##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007.
 o
    
    TRANSITION REPORTING PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 FOR THE TRANSITION PERIOD FROM
 _____ 

TO
 _____ .
 COMMISSION FILE NO. 0-21911
 SYNTROLEUM CORPORATION
  Delaware
    
    73-1565725(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 5416 S. Yale Suite 400
Tulsa, Oklahoma 74135
 (918) 592-7900
  
 o þ
 Yes
o No
þ
 þ o
 þ
  Large accelerated filer o
    
    Accelerated filer þ
    
    Smaller reporting company o
    
    Non-accelerated filer o
 o þ




---



##### 



TABLE OF CONTENTS
 PagePart IItem 1. Business
    
    
    2Item 1A. Risk Factors
    
    
    9Item 1B. Unresolved Staff Comments
    
    
    19Item 2. Properties
    
    
    19Item 3. Legal Proceedings
    
    
    19Item 4. Submission of Matters to a Vote of Security Holders
    
    
    19Part IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    19Item 6. Selected Financial Data
    
    
    23Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    
    38Item 8. Financial Statements and Supplementary Data
    
    
    39Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    39Item 9A. Controls and Procedures
    
    
    39Item 9B. Other Information
    
    
    40Part IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    41Item 11. Executive Compensation
    
    
    41Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    41Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    41Item 14. Principal Accountant Fees and Services
    
    
    41Part IVItem 15. Exhibits and Financial Statement Schedules
    
    
    42Exhibit 10.78Exhibit 10.79Exhibit 10.80Exhibit 21Exhibit 23Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
  FORWARD-LOOKING STATEMENTS
 ® ® ® ®




---



##### Table of Contents



PART I
 
 Item 1. Business
 Overview
   ®
  ® ® ® ® ® ® ®
 ® ®
 ® ®
 Bio-Synfining Projects  Dynamic Fuels
   2




---



##### Table of Contents



Business Strategy
  Focus on commercialization through project development.
 License the Syntroleum® Process. ®
 Cost structure improvement.
 The Syntroleum® Process
 ® ®
 Ultra-clean liquid fuels
  3




---



##### Table of Contents



Specialty products
 ®
 ®
 ®
 Step 1
Conversion of Natural Gas to Synthesis Gas
 
 Step 2
Fischer  Tropsch Synthesis
 
 ®
 The Synfining® Process
 ® ®
 The Bio-Synfining® Process
 ®
  4




---



##### Table of Contents



Syntroleum Technology Implementation
 ® ® ®
  ® ® ®
 ® ®
  Syntroleum Advantage
 ® ® ®
 
    
    produced substantially free of undesirable products normally found in fuels and
specialty products made from crude oil;
    
    used as blending stock to upgrade conventional fuels and specialty products made
from crude oil;
    
    used unblended in traditional internal combustion engines to reduce emissions;
    
    used in advanced internal combustion engines and fuel-cells that require sulfur-free
fuels; and
    
    transported through existing distribution infrastructures for crude oil and refined
products.
  5




---



##### Table of Contents



Bio-Synfined fuel compared to Biodiesel
  Resource Base
 Bio-Feedstocks
    Market Demand
 ®
  Increasing Demand by U.S. Military.
 Government Legislation.
   6




---



##### Table of Contents



Sales and Marketing
  Research and Development
 ® ®
 Intellectual Property
 ® ® ®
    7




---



##### Table of Contents



http://www.fischer-tropsch.org
  Employees
  Government Regulation
      8




---



##### Table of Contents



Operating Hazards
  Available Information
   
 Item 1A. Risk Factors
   9




---



##### Table of Contents



Risks Relating to Our Technology
 We might not successfully commercialize our technology, and commercial-scale plants based on
the Syntroleum® Process or our Technology may never be successfully constructed or operated.
 ® ® ® ® ® ® ®
 Commercial-scale plants based on the Syntroleum® and Synfining® Processes or our
Bio-Synfining Technology might not produce results necessary for success, including results
demonstrated on a laboratory, pilot plant and demonstration basis.
 ® ® ® ®
 
    
    lower reaction activity than demonstrated in the pilot plant and demonstration
plan operations which would decrease the conversion of natural gas into synthesis gas
and increase the amount of catalyst, and/or number of reactors required to produce
the design synthesis gas rate;
    
    lower reaction activity than that demonstrated in laboratory, pilot plant and
demonstration plant operations, which would increase the amount of catalyst or number
of reactors required to convert synthesis gas into liquid hydrocarbons and increase
capital and operating costs;
    
    shorter than anticipated catalyst life, which would require more frequent catalyst
regeneration, catalyst purchases, or both, thereby increasing operating costs;
    
    excessive production of gaseous light hydrocarbons from the FT reaction compared
to design conditions, which would lower the anticipated amount of liquid hydrocarbons
produced and would lower revenues and margins from plant operations;
    
    lower reaction activity than that demonstrated in laboratory, pilot plant and
demonstration plant operations, which would increase the amount of catalyst or number
of reactors required to convert FT products into finished, marketable fuels;
    
    inability of the gas turbines or heaters integrated into the Syntroleum® Process
to burn the low-heating-value tail gas produced by the Process, which would result in
the need to incorporate other methods to generate horsepower for the compression
process that may increase capital and operating costs;
    
    inability of third-party gasification and synthesis gas clean-up technology
integrated into the Syntroleum® Process to produce quantities of quality synthesis
gas adequate for economic operation of a CTL or BTL plant; and
    
    higher than anticipated capital and operating costs to design, construct and
operate a commercial scale plant.
  
    
    higher than anticipated catalyst or hydrogen consumption;
    
    inadequate removal of feedstock impurities in pre-treatment;
    
    lower process yields than that demonstrated in laboratory operations; and
    
    higher than anticipated capital and operating costs to design, construct and
operate a commercial scale plant.
  10




---



##### Table of Contents



® ®
 Many of our competitors have significantly more resources than we do, and technologies
developed by competitors could become more commercially successful than ours or render our
technologies obsolete.
 ® ®
  Our ability to protect our intellectual property rights involves complexities and
uncertainties and commercialization of the Syntroleum® and Synfining® Processes or our
Bio-Synfining Technology could give rise to claims that our technology infringes upon the rights
of others.
  ® ® ® ®
  11




---



##### Table of Contents



We could have potential indemnification liabilities to licensees relating to the operation of
plants based on the Syntroleum® and Synfining® Processes or our Bio-Synfining Technology or
intellectual property disputes.
 ® ®
 
    
    use of patent rights and technical information relating to the Syntroleum® and
Synfining® Processes or our Bio-Synfining Technology;
    
    acts or omissions by us in connection with our preparation of Process design
packages for plants; and
    
    performance guarantees that we may provide.
 Industry rejection of our technology would make the construction of plants based on the
Syntroleum® and Synfining® Processes or our Bio-Synfining Technology more difficult or impossible
and would adversely affect our ability to receive future license fees, product revenue or other
economic value.
 ® ® ® ®
 Risks Relating to Products of the Syntroleum® and Synfining® Processes or Bio-Synfining Technology
 The U.S. renewable fuels industry is highly dependent on a mix of federal and state
legislation and regulation and any changes in legislation or regulation could harm our business and
financial condition.
   Sufficient markets for the synthetic products of the Syntroleum® and Synfining® Processes or
Bio-Synfining Technology or products that utilize these synthetic products, including fuel cells,
may never develop or may take longer to develop than we anticipate.
 ® ® ® ®
 
    
    cost competitiveness of the synthetic products of the Syntroleum® and Synfining®
Processes or Bio-Synfining Technology;
    
    consumer reluctance to try a new product;
    
    environmental, safety and regulatory requirements; and
    
    emergence of more competitive products.
  12




---



##### Table of Contents



Risks Relating to Our Business
 We will need to obtain funds from additional financings or other sources for our business
activities. If we do not receive these funds, we would need to reduce, delay or eliminate some of
our expenditures.
 ® ®
    We need to remain listed on the NASDAQ stock market to be able to access adequate funding from
time to time. We face de-listing issues that would impair the liquidity of our stock and our
availability to access the capital markets.
   13




---



##### Table of Contents



Construction of plants based on the Syntroleum® and Synfining® Processes or Bio-Synfining
Technology will be subject to risks of delay and cost overruns.
 ® ®
 
    
    shortages of equipment, materials or skilled labor;
    
    unscheduled delays in the delivery of ordered materials and equipment;
    
    engineering problems, including those relating to the commissioning of newly
designed equipment;
    
    work stoppages;
    
    weather interference;
    
    unanticipated cost increases; and
    
    difficulty in obtaining necessary permits or approvals.
 We have a capital commitment to our joint venture, Dynamic, that requires us to fund our
portion of the capital obligation for the plant. This amount is estimated to be $75 million.
  We have incurred losses and anticipate continued losses.
 ® ® ® ®
  If prices for crude oil, natural gas, coal, vegetable oils and fats and other commodities are
unfavorable, plants based on the Syntroleum® and Synfining® Processes or Bio-Synfining Technology
may not be economical.
 ® ®
 
    
    level of consumer product demand;
    
    weather conditions;
    
    domestic and foreign government regulation;
    
    actions of the Organization of Petroleum Exporting Countries;
    
    political conditions in countries producing feedstocks for fuels plants;
  14




---



##### Table of Contents




    
    supply of crude oil, natural gas, coal, biomass fats, greases and vegetable oils;
    
    location of GTL plants relative to natural gas reserves and pipelines;
    
    location of CTL plants relative to coal reserves and transportation systems;
    
    location of BTL plants relative to biomass reserves and transportation systems;
    
    capacities of pipelines;
    
    fluctuations in seasonal demand;
    
    crop yields;
    
    farmer planting decisions;
    
    output and proximity of crush facilities that convert the crops to oils;
    
    alternative uses for fats;
    
    number of animals slaughtered and rendered;
    
    price and availability of alternative fuels; and
    
    overall economic conditions.
 We cannot predict the future markets and prices for oil, natural gas, coal or other materials
used in the Syntroleum® and Synfining® Processes and Bio-Synfining Technology or refined products.
 ® ® ® ®
 Adverse effect of seasonal fluctuations could impact operating results.
  Adverse operating conditions could prevent plants based on the Syntroleum® Process or
Bio-Synfining technology from operating economically.
 ® ®
 Plants will depend on the availability of the feedstock used at the plant at economic prices,
and alternative uses of the feedstock could be preferred in many circumstances.
   15




---



##### Table of Contents



Our receipt of license fees depends on substantial efforts by our licensees, and our licensees
could choose not to construct a plant based on the Syntroleum® and Synfining® Processes or
Bio-Synfining Technology or to pursue alternative technologies.
 ® ® ® ®
 Our success depends on the performance of our executive officers and key personnel, the loss
of who would disrupt our business operations.
   16




