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                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2004

                        Commission File Number: 000-50216

                                  ADA-ES, Inc.
                                  ------------
                 (Name of small business issuer in its charter)

              Colorado                              84-1457385
              --------                              ----------
     (State of incorporation)            (IRS Employer Identification No.)

           8100 SouthPark Way, Unit B, Littleton, Colorado 80120-4525
           ----------------------------------------------------------
          (Address of principal executive offices, including Zip Code)

        (Issuer's telephone number, including area code): (303) 734-1727

         Securities registered under Section 12(g) of the Exchange Act:

                                 Title of class
                           Common Stock, no par value
                           --------------------------

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. [X] Yes [ ] No

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ X ]

State issuer's revenues for its most recent fiscal year.  $ 8,417,000

State the aggregate market value of the voting and non-voting common equity held
by nonaffiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked prices of such common equity, as of a
specified date within the past 60 days. As of March 18, 2005 was $117,914,000.


Number of shares outstanding of registrant's Common Stock, no par value as of
March 18, 2005 - 4,830,887.


DOCUMENTS INCORPORATED BY REFERENCE:
None


Transitional Small Business Disclosure Format:  Yes __ No  X

<PAGE>

PART I

Item 1. Description of Business
This Annual Report may contain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 that involve risks and uncertainties.
In particular such forward-looking statements may be found in this section and
under the heading " Management's Discussion and Analysis or Plan of Operation."
Words or phrases such as "will," "hope," "expect," "intend," "plan" or similar
expressions are generally intended to identify forward-looking statements. Those
statements involve risks and uncertainties that could cause actual results to
differ materially from the results discussed herein. The principal risks and
uncertainties that may affect the Company's actual performance and results of
operations include the following: general economic conditions; adverse weather;
changes in federal income tax laws and federal funding for environmental
technology/specialty chemicals programs; governmental regulation; changes in
governmental and public policy; changes in economic conditions specific to one
or more of the Company's markets and businesses; competition; availability of
raw materials; and unexpected operations difficulties. Other risks and
uncertainties may also affect the outcome of the Company's actual performance
and results of operations. You are cautioned not to place undue reliance on the
forward-looking statements made in this Annual Report.

(a) Business Development.
ADA-ES, Inc. ("ADA-ES" or "Registrant" or "Company", which term includes its
wholly-owned subsidiary unless otherwise indicated) is an environmental
technology and specialty chemicals company helping electric utility companies
remain competitive while meeting environmental regulations. The major activities
of the Company include sales of equipment, field testing and services related to
the emerging market for mercury emission control ("MEC") for electric generating
coal-fired boilers, the sale of flue gas conditioning ("FGC") equipment and
chemicals, and other chemicals and technologies for such boilers. ADA-ES was
incorporated under the laws of the State of Colorado in 1997 to serve as the
holding company for ADA-ES, LLC. In May 1997, Earth Sciences, Inc. ("ESI" or
"Earth Sciences") acquired a 51% equity position in ADA-ES, LLC through a
combination of stock and cash. The acquisition agreement provided for payments
of cash and notes and included an option for Earth Sciences to acquire the
remaining equity interests in ADA-ES, LLC from the ADA-ES shareholders. In May
1998, Earth Sciences exercised that option, acquiring a 100% interest in ADA-ES,
LLC by issuance of 1,716,000 shares of stock to the shareholders of ADA-ES in
exchange for all their shares in ADA-ES. As of January 1, 2003, Earth Sciences
transferred all of its ownership in ADA-ES, LLC into ADA-ES. In March 2003
ADA-ES and ESI entered into an agreement for the pro rata distribution of all
the common stock of ADA-ES to the shareholders of ESI. The distribution occurred
on September 12, 2003 based on a record date of August 29, 2003 as set by the
ESI Board of Directors. The distribution resulted in ADA-ES being a separate
company operated apart from ESI.

During 2004, ADA-ES (a) substantially increased its MEC business through
government and industry funded field demonstration contract work including
existing and new contracts and a growing number of commercial activities; (b)
maintained its FGC business through continued chemical sales and service on
three full-time units, and installation of a new unit in December 2004; and (c)
continued limited sales and further demonstrated an anti-slagging product
through a joint venture with Arch Coal, Inc. ("Arch") formed to co-market that
product. In August 2004, the Company sold 1 million shares of its common stock
to a limited number of private investors and received net proceeds of $7.6
million. Shortly thereafter, the Company applied for and was granted listing
status on the NASDAQ small cap market.

Thus far in 2005, ADA-ES (1) continued work on government- and
industry-supported contracts for field testing, installation and evaluation of
mercury control systems at several sites, (2) prepared for testing at the four
plants under a new government and industry supported contract announced in
November 2004, and (3) continued the supply of FGC chemicals to several plants
including a new customer who began regular use in January. These activities and
those in the preceding paragraph are described in the succeeding paragraphs
below in Item 1(b).

ADA-ES currently has four operating FGC units at coal-fired utilities in
Illinois, Iowa, Louisiana, and Wisconsin. Revenues from sales of equipment and
chemicals to FGC customers in 2004 and other FGC contract work totaled
$2,122,000. Assuming the continuation of the historical levels of FGC chemical
purchases over the last four years by its existing customers, ADA-ES expects to
recognize revenues of approximately $2.3 million in 2005 from sales to those
customers. There can be no assurances that those expectations will be met.

                                       1
<PAGE>

Early in 2000, ADA-ES received the signed Department of Energy ("DOE")
cooperative agreement awarded to develop a broader spectrum of FGC chemicals
(the "DOE FGC Contract") and commenced research activities thereunder. In the
fall of 2000, ADA-ES received the award of an additional DOE cooperative
agreement to test mercury control technology (the "DOE Mercury Contract")
totaling up to $6.8 million over the life of the contract, which amount includes
industry cost-share, and commenced research activities thereunder. In the fall
of 2002 ADA-ES received the award of a further DOE cooperative agreement and
commenced activities thereunder for the long-term test of mercury control
technology totaling $2.4 million, which amount includes industry cost share.
During 2003 ADA-ES commenced limited work on the permanent installation, testing
and related activities of a mercury control system for We Energies Presque Isle
plant in northern Michigan. The contract for that work was signed in early 2004
and, after an amendment, which is expected to be signed in the first quarter of
2005, will cover approximately $9 million of work over a 5-year period. In the
fall of 2003 ADA-ES received the award of a further DOE cooperative agreement
and commenced activities thereunder for the testing of mercury control
technology, now at five plant sites through 2006 totaling $8.6 million, which
amount includes industry cost share. In November 2004 ADA-ES was notified by DOE
that DOE intends to negotiate a new cooperative agreement with the Company for
the purpose of testing mercury control technology at four power plant sites. The
agreement was signed in February 2005. Minor activities were conducted in 2004
related to the contract, which totals approximately $5 million, which amount
includes industry cost share. Revenues recognized in 2004 from these
government/industry contracts totaled $4.2 million. ADA-ES retains the right to
commercialize any products developed under the activities of these contracts.
Assuming continued funding, ADA-ES expects to recognize revenues of
approximately $3.6 million from these contracts in 2005. The government commits
funds for these contracts on an annual basis and although continued funding
under the awarded contracts is considered highly probable, there can be no
assurances that the government will continue to approve such funding in its
future budgets.


Sale of Shares.

In August 2004 the Company entered into several Subscription and Investment
Agreements and privately sold 1 million shares of its common stock to a limited
number of institutional investors at a price of $8.00 per share. The net
proceeds to ADA-ES from the sales totaled $7,620,000. Pritchard Capital Partners
LLP acted as the placement agent for the sales and received a fee of
approximately 5%. Approximately $551,000 of the proceeds were utilized to pay
off long-term debt. Approximately $7 million of the proceeds have been invested
in highly-rated corporate and government bonds, low-risk growth equities and
money market funds.


(b) Business of Issuer.

BUSINESS
Market for Our Products and Services
The primary drivers for many of our services are new environmental regulations
and the deregulation of the utility industry. Environmental regulations, such as
the 1990 Clean Air Act Amendments, various State regulations and permitting
requirements for new plants, are requiring utilities to reduce emission of
pollutants, such as sulfur dioxide and nitrogen dioxide, and toxic particles.
The Environmental Protection Agency and numerous state regulatory bodies are
developing regulations that are expected to require large mercury reductions at
the nation's 1,100-plus coal units. The Environmental Protection Agency (EPA)
has recently issued (March 2005) its mercury control regulations and we are in
the process of evaluating their effect on our future business. Early DOE studies
indicate that the cost to control these emissions will be $2-$5 billion
annually. We are positioning ourselves to be a key supplier of services to the
market that is anticipated to be established by these regulations. The markets
that will be affected by new regulations are the same ones that we currently
operate within. In addition, the systems and products that are required for
mercury controls fit well with our existing products and capabilities.

In addition to environmental regulations, the coal burning electric power
generation industry is also impacted by the ongoing deregulation of the utility
business. Historically, public utilities have been able to pass capital and
operating costs onto customers through rate adjustments. However with
deregulation, utility companies face competitive challenges requiring them to
better control capital spending and operating costs. These changes increase the
need for cost-effective retrofit technologies that can be used to enhance
existing plant equipment to meet the more stringent emission limits while
burning less expensive coals. We have entered this market with (1)our
proprietary non-toxic chemical conditioner that offers both technical and
economic advantages over the hazardous chemicals that have been in use, (2)
mercury control technology that has been demonstrated to effectively reduce
mercury emission over a broad range of plant configurations and coal types, and
(3) products, such as ADA-249, that provide utilities flexibility in choosing
the fuel they plan to burn.

                                       2
<PAGE>

In the unprecedented event that existing and expected environmental laws were
rescinded or substantially changed, our business would be adversely affected by
declining demand for such products and services. Demand for the Company's FGC
and ADA-249 products is primarily two-fold. Customers purchase these products to
mitigate operating problems and/or to help comply with environmental regulations
such as the Clean Air Act Amendments of 1990. Although the Company's existing
customers and those expected in the near-term are believed to desire the
Company's products for mitigation of operating problems, we would anticipate
that any softening of existing air pollution control requirements would slow
expected growth for these products. Demand for the Company's mercury emission
control technology is being driven almost exclusively by legislation requiring
such control. Several states have passed, or are expected to pass, legislation
requiring such control (Connecticut, Massachusetts, New Hampshire, New Jersey,
North Carolina and Wisconsin). The EPA has recently issued (March 2005) its
mercury control regulations and we are in the process of evaluating their effect
on our future business. Delays in, or derailment of, the passage of federal
mercury control legislation will significantly impede the potential growth of
the Company.

The environmental technology/specialty chemicals industry is generally subject
to seasonal trends. These trends reflect the general pattern of electricity use
and generation, which typically peak during the spring and summer months and
decline from October through March. Our quarterly results can be expected to
fluctuate in the future, reflecting this seasonality. These and other factors
may make it difficult to predict our results of operations. If our results of
operations do not meet the expectations of our stockholders and financial
analysts, then our common stock price may be adversely impacted.

Government and Industry Supported Contracts
In 2004, 2003 and 2002, 49%, 45% and 47%, respectively of the Company's revenues
were derived from or related to DOE and industry-supported programs. Our
revenues from government and industry-supported contracts would be adversely
impacted by any material decrease in funding for the projects in which we are
involved. In addition, we look to the DOE funding as a significant means to
further develop our technology and intellectual property in the area of mercury
emissions control covered by that funding. Any material decrease in funding for
the projects in which we are involved would hamper the development of our
technology and intellectual property as it does not appear that we could
currently fund the same level of development work apart from the support
provided by DOE and industry.

The DOE issues solicitations from time to time for various development and
demonstration projects. The DOE solicitations range in subject matter, and the
Company submits bids for topics that fit the Company's mission and strategic
plan. The bids involve a proposed statement of work, and contracts are
negotiated with successful bidders to perform the specified work. The contracts
with the DOE are known as Cooperative Agreements and are considered financial
assistance awards. The Company currently has three such agreements. Generally,
the agreements cover the development and/or demonstration of air pollution
control technologies for coal-fired power generating plants. Our agreements
cover the testing of mercury control systems at power plants. The work may
involve designing and fabricating equipment, installing the equipment at power
plants, testing the equipment, preparing economic studies, and preparing various
reports. The deliverables required by the agreements include various technical
and financial reports that are submitted by the Company on a prescribed
schedule. The agreements require that the negotiated scope of work be performed,
which includes testing/demonstrating various air pollution control technologies.
The agreements with the DOE provide that any inventions made by the Company as a
result of the work become the property of the Company.

The agreements with DOE generally require industry cost share, which is
considered a key component to the viability of the project and which may take
the form of cash contributions and/or in-kind contributions of material and
services. The cost share percentages on the mercury projects in which we are
involved range from 32% to 50%. Typically, the utility host site for the
demonstration project provides a considerable amount of the cost share with
other interested industry partners also providing funding, either individually
or through EPRI (the Electric Power Research Institute). To the extent that the
required cost share is not provided by industry partners or EPRI, ADA-ES
provides the balance by reducing the revenues it would otherwise recognize on
the work performed. We expect the power industry's interest in these and future
projects to continue and grow as the nation moves closer to enactment of mercury
control regulations.

                                       3
<PAGE>

Key Business Relationships
We have developed key industry relationships with companies much larger than
ourselves (e.g. NORIT Americas, Inc., ALSTOM Power, Inc., Thermo Electron, and
Arch Coal, Inc.). Subject to the terms of those agreements, the relationships
may be terminated by the passage of time, through notification from the other
party or failure of the Company to obtain a certain market share. Those
relationships are expected to bolster the premier position we believe we hold
that will allow participation in the large market projected to emerge from
regulations to limit mercury emissions from coal burning power plants. The loss
of those key relationships would impede our ability to secure the highest
achievable amount of business from that emerging mercury control market. (See
the discussion below under the caption "ADA-249" and "Commercial Mercury
Emissions Control.)

ADA-ES' Technology and Services - FGC
We have developed a technology for conditioning flue gas streams from combustion
sources that allows existing air pollution control devices to operate more
efficiently. Through various suppliers and contractors, we may manufacture
engineered units for each individual application. The units mix, pump and
monitor the feed of proprietary chemical blends. The chemical blends are applied
to the flue gas streams by a pressurized system of specially designed lances and
nozzles. Such treatment of the flue gas stream alters the physical properties of
the fly ash particles contained therein primarily by decreasing particle
resistivity. This alteration allows the existing electrostatic precipitator
("ESP") to more effectively collect such fly ash particles that would otherwise
escape into the atmosphere. ADA-ES' technology also has application in the
cement and petroleum refining industries where particulate emissions are being
or need to be controlled. The non-utility markets are not being aggressively
pursued since the profit margin potential for such customers is considered to be
less since chemical usage is lower.

ADA-249
In 2000, we introduced a new specialty chemical, ADA-249, a product designed to
save utility companies with cyclone furnaces significant costs each year through
reduced fuel costs, enhanced operational flexibility and improved marketability
of combustion by-products. Cyclone furnaces were designed as an efficient,
compact way to burn high-ash, high-sulfur coals to produce steam for power
generation. The coals for which these units were designed typically produce a
thick molten slag layer on the walls of each cyclone barrel. The slag coating
catches the incoming coal and holds it until combustion is completed. When
switching to Powder River Basin ("PRB") coal, however, the slag layer is usually
too thin and watery to capture the coal, so the coal must burn in flight. Even
though PRB coal burns faster than bituminous coal, there is just not enough time
for combustion to be completed within the main furnace firebox. The result is
usually unacceptable amounts of unburned carbon in the flyash as well as
increased ash deposition, increased air emissions, and an unfavorable unit heat
rate. Another problem with PRB coal slag in a cyclone furnace is that it
solidifies (freezes) abruptly during low-load operation when the cyclone
temperature drops.

Since these boilers rely on keeping the slag molten all the way to the slag tap
(a drain on the furnace floor) in order to operate, the freezing problem can
cause unplanned shutdowns and lost revenues. In order to keep the PRB coal slag
molten, these units must be operated at high loads even during periods of low
demand, which adversely affects power revenues. Finally, bottom ash is a more
valuable commodity for sale to ash brokers than flyash. Many cyclone boilers
that have converted to PRB coal have lost significant revenues from ash sales
compared to the old days of burning high-ash coals.

ADA-249 is a patented product designed to modify slag viscosity. ADA-249 is a
blend of iron oxides, mineralizers, and flow enhancers, that is added to the PRB
coal prior to combustion in order to create the proper slag layer for combustion
within the cyclone barrel. In application at the utility, ADA-249 is conveyed
mechanically from a supply delivered via dump truck to a hopper. From there
ADA-249 is fed by screw and belt conveyors to the coal feeders. The addition of
ADA-249 to the coal results in more coal burning in the cyclone, less carbon in
the flyash, better precipitator performance, reliable slag tapping, and more
bottom ash to sell. We design and sell the delivery system and the continuing
supply of chemical.

In May 2001, we entered into an agreement with Arch Coal Inc., the second
largest U.S. coal producer, to jointly market ADA-249 to cyclone-fired power
plants. The agreement was modified and restated as of January 1, 2002. Pursuant
to the agreement, the Company has granted a non-exclusive, non-transferable
license to the joint venture ("JV") to use ADA-249 in connection with the JV
activities. The JV is controlled by a five-member management committee, three of
whose members are selected by Arch and the remaining members by the Company. The
JV will pay the Company from the commercial price less a discount of
approximately $15 per ton for all ADA-249 material supplied and commercial rates
for any technical services. The Company and Arch each will bear their own costs
and expenses related to any ADA-249 marketing efforts. Arch will fund the JV
activities, including equipment needs and will retain any net profits. Either
party may terminate the JV upon 60-days written notice after non-approval of the
annually required business plan.

