--------|-------------|---------|
|                                                                                                      |   |                               |    |   |                            |   |    |           |   |   |       |   |   | **Paid-In** |    |   | **Retained** |   |   | **Stockholders’** |   |
|                                                                                                      |   | **Shares**                         |    |   | **Amount**                      |   |    | **Shares**     |   |   | **Amount** |   |   | **Capital** |    |   | **Earnings** |   |   | **Equity** |   |
|                                                                                                      |   |                               |    |   |                            |   |    |           |   |   |       |   |   |        |    |   |   |   |   |   |   |
| **BALANCES**,                January 1, 2004                                                              |   |                               | 344     |   |                            | $      | 4       |           |   |   | 5,031      |   |   | $           | 50      |   |   | $ | 11,205 |   |   | $ | 3,166 |   |   | $ | 14,425 |   |
| Exercise                  of common stock options and warrants                                            |   |                               | — |   |                            |   | — |           |   |   | 80         |   |   |        | 1       |   |   |   | 245 |   |   |   | — |   |   |   | 246 |   |
| Conversion                of preferred stock to common stock                                              |   |                               | (344    | )      |                            |   | (4      | )              |   |   | 344        |   |   |        | 4       |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Transaction                  costs of private placement of common stock                                   |   |                               | — |   |                            |   | — |           |   |   | —    |   |   |        | — |   |   |   | (39 | ) |   |   | — |   |   |   | (39 | ) |
| Issuance                of common stock                                                                   |   |                               | — |   |                            |   | — |           |   |   | 649        |   |   |        | 6       |   |   |   | 4,944 |   |   |   | — |   |   |   | 4,950 |   |
| Dividends                  on preferred stock                                                             |   |                               | — |   |                            |   | — |           |   |   | —    |   |   |        | — |   |   |   | — |   |   |   | (53 | ) |   |   | (53 | ) |
| Net                income                                                                                 |   |                               | — |   |                            |   | — |           |   |   | —    |   |   |        | — |   |   |   | — |   |   |   | 3,374 |   |   |   | 3,374 |   |
| **BALANCES**,                  January 1, 2005                                                            |   |                               | — |   |                            | $      | — |           |   |   | 6,104      |   |   | $           | 61      |   |   | $ | 16,355 |   |   | $ | 6,487 |   |   | $ | 22,903 |   |
| Exercise                of common stock options and warrants                                              |   |                               | — |   |                            |   | — |           |   |   | 2,308      |   |   |        | 23      |   |   |   | 13,063 |   |   |   | — |   |   |   | 13,086 |   |
| Compensation                  expense on issuance of common stock options                            |   |                               | — |   |                            |   | — |           |   |   | —    |   |   |        | — |   |   |   | 135 |   |   |   | — |   |   |   | 135 |   |
| Issuance                of common stock for acquisition                                                   |   |                               | — |   |                            |   | — |           |   |   | 610        |   |   |        | 6       |   |   |   | 5,114 |   |   |   | — |   |   |   | 5,120 |   |
| Net                  income                                                                               |   |                               | — |   |                            |   | — |           |   |   | —    |   |   |        | — |   |   |   | — |   |   |   | 4,446 |   |   |   | 4,446 |   |
| **BALANCES**,                January 1, 2006                                                              |   |                               | — |   |                            | $      | — |           |   |   | 9,022      |   |   | $           | 90      |   |   | $ | 34,667 |   |   | $ | 10,933 |   |   | $ | 45,690 |   |
| Exercise                  of common stock options and warrants                                            |   |                               | — |   |                            |   | — |           |   |   | 129        |   |   |        | 1       |   |   |   | 356 |   |   |   | — |   |   |   | 357 |   |
| Compensation                expense on issuance of common stock options                              |   |                               | — |   |                            |   | — |           |   |   | —    |   |   |        | — |   |   |   | 376 |   |   |   | — |   |   |   | 376 |   |
| Income                  tax benefit realized from the exercise of employee stock                  options |   |                               | — |   |                            |   | — |           |   |   | —    |   |   |        | — |   |   |   | 27 |   |   |   | — |   |   |   | 27 |   |
| Issuance                of common stock, net of  offering costs                                      |   |                               | — |   |                            |   | — |           |   |   | 2,895      |   |   |        | 29      |   |   |   | 47,134 |   |   |   | — |   |   |   | 47,163 |   |
| Net                  income                                                                               |   |                               | — |   |                            |   | — |           |   |   | —    |   |   |        | — |   |   |   | — |   |   |   | 7,588 |   |   |   | 7,588 |   |
| **BALANCES**,                December 31, 2006                                                            |   |                               | — |   |                            | $      | — |           |   |   | 12,046     |   |   | $           | 120     |   |   | $ | 82,560 |   |   | $ | 18,521 |   |   | $ | 101,201 |   |
|                                                                                                      |   |                               |    |   |                            |   |    |           |   |   |       |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

