##### 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, 2009.
 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. 001-34490
 SYNTROLEUM CORPORATION
  Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    73-1565725
(I.R.S. Employer
Identification No.)
 5416 S. Yale Suite 400
Tulsa, Oklahoma 74135
 (918) 592-7900
 
 
 Yes o No þ
  o þ
 þ o
 Yes
o No
þ
 o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Smaller reporting company o
    
    Non-accelerated filer o
 o þ




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##### 



TABLE OF CONTENTS
 PagePart IItem 1. Business
    
    
    2Item 1A. Risk Factors
    
    
    8Item 1B. Unresolved Staff Comments
    
    
    13Item 2. Properties
    
    
    13Item 3. Legal Proceedings
    
    
    14Item 4. Submission of Matters to a Vote of Security Holders
    
    
    14Part IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
    
    
    15Item 6. Selected Financial Data
    
    
    18Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    19Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    
    27Item 8. Financial Statements and Supplementary Data
    
    
    27Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    27Item 9A. Controls and Procedures
    
    
    27Item 9B. Other Information
    
    
    28Part IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    29Item 11. Executive Compensation
    
    
    29Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
    
    
    29Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    29Item 14. Principal Accountant Fees and Services
    
    
    29Part IVItem 15. Exhibits and Financial Statement Schedules
    
    
    30Exhibit 3.3.2Exhibit 4.1.1Exhibit 21Exhibit 23Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2Exhibit 99.2
  FORWARD-LOOKING STATEMENTS
 ® ®




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##### Table of Contents



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




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##### Table of Contents



Proceeds  Debt and Equity Contributions (in Millions)
    

Dynamic Fuels
    
    

Synm PortionFunded Proceeds from Debt Issuance*
    
    $
    100.0
    
    
    
    Funded Equity Contributions from Members
    
    $
    40.0
    
    
    $
    20.0Committed Equity Contributions from Members  2010
    
    $
    30.0
    
    
    $
    15.0Total Proceeds  Debt and Equity Contributions
    
    $
    170.0
    
    
    $
    35.0
 *
    
    Interest during construction is calculated based on the daily interest rate stated at closing
of 1.30 percent for 15 months. The interest rate for the bonds is a daily floating interest rate
and may change significantly from this amount. The interest rate as of December 31, 2009 was 0.20%.
Dynamic Fuels entered into an interest rate swap whereby it fixed its interest rate at 2.19% for
a period of 5 years with declining swap coverage in the fourth quarter of 2008. The bond indenture
requires that the bond principal be backed by a stand-by letter of credit. Tyson provided a letter
of credit guaranteeing the full amount of bonds for Dynamic Fuels. We granted Tyson warrants in
lieu of payment for the guarantee for our portion of the letter of credit. Monthly fees for this
letter of credit are paid by Tyson. Dynamic Fuels reimburses Tyson for these monthly fees and are
an additional financing cost to Dynamic.   Business Strategy
 ®
 Focus on commercialization through project development.
 Transfer the Syntroleum® Process. ®
 Provide Support and Process Design Packages through Engineering Services ®
 Cost structure improvement.
  3




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##### Table of Contents



The Syntroleum® Process
 ® ®
 Ultra-clean liquid fuels
 Specialty products
 ®
  ®
 ®
 
   The Synfining® Process
 ®
  4




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##### Table of Contents



The Bio-Synfining® Process
 ®
 Syntroleum Advantage
 ® ®
     Bio-Synfined fuel compared to Biodiesel
  Resource Base
 Bio-Feedstocks
    Market Demand
 ® ®
  5




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##### Table of Contents



Government Legislation.
   Intellectual Property
 ® ®
   Employees
   6




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##### Table of Contents



Government Regulation
     Operating Hazards
  Available Information
  www.syntroleum.com
  7




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##### Table of Contents



Item 1A.
    
    Risk Factors
  Risks Relating to Our Technology
 We might not successfully commercialize our technology, and commercial-scale plants based on
the Syntroleum® Process may never be successfully constructed or operated by ourselves or our
licensees.
 ® ® ® ® ®
 ® ®
 Commercial-scale plants based on the Syntroleum® Technologies 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
plant 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 third-party gasification and synthesis gas clean-up technology
integrated into the Syntroleum® Process to produce on specification synthesis gas
adequate for economic operation of a GTL, CTL or BTL plant; and
    
    higher than anticipated capital and operating costs.
  8




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
    
    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.
 ®
 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 our Syntroleum® Technologies could give rise to claims that
our technology infringes upon the rights of others.
  ® ® ®
 We could have potential indemnification liabilities to licensees relating to the operation of
plants based on our Syntroleum® Technologies or intellectual property disputes.
 ® ®
 
    
    use of patent rights and technical information relating to the Syntroleum®
Technologies;
    
    acts or omissions by us in connection with our preparation of process design
packages (PDP) for plants; and
    
    performance guarantees that we may provide.
  9




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##### Table of Contents



Risks Relating to Products of the Syntroleum® Technologies
 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.
   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 could face de-listing issues that would impair the liquidity of our stock and our
availability to access the capital markets.
  Construction and operations of plants based on the Syntroleum® Technologies will be subject to
risks of delay and cost overruns.
  10




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®
 
    
    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 incurred losses.
 ® ®
  If prices or margins for crude oil, natural gas, coal, vegetable oils and fats and other
commodities are unfavorable, plants based on the Syntroleum® Technologies 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;
    
    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;
  11




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
    
    fluctuations in seasonal demand;
    
    crop yields;
    
    seasonality of prices for feedstocks and refined products;
    
    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® Technologies or refined products.
 ® ®
 Our success depends on the performance of our executive officers and key personnel, the loss
of who would disrupt our business operations.
  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 or other technology transfer agreements of the Syntroleum®
Technologies and receipt and revenue recognition of license fees;
    
    feedstock prices;
    
    prices for refined products;
    
    demand for synthetic fuels and specialty products;
    
    introduction or enhancement of FT and renewable fuels technologies by us and our
competitors;
    
    market acceptance of new technologies; and
    
    general economic conditions.
  12




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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®
Technologies 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.
  
 Item 1B.
    
    Unresolved Staff Comments
  
 Item 2.
    
    Properties
     13




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##### Table of Contents



Item 3.
    
    Legal Proceedings
     
 Item 4.
    