                                       4
<PAGE>

Together, we and Arch anticipate providing to Arch customers a long-term package
of PRB coal, the ADA-249 chemical and, if needed, the required injection
equipment. This package is intended to enable boiler operators to achieve the
benefits of the ADA-249 fuel additive without making a significant capital
investment. The companies will also handle the logistics of supply and system
maintenance. During 2004, in addition to continual sales to one customer and
seasonal sales to another, (the revenues from whom amounted to less than 10% of
the Company's total revenues), ADA-249 was demonstrated at three sites, for
which we are in various stages of negotiation to supply ADA-249 on a continual
basis. The DOE does not participate with the Company in any of its activities
related to ADA-249.

DOE Mercury Contract
ADA-ES began work on a cooperative agreement with the Department of Energy in
October, 2000 to demonstrate full-scale mercury control systems at coal-fired
power plants. During the $6.8 million project, integrated control systems were
installed and tested at four power plants. The mercury control system involves
injecting powdered activated carbon (PAC) into the power plant flue gas where it
ties up the mercury. The existing particle control equipment at the power plant
then collects the PAC. ADA-ES was responsible for managing the project including
engineering, testing, economic analysis, and information dissemination
functions. Power generating companies that entered into contracts with ADA-ES
are Alabama Power Company, We Energies, and PG&E National Energy Group. During
2001 ADA-ES completed demonstration tests at two of the plants, and the
remaining two plants were tested during 2002. The first test site was Alabama
Power's Gaston plant, which uses fabric filters to reduce particulate matter
emissions. Tests using PAC at this site showed that 80-85 percent of the mercury
was removed, with as much as 90 percent being removed at the highest performing
periods during two weeks of testing. The We Energies Pleasant Prairie Power
Plant was the second site to be tested. This site is equipped with electrostatic
precipitators for particle collection. Mercury-removal rates at this site using
PAC ranged from 40 to 60 percent, with short-term peak removal rates being 60-70
percent. Testing at the PG&E Brayton Point Station and Salem Harbor Station
showed that mercury removals of 90 percent could be achieved using PAC. The
Cooperative Agreement with DOE is scheduled to be completed in early-2005.
Overall industry cost share on this project is 33% and ADA-ES has provided cost
share of approximately 13% of the total project.

DOE Long-Term Test of Mercury Controls
ADA-ES was awarded a $2.4 million cooperative agreement from the Department of
Energy in September 2002 to install a mercury control system and evaluate its
operation over an extended period of time. The project location is Alabama Power
Company's Plant Gaston where PAC has been injected into the flue gas stream
between an existing electrostatic precipitator and COHPAC baghouse. A limited
test of this configuration was performed under the DOE project described above
with good results. The extended test has matured the technology and provided
information that is needed to assure reliable long-term continuous operation in
these systems. Testing at the site was completed in 2004 and final reporting on
results of the project is expected in 2005. Overall industry cost share on this
project is 43% and ADA-ES has provided cost share of approximately 18% of the
total project.

Clean Coal Power Initiative Program at We Energies
The Company has been selected to provide mercury control technology and services
for a major project at the We Energies Presque Isle Power Plant. The U.S.
Department of Energy announced in January 2003 that it would award a cooperative
agreement to We Energies, located in Milwaukee, Wis., to demonstrate an
integrated mercury and particulate matter emissions control system on three
generating units at the facility located in Marquette, Mich. The demonstration
project, named TOXECON, is expected to also investigate the additional
capabilities of the proposed system to control sulfur dioxide and nitrogen oxide
emissions. The primary attribute of TOXECON, an EPRI (Electric Power Research
Institute) patented process, is that it potentially represents the best option
for control of greater than 80 percent of mercury from coal-fired plants.
TOXECON may also prove to be the primary mercury control choice for western
coals, and the only choice for units with hot-side electrostatic precipitators.
TOXECON is expected to make use of only one "baghouse," or emissions collection
structure, for three small boilers, increasing the cost-effectiveness of the
integrated system. TOXECON is expected to also allow for separate treatment or
disposal of the ash collected in the primary particulate control device, and is
expected to be applicable to a significant number of existing coal-fired plants
in the U.S. Specific objectives of the project are to achieve at least 90

                                       5
<PAGE>

percent mercury removal; determine viability of sorbent injection for up to 70
percent sulfur dioxide control; minimize waste disposal with a target of 100
percent utilization; and recover at least 90 percent of the mercury captured in
the ash. DOE is expected to provide $25 million of the project's $50 million
total cost. We Energies is hosting the project as well as serving as the prime
contractor with the DOE. The Company is providing on-site engineering support,
mercury control and measurement technologies, and project reporting services
under a $9 million contract with We Energies. Cummins & Barnard is providing
design construction management resources to the project. The formal contract was
executed in the first quarter of 2004. During 2004 our portion of the contract
was reduced from an expected $10 million to $9 million in recognition of the
effect of increased steel prices on the overall project and the direct
subcontracting of some work that was originally planned to be conducted through
ADA-ES. Overall industry cost share on this project is 50% and ADA-ES is not
providing any cost share to the total project.

Work under the contract will be performed over a five-year period , with design
and initial site work beginning in 2004. As a result of the project, it's
expected that there will be (i) a significant reduction in the rate of air
emissions from the Presque Isle units and (ii) mercury control retrofit
technologies and emissions control improvements applicable throughout the U.S.

DOE Mercury Control Program at Sunflower, AEP, Ameren UE, Detroit Edison and
Missouri Basin Power Project
During 2003 the Company was awarded an $8.4 million cooperative agreement with
the U.S. Department of Energy's National Energy Technology Laboratory
(DOE/NETL). The agreement is to perform sorbent-based mercury control technology
testing for coal-fired power plants. The project is being executed together with
ADA-ES' partner, ALSTOM Environmental Control Systems ("ALSTOM"), one of the
largest suppliers of air pollution control equipment to power plants in North
America. The program will be carried out over 3 years.

Under the program, ADA-ES and ALSTOM are testing the mercury control technology
at five power plants. These tests are covering a combination of coals and
pollution control equipment configurations typically used in over 900 plants,
and more than 75% of the U.S. coal-fired generating capacity. ADA-ES and ALSTOM
are working in partnership with Sunflower Electric, American Electric Power,
AmerenUE, Detroit Edison and Missouri Basin Power Project, which are providing
host sites. These companies, along with EPRI and ADA-ES, are contributing $2.6
million in cash and cost share to the project. The DOE is contributing $6
million of the $8.6 million in funding for the project. Overall industry cost
share on this project is 32% and ADA-ES has provided cost share of approximately
9% of the total project.

The original budget for the project was estimated at $8.8 million and was
revised in 2004 to $8.4 million to reflect lower indirect rates expected during
the life of the project. This is merely an accounting adjustment and does not
impact the scope of work to be performed under the project. Originally, Ontario
Power was providing its Nanticoke Station as a test site. Ontario Power withdrew
the site during 2004 due to changes in priority related to mercury control. This
site is being replaced by a power plant belonging to Detroit Edison. In
addition, a power plant belonging to the Missouri Basin Power Project is being
added to the project. Approval from DOE to add these two test sites occurred in
early 2005.

The test sites were specifically selected to provide key operating data that
will be complementary to our earlier demonstrations. The data from this program
should generate widespread interest in the power industry, and these tests
should significantly improve our ability to provide effective and reliable
mercury control systems that minimize the costs and impact on power generation.
Over the 3-year period, ADA-ES expects to recognize $7.4 million in revenue from
the project. Two sites were tested during 2004, and three additional sites are
expected to be tested in 2005 and 2006.

The project is expected to help promote the marketing arrangement between ADA-ES
and ALSTOM, discussed below, as the premier integrated solutions provider for
the control of mercury emissions from coal-fired power plants.

DOE Mercury Control Program at MidAmerican, AEP and Entergy
The Company was notified in 2004 that it was selected by DOE to perform
additional full-scale field tests of sorbent-based mercury control technology
for coal-fired power plants. The cooperative agreement was signed in February
2005. ADA-ES expects to recognize $1 - $2 million in annual revenues from this
contract during 2005 to 2007. This includes primary funding from DOE and at
least 25% cost sharing provided by participating power companies. In this new
program, ADA-ES is planning to install mercury control technology at four power
plants and evaluate performance and costs. Testing of novel high-temperature
sorbents, including ADA-ES' proprietary flue gas conditioning agents, is being
planned at two plants owned and operated by MidAmerican Energy. This is an
important market segment that is currently not being addressed by current

                                       6
<PAGE>

products. Tests are also planned to evaluate a new Electric Power Research
Institute (EPRI) technology named TOXECON II on both low-sulfur Western coal and
high-sulfur Eastern coal. The TOXECON II process uses activated carbon to reduce
mercury emissions in an innovative low-capital cost configuration that prevents
contamination of the ash. This technology is geared for power plants that need
to reduce mercury emissions by 50 to 70%, but want to continue to sell their ash
for use in concrete. Host sites are expected to be provided by MidAmerican,
American Electric Power and Entergy.

Government Funding of DOE Contracts
The government commits funds through the Department of Energy for the above
described contracts on an annual basis and although continued funding under the
awarded contracts is considered highly probable, there can be no assurances that
the government will continue to approve such funding in its future budgets.

Commercial Mercury Emissions Control
In December 2002 we entered into an exclusive relationship with ALSTOM
Environmental Control Systems ("ALSTOM"), the largest supplier of equipment to
power plants in North America, to market systems for mercury removal from power
plants and other facilities. In response to pending State and Federal
legislation for mercury emission control, ALSTOM and ADA-ES intend to provide
overall turnkey solutions for mercury control including guaranteed performance.
Such solutions may include all equipment required including carbon storage and
injection equipment, particulate collection equipment or
redesign/rebuild/conversion of existing equipment, monitoring equipment, and
even guaranteed supply of powdered activated carbon (PAC). The partnership will
focus on providing the required equipment and modifications to achieve up to 90%
removal of mercury meeting all applicable standards. The partnership will
combine our leading technology position in PAC-based mercury removal, acquired
through our years of development including the DOE sponsored projects, with
ALSTOM's technology in particulate collection (Electrostatic Precipitators and
Fabric Filters) and ALSTOM's experience in mercury removal in the
waste-to-energy business.

Under the terms of the agreement with ALSTOM:
     o    the parties will jointly develop marketing plans and sales objectives;
     o    the parties will grant one another exclusive marketing licenses to
          exploit their respective intellectual property for mercury emission
          control;
     o    the parties will grant one another limited, royalty-free licenses to
          use their respective intellectual property for mercury emission
          control;
     o    the parties will make joint commercial offerings for mercury emission
          control;
     o    ADA-ES and ALSTOM will each pay for their respective costs of
          marketing and development of their mercury control technologies; and
     o    the agreement may be terminated by mutual agreement of ADA-ES and
          ALSTOM, for an uncured breach of a material provision, and/or after
          one year upon three months written notice to the other party.

In 2001 Earth Sciences and NORIT Americas Inc. ("NORIT") entered into a Market
Development Agreement to jointly pursue the market for equipment and sorbents to
remove mercury from coal-fired boilers. Earth Sciences has assigned all of its
rights under that agreement to us as part of the distribution agreement with the
consent of NORIT. The agreement joins us with NORIT, the country's leading
supplier of powdered activated carbon. The goal of the agreement is to jointly
develop mercury control sorbents designed to maximize removal efficiency and
minimize costs. NORIT provides PAC and dosing systems for removing mercury from
flue gas generated from the combustion of municipal and medical solid waste and
hazardous waste. The agreement provides a long-term means for both us and NORIT
to benefit from potential sales of equipment and to participate in the
development of sorbents for this emerging mercury control market. We expect to
establish and further define the parameters for the mutual exclusivity this year
after the likely market becomes more clear after evaluation of the recently
issued (March 2005) EPA regulations.

Under the terms of the agreement with NORIT:
     o    the target market is defined as North American coal-fired utilities;
     o    ADA-ES is responsible for
          o    sorbent identification, technical and economic ranking and
               demonstration testing
          o    market development and sales coverage
          o    equipment contract negotiation, project execution and
               installation supervision
     o    NORIT is responsible for manufacture and/or supply of sorbents and the
          equipment dosing systems;
     o    subject to performance requirements, ADA-ES will represent NORIT
          exclusively in the defined market;

                                       7
<PAGE>

     o    in order for ADA-ES to maintain its exclusive representation of NORIT,
          at least 50% of the market users during the 2004 to 2007 period must
          be supplied by NORIT, in periods beyond those dates, annual minimum
          sales targets will be mutually agreed upon;
     o    for NORIT to maintain exclusivity, it must supply sorbents at prices
          and in quantities to meet the market demand and the ADA-ES sales
          targets;
     o    ADA-ES will earn a commission of 10% on sorbent sales and 5% on
          equipment sales, which commissions continue even if ADA-ES fails to
          maintain its exclusivity through failure to meet its performance
          requirements; and
     o    the parties agree to renew or renegotiate the agreement in good faith
          during the period when regulations requiring mercury emission controls
          are being reviewed which the parties estimate will be in mid-2005.

In April of 2004 we announced we had entered a cooperative agreement with Thermo
Electron Corporation to develop a continuous emission monitoring system (CEMS)
for the measurement of mercury in flue gas. Under this agreement, Thermo, the
leading supplier of stack gas monitors to the U.S. power generation market, will
design and manufacture the mercury CEMS. ADA-ES will conduct extensive field
validation prior to the product's commercialization, which is scheduled for
April 2005. The pending Federal legislation for reducing power plant mercury
emissions has generated the need for enhanced flue gas mercury removal
technology and the associated requirement to validate its performance via
continuous emission monitoring. This challenging monitoring application requires
extensive field studies under a broad range of flue gas matrices and operating
conditions. The arrangement with Thermo provides a unique opportunity to
accelerate the evaluation of sorbent injection based mercury removal systems and
concurrently demonstrate the suitability of Thermo's mercury CEMS.

Under the terms of the agreement with Thermo:
     o    Thermo is responsible for design of hardware, firmware software and
          overall product development as well as manufacture of commercial
          version of the mercury CEMS;
     o    ADA-ES is responsible for field validation and performance feedback
          and, depending on the work performed and supply of CEMS, may pay
          Thermo up to $400,000;
     o    Activities under the contract are expected to be completed by May 2005
          after which Thermo is expected to manufacture, market and sell mercury
          CEMS and ADA-ES is expected to purchase from Thermo all its
          requirements for mercury CEMS;
     o    Under a separate distribution arrangement, ADA-ES is expected to sell
          the Thermo CEMS only in conjunction with it mercury control technology
          and will receive a 25% discount from Thermo published price list;
     o    Either party may terminate the distribution arrangement upon 120 days
          written notice to the other party.


Other Consulting Services
ADA-ES also offers consulting services to assist utilities in planning and
implementing strategies to meet new government emission standards requiring
reductions in both sulfur dioxide and nitrogen dioxide. ADA-ES is also
developing and testing new chemical blends expected to aid coal-burning
utilities in the variety of problems that may be encountered in switching to
lower cost coals.

Competition
Our primary competition is the conventional FGC technology using either sulfur
trioxide or a combination of sulfur trioxide and ammonia. This technology has
been available commercially since the 1970's and is offered by Chemithon
Engineers Ltd., Wahlco, Inc. and Benetech in a variety of forms. Conditioning of
fly ash by injecting small amounts of sulfur trioxide into the flue gas is a
well-proven technique for improving performance of the ESP. Such sulfur trioxide
conditioning loses its effectiveness in application with temperatures over 350
degrees F. The capital costs of conventional FGC technology are in excess of $1
million. Injection of water mist into the flue gas stream is also a known
technique for improving performance of the ESP in certain applications and is
offered by EnviroCare, Inc. The capital cost of a water injection system are
typically $200,000-300,000. A typical ADA-ES system can cost between
$300,000-600,000. The Company has also introduced a product shown to be
effective in the 300-750 degree range that is suitable for intermittent
application and can augment a sulfur trioxide system and help to avoid use of
ammonia. The competitive advantages of our FGC technology include an effective
temperature range of 300 degrees F to 900 degrees F; a simple injection system;
a non-toxic conditioner that will not become a secondary pollutant; and
chemicals that are safer and easier to handle on site. The variety of products
in the industry to aid ESP performance primarily compete on the basis of
performance and price. The Company usually arranges for a full-scale
demonstration of its products to its potential customers prior to selling its
systems and chemicals for use on a continual basis.

                                       8
<PAGE>

There are no major barriers to entry of our products in the market, however,
utility companies are generally slow to embrace new technologies when they
perceive any potential for disruption in the production of electricity. The
market for ADA-249 is just starting to emerge and no significant competition yet
exists.

The commercial mercury control market for existing coal-fired electric utilities
is beginning to emerge as a result of the enactment of state and federal
regulations that for the first time in U.S. history are requiring such utilities
to control their mercury emissions. We estimate that there are approximately
1,100 individual units (several may be located on one site) in excess of 25
megawatts of generating capacity that could be impacted by such regulations. The
impact of the recently issued EPA regulations are being evaluated. Regulations
currently exist that require new coal-fired plants to control mercury emissions.
As of December 31, 2004, we had responded to over 150 bid requests for activated
carbon injection systems, 30 of which we believe are likely to proceed to orders
between now and 2008. The capital equipment expected to be required by those 30
units amounts to approximately $30 million, and the annual sorbent requirements
of such units are estimated to total approximately $30 million. We are not aware
of any other company who is responded to requests for commercial bids of mercury
control systems at this time. As this market matures, we expect competition will
arise primarily in the sorbent supply arena (activated carbon or other). See the
discussion above under the caption "Market for Our Products and Services."