---



##### Table of Contents



We depend on strategic relationships with feedstock suppliers, construction contractors, site
owners, manufacturing and engineering companies, and customers. If we are not successful in
entering into and achieving the benefits of these relationships, this could negatively impact our
business.
  ® ® ® ® ® ® ®
 ® ® ® ® ® ®
 Our operating results may be volatile due to a variety of factors and are not a meaningful
indicator of future performance.
  
    
    timing of any construction by us or our licensees of plants;
    
    demand for licenses of the Syntroleum® and Synfining® Processes or Bio-Synfining
Technology and receipt and revenue recognition of license fees;
    
    oil and gas prices;
    
    coal prices;
    
    fat and vegetable oil prices;
    
    timing and amount of research and development expenditures;
    
    demand for synthetic fuels and specialty products;
    
    introduction or enhancement of FT and renewable fuels technologies by us and our
competitors;
    
    availability of insurance;
    
    market acceptance of new technologies; and
    
    general economic conditions.
  17




---



##### Table of Contents



We are subject to extensive laws relating to the protection of the environment, and these laws
may increase the cost of designing, constructing and operating our plants based on the Syntroleum®
Processes or our Bio-Synfining Technology or affect demand for the products of these plants.
   Terrorist threats and U.S. military actions could result in a material adverse effect on our
business.
    We may not have enough insurance to cover all of the risks we face.
   18




---



##### Table of Contents



Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
       
 Item 3. Legal Proceedings
   
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Part II
 
 tem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
 Stock Prices
 Sales PriceHigh
    
    
    LowYear Ended December 31, 2007:First Quarter
    
    $
    3.81
    
    
    $
    2.96Second Quarter
    
    $
    3.57
    
    
    $
    2.76Third Quarter
    
    $
    2.79
    
    
    $
    1.60Fourth Quarter
    
    $
    1.80
    
    
    $
    0.80
  19




---



##### Table of Contents



Sales PriceHigh
    
    
    LowYear Ended December 31, 2006:First Quarter
    
    $
    11.85
    
    
    $
    7.83Second Quarter
    
    $
    8.30
    
    
    $
    4.82Third Quarter
    
    $
    6.05
    
    
    $
    3.96Fourth Quarter
    
    $
    4.91
    
    
    $
    2.45
 Record Holders.
 Dividends.
 Our stock price may continue to be volatile and could decline in the future. ®
  Future sales of our common stock could adversely affect our stock price.
 Issuer Repurchases of Equity Securities
  Equity Compensation Plans
   20




---



##### Table of Contents



Equity Compensation Plan Information
 Number of SecuritiesRemaining Available forNumber of Securities to
    
    
    Weighted-average Exercise
    
    
    Future Issuance Underbe Issued Upon Exercise
    
    
    Price of Outstanding
    
    
    Equity Compensation Plansof Outstanding Options,
    
    
    Options, Warrants and
    
    
    (excluding securitiesWarrants and Rights
    
    
    Rights
    
    
    reflected in column (a))Plan Category
    
    (a)
    
    
    (b)
    
    
    (c)Equity Compensation
Plans Approved by
Security Holders
(1)(2)(3)
    
    
    6,301,967
    
    
    $
    7.65
    
    
    
    1,573,000Equity Compensation
Plans Not Approved
by Security Holders
(4)(5)(6)
    
    
    5,258,000
    
    
    $
    2.63
    
    
    
    4,597,449Total
    
    
    11,559,967
    
    
    $
    5.10
    
    
    
    6,170,449
 (1)
    
    Includes the 1993 Stock Option and Incentive Plan, the 1997 Stock Incentive
Plan, the 2005 Stock Incentive Plan and the Stock Option Plan for Outside Directors.(2)
    
    Includes 346,253 shares to be issued upon exercise of options with a weighted
average exercise price of $12.45 that were granted under our 1993 Stock Option and
Incentive Plan and our Stock Option Plan for Outside Directors assumed by us in
connection with the merger of Syntroleum Corporation and SLH Corporation on August 7,
1998, which were approved by our stockholders.(3)
    
    Includes up to 141,250 shares to be issued upon exercise of warrants issued
to Sovereign Oil & Gas Company II, LLC, a consulting firm that we previously have
retained to assist us in acquiring stranded natural gas fields worldwide, which were
approved by our stockholders. The warrants are issuable in varying amounts upon the
acquisition of properties of the achievement of third-party participation in a
project, and have an exercise price of between $6. 40 and $7.98 per share for warrants
issued since March 1, 2004. The issuance of warrants to purchase up to 500,000 shares
of our common stock has been approved by our stockholders.(4)
    
    On August 31, 2002, we granted options to purchase 1,000,000 shares of our
common stock at an exercise price of $1.55 to our Chief Executive Officer, John B.
Holmes, Jr., as an inducement to his employment with Syntroleum. The rights to
exercise the options and purchase 333,334 shares vested on October 1, 2002, the rights
to exercise the options and purchase an additional 333,333 shares vested on October 1,
2003, and the rights to exercise the options and purchase an additional 333,333 shares
vested on October 1, 2004. The ability to exercise the options will terminate upon the
earliest of: (a) the tenth anniversary of the date of the grant.(5)
    
    On February 3, 1999, we granted options to purchase 8,000 shares of common
stock at exercise prices of $6.88, to a Business Development Consultant. The rights to
exercise the options and purchase shares vest in three equal installments each year on
the anniversary of each grant.(6)
    
    The Company has registered via S-8 750,000 shares of common stock issuable as
matching pursuant to the terms of the Syntroleum 401 (k) Plan. As of December 31,
2007, the Company had issued 152,551 shares under this Plan.  21




---



##### Table of Contents



Performance Graph
  VALUE OF $100 INVESTMENT
 
  22




---



##### Table of Contents



Item 6. Selected Financial Data
  For the Year Ended December 31,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003(in thousands, except per share data)Statement of Operations Data:Total revenues
    
    
    16,472
    
    
    
    2,700
    
    
    
    464
    
    
    
    5,682
    
    
    
    5,056Operating income (loss)
    
    
    (10,362
    )
    
    
    (28,506
    )
    
    
    (25,310
    )
    
    
    (22,256
    )
    
    
    (21,184
    )Investment, interest, other income
(expense),
foreign currency, taxes and minority
interest
    
    
    518
    
    
    
    436
    
    
    
    3,473
    
    
    
    94
    
    
    
    8Income (loss) from discontinued operations
    
    
    13,595
    
    
    
    (26,555
    )
    
    
    (19,557
    )
    
    
    (20,388
    )
    
    
    (13,462
    )Net income (loss)
    
    $
    3,751
    
    
    $
    (54,625
    )
    
    $
    (41,394
    )
    
    $
    (42,550
    )
    
    $
    (34,638
    )Basic and diluted per share amounts -Income (loss) from continuing operations
    
    $
    (0.17
    )
    
    $
    (0.50
    )
    
    $
    (0.41
    )
    
    $
    (0.51
    )
    
    $
    (0.61
    )Income from discontinued operations
    
    $
    0.23
    
    
    $
    (0.48
    )
    
    $
    (0.36
    )
    
    $
    (0.47
    )
    
    $
    (0.39
    )Net income (loss)
    
    $
    0.06
    
    
    $
    (0.98
    )
    
    $
    (0.77
    )
    
    $
    (0.98
    )
    
    $
    (1.00
    )
 As of December 31,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003(in thousands)Balance Sheet Data:Working capital
    
    $
    22,401
    
    
    $
    29,199
    
    
    $
    46,095
    
    
    $
    22,625
    
    
    $
    10,795Total assets
    
    
    32,291
    
    
    
    43,937
    
    
    
    89,795
    
    
    
    44,751
    
    
    
    67,235Current maturities
of debt and
deferred
credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,546Convertible debt
    
    
    
    
    
    
    27,641
    
    
    
    25,925
    
    
    
    24,221
    
    
    
    21,842Deferred revenue
    
    
    22,578
    
    
    
    21,840
    
    
    
    20,952
    
    
    
    21,702
    
    
    
    38,273
  23




---



##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operation
 Overview
  ® ® ® ® ® ® ®
 Operating Revenues
 ®
 ® ®
 ® ®
 Operating Expenses
   24




---



##### Table of Contents



®
  Discontinued Operations
 Research and Development
 Accounting for Research and Development Costs ® ®
     25




---



##### Table of Contents



Accounting for the Impairment or Disposal
of Long-Lived Assets
 International Oil and Gas
    Domestic Oil and Gas
   26




---



##### Table of Contents



Significant Developments During 2007
 Commercial and Licensee Projects
        27




---



##### Table of Contents



Demonstration Activities
 DOE Catoosa Project ®
 Accounting for Research and Development Costs.
 DOD Projects
   ® ® ® ® ® ®
  28




---



##### Table of Contents



DOT Fuel Evaluation Program.
 Coal Derived Synthesis Gas
 Results of Operations
 Consolidated Results for the Years Ended December 31,
 Revenues
    
    2007
    
    
    2006
    
    
    2005(in thousands)Licensing Revenue from Marathon
    
    $
    13,665
    
    
    $
    
    
    
    $
    Technical Services Revenue
    
    
    1,948
    
    
    
    
    
    
    
    Other Revenue
    
    
    859
    
    
    
    2,700
    
    
    
    464Total Revenues
    
    $
    16,472
    
    
    $
    2,700
    
    
    $
    464
 2007 vs. 2006
 Licensing Revenue from Marathon.
 Technical Services Revenue
 Other Revenue.
 2006 vs. 2005
 Other Revenue.
 Operating Costs and Expenses
    
    2007
    
    
    2006
    
    
    2005(in thousands)Engineering
    
    
    5,753
    
    
    
    3,381
    
    
    
    2,665Depreciation, depletion, amortization
    
    
    745
    
    
    
    816
    
    
    
    686Non-cash equity compensation
    
    
    4,980
    
    
    
    7,859
    
    
    
    4,686General and administrative and other
    
    
    15,356
    
    
    
    19,150
    
    
    
    17,737Total Operating Costs and Expenses
    
    $
    26,834
    
    
    $
    31,206
    
    
    $
    25,774
  29




---



##### Table of Contents



2007 vs. 2006
 Engineering Expense.
 
    
    increased expenditures associated with outside engineering firms for work on
mechanical reactor designs,
    
    increased salaries and wages and for the engineering group based on current
market prices,
    
    and retention bonuses were paid and accrued for in 2007 as an incentive to
retain key
engineers.
 Non-Cash Equity Compensation
 General and Administrative and Other.
 
