##### 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, 2008.
 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 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 5416 S. Yale Suite 400
 Tulsa, Oklahoma 74135
 (918) 592-7900
  
 o þ
 o þ
 þ o
 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
    
    
    14Item 2. Properties
    
    
    14Item 3. Legal Proceedings
    
    
    15Item 4. Submission of Matters to a Vote of Security Holders
    
    
    15Part IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
    
    
    15Item 6. Selected Financial Data
    
    
    19Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    
    29Item 8. Financial Statements and Supplementary Data
    
    
    29Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    29Item 9A. Controls and Procedures
    
    
    29Item 9B. Other Information
    
    
    30Part IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    31Item 11. Executive Compensation
    
    
    31Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
    
    
    31Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    31Item 14. Principal Accountant Fees and Services
    
    
    31Part IVItem 15. Exhibits and Financial Statement Schedules
    
    
    32Exhibit 10.82Exhibit 10.83Exhibit 10.84Exhibit 21Exhibit 23Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
  FORWARD-LOOKING STATEMENTS
 ® ® ® ®




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##### Table of Contents



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




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Business Strategy
  Focus on commercialization through project development.
 Transfer the Syntroleum® Process. ®
 Provide Support and Process Design Packages through Engineering Services
 Cost structure improvement.
 The Syntroleum® Process
 ® ®
 Ultra-clean liquid fuels
 Specialty products
 ®
  ®
 ®
  3




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Step 1
Conversion of Carbon feedstock to Synthesis Gas
 
 Step 2
Fischer  Tropsch Synthesis
 
  ®
 The Synfining® Process
 ®
 The Bio-Synfining® Process
 ®
 Syntroleum Technology Implementation
 ® ® ®
  4




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Syntroleum Advantage
 ® ® ®
 
    
    produced substantially free of undesirable products normally found in fuels;
    
    used as blending stock to upgrade conventional fuels and specialty products made
from crude oil;
    
    used blended or unblended in traditional internal combustion engines to reduce
emissions; and
    
    transported through existing distribution infrastructures for refined products.
 Bio-Synfined fuel compared to Biodiesel
  Resource Base
 Bio-Feedstocks
    Market Demand
 ®
  5




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Government Legislation.
  Research and Development
 ®
 Intellectual Property
 ® ®
   6




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##### Table of Contents



Employees
  Government Regulation
      Operating Hazards
   7




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Available Information
   
 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 or our Technology may never be successfully constructed or operated by
ourselves or our licensees.
 ® ® ® ® ® ®
 ® ® ® ®
 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
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;
  8




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
    
    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.
  
    
    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 the Syntroleum® and Synfining® Processes or our
Bio-Synfining Technology could give rise to claims that our technology infringes upon the rights
of others.
   9




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® ® ® ®
 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.
 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.
    10




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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.
  We are the subject of litigation which if adversely determined could have a material adverse
effect on our financial condition.
  Construction and operations 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.
  11




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We have incurred losses and anticipate continued 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® 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;
 
    
    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;
 
    
    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.
  12




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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.
 ® ®
 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® and
Synfining® Processes or Bio-Synfining Technology and receipt and revenue recognition
of license fees;
 
    
    feedstock prices;
 
    
    prices for refined products
 
    
    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;
 
    
    market acceptance of new technologies; and
 
    
    general economic conditions.
   13




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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®
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.
  
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
      14




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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, 2008:First Quarter
    
    $
    0.99
    
    
    $
    0.46Second Quarter
    
    $
    2.73
    
    
    $
    0.66Third Quarter
    
    $
    2.24
    
    
    $
    0.97Fourth Quarter
    
    $
    1.09
    
    
    $
    0.54Year 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
  15




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##### Table of Contents



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
   16




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Equity Compensation Plans
  Equity Compensation Plan Information
 Number of SecuritiesRemaining Availablefor Future IssuanceNumber of Securities to
    
    
    Weighted-average
    
    
    Under Equitybe Issued Upon Exercise
    
    
    Exercise Price of
    
    
    Compensation Plansof Outstanding Options,
    
    
    Outstanding Options,
    
    
    (excluding securitiesWarrants and Rights
    
    
    Warrants and Rights
    
    
    reflected in column (a))Plan Category
    
    (a)
    
    
    (b)
    
    
    (c)Equity Compensation
Plans Approved by
Security Holders
(1)(2)
    
    
    10,859,754
    
    
    $
    3.59
    
    
    
    2,596,270Equity Compensation
Plans Not Approved
by Security Holders
(3)(4)(5)(6)
    
    
    13,250,000
    
    
    $
    1.04
    
    
    
    4,431,641Total
    
    
    24,109,754
    
    
    $
    2.19
    
    
    
    7,027,911
 (1)
    