Patents
We have received seven patents related to different aspects of our technology.
The Company's patents have terms of 20 years measured from the application date,
the earliest of which was in 1995. A patent related to ADA-249 was issued during
2004. In addition a patent for a new FGC additive was issued to the Company in
2004. We continue to improve our products, and patents applications for
additional products have been submitted. Although important to protect our
continuing business, we do not consider any of such patents to be critical to
the ongoing conduct of our business.

Supply of Chemical for Our Customers
We typically negotiate blending contracts that include secrecy agreements with
chemical suppliers located near major customers. These arrangements minimize
transportation costs while assuring continuous supply of ADA-ES proprietary
chemical blends. Such arrangements have been in place since the spring of 1999
and are generally renewed on an annual basis.

Raw Materials
We purchase equipment from a variety of vendors for the engineered units we
manufacture. Such equipment is available from numerous sources. We typically
subcontract the major portion of the construction labor associated with
installation of such equipment, again from a variety of vendors, usually those
local to the site of the work. We purchase our proprietary chemicals through
negotiated blending contracts with chemical suppliers generally located near
each major customer. The chemicals used are readily available, and several such
chemical suppliers can perform to our requirements.

Seasonality of Activities
The sale of FGC chemicals is dependent on the operations of the utilities to
which such chemicals are provided. Our FGC customers routinely schedule
maintenance outages in the spring of each year. During the period of such
outages, which may range from two weeks to over a month, no FGC chemicals are
used and purchases from us are correspondingly reduced.

Dependence on Major Customers
In 2004 we regularly supplied chemical, equipment and services to 3 FGC
customers. We recognized 8% of our revenue from MidAmerican Energy Co. in Iowa,
6% from Alliant Power in Wisconsin, and 7% from Cleco Utility Group, Inc. in
Louisiana. Also in 2004 we sold an activated carbon injection system to a
northeastern utility and provided services as they utilized that system to
evaluate their future needs for mercury emission control. Revenue related to
that sale and provision of services represented 9% of our revenue. ADA-ES' own
sales staff markets our technology through trade shows, mailings and direct
contact with potential customers. During 2004 we recognized 49% of our revenue
from services provided directly or as a subcontractor under contracts to the
U.S. government as discussed above under Government and Industry Supported
Contracts. (See also Notes 5 and 9 to the Consolidated Financial Statement
included elsewhere in this report).

                                       9
<PAGE>

Research and Development Activities
The Company is involved in several R&D contracts funded by DOE and industry
groups primarily directed toward the control of mercury emissions. The Company
cost shares in many of those contracts. For 2004 and 2003 we estimate that our
direct cost share of R&D in our DOE related contracts amounted to approximately
$348,000 and $217,000, respectively. In addition, we spent approximately
$467,000 and $376,000 on our own behalf on research and development activities
related to further development of our technologies during 2004 and 2003,
respectively.

Employees
As of December 31, 2004 we employed a total of 27 full-time personnel. Included
in this number are 25 people employed at our offices in Littleton, Colorado and
2 in Alabama. In addition, other personnel were employed on a contract basis for
specific project tasks.

Item 2. Description of Property.

Office Lease
ADA-ES leases approx. 12,000 square feet of combined office and warehouse space
in Littleton, Colorado a suburb of Denver. The term of the lease runs through
2009 and the lease agreement has an option to extend the term. We believe the
facilities are sufficient for our needs in to the foreseeable future. We do not
own any real property, but lease all of our office facilities. Annual lease
costs on this space amount to approximately $150,000.

Item 3. Legal Proceedings.

Registrant knows of no reportable pending legal matters involving Registrant or
its subsidiary.

Item 4. Submission of Matters to a Vote of Security Holders.
None.

PART II
Item 5. Market for Common Equity, Related Stockholder Matters and Small Business
Issuer Purchases of Equity Securities.
(a) Market Information.
Registrant's common stock commenced trading on the NASDAQ SmallCap market on
October 14, 2004 under the symbol ADES. Prior to such time, trading occurred on
the OTCBB market commencing on October 22, 2003, after the spin off from ESI
noted above. For the period from October 22, 2003 through December 31, 2003, the
Company's common stock traded in the price ranges of $3.00 to $7.50 (high and
low closing prices). During 2004 closing price ranges were as follows:

                                    High             Low
                                    ----             ---
         1st Quarter                $9.75            $6.60
         2nd Quarter                $9.50            $7.51
         3rd Quarter                $14.40           $8.25
         4th Quarter                $28.21           $12.80

The price ranges shown in the above table are based on NASDAQ quoted sales
prices for the fourth quarter of 2004 and and OTCBB bid prices for the first
three quarters of 2004. The sale prices may reflect inter-dealer prices, without
retail mark-up, markdown or commission and may not represent actual
transactions.

(b) Holders.
The number of record holders of common stock of Registrant as of March 18, 2005
was approximately 1,740; the approximate number of beneficial shareholders is
estimated at 8,000.

(c) Dividends.
Registrant has not paid dividends since its inception and there are no plans for
paying dividends in the foreseeable future.

                                       10
<PAGE>

Item 6. Management's Discussion and Analysis or Plan of Operation.
This Annual Report may contain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 that involve risks and uncertainties.
In particular such forward-looking statements may be found in this section and
under the heading "Description of Business." The following discussion and
analysis of the financial condition and results of operations of the Company
should be read in conjunction with the consolidated financial statements and
related notes thereto included elsewhere in this report. Words or phrases such
as "will," "hope," "expect," "intend," "plan" or similar expressions are
generally intended to identify forward-looking statements. Those statements
involve risks and uncertainties that could cause actual results to differ
materially from the results discussed herein. The principal risks and
uncertainties that may affect the Company's actual performance and results of
operations include the following: general economic conditions; adverse weather;
changes in federal income tax laws and federal funding for environmental
technology/specialty chemicals programs; governmental regulation; changes in
governmental and public policy; changes in economic conditions specific to one
or more of the Company's markets and businesses; competition; availability of
raw materials; and unexpected operations difficulties. Other risks and
uncertainties may also affect the outcome of the Company's actual performance
and results of operations. You are cautioned not to place undue reliance on the
forward-looking statements made in this Management's Discussion and Analysis of
Financial Condition and Results of Operations.


OVERVIEW
The Company provides environmental technologies and specialty chemicals to the
coal-burning electric utility industry. Revenues are generated through (1) time
and materials contracts for the emerging mercury emission control (MEC) market,
several of which are co-funded by government and industry, (2) the sale of
specialty chemicals and services for flue gas conditioning (FGC), and (3) the
sale of combustion aid (CA) chemicals and services, primarily ADA-249 through a
joint venture with Arch Coal.

Mercury has been identified as a toxic substance and pursuant to a court order
the EPA issued regulations for its control in March 2005. We are evaluating the
impact of those regulations on the future of our business, and the long-term
growth of the MEC market for the electric utility industry will most likely be
dependent on the impact of those federal and/or state regulations, which are in
various stages of enactment. As many as 1,100 existing coal-fired boilers may be
affected by such regulations, when they are fully implemented. Permitting of new
coal-fired plants generally requires them to meet more stringent requirements
that likely include MEC. For the near-term, our revenues from this market will
be dependent on (i) DOE- and industry-funded contracts discussed above, (ii)
mercury testing services and (iii) equipment sales and commissions on sorbents
sold to new plants and existing plants affected by the implementation of enacted
regulations. Although we expect this market to show steady growth over the next
several years, significant revenue growth is anticipated when federal
regulations impact a significant portion of existing boilers.

The market for our FGC chemicals and services is relatively flat and is expected
to only show modest growth, if any, in the near -term. Margins on these products
are typically higher than what we recognize for our present MEC sales and
represent an important contribution to the overall profitability of the Company.
In spite of several successful demonstrations, market acceptance for our CA
products has not grown as previously expected. Commencement of continuing sales
to a significant future customer is important, and if such occurs, is expected
to help promote additional sales.

In August 2004 the Company entered into several Subscription and Investment
Agreements and privately sold 1 million shares of its common stock to a limited
number of institutional investors at a price of $8.00 per share. The net
proceeds to ADA-ES from the sales totaled $7,620,000. Pritchard Capital Partners
LLP acted as the placement agent for the sales and received a fee of
approximately 5%. Approximately $551,000 of the proceeds were utilized to pay
off long-term debt. Approximately $7 million of the proceeds have been invested
in highly-rated corporate and government bonds and low-risk growth equities.

During the second quarter of 2004 the Company announced it signed a commercial
contract to supply and install a FGC system to improve capture of flyash
particles at a Midwestern coal-fired power plant. The plant has made provisions
to switch to coal from the Wyoming Powder River Basin (PRB). The contract called
for the purchase and installation of the equipment for approximately $300,000,
which was installed and operational in December 2004, and at such time began
routine injection of the Company's proprietary chemical. Based upon historical
average usage of the chemical at existing customers' plants, it is anticipated
that future chemical purchases will provide additional revenues of $500,000 -
$700,000 per year.

                                       11
<PAGE>

Liquidity and Capital Resources
The Company had a positive working capital of $3.2 million at 12/31/04. The
amount represents an increase of $1.9 million during the year. In addition, the
Company has investments in securities, accounted for as held to maturitiy
investments, that amount to approximately $5.8 million. The Company intends to
retain these investments to demonstrate strength in its financial position to
support guarantees the Company expects to provide on future sale of activated
carbon systems. Management believes that existing and expected improving working
capital, through continued and improved cash flow from ongoing operations, will
be sufficient to meet the anticipated needs of the Company in 2005. However,
there can be no assurances that the positive cash flow that has been achieved
will continue. The Company also has a $250,000 line-of-credit arrangement with a
bank to help with its working capital needs. No amounts were outstanding under
the line as of 12/31/04.

The Company's principal source of liquidity is its existing working capital and
operating cash flows as supplemented by its line-of-credit noted above. The
continuation of positive cash flow is somewhat dependent upon the continuation
of chemical sales and operations of the flue gas conditioning (FGC) units
currently in-place in Illinois, Louisiana and Iowa, each of which provide an
average monthly cash flow of approximately $20,000. Unsatisfactory results,
which could be caused by a combination or single factor such as changes in coal,
mechanical difficulties (whether in the FGC unit or otherwise), and/or overall
cost/benefit analysis, at any of those units may decrease or end the sale of
chemicals for such units. The Company is also performing services under three
DOE and industry co-funded contracts, which overall are expected to produce an
estimated $3.6 million in revenues in 2005. Of that amount approximately 35%
represents cost share amounts from industry partners, and 65% represents
reimbursement from DOE for costs that pass through the Company. Currently
funding has been approved by the DOE for approximately $15.8 million of its
share of those contracts. If further funding were not approved, the Company
would decrease or cease activities on those contracts and would expect to
maintain a positive cash flow but at a reduced level.

Debt service obligations in 2004 totaled approximately $145,000. The Company
paid-off all of its term debt during the third quarter of 2004 in an effort to
reduce interest expense. Planned capital expenditures for ADA-ES to sustain and
improve ongoing operations for 2005 are estimated at $311,000. The Company
expects to fund these requirements out of existing working capital and cash flow
from operations.

The Company assumed a defined contribution and 401(k) plan covering all eligible
employees from Earth Sciences Inc. as of January 1, 2003. The Company matches up
to 5% of salary amounts deferred by employees in the Plan. During 2004, the
Company recognized $81,000 of matching expense; this expense is expected to
amount to approximately $105,000 in 2005. In the past the Company has also made
discretionary contributions to the Plan amounting to approximately 10% of
salaries, which amounts were paid in stock. At December 31, 2003, the Company
had authorized a discretionary contribution of $147,000, which amount was paid
in the first quarter of 2004 through the issuance of stock. Based on results for
2004 such amount totaled approximately $160,000 and was paid in the form of cash
to all eligible employees in February 2005.

The Company has recorded net deferred tax assets of $406,000 as of 12/31/04.
Based on existing R&D contracts supported by the DOE and industry and other
expectation of continuing work, the Company has determined that it is more
probable than not that those deferred tax assets will be realized in the future.

Cash flow provided from operations totaled $831,000 for 2004 compared to
$183,000 for 2003. Cash flow from operations in 2004 was higher than 2003 as the
result of significant increases in expenses paid with stock and accounts payable
during 2004, which changes improved the Company's cash flow for the year. Cash
flow provided from operations in 2004 resulted primarily from the operating
income plus non-cash charges for depreciation, amortization and expenses paid
with stock plus and minus other components of working capital. Cash flow from
net investing activities for 2004 includes a use for investments in securities
of ($8,068,000), proceeds from sale of securities of $1,587,000, proceeds from
asset dispositions of $60,000 and capital expenditures of $(212,000). Cash flow
from financing activities in 2004 consisted of payments on notes payable of
$(922,000), proceeds from the sale of stock of $7,620,000 and proceeds from the
exercise of stock options of $435,000. Cash flow used in operations in 2003 also
resulted primarily from the operating income plus non-cash charges for
depreciation and amortization and changes in other operating assets and
liabilities. Cash flow from investing activities for 2003 includes a use for
capital expenditures of $(372,000). Cash flow from financing activities in 2003
consisted of payments on assumed debt and notes payable ($968,000), proceeds
from note payable and convertible debenture of $940,000, proceeds from the sale
of stock of $1,000,000 and advances to its then parent company, ESI, of
$(355,000).

                                       12
<PAGE>

Results of Operations
Revenues totaled $8,417,000 for 2004 versus $5,863,000 for 2003. Revenues in
2004 increased $2,503,000 and $85,000 due to increased sales in MEC and FGC
activities, respectively. The significant increase in MEC revenues for the year
is the result of the commercial sale of an activated carbon injection (ACI)
system, testing services provided therewith, and increased field activities in
DOE supported programs during the year. MEC revenues include $355,000 for
mercury measurement services. FGC revenues are $85,000 higher than 2003 due to
the injection system and related chemicals sales in December 2004 noted above.
We expect FGC revenues in 2005 to show only modest growth. CA revenues decreased
by $34,000 in 2004 compared to 2003. CA revenues for 2003 include installation
of a feed system at one of our continuing customers that was not repeated in
2004. In order for CA revenues to grow appreciably, we will need to add
additional customers. MEC revenues are primarily a function of government and
industry supported field demonstrations of our mercury control technology,
commercial sales of ACI systems and other consulting in mercury emission
measurement. The Company's government contracts are subject to audit by the
federal government, which could result in adjustment(s) to previously recognized
revenue. The Company believes, however, it has complied with all the
requirements of the contracts and future adjustments, if any, will not be
material. Based on contracts in hand and other anticipated work, total revenues
for 2005 are anticipated to grow by approximately 30% from the 2004 level. We
have been hiring personnel in response to the growth realized and adequate
resources of skilled labor appear to be available the anticipated needs.

Cost of services increased by $2,125,000 in 2004, as compared to 2003 as a
result of the increased revenue generating activities. ADA-ES experienced
positive gross margins in 2004 and 2003 of 40% and 51%, respectively. As noted
above, management expects the amount of time and materials work for the near
term to represent an increasing source of revenues wherein the anticipated gross
margins are less than for our specialty chemical sales. Gross margins for 2005
are expected to decline somewhat from the levels achieved in 2004, both as a
result of an increasing proportion of time and materials work and the Company's
increasing its share of costs in the field demonstration projects in which it
has elected to participate.

Research and development expenses increased in 2004 by $222,000 to $815,000 from
2003. The Company incurs R&D expenses not only on direct activities it conducts
but also by sharing a portion of the costs in the government and industry
programs in which it participates. Future consolidated research and development
expenses, except for those anticipated to be funded by the DOE contracts and
others that may be awarded, are expected to grow at about 10% per year for the
next several years.

General and administrative expenses increased by $121,000 to $2,046,000 in 2004.
The increase in 2004 results primarily from increases in staff and our office
space as the Company has made preparations for the anticipated growth in the
mercury control market, and other general increases in costs, such as insurance.

The Company's interest expense totaled approximately $34,000 for 2004 and
$27,000 for 2003. As a result of the pay-off of all term debt noted above we
expect future interest expense to be minimal.

Critical Accounting Policies and Estimates
Significant estimates are used in preparation of the financial statements and
include the Company's allowance for doubtful accounts, which is based on
historical experience. However, a significant amount of the Company's accounts
receivable ($223,000 and $241,000 at December 31, 2004 and 2003, respectively)
is from the federal government. Amounts invoiced for government contracts are
subject to change based on the results of future audits by the federal
government. The Company has not experienced significant adjustments in the past,
and we do not expect that a significant adjustment will be made in the future.
The Company uses its judgment to support the current fair value of goodwill and
other intangible assets of $2.1 million on the consolidated balance sheet.
Although the Company has had an independent valuation prepared, which supports
its recorded value and, management believes the fair value of other recorded
intangibles are not impaired, market demand for the Company's product and
services could change in the future requiring a write-down in recorded values.
As with all estimates, the amounts described above are subject to change as
additional information becomes available.