**NATURAL      GAS SERVICES GROUP, INC. AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS**

|                                                                                                                                                                     |   | **For                the Years Ended December 31,** |    |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|---------|
|                                                                                                                                                                     |   | **2004**                                            |    |   | **2005** |   |   | **2006** |   |
| **CASH                FLOWS FROM OPERATING ACTIVITIES:**                                                                                                                 |   |                                                |    |   |   |   |   |   |   |
|     Net                  income                                                                                                                      |   | $                                                   | 3,374   |   |   | $ | 4,446 |   |   | $ | 7,588 |   |
| **        Adjustments                to reconcile net income to net cash provided by operating                activities:** |   |                                                |    |   |   |   |   |   |   |   |   |   |
|          Depreciation                  and amortization                                                                     |   |                                                | 2,444   |   |   |   | 4,224 |   |   |   | 6,020 |   |
|          Deferred                taxes                                                                                      |   |                                                | 1,120   |   |   |   | 2,408 |   |   |   | 2,544 |   |
|          Employee                  stock option expense                                                                     |   |                                                | — |   |   |   | 135 |   |   |   | 376 |   |
|          Loss                (gain) on disposal of assets                                                                   |   |                                                | 71      |   |   |   | (28 | ) |   |   | 13 |   |
| **         Changes                  in current assets:**                                                                    |   |                                                |    |   |   |   |   |   |   |   |   |   |
|          Trade                accounts and other receivables                                                                |   |                                                | (1,182  | ) |   |   | (1,352 | ) |   |   | (2,271 | ) |
|          Inventory                                                                                                          |   |                                                | (1,915  | ) |   |   | (5,699 | ) |   |   | 749 |   |
|          Prepaid                expenses and other                                                                          |   |                                                | (34     | ) |   |   | (362 | ) |   |   | 135 |   |
|          **Changes                  in current liabilities:**                                                               |   |                                                |    |   |   |   |   |   |   |   |   |   |
|          Accounts                payable and accrued liabilities                                                            |   |                                                | 1,264   |   |   |   | 337 |   |   |   | (3 | ) |
|          Current                  income tax liability                                                                      |   |                                                | 20      |   |   |   | 187 |   |   |   | 849 |   |
|          Deferred                income                                                                                     |   |                                                | (185    | ) |   |   | (855 | ) |   |   | 122 |   |
|          Other                  assets                                                                                      |   |                                                | (279    | ) |   |   | 348 |   |   |   | (46 | ) |
| ** NET                CASH PROVIDED BY OPERATING ACTIVITIES**                                                                                                       |   |                                                | 4,698   |   |   |   | 3,789 |   |   |   | 16,076 |   |
| **CASH                  FLOWS FROM INVESTING ACTIVITIES:**                                                                                                               |   |                                                |    |   |   |   |   |   |   |   |   |   |
|     Purchase                of property and equipment                                                                                                |   |                                                | (11,596 | ) |   |   | (17,708 | ) |   |   | (27,684 | ) |
|     Purchase                  of short-term investments                                                                                              |   |                                                | — |   |   |   | — |   |   |   | (38,252 | ) |
|     Redemption                of short-term investments                                                                                              |   |                                                | — |   |   |   | — |   |   |   | 13,200 |   |
|     Assets                  acquired, net of cash                                                                                                    |   |                                                | — |   |   |   | (7,584 | ) |   |   | — |   |
|     Proceeds                from sale of property and equipment                                                                                      |   |                                                | 50      |   |   |   | 264 |   |   |   | 73 |   |
|     Changes                  in restricted cash                                                                                                      |   |                                                | (2,000  | ) |   |   | 2,000 |   |   |   | — |   |
| **  NET                CASH USED IN INVESTING ACTIVITIES**                                                                                                     |   |                                                | (13,546 | ) |   |   | (23,028 | ) |   |   | (52,663 | ) |
| **CASH                  FLOWS FROM FINANCING ACTIVITIES:**                                                                                                               |   |                                                |    |   |   |   |   |   |   |   |   |   |
|     Net                proceeds from line of credit                                                                                                  |   |                                                | 550     |   |   |   | 300 |   |   |   | 1,375 |   |
|     Proceeds                  from long-term debt                                                                                                    |   |                                                | 6,592   |   |   |   | 21,517 |   |   |   | 68 |   |
|     Repayments                of long-term debt                                                                                                      |   |                                                | (2,589  | ) |   |   | (13,077 | ) |   |   | (9,581 | ) |
|     Repayment                  of line of credit                                                                                                     |   |                                                | (300    | ) |   |   | — |   |   |   | (1,675 | ) |
|     Dividends                paid on preferred stock                                                                                                 |   |                                                | (53     | ) |   |   | — |   |   |   | — |   |
|     Proceeds                  from exercise of stock options and warrants                                                                            |   |                                                | 5,157   |   |   |   | 13,085 |   |   |   | 357 |   |
|     Proceeds                from sale of stock, net of transaction costs                                                                             |   |                                                | — |   |   |   | — |   |   |   | 47,163 |   |
|   **NET                  CASH PROVIDED BY FINANCING ACTIVITIES**                                                                                               |   |                                                | 9,357   |   |   |   | 21,825 |   |   |   | 37,707 |   |
|                                                                                                                                                                     |   |                                                |    |   |   |   |   |   |   |   |   |   |
| **NET                  CHANGE IN CASH**                                                                                                                                  |   |                                                | 509     |   |   |   | 2,586 |   |   |   | 1,120 |   |
| **CASH                AT BEGINNING OF PERIOD**                                                                                                                           |   |                                                | 176     |   |   |   | 685 |   |   |   | 3,271 |   |
| **CASH                  AT END OF PERIOD**                                                                                                                               |   | $                                                   | 685     |   |   | $ | 3,271 |   |   | $ | 4,391 |   |
|                                                                                                                                                                     |   |                                                |    |   |   |   |   |   |   |   |   |   |
| **SUPPLEMENTAL                  DISCLOSURES OF CASH FLOW INFORMATION:**                                                                                             |   |                                                |    |   |   |   |   |   |   |   |   |   |
|   Interest                paid                                                                                                                                 |   | $                                                   | 775     |   |   | $ | 1,877 |   |   | $ | 1,692 |   |
|   Income                  taxes paid                                                                                                                           |   | $                                                   | 31      |   |   | $ | 24 |   |   | $ | 894 |   |
|                                                                                                                                                                     |   |                                                |    |   |   |   |   |   |   |   |   |   |
| **SUPPLEMENTAL                  DISCLOSURE OF NON-CASH INVESTING AND FINANCING                  ACTIVITIES:**                                                       |   |                                                |    |   |   |   |   |   |   |   |   |   |
|   Assets                acquired for issuance of subordinated debt                                                                                             |   |                                                | — |   |   |   | 3,000 |   |   |   | — |   |
|   Assets                  acquired for issuance of  common stock                                                                                     |   |                                                | — |   |   |   | 5,120 |   |   |   | — |   |

----

**NATURAL      GAS SERVICES GROUP, INC. AND SUBSIDIARIES**

**1.  Summary      of Significant Accounting Policies**

***Organization      and Principles of Consolidation***

***Nature      of Operations***

***Use      of Estimates***

***Cash      Equivalents***

***Short-term      Investments***

***Accounts      Receivable***

----

***Revenue      Recognition***

***Description      of Rental Arrangements***

***Major      Customers and Concentration of Credit Risk***

***Inventory***

|                             |   | 2005   |          |   | 2006   |   |
|----------------------------------|--------|--------|---------------|--------|--------|--------|
| Raw                  materials   |   | $      | 11,771        |   |   | $      | 12,154 |   |
| Finished              goods      |   |   |  — |   |   |   | 1,084 |   |
| Work                  in process |   |   | 2,952         |   |   |   | 3,705 |   |
|                             |   | $      | 14,723        |   |   | $      | 16,943 |   |

***Property      and Equipment***

***Goodwill***

----

***Intangibles***

| 2007       |   | 299   |
|------------|--------|-------|
| 2008       |   | 299   |
| 2009       |   | 299   |
| 2010       |   | 260   |
| 2011       |   | 179   |
| Thereafter |   | 1,629 |
|       | $      | 2,965 |