    Submission of Matters to a Vote of Security Holders
   14




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Part II
 
 Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
 Stock Prices
 Sales PriceHigh
    
    
    LowYear Ended December 31, 2009:First Quarter
    
    $
    1.46
    
    
    $
    0.61Second Quarter
    
    $
    2.58
    
    
    $
    1.34Third Quarter
    
    $
    3.13
    
    
    $
    1.97Fourth Quarter
    
    $
    2.76
    
    
    $
    2.02Year Ended December 31, 2008:First Quarter
    
    $
    0.99
    
    
    $
    0.46Second Quarter
    
    $
    2.73
    
    
    $
    0.66Third Quarter
    
    $
    2.24
    
    
    $
    0.97Fourth Quarter
    
    $
    1.09
    
    
    $
    0.54
 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
   15




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Equity Compensation Plans
  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)
    
    
    8,501,811
    
    
    $
    3.12
    
    
    
    4,034,394Equity Compensation
Plans Not Approved 
by Security Holders
(3)(4)(5)
    
    
    5,250,000
    
    
    $
    2.62
    
    
    
    4,307,096Total
    
    
    13,751,811
    
    
    $
    2.93
    
    
    
    8,341,490
 (1)
    
    Includes the 1993 Stock Option and Incentive Plan, the 1997 Stock Incentive Plan,
the 2005 Stock Incentive Plan, as amended, including the Stock Option Plan for Outside
Directors.(2)
    
    Includes up to 75,000 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 October
2004.(3)
    
    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 previous Chief Executive Officer,
John B. Holmes, Jr., as an inducement to his employment with Syntroleum. The ability
to exercise the options will terminate upon the tenth anniversary of the date of the
grant.(4)
    
    Includes up to 4,250,000 shares to be issued upon exercise of warrants issued
to Tyson. The warrants are issuable upon Tyson remaining at least a 10% equity owner
in Dynamic and upon commercial operation of the plant. The warrants have an exercise
price of $2.87 per share. An additional 4,000,000 shares remain available to issue to
Tyson upon Tyson remaining an equity partner and commercial operations of plants in
the future.(5)
    
    We have 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,
2009, we have issued 442,904 shares under this Plan.  16




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##### Table of Contents



Performance Graph
  VALUE OF $100 INVESTMENT
  
  17




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##### Table of Contents



Item 6.
    
    Selected Financial Data
  For the Year Ended December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(in thousands, except per share data)Statement of Operations Data:Total revenues
    
    $
    27,432
    
    
    $
    4,890
    
    
    $
    16,472
    
    
    $
    2,700
    
    
    $
    464Income (loss) from continuing operations
    
    
    12,469
    
    
    
    (8,381
    )
    
    
    (10,362
    )
    
    
    (28,506
    )
    
    
    (25,310
    )Investment, interest, other income (expense),
foreign currency, taxes and minority interest
    
    
    (7,309
    )
    
    
    2,933
    
    
    
    518
    
    
    
    436
    
    
    
    3,473Income (loss) from discontinued operations
    
    
    (122
    )
    
    
    1,310
    
    
    
    13,595
    
    
    
    (26,555
    )
    
    
    (19,557
    )Net income (loss)
    
    $
    5,038
    
    
    $
    (4,138
    )
    
    $
    3,751
    
    
    $
    (54,625
    )
    
    $
    (41,394
    )Basic and diluted per share amounts Income (loss) from continuing operations
    
    $
    0.07
    
    
    $
    (0.09
    )
    
    $
    (0.17
    )
    
    $
    (0.50
    )
    
    $
    (0.41
    )Income (loss) from discontinued operations
    
    $
    0.00
    
    
    $
    0.02
    
    
    $
    0.23
    
    
    $
    (0.48
    )
    
    $
    (0.36
    )Net income (loss)
    
    $
    0.07
    
    
    $
    (0.07
    )
    
    $
    0.06
    
    
    $
    (0.98
    )
    
    $
    (0.77
    )As of December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(in thousands)Balance Sheet Data:Working capital
    
    $
    27,307
    
    
    $
    7,709
    
    
    $
    22,401
    
    
    $
    29,199
    
    
    $
    46,095Total assets
    
    
    58,861
    
    
    
    38,838
    
    
    
    32,291
    
    
    
    43,937
    
    
    
    89,705Convertible debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,641
    
    
    
    25,925Deferred revenue
    
    
    25,668
    
    
    
    22,613
    
    
    
    22,578
    
    
    
    21,840
    
    
    
    20,952
  18




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Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operation
 Overview
  ® ® ® ® ® ® ®
 Operating Revenues
 ®
 ® ®
 ®
 Operating Expenses
    19




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®
  Commercial and Licensee Projects
   Proceeds  Debt and Equity Contributions (in Millions)
    

Dynamic Fuels
    
    

Synm PortionFunded Proceeds from Debt Issuance*
    
    $
    100.0
    
    
    
    Funded Equity Contributions from Members
    
    $
    40.0
    
    
    $
    20.0Committed Equity Contributions from Members  2010
    
    $
    30.0
    
    
    $
    15.0Total Proceeds  Debt and Equity Contributions
    
    $
    170.0
    
    
    $
    35.0
 *
    
    Interest during construction is calculated based on the daily interest rate stated at closing
of 1.30 percent for 15 months. The interest rate for the bonds is a daily floating interest rate
and may change significantly from this amount. The interest rate as of December 31, 2009 was 0.20%.
Dynamic Fuels entered into an interest rate swap whereby it fixed its interest rate at 2.19% for
a period of 5 years with declining swap coverage in the fourth quarter of 2008. The bond indenture
requires that the bond principal be backed by a stand-by letter of credit. Tyson provided a letter
of credit guaranteeing the full amount of bonds for Dynamic Fuels. We granted Tyson warrants in
lieu of payment for the guarantee for our portion of the letter of credit. Monthly fees for this
letter of credit are paid by Tyson. Dynamic Fuels reimburses Tyson for these monthly fees and are
an additional financing cost to Dynamic.    20




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Discontinued Operations
 Research and Development
 ® ®
 International Oil and Gas
  Results of Operations
 Consolidated Results for the Years Ended December 31,
 Revenues
    
    2009
    
    
    2008
    
    
    2007(in thousands)Technology Revenue
    
    $
    22,503
    
    
    $
    
    
    
    $
    Licensing Revenue from Marathon
    
    
    
    
    
    
    
    
    
    
    13,665Technical Services Revenue
    
    
    1,940
    
    
    
    576
    
    
    
    394Technical Services Revenue from Dynamic Fuels
    
    
    2,767
    
    
    
    2,592
    
    
    
    1,554Other Revenue
    
    
    222
    
    
    
    1,722
    
    
    
    859Total Revenues
    
    $
    27,432
    
    
    $
    4,890
    
    
    $
    16,472
 Technology Revenue.
 Licensing Revenue from Marathon.
 Technical Services Revenue
  21




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##### Table of Contents



Other Revenue.
 Operating Costs and Expenses
    
    2009
    
    
    2008
    
    
    2007(in thousands)Engineering
    
    
    3,416
    
    
    