New Accounting Policies
In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment". This
Statement is a revision of FASB Statement No. 123, "Accounting for Stock-Based
Compensation". This Statement supersedes APB Opinion No. 25, "Accounting for
Stock Issued to Employees", and its related implementation guidance. SFAS No.
123R establishes standards for the accounting for transactions in which an

                                       13
<PAGE>

entity exchanges its equity instruments for goods or services, or incurs
liabilities in exchange for goods or services that are based on the fair value
of the entity's equity instruments or that may be settled by the issuance of
those equity instruments. SFAS No. 123R focuses primarily on accounting for
transactions in which an entity obtains employee services in share-based payment
transactions and requires the Company to measure and recognize costs of
share-based payment transactions in the financial statements. The Company must
implement SFAS No. 123R as of the beginning of the first interim or annual
reporting period that begins after December 15, 2005. The Company is evaluating
the impact of SFAS No. 123R on its financial statements and believes the impact
may be material if equity instruments are used as a significant means of
compensation in the future.


Item 7. Financial Statements. (see pages F-1 through F-20)
Index to Financial Statements
Report of Independent Registered Public Accounting Firm
Financial Statements:
         ADA-ES, Inc. and Subsidiary
         Consolidated Balance Sheet, December 31, 2004
         Consolidated Statements of Operations, For the Years Ended December 31,
           2004 and 2003
         Consolidated Statement of Stockholders' Equity, For the Period from
           January 1, 2003 to December 31, 2004
         Consolidated Statements of Cash Flows, For the Years Ended December 31,
           2004 and 2003
         Notes to Consolidated Financial Statements

Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.
None.

Item 8A. Controls and Procedures.

Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures designed to ensure
reports it files with the Securities and Exchange Commission (SEC), and to
process, summarize and disclose this information within the time periods
specified in the rules of the SEC. Based on their evaluation of the Company's
disclosure controls and procedures which took place as of December 31, 2004, the
end of the period covered by this report, the Chief Executive and Financial
Officers believe that these controls and procedures are effective to ensure that
the Company is able to collect, process and disclose the information it is
required to disclose in the reports it files with the SEC within the required
time periods.

The Company also maintains a system of internal controls designed to provide
reasonable assurance that: transactions are executed in accordance with
management's general or specific authorization; transactions are recorded as
necessary (1) to permit preparation of financial statements in conformity with
generally accepted accounting principles, and (2) to maintain accountability for
assets; access to assets is permitted only in accordance with management's
general or specific authorization; and the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.

During the company's fourth fiscal quarter of 2004, there have been no
significant changes in such controls or in other factors that have materially
affected, or are reasonably likely to materially affect, those controls.


PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
With Section 16(a) of the Exchange Act.

Except as noted below in the short biographies that follow the table, our
directors and executive officers were appointed by Earth Sciences prior to the
spin-off. Our Directors will serve until the first annual meeting of
stockholders, which is expected to occur in May 2005. Directors are expected to
be elected annually. Information concerning our directors and our key executive
officers is provided below.

                                       14
<PAGE>

Name                         Age            Position and Offices
----                         ---         ---------------------------
Jonathan S. Barr             47       Vice President Sales and Marketing
Ramon E. Bisque              73       Chairman of the Board of Directors
Duane N. Bloom               71       Director
C. Jean Bustard              47       Chief Operating Officer
Michael D. Durham            55       Director, President
John W. Eaves                47       Director, Member of the Audit Committee
Ronald B. Johnson            73       Director, Chairman of the Audit Committee
Robert H. Lowdermilk         68       Director
Mark H. McKinnies            53       Director, Chief Financial Officer
Rollie J. Peterson           57       Director, Member of the Audit Committee
Richard J. Schlager          53       Vice President Contract R&D
Jeffrey C. Smith             52       Director, Member of Audit Committee

The appointment of John Eaves to the Board of Directors of Registrant (the
"Board") was made pursuant to the investment agreement with Arch Coal, Inc.
whereby the management of the Company has agreed to make available one seat on
the Board so long as Arch continues to hold no less than 100,000 shares. There
are no other arrangements or understandings between any directors or executive
officers and any other person or persons pursuant to which they were selected as
director or executive officer.

Each of the officers named above serves from year to year at the pleasure of the
Board of Directors. Drs. Bisque and Bloom and Mr. McKinnies continue as
Directors of Earth Sciences, Inc. None of the other individuals named above are
directors of any other public companies.

Mr. Barr has been Vice President Sales and Marketing of the Company since July
2004. Prior to that he was a National Vice President of Sales and Regional Vice
President of Sales and Marketing for Arch Coal, Inc. from 1998 until 2004. Prior
to that, from 1994 - 1998, Mr. Barr was with the C&O unit of CSX Transportation,
where he served as the Director of River Coal Marketing and Market Manager for
Utility Coal.

Dr. Bisque is Professor Emeritus at the Colorado School of Mines, Golden,
Colorado and was a co-founder of Earth Sciences, Inc. in 1963. Dr. Bisque has
been Chairman of the Board of Directors and a was full or part-time employee of
Earth Sciences from 1974 through 2003.

Dr. Bloom was a co-founder of Earth Sciences, Inc. in 1963. Dr. Bloom was
employed full time by Earth Sciences from that time through 1999. Dr. Bloom has
been retired since that time. Dr. Bloom also remains a director of Earth
Sciences.

Ms. Bustard was appointed Chief Operating Officer of the Company in June 2004.
Prior to that appointment she had been Executive Vice President of ADA-ES, LLC
since its formation in 1996. Ms. Bustard was employed by ADA Technologies from
1988 through 1996. Ms. Bustard holds a B.S. in Physics Education from Indiana
University, a 1979 M.A. in Physics from Indiana State University and an MBA from
Colorado University.

Dr. Durham was a co-founder in 1985 of ADA Technologies, Inc., an Englewood,
Colorado private company which contracts to the Federal government and others
for development of emission technologies. Dr. Durham has been president of
ADA-ES LLC, since 1996.

John W. Eaves is currently Executive Vice President and Chief Operating Officer,
Arch Coal, Inc. Mr. Eaves had held the position of vice president of marketing
for Arch Coal since that company was formed on July 1, 1997. Prior to that time,
he served as president of the marketing subsidiary of Arch Mineral Corporation,
one of Arch Coal's predecessor companies. He has also held various positions in
sales and administration with Diamond Shamrock Company and Natomas Coal Company.

                                       15
<PAGE>

Mr. Johnson has been involved in all phases of the chemical industry:
production, compounding and distribution both domestically and internationally
for 47 years. He has held management and marketing positions with Dupont,
Industrial and Biochemical Department in strategic planning, Gamlen Chemical, a
international compounding company as manager of worldwide development and Vice
President of Univar, a North American chemical distributor. Further, he was a
Board Member with Charter National Bank and Trust from 1987-2000. Currently, he
is Chairman of Twin-Kem International, Inc., a distributor of agricultural
industrial chemicals, since 1984 and Chairman of ExecuVest, Inc., an oil & gas
exploration company, since 1987.

Mr. Lowdermilk has been president of Tectonic Construction Company, a producer
of washed aggregates and specialty sands since 1986. Mr. Lowdermilk has a long
history in construction and engineering projects.

Mr. McKinnies is a CPA and worked for Peat, Marwick, Mitchell & Co. before
commencing employment at Earth Sciences in 1978 and was employed there through
2000. Mr. McKinnies has been President of Earth Sciences since 1983 and remains
a director of Earth Sciences.

Mr. Peterson is a self-employed businessman and president and co-owner of
Cobblestone Development Co., a commercial land development company in Minnesota
that he helped found in 1987.

Mr. Schlager has been employed by the Company since 2000 and was employed by ADA
Technologies from 1989 until that time. Mr. Schlager holds a BS in Chemistry and
a M.S. in Metallurgical Engineering from the Colorado School of Mines.

Mr. Smith was appointed a director of the Company in August 2003 and is a
self-employed lawyer in the Law Office of Jeffrey C. Smith. Mr. Smith is the
past Executive Director of the Institute of Clean Air Companies where he served
for 17 years.

No family relationship exists between any individuals named in this Item 9.

Audit Committee
The Board of Directors has an Audit Committee consisting of Messrs. Eaves,
Johnson, Peterson and Smith. Mr. Johnson serves as the chairman of the Audit
Committee and as the Audit Committee Financial Expert. Mr. Johnson is
"independent" as that term is used in Item7(d)(3)(iv) of Schedule 14A under the
U.S. Securities Exchange Act.

Nominating Committee
The Board of Directors has appointed a Nominating Committee consisting of
Messrs. Eaves, Johnson, Peterson and Smith. Mr. Johnson serves as the chairman.
The responsibilities of the Committee, as set forth in the Governance Committee
charter, are to identify and recommend to the Board the nominees to be submitted
to the Company's shareholders for election as Directors at annual meetings of
the shareholders, to consider and make recommendations to the Board regarding
nominees for Director submitted by the Company's shareholders and recommend to
the Board the election of individuals to fill any vacancies occurring on the
Board from time to time. Under the Governance Committee charter, the Nominating
Committee will consider nominees submitted by shareholders of the Company.

Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires Registrant's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership with the Securities and Exchange Commission (the "SEC"). Officers,
directors and greater than ten percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.

Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons, Registrant believes that
during the fiscal year ended December 31, 2004, all filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were met.

Code of Ethics
The Company has adopted a Code of Ethics for Senior Financial Officers that is
applicable to our principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions. A copy of our Code of Ethics for Senior Financial Officers is filed
as an exhibit to the Company's annual report on Form 10KSB for 2003 and is
posted on the Company's website at www.adaes.com.

                                       16
<PAGE>

Item 10. Executive Compensation.
The following tables show compensation during the fiscal years ended December
31, 2004, 2003 and 2002, and option grants and option exercises during the
fiscal years ended December 31, 2004 and 2003, of those persons who were, at
December 31, 2004 the four most highly compensated executive officers of ADA-ES
whose total compensation exceeded $100,000.
<TABLE>
<CAPTION>

                               Summary Compensation Table
                                                                  Long Term Compensation Awards
                                                                  -----------------------------
                                                                       Securities Underlying
Name of Individual and                        Annual Compensation         Options (#)(2)
Principal Position               Year       Salary        Pension(1)    --------------------
------------------               ----       ------        ----------
<S>                              <C>       <C>             <C>                <C>
C. Jean Bustard                  2004      $119,565        $28,919            33,900
Chief Operating Officer          2003      $107,244        $28,885              -
                                 2002       $97,170        $26,633              -

Michael D. Durham                2004      $173,781        $39,579            59,000
President, CEO  and              2003      $155,137        $38,351              -
Director                         2002      $150,652        $35,742              -

Mark H. McKinnies                2004      $163,137        $38,747            44,400
Director and Chief               2003      $156,468        $36,351            14,500
Financial Officer                2002      $149,156        $35,628              -

Richard J. Schlager              2004      $112,901        $32,811            32,100
Vice President of Contract       2003      $104,328        $30,827              -
Research & Development           2002       $92,041        $25,335              -

     (1)  Amounts represent pension and profit sharing contributions, 401(k)
          deferrals, and matching payments made or accruing to a qualified plan
          by the Company for the benefit of the named individual. In 2002 such
          amounts include stock issued by Earth Sciences, Inc. for the
          discretionary pension contribution portion of such payments. Amounts
          paid by stock average 40% of the amounts shown for 2002.

     (2)  The securities shown for 2003 represent options to acquire shares
          granted pursuant to the Company's ISO Plan. The securities shown for
          2004 represent options to acquire shares granted pursuant to the
          Company's Executive Stock Option Plan described below, none of which
          were vested as of 12/31/2004.

                               Options/SAR Grants in Last Fiscal Year
                                        Individual Grants

                           Number of Securities    % of Total Options
                           Underlying Options      Granted to Employees   Exercise or Base   Expiration
Name                       Granted (#)               in Fiscal Year         Price ($/Sh)        Date
-------------------------------------------------------------------------------------------------------
C. Jean Bustard              33,900                       12.3%                $8.60         8/24/2014
Michael D. Durham            59,000                       21.4%                $8.60         8/24/2014
Mark H. McKinnies            44,400                       16.1%                $8.60         8/24/2014
Richard J. Schlager          32,100                       11.6%                $8.60

    Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values

                                                      Number of securities
                      Shares                         underlying unexercised       Value of unexercised
                      acquired on    Value realized  options at FY-end(#)(1)       options at FY-End
Name                  exercise (#)        ($)       Exercisable/Unexercisable   Exercisable/Unexercisable
----                  ------------        ---       -------------------------   -------------------------

C. Jean Bustard        4,695            $30,283           4,695/ 33,900             $100,989 /$522,399
Michael D. Durham      14,550           $84,390            -0-/ 59,000                 -0- /$909,190
Mark H. McKinnies      14,500           $75,980            -0- / 44,400                -0- /$684,204
Richard J. Schlager    9,390            $53,054            -0-/ 32,100                 -0- /$494,661

     (1)  The securities shown as "Unexercisable" as of December 31, 2004
          represent options to acquire shares granted pursuant to the Company's
          Executive Stock Option Plan described below, none of which were vested
          as of 12/31/2004.

                                       17
</TABLE>
<PAGE>

DIRECTOR COMPENSATION
The compensation plan for our non-employee directors is reviewed annually. Under
the existing compensation plan, each non-employee director are expected to
receive 603 shares of common stock per year plus such directors are paid a fee
of $620 per regular meeting, $310 per committee or telephonic meeting and/or
$518 per committee meeting for serving as chairman of the committee. The
Chairman of the Audit Committee is paid the greater of $3,000 per month or the
per meeting fee amounts. In November 2004, the Board of Directors approved the
issuance of 603 shares of common stock and the grant of 5,000 options to
non-employee directors as part of their compensation for service. The issuance
of such shares and the grant of such options are subject to shareholder
approval, which the Company intends to seek at its 2005 Annual Meeting.

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS

The Company has executed employment agreements with every fulltime employee,
including all executive officers that contain the following standard provisions:
     1.   Automatic extensions for one-year periods.
     2.   Three month written notice of intent to terminate by either the
          Company of the employee.
     3.   Description of position, duties, authority, compensation, benefits and
          obligation of the employee to devote fulltime to the fulfillment of
          his/her obligations under the agreement
     4.   Disclosure/ownership of inventions and confidential subject matter.
     5.   Assignment of inventions and confidential subject
          matter/documentation/commercialization.
     6.   Copyright works and written records.
     7.   Restrictive obligations relating to confidential subject matter.
     8.   Conflicting obligations and obligations upon termination of
          employment.

The compensation amounts included in the employment agreements are subject to
annual adjustment and the 2004 compensation levels are shown in the tables
above. None of the Company's employment contracts nor other agreements contain
any provisions for the payment of any amounts that result from or will result
from the resignation, retirement or any other termination of any executive
officer's employment with the Company or from a change-in-control of the Company
or a change in the named executive officer's responsibilities following a
change-in-control.


Item 11. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
The following table provides information with respect to the beneficial
ownership of the Company's common stock by (1) each of our stockholders whom we
believe are beneficial owners of more than 5% of our outstanding common stock,
(2) each of our directors and executive officers and (3) all of our directors
and executive officers as a group. We base the share amounts shown on each
person's beneficial ownership as of March 18, 2004, unless we indicate some
other basis for the share amounts. Except as noted in the footnotes accompanying
the table, each of the individuals named below has sole voting and investment
power for the respective shares.


                                       18
<TABLE>
<CAPTION>

                                                   Amount and Nature of
 Name and Address                                  Beneficial Ownership    Percent of Class
 ----------------                                  --------------------    ----------------
<S>                                                      <C>                      <C>
 Jonathan S. Barr (VP Sales and Marketing)               4,800 (1)                 *
 8100 SouthPark Way
 Littleton, CO

 Ramon E. Bisque (Chairman of the Board of Directors)   71,350 (2)                1.5%
 9113 Fern Way
 Golden, CO

 Duane N. Bloom (Director)                              53,766 (3)                1.1%
 5565 Pine Ridge Rd.
 Golden, CO

 C. Jean Bustard (Chief Operating Officer)              20,087 (4)                 *
 9193 Buffalo Drive
 Littleton, CO

 Michael D. Durham (Director and President)            160,538 (5)                3.3%
 5252 Lariat Drive
 Castle Rock, CO

 John W. Eaves (Director)                                1,000                     *
 1 CityPlace One, Suite 300
 St. Louis, MO

 Hummingbird Value Funds                               229,457                    4.8%
 153 East 53rd Street, 55th Floor.
 New York, NY

 Ronald B. Johnson (Director)                            8,600                     *
 4220 S. Allison St.
 Littleton, CO

 Robert H. Lowdermilk (Director)                       183,335 (6)                3.8%
 100 Cherry St.
 Denver, CO

 Mark H. McKinnies (Director, Secretary and CFO)        71,595 (7)                1.9%
 27638 Pine Grove Trail
 Conifer, CO

 Rollie J. Peterson (Director)                          27,644                     *
 22486 County Road 73
 Big Lake, MN

 Richard J. Schlager (VP of Contract R&D)               21,473 (8)                 *
 16242 E. Prentice Lane
 Centennial, CO

 Jeffrey C. Smith (Director)                             6,200                     *
 7272 Wisconsin Avenue, Suite 300
 Bethesda, MD

 Tontine Capital Partners, L.P.                        257,000                    5.4%
 31 West 52nd ST, 17th Floor
 New York, NY

 Wellington Management Company                         561,900                   11.7%
 75 State Street
 Boston, Massachusetts

 Directors and Officers as a Group (12 individuals)    627,181 (9)               13.0%

*  Less than 1%.