    
    significant reductions in professional fees such as attorney fees and
business development consulting fees;
    
    a reduction in general and administrative staffing expenses, such as,
communications expenses, general office costs and employee benefits;
    
    a reduction in travel expenditures;
    
    a reduction in liability and director and officer insurance premiums, but
    
    decreases were offset by increased severance and retirement expense for
several executive officers in accordance with individual retirement or
separation agreements with the Company.
  2006 vs. 2005
 Engineering Expense.
 Non-Cash Equity Compensation Share-Based Payment
 General and Administrative and Other.
 
    
    increased expenses in 2006 related to business development professional
consultants and higher insurance premiums in 2006,
    
    increased travel expenses associated with international business development
efforts, and
    
    settlement of dispute with a vendor in 2005 that resulted in the reversal of
a $680,000 contingency accrual.
 Other Income and Expenses
    
    2007
    
    
    2006
    
    
    2005(in thousands)Investment and Interest Income
    
    $
    1,454
    
    
    $
    2,528
    
    
    $
    2,554Other Income (Expense)
    
    
    (327
    )
    
    
    (1,200
    )
    
    
    174Foreign Currency Exchange
    
    
    (1,315
    )
    
    
    (892
    )
    
    
    745Minority Interest
    
    
    706
    
    
    
    
    
    
    
    Income (Loss) From Discontinued Operations
    
    
    13,595
    
    
    
    (26,555
    )
    
    
    (19,557
    )
  30




---



##### Table of Contents



2007 vs. 2006
 Investment and Interest Income.
 Other Income (Expense) and Foreign Exchange.
 Income
(Loss) from Discontinued Operations.
 Oil and Gas
 
    
    international oil and gas gains of $10,078,000 recognized for the sale of
stock in our Nigerian subsidiary for our interests in Aje and Ajapa assets in
2007, $5,766,000 of this gain was collected in March of 2008,
    
    offset by the domestic oil and gas impairment expense in the amount of
$604,000 related to the gas processing plant and related equipment held for
sale throughout 2007,
    
    this compares to amortization expense of $1,457,000 related to the
termination of the stranded gas venture in 2006, and
    
    an increase in impairment for domestic oil and gas assets sold in January of
2006.
 Research and Development
 
    
    decrease in expenditures for research and development activities associated
with the demonstration plants due to completion of operations of plants offset
by increased expenditures associated with laboratory facilities, personnel and
termination expenditures in 2007 resulting in expenditures associated with
activities of $6,813,000 compared to;
    
    expenditures of $17,748,000 for activities at both pilot plant facilities
for nine months of the year and additional expenses associated with increased
staffing levels for operation of demonstration facilities in 2006; and
    
    a one time gain in 2007 resulting from the extinguishment of debt related to
the Marathon note for the construction of the demonstration facility in the
amount of $11,793,000 contributed to the income recognized in 2007.
  2006 vs. 2005
 Investment and Interest Income.
 Other Income (Expense) and Foreign Exchange.
 
    
    other expense of $1,200,000 related to financing costs previously
capitalized that were expensed in 2006, and
    
    foreign currency losses recorded in 2006 compared to foreign currency gains
recorded in 2005 due to the fluctuation in the value of the Australian dollar
compared to the U.S. Dollar between periods.
 Loss from Discontinued Operations.
 Oil and Gas
 
    
    the absence of $3,556,000 gain recognized in 2005 from conveyance of a
portion of our participating interest in the Aje field,
    
    amortization expense of $1,457,000 related to the termination of the stranded gas venture in 2006 compared to $165,000 in 2005, and
  31




---



##### Table of Contents




    
    higher impairment in 2005 due to impairment of domestic oil and gas assets
that were sold in January 2006.
 Research and Development
 
    
    expenditures for research and development activities in 2006 and 2005 were
$17,748,000 and $19,779,000, respectively,
    
    the 2005 expenditures were offset by the recognition of revenue of
previously deferred revenue related to fuel delivery commitment associated with
the DOE Ultra Clean Fuels Demonstration project in the amount of $5,798,000.
 Net Income (Loss)
    
    2007
    
    
    2006
    
    
    2005(in thousands)Net Income (Loss)
    
    $
    3,751
    
    
    $
    (54,625
    )
    
    $
    (41,394
    )
 2007 vs. 2006
  2006 vs. 2005
  Liquidity and Capital Resources
 General
       32




---



##### Table of Contents



® ® ®
    ®
  Contractual Obligations
  Payments Due by PeriodLess than 1
    
    
    
    
    
    
    
    
    
    
    After 5Contractual Obligations
    
    Total
    
    
    year
    
    
    1-3 years
    
    
    4-5 years
    
    
    yearsCapital (Finance) Lease Obligations
    
    
    35
    
    
    
    35
    
    
    
    
    
    
    
    
    
    
    
    Operating Lease Obligations
    
    
    1,095
    
    
    
    329
    
    
    
    674
    
    
    
    18
    
    
    
    74Asset Retirement Obligations
    
    
    1,504
    
    
    
    546
    
    
    
    958
    
    
    
    
    
    
    
    Total
    
    $
    2,634
    
    
    $
    910
    
    
    $
    1,632
    
    
    $
    18
    
    
    $
    74
  33




---



##### Table of Contents



Equity Lines of Credit
   34




---



##### Table of Contents



Equity Issuances
     New Accounting Pronouncements
 Accounting for Uncertainty in Income
Taxes  an Interpretation of FASB Statement 109
  35




---



##### Table of Contents



Fair Value Measurements
 Debtors Accounting for a Modification (or Exchange) of
Convertible Debt Instruments Accounting for Modifications to
Conversion Options Embedded in Debt Instruments and Related Issues Debtors Accounting for a Modification or Exchange of Debt Instruments
 Accounting for Registration Payment Arrangements Accounting for Contingencies
 The Fair Value Option for Financial Assets and
Financial LiabilitiesIncluding an amendment to FASB Statement No. 115
  Critical Accounting Policies and Estimates
  Revenue Recognition .
 ®
  36




---



##### Table of Contents



® Software Revenue Recognition
   Research and Development. Accounting for Research and Development Costs
 Stock-Based Compensation. Accounting for Stock Issued to Employees Accounting for Stock-Based Compensation Share-Based Payment
  Non-Employee Stock-Based Compensation. Accounting for Equity Instruments That Are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling, Goods or Services
   37




---



##### Table of Contents



Oil and Gas Properties.
 Discontinued Operations and Impairment of Assets Accounting for the Impairment or Disposal of Long-Lived Assets .
  Critical Estimates.
 
 Item 7A. Quantitative and Qualitative Disclosures about Market Risk
     38




---



##### Table of Contents



Item 8. Financial Statements and Supplementary Data
  
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures.
 Changes in Internal Controls.
 Managements Report on Internal Control Over Financial Reporting.
   REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal ControlIntegrated
Framework
   39




---



##### Table of Contents



Internal
ControlIntegrated Framework
   
 
 Item 9B. Other Information
   40




---



##### Table of Contents



PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance of the Registrant
  
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
  
 Item 13. Certain Relationships and Related Transactions, and Director Independence
  
 Item 14. Principal Accountant Fees and Services
   41




---



##### Table of Contents



PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
 (a)(1) Financial Statements
 Consolidated Financial Statements for the Three Years Ended December 31, 2007:
 Report of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated Balance Sheets as of December 31, 2007 and 2006
    
    
    F-2Consolidated Statements of Operations for each of the Three Years in the Period Ended December 31, 2007
    
    
    F-3Consolidated Statements of Stockholders Equity (Deficit) for each of the Three Years in the Period Ended December 31, 2007
    
    
    F-4Consolidated Statements of Cash Flows for each of the Three Years in the Period Ended December 31, 2007
    
    
    F-5Notes to Consolidated Financial Statements
    
    
    F-6
 (a)(2) Financial Statement Schedules
  (a)(3) Index of Exhibits
 ExhibitNo.
    
    
    Description of Exhibit*3.1
    
    
    Certificate of Incorporation of the Company (incorporated by reference to Appendix B to the Companys
Proxy Statement filed with the Securities and Exchange Commission on May 12, 1999 (File No. 0-21911)).*3.2
    
    
    Amended and Restated Certificate of Designations of Series A Junior Participating Preferred Stock of the
Company dated October 24, 2004 (incorporated by reference to Exhibit 4.5 to Amendment No. 2 to the
Companys Current Report on Form 8-K dated June 17, 1999 and filed with the Securities and Exchange
Commission on October 28, 2004 (File No. 0-21911)).*3.3
    
    
    Bylaws of the Company (incorporated by reference to Exhibit 3.3 to the Companys Annual Report on form
10-K for the year ended December 31, 2005 filed with the Securities and Exchange Commission on March 7,
2006 (File No. 0-21911)).*3.3.1
    
    
    Amendment to the Bylaws of the Company (incorporated by reference to Exhibit 3.3.1 to the Companys
Annual Report on Form 10-K for the year ended December 31, 2005 filed with the Securities and Exchange
Commission on March 7, 2006 (File No. 0-21911)).*4.1
    
    
    Second Amended and Restated Rights Agreement dated as of October 28, 2004 (incorporated by reference to
Exhibit 4.1 to the Companys Current Report on Form 8-K filed with the Securities and Exchange
Commission on October 29, 2004 (File No. 0-21911)).*4.2
    
    
    Warrant Agreement, dated as of November 4, 2003, between the Company and American Stock Transfer and
Trust Company, as warrant agent (including form of warrant certificate) (incorporated by reference to
Exhibit 4.1 to the Companys Quarterly Report on Form 10-Q for the period ended September 30, 2003 filed
with the Securities and Exchange Commission on November 14, 2003 (File No. 0-21911)).*4.3
    
    
    Warrant Agreement, dated as of May 26, 2004, between the Company and American Stock Transfer and Trust
Company, as warrant agent (including form of warrant certificate) (incorporated by reference to Exhibit
4.1 to the Companys Current Report on Form 8-K filed with the Securities and Exchange Commission on May
25, 2004 (File No. 0-21911)).
 *4.4
    
    
    Warrant Agreement, dated as of June 22, 2007, between the Company and Tyson Foods, Inc.
a Delaware Corporation (incorporated by reference to Exhibit 4.4 to the Companys
Quarterly Report on Form 10-Q for the period ended June 30, 2007 filed with the
Securities and Exchange Commission on May 10, 2007 (File No. 0-21911)).
  42




---



##### Table of Contents



ExhibitNo.
    