    3,803
    
    
    
    5,753Depreciation, depletion, amortization
    
    
    339
    
    
    
    620
    
    
    
    745Non-cash equity compensation
    
    
    4,180
    
    
    
    2,418
    
    
    
    4,980General and administrative and other
    
    
    7,028
    
    
    
    6,430
    
    
    
    15,356Total Operating Costs and Expenses
    
    $
    14,963
    
    
    $
    13,271
    
    
    $
    26,834
 Engineering Expense.
 Non-Cash Equity Compensation
 General and Administrative and Other.
 Other Income and Expenses
    
    2009
    
    
    2008
    
    
    2007(in thousands)Interest Income
    
    $
    96
    
    
    $
    542
    
    
    $
    1,454Other Income (Expense)
    
    
    70
    
    
    
    25
    
    
    
    1Loss in equity of Dynamic Fuels, LLC
    
    
    (4,158
    )
    
    
    (424
    )
    
    
    (340
    )Foreign Currency Exchange
    
    
    (3,036
    )
    
    
    2,790
    
    
    
    (1,315
    )Minority Interest
    
    
    
    
    
    
    
    
    
    
    706Income taxes
    
    
    (281
    )
    
    
    
    
    
    
    Income (Loss) From Discontinued Operations
    
    
    (122
    )
    
    
    1,310
    
    
    
    13,595
 Interest Income.
 Loss in equity of Dynamic Fuels, LLC.
 Foreign Currency Exchange.
  22




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Income (Loss) from Discontinued Operations.
 Oil and Gas
 
    
    proceeds received in the amount of $1,500,000 from the settlement of future
payments that would have been calculated on first gross revenues from our
international oil and gas assets in 2008; and
    
    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.
 Research and Development
 
    
    decrease in expenditures for research and development activities associated
with the demonstration plants due to mothballing of plants or leasing
agreements in 2009 and 2008. The large increase in 2007 is with laboratory
facilities, personnel and termination expenditures in 2007, as well as
operations of demonstration plants in 2007; and
    
    a onetime 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;
  Liquidity and Capital Resources
 General
    ®
 Cash Flows
 2009 vs. 2008
     23




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2008 vs. 2007
    Contractual Obligations
  Payments Due by Period(In thousands)Less than 1
    
    
    
    
    
    
    
    
    
    
    After 5Contractual Obligations
    
    Total
    
    
    year
    
    
    1-3 years
    
    
    4-5 years
    
    
    yearsOperating Lease Obligations
    
    
    535
    
    
    
    310
    
    
    
    151
    
    
    
    18
    
    
    
    56Capital Investments
    
    
    15,000
    
    
    
    15,000
    
    
    
    
    
    
    
    
    
    
    
    Asset Retirement Obligations
    
    
    1,020
    
    
    
    1,020
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    16,555
    
    
    $
    16,330
    
    
    $
    151
    
    
    $
    18
    
    
    $
    56
    Equity Issuances
   24




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##### Table of Contents



New Accounting Pronouncements
    Critical Accounting Policies and Estimates
  Revenue Recognition .
  25




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##### Table of Contents



Stock-Based Compensation.
 Non-Employee Stock-Based Compensation. .
 Asset Retirement Obligations.
 Critical Estimates.
  26




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##### Table of Contents



Item 7A.
    
    Quantitative and Qualitative Disclosures about Market Risk.
 ® . ®
    
 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.
  27




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal ControlIntegrated
Framework
    Internal
ControlIntegrated Framework
   
 
 Item 9B.
    
    Other Information
   28




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##### Table of Contents



PART III
 
 Item 10.
    
    Directors, Executive Officers and Corporate Governance
  
 Item 11.
    
    Executive Compensation
  
 Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
 Form 10-K.
 
 Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
  
 Item 14.
    
    Principal Accountant Fees and Services
   29




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##### 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, 2009:
 Report of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated Balance Sheets as of December 31, 2009 and 2008
    
    
    F-2Consolidated Statements of Operations for each of the Three Years in the Period Ended December 31, 2009
    
    
    F-3Consolidated Statements of Stockholders Equity (Deficit) for each of the Three Years in the Period
Ended December 31, 2009
    
    
    F-4Consolidated Statements of Cash Flows for each of the Three Years in the Period Ended December 31, 2009
    
    
    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)).**3.3.2
    
    Amendment to the Bylaws of the Company adopted on April 22, 2008.*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)).**4.1.1
    
    Amendment dated as of November 15, 2007, to Second Amended and Restated Rights Agreement*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)).
  30




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##### Table of Contents



ExhibitNo.
    
    Description of Exhibit*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)).*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)).*4.6
    
    Warrant Agreement with Tyson Foods, Inc dated as of June 30, 2008 (incorporated by reference to
Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for the period ended June 30, 2008 filed
with the Securities and Exchange Commission on August 4, 2008 (File No. 0-21911).*4.7
    
    Warrants to Purchase 8,000,000 Shares of Common Stock Dated as of October 21, 2008 (incorporated by
reference to Exhibit 4.1 to the Companys Quarterly Report on Form 10-Q for the period ended September
30, 2008 filed with the Securities and Exchange Commission on October 31, 2008 (File No. 0-21911).*4.8
    
    Common Stock Purchase Warrant Dated October 14, 2009 between the Company and Fletcher International,
Ltd. (incorporated by reference to Exhibit 10.89 to the Companys Current Report on Form 8-K filed
with the Securities and Exchange Commission on October 14, 2009 (File No. 001-34490)).*4.9
    
    Common Stock Purchase Warrant Dated December 30, 2009 between the Company and Fletcher International,
Ltd. (incorporated by reference to Exhibit 10.90 to the Companys Current Report on Form 8-K filed
with the Securities and Exchange Commission on December 30, 2009 (File No. 001-34490)).+*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)).
  31




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##### Table of Contents



ExhibitNo.
    
    Description of Exhibit+ *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)).*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 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)).+*10.16
    
    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 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)).+*10.27
    
    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).
  32




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##### Table of Contents



ExhibitNo.
    
    Description of Exhibit+*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)).+*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).
  33




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##### Table of Contents



ExhibitNo.
    
    Description of Exhibit*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).*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).
  34




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##### Table of Contents



ExhibitNo.
    