                                       19
<PAGE>

Notes:

(1)  Included in the amount shown are 1,800 shares to which Mr. Barr has the
     right to acquire beneficial ownership through stock options.
(2)  Included in the amount shown are 100 shares registered in the name of Dr.
     Bisque's wife and 16,281 shares held in Dr. Bisque's pension fund account.
(3)  Included in the amount shown are 773 shares registered in the name of Dr.
     Bloom's wife and 20,416 shares held in Dr. Bloom's pension fund account.
(4)  Included in the amount shown are 4,000 shares to which Ms. Bustard has the
     right to acquire beneficial ownership through stock options and 10,933
     shares held in Ms. Bustard's pension fund account.
(5)  Included in the amount shown are 45,852 shares held in Dr. Durham's pension
     fund account.
(6)  Included in the amount shown are 13,000 shares registered in the name of
     Mr. Lowdermilk's wife, and 109,000 shares held by Tectonic Construction Co.
     ("TCC"). Mr. Lowdermilk is the president and majority shareholder of TCC.
(7)  Included in the amount shown are 32,976 shares held in Mr. McKinnies'
     pension fund account.
(8)  Included in the amount shown are 12,086 shares held in Mr. Schlager's
     pension fund account.
(9)  The amount shown includes 5,800 shares to which individuals in the group
     have the right to acquire beneficial ownership through stock options.

                                             Equity Compensation Plan Information
                                             ------------------------------------
                                                                                         Number of securities remaining
                                 Number of securities to     Weighted-average exercise   available for future issuance under
                                 be issued upon exercise     price of outstanding        equity compensation plans
                                 of outstanding options,     options, warrants and       (excluding securities reflected in
Plan category                    warrants and rights         rights                      column (a))
-------------                    -------------------         -------------------------   -----------------------------------
                                         (a)                         (b)                              (c)
Equity compensation plans
approved by security holders           93,115                       $9.12                           195,530

Equity compensation plans not
approved by security holders          200,000                       $8.60                                 0
                                     --------                       -----                           -------
Total                                 293,115                       $8.76                           195,530
                                     ========                       =====                           =======
</TABLE>

DIRECTOR COMPENSATION
As noted above, under the existing compensation plan, each non-employee director
will receive stock and options, subject to shareholder approval. This payment
plan has not been approved by the shareholders and is not included in the table
above.

STOCK OPTION PLANS
During 2003 the Company adopted the 2002 ADA-ES, Inc. Stock Option Plan. One
purpose of the plan was to duplicate the options previously awarded by Earth
Sciences that have been cancelled. Otherwise, the plan is intended to serve to
encourage our key employees, through their individual efforts, to improve our
overall performance and to promote profitability by providing them an
opportunity to participate in the increased value they help create. Options
granted under the plan may be in the form of "incentive stock options" as
defined under section 422 of the Internal Revenue Code of 1986, as amended, or
options that are not incentive stock options. The plan is administered by the
compensation committee of the Board of Directors. The plan was approved by ESI
as the sole shareholder of ADAES prior to the spin-off distribution of ADA-ES
shares. We reserved 400,000 shares of our common stock for issuance under the
plan. In general, all options granted under the plan will lapse ten years from
the date of grant (five years in the case of a 10% stockholder of our company,
our parent or one of our subsidiaries). In general, the exercise price of an
option will be determined by the compensation committee of the board of
directors at the time the option is granted and will not be less than 100% of
the fair market value of a share of our common stock on the date the option is
granted. The compensation committee may provide in the option agreement that an
option may be exercised in whole immediately or is exercisable in increments
through a vesting schedule. During 2004, 75,995 options were granted under the
plan.

                                       20
<PAGE>

During 2004 the Company adopted the 2004 Executive Stock Option Plan, which did
not require shareholder approval. The plan authorized the grant of up to 200,000
options to purchase shares of the Company's Common Stock to executive officers
of the Company. The purpose of the plan is to promote the growth and
profitability of the Company by awarding options to purchase Common Stock of the
Company for services performed and to be performed in the future. Options
granted under the plan are generally intended to be non-qualified stock options
("NQSO") for federal income tax purposes. The plan is administered by the
compensation committee of the Board of Directors. In each case, the option
exercise price is the market price on the date of the grant. The options are
exercisable over a 10-year period based on a vesting schedule that may be
accelerated based on performance of the individual recipients as determined by
the Board of Directors. Options were granted under the Plan to five executive
officers, who are also full-time employees of the Company. During 2004, 200,000
options were granted under the plan, none of which were vested at December 31,
2004. In January 2005 the Board of Directors authorized the vesting of 27,080
options under the plan.


Item 12. Certain Relationships and Related Transactions.
In 2000, Earth Sciences re-negotiated a convertible debenture in the amount of
$1,000,000 (the "Debenture") with Tectonic Construction Co. ("TCC") and a note
in the amount of $250,000 (the "Note") from TCC to extend the due dates and
clarify certain collateral. Mr. Lowdermilk, a director of Registrant, is the
president and majority shareholder of TCC. The Debenture and the Note bore
interest at the greater of prime plus two points or 10% which interest was
payable quarterly. As required under the Distribution Agreement with Earth
Sciences, in September 2003 the Company assumed remaining balance of the notes
payable to Tectonic Construction Co. totaling $1,150,000. Of that amount
$300,000 was paid off with proceeds of a convertible debenture sold to Arch in a
like amount as noted below. Also in September 2003, Tectonic converted $210,000
of the remaining debt into 100,000 shares of the Company's stock pursuant to the
terms of the debt assumed from Earth Sciences. The remaining $640,000 was also
paid-off in September 2003 with the proceeds from a term loan of the same amount
obtained from a commercial bank. At that date the Company also assumed other
indebtedness from ESI in the amount of $130,000 related to past service
obligations ($77,000 payable for the benefit of Mr. McKinnies and $44,200
payable for the benefit of Dr. Bisque, both Directors of the Company).

As discussed above, the Company executed a Securities Subscription and
Investment Agreement with Arch Coal, Inc. in July 2003. Pursuant to the
investment agreement, in September 2003 Arch purchased a $300,000 convertible
debenture from the Company, purchased 137,741 shares of the Company's Common
stock and was also granted an option to purchase 50,000 shares. The Company also
co-markets its ADA-249 product under an agreement with Arch as described above.
Under that arrangement, the Company has recorded revenue of $60,000 and $150,000
in 2002 and 2003, respectively. The Company also granted Arch certain
"piggyback" rights in the event the Company registers certain other equity
securities and certain demand registration rights as part of the transaction. A
designee of Arch, John W. Eaves, has been appointed a seat on the Company's
Board of Directors and management of the Company has agreed in the future to
nominate and to vote all proxies and other shares of stock in the Company which
they are entitled to vote in favor of that designee so long as Arch holds no
less 100,000 shares of the Company's common stock.

Item 13. Exhibits

(a) Exhibits and Index of Exhibits (all exhibits except as otherwise noted are
incorporated by reference; Exhibit 3.1 through Exhibit 10.12 were filed as
exhibits to Registrant's Form 10SB, as amended, filed March 23, 2003; Exhibit
10.13 was filed as an exhibit to Registrant's Form S-8 filed November 13, 2003;
Exhibit 10.14 was filed as an exhibit to Registrant's Form S-8 filed February 6,
2004; Exhibits 10.15 through 10.19 were filed as exhibits to Registrant's Form
10QSB filed May 12, 2004; Exhibits 10.20 and 10.21 were filed as exhibits to
Registrants Form S-8 filed December 14, 2004; and Exhibits 14 and 21.1 were
filed as exhibits to Registrant's Form 10KSB for the year ended December 31,
2003).
No.       Description
---       -----------
Index to Exhibits.
3.1       Amended and Restated Articles of Incorporation of ADA-ES
3.2       Amended and Restated Bylaws of ADA-ES
4.1       Form of Specimen Stock Certificate
10.1      Distribution Agreement
10.2      2002 ADA-ES, Inc. Stock Option Plan
10.3      Market Development Agreement between NORIT Americas Inc. and Earth
          Sciences, Inc. dated June 29, 2001
10.4      Assignment and Assumption Agreement between NORIT Americas Inc. and
          ADA-Environmental Solutions, LLC dated August 4, 2003
10.5      Joint Venture and Co-Marketing Agreement by and between Arch Coal
          Sales Company and ADA- Environmental Solutions, LLC as of January 1,
          2002
10.6      Securities Subscription and Investment Agreement between ADA-ES, Inc.
          and Arch Coal, Inc. dated July 7, 2003
10.7      U.S. Department of Energy Cooperative Agreement No. DE-FC26-00NT40755
          "Advanced Flue Gas Conditioning as a Retrofit Upgrade to Enhance PM
          collection from Coal-Fired Electric Utility Boilers"
10.8      U.S. Department of Energy Cooperative Agreement No. DE-FC26-00NT41005
          "Field Test Program to Develop Comprehensive Design, Operating, and
          Cost Data for Mercury Control Systems"
10.9      Joint Product Exploitation and Marketing Agreement dated October 2,
          2002, by and between ALSTOM Power Inc. ADA Environmental Solutions LLC
10.10     Tax Sharing Agreement between ADA-ES, Inc. and Earth Sciences, Inc.
          dated March 17, 2003
10.11     U.S. Department of Energy Cooperative Agreement No. DE-FC26-02NT41591
          "Long-Term Operation of a COHPAC System for Removing Mercury from
          Coal-Fired Flue Gas"
10.12     Amendment No. 1 to Distribution Agreement by and between ADA-ES, Inc.
          and Earth Sciences, Inc. dated August 15, 2003
10.13     2003 Stock Compensation Plan #1
10.14     2003 Stock Compensation Plan #2
10.15     U.S. Department of Energy Cooperative Agreement No. DE-FC26-03NT41986
          "Evaluation of Sorbent Injection for Mercury Control ".
10.16     Purchase Order #4500589101 signed 3/18/04 from We Energies Clean Coal
          Power Initiative Repayment Agreement between the U.S. Department of
          Energy and ADA-ES, Inc. dated April 6, 2004
10.17     TOXECON Sorbent Sales Repayment Agreement by and between Norit America
          Inc. and ADA-ES, Inc. dated February 18, 2004
10.18     Development and Field Validation Agreement between Thermo
          Environmental Instruments Inc, and ADA-ES, Inc. dated April 16, 2004
10.19     Distribution Agreement between Thermo Environmental Instruments Inc,
          and ADA-ES, Inc. dated April 16, 2004
10.20     ADA-ES, Inc. 2004 Executive Stock Option Plan
10.21     2004 Stock Compensation Plan #2 and model stock option agreements
10.22*    U.S. Department of Energy Cooperative Agreement No. DE-FC26-05NT42307
          "Low-Cost Options for Moderate Levels of Mercury Control".
10.23*    Employment Agreement dated between C. Jean Bustard and ADA
          Environmental Solutions, LLC.
10.24*    Employment Agreement dated between Michael D. Durham and ADA
          Environmental Solutions, LLC.
10.25*    Employment Agreement dated January 2, 2000 between Mark H. McKinnies
          and ADA Environmental Solutions, LLC.
10.26*    Employment Agreement dated January 1, 2000 between Richard J. Schlager
          and ADA Environmental Solutions, LLC.
14        Code of Ethics for Senior Financial Officers
21.1      Subsidiaries of ADA-ES
23.1*     Consent of Hein & Associates LLP
31.1*     Certification of Chief Executive and Chief Financial Officer of
          ADA-ES, Inc. Pursuant to 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a)
32.1*     Certifications Pursuant to 18 U.S.C. Section 1350

(*) - filed herewith.


Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
                                                          Fiscal Year
                                                          -----------
                                                  2004                  2003
                                                  ----                  ----
Audit Fees                                       $58,513              $66,267
Audit-Related Fees                                 1,896                  -
Tax Fees (1)                                         -                    -
All Other Fees (2)                                   -                $19,021

                                       22
<PAGE>

The above amounts include combined services provided for Registrant and Earth
Sciences for a portion of 2003, where such services could not be divided into
their components.
(1) Registrant's principal accountant provided review and consulting services
related to the filing of the Company's 2003 Federal Income Tax returns.
(2) Registrant's principal accountant provided review and consulting services
related to the filing of a Form 10SB with the SEC to effect the spin-off from
Earth Sciences in 2003, filing of a Form S-3 in 2004 and review of preliminary
Sarbanes-Oxley Section 404 documentation in 2004.

Audit Committee Approval of Services
It is the policy of the Audit Committee of the Company to approve the engagement
to render audit or non-audit services before the accountant is engaged by the
Company. The Audit Committee approved of 100% of the services provided by the
independent accountant in 2004.



SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

ADA-ES, Inc.
------------
(Registrant)

By /s/ Mark H. McKinnies                            /s/ Michael D. Durham
------------------------                            ---------------------
Mark H. McKinnies, Treasurer                        Michael D. Durham
and Principal Financial Officer                     President

Date:  March 25, 2005                               March 25, 2005
       --------------                               --------------

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.

/s/ Ramon E. Bisque                                 /s/ Robert H. Lowdermilk
-------------------                                 -------------------------
Ramon E. Bisque                                     Robert H. Lowdermilk
Chairman of The Board of Directors                  Director

March 25, 2005                                      March 25, 2005
--------------                                      --------------
    Date                                                  Date


/s/ Duane N. Bloom                                  /s/ Michael D. Durham
------------------                                  ---------------------
Duane N.  Bloom, Director                           Michael D. Durham, Director

March 25, 2005                                      March 25, 2005
--------------                                      --------------
    Date                                                  Date


/s/ Mark H. McKinnies                               /s/ Ronald B. Johnson
---------------------                               ---------------------
Mark H. McKinnies, Director                         Ronald B. Johnson, Director

March 25, 2005                                      March 25, 2005
--------------                                      --------------
    Date                                                  Date


                                       23
<PAGE>





                          INDEX TO FINANCIAL STATEMENTS


                                                                            PAGE
                                                                            ----

Report of Independent Registered Public Accounting Firm......................F-2

Consolidated Balance Sheet - December 31, 2004...............................F-3

Consolidated Statements of Operations - For the Years Ended
     December 31, 2004 and 2003..............................................F-4

Consolidated Statements of Changes in Stockholders' Equity -
     For the Years Ended December 31, 2004 and 2003..........................F-5

Consolidated Statements of Cash Flows - For the Years Ended
     December 31, 2004 and 2003..............................................F-6

Notes to Consolidated Financial Statements...................................F-7








                                       F-1
<PAGE>



             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the Board of Directors and Stockholders
ADA-ES, Inc. and Subsidiary
Littleton, Colorado


We have audited the accompanying consolidated balance sheet of ADA-ES, Inc. and
Subsidiary as of December 31, 2004, and the related consolidated statements of
income, changes in stockholders' equity and cash flows for the years ended
December 31, 2004 and 2003. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of ADA-ES,
Inc. and Subsidiary as of December 31, 2004, and the results of their operations
and their cash flows for the years ended December 31, 2004 and 2003, in
conformity with U.S. generally accepted accounting principles.



/s/ HEIN & ASSOCIATES LLP
-------------------------
HEIN & ASSOCIATES LLP


Denver, Colorado
February 16, 2005




                                       F-2
<PAGE>
<TABLE>
<CAPTION>

                              ADA-ES, INC. AND SUBSIDIARY
                              CONSOLIDATED BALANCE SHEET
                                   DECEMBER 31, 2004

                                        ASSETS
                                        ------
CURRENT ASSETS:
<S>                                                                       <C>
    Cash and cash equivalents                                             $  2,108,000
    Trade receivables, net of allowance for doubtful accounts of $4,000      1,198,000
    Inventories                                                                 48,000
    Investments in securities (Note 4)                                         713,000
    Prepaid expenses and other                                                 200,000
                                                                          ------------
             Total current assets                                            4,267,000
                                                                          ------------

PROPERTY AND EQUIPMENT, at cost                                              1,345,000
    Less accumulated depreciation and amortization                            (896,000)
                                                                          ------------
             Net property, plant and equipment                                 449,000
                                                                          ------------

GOODWILL, net of $1,556,000 in amortization                                  2,024,000
INTANGIBLE ASSETS, net of $33,000 in amortization                              146,000
INVESTMENTS IN SECURITIES AND OTHER ASSETS (Note 4)                          6,194,000
                                                                          ------------
TOTAL ASSETS                                                              $ 13,080,000
                                                                          ============
                         LIABILITIES AND STOCKHOLDERS' EQUITY
                         ------------------------------------
CURRENT LIABILITIES:
    Accounts payable                                                      $    433,000
    Accrued payroll and related liabilities                                    363,000
    Accrued expenses                                                            40,000
    Deferred revenue                                                           202,000
                                                                          ------------
             Total current liabilities                                       1,038,000
                                                                          ------------

LONG-TERM LIABILITIES:
    Deferred compensation and other                                             32,000
                                                                          ------------
             Total long-term liabilities                                        32,000
                                                                          ------------

COMMITMENTS AND CONTINGENCIES (Notes 5 and 8)
STOCKHOLDERS' EQUITY:
    Preferred stock; 50,000,000 shares authorized, none outstanding               --
    Common stock; no par value, 50,000,000 shares authorized,
         4,795,711 shares issued and outstanding                            13,134,000
    Accumulated other comprehensive income                                      34,000
    Accumulated deficit                                                     (1,158,000)
                                                                          ------------
             Total stockholders' equity                                     12,010,000
                                                                          ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                $ 13,080,000
                                                                          ============


                 See accompanying notes to these financial statements.