    
    Description of Exhibit*4.5
    
    
    Registration Rights Agreement dated as of June 22, 2007, between the Company and Tyson
Foods, Inc. a Delaware Corporation (incorporated by reference to Exhibit 4.5 to the
Companys Quarterly Report on Form 10-Q for the period ended June 30, 2007 filed with
the Securities and Exchange Commission on May 10, 2007 (File No. 0-21911)).+* 10.2
    
    
    Form of Amended and Restated Indemnification Agreement between the Company and each of
its officers and directors (incorporated by reference to Exhibit 10.2 to the Companys
Annual Report on Form 10-K for the year ended December 31, 2000 filed with the
Securities and Exchange Commission on March 22, 2001 (File No. 0-21911)).+*10.3
    
    
    Form of Option Agreement under the Stock Option Plan for Outside Directors of the
Company (incorporated by reference to Exhibit 10.2 to the Companys Annual Report on
Form 10-K for the year ended December 31, 2004 filed with the Securities and Exchange
Commission on March 16, 2005 (File No. 0-21911)).*10.4
    
    
    Master Preferred License Agreement dated March 7, 1997 between the Company and Marathon
Oil Company (incorporated by reference to Exhibit 10.23 to the Companys Registration
Statement on Form S-4/A (Registration No. 333-50253) filed with the Securities and
Exchange Commission on June 8, 1998).*10.5
    
    
    Master Preferred License Agreement dated April 10, 1997 between the Company and
Atlantic Richfield Company (incorporated by reference to Exhibit 10.24 to the Companys
Registration Statement on Form S-4/A (Registration No. 333-50253) filed with the
Securities and Exchange Commission on June 8, 1998).*10.6
    
    
    Volume License Agreement dated August 1, 1997 between the Company and YPF
International, Ltd. (incorporated by reference to Exhibit 10.25 to the Companys
Registration Statement on Form S-4/A (Registration No. 333-50253) filed with the
Securities and Exchange Commission on June 8, 1998).*10.7
    
    
    Volume License Agreement dated February 4, 1998 between the Company and Kerr-McGee
Corporation (incorporated by reference to Exhibit 10.26 to the Companys Registration
Statement on Form S-4/A (Registration No. 333-50253) filed with the Securities and
Exchange Commission on June 8, 1998).*10.8
    
    
    Consolidation and License Agreement dated as of January 16, 2007 between the Company
and Marathon Oil Company (incorporated by reference to Exhibit 10.8 to the Companys
Annual Report on Form 10-K for the year ended December 31, 2006 filed with the
Securities and Exchange Commission on March 16, 2007 (File No. 0-21911)).+ *10.9.1
    
    
    SLH Corporation 1997 Stock Incentive Plan (incorporated by reference to Exhibit 10(c)
to Amendment No. 1 to the Companys Annual Report on Form 10-K/A for the year ended
December 31, 1997 filed with the Securities and Exchange Commission on April 13, 1998
(File No. 0-21911)).+ *10.9.2
    
    
    Form of Option Agreement with certain executive officers under the SLH Corporation 1997
Stock Incentive Plan (incorporated by reference to Exhibit 10(e) to Amendment No. 1 to
the Companys Annual Report on Form 10-K/A for the year ended December 31, 1997 filed
with the Securities and Exchange Commission on April 13, 1998 (File No. 0-21911)).+ *10.9.3
    
    
    Form of Option Agreement with directors under the SLH Corporation 1997 Stock Incentive
Plan (incorporated by reference to Exhibit 10(f) to Amendment No. 1 to the Companys
Annual Report on Form 10-K/A for the year ended December 31, 1997 filed with the
Securities and Exchange Commission on April 13, 1998 (File No. 0-21911)).+ *10.10
    
    
    Form of Consent to Adjustment to Option Agreements called for by Section 2.1(c) of the
Agreement and Plan of Merger dated as of March 30, 1998 by and between SLH and the
Company (incorporated by reference to Exhibit 10.8 to the Companys Registration
Statement on Form S-4 (Registration No. 333-50253) filed with the Securities and
Exchange Commission on April 16, 1998).*10.11
    
    
    License Agreement dated April 26, 2000 between the Company and Ivanhoe Energy Inc.
(incorporated by reference to Exhibit 10.1 of the Companys Quarterly Report on Form
10-Q for the quarter ended March 31, 2000 filed with the Securities and Exchange
Commission on May 12, 2000 (File No. 0-21911)).*10.12
    
    
    License Agreement dated August 2, 2000 between the Company and Syntroleum Australia
Licensing Corporation (incorporated by reference to Exhibit 10.1 of the Companys
Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 filed with the
Securities and Exchange Commission on August 14, 2000 (File No. 0-21911)).
  43




---



##### Table of Contents



ExhibitNo.
    
    
    Description of Exhibit*10.13
    
    
    License Agreement dated August 3, 2000 between Syntroleum Australia Licensing
Corporation and the Commonwealth of Australia (incorporated by reference to Exhibit
10.2 of the Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2000
filed with the Securities and Exchange Commission on August 14, 2000 (File No.
0-21911)).*10.14.1
    
    
    Amendment No. 1 to Volume License Agreement dated October 11, 2000 between the Company
and Ivanhoe Energy Inc. (incorporated by reference to Exhibit 10.1 of the Companys
Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 filed with the
Securities and Exchange Commission on November 14, 2000 (File No. 0-21911)).*10.14.2
    
    
    Amendment No 3 to Volume License Agreement dated July 1, 2003 between the Company and
Ivanhoe Energy, Inc. (incorporated by reference to Exhibit 10.8 to the Companys
Annual Report on Form 10-K for the year ended December 31, 2006 filed with the
Securities and Exchange Commission on March 16, 2007 (File No. 0-21911)).*10.15
    
    
    Transfer of Participating Interest in Oil Mining Lease 113 from Syntroleum Nigeria
Limited to Energy Equity Resources Oil and Gas Limited, a subsidiary of Energy Equity
Resources Limited. (incorporated by reference to Exhibit 10.8 to the Companys Annual
Report on Form 10-K for the year ended December 31, 2006 filed with the Securities and
Exchange Commission on March 16, 2008 (File No. 0-21911)).+*10.23
    
    
    Employment Agreement dated September 17, 2002 between the Company and Jeffrey M. Bigger
(incorporated by reference to Exhibit 10.7 to the Companys Quarterly Report on Form
10-Q for the period ended September 30, 2002 filed with the Securities and Exchange
Commission on November 14, 2002 (File No. 0-21911)).+*10.24
    
    
    Indemnification Agreement dated September 16, 2002 between the Company and Jeffrey M.
Bigger (incorporated by reference to Exhibit 10.8 to the Companys Quarterly Report on
Form 10-Q for the period ended September 30, 2002 filed with the Securities and
Exchange Commission on November 14, 2002 (File No., 0-21911)).+*10.25
    
    
    Indemnification Agreement dated as of March 13, 2003 between the Company and Ronald E.
Stinebaugh (incorporated by reference to Exhibit 10.42 to the Companys Annual Report
of Form 10-K for the year ended December 31, 2002 filed with the Securities and
Exchange Commission on March 31, 2003 (File No. 0-21911)).+*10.16
    
    
    Employment Agreement dated February 17, 2003 between the Company and Ronald E.
Stinebaugh (incorporated by reference to Exhibit 10.43 to the Companys Annual Report
of Form 10-K for the year ended December 31, 2002 filed with the Securities and
Exchange Commission on March 31, 2003 (File No. 0-21911)).+*10.27
    
    
    Stock Option Agreement dated October 1, 2002 between the Company and John B. Holmes,
Jr. (incorporated by reference to Exhibit 10.44 to the Companys Annual Report on Form
10-K for the year ended December 31, 2002 filed with the Securities and Exchange
Commission on March 31, 2003 (File No. 0-21911)).*10.33
    
    
    Warrant Agreement dated as of November 28, 2005 between the Company and Sovereign Oil
and Gas Company II, LLC (incorporated by reference to Exhibit 10.3 to the Companys
Registration Statement on Form S-3 (Registration No. 333-138487) filed with the
Securities and Exchange Commission on November 7, 2006).*10.34
    
    
    Warrant Agreement dated as of July 26, 2006 between the Company and Sovereign Oil and
Gas Company II. LLC (incorporated by reference to Exhibit 10.4 to the Companys
Registration Statement on Form S-3 (Registration No. 333-138487) filed with the
Securities and Exchange Commission on November 7, 2006).+*10.35
    
    
    Director Stock Option Agreement dated December 20, 2002 between the Company and James
R. Seward (incorporated by reference to Annex D to the Companys proxy statement filed
with the Securities and Exchange Commission on March 29, 2004 (File No. 0-21911)).*10.39
    
    
    Amendment to Option Deed dated July 26, 2006, entered into August 10, 2006, between
Syntroleum Nigeria Limited and Energy Equity Resources Oil and Gas Limited
(incorporated by reference to Exhibit 10.8 to the Companys Annual Report on Form 10-K
for the year ended December 31, 2006 filed with the Securities and Exchange Commission
on March 16, 2007 (File No. 0-21911)).+*10.40
    
    
    Employment Agreement dated as of July 6, 2004 between the Company and Edward G. Roth
(incorporated by reference to Exhibit 10.4 to the Companys Quarterly Report on Form
10-Q for the period ended June 30, 2004 filed with the Securities and Exchange
Commission on August 13, 2004 (File No. 0-21911)).
  44




---



##### Table of Contents



ExhibitNo.
    