***Patents***

***Restricted      Cash***

***Other      Assets***

***Warranty***

----

***Financial      Instruments***

***Advertising      Costs***

***Per      Share Data***

|                                                                        |   | **Year                Ended****December                31,** |        |
|-----------------------------------------------------------------------------|--------|--------------------------------------------------------------|-------------|
|                                                                        |   | **2004**                                                     |        |   | **2005** |   |   | **2006** |   |
|  Numeratior:                                                           |   |                                                         |        |   |   |   |   |   |   |   |   |   |
|   Net                  income                                     |   | $                                                            | 3,374       |   |   | $ | 4,446 |   |   | $ | 7,588 |   |
|                Less preferred dividends                                |   |                                                         | 53          |   |   |   | — |   |   |   |  — |   |
|   Income                  available to common stockholders        |   |                                                         | 3,321       |   |   |   | 4,446 |   |   |   | 7,588 |   |
|                Denominator for basic net income per common share:      |   |                                                         |        |   |   |   |   |   |   |   |   |   |
|   Weighted                  average common shares outstanding     |   |                                                         | 5,591       |   |   |   | 7,564 |   |   |   | 11,405 |   |
|                                                                        |   |                                                         |        |   |   |   |   |   |   |   |   |   |
| Denominator                  for diluted net income per share:              |   |                                                         |        |   |   |   |   |   |   |   |   |   |
|                Weighted averate common shares outstanding              |   |                                                         | 5,591  |   |   |   | 7,564  |   |   |   |  11,405 |   |
|   Dilutive                  effect of stock options and warrants  |   |                                                         | 792         |   |   |   | 917 |   |   |   | 67 |   |
|                    Diluted weighted average shares |   |                                                         |  6,383 |   |   |   | 8,481  |   |   |   | 11,472  |   |
|                                                                        |   |                                                         |        |   |   |   |   |   |   |   |   |   |
|  Earnings              per common share:                               |   |                                                         |        |   |   |   |   |   |   |   |   |   |
|   Basic                                                           |   | $                                                            | 0.59        |   |   | $ | 0.59 |   |   | $ | 0.67 |   |
|                Diluted                                                 |   | $                                                            | 0.52        |   |   | $ | 0.52 |   |   | $ | 0.66 |   |

***Income      Taxes***

***Reclassification***

----

***Recently      Issued Accounting Pronouncements***

*Share-Based Payment*
*Accounting for Stock-Based      Compensation*
*Accounting      for Stock Issued to Employees*

*Accounting for Uncertainty in Income Taxes – an interpretation of FASB      Statement 109*
*Accounting for Income      Taxes*

**2.  Acquisitions**

|   | · | $8                million in                cash; |
|--------|--------|---------------------------------------------------|

|   | · | Promissory                notes issued by                Natural Gas Services Group, Inc.  in the aggregate principal                amount of $3 million bearing interest at the rate of 4.00% per annum,                maturing three years from the date of closing and secured by a letter                of                credit in the face amount of $2 million;                and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | 609,756                shares of Natural Gas                Services Group, Inc.  common stock valued at $5.1 million based                upon the closing price of the Company’s stock at the time of the                transaction.  All of the shares are "restricted" securities                within the meaning of Rule 144 under the Securities Act of 1933,                as                amended, and bear a legend to that                effect. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| **(Unaudited)****Pro                Forma Results**          |   |                               |   |
|--------------------------------------------------------------|--------|------------------------------------|--------|
| (in                thousands, except per share data)         |   | Twelve                Months Ended |   |
|                                                         |   | December                31, 2004   |   |
| Revenue                                                      |   | $                                  | 37,382 |   |
| Net                income available to common stockholders   |   |                               | 4,148  |   |
| Net                  income per common share, basic          |   |                               | 0.67   |   |
| Net                income per common share, diluted          |   |                               | 0.59   |   |
|                                                         |   |                               |   |   |
| Summary                of net assets acquired is as follows: |   |                               |   |   |
| Current                  assets                              |   | $                                  | 8,274  |   |
| Other                assets                                  |   |                               | 3,047  |   |
| Intangibles                                                  |   |                               | 4,218  |   |
| Goodwill                                                     |   |                               | 7,468  |   |
| Total                  assets                                |   | $                                  | 23,007 |   |
|                                                         |   |                               |   |   |
| Current                  liabilities                         |   | $                                  | 3,180  |   |
| Notes                payable                                 |   |                               | 1,403  |   |
| Other                  liabilities                           |   |                               | 1,884  |   |
| Total                liabilities                             |   | $                                  | 6,467  |   |
|                                                         |   |                               |   |   |
| Net                assets                                    |   |                               | 16,540 |   |
| Acquisition                  expenses                        |   |                               | (418   | ) |
| Purchase                price                                |   | $                                  | 16,122 |   |

**3.  Rental      Activity**

| **Years                Ended December 31,** |   |   |
|---------------------------------------------|--------|--------|
| 2007                                        |   | $      | 1,624 |
| 2008                                        |   |   | 74 |
| Total                                       |   | $      | 1,698 |

----

**4.  Property      and Equipment**

|                                            |   | 2005   |        |   | 2006   |   |
|-------------------------------------------------|--------|--------|-------------|--------|--------|--------|
| Land                  and building              |   | $      | 3,365       |   |   | $      | 3,365 |   |
| Leashold              improvements              |   |   | 283         |   |   |   | 398 |   |
| Office                  equipment and furniture |   |   | 424         |   |   |   | 501 |   |
| Software                                        |   |   | 268         |   |   |   | 360 |   |
| Machinery                  and equipment        |   |   | 1,153       |   |   |   | 1,447 |   |
| Vehicles                                        |   |   |  3,389 |   |   |   | 4,322 |   |
| Less                  accumulated depreciation  |   |   | (2,458      | )      |   |   | (3,679 | ) |
|                                            |   |   |        |   |   |   |   |   |
| Total                                           |   | $      | 6,424       |   |   | $      | 6,714 |   |