                                          F-3
<PAGE>

                           ADA-ES, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS



                                                        FOR THE YEARS ENDED
                                                            DECEMBER 31,
                                                     --------------------------
                                                         2004           2003
                                                     -----------    -----------

REVENUE:
    Mercury emission control                         $ 5,940,000    $ 3,437,000
    Flue gas conditioning                              2,122,000      2,037,000
    Combustion aids and others                           355,000        389,000
                                                     -----------    -----------
         Total net revenues                            8,417,000      5,863,000

COST OF SERVICES                                       5,020,000      2,895,000
                                                     -----------    -----------

GROSS MARGIN                                           3,397,000      2,968,000

OTHER COSTS AND EXPENSES:
    General and administrative                         2,046,000      1,925,000
    Research and development                             815,000        593,000
    Depreciation and amortization                        153,000        130,000
                                                     -----------    -----------
         Total expenses                                3,014,000      2,648,000
                                                     -----------    -----------

OPERATING INCOME                                         383,000        320,000

OTHER INCOME (EXPENSE):
    Interest expense                                     (34,000)       (27,000)
    Other, net                                            49,000         23,000
                                                     -----------    -----------
             Total other income (expense)                 15,000         (4,000)
                                                     -----------    -----------

NET INCOME BEFORE TAXES                                  398,000        316,000

PROVISION FOR TAX BENEFIT (EXPENSE)                      (62,000)        93,000
                                                     -----------    -----------

NET INCOME                                               336,000        409,000
                                                     -----------    -----------

UNREALIZED GAINS AND LOSSES ON CERTAIN INVESTMENTS
    IN EQUITY SECURITIES, net of tax                      34,000           --
                                                     -----------    -----------

COMPREHENSIVE INCOME                                 $   370,000    $   409,000
                                                     ===========    ===========

NET INCOME PER COMMON SHARE - BASIC AND DILUTED      $       .08    $       .12
                                                     ===========    ===========

WEIGHTED AVERAGE BASIC COMMON SHARES OUTSTANDING       4,126,000      3,412,000
                                                     ===========    ===========

WEIGHTED AVERAGE DILUTED COMMON SHARES OUTSTANDING     4,193,000      3,507,000
                                                     ===========    ===========


              See accompanying notes to these financial statements.

                                       F-4
<PAGE>

                                                    ADA-ES, INC. AND SUBSIDIARY

                                    CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                          FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


                                                                                        ACCUMULATED
                                              COMMON STOCK              RECEIVABLE        OTHER
                                       ----------------------------        FROM        COMPREHENSIVE   ACCUMULATED
                                          SHARES          AMOUNT          PARENT          INCOME         DEFICIT          TOTAL
                                       ------------    ------------    ------------    ------------    ------------    ------------

BALANCES, January 1, 2003                    10,000    $  5,326,000    $   (473,000)   $       --      $ (1,903,000)   $  2,950,000
   Cash distributions to Parent                                            (355,000)           --              --          (355,000)
   Stock issued to employees by
      Parent for expenses                      --              --            20,000            --              --            20,000
   Stock option issued to third
      party for services                       --            19,000            --              --              --            19,000
   Assumption of debt on spin-off              --              --        (1,280,000)           --              --        (1,280,000)
   Constructive dividend to Parent
      to complete spin-off                3,334,489      (2,088,000)      2,088,000            --              --              --
   Issuance of stock for cash               137,741       1,000,000            --              --              --         1,000,000
   Issuance of stock on conversion
      of debt                               100,000         210,000            --              --              --           210,000
   Net income                                  --              --              --              --           409,000         409,000
                                       ------------    ------------    ------------    ------------    ------------    ------------

BALANCES, December 31, 2003
                                          3,582,230       4,467,000            --              --        (1,494,000)      2,973,000
   Stock issued to employees and
      directors for expenses                 25,716         181,000            --              --              --           181,000
   Issuance of stock for cash, net        1,000,000       7,620,000            --              --              --         7,620,000
   Issuance of stock on exercise of
      options                               173,265         435,000            --              --              --           435,000
   Issuance of stock on conversion
      of debt                                14,500          36,000            --              --              --            36,000
   Tax benefit of stock transactions           --           395,000            --              --              --           395,000
   Unrealized gains on investments             --              --              --            34,000            --            34,000
   Net income                                  --              --              --              --           336,000         336,000
                                       ------------    ------------    ------------    ------------    ------------    ------------

BALANCES, December 31, 2004               4,795,711    $ 13,134,000    $       --      $     34,000    $ (1,158,000)   $ 12,010,000
                                       ============    ============    ============    ============    ============    ============


                                       See accompanying notes to these financial statements.

                                                               F-5
<PAGE>

                                   ADA-ES, INC. AND SUBSIDIARY
                              CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                            FOR THE YEARS ENDED
                                                                                DECEMBER 31,
                                                                        --------------------------
                                                                            2004           2003
                                                                        -----------    -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                           $   336,000    $   409,000
   Adjustments to reconcile net income to net cash provided by
      operating activities:
         Depreciation and amortization                                      153,000        130,000
         Loss on asset dispositions and securities                           24,000          6,000
         Expenses paid with stock and stock options                         181,000         39,000
         Deferred tax expense (benefit)                                      62,000        (93,000)
         Changes in operating assets and liabilities:
             (Increase) decrease in:
                  Receivables                                              (133,000)        16,000
                  Inventories                                                (5,000)        (1,000)
                  Other assets                                              (89,000)        16,000
             Increase (decrease) in:
                  Accounts payable                                          271,000       (292,000)
                  Accrued expenses                                          190,000        183,000
                  Other liabilities                                        (159,000)      (230,000)
                                                                        -----------    -----------
             Net cash provided by operating activities                      831,000        183,000
                                                                        -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures for equipment and patents                          (212,000)      (372,000)
   Investment in securities                                              (8,068,000)          --
   Proceeds from asset dispositions                                          60,000         24,000
   Proceeds from sale of securities                                       1,587,000           --
                                                                        -----------    -----------
             Net cash used in investing activities                       (6,633,000)      (348,000)
                                                                        -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from notes payable                                                 --          940,000
   Payments on debt and notes payable                                      (922,000)      (968,000)
   Advances to Parent                                                          --         (355,000)
   Exercise of stock options                                                435,000           --
   Sale of stock                                                          7,620,000      1,000,000
                                                                        -----------    -----------
             Net cash provided in financing activities                    7,133,000        617,000
                                                                        -----------    -----------
INCREASE  IN CASH AND CASH EQUIVALENTS                                    1,331,000        452,000
CASH AND CASH EQUIVALENTS, beginning of year                                777,000        325,000
                                                                        -----------    -----------
CASH AND CASH EQUIVALENTS, end of year                                  $ 2,108,000    $   777,000
                                                                        ===========    ===========
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:
   Cash payments for interest                                           $    34,000    $    26,000
                                                                        ===========    ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
   Assumption of debt and accrued liabilities at spin-off               $      --      $ 1,280,000
                                                                        ===========    ===========
   Constructive dividend to Parent at Spin-off                          $      --      $ 2,088,000
                                                                        ===========    ===========
   Transfer of inventory to property                                    $    39,000    $      --
                                                                        ===========    ===========
   Tax effect of stock option exercises                                 $   415,000    $      --
                                                                        ===========    ===========
   Stock issued in conversion of debt                                   $    36,000    $   210,000
                                                                        ===========    ===========


                     See accompanying notes to these financial statements.

                                            F-6
</TABLE>
<PAGE>

                           ADA-ES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. SUMMARY OF NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES:
-----------------------------------------------------------------------

Nature of Operations - The accompanying consolidated financial statements
include the accounts of ADA-ES, Inc. (ADA-ES) and its wholly-owned subsidiary,
ADA Environment Solutions, LLC (ADA). ADA-ES was a wholly-owned subsidiary of
Earth Sciences, Inc. ("ESI" or the "Parent") until September 2003 when ESI
distributed all of the then outstanding stock of ADA-ES to its stockholders.
ADA-ES' only asset is its investment in its wholly-owned subsidiary, ADA. All
significant intercompany transactions have been eliminated. Collectively, ADA
and ADA-ES are referred to as the Company.

The Company is principally engaged in providing environmental technologies and
specialty chemicals to the coal-burning utility industry. The Company also
generates substantial revenue from contracts co-funded by the government and
industry. The Company's sales occur principally throughout the United States.

Cash Equivalents - For purposes of the statement of cash flows, the Company
considers all highly liquid debt instruments with original maturities of three
months or less to be cash equivalents. The Company maintains the majority of its
cash accounts in one commercial bank. The amount on deposit at December 31, 2004
was in excess of the insurance limits of the Federal Deposit Insurance
Corporation.

Receivables and Credit Policies - Trade receivable are uncollateralized customer
obligations due under normal trade terms requiring payment within 30 days from
the invoice date. Included in trade receivables are $139,000 of amounts not yet
billed to customers as of December 31, 2004. Management reviews trade
receivables periodically and reduces the carrying amount by a valuation
allowance that reflects management's best estimate of the amount that may not be
collectible.

Investments - Securities investments that the Company has the positive intent
and ability to hold to maturity are classified as held-to-maturity securities
and are recorded at amortized cost in investments and other assets. Securities
not classified as held-to-maturity are classified as available-for-sale
securities. Available-for-sale securities are recorded at fair value in
investments in securities in current assets, with the change in fair value
during the period excluded from earnings and recorded net of tax as a component
of other comprehensive income.

Premiums and discounts on debt securities are amortized over the contractual
lives of those securities. The Company's investments in debt securities are
classified as held to maturity securities and valued at amortized cost, which
approximates fair value. The amortized cost at December 31, 2004 was $5,812,000
for investments in corporate debt securities, U.S. government and agency
obligations, and obligations of individual states and political subdivisions.
The Company's investments in marketable equity securities are held for an
indefinite period and thus are classified as available for sale. Unrealized
holding gains on such securities, net of tax, which were reported in other
comprehensive income for 2004 were $34,000.

Inventories - Inventories are stated at the lower of cost or market, determined
by the first-in, first-out method and consist of supplies.

Percentage of Completion - ADA follows the percentage of completion method of
accounting for all significant long-term contracts excluding government
contracts and chemical sales. The Company recognizes revenue on government
contracts based on the time and expenses incurred to date. The percentage of
completion method of reporting income from contracts takes into account the cost
and revenue to date on contracts not yet completed. Except for the government
contracts (discussed in Note 5), the Company had no material long-term contracts
in progress at December 31, 2004.

                                      F-7
<PAGE>

                           ADA-ES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Revenue Recognition - ADA chemical sales are recognized when products are
shipped to customers. A reserve is established for any returns, based on
historical trends. Chemical products are shipped FOB shipping point and title
passes to the customer when the chemicals are shipped. The Company's sales
agreements do not contain a right of inspection or acceptance provision and
products are generally received by customers within one day of shipment. The
Company has had no significant history of non-acceptance, nor of replacing goods
damaged or lost in transit. ADA equipment sales are recognized when the
equipment is delivered and installed and all return or buy back privileges have
expired. Consulting revenue is recognized as services are performed and
collection is assured.

Property and Equipment - Property and equipment is stated at cost. Depreciation
on assets is provided using the straight-line method based on estimated useful
lives ranging from 3 to 10 years. Maintenance and repairs are charged to
operations as incurred. When assets are retired, or otherwise disposed of, the
property accounts are relieved of costs and accumulated depreciation and any
resulting gain or loss is credited or charged to income.

Intangible Assets - Intangible assets principally consist of patents. Acquired
patents are being amortized over a 7-year period using the straight-line method,
which is less than the remaining legal life of the patents. Patents obtained by
the Company directly are being amortized over a 17-year life. Amortization of
intangible assets for the years ended December 31, 2004 and 2003 was $10,000 and
$7,000, respectively. Based on the balance of intangible assets as of December
31, 2004, the Company anticipates amortization expense over the next 5 years to
be approximately $10,000 per year.

Intangible assets consist of:

                                      Accumulated
                               Cost   Amortization     Net
                             -------- ------------  --------

                   Patents   $179,000   $(33,000)   $146,000
                             ========   ========    ========


Goodwill - Goodwill consists of the excess of the aggregate purchase price over
the fair value of net assets of businesses acquired. Goodwill was amortized over
a 10-year period through December 31, 2001 and is attributable to the Company's
FGC reporting segment. As of January 1, 2002, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other Intangible
Assets. Under SFAS No. 142, Goodwill is no longer amortized, but subject to an
impairment evaluation, which is performed in the fourth quarter of each year.
During fiscal 2002, the Company engaged an investment banking firm to perform a
valuation of the Company. As a result of this evaluation, which was reviewed and
updated for 2003 and 2004, the Company concluded that no impairment of its
goodwill was required.

Receivable from Parent - As discussed above, ADA was a wholly-owned subsidiary
of ESI. The net of intercompany transactions between ADA and ESI were set forth
in the Receivable from Parent and shown in the accompanying Consolidated
Statement of Stockholder's Equity. The intercompany transactions consisted of
cash distributions from ADA to the Parent and the payment of certain ADA pension
expenses (see Note 8) by the Parent using its stock.

                                      F-8
<PAGE>

                           ADA-ES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Operating Costs - Operating costs include all labor, fringe, subcontract labor,
chemical costs, materials, equipment, supplies and travel costs directly related
to ADA's production of revenue.

General and Administrative - General and administrative costs include personnel
related fringe benefits, sales and administrative staff labor costs, facility
costs and other general cost of conducting business.

Net Income Per Share - Net income per share is presented in accordance with the
provisions of SFAS No. 128, Earnings Per Share. Basic EPS is calculated by
dividing the income or loss available to common shareholders by the weighted
average number of common shares outstanding for the period. Diluted EPS is
calculated using the same numerator as basic EPS and further reflects the
potential dilution that could occur if outstanding stock options were exercised.
The effect of such dilutive stock options added 53,000 and 95,000 shares in 2004
and 2003, respectively, to the weighted average number of common shares
outstanding used in calculation of diluted EPS. For 2003, the weighted average
number of common shares outstanding for the periods shown have been adjusted to
reflect the spin-off as if it occurred on January 1, 2003.

Impairment of Long-Lived Assets - The Company follows SFAS No. 144, Impairment
of Long-Lived Assets. In the event that facts and circumstances indicate that
the cost of assets or intangible assets may be impaired, an evaluation of
recoverability would be performed.

Fair Value of Financial Instruments - The carrying amounts of financial
instruments, including cash, cash equivalents, accounts receivable, accounts
payable and accrued liabilities approximates fair value due to the short
maturity of these instruments. The fair values of investments are estimated
based on quoted market prices for those investments.

Income Taxes - The Company accounts for income taxes under the liability method
of SFAS No. 109, whereby current and deferred tax assets and liabilities are
determined based on tax rates and laws enacted as of the balance sheet date.
Income taxes for financial reporting purposes for the Company for the period
through September 11, 2003 are computed as if the Company filed a separate
return, even though the Company files a consolidated income tax return with ESI
for those periods.

Research and Development Costs - Research and development costs are charged to
operations in the period incurred.

Stock-Based Compensation - The Company records expense for stock options granted
to employees by using APB 25, which requires expense to be recognized only to
the extent the exercise price of the stock-based compensation is below the
market price on the date of grant. Transactions in equity instruments with
non-employees for goods or services are accounted for on the fair value method.
Because the Company has elected not to adopt the fair value accounting described
in SFAS No. 123 for employees, it is subject only to the disclosure requirements
described in SFAS No. 123.

Had compensation cost been determined based on an estimate of the fair value
consistent with the method of SFAS No. 123 at the grant dates for awards under
those plans, the Company's net income and EPS would have been reduced to the pro
forma amounts indicated below.

                                      F-9
<PAGE>

                           ADA-ES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                                       Year Ended December 31,
                                                       ----------------------
                                                          2004         2003
                                                       ---------    ---------

 Net income (loss):
     As reported                                       $ 336,000    $ 409,000
     Fair value of stock based compensation             (374,000)     (62,000)
                                                       ---------    ---------

     Pro forma                                         $ (38,000)   $ 347,000
                                                       =========    =========

 Net income (loss) per share - basic and diluted:
    As reported                                        $     .08    $     .12
    Fair value of net income per share                      (.09)        (.02)
                                                       ---------    ---------

    Pro forma - basic and diluted                      $    (.01)   $     .10
                                                       ==========   =========


The options granted in 2003 and 2004 had an exercise price equal to the market
price on the date of the grant. The average fair value of each employee option
granted in 2004 and 2003 was approximately $1.36 and $2.32, respectively, and
was estimated on the date of grant using the Black-Scholes option-pricing model
with the following weighted average assumptions:

                                            Years Ended December 31,
                                            ------------------------
                                              2004           2003
                                            ---------     ----------

            Expected volatility               35%               50%
            Risk-free interest rate          2.5%                2%
            Expected dividends                 0                 0


Use of Estimates - The preparation of the Company's consolidated financial
statements in conformity with generally accepted accounting principles requires
the Company's management to make estimates and assumptions that affect the
amounts reported in these financial statements and accompanying notes. Actual
results could differ from those estimates. The Company makes significant
assumptions concerning the impairment of and the remaining realizability of its
intangibles. In addition, the Company enters into significant research contracts
with the U.S. Government, which are subject to future audits. Pursuant to the
contracts, the Company makes estimates of certain overhead and other rates,
which may be adjusted as a result of such audits. At this time, the Company does
not believe any future government audit will result in material adjustment to
previously recorded revenues.