    
    Description of Exhibit+*10.41
    
    
    Indemnification Agreement dated as of July 6, 2004 between the Company and Edward G.
Roth (incorporated by reference to Exhibit 10.5 to the Companys Quarterly Report on
Form 10-Q for the period ended June 30, 2004 filed with the Securities and Exchange
Commission on August 13, 2004 (File No. 0-21911)).*10.48
    
    
    Common Stock Purchase Agreement dated November 20, 2006 by and between Syntroleum
Corporation and Azimuth Opportunity Ltd. (incorporated by reference to Exhibit 10.1 to
the Companys Current Report on Form 8-K filed with the Securities and Exchange
Commission on November 21, 2006 (File No. 0-21911)).*10.49
    
    
    Share Sale and Purchase Agreement dated January 19, 2007 between Syntroleum
International Corporation, Syntroleum Corporation, African Energy Equity Resources
Limited and Energy Equity Resources (Norway) Limited ((incorporated by reference to
Exhibit 10.1 to the Companys Current Report on Form 8-K filed with the Securities and
Exchange Commission on January 23, 2007 (File No. 0-21911)).+*10.50
    
    
    Syntroleum Corporation 2005 Stock Incentive Plan, effective as of April 25, 2005
(incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form
8-K filed with the Securities and Exchange Commission on April 28, 2005 (File No. 0-
21911)).+*10.51
    
    
    Summary of Performance Objectives and Target Payouts under the Syntroleum
Corporation Annual Incentive Plan (incorporated by reference to Exhibit 10.12 to the
Companys Quarterly Report on Form 10-Q for the period ended March 31, 2005 filed
with the Securities and Exchange Commission on May 10, 2005 (File No. 0-21911)).+*10.52
    
    
    Form of Performance Vested Non-Qualified Option Award Agreement (incorporated
by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed with
the Securities and Exchange Commission on July 5, 2005 (File No. 0-21911)).+*10.53
    
    
    Form of Stock Option Agreement (incorporated by reference to Exhibit 10.3 to the
Companys Registration Statement on Form S-8 filed with the Securities and Exchange
Commission on July 8, 2005 (Registration No. 333-126427)).+*10.54
    
    
    Form of Employee Restricted Stock Award Agreement (incorporated by reference to
Exhibit 10.4 to the Companys Registration Statement on Form S-8 filed with the
Securities and Exchange Commission on July 6, 2005 (Registration No. 333-126427)).+*10.58
    
    
    Form of Service Vested Incentive Stock Option Award Agreement (incorporated by
reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed with the
Securities and Exchange Commission on January 27, 2006 (File No. 0-21911).*10.59
    
    
    Syntroleum Corporation Retention Incentive Agreement dated December 8, 2006
(incorporated by reference to Exhibit 10.8 to the Companys Annual Report on Form 10-K
for the year ended December 31, 2006 filed with the Securities and Exchange Commission
on March 16, 2007 (File No. 0-21911)).*10.60
    
    
    Dynamic Fuels Limited Liability Company Agreement dated June 22, 2007 (incorporated by
reference to Exhibit 10.60 to the Companys Quarterly Report on Form 10-Q for the
period ended June 30, 2007 filed with the Securities and Exchange Commission on August
9, 2007 (File No. 0-21911).*10.61
    
    
    Syntroleum Corporation Bio-Synfining Master License Agreement with Dynamic Fuels dated
June 22, 2007. (incorporated by reference to Exhibit 10.61 to the Companys Quarterly
Report on Form 10-Q for the period ended June 30, 2007 filed with the Securities and
Exchange Commission on August 9, 2007 (File No. 0-21911).*10.62
    
    
    Syntroleum Corporation Participation Agreement with Tyson Foods, Inc. dated June 22,
2007 (incorporated by reference to Exhibit 10.62 to the Companys Quarterly Report on
Form 10-Q for the period ended June 30, 2007 filed with the Securities and Exchange
Commission on August 9, 2007 (File No. 0-21911).*10.63
    
    
    Resignation and Compromise Agreement dated as of August 6, 2007 between the Company and
Mr. Ziad Ghandour and TI Capital Management (incorporated by reference to Exhibit 10.63
to the Companys Quarterly Report on Form 10-Q for the period ended September 30, 2007
filed with the Securities and Exchange Commission on November 8, 2007 (File No.
0-21911).
  45




---



##### Table of Contents



ExhibitNo.
    
    
    Description of Exhibit*10.64
    
    
    Restricted Stock Agreement dated April 24, 2007 between the Company and Mr. Edward G.
Roth (incorporated by reference to Exhibit 10.64 to the Companys Quarterly Report on
Form 10-Q for the period ended September 30, 2007 filed with the Securities and
Exchange Commission on November 8, 2007 (File No. 0-21911).*10.65
    
    
    Restricted Stock Agreement dated March 19, 2007 between the Company and Mr. John B.
Holmes, Jr. (incorporated by reference to Exhibit 10.65 to the Companys Quarterly
Report on Form 10-Q for the period ended September 30, 2007 filed with the Securities
and Exchange Commission on November 8, 2007 (File No. 0-21911).*10.66
    
    
    Employment Agreement dated June 13, 2007 between the Company and Ms. Karen L. Gallagher
(incorporated by reference to Exhibit 10.66 to the Companys Quarterly Report on Form
10-Q for the period ended September 30, 2007 filed with the Securities and Exchange
Commission on November 8, 2007 (File No. 0-21911).*10.67
    
    
    Restricted Stock Agreement dated July 12, 2007 between the Company and Ms. Karen L.
Gallagher (incorporated by reference to Exhibit 10.67 to the Companys Quarterly Report
on Form 10-Q for the period ended September 30, 2007 filed with the Securities and
Exchange Commission on November 8, 2007 (File No. 0-21911).*10.68
    
    
    Amendment to Option Deed dated August 13, 2007, between Syntroleum Corporation,
Syntroleum International Corporation, African Energy Equity Resources Limited and
Energy Equity Resources Limited (incorporated by reference to Exhibit 10.67 to the
Companys Quarterly Report on Form 10-Q for the period ended September 30, 2007 filed
with the Securities and Exchange Commission on November 8, 2007 (File No. 0-21911).*10.69
    
    
    Syntroleum Corporation Stock Purchase and Sale of Common Stock with Fletcher
International Ltd. Dated November 18, 2007 (incorporated by reference to Exhibit 10.68
to the Companys Form 8-K filed with the Securities and Exchange Commission on November
21, 2007 (File No. 0-21911)).*10.70
    
    
    Syntroleum Corporation and Marathon Oil Corporation Settlement of Consolidation and
License Agreement dated December 20, 2007 (incorporated by reference to Exhibit 10.70
to the Companys Form 8-K filed with the Securities and Exchange Commission on December
27, 2007 (File No. 0-21911)).*10.71
    
    
    Separation Agreement dated December 20, 2007 between the Company and Richard L.
Edmonson (incorporated by reference to Exhibit 10.71 to the Companys Form 8-K filed
with the Securities and Exchange Commission on December 27, 2007 (File No. 0-21911)).*10.72
    
    
    Restricted Stock Agreement dated December 20, 2007 between the Company and Mr. Richard
L. Edmonson (incorporated by reference to Exhibit 10.72 to the Companys Form 8-K filed
with the Securities and Exchange Commission on December 27, 2007 (File No. 0-21911)).*10.73
    
    
    Syntroleum Corporation Asset Lease and Purchase Agreement with Emerging Fuels
Technology, LLC dated January 10, 2008 (incorporated by reference to Exhibit 10.73 to
the Companys Form 8-K filed with the Securities and Exchange Commission on January 16,
2007 (File No. 0-21911)).*10.74
    
    
    Amendment Deed between Syntroleum Corporation, Syntroleum International, African Energy
Equity Resources, Ltd, and Energy Equity Resources (Norway) Ltd dated March 30, 2007
(incorporated by reference to Exhibit 10.2 to the Companys Quarterly Report on Form
10-Q for the period ended March 31, 2007 filed with the Securities and Exchange
Commission on May 10, 2007 (File No. 0-21911).*10.75
    
    
    Termination Agreement between Syntroleum International Corporation and Sovereign Oil
and Gas Company II, LLC dated March 29, 2007 (incorporated by reference to Exhibit 10.3
to the Companys Quarterly Report on Form 10-Q for the period ended March 31, 2007
filed with the Securities and Exchange Commission on May 10, 2007 (File No. 0-21911).*10.76
    
    
    Employment Agreement dated April 24, 2007 between the Company and Mr. Edward G. Roth
(incorporated by reference to Exhibit 10.4 to the Companys Quarterly Report on Form
10-Q for the period ended March 31, 2007 filed with the Securities and Exchange
Commission on May 10, 2007 (File No. 0-21911).*10.77
    
    
    Retirement Agreement dated April 30, 2007 between the Company and Mr. Greg Jenkins
(incorporated by reference to Exhibit 10.5 to the Companys Quarterly Report on Form
10-Q for the period ended March 31, 2007 filed with the Securities and Exchange
Commission on May 10, 2007 (File No. 0-21911).**10.78
    
    
    Retirement Agreement dated November 15, 2007 between the Company and Jack B. Holmes, Jr.
  46




---



##### Table of Contents



ExhibitNo.
    
    
    Description of Exhibit**10.79
    
    
    Retirement Agreement dated November 16, 2007 between the Company and Ken Agee.**10.80
    
    
    Restricted Stock Agreement dated November 16, 2007 between the Company and Ken Agee.**14
    
    
    Code of Ethics (incorporated by reference to Exhibit 14 to the Companys Annual Report
on Form 10-K for the year ended December 31, 2003 filed with the Securities and
Exchange Commission on March 23, 2004 (File No. 0-21911)).**21
    
    
    Subsidiaries of Syntroleum**23
    
    
    Consent of Grant Thornton LLP**31.1
    
    
    Section 302 Certification of Chief Executive Officer**31.2
    
    
    Section 302 Certification of Chief Financial Officer**32.1
    
    
    Section 906 Certification of Chief Executive Officer**32.2
    
    
    Section 906 Certification of Chief Financial Officer
 
 *
    
    Incorporated by reference as indicated.**
    
    Filed herewith+
    
    Compensatory plan or arrangement.  47




---



##### Table of Contents



SIGNATURES
  SYNTROLEUM CORPORATIONDated:  March 17, 2008
    By:
    /s/ Edward G. RothEdward G. RothChief Executive Officer  Name
    
    Capacity
    
    Date/s/Edward G. Roth
Edward G. Roth
    
    Chief Executive Officer and
Director(Principal Executive Officer)
    
    March 17, 2008/s/Karen L. Gallagher
Karen L. Gallagher
    
    Senior Vice President of Finance and Principal Financial Officer(Principal Financial Officer)
    
    March 17, 2008/s/Robert B. Rosene, Jr.
    
    Chairman of the Board
    
    March 17, 2008Robert B. Rosene, Jr./s/Alvin R. Albe, Jr.
    