**5.  Line      of Credit**

----

**6.  Long-term      Debt**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | 2005   |         |   | 2006   |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------------|--------|--------|--------|
| Note                  payable to a bank, interest at bank's prime rate plus .5% but not                  less                  than 5.25% (7.75% at December 31, 2005).  This was an advance                  line of credit note for $10.0 million.  Interest was payable                  monthly.  Principal was due in 60 consecutive payments of $167                  thousand beginning December 15, 2004 until November 15,                  2009.  The note was collateralized by substantially all of the                  assets of the Company.  See Note 5 regarding loan                  covenants.  This note was consolidated into the last note in                  this table on October 15, 2006.                                                                                                                                                    |   | $      | 7,900        |   |   | $      | — |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |         |   |   |   |   |   |
| Note                  payable to a bank, interest at the greater of (1) the prime rate                  plus 0.5%                  or (2) 6.0% (7.75% at December 31, 2005).  This was an $8.0                  million term loan.  Principal under this was credit facility was                  due and payable in 84 monthly installments of $95 thousand each,                  commencing February 1, 2005 and continuing through December 1,                  2011.  Interest on the unpaid principal balance was due and                  payable on the same dates as principal payments.  All                  outstanding principal and unpaid interest was due on January 1,                  2012.  See Note 5 regarding loan covenants.  This note                  was consolidated into the last note in this table on October 15,                  2006. |   |   | 6,952        |   |   |   | — |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |         |   |   |   |   |   |
| Note                  payable to a bank, interest at the greater of (1) the prime rate                  plus 0.5%                  or (2) 5.25% (7.75% at December 31, 2005).  Interest only under                  this credit facility was due and payable on the 15th day of each                  month                  commencing May 1, 2005 and continuing through April 30,                  2006.  Principal under this was credit facility was due and                  payable in 59 monthly installments of $167 thousand each, commencing                  May                  1, 2006 and continuing through April 1, 2011.  See Note 5                  regarding loan covenants.  This note was consolidated into the                  last note in this table on October 15, 2006.                                                                                        |   |   | 10,000       |   |   |   | — |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |         |   |   |   |   |   |
| Note                  payable to a bank, interest at a fixed rate of 7.5%.  Principal                  and interest payment due and payable on the 1st day of each month                  commencing November 1, 2006 and continuing through September 1,                  2011.  Principal under this credit facility is due and payable                  in 59 monthly installments of $281,500 each.  The note is                  collateralized by substantially all of the assets of the                  Company.  See Note 5 regarding loan covenants.  This                  note consolidated the three previous notes into one obligation                  on October                  15, 2006.                                                                                                                                                                        |   |   | —      |   |   |   | 16,328 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |         |   |   |   |   |   |
| Other                  notes payable for vehicles, various terms                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   | 53           |   |   |   | 64 |   |
| Total                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |   |  24,905 |   |   |   |  16,392 |   |
| Less                  current portion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |   | (4,680       | )      |   |   | (3,442 | ) |
| Total                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | $      | 20,225       |   |   | $      | 12,950  |   |

| 2007  | $      | 3,442        |
|-------|--------|--------------|
| 2008  |   | 3,378   |
| 2009  |   | 3,378        |
| 2010  |   |  3,378  |
| 2011  |   | 2,816        |
| Total | $      |  16,392 |

----

**7.  Subordinated      Notes**

**8.  Income      Taxes**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | **2004** |        |   | **2005** |   |   | **2006** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|-------------|--------|----------|--------|--------|----------|--------|
| Current                provision:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |     |        |   |     |   |   |     |   |
|   Federal                                                                                         |   | **$**    | **—** |   |     | $      | 91     |     |   | $ | 1,475 |   |
|   State                                                                                           |   |     | 20          |   |     |   | 116    |     |   |   | 268 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |     | 20          |   |     |   | 207    |     |   |   | 1,743 |   |
| Deferred                provision:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |     |        |   |     |   |   |     |   |   |   |   |
|   Federal                                                                                         |   |     | 1,029       |   |     |   | 2,310  |     |   |   | 2,403 |   |
|   State                                                                                           |   |     | 91          |   |     |   | 98     |     |   |   | 141 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |     | 1,120       |   |     |   | 2,408  |     |   |   | 2,544 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | $        | 1,140       |   |     | $      | 2,615  |     |   | $ | 4,287 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | **2004** |              |   | **2005** |   |     | **2006** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|-------------------|--------|----------|--------|----------|----------|--------|
| Deferred                income tax assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |     |              |   |     |   |     |     |   |
|   Net                  operating                  loss                                                                                                                                                                                                                                                                                                    |   | $        | 2,669             |   |     | $      | 984      |     |   | **$** | **—** |   |
|  Alternative              minimum tax credit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |     |  **—** |   |     |   |  91 |     |   |   |  99 |   |
|   Other                                                                                         |   |     | 7                 |   |     |   | 60       |     |   |   | 242 |   |
| Total                deferred income tax assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |     | 2,676             |   |     |   | 1,135    |     |   |   | 341 |   |
| Deferred                  income tax liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |     |              |   |     |   |     |     |   |   |   |   |
|   Property                and equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |     | (5,483            | )      |     |   | (6,736   | )        |   |   | (8,571 | ) |
|   Goodwill                  and other intangible assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |     | (142              | )      |     |   | (1,575   | )        |   |   | (1,508 | ) |
|   Other                                                                                         |   |     | (9                | )      |     |   | (71      | )        |   |   | (26 | ) |
| Total                  deferred income tax liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |     | (5,634            | )      |     |   | (8,382   | )        |   |   | (10,105 | ) |
|    Net                deferred income tax liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | $        | (2,958            | )      |     | $      | (7,247   | )        |   | $ | (9,764 | ) |

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | **2004** |        |   | **2005** |   |        | **2006** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|-------------|--------|----------|--------|-------------|----------|--------|
| Statutory                  rate                                                                                                                                                                                                                                                                                                                                                                                                              |   |     | 34          | %      |     |   | 34          | %        |   |   | 34 | % |
| State                and local taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |     | 3           | %      |     |   | 3           | %        |   |   | 3 | % |
| Nontaxable                  life insurance proceeds                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |     | (12         | )%     |     |   | **—** |     |   |   | **—** |   |
| Other                                                                                         |   |     | **—** |   |     |   | **—** |     |   |   | (1 | )% |
| Effective                  rate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |     | 25          | %      |     |   | 37          | %        |   |   | 36 | % |