    Description of Exhibit*10.78
    
    Retirement Agreement dated November 15, 2007 between the Company and Jack B. Holmes, Jr. (incorporated
by reference to Exhibit 10.79 to the Companys Annual Report on Form 10-K for the year ended December
31, 2008 filed with the Securities and Exchange Commission on March 17, 2008 (File No. 0-21911).*10.79
    
    Retirement Agreement dated November 16, 2007 between the Company and Ken Agee. (incorporated by
reference to Exhibit 10.78 to the Companys Annual Report on Form 10-K for the year ended December 31,
2008 filed with the Securities and Exchange Commission on March 17, 2008 (File No. 0-21911).*10.80
    
    Restricted Stock Agreement dated November 16, 2007 between the Company and Ken Agee. (incorporated by
reference to Exhibit 10.80 to the Companys Annual Report on Form 10-K for the year ended December 31,
2008 filed with the Securities and Exchange Commission on March 17, 2008 (File No. 0-21911).*10.81
    
    Amendment to Syntroleum Corporation 2005 Incentive Plan (incorporated by reference to Exhibit 10.1 to
the Companys 8-K filed with the Securities and Exchange Commission on June 18, 2008 (File No.
0-21911).*10.82
    
    Stock Option Agreement Dated November 21, 2008 between the Company and Karen Gallagher (incorporated
by reference to Exhibit 10.82 to the Companys Annual Report on Form 10-K for the year ended December
31, 2008, filed with the Securities and Exchange Commission on March 2, 2009. (File No. 0-21911).*10.83
    
    Restricted Stock Agreement Dated November 21, 2008 between the Company and Edward G. Roth
(incorporated by reference to Exhibit 10.83 to the Companys Annual Report on Form 10-K for the year
ended December 31, 2008, filed with the Securities and Exchange Commission on March 2, 2009. (File
No. 0-21911).*10.84
    
    Settlement Agreement and Release of Claims Dated October 14, 2009 between the Company and Fletcher
International, Ltd. (incorporated by reference to Exhibit 10.87 to the Companys Current Report on
Form 8-K filed with the Securities and Exchange Commission on October 14, 2009 (File No. 001-34490)).*10.85
    
    Securities Purchase Agreement Dated October 14, 2009 between the Company and Fletcher International,
Ltd. (incorporated by reference to Exhibit 10.88 to the Companys Current Report on Form 8-K filed
with the Securities and Exchange Commission on October 14, 2009 (File No. 001-34490)).*10.86
    
    Technology Transfer Agreement dated December 15, 2008 but effective as of February 20, 2009, between
the Company and Sinopec Corp. (incorporated by reference to Exhibit 10.85 to the Companys Current
Report on Form 8-K filed with the Securities and Exchange Commission on February 25, 2009) (File No.
0-21911)****10.87
    
    CDF Equipment and Material Transfer Agreement dated December 15, 2008 but effective as of February 20,
2009, between the Company and Sinopec Corp. (incorporated by reference to Exhibit 10.86 to the
Companys Current Report on Form 8-K filed with the Securities and Exchange Commission on February 25,
2009.) (File No. 0-21911)****10.88
    
    Amendment to Syntroleum Corporation 2005 Incentive Plan (incorporated by reference to Exhibit B to the
Companys definitive proxy statement filed with the Securities and Exchange Commission on April 13,
2009). (File No. 0-21911).*99.1
    
    Dynamic Fuels, LLC Audited Financial Statements, year ended September 30, 2008.**99.2
    
    Dynamic Fuels, LLC Audited Financial Statements, year ended September 30, 2009.**21
    
    Subsidiaries of Syntroleum**23
    
    Consent of HoganTaylor, 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.***
    
    CERTAIN PORTIONS OF THIS EXHIBIT AND THE ANNEXES THERETO WHICH ARE INDICATED BY XXX HAVE
BEEN OMITTED BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT WHICH HAS BEEN GRANTED BY THE
SECURITIES AND EXCHANGE COMMISSION. SUCH OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES AND EXCHANGE ACT
OF 1934.  35




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##### Table of Contents



SIGNATURES
  SYNTROLEUM CORPORATIONDated:  February 26, 2010
    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)
    
    February 26, 2010/s/Karen L. Gallagher

Karen L. Gallagher
    
    Senior Vice President
of Finance and
Principal Financial
Officer (Principal
Financial Officer)
    
    February 26, 2010/s/Robert B. Rosene, Jr.

Robert B. Rosene, Jr.
    
    Chairman of the Board
    
    February 26, 2010/s/Alvin R. Albe, Jr.

Alvin R. Albe, Jr.
    
    Director
    
    February 26, 2010/s/Frank M. Bumstead

Frank M. Bumstead
    
    Director
    
    February 26, 2010/s/P. Anthony Jacobs

P. Anthony Jacobs
    
    Director
    
    February 26, 2010/s/James R. Seward

James R. Seward
    
    Director
    
    February 26, 2010
  36




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##### Table of Contents



Index to Exhibits
 **3.3.2
    
    Amendment to the Bylaws of the Company adopted on April 22, 2008**4.1.1
    
    Amendment dated as of November 17, 2007, to Second Amended and Restated Rights Agreement**99.2
    
    Dynamic Fuels, LLC Audited Financial Statements, year ended September 30, 2009**21
    
    Subsidiaries of Syntroleum**23
    
    Consent of HoganTaylor 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
  37




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##### Table of Contents



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




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##### Table of Contents



SYNTROLEUM CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
  December 31,
    
    
    December 31,2009
    
    
    2008ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    25,012
    
    
    $
    10,101Restricted cash
    
    
    449
    
    
    
    Accounts receivable
    
    
    3,315
    
    
    
    517Other current assets
    
    
    378
    
    
    
    272Total current assets
    
    
    29,154
    
    
    
    10,890PROPERTY AND EQUIPMENT  at cost, net
    
    
    156
    
    
    
    187INVESTMENT IN DYNAMIC FUELS, LLC
    
    
    27,900
    
    
    
    26,059OTHER ASSETS, net
    
    
    1,651
    
    
    
    1,702$
    58,861
    
    
    $
    38,838LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    $
    361
    
    
    $
    662Accrued employee costs
    
    
    339
    
    
    
    858Deposits
    
    
    449
    
    
    
    Income tax payable
    
    
    281
    
    
    
    Current liabilities of discontinued operations
    
    
    417
    
    
    
    1,661Total current liabilities
    
    
    1,847
    
    
    
    3,181NONCURRENT LIABILITIES OF DISCONTINUED OPERATIONS
    
    
    603
    
    
    
    DEFERRED REVENUE
    
    
    25,668
    
    
    
    22,613COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITY:Preferred stock, $0.01 par value, 5,000 shares authorized, no shares issued
    
    
    
    
    
    
    Common stock, $0.01 par value, 150,000 shares authorized, 76,014 and
63,529 shares issued and outstanding at December 31, 2009 and 2008,
respectively
    
    
    760
    
    
    
    635Additional paid-in capital
    
    
    362,861
    
    
    