    Includes the 1993 Stock Option and Incentive Plan, the 1997 Stock Incentive
Plan, the 2005 Stock Incentive Plan, the amendment to the 2005 Stock Incentive Plan and
the Stock Option Plan for Outside Directors.(2)
    
    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.(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)
    
    Includes 8,000,000 shares to be issued upon exercise of warrants issued to
Tyson. The warrants vested upon Tyson providing a letter of credit to secure the
$100,000,000 in Go Zone Bonds. The warrants have an exercise price of $0.01.(6)
    
    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,
2008, we have issued 318,359 shares under this Plan.  17




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##### Table of Contents



Performance Graph
  VALUE OF $100 INVESTMENT
 
  18




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##### Table of Contents



Item 6. Selected Financial Data
  For the Year Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(in thousands, except per share data)Statement of Operations Data:Total revenues
    
    
    4,890
    
    
    
    16,472
    
    
    
    2,700
    
    
    
    464
    
    
    
    5,682Operating (loss)
    
    
    (8,381
    )
    
    
    (10,362
    )
    
    
    (28,506
    )
    
    
    (25,310
    )
    
    
    (22,256
    )Investment, interest, other income (expense),
foreign currency, taxes and minority interest
    
    
    2,933
    
    
    
    518
    
    
    
    436
    
    
    
    3,473
    
    
    
    94Income (loss) from discontinued operations
    
    
    1,310
    
    
    
    13,595
    
    
    
    (26,555
    )
    
    
    (19,557
    )
    
    
    (20.388
    )Net income (loss)
    
    $
    (4,138
    )
    
    $
    3,751
    
    
    $
    (54,625
    )
    
    $
    (41,394
    )
    
    $
    (42.550
    )Basic and diluted per share amounts -Income (loss) from continuing operations
    
    $
    (0.09
    )
    
    $
    (0.17
    )
    
    $
    (0.50
    )
    
    $
    (0.41
    )
    
    $
    (0.51
    )Income from discontinued operations
    
    $
    0.02
    
    
    $
    0.23
    
    
    $
    (0.48
    )
    
    $
    (0.36
    )
    
    $
    (0.47
    )Net income (loss)
    
    $
    (0.07
    )
    
    $
    0.06
    
    
    $
    (0.98
    )
    
    $
    (0.77
    )
    
    $
    (0.98
    )
 As of December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(in thousands)Balance Sheet Data:Working capital
    
    $
    7,709
    
    
    $
    22,401
    
    
    $
    29,199
    
    
    $
    46,095
    
    
    $
    22,625Total assets
    
    
    38,838
    
    
    
    32,291
    
    
    
    43,937
    
    
    
    89,705
    
    
    
    44,751Convertible debt
    
    
    
    
    
    
    
    
    
    
    27,641
    
    
    
    25,925
    
    
    
    24,221Deferred revenue
    
    
    22,613
    
    
    
    22,578
    
    
    
    21,840
    
    
    
    20,952
    
    
    
    21,702
  19




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operation
 Overview
  ® ® ® ® ® ® ®
 Operating Revenues
 ®
 ® ®
 ® ®
 Operating Expenses
   20




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®
  Discontinued Operations
 Research and Development
 Accounting for Research and Development Costs ® ®
 International Oil and Gas
  Significant Developments During 2008
 Commercial and Licensee Projects
   21




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Proceeds   Debt and Equity Contributions
    
    Dynamic
    
    
    Synm(in Millions)
    
    Fuels
    
    
    PortionFunded Proceeds from Debt Issuance*
    
    $
    100.0
    
    
    
    Funded Equity Contributions from Members  July 2008
    
    $
    28.0
    
    
    $
    14.0Committed Equity Contributions from Members  2009
    
    $
    22.0
    
    
    $
    11.0Total Proceeds  Debt and Equity Contributions
    
    $
    150.0
    
    
    $
    25.0
 *
    
    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. Dynamic Fuels entered into an interest rate swap of
2.19% for a period of 5 years with declining swap coverage in the fourth quarter of 2008.  DOD Projects
 ® ® ® ®
 Results of Operations
 Consolidated Results for the Years Ended December 31,
 Revenues
    
    2008
    
    
    2007
    
    
    2006(in thousands)Licensing Revenue from Marathon
    
    $
    
    
    
    $
    13,665
    
    
    $
    Technical Services Revenue
    
    
    3,168
    
    
    
    1,948
    
    
    
    Other Revenue
    
    
    1,722
    
    
    
    859
    
    
    
    2,700Total Revenues
    
    $
    4,890
    
    
    $
    16,472
    
    
    $
    2,700
  22




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##### Table of Contents



Licensing Revenue from Marathon.
 Technical Services Revenue
 Other Revenue.
 Operating Costs and Expenses
    
    2008
    
    
    2007
    
    
    2006(in thousands)Engineering
    
    
    3,803
    
    
    
    5,753
    
    
    