**9.  Stockholders'      Equity**

***Initial      Public Offering***

***Secondary      Public Offering***

***Conversion***

***Warrants***

----

***Preferred      Stock***

***Other***

***Common      Stock Private Placement***

----

**10.  Stock-Based      Compensation**

***Stock      Options***

*“Share-Based Payment”*
*“Share-Based Payment”*

*Accounting for Stock Issued to      Employees*

*Pro-Forma      Stock Compensation Expense for the Year Ended December 31,      2005*

|                                                                                                                                                                                                         |   | **Years                Ended****December                31** |        |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------|-------------|
|                                                                                                                                                                                                         |   | **2004**                                                     |        |   | **2005** |   |
| Net                  income, as reported                                                                                                                                                                     |   | $                                                            | 3,374       |   |   | $ | 4,446 |   |
|  Less                preferred dividends                                                                                                                                                                |   |                                                         | 53          |   |   |   | — |   |
| Income                  available to common stockholders                                                                                                                                                     |   |                                                         | 3,321       |   |   |   | 4,446 |   |
| Compensation              expenses regained under Opinion 25                                                                                                                                                 |   |                                                         | —     |   |   |   |  135 |   |
|     Deduct:                  Total stock-based employee compensation expense determined                  under fair value method for all awards (net                  of  tax) |   |                                                         | (38         | ) |   |   | (295 | ) |
| Income              available to common stockholders, pro forma                                                                                                                                              |   | $                                                            | 3,283  |   |   | $ | 4,286  |   |
| Earnings                  per common share:                                                                                                                                                                  |   |                                                         |        |   |   |   |   |   |
| Basic,                as reported                                                                                                                                                                            |   | $                                                            | 0.59        |   |   | $ | 0.59 |   |
|     Basic,                  pro forma                                                                                                                                                    |   | $                                                            | 0.59        |   |   | $ | 0.57 |   |
| Diluted,                as reported                                                                                                                                                                          |   | $                                                            | 0.52        |   |   | $ | 0.52 |   |
|     Diluted,                  pro forma                                                                                                                                                  |   | $                                                            | 0.51        |   |   | $ | 0.51 |   |
|  Weighted              average fair value of options granted during the year                                                                                                                            |   | $                                                            | 4.75   |   |   | $ | 10.37  |   |

----

* Stock      Option Plan*

| **Weighted                average Black-Scholes fair value assumptions:** |   | **2004** |                        |   | **2005** |   |                        | **2006** |   |
|---------------------------------------------------------------------------|--------|----------|-----------------------------|--------|----------|--------|-----------------------------|----------|--------|
| Risk                  free rate                                           |   |     | 5.25                        | %      |     |   | 7.25                        | %        |   |   | 8.25 | % |
|                  Expected life                             |   |     |  10                yrs |   |     |   |  10                yrs |     |   |   |  4                yrs |   |
| Expected                  volatility                                      |   |     | 44.0                        | %      |     |   | 47.0                        | %        |   |   | 50.3 | % |
|                  Expected dividend yield                   |   |     |  0.0                   | %      |     |   | 0.0                         | %        |   |   | 0.0 | % |

----

|                                            |   | Number                ofStock                Options |    |   | Weighted                AverageExercise                Price |   |   | WeightedAverageRemainingContractual                Life (years) |   |   | Aggregate                Intrinsic Value |   |
|-------------------------------------------------|--------|------------------------------------------------------|---------|--------|--------------------------------------------------------------|--------|--------|-----------------------------------------------------------------|--------|--------|------------------------------------------|--------|
|                                            |   |                                                 |    |   |                                                         |   |   |                                                            |   |   | (in                thousands)            |   |
| Outstanding,                  January 1, 2006   |   |                                                 | 146,668 |   |                                                         | $      | 7.69   |                                                            |   |   |                                     |   |   |   |
|                                            |   |                                                 |    |   |                                                         |   |   |                                                            |   |   |                                     |   |   |   |
| Granted                                         |   |                                                 | 49,500  |   |                                                         |   | 14.12  |                                                            |   |   |                                     |   |   |   |
| Exercised                                       |   |                                                 | (8,998  | )      |                                                         |   | 6.43   |                                                            |   |   |                                     |   |   |   |
| Forfeited                  or expired           |   |                                                 | (13,000 | )      |                                                         |   | 7.06   |                                                            |   |   |                                     |   |   |   |
|                                            |   |                                                 |    |   |                                                         |   |   |                                                            |   |   |                                     |   |   |   |
| Outstanding,                  December 31, 2006 |   |                                                 | 174,170 |   |                                                         | $      | 9.63   |                                                            |   |   | 8.22                                     |   |   | $ | 744 |   |
|                                            |   |                                                 |    |   |                                                         |   |   |                                                            |   |   |                                     |   |   |   |   |   |
| Exercisable,                  December 31, 2006 |   |                                                 | 88,332  |   |                                                         | $      | 7.41   |                                                            |   |   | 7.15                                     |   |   | $ | 574 |   |

|                                    |                                    |   | Options                Outstanding |   |    | Options                Exercisable                             |   |
|-----------------------------------------|-----------------------------------------|--------|------------------------------------|--------|---------|----------------------------------------------------------------|--------|
| Range                of Exercise Prices |                                    |   | Shares                             |   |    | WeightedAverageRemainingContractualLife                (years) |   |   | WeightedAverageExercisePrice |   |   | Shares |   |   | WeightedAverageExercisePrice |   |
|                                    |                                    |   |                               |   |    |                                                           |   |   |   |   |   |   |   |   |   |   |
| $                                       | 0.00                  – 5.58 |   |                               |   | 42,000  |                                                           |   |   | 5.83 |   |   | $ | 3.98 |   |   |   | 42,000 |   |   | $ | 3.98 |   |
|                                    | 5.59                – 9.43   |   |                               |   | 72,670  |                                                           |   |   | 8.32 |   |   |   | 8.83 |   |   |   | 36,332 |   |   |   | 8.74 |   |
|                                    | 9.44                  – 16.96     |   |                               |   | 59,500  |                                                           |   |   | 9.77 |   |   |   | 14.60 |   |   |   | 10,000 |   |   |   | 16.96 |   |
|                                    |                                    |   |                               |   |    |                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $                                       | 0.00                  - 16.96      |   |                               |   | 174,170 |                                                           |   |   | 8.22 |   |   | $ | 9.63 |   |   |   | 88,332 |   |   | $ | 7.41 |   |
|                                    |                                    |   |                               |   |    |                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|  Unvested                stock options:   |   | Shares |   |   | Weighted                Average Grant Date Fair Value |   |
|------------------------------------------------|--------|--------|--------|--------|-------------------------------------------------------|--------|
|                                           |   |   |   |   |                                                  |   |
| Unvested                  at January 1, 2006   |   |   | 75,333 |   |                                                  | $      | 10.34 |   |
|                                           |   |   |   |   |                                                  |   |   |   |
| Granted                                        |   |   | 49,500 |   |                                                  |   | 4.75 |   |
| Vested                                         |   |   | 27,328 |   |                                                  |   | 9.86 |   |
| Forfeited                                      |   |   | 11,667 |   |                                                  |   | 4.25 |   |
|                                           |   |   |   |   |                                                  |   |   |   |
| Unvested                  at December 31, 2006 |   |   | 85,838 |   |                                                  | $      | 8.10 |   |
|                                           |   |   |   |   |                                                  |   |   |   |