    350,325Accumulated deficit
    
    
    (332,878
    )
    
    
    (337,916
    )Total stockholders equity
    
    
    30,743
    
    
    
    13,044$
    58,861
    
    
    $
    38,838
   F-2




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##### Table of Contents



SYNTROLEUM CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
  For the Year Ended December 31,2009
    
    
    2008
    
    
    2007REVENUES:Technology revenue
    
    $
    22,503
    
    
    $
    
    
    
    $
    Licensing revenue from Marathon
    
    
    
    
    
    
    
    
    
    
    13,665Technical services revenue
    
    
    1,940
    
    
    
    576
    
    
    
    394Technical services revenue from Dynamic Fuels, LLC
    
    
    2,767
    
    
    
    2,592
    
    
    
    1,554Other revenues
    
    
    222
    
    
    
    1,722
    
    
    
    859Total revenues
    
    
    27,432
    
    
    
    4,890
    
    
    
    16,472COSTS AND EXPENSES:Engineering
    
    
    3,416
    
    
    
    3,803
    
    
    
    5,753Depreciation and amortization
    
    
    339
    
    
    
    620
    
    
    
    745General, administrative and other (including
non-cash
equity compensation of $4,180, $2,418 and
$4,980
for the years ended December 31, 2009, 2008 and
2007, respectively.)
    
    
    11,208
    
    
    
    8,848
    
    
    
    20,336OPERATING INCOME (LOSS)
    
    
    12,469
    
    
    
    (8,381
    )
    
    
    (10,362
    )INTEREST INCOME
    
    
    96
    
    
    
    542
    
    
    
    1,454OTHER INCOME
    
    
    70
    
    
    
    25
    
    
    
    13LOSS IN EQUITY OF DYNAMIC FUELS, LLC
    
    
    (4,158
    )
    
    
    (424
    )
    
    
    (340
    )FOREIGN CURRENCY EXCHANGE
    
    
    (3,036
    )
    
    
    2,790
    
    
    
    (1,315
    )INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES
    
    
    5,441
    
    
    
    (5,448
    )
    
    
    (10,550
    )INCOME TAXES
    
    
    (281
    )
    
    
    
    
    
    
    INCOME (LOSS) FROM CONTINUING OPERATIONS
    
    
    5,160
    
    
    
    (5,448
    )
    
    
    (10,550
    )INCOME (LOSS) FROM DISCONTINUED OPERATIONS
    
    
    (122
    )
    
    
    1,310
    
    
    
    13,595NET INCOME (LOSS)
    
    $
    5,038
    
    
    $
    (4,138
    )
    
    $
    3,045LESS: NET INCOME ATTRIBUTABLE TO THE
NONCONTROLLING INTEREST
    
    
    
    
    
    
    
    
    
    
    706NET INCOME (LOSS) ATTRIBUTABLE TO
SYNTROLEUM CORPORATION
    
    $
    5,038
    
    
    $
    (4,138
    )
    
    $
    3,751BASIC AND DILUTED NET INCOME (LOSS) PER SHARE:Income (loss) from continuing operations
    
    $
    0.07
    
    
    $
    (0.09
    )
    
    $
    (0.17
    )Income (loss) from discontinued operations
    
    
    0.00
    
    
    
    0.02
    
    
    
    0.23Net income (loss)
    
    $
    0.07
    
    
    $
    (0.07
    )
    
    $
    0.06WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:Basic
    
    
    70,355
    
    
    
    62,725
    
    
    
    59,731Diluted
    
    
    73,018
    
    
    
    62,725
    
    
    
    60,383
   F-3




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##### Table of Contents



SYNTROLEUM CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
  Common Stock
    
    
    AdditionalNumber
    
    
    
    
    
    
    Paid-in
    
    
    Accumulated
    
    
    Stockholdersof Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Equity (Deficit)Balance, January 1, 2007
    
    
    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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,751
    
    
    
    3,751Balance, December 31, 2007
    
    
    62,523
    
    
    $
    625
    
    
    $
    339,277
    
    
    $
    (333,778
    )
    
    $
    6,124Vesting of warrants granted
    
    
    
    
    
    
    
    
    
    
    8,640
    
    
    
    
    
    
    
    8,640Vesting of awards granted
    
    
    
    
    
    
    
    
    
    
    2,275
    
    
    
    
    
    
    
    2,275Stock-based bonuses and match to 401(k)
    
    
    1,316
    
    
    
    13
    
    
    
    130
    
    
    
    
    
    
    
    143Cancellation of restricted shares
    
    
    (310
    )
    
    
    (3
    )
    
    
    3
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,138
    )
    
    
    (4,138
    )Balance, December 31, 2008
    
    
    63,529
    
    
    $
    635
    
    
    $
    350,325
    
    
    $
    (337,916
    )
    
    $
    13,044Stock options exercised
    
    
    526
    
    
    
    6
    
    
    
    342
    
    
    
    
    
    
    
    348Issuance of shares and warrants under common
stock purchase agreement
    
    
    3,406
    
    
    
    34
    
    
    
    8,966
    
    
    
    
    
    
    
    9,000Warrants exercised
    
    
    8,000
    
    
    
    80
    
    
    
    
    
    
    
    
    
    
    
    80Vesting of awards granted
    
    
    128
    
    
    
    1
    
    
    
    3,783
    
    
    
    
    
    
    
    3,784Stock-based bonuses and match to 401(k)
    
    
    425
    
    
    
    4
    
    
    
    390
    
    
    
    
    
    
    
    394Cancellation of option awards
    
    
    
    
    
    
    
    
    
    
    (945
    )
    
    
    
    
    
    
    (945
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,038
    
    
    
    5,038Balance, December 31, 2009
    
    
    76,014
    
    
    $
    760
    
    
    $
    362,861
    
    
    $
    (332,878
    )
    
    $
    30,743
   F-4




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##### Table of Contents



SYNTROLEUM CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
  For the Year Ended December 31,2009
    
    
    2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    5,038
    
    
    $
    (4,138
    )
    
    $
    3,751Income (loss) from discontinued operations
    
    
    (122
    )
    
    
    1,310
    
    
    
    13,595(Loss) income from continuing operations
    
    
    5,160
    
    
    
    (5,448
    )
    
    
    (9,844
    )Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:Depreciation, depletion and amortization
    
    
    339
    
    
    
    620
    
    
    
    745Foreign currency exchange
    
    
    3,036
    
    
    
    (2,790
    )
    
    
    1,311Non-cash compensation expense
    
    
    4,180
    
    
    
    2,418
    
    
    
    4,980Loss on sale of assets
    
    
    84
    
    
    
    
    
    
    
    14Minority interest release of project equity contribution
    
    
    