    3,381Depreciation, depletion, amortization
    
    
    620
    
    
    
    745
    
    
    
    816Non-cash equity compensation
    
    
    2,418
    
    
    
    4,980
    
    
    
    7,859General and administrative and other
    
    
    6,430
    
    
    
    15,356
    
    
    
    19,150Total Operating Costs and Expenses
    
    $
    13,271
    
    
    $
    26,834
    
    
    $
    31,206
 Engineering Expense.
 Non-Cash Equity Compensation
 General and Administrative and Other.
 Other Income and Expenses
    
    2008
    
    
    2007
    
    
    2006(in thousands)Interest Income
    
    $
    542
    
    
    $
    1,454
    
    
    $
    2,528Other Income (Expense)
    
    
    (399
    )
    
    
    (327
    )
    
    
    (1,200
    )Foreign Currency Exchange
    
    
    2,790
    
    
    
    (1,315
    )
    
    
    (892
    )Minority Interest
    
    
    
    
    
    
    706
    
    
    
    Income (Loss) From Discontinued Operations
    
    
    1,310
    
    
    
    13,595
    
    
    
    (26,555
    )
  23




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Interest Income.
 Other Income (Expense) and Foreign Exchange.
 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.
    
    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,
    
    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 in 2008
and 2007offset by increased expenditures associated with laboratory facilities,
personnel and termination expenditures in 2007;
    
    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; and
    
    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.
  Liquidity and Capital Resources
 General
   ®
    24




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##### Table of Contents



®
 Cash Flows
 2008 vs. 2007
    2007 vs. 2006
     25




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##### Table of Contents



Contractual Obligations
  Payments Due by Period(In thousands)Less than
    
    
    
    
    
    
    
    
    
    
    AfterContractual Obligations
    
    Total
    
    
    1 year
    
    
    1-3 years
    
    
    4-5 years
    
    
    5 yearsOperating Lease Obligations
    
    
    657
    
    
    
    226
    
    
    
    347
    
    
    
    18
    
    
    
    66Capital Investments
    
    
    11,000
    
    
    
    11,000
    
    
    
    
    
    
    
    
    
    
    
    Asset Retirement Obligations
    
    
    1,661
    
    
    
    1,661
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    13,318
    
    
    $
    12,887
    
    
    $
    347
    
    
    $
    18
    
    
    $
    66
     Equity Issuances
    26




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##### Table of Contents



New Accounting Pronouncements
  The Fair Value Option for Financial Assets and
Financial LiabilitiesIncluding an amendment to FASB Statement No. 115
 Fair Value Measurements
  Critical Accounting Policies and Estimates
  Revenue Recognition .
   27




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##### Table of Contents



®
 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 Accounting for
Stock-Based Compensation.
 Asset Retirement Obligations. Accounting for Asset Retirement
Obligations
 Critical Estimates.
  28




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Item 7A. Quantitative and Qualitative Disclosures about Market Risk .
 Syntroleum® and Synfining® Processes or
Bio-Synfining Technology. ® ®
    
 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.
  29




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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
   30




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##### 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
   31




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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, 2008:
 Report of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated Balance Sheets as of December 31, 2008 and 2007
    
    
    F-2Consolidated Statements of Operations for each of the Three Years in the Period Ended December 31, 2008
    
    
    F-3Consolidated Statements of Stockholders Equity (Deficit) for each of the Three Years in the Period
Ended December 31, 2008
    
    
    F-4Consolidated Statements of Cash Flows for each of the Three Years in the Period Ended December 31, 2008
    
    
    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)).
  32




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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).+*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)).
  33




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##### Table of Contents



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




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##### Table of Contents



ExhibitNo.
    
    Description of Exhibit+*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).
  35




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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).
  36




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##### Table of Contents



ExhibitNo.
    
    Description of Exhibit*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. (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.**10.83
    
    
    Restricted Stock Agreement Dated November 21, 2008 between the Company and Edward G. Roth.**10.84
    
    
    Dynamic Fuels, LLC Audited Financial Statements, year ended September 30, 2008.*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 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.  37




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##### Table of Contents



SIGNATURES
  SYNTROLEUM CORPORATIONDated:  March 2, 2009
    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 2, 2009/s/ Karen L. Gallagher

Karen L. Gallagher
    
    Senior Vice President of
Finance and Principal
Financial Officer
(Principal Financial
Officer)
    
    March 2, 2009/s/ Robert B. Rosene, Jr.

Robert B. Rosene, Jr.
    
    Chairman of the Board
    
    March 2, 2009/s/ Alvin R. Albe, Jr.

Alvin R. Albe, Jr.
    