----

**11.  Commitments**

***401(k)      Plan***

***Rented      Facilities***

| 2007       |   | $      | 129 |   |
|------------|--------|--------|-----|--------|
| 2008       |   |   | 62  |   |
| 2009       |   |   | 29  |   |
| 2010       |   |   | 29  |   |
| 2011       |   |   | 30  |   |
| Thereafter |   |   | 76  |   |
| Total      |   | $      | 355 |   |

**12.  Other      Income**

**13.  Segment      Information**

*Disclosures About Segments of an Enterprise and Related      Information*

----

**For      the Year Ended December 31, 2004**

|                                                                 |   | **Sales**                                    |    |   | **Service                &****Maintenance** |   |    | **Rental** |   |   | **Corporate** |   |   | **Total** |    |
|----------------------------------------------------------------------|--------|----------------------------------------------|---------|--------|-------------------------------------------------|--------|---------|------------|--------|--------|---------------|--------|--------|-----------|---------|
|                                                                 |   | **(in                thousands of dollars)** |    |
| Revenue                                                              |   | $                                            | 3,593   |   |                                            | $      | 1,874   |       |   | $      | 10,491        |   |   | $         | — |   |   | $ | 15,958 |   |
| Operating                costs and expenses                          |   |                                         | 2,556   |   |                                            |   | 1,357   |       |   |   | 3,038         |   |   |      | 5,096   |   |   |   | 12,047 |   |
| Operating                  income                                    |   |                                         | 1,037   |   |                                            |   | 517     |       |   |   | 7,453         |   |   |      | (5,096  | ) |   |   | 3,911 |   |
| Other                income/(expense)                                |   |                                         | — |   |                                            |   | — |       |   |   | —       |   |   |      | 603     |   |   |   | 603 |   |
| Income                  before provision for  income taxes |   |                                         | 1,037   |   |                                            |   | 517     |       |   |   | 7,453         |   |   |      | (4,493  | ) |   |   | 4,514 |   |
| *Segment                assets                                       |   | $                                            | — |   |                                            | $      | — |       |   | $      | —       |   |   | $         | 43,255  |   |   | $ | 43,255 |   |

**For      the Year Ended December 31, 2005**

|                                                                 |   | **Sales**                                    |    |   | **Service                &****Maintenance** |   |    | **Rental** |   |   | **Corporate** |   |   | **Total** |    |
|----------------------------------------------------------------------|--------|----------------------------------------------|---------|--------|-------------------------------------------------|--------|---------|------------|--------|--------|---------------|--------|--------|-----------|---------|
|                                                                 |   | **(in                thousands of dollars)** |    |
| Revenue                                                              |   | $                                            | 30,278  |   |                                            | $      | 2,424   |       |   | $      | 16,609        |   |   | $         | — |   |   | $ | 49,311 |   |
| Operating                costs and expenses                          |   |                                         | 23,331  |   |                                            |   | 1,479   |       |   |   | 6,528         |   |   |      | 9,114   |   |   |   | 40,452 |   |
| Operating                  income                                    |   |                                         | 6,947   |   |                                            |   | 945     |       |   |   | 10,081        |   |   |      | (9,114  | ) |   |   | 8,859 |   |
| Other                income/(expense)                                |   |                                         | — |   |                                            |   | — |       |   |   | —       |   |   |      | (1,798  | ) |   |   | (1,798 | ) |
| Income                  before provision for  income taxes |   |                                         | 6,947   |   |                                            |   | 945     |       |   |   | 10,081        |   |   | $         | (10,912 | ) |   |   | 7,061 |   |
| *Segment                assets                                       |   | $                                            | — |   |                                            | $      | — |       |   | $      | —       |   |   | $         | 86,369  |   |   | $ | 86,369 |   |

**For      the Year Ended December 31, 2006**

|                                                                 |   | **Sales**                                    |    |   | **Service                &****Maintenance** |   |    | **Rental** |   |   | **Corporate** |   |   | **Total** |    |
|----------------------------------------------------------------------|--------|----------------------------------------------|---------|--------|-------------------------------------------------|--------|---------|------------|--------|--------|---------------|--------|--------|-----------|---------|
|                                                                 |   | **(in                thousands of dollars)** |    |
| Revenue                                                              |   | $                                            | 38,214  |   |                                            | $      | 979     |       |   | $      | 23,536        |   |   | $         | — |   |   | $ | 62,729 |   |
| Operating                costs and expenses                          |   |                                         | 29,629  |   |                                            |   | 735     |       |   |   | 8,944         |   |   |      | 11,290  |   |   |   | 50,598 |   |
| Operating                  income                                    |   |                                         | 8,585   |   |                                            |   | 244     |       |   |   | 14,592        |   |   |      | (11,290 | ) |   |   | 12,131 |   |
| Other                income/(expense)                                |   |                                         | — |   |                                            |   | — |       |   |   | —       |   |   |      | (256    | ) |   |   | (256 | ) |
| Income                  before provision for  income taxes |   |                                         | 8,585   |   |                                            |   | 244     |       |   |   | 14,592        |   |   |      | (11,546 | ) |   |   | 11,875 |   |
| *Segment                assets                                       |   | $                                            | — |   |                                            | $      | — |       |   | $      | —       |   |   | $         | 135,552 |   |   | $ | 135,552 |   |

----

**14.           Quarterly      Financial Data (In thousands, except per share data) -      Unaudited**

| **2006**                                                |   | **Q1                2006** |   |   | **Q2                2006** |   |   | **Q3                2006** |   |   | **Q4                2006** |   |   | **Total** |   |
|---------------------------------------------------------|--------|----------------------------|--------|--------|----------------------------|--------|--------|----------------------------|--------|--------|----------------------------|--------|--------|-----------|--------|
| Net                  Revenue                            |   | $                          | 13,578 |   |                       | $      | 15,458 |                       |   | $      | 17,130                     |   |   | $         | 16,563 |   |   | $ | 62,729 |   |
| Operating                income                         |   |                       | 3,053  |   |                       |   | 1,912  |                       |   |   | 3,690                      |   |   |      | 3,476  |   |   |   | 12,131 |   |
| Net                  income applicable to common shares |   |                       | 1,696  |   |                       |   | 1,208  |                       |   |   | 2,364                      |   |   |      | 2,320  |   |   |   | 7,588 |   |
| Net                income per share - Basic             |   |                       | 0.18   |   |                       |   | 0.10   |                       |   |   | 0.20                       |   |   |      | 0.19   |   |   |   | 0.67 |   |
| Net                  income per share - Diluted         |   |                       | 0.17   |   |                       |   | 0.10   |                       |   |   | 0.20                       |   |   |      | 0.19   |   |   |   | 0.66 |   |