    
    
    
    
    
    
    
    (706
    )Non-cash loss in equity method investee
    
    
    4,158
    
    
    
    424
    
    
    
    340Non-cash licensing revenue
    
    
    
    
    
    
    
    
    
    
    (13,665
    )Changes in assets and liabilities:Accounts receivable
    
    
    (2,798
    )
    
    
    (97
    )
    
    
    80Other assets
    
    
    (230
    )
    
    
    (14
    )
    
    
    928Accounts payable
    
    
    (301
    )
    
    
    37
    
    
    
    (1,467
    )Accrued liabilities and other
    
    
    (238
    )
    
    
    (296
    )
    
    
    (1,159
    )Deferred revenue
    
    
    (112
    )
    
    
    2,825
    
    
    
    372Net cash provided by (used in) continuing operations
    
    
    13,278
    
    
    
    (2,321
    )
    
    
    (18,071
    )Net cash used in discontinued operations
    
    
    (632
    )
    
    
    (451
    )
    
    
    (5,007
    )Net cash provided by (used in) operating activities
    
    
    12,646
    
    
    
    (2,772
    )
    
    
    (23,078
    )CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property and equipment
    
    
    (723
    )
    
    
    (202
    )
    
    
    (162
    )Proceeds from disposal of property and equipment
    
    
    505
    
    
    
    
    
    
    
    Investment in Dynamic Fuels
    
    
    (6,000
    )
    
    
    (14,000
    )
    
    
    (4,250
    )Decrease in restricted cash
    
    
    
    
    
    
    
    
    
    
    166Net cash (used in) continuing operations
    
    
    (6,218
    )
    
    
    (14,202
    )
    
    
    (4,246
    )Net cash provided by discontinued operations
    
    
    
    
    
    
    8,670
    
    
    
    5,730Net cash (used in) provided by investing activities
    
    
    (6,218
    )
    
    
    (5,532
    )
    
    
    1,484CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from sale of common stock, warrants and option exercises
    
    
    428
    
    
    
    
    
    
    
    36Proceeds from common stock purchase agreement
    
    
    9,000
    
    
    
    
    
    
    
    12,800Payment of debt
    
    
    
    
    
    
    
    
    
    
    (3,750
    )Repurchase of stock option awards
    
    
    (945
    )
    
    
    
    
    
    
    Purchase and retirement of treasury stock
    
    
    
    
    
    
    
    
    
    
    (885
    )Net cash provided by continuing operations
    
    
    8,483
    
    
    
    
    
    
    
    8,201Net cash (used in) discontinued operations
    
    
    
    
    
    
    
    
    
    
    (1,667
    )Net cash provided by financing activities
    
    
    8,483
    
    
    
    
    
    
    
    6,534FOREIGN EXCHANGE EFFECT ON CASH
    
    
    
    
    
    
    
    
    
    
    (4
    )NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    14,911
    
    
    
    (8,304
    )
    
    
    (15,064
    )CASH AND CASH EQUIVALENTS, beginning of year
    
    
    10,101
    
    
    
    18,405
    
    
    
    33,469CASH AND CASH EQUIVALENTS, end of year
    
    $
    25,012
    
    
    $
    10,101
    
    
    $
    18,405NON-CASH INVESTING AND FINANCING ACTIVITIESIssuance of Common stock warrants for Dynamic Fuels Credit Enhancement
    
    $
    
    
    
    $
    8,640
    
    
    $
    
   F-5




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##### Table of Contents



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




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##### Table of Contents



Cash and Cash Equivalents
  Restricted Cash
  Accounts Receivable
  Property and Equipment
  December 31,
    
    
    December 31,2009
    
    
    2008Furniture and office equipment
    
    $
    914
    
    
    $
    1,306Leasehold improvements
    
    
    37
    
    
    
    34951
    
    
    
    1,340Less  accumulated depreciation
    
    
    (795
    )
    
    
    (1,153
    )$
    156
    
    
    $
    187
 Income Taxes
   F-7




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##### Table of Contents



Asset Retirement Obligations
  December 31,
    
    
    December 31,2009
    
    
    2008Beginning Balance
    
    $
    1,661
    
    
    $
    1,504Liabilities Settled
    
    
    (641
    )
    
    
    Accretion Expense
    
    
    
    
    
    
    157Ending Balance
    
    $
    1,020
    
    
    $
    1,661
 Other Assets
  December 31,
    
    
    December 31,2009
    
    
    2008Patents
    
    $
    2,704
    
    
    $
    2,581Less  accumulated amortization
    
    
    (1,053
    )
    
    
    (879
    )$
    1,651
    
    
    $
    1,702
 Impairment of Assets
  Accounting for Guarantees
  Stock-Based Compensation
 Employee Stock-Based Compensation.
 Non-Employee Stock-Based Compensation.
 Earnings Per Share
  Year ended December 31,2009
    
    
    2008
    
    
    2007(in thousands)Basic weighted-average shares
    
    
    70,355
    
    
    
    62,725
    
    
    
    59,731Effect of dilutive securities:Unvested restricted stock units (1)
    
    
    44
    
    
    
    
    
    
    
    100Stock options
    
    
    2,619
    
    
    
    
    
    
    
    552Dilutive weighted-average shares
    
    
    73,018
    
    
    
    62,725
    
    
    
    60,383
 (1)
    
    The unvested restricted stock units outstanding at December 31,
2009 are expected to vest over the twelve months ended December
31, 2010.  F-8




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##### Table of Contents



Year Ended,December 31,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2007Options and warrants (in thousands)
    
    
    12,600
    
    
    
    24,110
    
    
    
    10,713Restricted stock excluded
    
    
    
    
    
    
    80
    
    
    
    1,082Weighted-average exercise prices
of options and warrants
    
    $
    4.11
    
    
    $
    2.22
    
    
    $
    5.49Weighted average market price
    
    $
    1.96
    
    
    $
    1.17
    
    
    $
    2.46
 Defined Contribution Plan  401(k)
   Use of Estimates
  Reclassifications
  Foreign Currency Transactions
  New Accounting Pronouncements
   F-9




---



##### Table of Contents



2. OPERATIONS AND LIQUIDITY
   3. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE
 International Oil and Gas
   Domestic Oil and Gas
  Research and Development
   F-10




---



##### Table of Contents



December 31,INTERNATIONAL OIL AND GAS
    
    2009
    
    
    2008
    
    
    2007Revenues
    
    
    
    
    
    
    
    
    
    
    Costs and Expenses:Depreciation, depletion, amortization and impairment
    
    
    
    
    
    
    
    
    
    
    General, administrative and other
    
    
    
    
    
    
    80
    
    
    