    Director
    
    March 2, 2009/s/ Frank M. Bumstead

Frank M. Bumstead
    
    Director
    
    March 2, 2009/s/ P. Anthony Jacobs

P. Anthony Jacobs
    
    Director
    
    March 2, 2009/s/ James R. Seward

James R. Seward
    
    Director
    
    March 2, 2009
  38




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##### Table of Contents



Index to Exhibits
 **10.82
    
    Stock Option Agreement Dated November 21, 2008 between the Company and Karen Gallagher.**10.83
    
    Restricted Stock Agreement Dated November 21, 2008 between the Company and Edward G. Roth.**10.84
    
    Dynamic Fuels, LLC Audited Financial Statements, year ended September 30, 2008.**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
  39




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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 31,2008
    
    
    2007ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    10,101
    
    
    $
    18,405Accounts receivable
    
    
    517
    
    
    
    420Other current assets
    
    
    272
    
    
    
    441Current assets of discontinued operations
    
    
    
    
    
    
    5,766Total current assets
    
    
    10,890
    
    
    
    25,032PROPERTY HELD FOR SALE
    
    
    
    
    
    
    1,162PROPERTY AND EQUIPMENT  at cost, net
    
    
    187
    
    
    
    508INVESTMENT IN DYNAMIC FUELS, LLC
    
    
    17,486
    
    
    
    3,910OTHER ASSETS, net
    
    
    10,275
    
    
    
    1,679$
    38,838
    
    
    $
    32,291LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    $
    662
    
    
    $
    625Accrued employee costs
    
    
    858
    
    
    
    1,275Other accrued liabilities
    
    
    
    
    
    
    35Current liabilities of discontinued operations
    
    
    1,661
    
    
    
    696Total current liabilities
    
    
    3,181
    
    
    
    2,631NONCURRENT LIABILITIES OF DISCONTINUED OPERATIONS
    
    
    
    
    
    
    958DEFERRED REVENUE
    
    
    22,613
    
    
    
    22,578COMMITMENTS 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, 63,529 and
62,523 shares issued and outstanding at December 31, 2008 and 2007,
respectively
    
    
    635
    
    
    
    625Additional paid-in capital
    
    
    350,325
    
    
    
    339,277Accumulated deficit
    
    
    (337,916
    )
    
    
    (333,778
    )Total stockholders equity
    
    
    13,044
    
    
    
    6,124$
    38,838
    
    
    $
    32,291
   F-2




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##### Table of Contents



SYNTROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Year Ended December 31,2008
    
    
    2007
    
    
    2006REVENUES:Licensing revenue from Marathon
    
    $
    
    
    
    $
    13,665
    
    
    $
    Technical services revenue
    
    
    3,168
    
    
    
    1,948
    
    
    
    Other revenues
    
    
    1,722
    
    
    
    859
    
    
    
    2,700Total revenues
    
    
    4,890
    
    
    
    16,472
    
    
    
    2,700COSTS AND EXPENSES:Engineering
    
    
    3,803
    
    
    
    5,753
    
    
    
    3,381Depreciation, depletion and amortization
    
    
    620
    
    
    
    745
    
    
    
    816General, administrative and other (including
non-cash
equity compensation of $2,418, $4,980 and
$7,859 for the years ended
December 31, 2008, 2007 and
2006, respectively.)
    
    
    8,848
    
    
    
    20,336
    
    
    
    27,009OPERATING LOSS
    
    
    (8,381
    )
    
    
    (10,362
    )
    
    
    (28,506
    )INTEREST INCOME
    
    
    542
    
    
    
    1,454
    
    
    
    2,528OTHER INCOME (EXPENSE)
    
    
    25
    
    
    
    1
    
    
    
    (1,200
    )LOSS IN EQUITY OF DYNAMIC FUELS, LLC
    
    
    (424
    )
    
    
    (340
    )
    
    
    FOREIGN CURRENCY EXCHANGE
    
    
    2,790
    
    
    
    (1,315
    )
    
    
    (892
    )LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES
    
    
    (5,448
    )
    
    
    (10,550
    )
    
    
    (28,070
    )MINORITY INTEREST
    
    
    
    
    
    
    706
    
    
    
    INCOME TAXES
    
    
    
    
    
    
    
    
    
    
    LOSS FROM CONTINUING OPERATIONS
    
    
    (5,448
    )
    
    
    (9,844
    )
    
    
    (28,070
    )INCOME (LOSS) FROM DISCONTINUED OPERATIONS
    
    
    1,310
    
    
    
    13,595
    
    
    
    (26,555
    )NET INCOME (LOSS)
    
    $
    (4,138
    )
    
    $
    3,751
    
    
    $
    (54,625
    )BASIC AND DILUTED NET INCOME (LOSS) PER SHARE:Loss from continuing operations
    
    $
    (0.09
    )
    
    $
    (0.17
    )
    
    $
    (0.50
    )Income (loss) from discontinued operations
    
    
    0.02
    
    
    
    0.23
    
    
    
    (0.48
    )Net income (loss)
    
    $
    (0.07
    )
    