| **2005**                                                |   | **Q1                2005** |   |   | **Q2                2005** |   |   | **Q3                2005** |   |   | **Q4                2005** |   |   | **Total** |   |
|---------------------------------------------------------|--------|----------------------------|--------|--------|----------------------------|--------|--------|----------------------------|--------|--------|----------------------------|--------|--------|-----------|--------|
| Net                  Revenue                            |   | $                          | 11,041 |   |                       | $      | 12,031 |                       |   | $      | 12,460                     |   |   | $         | 13,779 |   |   | $ | 49,311 |   |
| Operating                income                         |   |                       | 1,837  |   |                       |   | 2,200  |                       |   |   | 2,207                      |   |   |      | 2,615  |   |   |   | 8,859 |   |
| Net                  income applicable to common shares |   |                       | 898    |   |                       |   | 1,070  |                       |   |   | 1,091                      |   |   |      | 1,387  |   |   |   | 4,446 |   |
| Net                income per share - Basic             |   |                       | 0.13   |   |                       |   | 0.16   |                       |   |   | 0.14                       |   |   |      | 0.15   |   |   |   | 0.59 |   |
| Net                  income per share - Diluted         |   |                       | 0.11   |   |                       |   | 0.13   |                       |   |   | 0.12                       |   |   |      | 0.15   |   |   |   | 0.52 |   |

----

| 3.1 | Articles                of Incorporation, as                amended (Incorporated by reference to Exhibit 3.1 of the 10QSB filed                and                dated November 10, 2004) |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.2 | Bylaws                (Incorporated by reference                to Exhibit 3.4 of the Registrant's Registration Statement on Form                SB-2,                No.  333-88314) |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.1 | Form                of warrant certificate                (Incorporated by reference to Exhibit 4.1 of the Registrant's Registration                Statement on Form SB-2,                No.  333-88314) |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.2 | Form                of warrant agent agreement                (Incorporated by reference to Exhibit 4.2 of the Registrant's Registration                Statement on Form SB-2,                No.  333-88314) |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.3 | Form                of representative's option                for the purchase of common stock (Incorporated by reference to Exhibit                4.4                of the Registrant's Registration Statement on Form SB-2,                No.  333-88314) |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.4 | Form                of representative's option                for the purchase of warrants (Incorporated by reference to Exhibit                4.5 of                the Registrant's Registration Statement on Form SB-2,                No.  333-88314) |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.5 | Stockholders                Agreement, dated                January 3, 2005 among Paul D. Hensley, Tony Vohjesus, Jim Hazlett                and                Natural Gas Services Group, Inc.  (Incorporated by reference to                Exhibit 4.3 of the Registrant's From 8-K Report, dated January 3,                2005, as                filed with the Securities and Exchange Commission on January 7,                2005) |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Executive                Compensation Plans and                Arrangements (Exhibits 10.1, 10.14, 10.15, 10.16, 10.23, 10.24, 10.26                and                10.27) |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.1 | 1998                Stock Option Plan, as                amended (Incorporated by reference to Exhibit 10.1 of the Registrant’s                Form 8-K Report dated June 20, 2006 on file with the SEC June 26,                2006) |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.2 | Form                of Series A 10% Subordinated                Notes due December 31, 2006 (Incorporated by reference to Exhibit                10.8 of                the Registrant's Registration Statement on Form SB-2,                No.  333-88314) |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.3 | Form                of Five-Year Warrants to                Purchase Common Stock (Incorporated by reference to Exhibit 10.9                of the                Registrant's Registration Statement on Form SB-2,                No.  333-88314) |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.4 | Warrants                issued to Berry-Shino                Securities, Inc.  (Incorporated by reference to Exhibit 10.10 of                the Registrant's Registration Statement on Form SB-2,                No.  333-88314) |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.5 | Warrants                issued to Neidiger,                Tucker, Bruner, Inc.  (Incorporated by reference to Exhibit                10.11 of the Registrant's Registration Statement on Form SB-2,                No.  333-88314) |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.6 | Form                of warrant issued in March                2001 for guaranteeing debt (Incorporated by reference to Exhibit                10.12 of                the Registrant's Registration Statement on Form SB-2,                No.  333-88314) |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.7 | Form                of warrant issued in April                2002 for guaranteeing debt (Incorporated by reference to Exhibit10.13                of                the Registrant's Registration Statement on Form SB-2,                No.  333-88314) |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.8 | First                Amended and Restated Loan                Agreement between the Registrant and Western National Bank (Incorporated                by reference to Exhibit 10.1 of the Registrant's Current Report on                Form                8-K, dated March 27, 2003 and filed with the Securities and Exchange                Commission on April 14,                2003) |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Exhibit                No. | Description |
|----------------------------|-------------|