    241Operating Loss
    
    $
    
    
    
    $
    (80
    )
    
    $
    (241
    )Interest Expense
    
    
    
    
    
    
    
    
    
    
    Other Income (Expense)
    
    
    
    
    
    
    1,604
    
    
    
    10,078Income (Loss) before income taxes
    
    
    
    
    
    
    1,524
    
    
    
    9,837Income (Loss) from Discontinued Operations
    
    $
    
    
    
    $
    1,524
    
    
    $
    9,837
 December 31,DOMESTIC OIL AND GAS
    
    2009
    
    
    2008
    
    
    2007Costs and Expenses:Depreciation, depletion, amortization and impairment
    
    
    
    
    
    
    
    
    
    
    610General, administrative and other
    
    
    
    
    
    
    
    
    
    
    Operating Loss
    
    $
    
    
    
    $
    
    
    
    $
    (610
    )Other Income (Expense)
    
    
    
    
    
    
    95
    
    
    
    5Income (Loss) before income taxes
    
    
    
    
    
    
    95
    
    
    
    (605
    )Income (Loss) from Discontinued Operations
    
    $
    
    
    
    $
    95
    
    
    $
    (605
    )
 December 31,RESEARCH AND DEVELOPMENT
    
    2009
    
    
    2008
    
    
    2007Revenues
    
    
    
    
    
    
    
    
    
    
    498Costs and Expenses:Research and Development
    
    
    122
    
    
    
    171
    
    
    
    6,813Depreciation, depletion amortization and impairment
    
    
    
    
    
    
    155
    
    
    
    492General, administrative and other
    
    
    
    
    
    
    
    
    
    
    Operating Loss
    
    $
    (122
    )
    
    $
    (326
    )
    
    $
    (6,807
    )Interest Expense
    
    
    
    
    
    
    
    
    
    
    (622
    )Other Income (Expense)
    
    
    
    
    
    
    17
    
    
    
    Gain on Extinguishment of Debt
    
    
    
    
    
    
    
    
    
    
    11,792Income (Loss) before income taxes
    
    
    (122
    )
    
    
    (309
    )
    
    
    (4,363
    )Income (Loss) from Discontinued Operations
    
    $
    (122
    )
    
    $
    (309
    )
    
    $
    (4,363
    )
 4. INVESTMENT IN DYNAMIC FUELS
    F-11




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##### Table of Contents



September 30,Balance Sheet
    
    2009
    
    
    2008Cash
    
    $
    32,322
    
    
    $
    25,489Restricted Cash
    
    
    42,775
    
    
    
    Other Current Assets
    
    
    1,917
    
    
    
    3,685Total Current Assets
    
    
    77,014
    
    
    
    29,174Property, Plant and Equipment and Other Assets
    
    
    77,624
    
    
    
    7,229Total Assets
    
    $
    154,638
    
    
    $
    36,403Current Liabilities
    
    $
    15,967
    
    
    $
    1,431Long-Term Liabilities
    
    
    100,016
    
    
    
    Total Liabilities
    
    
    115,983
    
    
    
    1,431Members Capital Contributions
    
    
    48,500
    
    
    
    36,500Deficit accumulated during the development stage
    
    
    (9,845
    )
    
    
    (1,528
    )Total Members Equity
    
    
    38,655
    
    
    
    34,972Total Liabilities and Members Equity
    
    $
    154,638
    
    
    $
    36,403
 UnauditedPeriod fromJune 22, 2007,Audited
    
    
    Audited
    
    
    Date ofYear Ended
    
    
    Year Ended
    
    
    Inception, toSeptember 30,
    
    
    September 30,
    
    
    September 30,Statements of Operations
    
    2009
    
    
    2008
    
    
    2009Costs and Expenses:Depreciation, depletion amortization and impairment
    
    $
    57
    
    
    $
    
    
    
    $
    57General, administrative and other
    
    
    5,203
    
    
    
    1,471
    
    
    
    6,986Operating Income (Loss)
    
    $
    (5,260
    )
    
    $
    (1,471
    )
    
    $
    (7,043
    )Interest Rate Swap Valuation Adjustment
    
    
    (3,679
    )
    
    
    
    
    
    
    (3,679
    )Other Income (Expense)
    
    
    622
    
    
    
    177
    
    
    
    877Income (Loss) before income taxes
    
    
    (8,317
    )
    
    
    (1,294
    )
    
    
    (9,845
    )Net Income (Loss)
    
    $
    (8,317
    )
    
    $
    (1,294
    )
    
    $
    (9,845
    )
   F-12




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##### Table of Contents



5. MARATHON PARTICIPATION AND LOAN AGREEMENT
     6. DEFERRED REVENUE
  ®
   F-13




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##### Table of Contents



7. COMMON STOCK PURCHASE AGREEMENTS
 Fletcher International Ltd.
   8. STOCKHOLDERS EQUITY
 Tyson.
   F-14




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##### Table of Contents



Retirement of Treasury Stock.
 9. STOCK-BASED COMPENSATION
   Stock Options
  Shares
    
    
    WeightedUnder
    
    
    Average PriceStock Options
    
    
    Per ShareOUTSTANDING AT DECEMBER 31, 2008
    
    
    11,638,504
    
    
    $
    3.40Granted at market price
    
    
    
    
    
    $
    Exercised
    
    
    (526,069
    )
    
    $
    0.66Expired or forfeited
    
    
    (1,728,124
    )
    
    $
    6.76OUTSTANDING AT DECEMBER 31, 2009
    
    
    9,384,311
    
    
    $
    2.94
  Options Outstanding
    
    
    Options ExercisableWeightedWeighted
    
    
    Weighted Average
    
    
    
    
    
    
    AverageRange of
    
    Options
    
    
    Average
    
    
    Remaining
    
    
    Options
    
    
    Exercise PriceExercise Price
    
    Outstanding
    
    
    Exercise Price
    
    
    Contractual Life
    
    
    Exercisable
    
    
    Per Share$0.66    $0.66
    
    
    5,116,881
    
    
    $
    0.66
    
    
    
    8.89
    
    
    
    964,431
    
    
    $
    0.66$1.49    $1.55
    
    
    1,010,666
    
    
    
    1.55
    
    
    
    2.75
    
    
    
    1,010,666
    
    
    
    1.55$1.62    $2.89
    
    
    1,140,195
    
    
    
    2.33
    
    
    
    4.71
    
    
    
    1,140,195
    
    
    
    2.33$3.19    $6.88
    
    
    769,277
    
    
    
    6.32
    
    
    
    4.50
    
    
    
    769,277
    
    
    
    6.32$7.10    $10.14
    
    
    551,974
    
    
    
    9.73
    
    
    
    5.49
    
    
    
    251,974
    
    
    
    9.23$10.51    $19.88
    
    
    795,318
    
    
    
    12.23
    
    
    
    3.93
    
    
    
    295,318
    
    
    
    15.129,384,311
    
    
    $
    2.94
    
    
    
    
    
    
    
    4,431,861
    
    
    $
    3.73
    F-15




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Year Ended
    
    
    Year EndedDecember 31, 2008
    
    
    December 31, 2007Expected dividend yield
    
    
    0
    %
    
    
    0
    %Expected volatility
    
    
    90
    %
    
    
    73
    %Risk-free interest rate
    
    
    2.02
    %
    
    
    4.54
    %Expected life
    
    5.50 yrs.
    