    $
    0.06
    
    
    $
    (0.98
    )WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:Basic
    
    
    62,725
    
    
    
    59,731
    
    
    
    55,850Diluted
    
    
    62,725
    
    
    
    60,383
    
    
    
    55,850
   F-3




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##### Table of Contents



SYNTROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
 Common Stock
    
    
    AdditionalNumber
    
    
    
    
    
    
    Paid-in
    
    
    Deferred
    
    
    Accumulated
    
    
    Stockholdersof Shares
    
    
    Amount
    
    
    Capital
    
    
    Compensation
    
    
    Deficit
    
    
    Equity (Deficit)Balance, January 1, 2006
    
    
    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 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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
    )
    
    $
    13,044
   F-4




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##### Table of Contents



SYNTROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Year Ended December 31,2008
    
    
    2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    (4,138
    )
    
    $
    3,751
    
    
    $
    (54,625
    )Income (loss) from discontinued operations
    
    
    1,310
    
    
    
    13,595
    
    
    
    (26,555
    )Loss from continuing operations
    
    
    (5,448
    )
    
    
    (9,844
    )
    
    
    (28,070
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation, depletion and amortization
    
    
    620
    
    
    
    745
    
    
    
    816Foreign currency exchange
    
    
    2,790
    
    
    
    1,311
    
    
    
    888Non-cash compensation expense
    
    
    2,418
    
    
    
    4,980
    
    
    
    7,859Loss on sale of assets
    
    
    
    
    
    
    14
    
    
    
    Minority interest release of project equity contribution
    
    
    
    
    
    
    (706)         -
    
    
    
    Non-cash loss in equity method investee
    
    
    424
    
    
    
    340           -
    
    
    
    Non-cash licensing revenue
    
    
    
    
    
    
    (13,665
    )
    
    
    Changes in assets and liabilities:Accounts receivable
    
    
    (97
    )
    
    
    80
    
    
    
    521Other assets
    
    
    (14
    )
    
    
    928
    
    
    
    1,061Accounts payable
    
    
    37
    
    
    
    (1,467
    )
    
    
    (535
    )Accrued liabilities and other
    
    
    (296
    )
    
    
    (1,159
    )
    
    
    (500
    )Deferred revenue
    
    
    (2,755
    )
    
    
    372
    
    
    
    Net cash used in continuing operations
    
    
    (2,321
    )
    
    
    (18,071
    )
    
    
    (17,960
    )Net cash used in discontinued operations
    
    
    (451
    )
    
    
    (5,007
    )
    
    
    (17,847
    )Net cash used in operating activities
    
    
    (2,772
    )
    
    
    (23,078
    )
    
    
    (35,807
    )CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property and equipment
    
    
    (202
    )
    
    
    (162
    )
    
    
    (380
    )Proceeds from note receivable
    
    
    
    
    
    
    
    
    
    
    1,802Investment in Dynamic Fuels, LLC
    
    
    (14,000
    )
    
    
    (4,250
    )
    
    
    (Increase) decrease in restricted cash
    
    
    
    
    
    
    166
    
    
    
    (166
    )Net cash provided by (used in) continuing operations
    
    
    (14,202
    )
    
    
    (4,246
    )
    
    
    1,256Net cash provided by (used in) discontinued operations
    
    
    8,670
    
    
    
    5,730
    
    
    
    (1,675
    )Net cash provided by (used in) provided by investing activities
    
    
    (5,532
    )
    
    
    1,484
    
    
    
    (419
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from sale of common stock, warrants and option exercises
    
    
    
    
    
    
    36
    
    
    
    426Proceeds from common stock purchase agreement
    
    
    
    
    
    
    12,800
    
    
    
    Payment of debt
    
    
    
    
    
    
    (3,750
    )
    
    
    Purchase and retirement of treasury stock
    
    
    
    
    
    
    (885
    )
    
    
    (686
    )Net cash (used in) provided by continuing operations
    
    
    
    
    
    
    8,201
    
    
    
    (260
    )Net cash (used in) provided by discontinued operations
    
    
    
    
    
    
    (1,667
    )
    
    
    294Net cash provided by financing activities
    
    
    
    
    
    
    6,534
    
    
    
    34FOREIGN EXCHANGE EFFECT ON CASH
    
    
    
    
    
    
    (4
    )
    
    
    (2
    )NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    (8,304
    )
    
    
    (15,064
    )
    
    
    (36,194
    )CASH AND CASH EQUIVALENTS, beginning of period
    
    
    18,405
    
    
    
    33,469
    
    
    
    69,663CASH AND CASH EQUIVALENTS, end of period
    
    $
    10,101
    
    
    $
    18,405
    
    
    $
    33,469NON-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
  Accounts Receivable
  Property and Equipment
  December 31,
    