| 10.9 | Lease                Agreement, dated March 1,                2004, between the Registrant and the City of Midland, Texas (Incorporated                by reference to Exhibit 10.19 of the Registrant's Form 10-QSB for                the                fiscal quarter ended June 30,                2004) |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.10 | Second                Amended and Restated Loan                Agreement, dated November 3, 2003, between the Registrant and Western                National Bank (Incorporated by reference to Exhibit 10.20 of the                Registrant's Form 10-QSB for the fiscal quarter ended June 30,                2004) |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.11 | Securities                Purchase Agreement,                dated July 20, 2004, between the Registrant and CBarney Investments,                Ltd.  (Incorporated by reference to Exhibit 4.1 of the                Registrant's Current Report on Form 8-K dated July 20, 2004 and filed                with                the Securities and Exchange Commission on July 27,                2004) |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.12 | Stock                Purchase Agreement, dated                October 18, 2004, by and among the Registrant, Screw Compression                Systems,                Inc., Paul D. Hensley, Jim Hazlett and Tony Vohjesus (Incorporated                by                reference to Exhibit 4.1 of the Registrant's Current Report on Form                8-K                dated October 18, 2004 and filed with the Securities and Exchange                Commission on October 21,                2004) |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.13 | Third                Amended and Restated Loan                Agreement, dated as of January 3, 2005, among Natural Gas Services                Group,                Inc., Screw Compression Systems, Inc.  and Western National Bank                (Incorporated by reference to Exhibit 10.1 of the Registrant’s Current                Report on Form 8-K, dated January 3, 2005, and filed with the Securities                and Exchange Commission on January 7,                2005) |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.14 | Employment                Agreement between Paul                D. Hensley and Natural Gas Services Group, Inc.  (Incorporated                by reference to Exhibit 10.1 of the Registrants Form 8-K Report,                dated                January 3, 2005, as filed with the Securities and Exchange Commission                on                January 7, 2005) |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.15 | Employment                Agreement between                William R. Larkin and Natural Gas Services Group,                Inc.  (Incorporated by reference to Exhibit 10.25 of the                Registrant's Form 10-KSB for the fiscal year ended December 31, 2004,                and                filed with the Securities and Exchange Commission on March 30,                2005) |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.16 | Promissory                Note, dated January 3,                2005, in the original principal amount of $2.1 million made by Natural                Gas                Services Group, Inc.  payable to Paul D. Hensley (Incorporated                by reference to Exhibit 10.26 of the Registrant's Form 10-KSB for                the                fiscal year ended December 31, 2004, and filed with the Securities                and                Exchange Commission on March 30,                2005) |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.17 | Fourth                Amended and Restated Loan                Agreement (Incorporated by reference to Exhibit 10.1 of the Registrant’s                Current Report on Form 8-K, dated March 14, 2005, and filed with                the                Securities and Exchange Commission on March 18,                2005) |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.18 | Modification                Agreement, dated as                of  January 3, 2005, by and between Natural Gas Services Group,                Inc.  and Western National Bank  (Incorporated by                reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K,                dated January 3, 2005, and filed with the Securities and Exchange                Commission on January 7,                2005) |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.19 | Guaranty                Agreement, dated as of                January 3, 2005, made by Natural Gas Service Group, Inc., for the                benefit                of Western National Bank (Incorporated by reference to Exhibit 10.3                of the                Registrant’s Current Report on Form 8-K, dated January 3, 2005, and filed                with the Securities and Exchange Commission on January 7,                2005) |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.20 | Guaranty                Agreement, dated as of                January 3, 2005, made by Screw Compression Systems, Inc., for the                benefit                of Western National Bank (Incorporated by reference to Exhibit 10.4                of the                Registrant’s Current Report on Form 8-K, dated January 3, 2005, and filed                with the Securities and Exchange Commission on January 7,                2005) |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.21 | Fifth                Amended and Restated Loan                Agreement (Incorporated by reference to Exhibit 10.2 of the Registrant’s                Form 8-K dated January 3, 2006 and filed with the Securities and                Exchange                Commission January 6, 2006) |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.22 | First                Modification to Fourth                Amended and Restated Loan Agreement (Incorporated by reference Exhibit                10.1 of the Registrant’s Form 8-K dated May 1, 2005 and filed with                Securities and Exchange Commission May 13,                2005) |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Exhibit                No. | Description |
|----------------------------|-------------|

| 10.23 | Employment                Agreement between                Stephen C. Taylor and Natural Gas Services Group,                Inc.  (Incorporated by reference to Exhibit 10.1 of the                Registrant’s Form 8-K Report, dated August 24, 2005, and filed with the                Securities and Exchange Commission on August 30,                2005) |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.24 | Employment                Agreement between                James R. Hazlett and Natural Gas Services Group,                Inc.  (Incorporated by reference to Exhibit 10.1 of the                Registrant’s Form 8-K Report, dated June 14, 2005, and filed with the                Securities and Exchange Commission on November 14,                2005) |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.25 | Stockholders                Agreement, dated                January 3, 2005 among Paul D. Hensley, Tony Vohjesus, Jim Hazlett                and                Natural Gas Services Group, Inc.  (Incorporated by reference to                Exhibit 4.3 of the Registrant’s Form 8-K Report, dated January 3, 2005,                and filed with the Securities and Exchange Commission on January                7,                2005) |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.26 | Promissory                Note, dated January 3,                2005, in the original principal amount of $300 thousand made by Natural                Gas Services Group, Inc.  payable to Jim Hazlett (Incorporated                by reference to Exhibit 10.3 of the Registrant’s Form 8-K Report, dated                June 14, 2005, and filed with the Securities and Exchange Commission                on                November 14, 2005) |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.27 | Retirement                Agreement, dated                December 14, 2005, between Wallace C. Sparkman and Natural Gas Services                Group, Inc.  (Incorporated by reference to Exhibit 10.1 of the                Registrant’s Form 8-K Report, dated December 14, 2005, and filed with the                Securities and Exchange Commission on December 15,                2005) |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.28 | Sixth                Amended and Restated Loan                Agreement, dated as of January 3, 2006 (Incorporated by reference                to                Exhibit 10.3 of the Registrant’s Current Report on Form 8-K, dated January                3, 2006, and filed with the Securities and Exchange Commission on                January                6, 2006) |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.29 | Guaranty                Agreement, dated as of                January 3, 2006, and made by Screw Compression Systems,                Inc.  for the benefit of Western National Bank (Incorporated by                reference to Exhibit 10.4 of the Registrant’s Current Report on Form 8-K,                dated January 3, 2006, and filed with the Securities and Exchange                Commission on January 6,                2006) |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.30 | Seventh                Amended and Restated Loan                Agreement (Incorporated by reference to Exhibit 10.1 of the Registrant’s                Form 8-K dated October 26, 2006 and filed with the Securities and                Exchange                Commission on November 1,                2006 |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 14.0 | Code                of Ethics (Incorporated by                reference to Exhibit 14.0 of the Registrant's Form 10-KSB for the                fiscal                year ended December 31, 2004, and filed with the Securities and Exchange                Commission on March 30,                2005) |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 21.0 | Subsidiaries                (Incorporated by                reference to Exhibit 21.0 of the Registrant's Form 10-KSB for the                fiscal                year ended December 31, 2004, and filed with the Securities and Exchange                Commission on March 30,                2005) |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *23.1 | Consent                of Hein & Associates                LLP |
|-------|--------------------------------------------------------------------|

| *31.1 | Certifications |
|-------|----------------|

| *31.2 | Certifications  |
|-------|----------------------|

| *32.1 | Certification                required by Section                906 of the Sarbanes-Oxley Act of                2002 |
|-------|----------------------------------------------------------------------------------------------------------------------|

| *32.2 | Certification                required by Section                906 of the Sarbanes-Oxley Act of                2002 |
|-------|----------------------------------------------------------------------------------------------------------------------|

|   |  *                Filed                herewith. |
|--------|-------------------------------------------------------|