    
    4.38 yrs.
   Restricted Stock
  Weighted-AverageGrant Date FairShares / Units
    
    
    ValueNONVESTED AT DECEMBER, 31, 2008
    
    
    1,842,000
    
    
    $
    2.96Granted
    
    
    300,000
    
    
    $
    0.84Vested or Exercised
    
    
    (665,500
    )
    
    $
    1.91Expired or forfeited
    
    
    (10,000
    )
    
    $
    10.14NONVESTED AT DECEMBER 31, 2009
    
    
    1,466,500
    
    
    $
    1.12
 10. INCOME TAXES
  Year
    
    Amount(in thousands)2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    Thereafter
    
    
    310,588
  F-16




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##### Table of Contents



December 31,2009
    
    
    2008Deferred tax assets:NOL carry-forwards
    
    $
    117,765
    
    
    $
    124,403Capital loss carry-forwards
    
    
    
    
    
    
    151Research and development credit
    
    
    8,207
    
    
    
    8,164Deferred revenue
    
    
    7,259
    
    
    
    6,968Investments
    
    
    1,951
    
    
    
    326Stock-based compensation
    
    
    3,023
    
    
    
    4,924Other
    
    
    1,705
    
    
    
    1,567139,910
    
    
    
    146,503Deferred tax liabilities:Oil and gas properties
    
    
    
    
    
    
    (1,026
    )Other
    
    
    (627
    )
    
    
    (626
    )Net deferred tax asset before valuation allowance
    
    
    139,283
    
    
    
    144,851Valuation allowance
    
    
    (139,283
    )
    
    
    (144,851
    )Net deferred tax assets
    
    $
    
    
    
    $
    
  11. COMMITMENTS AND CONTINGENCIES
  Year
    
    Amount(in thousands)2010
    
    $
    3102011
    
    
    1332012
    
    
    92013
    
    
    92014
    
    
    9Thereafter
    
    
    65$
    535
  F-17




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##### Table of Contents



Proceeds  Debt and Equity Contributions (in Millions)
    
    Dynamic Fuels
    
    
    Synm PortionFunded Proceeds from Debt Issuance*
    
    $
    100.0
    
    
    
    Funded Equity Contributions from Members  July 2008
    
    $
    40.0
    
    
    $
    20.0Committed Equity Contributions from Members  2009
    
    $
    30.0
    
    
    $
    15.0Total Proceeds  Debt and Equity Contributions
    
    $
    170.0
    
    
    $
    35.0
 *
    
    Interest during construction is calculated based on the daily interest rate stated at closing
of 1.30 percent for 15 months. The interest rate for the bonds is a daily floating interest rate
and may change significantly from this amount. The interest rate as of December 31, 2009 was 0.20%.
Dynamic Fuels entered into an interest rate swap whereby it fixed its interest rate at 2.19% for
a period of 5 years with declining swap coverage in the fourth quarter of 2008. The bond indenture
requires that the bond principal be backed by a stand-by letter of credit. Tyson provided a letter
of credit guaranteeing the full amount of bonds for Dynamic Fuels. We granted Tyson warrants in
lieu of payment for the guarantee for our portion of the letter of credit. Monthly fees for this
letter of credit are paid by Tyson. Dynamic Fuels reimburses Tyson for these monthly fees and are
an additional financing cost to Dynamic.   12. SIGNIFICANT CUSTOMERS
  13. FAIR VALUE DISCLOSURES
  14. SEGMENT INFORMATION
  15. SUBSEQUENT EVENTS
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16. QUARTERLY DATA (UNAUDITED)
 Quarter EndedMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,(in thousands, except per share data)2009Revenues
    
    $
    20,190
    
    
    $
    1,694
    
    
    $
    4,411
    
    
    $
    1,137Operating income (loss)
    
    
    13,346
    
    
    
    (1,093
    )
    
    
    1,553
    
    
    
    (1,337
    )Net income (loss) from
continuing operations
    
    
    11,222
    
    
    
    (3,779
    )
    
    
    (242
    )
    
    
    (2,041
    )Net income (loss) from
discontinued business
    
    
    (39
    )
    
    
    (31
    )
    
    
    (28
    )
    
    
    (24
    )Net income (loss)
    
    
    11,183
    
    
    
    (3,810
    )
    
    
    (270
    )
    
    
    (2,065
    )Basic and diluted EPS:Continuing operations
    
    $
    0.18
    
    
    $
    (0.05
    )
    
    $
    0.00
    
    
    $
    (0.02
    )Discontinued operations
    
    $
    0.00
    
    
    $
    0.00
    
    
    $
    0.00
    
    
    $
    0.00Net income (loss)
    
    $
    0.18
    
    
    $
    (0.05
    )
    
    $
    0.00
    
    
    $
    (0.02
    )
 Quarter EndedMarch 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,(in thousands, except per share data)2008Revenues
    
    $
    1,562
    
    
    $
    887
    
    
    $
    1,447
    
    
    $
    994Operating income (loss)
    
    
    (1,582
    )
    
    
    (2,681
    )
    
    
    (1,316
    )
    
    
    (2,802
    )Net income (loss) from
continuing operations
    
    
    (2,165
    )
    
    
    (3,425
    )
    
    
    918
    
    
    
    (776
    )Net income (loss) from
discontinued operations
    
    
    (66
    )
    
    
    1,533
    
    
    
    (80
    )
    
    
    (77
    )Net income (loss)
    
    
    (2,231
    )
    
    
    (1,892
    )
    
    
    838
    
    
    
    (853
    )Basic and diluted EPSContinuing operations
    
    $
    (0.03
    )
    
    $
    (0.05
    )
    
    $
    0.01
    
    
    $
    (0.01
    )Discontinued operations
    
    $
    0.00
    
    
    $
    0.02
    
    
    $
    0.00
    
    
    $
    0.00Net income (loss)
    
    $
    (0.04
    )
    
    $
    (0.03
    )
    
    $
    0.02
    
    
    $
    0.00
   F-19