    
    December 31,2008
    
    
    2007Furniture and office equipment
    
    $
    1,306
    
    
    $
    6,094Leasehold improvements
    
    
    34
    
    
    
    4051,340
    
    
    
    6,499Less  accumulated depreciation
    
    
    (1,153
    )
    
    
    (5,991
    )$
    187
    
    
    $
    508
 Income Taxes
  Asset Retirement Obligations
 Accounting for Asset Retirement Obligations
 Other Assets
   F-7




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##### Table of Contents



December 31,
    
    
    December 31,2008
    
    
    2007Patents
    
    $
    2,581
    
    
    $
    2,399Less  accumulated amortization
    
    
    (878
    )
    
    
    (720
    )$
    1,702
    
    
    $
    1,679
 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
 Employee 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 Accounting for
Stock-Based Compensation
 Earnings Per Share
  Year ended December 31,2008
    
    
    2007
    
    
    2006(in thousands)Basic weighted-average shares
    
    
    62,725
    
    
    
    59,731
    
    
    
    55,850Effect of dilutive securities:Unvested restricted stock units (1)
    
    
    
    
    
    
    100
    
    
    
    Stock options
    
    
    
    
    
    
    552
    
    
    
    Dilutive weighted-average shares
    
    
    62,725
    
    
    
    60,383
    
    
    
    55,850
 (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-8




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##### Table of Contents



Twelve Months Ended,December 31,
    
    
    December 30,
    
    
    December 30,2008
    
    
    2007
    
    
    2006Options and warrants (in thousands)
    
    
    24,110
    
    
    
    10,713
    
    
    
    10,949Restricted stock excluded
    
    
    80
    
    
    
    1,082
    
    
    
    426Weighted-average exercise prices of
options and warrants
    
    $
    2.22
    
    
    $
    5.49
    
    
    $
    6.43Period weighted average market price
    
    $
    1.17
    
    
    $
    2.46
    
    
    $
    6.04
 Defined Contribution Plan  401(k)
   Use of Estimates
  Foreign Currency Transactions
  New Accounting Pronouncements
  The Fair Value Option for Financial Assets and
Financial LiabilitiesIncluding an amendment to FASB Statement No. 115
 Fair Value Measurements
  F-9




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##### Table of Contents



2. OPERATIONS AND LIQUIDITY
 ® ®
    3. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE
 International Oil and Gas
 , Accounting for the Impairment or Disposal of
Long-Lived Assets
   F-10




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##### Table of Contents



Domestic Oil and Gas
  Research and Development
    December 31,INTERNATIONAL OIL AND GAS
    
    2008
    
    
    2007
    
    
    2006Revenues
    
    
    
    
    
    
    
    
    
    
    Costs and Expenses:Depreciation, depletion, amortization and impairment
    
    
    
    
    
    
    
    
    
    
    4,790General, administrative and other
    
    
    80
    
    
    
    241
    
    
    
    922Operating Loss
    
    $
    (80
    )
    
    $
    (241
    )
    
    $
    (5,712
    )Interest Expense
    
    
    
    
    
    
    
    
    
    
    (1,457
    )Other Income (Expense)
    
    
    1,604
    
    
    
    10,078
    
    
    
    (240
    )Income (Loss) before income taxes
    
    
    1,524
    
    
    
    9,837
    
    
    
    (7,409
    )Income (Loss) from Discontinued Operations
    
    $
    1,524
    
    
    $
    9,837
    
    
    $
    (7,409
    )
 December 31,DOMESTIC OIL AND GAS
    
    2008
    
    
    2007
    
    
    2006Costs and Expenses:Depreciation, depletion, amortization and impairment
    
    
    
    
    
    
    610
    
    
    
    608General, administrative and other
    
    
    
    
    
    
    
    
    
    
    13Operating Loss
    
    $
    
    
    
    $
    (610
    )
    
    $
    (621
    )Other Income (Expense)
    
    
    95
    
    
    
    5
    
    
    
    68Income (Loss) before income taxes
    
    
    95
    
    
    
    (605
    )
    
    
    (553
    )Income (Loss) from Discontinued Operations
    
    $
    95
    
    
    $
    (605
    )
    
    $
    (553
    )
  F-11




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##### Table of Contents



December 31,RESEARCH AND DEVELOPMENT
    
    2008
    
    
    2007
    
    
    2006Revenues
    
    
    
    
    
    
    498
    
    
    
    1,089Costs and Expenses:Research and Development
    
    
    171
    
    
    
    6,813
    
    
    
    17,748Depreciation, depletion amortization and impairment
    
    
    155
    
    
    
    492
    
    
    
    General, administrative and other
    
    
    
    
    
    
    
    
    
    
    217Operating Loss
    
    $
    (326
    )
    
    $
    (6,807
    )
    
    $
    (16,876
    )Interest Expense
    
    
    
    
    
    
    (622
    )
    