                                      F-10
<PAGE>

                           ADA-ES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Comprehensive Income/Loss - SFAS No. 130 establishes standards for reporting and
display of comprehensive income/loss, its components and accumulated balances.
Comprehensive income/loss is defined to include all changes in equity except
those resulting from investments by owners and distributions to owners. In 2004,
comprehensive income includes unrealized gains on investments, net of income tax
expense, of $34,000. Comprehensive income was the same as net income in 2003.

Segment Information - The Company follows SFAS No. 131, Disclosure About
Segments of an Enterprise and Related Information. SFAS No. 131 establishes
standards on the way that public companies report financial information about
operating segments in annual financial statements and requires reporting of
selected information about operating segments in interim financial statements
issued to the public. It also establishes standards for disclosures regarding
products and services, geographic areas, and major customers. SFAS No. 131
defines operating segments as components of a company about which discrete
financial information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in assessing
performance. The Company has three reportable segments even though it derives
its revenues primarily from specialty chemicals and government contracts.

Recently Issued Accounting Pronouncements - In November 2004, the Financial
Accounting Standards Board ("FASB") issued SFAS No. 151, "Inventory Costs - an
amendment of ARB No. 43, Chapter 4". Previously, under ARB No. 43, Chapter 4,
items such as idle facility expense, excessive spoilage, double freight and
re-handling costs could be considered so abnormal under certain circumstances as
to be treated as current period costs. SFAS No. 151 requires that such items be
considered current period costs, regardless of whether considered abnormal. SFAS
No. 151 also requires that allocation of fixed production overheads to the costs
of conversion be based on the normal capacity of the production facilities. SFAS
No. 151 is effective for inventory costs incurred during fiscal years beginning
after June 15, 2005 and is to be applied prospectively. The Company does not
expect a material impact on its financial statements from implementation of SFAS
151.

In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment". This
Statement is a revision of SFAS No. 123, "Accounting for Stock-Based
Compensation". This Statement supersedes APB Opinion No. 25, "Accounting for
Stock Issued to Employees", and its related implementation guidance. SFAS No.
123R establishes standards for the accounting for transactions in which an
entity exchanges its equity instruments for goods or services, or incurs
liabilities in exchange for goods or services that are based on the fair value
of the entity's equity instruments or that may be settled by the issuance of
those equity instruments. SFAS No. 123R focuses primarily on accounting for
transactions in which an entity obtains employee services in share-based payment
transactions and requires the Company to measure and recognize costs of
share-based payment transactions in the financial statements. The Company must
implement SFAS No. 123R as of the beginning of the first interim or annual
reporting period that begins after December 15, 2005. The Company is evaluating
the impact of SFAS No. 123R on its financial statements and believes the impact
may be material if equity instruments are used as a significant means of
compensation in the future.

Reclassifications - Certain prior year balances have been reclassified to
conform to the current year's classification. Such reclassifications had no
effect on net income.

                                      F-11
<PAGE>

                           ADA-ES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


2. SPIN-OFF OF ADA-ES:
----------------------

In March 2003, the Company and ESI entered into an agreement (the "Distribution
Agreement") for the pro rata distribution of all the common stock of the Company
to the stockholders of ESI based on a record date of August 29, 2003 and thereby
formed a separate public company. The Distribution Agreement required certain
allocations of cash and liabilities among ESI and the Company prior to the
distribution of the Company's common stock.

Based on the Distribution Agreement, ESI issued one share of ADA-ES for each ten
shares currently owned by the stockholders of ESI. Approximately 3,344,000
shares of ADA-ES were issued to the shareholders of ESI in September 2003 to
effect the spin-off.

In a related transaction, ADA-ES entered into an investment agreement with Arch
Coal, Inc. (Arch). The Arch Coal Agreement was subject to the spin-off of ADA-ES
from ESI. The agreement provided for $300,000 of additional debt (the proceeds
of which were used to pay down debt assumed in the spin-off) and $1,000,000 of
equity for the issuance of shares of common stock. The final price of the stock
of $8.47 per share was based on a multiple of the market price for the ESI
common stock at the time of the spin-off, adjusted for changes that occurred in
the year subsequent to the sale.

3. PROPERTY AND EQUIPMENT:
--------------------------

Property and equipment as of December 31, 2004 is summarized as follows:

                                                     Estimated Useful
                                                           Lives
                                                     ----------------

         Machinery and equipment       $1,073,000          3-10
         Leasehold improvements           196,000            7
         Furniture and fixtures            76,000            5
                                       ----------

                                       $1,345,000
                                       ==========

Depreciation and amortization of property and equipment for the years ended
December 31, 2004 and 2003 was $143,000 and $123,000, respectively.

4. INVESTMENTS:
---------------

Investments in available-for-sale securities are reported as a current asset at
their fair value in investments in securities. Investments in held-to-maturity
securities are reported at their unamortized cost in investments securities and
other assets. Investments in securities are summarized as follows at December
31, 2004:

                                  Gross Unrealized  Gross Unrealized     Fair
                                        Gain             Loss            Value
                                        ----             ----            -----
Available-for-sale securities:
   Common stock                      $   58,000       $   (3,000)     $  713,000
                                     ==========       ==========      ==========
Held-to-maturing securities:
   Debt securities                   $        0       $  (42,000)     $5,783,000
                                     ==========       ==========      ==========

                                      F-12
<PAGE>

                           ADA-ES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Realized gains and losses are determined on the basis of specific identification
of the security sold. Held-to-maturity securities were sold in 2004 to adjust
the portfolio to target interest rates and maturities in line with the Company's
investment objectives. During 2004, information on securities sold is as
follows:

                 Classification            Available for Sale   Held-to-Maturity
                 --------------            ------------------   ----------------

      Carrying amount of securities sold      $    23,000          $ 1,575,000
                                              ===========          ===========
      Sale proceeds                           $    21,000          $ 1,566,000
                                              ===========          ===========
      Gross realized losses                   $    (2,000)         $   (10,000)
                                              ===========          ===========
      Gross realized gains                    $      --            $     1,000
                                              ===========          ===========

Other comprehensive income for 2004 includes an unrealized holding gain, net of
tax, on available-for-sale securities of $34,000.

Held-to-maturity securities will mature as follows:

                       Year(s)                  Amount
                       -------                  ------
                       2005                   $  246,000
                       2006-2009               1,784,000
                       2010-2014               2,489,000
                       Beyond 2014             1,013,000
                                              ----------
                       Total                  $5,532,000
                                              ==========


5. GOVERNMENT AND INDUSTRY FUNDED CONTRACTS:
--------------------------------------------

ADA has performed activities under four contracts awarded by the Department of
Energy (the "DOE") that contributed a total of $2,469,000 and $2,164,000 to
revenues in 2004 and 2003, respectively. These amounts are included in Mercury
emission control revenues of $2,469,000 and $1,956,000, in 2004 and 2003,
respectively and Flue gas conditioning revenues of $208,000 in 2003. ADA
typically invoices the DOE monthly for estimated labor and expenditures plus
overhead factors, less cost share amounts. The total approved DOE budgets amount
to $23.2 million, of which the Company's and industry partners' cost-share
portion is $7.4 million. The remaining unearned amount of the contracts expected
to be recognized by the Company in 2005 (including cash contributions by other
industry partners) is $3.6 million. These contracts are subject to audit and
future appropriation of funds by Congress. The Company's historical experience
has not resulted in significant adverse adjustments to the Company, however the
government audits for years ended 2004, 2003 and 2002 have not yet been
finalized.

                                      F-13
<PAGE>

                           ADA-ES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


6. DEBT:
--------

Term Loan and Line of Credit - In 2004, ADA renegotiated a revolving $250,000
line of credit with a financial institution. No amounts were outstanding under
the line of credit at December 31, 2004, which bears interest at bank prime plus
1.75%, payable monthly. Covenants of the line require the Company to meet
certain borrowing base requirements and other financial covenants. The line is
secured by inventory, accounts receivable, equipment and intangibles of the
Company.

7. STOCKHOLDERS' EQUITY:
------------------------

Shares Issued for Pension Expenses and Directors' Compensation - In 2004 the
Company issued shares of its common stock and in 2003 ESI issued shares of its
common stock for the payments of approximately $146,000 and $20,000,
respectively, of ADA pension related expenses (see Note 8) and in 2004 the
Company issued shares of its common stock for payment of $35,000 of
non-management directors' compensation, based upon the per share value of
unrestricted common stock of ADA or ESI at the time of exchanges. The 2003
amount was recorded as an additional payable of the Company to ESI, and was
recorded in the Receivable from Parent and shown in the accompanying financial
statements in the Stockholder's Equity section.

Sale of Stock, Convertible Debenture and Grant of Option to Arch - In September
2003, the Company sold 137,741 shares to Arch Coal for $1 million and sold a
convertible debenture for $300,000, both pursuant to an investment agreement. Of
the shares sold, 37,741 have been placed in escrow and 19,730 shares will be
returned to the Company since the market price of the Company's shares exceeded
a minimum of $9.08 for a twenty-day continuous period during the one-year period
from the date of their issuance. The Debenture was repaid during 2004. As a part
of the share purchase Arch was also granted an option to purchase 50,000 shares
for $10.00 per share. The option expires in five years. Under the option, Arch
may purchase 16,667 shares after August 2004, another 16,667 shares after August
2005, and the remaining shares after August 2006.

Sale of Stock in 2004 - In August 2004 the Company entered into several
Subscription and Investment Agreements and privately sold 1 million shares of
its common stock to a limited number of institutional investors at a price of
$8.00 per share. The net proceeds to the Company from the sales totaled
$7,620,000.

Conversion of Debt to Shares - The Company assumed convertible debt to a related
party as part of the spin-off transaction (see Note 11), which debt, to the
extent allowable, was converted to stock in September 2003. Upon such
conversion, the Company issued 100,000 shares of its common stock in exchange
for $210,000 of such debt.

Stock Options - As a result of the spin-off (Note 2), options outstanding at ESI
were exchanged for options of ADA-ES based on the effective share exchange of
one option share for each ten options outstanding at ESI based on the price and
terms the options were originally issued. The Company granted options to
employees in 2004 as additional compensation. The following is a table of
options activity during 2003 and 2004:

                                      F-14
<PAGE>

                           ADA-ES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                                                        Weighted
                                                                        Average
                                               Employees  Non-Employee  Exercise
                                                Options     Options     Price
                                                --------    --------    -----

   OPTIONS OUTSTANDING, January 1, 2003             --          --      $ --
      Options granted resulting from spin-off    133,710        --       2.50
      Other options granted                       53,600      80,000     5.38
                                                --------    --------    -----
   OPTIONS OUTSTANDING, December 31, 2003        187,310      80,000     3.94
      Options granted                            275,995        --       9.32
      Options expired                             (7,800)       --       2.80
      Options exercised                         (157,765)    (30,000)    2.51
                                                --------    --------    -----

   OPTIONS OUTSTANDING, December 31, 2004        297,740      50,000    $9.01
                                                ========    ========    =====


The weighted average remaining contractual life for all options as of December
31, 2004 was approximately 9 years. At December 31, 2004, 66,430 options with a
weighted average exercise price of $11.15 were fully vested and exercisable. Of
the remaining 281,310 options, 65,850 options with a weighted average exercise
price of $7.83 vest in 2005, 35,462 options with a weighted average exercise
price of $9.26 vest in 2006, 10,000 options per year with an exercise price of
$8.60 vest annually from 2007 through 2009 and 150,000 options with an exercise
price of $8.60 vest at the rate of 30,000 options per year thereafter or earlier
based on specific achievements of individual employees.

If not previously exercised, options outstanding at December 31, 2004, will
expire as follows:



                                                         Weighted
                               Range                     Average
                         ------------------  Number of   Exercise
               Year        Low       High     Options     Price
               ----      --------  --------  ---------   -------

               2008       10.00      10.00     50,000     $10.00
               2013        2.50       2.80     21,745     $ 2.74
               2014        8.60      13.80    275,995     $ 9.32
                                              -------
                                              347,740
                                              =======

Change in Shares Authorized - During 2003, the Company changed its authorized
shares to 50,000,000 of preferred stock and 50,000,000 of common stock.
Preferred shares may be issued in the future in such series and with preferences
as determined by the Company's Board of Directors.

                                      F-15
<PAGE>

                           ADA-ES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


8. COMMITMENTS AND CONTINGENCIES:
---------------------------------

Pension Expense and Retirement Plan - The Company assumed a defined contribution
and 401(k) plan covering all eligible employees from ESI as of January 1, 2003.
The Company recognized contribution expense of $161,000 and $217,000 for 2004
and 2003, respectively, based on a percentage of the eligible employees' annual
compensation. A portion of the 2003 expenses were paid for with stock (see Note
7).

Office Lease - The Company leases office space under a noncancellable operating
lease. Total rental expense was $158,000 and $135,000 for the years ending
December 31, 2004 and 2003, respectively. The total minimum rental commitments
at December 31, 2004 was $610,000 for lease payments due in 2005 through 2009 as
follows:

                          Year                   Amount
                          ----                 -----------

                          2005                 $   116,000
                          2006                     119,000
                          2007                     122,000
                          2008                     125,000
                          2009                     128,000
                                               -----------

                                               $   610,000
                                               ===========


9. MAJOR CUSTOMERS:
-------------------

Sales to unaffiliated customers which represent 10% or more of the Company's
sales for the year ended December 31, 2004 and 2003 were as follows (as a
percentage of each entity's sales):

                Customer                          2004        2003
                ----------------------------    --------    --------

                A (Governmental Contracts)        30%         26%
                B                                 10%         12%
                C                                  -          11%


At December 31, 2004, approximately 50% of the Company's trade receivables were
from five customers.

                                      F-16
<PAGE>

                           ADA-ES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


A significant portion of ADA's revenue is derived from contracts with Department
of Energy and chemical and equipment sales to coal-burning electric power
plants.

10. INCOME TAXES:
-----------------

Prior to September 2003, the Company was a wholly owned subsidiary of ESI. The
Company's tax attributes were passed through to its Parent and any taxable
income was offset by the Parent's tax loss carryforwards. In connection with the
spin-off, the Company retained its tax loss carryforward generated in the
current year returns. The Company's tax basis of its assets and liabilities
carry forward after the spin-off. The following lists the Company's deferred tax
assets and liabilities as of December 31, 2004:

        Current assets (liabilities):
            Prepaid expenses                                 $ (34,000)
            Valuation allowance - securities held for sale     (20,000)
            Deferred revenues and compensation                  94,000
                                                             ---------
                                                                40,000
        Non-current assets (liabilities)
            Property, compensation and intangible assets       (42,000)
            Net loss carryforward                              319,000
            Tax credits                                         89,000
                                                             ---------
                                                               366,000
                                                             ---------

              Net tax assets                                   406,000
            Net valuation allowances                              --
                                                             ---------

                                                             $ 406,000
                                                             =========


As of December 31, 2004, the Company had approximately $859,000 of tax loss
carryforwards, which if not utilized to reduce taxable income in future periods,
will expire $40,000 in 2023 and $819,000 in 2024. The Company's valuation
allowance as of December 31, 2004 and 2003 was $0; the valuation allowance was
reduced by $80,000 in 2003.

At December 31, 2004, the Company's current tax provision was reduced by
$415,000 attributable to the tax effects of stock option exercises recorded in
stockholders' equity.

The following is a reconciliation of the actual income tax rate - expense
(benefit) to the expected combined Federal and State tax rate of approximately
37%:

                                              2004         2003
                                              ----         ----
                                                %            %

         Expected income tax rate -
            expense (benefit)                  37%          37%
         Permanent differences                 (4%)          1%
         Tax credits                          (17%)          -
         Decrease in the deferred tax
            valuation allowance                 -          (67%)
                                              ----         ----

         Actual income tax rate                16%         (29%)
                                              ====         ====

During 2003, the Company determined that it was more probable than not that the
Company's net deferred tax asset would be realized in the future and
accordingly, the Company eliminated the related valuation allowance.

                                      F-17
<PAGE>

                           ADA-ES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


11. RELATED PARTY TRANSACTIONS:
-------------------------------

In 2003, pursuant to the Distribution Agreement with ESI (see Note 2) the
company assumed a convertible debenture in the amount of $1,000,000 (the
"Debenture") with Tectonic Construction Co. ("TCC") and a note in the amount of
$150,000 (the "Note"). A director of the Company is the president and majority
shareholder of TCC. The Debenture and the Note bore interest at the greater of
prime plus two points or 10% which interest was payable quarterly. Of that
amount $300,000 was paid off with proceeds of a convertible debenture sold to
Arch in a like amount. Also, in September of 2003, TCC converted $210,000 of the
remaining debt into 100,000 shares of the Company's stock pursuant to the terms
of the debt assumed from ESI. The remaining $640,000 was also paid off in
September 2003 with the proceeds from a term loan of the same amount obtained
from a commercial bank.