    Director
    
    March 17, 2008Alvin R. Albe, Jr./s/Frank M. Bumstead
    
    Director
    
    March 17, 2008Frank M. Bumstead/s/P. Anthony Jacobs
    
    Director
    
    March 17, 2008P. Anthony Jacobs/s/James R. Seward
    
    Director
    
    March 17, 2008James R. Seward
  48




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     Internal ControlIntegrated Framework
  
  F-1




---



##### Table of Contents



SYNTROLEUM CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
  December 31,
    
    
    December 31,2007
    
    
    2006ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    18,405
    
    
    $
    33,469Restricted cash
    
    
    
    
    
    
    166Accounts receivable
    
    
    420
    
    
    
    500Other current assets
    
    
    441
    
    
    
    1,674Current assets of discontinued operations
    
    
    5,766
    
    
    
    1,663Total current assets
    
    
    25,032
    
    
    
    37,472OIL AND GAS PROPERTIES, USING FULL COST METHOD AND PROPERTY AND EQUIPMENT
HELD FOR SALE
    
    
    1,162
    
    
    
    4,024PROPERTY AND EQUIPMENT  at cost, net
    
    
    508
    
    
    
    932INVESTMENT IN DYNAMIC FUELS, LLC
    
    
    3,910
    
    
    
    OTHER ASSETS, net
    
    
    1,679
    
    
    
    1,509$
    32,291
    
    
    $
    43,937LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)CURRENT LIABILITIES:Accounts payable
    
    $
    625
    
    
    $
    2,096Accrued employee costs
    
    
    1,275
    
    
    
    1,191Accrued corporate insurance
    
    
    
    
    
    
    1,161Other accrued liabilities
    
    
    35
    
    
    
    82Current liabilities of discontinued operations
    
    
    696
    
    
    
    3,743Total current liabilities
    
    
    2,631
    
    
    
    8,273NONCURRENT LIABILITIES OF DISCONTINUED OPERATIONS
    
    
    958
    
    
    
    NONCURRENT CONVERTIBLE DEBT
    
    
    
    
    
    
    27,641OTHER NONCURRENT LIABILITIES
    
    
    
    
    
    
    35DEFERRED REVENUE
    
    
    22,578
    
    
    
    21,840COMMITMENTS AND CONTINGENCIES
MINORITY INTERESTS
    
    
    
    
    
    
    706STOCKHOLDERS EQUITY (DEFICIT):Preferred stock, $0.01 par value, 5,000 shares authorized, no shares issued
    
    
    
    
    
    
    Common stock, $0.01 par value, 150,000 shares authorized, 62,523 and
56,020 shares issued and outstanding at December 31, 2007 and 2006,
respectively
    
    
    625
    
    
    
    560Additional paid-in capital
    
    
    339,277
    
    
    
    322,411Accumulated deficit
    
    
    (333,778
    )
    
    
    (337,529
    )Total stockholders equity (deficit)
    
    
    6,124
    
    
    
    (14,558
    )$
    32,291
    
    
    $
    43,937
   F-2




---



##### Table of Contents



SYNTROLEUM CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
  For the Year Ended December 31,2007
    
    
    2006
    
    
    2005REVENUES:Licensing revenue from Marathon
    
    $
    13,665
    
    
    $
    
    
    
    $
    Technical services revenue
    
    
    1,948
    
    
    
    
    
    
    
    Other revenues
    
    
    859
    
    
    
    2,700
    
    
    
    464Total revenues
    
    
    16,472
    
    
    
    2,700
    
    
    
    464COSTS AND EXPENSES:Engineering
    
    
    5,753
    
    
    
    3,381
    
    
    
    2,665Depreciation, depletion and amortization
    
    
    745
    
    
    
    816
    
    
    
    686General, administrative and other (including
non-cash
equity compensation of $4,980, $7,859 and
$4,686
for the years ended December 31, 2007, 2006 and
2005, respectively.)
    
    
    20,336
    
    
    
    27,009
    
    
    
    22,423OPERATING INCOME (LOSS)
    
    
    (10,362
    )
    
    
    (28,506
    )
    
    
    (25,310
    )INTEREST INCOME
    
    
    1,454
    
    
    
    2,528
    
    
    
    2,554OTHER INCOME (EXPENSE)
    
    
    (327
    )
    
    
    (1,200
    )
    
    
    174FOREIGN CURRENCY EXCHANGE
    
    
    (1,315
    )
    
    
    (892
    )
    
    
    745INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES
    
    
    (10,550
    )
    
    
    (28,070
    )
    
    
    (21,837
    )MINORITY INTEREST
    
    
    706
    
    
    
    
    
    
    
    INCOME TAXES
    
    
    
    
    
    
    
    
    
    
    INCOME (LOSS) FROM CONTINUING OPERATIONS
    
    
    (9,844
    )
    
    
    (28,070
    )
    
    
    (21,837
    )INCOME (LOSS) FROM DISCONTINUED OPERATIONS
    
    
    13,595
    
    
    
    (26,555
    )
    
    
    (19,557
    )NET INCOME (LOSS)
    
    $
    3,751
    
    
    $
    (54,625
    )
    
    $
    (41,394
    )BASIC AND DILUTED NET INCOME (LOSS) PER SHARE:Income (loss) from continuing operations
    
    $
    (0.17
    )
    
    $
    (0.50
    )
    
    $
    (0.41
    )Income (loss) from discontinued operations
    
    
    0.23
    
    
    
    (0.48
    )
    
    
    (0.36
    )Net income (loss)
    
    $
    0.06
    
    
    $
    (0.98
    )
    
    $
    (0.77
    )WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:Basic
    
    
    59,731
    
    
    
    55,850
    
    
    
    53,554Diluted
    
    
    60,383
    
    
    
    55,850
    
    
    
    53,554
   F-3




---



##### Table of Contents



SYNTROLEUM CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
  Common Stock
    
    
    AdditionalNumber
    
    
    
    
    
    
    Paid-in
    
    
    Deferred
    
    
    Accumulated
    
    
    Treasury
    
    
    Stockholdersof Shares
    
    
    Amount
    
    
    Capital
    
    
    Compensation
    
    
    Deficit
    
    
    Stock
    
    
    Equity (Deficit)Balance, January 1, 2005
    
    
    54,482
    
    
    
    545
    
    
    
    228,295
    
    
    
    (577
    )
    
    
    (241,510
    )
    
    
    (77
    )
    
    
    (13,324
    )Stock options exercised
    
    
    256
    
    
    
    3
    
    
    
    794
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    797Stock warrants exercised
    
    
    233
    
    
    
    3
    
    
    
    1,074
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,077Stock-based compensation for consultants
    
    
    
    
    
    
    
    
    
    
    4,150
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,150Issuance of common stock
    
    
    8,000
    
    
    
    80
    
    
    
    79,838
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79,918Stock-based bonuses
    
    
    330
    
    
    
    3
    
    
    
    3,829
    
    
    
    (2,850
    )
    
    
    
    
    
    
    
    
    
    
    982Vesting/cancellation of restricted common stock units
    
    
    
    
    
    
    
    
    
    
    (31
    )
    
    
    838
    
    
    
    
    
    
    
    
    
    
    
    807Purchase and retirement of treasury stock
    
    
    (7,733
    )
    
    
    (78
    )
    
    
    (599
    )
    
    
    
    
    
    
    
    
    
    
    77
    
    
    
    (600
    )Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (41,394
    )
    
    
    
    
    
    
    (41,394
    )Balance, December 31, 2005
    
    
    55,568
    
    
    
    556
    
    
    
    317,350
    
    
    
    (2,589
    )
    
    
    (282,904
    )
    
    
    
    
    
    
    32,413Adoption of SFAS 123 (R)
    
    
    
    
    
    
    
    
    
    
    (2,589
    )
    
    
    2,589
    
    
    
    
    
    
    
    
    
    
    
    Stock options exercised
    
    
    186
    
    
    
    2
    
    
    
    412
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    414Stock warrants exercised
    
    
    2
    
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12Vesting of awards granted
    
    
    146
    
    
    
    1
    
    
    
    6,100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,101Stock-based bonuses and match to 401(k)
    
    
    195
    
    
    
    2
    
    
    
    1,811
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,813Retirement of treasury stock
    
    
    (77
    )
    
    
    (1
    )
    
    
    (685
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (686
    )Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (54,625
    )
    
    
    
    
    
    
    (54,625
    )Balance, December 31, 2006
    
    
    56,020
    
    
    $
    560
    
    
    $
    322,411
    
    
    $
    
    
    
    $
    (337,529
    )
    
    $
    
    
    
    $
    (14,558
    )Stock options exercised
    
    
    22
    
    
    
    
    
    
    
    36
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36Draw-down under common stock purchase agreement
    
    
    4,496
    
    
    
    45
    
    
    
    12,755
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,800Vesting of awards granted
    
    
    646
    
    
    
    6
    
    
    
    4,369
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,375Stock-based bonuses and match to 401(k)
    
    
    1,735
    
    
    
    17
    
    
    
    855
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    872Cancellation of restricted shares
    
    
    (100
    )
    
    
    
    
    
    
    (267
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (267
    )Retirement of treasury stock
    
    
    (296
    )
    
    
    (3
    )
    
    
    (882
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (885
    )Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,751
    
    
    
    
    
    
    
    3,751Balance, December 31, 2007
    
    
    62,523
    
    
    $
    625
    
    
    $
    339,277
    
    
    $
    
    
    
    $
    (333,778
    )
    
    $
    
    
    
    $
    6,124
   F-4




---



##### Table of Contents



SYNTROLEUM CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
  For the Year Ended December 31,2007
    
    
    2006
    
    
    2005CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    3,751
    
    
    $
    (54,625
    )
    
    $
    (41,394
    )Income (loss) from discontinued operations
    
    
    13,595
    
    
    
    (26,555
    )
    
    
    (19,557
    )Loss from continuing operations
    
    
    (9,844
    )
    
    
    (28,070
    )
    
    
    (21,837
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation, depletion and amortization
    
    
    745
    
    
    
    816
    
    
    
    686Foreign currency exchange
    
    
    1,311
    
    
    
    888
    
    
    
    (750
    )Non-cash compensation expense
    
    
    4,980
    
    
    
    7,859
    
    
    
    4,686Loss on sale of assets
    
    
    14
    
    
    
    
    
    
    
    Minority interest release of project equity contribution
    
    
    (706
    )
    
    
    
    
    
    
    Non-cash loss in equity method investee
    
    
    340
    
    
    
    
    
    
    
    Non-cash licensing revenue
    
    
    (13,665
    )
    
    
    
    
    
    
    Changes in assets and liabilities:Accounts receivable
    
    
    80
    
    
    
    521
    
    
    
    (428
    )Other assets
    
    
    928
    
    
    
    1,061
    
    
    
    (234
    )Accounts payable
    
    
    (1,467
    )
    
    
    (535
    )
    
    
    (250
    )Accrued liabilities and other
    
    
    (1,159
    )
    
    
    (500
    )
    
    
    597Deferred revenue
    
    
    372
    
    
    
    
    
    
    
    (75
    )Net cash used in continuing operations
    
    
    (18,071
    )
    
    
    (17,960
    )
    
    
    (17,605
    )Net cash used in discontinued operations
    
    
    (5,007
    )
    
    
    (17,847
    )
    
    
    (20,865
    )Net cash used in operating activities
    
    
    (23,078
    )
    
    
    (35,807
    )
    
    
    (38,470
    )CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property and equipment
    
    
    (162
    )
    
    
    (380
    )
    
    
    (1,116
    )Proceeds from disposal or conveyance of property
    
    
    
    
    
    
    
    
    
    
    169Proceeds from note receivable
    
    
    
    
    
    
    1,802
    
    
    
    7Investment in Dynamic Fuels, LLC
    
    
    (4,250
    )
    
    
    
    
    