    
    (1,717
    )Other Income (Expense)
    
    
    17
    
    
    
    
    
    
    
    Gain on Extinguishment of Debt
    
    
    
    
    
    
    11,792
    
    
    
    Income (Loss) before income taxes
    
    
    (309
    )
    
    
    (4,363
    )
    
    
    (18,593
    )Income (Loss) from Discontinued Operations
    
    $
    (309
    )
    
    $
    (4,363
    )
    
    $
    (18,593
    )
 4. INVESTMENT IN DYNAMIC FUELS
      September 30,Balance Sheet
    
    2008
    
    
    2007Cash
    
    
    25,489
    
    
    
    8,261Other Current Assets
    
    
    3,685
    
    
    
    Total Current Assets
    
    
    29,174
    
    
    
    8,261Property, Plant and Equipment and Other Assets
    
    
    7,229
    
    
    
    395Total Assets
    
    $
    36,403
    
    
    $
    8,656Current Liabilities
    
    
    1,431
    
    
    
    391Total Liabilities
    
    
    1,431
    
    
    
    391Members Capital Contributions
    
    
    36,500
    
    
    
    8,500Deficit accumulated during the development stage
    
    
    (1,528
    )
    
    
    (235
    )Total Members Equity
    
    
    34,972
    
    
    
    8,265Total Liabilities and Members Equity
    
    $
    36,403
    
    
    $
    8,656
  F-12




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##### Table of Contents



UnauditedPeriod fromJune 22, 2007,Audited
    
    
    Date ofYear Ended
    
    
    Inception, toSeptember 30,
    
    
    September 30,Statements of Operations
    
    2008
    
    
    2007Costs and Expenses:Depreciation, depletion amortization and impairment
    
    
    
    
    
    
    General, administrative and other
    
    
    1,470
    
    
    
    312Operating Income (Loss)
    
    $
    (1,470
    )
    
    $
    (312
    )Other Income (Expense)
    
    
    177
    
    
    
    77Income (Loss) before income taxes
    
    
    (1,294
    )
    
    
    (234
    )Net Income (Loss)
    
    $
    (1,294
    )
    
    $
    (234
    )
  5. MARATHON PARTICIPATION AND LOAN AGREEMENT
   Accounting for a Modification or Exchange of Debt Instruments
 6. DEFERRED REVENUE
  ®
  F-13




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##### Table of Contents



7. COMMON STOCK PURCHASE AGREEMENT
     8. STOCKHOLDERS EQUITY
 Retirement of Treasury Stock.
 Tyson. Accounting for Equity Instruments that are Issued to Other than Employees for
Acquiring, or in Conjunction with Selling, Goods or Service Accounting for Stock-Based Compensation
  F-14




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##### Table of Contents



Accounting for Stock-Based Compensation, Accounting for
Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services
  9. STOCK-BASED COMPENSATION
    Stock Options
  Shares
    
    
    WeightedUnder
    
    
    Average PriceStock Options
    
    
    Per ShareOUTSTANDING AT DECEMBER 31, 2007
    
    
    5,986,717
    
    
    $
    6.65Granted at market price
    
    
    6,066,200
    
    
    $
    0.66Exercised
    
    
    
    
    
    $
    Expired or forfeited
    
    
    (414,413
    )
    
    $
    10.22OUTSTANDING AT DECEMBER 31, 2008
    
    
    11,638,504
    
    
    $
    3.40
  F-15




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##### Table of Contents



Options Outstanding
    
    
    Options ExercisableWeighted
    
    
    
    
    
    
    WeightedWeighted
    
    
    Average
    
    
    
    
    
    
    AverageRange of
    
    Options
    
    
    Average
    
    
    Remaining
    
    
    Options
    
    
    Exercise PriceExercise Price
    
    Outstanding
    
    
    Exercise Price
    
    
    Contractual Life
    
    
    Exercisable
    
    
    Per Share$0.66    $0.66
    
    
    6,066,200
    
    
    $
    0.66
    
    
    
    10.00
    
    
    
    763,500
    
    
    $
    0.66$1.49    $1.55
    
    
    1,010,666
    
    
    
    1.55
    
    
    
    3.75
    
    
    
    1,010,666
    
    
    
    1.55$1.62    $2.89
    
    
    1,140,695
    
    
    
    2.33
    
    
    
    5.71
    
    
    
    1,140,695
    
    
    
    2.33$3.19    $6.88
    
    
    1,183,651
    
    
    
    6.33
    
    
    
    4.85
    
    
    
    1,180,318
    
    
    
    6.34$7.10    $10.14
    
    
    1,141,974
    
    
    
    9.34
    
    
    
    6.66
    
    
    
    611,306
    
    
    
    8.67$10.51    $19.88
    
    
    1,095,318
    
    
    
    12.05
    
    
    
    5.14
    
    
    
    345,318
    
    
    
    15.3611,638,504
    
    
    $
    3.40
    
    
    
    
    
    
    
    5,051,803
    
    
    $
    4.52
    Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31, 2008
    
    
    December 31, 2007
    
    
    December 31, 2006Expected dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Expected volatility
    
    
    90
    %
    
    
    73
    %
    
    
    81
    %Risk-free interest rate
    
    
    2.02
    %
    
    
    4.54
    %
    
    
    4.61
    %Expected life
    
    5.50 yrs.
    
    
    4.38 yrs.
    
    
    5.83 yrs.
   Restricted Stock
   F-16




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##### Table of Contents



Weighted-AverageGrant Date FairShares / Units
    
    
    ValueNONVESTED AT DECEMBER, 31, 2007
    
    
    1,182,000
    
    
    $
    2.96Granted
    
    
    1,150,000
    
    
    $
    0.66Vested or Exercised
    
    
    (180,000
    )
    
    $
    2.17Expired or forfeited
    
    
    (310,000
    )
    
    $
    2.10NONVESTED AT DECEMBER 31, 2008
    
    
    1,842,000
    
    
    $
    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
    
    
    $
    887,000
 10. INCOME TAXES
  Year
    
    Amount(in thousands)2009
    
    $
    3202010
    
    
    1,0262011
    
    
    1,8652012
    
    
    2013
    
    
    Thereafter
    
    
    324,253
    F-17




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##### Table of Contents



December 31,2008
    
    
    2007Deferred tax assets:NOL carry-forwards
    
    $
    124,403
    
    
    $
    121,674Capital loss carry-forwards
    
    
    151
    
    
    
    1,626Research and development credit
    
    
    8,164
    
    
    
    8,226Deferred revenue
    
    
    6,968
    
    
    
    6,968Investments
    
    
    326
    
    
    
    410Stock-based compensation
    
    
    4,924
    
    
    
    4,924Other
    
    
    1,567
    
    
    
    1 983146,503
    
    
    
    145,811Deferred tax liabilities:Oil and gas properties
    
    
    (1,026
    )
    
    
    (593
    )Other
    
    
    (626
    )
    
    
    (617
    )Net deferred tax asset before valuation allowance
    
    
    144,851
    
    
    
    144,601Valuation allowance
    
    
    (144,851
    )
    
    
    (144,601
    )Net deferred tax assets
    
    $
    
    
    
    $
    
  11. COMMITMENTS AND CONTINGENCIES
  Year
    
    Amount(in thousands)2009
    
    $
    2262010
    
    
    2262011
    
    
    1122012
    
    
    92013
    
    
    9Thereafter
    
    
    74$
    656
  Proceeds  Debt and Equity Contributions
    
    Dynamic
    
    
    Synm(in Millions)
    
    Fuels
    
    
    PortionFunded Proceeds from Debt Issuance*
    
    $
    100.0
    
    
    
    Funded Equity Contributions from Members  July 2008
    
    $
    28.0
    
    
    $
    14.0Committed Equity Contributions from Members  2009
    
    $
    22.0
    
    
    $
    11.0Total Proceeds  Debt and Equity Contributions
    
    $
    150.0
    
    
    $
    25.0
 *
    
    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. Dynamic Fuels entered into an interest rate swap of 2.19% for a period of 5
years with declining swap coverage in the fourth quarter of 2008.  F-18




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##### Table of Contents



12. SIGNIFICANT CUSTOMERS
  13. FAIR VALUE OF FINANCIAL INSTRUMENTS
  2008
    
    
    2007Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    EstimatedAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair Value(in thousands)Assets:Cash and cash equivalents
    
    $
    10,101
    
    
    $
    10,101
    
    
    $
    18,405
    
    
    $
    18,405Accounts receivable
    
    
    517
    
    
    
    517
    
    
    
    420
    
    
    
    420
  14. SEGMENT INFORMATION
 Disclosures About Segments of an Enterprise and Related Information
 15. SUBSEQUENT EVENTS
    F-19




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##### Table of Contents



16. QUARTERLY DATA (UNAUDITED)
 Quarter Ended2008
    
    March 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,(in thousands, except per share data)Revenues
    
    $
    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 business
    
    
    (66
    )
    
    
    1,533
    
    
    
    (80
    )
    
    
    (77
    )Net income (loss)
    
    
    (2,231
    )
    
    
    (1,892
    )
    
    
    838
    
    
    
    (853
    )Basic and diluted EPS:Continuing 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
 Quarter Ended2007
    
    March 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,(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 operations
    
    
    10,904
    
    
    
    (932
    )
    
    
    (599
    )
    
    
    4,222Net income (loss)
    
    
    14,808
    
    
    
    (9,641
    )
    
    
    (3,059
    )
    
    
    1,643Basic and diluted EPSContinuing 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
   F-20