    
    (Increase) decrease in restricted cash
    
    
    166
    
    
    
    (166
    )
    
    
    Net cash provided by (used in) continuing operations
    
    
    (4,246
    )
    
    
    1,256
    
    
    
    (940
    )Net cash provided by (used in) discontinued operations
    
    
    5,730
    
    
    
    (1,675
    )
    
    
    (7,002
    )Net cash provided by (used in) provided by investing activities
    
    
    1,484
    
    
    
    (419
    )
    
    
    (7,942
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from sale of common stock, warrants and option exercises
    
    
    36
    
    
    
    426
    
    
    
    81,792Proceeds from common stock purchase agreement
    
    
    12,800
    
    
    
    
    
    
    
    Payment of debt
    
    
    (3,750
    )
    
    
    
    
    
    
    Purchase and retirement of treasury stock
    
    
    (885
    )
    
    
    (686
    )
    
    
    (600
    )Net cash (used in) provided by continuing operations
    
    
    8,201
    
    
    
    (260
    )
    
    
    81,192Net cash (used in) provided by discontinued operations
    
    
    (1,667
    )
    
    
    294
    
    
    
    3,315Net cash provided by financing activities
    
    
    6,534
    
    
    
    34
    
    
    
    84,507FOREIGN EXCHANGE EFFECT ON CASH
    
    
    (4
    )
    
    
    (2
    )
    
    
    (5
    )NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    (15,064
    )
    
    
    (36,194
    )
    
    
    38,090CASH AND CASH EQUIVALENTS, beginning of period
    
    
    33,469
    
    
    
    69,663
    
    
    
    31,573CASH AND CASH EQUIVALENTS, end of period
    
    $
    18,405
    
    
    $
    33,469
    
    
    $
    69,663
   F-5




---



##### Table of Contents



SYNTROLEUM CORPORATION AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 Nature of Operations
  ® ® ® ® ® ® ®
 Consolidation
  Revenue Recognition
   ® Software Revenue Recognition
  F-6




---



##### Table of Contents



Cash and Cash Equivalents and Restricted Cash
   Accounts Receivable
   F-7




---



##### Table of Contents



Research and Development
 Accounting for Research and Development Costs
 Property and Equipment
  December 31,
    
    
    December 31,2007
    
    
    2006Furniture and office equipment
    
    $
    6,094
    
    
    $
    5,958Leasehold improvements
    
    
    405
    
    
    
    4056,499
    
    
    
    6,363Less  accumulated depreciation
    
    
    (5,991
    )
    
    
    (5,431
    )$
    508
    
    
    $
    932
 Oil and Gas Properties
 Interaction of
Statement of SFAS No. 143, Accounting for Asset Retirement Obligations, with the Full Cost
Accounting Rules in Article 4-10 of Regulation S-X
  Asset Retirement Obligations
 Accounting for Asset Retirement Obligations
  F-8




---



##### Table of Contents



Other Assets
  December 31,
    
    
    December 31,2007
    
    
    2006Patents
    
    $
    2,399
    
    
    $
    2,093Less  accumulated amortization
    
    
    (720
    )
    
    
    (584
    )$
    1,679
    
    
    $
    1,509
 Income Taxes
  Impairment of Assets
 Accounting for the Impairment or Disposal
of Long-Lived Assets , .
 Accounting for Guarantees
 , Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others .
 Stock-Based Compensation
 Share-Based
Payment Accounting for Stock Issued to Employees Accounting for Stock-Based Compensation
    F-9




---



##### Table of Contents



December 31,2005Net income (loss), as reported
    
    $
    (41,394
    )Deduct: Total stock-based employee compensation
expense determined under fair value based method
for awards granted, modified, or settled, net of
related tax effects, if any
    
    
    (3,534
    )Pro forma net income (loss)
    
    $
    ( 44,928
    )Earnings (loss) per share:Basic and diluted- as reported
    
    $
    (0.77
    )Basic and diluted- pro forma
    
    $
    (0.84
    )
  Year EndedDecember 31, 2005Expected dividend yield
    
    
    0
    %Expected volatility
    
    
    52
    %Risk-free interest rate
    
    
    3.84
    %Expected life
    
    5 yrs.
 Non-Employee Stock-Based Compensation. Accounting for Equity Instruments That Are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling, Goods or Services
 Earnings Per Share
  Year ended December 31,2007
    
    
    2006
    
    
    2005(in thousands)Basic weighted-average shares
    
    
    59,731
    
    
    
    55,850
    
    
    
    53,554Effect of dilutive securities:Unvested restricted stock units (1)
    
    
    100
    
    
    
    
    
    
    
    Stock options
    
    
    552
    
    
    
    
    
    
    
    Dilutive weighted-average shares
    
    
    60,383
    
    
    
    55,850
    
    
    
    53,554
 (1)
    
    The unvested restricted stock units outstanding at December 31, 2007
are expected to vest over the period from January 2008 to December
2010.   F-10




---



##### Table of Contents



Twelve Months Ended,December 31,
    
    
    30, December
    
    
    30, December2007
    
    
    2006
    
    
    2005Options and warrants (in thousands)
    
    
    10,713
    
    
    
    10,949
    
    
    
    11,277Restricted stock excluded
    
    
    1,082
    
    
    
    426
    
    
    
    410Weighted-average exercise prices of
options and warrants
    
    $
    5.49
    
    
    $
    6.43
    
    
    $
    6.88Period weighted average market price
    
    $
    2.46
    
    
    $
    6.04
    
    
    $
    10.20
  Defined Contribution Plan  401(k)
    Use of Estimates
  Foreign Currency Transactions
  New Accounting Pronouncements
 Accounting for Uncertainty in Income
Taxes  an Interpretation of FASB Statement 109
 Fair Value Measurements
 Debtors Accounting for a Modification (or Exchange) of
Convertible Debt Instruments Accounting for Modifications to
Conversion Options Embedded in Debt Instruments and Related Issues Debtors Accounting for a Modification or Exchange of Debt Instruments
  F-11




---



##### Table of Contents



Accounting for Registration Payment Arrangements Accounting for Contingencies
 The Fair Value Option for Financial Assets and
Financial LiabilitiesIncluding an amendment to FASB Statement No. 115
 Business
Combinations Noncontrolling Interests in Consolidated Financial
Statements, an amendment of Accounting Research Bulleting No. 51
 Reclassifications
  2. OPERATIONS AND LIQUIDITY
     F-12




---



##### Table of Contents



3. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE
 International Oil and Gas
     F-13




---



##### Table of Contents



Domestic Oil and Gas
  Oil and Gas Properties.
  Gas Processing Equipment.
 Research and Development
    December 31,2007
    
    
    2006
    
    
    2005INTERNATIONAL OIL AND GASRevenues
    
    
    
    
    
    
    
    
    
    
    Costs and Expenses:Depreciation, depletion, amortization and impairment
    
    
    
    
    
    
    4,790
    
    
    
    4,378General, administrative and other
    
    
    241
    
    
    
    922
    
    
    
    648Operating Income (Loss)
    
    $
    (241
    )
    
    $
    (5,712
    )
    
    $
    (5,026
    )Interest Expense
    
    
    
    
    
    
    (1,457
    )
    
    
    (165
    )Other Income (Expense)
    
    
    10,078
    
    
    
    (240
    )
    
    
    3,555Income (Loss) before income taxes
    
    
    9,837
    
    
    
    (7,409
    )
    
    
    (1,636
    )Income (Loss) from Discontinued Operations
    
    $
    9,837
    
    
    $
    (7,409
    )
    
    $
    (1,636
    )
  F-14




---



##### Table of Contents



December 31,2007
    
    
    2006
    
    
    2005DOMESTIC OIL AND GASRevenues
    
    
    
    
    
    
    
    
    
    
    70Costs and Expenses:Depreciation, depletion amortization and impairment
    
    
    610
    
    
    
    608
    
    
    
    3,784General, administrative and other
    
    
    
    
    
    
    13
    
    
    
    173Operating Income (Loss)
    
    $
    (610
    )
    
    $
    (621
    )
    
    $
    (3,887
    )Interest Expense
    
    
    
    
    
    
    
    
    
    
    5Other Income (Expense)
    
    
    5
    
    
    
    68
    
    
    
    Income (Loss) before income taxes
    
    
    (605
    )
    
    
    (553
    )
    
    
    (3,882
    )Income (Loss) from Discontinued Operations
    
    $
    (605
    )
    
    $
    (553
    )
    
    $
    (3,882
    )
 December 31,2007
    
    
    2006
    
    
    2005RESEARCH AND DEVELOPMENTRevenues
    
    
    498
    
    
    
    1,089
    
    
    
    7,444Costs and Expenses:Research and Development
    
    
    6,813
    
    
    
    17,748
    
    
    
    19,779Depreciation, depletion amortization and impairment
    
    
    492
    
    
    
    
    
    
    
    General, administrative and other
    
    
    
    
    
    
    217
    
    
    
    Operating Income (Loss)
    
    $
    (6,807
    )
    
    $
    (16,876
    )
    
    $
    (12,335
    )Interest Expense
    
    
    (622
    )
    
    
    (1,717
    )
    
    
    (1,704
    )Gain on Extinguishment of Debt
    
    
    11,792
    
    
    
    
    
    
    
    Income (Loss) before income taxes
    
    
    4,363
    
    
    
    (18,593
    )
    
    
    (14,039
    )Income (Loss) from Discontinued Operations
    
    $
    4,363
    
    
    $
    (18,593
    )
    
    $
    (14,039
    )
 4. NOTE RECEIVABLE
   5. INVESTMENT IN DYNAMIC
   F-15




---



##### Table of Contents



6. MARATHON PARTICIPATION AND LOAN AGREEMENT
  Classification of Short Term
Obligations Expected to be Refinanced
 Accounting for a Modification or Exchange
of Debt Instruments
 7. DEFERRED REVENUE
 ®
  8. COMMON STOCK PURCHASE AGREEMENT
   F-16




---



##### Table of Contents



9. STOCKHOLDERS EQUITY
 Private Placements and Public Offerings
   Retirement of Treasury Stock.
  F-17




---



##### Table of Contents



Tyson. Accounting for Equity Instruments that are Issued to Other than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services
  TI Capital Management.
   Sovereign Oil & Gas Company II, LLC.
   F-18




---



##### Table of Contents



Warrants Granted
    
    
    Warrants ExercisedDate of
    
    Warrants
    
    
    Exercise
    
    
    Valuation at
    
    
    Date
    
    
    WarrantsGrant
    
    Granted
    
    
    Price
    
    
    Grant
    
    
    Exercised
    
    
    Exercised
    
    
    Proceeds7/26/2006
    
    
    25,000
    
    
    $
    7.98
    
    
    $
    79,000
    
    
    
    
    
    
    
    
    
    
    $
    11/28/2005
    
    
    25,000
    
    
    $
    6.94
    
    
    
    75,000
    
    
    
    
    
    
    
    
    
    
    
    4/14/2005
    
    
    25,000
    
    
    $
    6.40
    
    
    
    157,000
    
    
    
    
    
    
    
    
    
    
    
    9/7/2004
    
    
    25,000
    
    
    $
    6.40
    
    
    
    75,000
    
    
    
    
    
    
    
    
    
    
    
    4/26/2004
    
    
    50,000
    
    
    $
    6.40
    
    
    
    165,000
    
    
    
    1/28/2005
    
    
    
    8,750
    
    
    
    56,000Total
    
    
    150,000
    
    
    
    
    
    
    $
    551,000
    
    
    
    
    
    
    
    8,750
    
    
    $
    56,000
 10. STOCK-BASED COMPENSATION
  Stock Options
  Shares
    
    
    WeightedUnder
    
    
    Average PriceStock Options
    
    
    Per ShareOUTSTANDING AT DECEMBER 31, 2006
    
    
    7,423,419
    
    
    $
    6.77Granted at market price
    
    
    33,899
    
    
    $
    3.19Exercised
    
    
    (22,666
    )
    
    $
    1.62Expired or forfeited
    
    
    (1,447,935
    )
    
    $
    7.27OUTSTANDING AT DECEMBER 31, 2007
    
    
    5,986,717
    
    
    $
    6.65
  F-19




---



##### Table of Contents



Options Outstanding
    
    
    Options ExercisableWeightedWeighted
    
    
    Weighted Average
    
    
    
    
    
    
    AverageRange of
    
    Options
    
    
    Average
    
    
    Remaining
    
    
    Options
    
    
    Exercise PriceExercise Price
    
    Outstanding
    
    
    Exercise Price
    
    
    Contractual Life
    
    
    Exercisable
    
    
    Per Share$1.49  -  $1.49
    
    
    10,666
    
    
    $
    1.49
    
    
    
    4.84
    
    
    
    10,666
    
    
    $
    1.49$1.55  -  $1.55
    
    
    1,000,000
    
    
    
    1.55
    
    
    
    4.75
    
    
    
    1,000,000
    
    
    
    1.55$1.62  -  $2.89
    
    
    1,246,028
    
    
    
    2.34
    
    
    
    6.61
    
    
    
    1,033,528
    
    
    
    2.23$3.19  -  $6.88
    
    
    1,237,220
    
    
    
    6.31
    
    
    
    5.73
    
    
    
    1,228,888
    
    
    
    6.32$7.10  -  $10.14
    
    
    1,216,974
    
    
    
    9.27
    
    
    
    7.69
    
    
    
    413,665
    
    
    
    8.58$10.51  -  $19.88
    
    
    1,275,829
    
    
    
    12.73
    
    
    
    5.37
    
    
    
    525,163
    
    
    
    15.895,986,717
    
    
    $
    6.65
    
    
    
    
    
    
    
    4,211,910
    
    
    $
    5.59
    Year Ended
    
    
    Year EndedDecember 31, 2007
    
    
    December 31, 2006Expected dividend yield
    
    
    0
    %
    
    
    0
    %Expected volatility
    
    
    73
    %
    
    
    81
    %Risk-free interest rate
    
    
    4.54
    %
    
    
    4.61
    %Expected life
    
    4.38 yrs.
    
    
    5.83 yrs.
   Restricted Stock
   F-20




---



##### Table of Contents



Weighted-AverageGrant Date FairShares / Units
    
    
    ValueNONVESTED AT DECEMBER, 31, 2006
    
    
    426,000
    
    
    $
    6.53Granted
    
    
    2,123,087
    
    
    $
    2.73Vested or Exercised
    
    
    (1,185,837
    )
    
    $
    3.17Expired or forfeited
    
    
    (181,250
    )
    
    $
    5.70NONVESTED AT DECEMBER 31, 2007
    
    
    1,182,000
    
    
    $
    2.96
 Stock Incentive Plan
   Common Stock Grants for PerformanceSharesCancelled,Shares
    
    
    
    
    
    
    Retired or
    
    
    Net SharesGranted
    
    
    Price ($)
    
    
    Exchanged
    
    
    Issued
    
    
    Valuation2007
    
    
    331,381
    
    
    $
    3.25
    
    
    
    105,288
    
    
    
    226,093
    
    
    $
    1,078,0992006
    
    
    91,707
    
    
    $
    9.67
    
    
    
    29,558
    
    
    
    62,149
    
    
    $
    887,0002005
    
    
    91,925
    
    
    $
    9.27
    
    
    
    18,416
    
    
    
    73,509
    
    
    $
    852,000
 Long-Term Incentive Compensation Awards
   11. INCOME TAXES
  Year
    
    Amount(in thousands)2008
    
    $
    2672009
    
    
    3202010
    
    
    1,0262011
    
    
    1,8652012
    
    
    Thereafter
    
    
    316,687
  F-21




---



##### Table of Contents



December 31,2007
    
    
    2006Deferred tax assets:NOL carry-forwards
    
    $
    121,674
    
    
    $
    120,785Capital loss carry-forwards
    
    
    1,626
    
    
    
    1,626Research and development credit
    
    
    8,226
    
    
    
    8,466Deferred revenue
    
    
    6,968
    
    
    
    6,695Investments
    
    
    410
    
    
    
    326Oil and gas properties
    
    
    
    
    
    
    4,787Stranded gas venture
    
    
    
    
    
    
    112Stock-based compensation
    
    
    4,924
    
    
    
    4,185Other
    
    
    1,983
    
    
    
    962145,811
    
    
    
    147,944Deferred tax liabilities:Oil and gas properties
    
    
    (593
    )
    
    
    Other
    
    
    (617
    )
    
    
    (942
    )Net deferred tax asset before valuation allowance
    
    
    144,601
    
    
    
    147,002Valuation allowance
    
    
    (144,601
    )
    
    
    (147,002
    )Net deferred tax assets
    
    $
    
    
    
    $
    
  12. COMMITMENTS AND CONTINGENCIES
  Year
    
    Amount(in thousands)2008
    
    $
    3292009
    
    
    2752010
    
    
    2692011
    
    
    1302012
    
    
    9Thereafter
    
    
    83$
    1,095
    F-22




---



##### Table of Contents



®
  F-23




---



##### Table of Contents



13. FAIR VALUE OF FINANCIAL INSTRUMENTS
  2007
    
    
    2006Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    EstimatedAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair Value(in thousands)Assets:Cash and cash equivalents
    
    $
    18,405
    
    
    $
    18,405
    
    
    $
    33,469
    
    
    $
    33,469Accounts receivable
    
    
    420
    
    
    
    420
    
    
    
    500
    
    
    
    500Restricted cash  current
    
    
    
    
    
    
    
    
    
    
    166
    
    
    
    166Liabilities:Convertible debt
    
    
    
    
    
    
    
    
    
    
    27,641
    
    
    
    27,641
  14. SIGNIFICANT CUSTOMERS
  ®
 ® ®
  F-24




---



##### Table of Contents



15. STRANDED GAS VENTURE
    16. STOCKHOLDER RIGHTS PLAN
  17. SEGMENT INFORMATION
 Disclosures About Segments of an Enterprise and Related
Information
 18. SUBSEQUENT EVENTS
    F-25




---



##### Table of Contents



19. QUARTERLY DATA (UNAUDITED)
 Quarter EndedMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,2007
    
    (in thousands, except per share data)Revenues
    
    $
    13,705
    
    
    $
    546
    
    
    $
    1,026
    
    
    $
    1,195Operating income (loss)
    
    
    3,872
    
    
    
    (8,470
    )
    
    
    (2,891
    )
    
    
    (2,873
    )Net income (loss) from
continuing operations
    
    
    3,904
    
    
    
    (8,709
    )
    
    
    (2,460
    )
    
    
    (2,579
    )Net income (loss) from
discontinued business
    
    
    10,904
    
    
    
    (932
    )
    
    
    (599
    )
    
    
    4,222Net income (loss)
    
    
    14,808
    
    
    
    (9,641
    )
    
    
    (3,059
    )
    
    
    1,643Basic and diluted EPS:Continuing operations
    
    $
    0.07
    
    
    $
    (0.15
    )
    
    $
    (0.04
    )
    
    $
    (0.04
    )Discontinued operations
    
    $
    0.19
    
    
    $
    (0.02
    )
    
    $
    (0.01
    )
    
    $
    0.07Net income (loss)
    
    $
    0.26
    
    
    $
    (0.17
    )
    
    $
    (0.05
    )
    
    $
    0.03
 Quarter EndedMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,2006
    
    (in thousands, except per share data)Revenues
    
    $
    54
    
    
    $
    56
    
    
    $
    2,470
    
    
    $
    120Operating income (loss)
    
    
    (7,405
    )
    
    
    (7,681
    )
    
    
    (5,530
    )
    
    
    (7,890
    )Net income (loss) from
continuing operations
    
    
    (6,337
    )
    
    
    (8,514
    )
    
    
    (5,183
    )
    
    
    (8,036
    )Net income (loss) from
discontinued operations
    
    
    (6,567
    )
    
    
    (7,188
    )
    
    
    (7,838
    )
    
    
    (4,962
    )Net income (loss)
    
    
    (12,904
    )
    
    
    (15,702
    )
    
    
    (13,021
    )
    
    
    (12,998
    )Basic and diluted EPSContinuing operations
    
    $
    (0.11
    )
    
    $
    (0.15
    )
    
    $
    (0.09
    )
    
    $
    (0.14
    )Discontinued operations
    
    $
    (0.12
    )
    
    $
    (0.13
    )
    
    $
    (0.14
    )
    
    $
    (0.09
    )Net income (loss)
    
    $
    (0.23
    )
    
    $
    (0.28
    )
    
    $
    (0.23
    )
    
    $
    (0.23
    )
   F-26




---



##### Table of Contents



Index to Exhibits
 10.78
    
    Retirement Agreement dated November 15, 2007 between the Company and Jack B. Holmes, Jr.10.79
    
    Retirement Agreement dated November 16, 2007 between the Company and Ken Agee.10.80
    
    Restricted Stock Agreement dated November 16, 2007 between the Company and Ken Agee.21
    
    Subsidiaries of Syntroleum23
    
    Consent of Grant Thornton LLP31.1
    
    Section 302 Certification of Chief Executive Officer31.2
    
    Section 302 Certification of Chief Financial Officer32.1
    
    Section 906 Certification of Chief Executive Officer32.2
    
    Section 906 Certification of Chief Financial Officer