As discussed above in Note 2, the Company executed a Securities Subscription and
Investment Agreement with Arch Coal, Inc. in July 2003. Pursuant to the
investment agreement, in September 2003 Arch purchased a $300,000 convertible
debenture from the Company, purchased 137,741 shares of the Company's Common
stock and was also granted an option to purchase 50,000 shares. The debenture
and accrued interest thereon was repaid in 2004. The Company also co-markets its
ADA-249 product under an agreement with Arch as described above. Under that
arrangement, the Company has recorded revenue of $25,000 and $150,000 in 2004
and 2003, respectively. A designee of Arch has been appointed a seat on the
Company's Board of Directors and management of the Company has agreed in the
future to nominate and to vote all proxies and other shares of stock in the
Company which they are entitled to vote in favor of that designee so long as
Arch holds no less than 100,000 shares of the Company's common stock.

12. BUSINESS SEGMENT INFORMATION:
---------------------------------

The Company has three reportable segments: mercury emission controls (MEC), flue
gas conditioning and consulting (FGC), and combustion aids and consulting (CA).
All assets are located in the U.S. and are not evaluated by management on a
segment basis. All significant customers are U.S. companies.

                                      F-18
<PAGE>

                           ADA-ES, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Year Ended December 31, 2004:
-----------------------------
                                    MEC         FGC          CA         Total
                                ----------   ----------  ----------   ----------

     Total revenue              $5,940,000   $2,122,000  $  355,000   $8,417,000
     Segment profit (loss)      $  996,000   $  964,000  $   34,000   $1,994,000


Year Ended December 31, 2003:
-----------------------------
                                    MEC         FGC          CA         Total
                                ----------   ----------  ----------   ----------

     Total revenue              $3,437,000   $2,037,000  $  389,000   $5,863,000
     Segment profit (loss)      $  890,000   $1,104,000  $  (84,000)  $1,910,000


A reconciliation of the reported total segment profit (loss) to Comprehensive
Income for the periods shown above is as follows:

                                                       2004           2003
                                                   -----------    -----------

 Total segment profit                              $ 1,994,000    $ 1,910,000
 Non-allocated general & administrative expenses    (1,458,000)    (1,460,000)
 Depreciation and amortization                        (153,000)      (130,000)
 Interest, other income/expenses and tax
    (provision) benefit                                (47,000)        89,000
                                                   -----------    -----------

 Net income                                        $   336,000    $   409,000
                                                   ===========    ===========






                                      F-19
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.22
<SEQUENCE>2
<FILENAME>adaes10-22.txt
<DESCRIPTION>NOTICE OF AWARD
<TEXT>

Exhibit 10.22

<TABLE>
<CAPTION>

U.S. DOE Cooperative Agreement No. DE-FC26-05NT42307

DOE F 4600.1#                                            U.S. DEPARTMENT OF ENERGY
(10/04)                                            NOTICE OF FINANCIAL ASSISTANCE AWARD


Under the authority of Public Law    95-91 DOE Organization Act
                                 ---------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>
  1. PROJECT TITLE "Low-Cost Options for Moderate Levels of Mercury      2. INSTRUMENT TYPE
     Control"
                                                                            | | GRANT               |X| COOPERATIVE AGREEMENT
------------------------------------------------------------------------------------------------------------------------------------
  3. RECIPIENT (Name, address, zip code, area code and telephone no.)    4. INSTRUMENT NO.              5. AMENDMENT NO.
       ADA-ES, Inc.                                                         DE-FC26-05NT42307              A000
       8100 SouthPark Way, Unit B
       Littleton, CO  80120

------------------------------------------------------------------------------------------------------------------------------------
                                                                        6.  BUDGET PERIOD               7. PROJECT PERIOD

                                                                     FROM: 02/10/05  THRU: 02/09/08   FROM: 02/10/05  THRU: 02/09/08
------------------------------------------------------------------------------------------------------------------------------------
  8. RECIPIENT PROJECT DIRECTOR (Name and telephone no.)               10. TYPE OF AWARD
       David Muggli (303) 734-1727 Ext. 129 davidm@adaes.com
                                                                            |X|  NEW             | |  CONTINUATION     | | RENEWAL

                                                                            | |  REVISION        | |  SUPPLEMENT
------------------------------------------------------------------------------------------------------------------------------------
  9. RECIPIENT BUSINESS OFFICER (Name and telephone no.)
      Richard Schlager (303) 734-1727 Ext. 101 richards@adaes.com
------------------------------------------------------------------------------------------------------------------------------------
11. DOE PROJECT OFFICER (Name, address, zip code, telephone no.)      12. ADMINISTERED FOR DOE BY (Name, address, zip code,
    Andrew O'Palko 304-285-4715 E-mail: Andrew.OPalko@netl.doe.gov        telephone no. Keith R. Miles  412-386-5984
    U.S. Department of Energy, National Energy Technology Laboratory      E-mail: miles@netl.doe.gov
    3610 Collins Ferry Road,                                              U. S. Department of Energy, National Energy Technology
    P. O. Box 880, MS C04                                                 Laboratory
    Morgantown, WV 26507-0880                                             P. O. Box 10940,  MS 921-143
                                                                          626 Cochrans Mill Road
                                                                          Pittsburgh, PA 15236-0940
------------------------------------------------------------------------------------------------------------------------------------
13. RECIPIENT TYPE

     | |  STATE GOV'T        | |   INDIAN TRIBAL GOV'T        | |   HOSPITAL          |X|  FOR PROFIT           | |  INDIVIDUAL
                                                                                           ORGANIZATION
     | |  LOCAL GOV'T        | |   INSTITUTION OF             | |   OTHER NONPROFIT   |X|  C  | |  P   | |  SP  | |  OTHER (Specify)
                                   HIGHER EDUCATION                 ORGANIZATION
------------------------------------------------------------------------------------------------------------------------------------

14. ACCOUNTING AND APPROPRIATIONS DATA: 26-05NT42307.000              15. EMPLOYER I.D. NUMBER

                                                                          a. TIN: 84-1341182
                                                                          b. DUNS: 13-331-4067
------------------------------------------------------------------------------------------------------------------------------------
a. Appropriation Symbol    b. B&R Number    c. FT/AFP/OC    d. CFA Number

------------------------------------------------------------------------------------------------------------------------------------
16. BUDGET AND FUNDING INFORMATION
------------------------------------------------------------------------------------------------------------------------------------
a. CURRENT BUDGET PERIOD INFORMATION                                            b. CUMULATIVE DOE OBLIGATIONS
------------------------------------------------------------------------------------------------------------------------------------
(1)  DOE Funds Obligated This Action                $   600,000.00         (1) This Budget Period                 $600,000.00
(2)  DOE Funds Authorized for Carry Over            $         0.00             [Total of lines a.(1) and a.(3)]
(3)  DOE Funds Previously Obligated in this Budget Period$    0.00
(4)  DOE Share of Total Approved Budget             $ 3,946,323.00         (2) Prior Budget Periods               $      0.00
(5)  Recipient Share of Total Approved Budget       $ 1,501,588.00
(6)  Total Approved Budget                          $ 5,447,910.00         (3) Project Period to Date             $600,000.00
                                                                               [Total of lines b.(1) and b.(2)]
------------------------------------------------------------------------------------------------------------------------------------
17. TOTAL ESTIMATED COST OF PROJECT, INCLUDING DOE FUNDS TO FFRDC: $5,447,910.00
    (This is the current estimated cost of the project. It is not a promise to award nor an authorization to expend funds in this
    amount.)
------------------------------------------------------------------------------------------------------------------------------------
18. AWARD AGREEMENT TERMS AND CONDITIONS
    This award/agreement consists of this form plus the following:
    a. Special terms and conditions.
    b. Applicable program regulations (specify)
    (Date)                            .
           ---------------------------
    c. DOE Assistance Regulations, 10 CFR Part 600at http://ecfr.gpoaccess.gov or, if the award is a grant to a Federal
    Demonstration Partnership (FDP) institution, the FDP Terms & Conditions and the DOE FDP Agency Specific Requirements at
    http://www.nsf.gov.
    d. Application/proposal as approved by DOE.
    e. National Policy Assurances to Be Incorporated as Award Terms at http://grants.pr.doe.gov.
------------------------------------------------------------------------------------------------------------------------------------
19. REMARKS


------------------------------------------------------------------------------------------------------------------------------------
20. EVIDENCE OF RECIPIENT ACCEPTANCE                                  21. AWARDED BY

    /s/ Richard J Schlager                           2/17/05              /s/ Richard D Rogus                               2/10/05
    --------------------------------------------------------              ----------------------------------------------------------
    (Signature of Authorized Recipient Official)      (Date)              (Signature)                                       (Date)

    Richard Schlager                                                      Richard D. Rogus
    --------------------------------------------------------              ----------------------------------------------------------
                              (Name)                                                                 (Name)

    Vice President                                                        Contracting Officer
    --------------------------------------------------------              ----------------------------------------------------------
                              (Title)
                                                                                                     (Title)
------------------------------------------------------------------------------------------------------------------------------------
<PAGE>

                                               TABLE OF CONTENTS



SECTION I - SPECIAL TERMS AND CONDITIONS..........................................................................4
-------------------------------------------------------------------------------------------------------------------

   RESOLUTION OF CONFLICTING CONDITIONS (OCT 2004)................................................................4
   -----------------------------------------------
   LIMITATION OF GOVERNMENT LIABILITY.............................................................................4
   PAYMENT PROCEDURES - REIMBURSEMENT THROUGH THE AUTOMATED STANDARD
   -----------------------------------------------------------------
   APPLICATION FOR PAYMENTS (ASAP) SYSTEM (OCT 2004)..............................................................4
   -------------------------------------------------
   COST SHARING (OCT 2004)........................................................................................5
   -----------------------
   INCREMENTAL FUNDING (OCT 2004).................................................................................5
   ------------------------------
   STATEMENT OF FEDERAL STEWARDSHIP (OCT 2004)....................................................................6
   -------------------------------------------
   STATEMENT OF SUBSTANTIAL INVOLVEMENT (OCT 2004)................................................................6
   -----------------------------------------------
   SITE VISITS (OCT 2004).........................................................................................6
   ----------------------
   REPORTING REQUIREMENTS (OCT 2004)..............................................................................7
   ---------------------------------
   PUBLICATIONS (OCT 2004)........................................................................................7
   -----------------------
   FEDERAL, STATE, AND MUNICIPAL REQUIREMENTS OCT 2004)...........................................................8
   ----------------------------------------------------
   INTELLECTUAL PROPERTY PROVISIONS (OCT 2004)....................................................................8
   -------------------------------------------
   NATIONAL SECURITY: CLASSIFIABLE RESULTS ORIGINATING UNDER AN AWARD (OCT 2004)..................................8
   -----------------------------------------------------------------------------
   LOBBYING RESTRICTIONS (OCT 2004)...............................................................................9
   --------------------------------
   NOTICE REGARDING THE PURCHASE OF AMERICAN-MADE EQUIPMENT AND PRODUCTS -- SENSE OF CONGRESS (OCT 2004)..........9
   -----------------------------------------------------------------------------------------------------
   COMPLIANCE WITH BUY AMERICAN ACT (OCT 2004)....................................................................9
   -------------------------------------------
   ANNUAL INDIRECT COST PROPOSAL AND RECONCILIATION (OCT 2004)....................................................9
   -----------------------------------------------------------
   REAL PROPERTY - NONE (JAN 1999)................................................................................9
   -------------------------------
   RECIPIENT ACQUIRED PROPERTY - FOR-PROFIT ORGANIZATIONS (JAN 2004).............................................10
   -----------------------------------------------------------------
   FEDERALLY OWNED PROPERTY (GOVERNMENT-FURNISHED) - NONE (JAN 1999).............................................10
   -----------------------------------------------------------------
   ACKNOWLEDGMENT OF FEDERAL FUNDING (NOV 1998)..................................................................10
   --------------------------------------------
   PUBLIC ACCESS TO INFORMATION (APR 2000).......................................................................10
   ---------------------------------------
   NOTICE REGARDING UNALLOWABLE COSTS AND LOBBYING ACTIVITIES (NOV 1998).........................................10
   ---------------------------------------------------------------------
   RECIPIENT PRESS RELEASES (APR 1998)...........................................................................10
   -----------------------------------
   HAZARDOUS WASTES MANIFESTS AND LABELS (MAR 2003)..............................................................11

SECTION II - INTELLECTUAL PROPERTY PROVISIONS....................................................................12
-------------------------------------------------------------------------------------------------------------------

   INTELLECTUAL PROPERTY PROVISIONS (FOR-PROFIT R&D) (JAN 2004)..................................................12
   ------------------------------------------------------------
   CONFIDENTIAL BUSINESS INFORMATION (JAN 2004)..................................................................12
   --------------------------------------------
   52.227-1 AUTHORIZATION AND CONSENT (JUL 1995) - ALTERNATE I (APR 1984)........................................12
   ----------------------------------------------------------------------
   52.227-2 NOTICE AND ASSISTANCE REGARDING PATENT AND COPYRIGHT INFRINGEMENT (AUG 1996).........................12
   -------------------------------------------------------------------------------------
   PATENT RIGHTS (SMALL BUSINESS FIRMS AND NONPROFIT ORGANIZATIONS) (OCT 2003)...................................13
   ---------------------------------------------------------------------------
   RIGHTS IN DATA - GENERAL (OCT 2003)...........................................................................19
   -----------------------------------
   LIMITED RIGHTS DATA (JAN 2004)................................................................................24
   ------------------------------
   52.227-23 RIGHTS TO PROPOSAL DATA (TECHNICAL). (JUN 1987).....................................................25
   ---------------------------------------------------------

SECTION III -  LIST OF ATTACHMENTS...............................................................................26
-------------------------------------------------------------------------------------------------------------------

   ATTACHMENT A -- STATEMENT OF PROJECT OBJECTIVES...............................................................27
   -----------------------------------------------
   ATTACHMENT B - FEDERAL ASSISTANCE REPORTING CHECKLIST.........................................................42
   -----------------------------------------------------
   ATTACHMENT C - BUDGET PAGE(S).................................................................................50
   --------------------------
   ATTACHMENT D -- RECIPIENT ACQUIRED PROPERTY...................................................................51
   -------------------------------------------

                                                                3
</TABLE>
<PAGE>

                    SECTION I - SPECIAL TERMS AND CONDITIONS


RESOLUTION OF CONFLICTING CONDITIONS (OCT 2004) )
-------------------------------------------------

Any apparent inconsistency between Federal statutes and regulations and the
terms and conditions contained in this award must be referred to the DOE Award
Administrator identified in Block 12 of the Notice of Financial Assistance Award
for guidance.

LIMITATION ON PERFORMANCE AND MAXIMUM GOVERNMENT LIABILITY
----------------------------------------------------------

In performing the Statement of Project Objectives (Attachment A) under this
Cooperative Agreement, the Recipient intends to evaluate two technologies
(TOXECON IITM and high-temperature sorbents) at four (4) different sites. The
Recipient plans on testing TOXECON IITM at AEP Gavin (high S bituminous), and
Entergy Independence (PRB), and will test high-temperature sorbents at
MidAmerican's Council Bluffs and Louisa (PRB) sites. It is recognized that the
sequence of field testing may change; however, regardless of the order in which
the field testing is conducted host site agreements will be executed and
furnished to DOE for each site PRIOR to the conduct of specific testing.

(a) The Recipient must provide to DOE a fully executed host site for each of the
proposed field testing locations prior to the conduct of any field testing.

(b) For the selected sequence of field testing, the Recipient is authorized to
perform associated (site specific) activities including: Task 1 for each site
entitled "Site Coordination, Kickoff Meeting, Test Plan, and QA/QC Plan," the
portion (i.e., limited to pre-site testing) of Task 2 for each site entitled
"Design and Install Site Specific Equipment," and associated Task 11 "Management
and Reporting," but not authorized to incur project expenditures exceeding the
DOE share shown below:

     o    Louisa - $50,000
     o    Council Bluffs - $404,000
     o    Gavin - $370,000
     o    Independence - $345,000

until such time as an executed host site agreement is furnished to the DOE
which:

          (1)  provides for the use of the selected (AEP Gavin; Entergy
               Independence (PRB); MidAmerican Council Bluffs; or Louisa)
               facility for the project, or
          (2)  provides the use of an alternate host site that is acceptable to
               DOE.

(c) In the event the Recipient has not satisfied the conditions set forth above,
DOE shall have the right to declare the cooperative agreement concluded. In such
event, DOE shall not be liable for any costs in excess of the amounts shown
above.

PAYMENT PROCEDURES - REIMBURSEMENT THROUGH THE AUTOMATED STANDARD APPLICATION
FOR PAYMENTS (ASAP) SYSTEM (OCT 2004)
-----------------------------------------------------------------------------

a.   Method of Payment. Payment will be made by reimbursement through the
     Department of Treasury's ASAP system.

                                       4
<PAGE>

b.   Requesting Reimbursement. Requests for reimbursements must be made through
     the ASAP system. Your requests for reimbursement should coincide with your
     normal billing pattern, but not more frequently than every two weeks. Each
     request must be limited to the amount of disbursements made for the federal
     share of direct project costs and the proportionate share of allowable
     indirect costs incurred during that billing period.

c.   Adjusting payment requests for available cash. You must disburse any funds
     that are available from repayments to and interest earned on a revolving
     fund, program income, rebates, refunds, contract settlements, audit
     recoveries, credits, discounts, and interest earned on any of those funds
     before requesting additional cash payments from DOE.

d.   Payments. All payments are made by electronic funds transfer to the bank
     account identified on the ASAP Bank Information Form that you filed with
     the U.S. Department of Treasury.

COST SHARING (OCT 2004)
-----------------------

a.   Notwithstanding the recipient's cost share described below in paragraph b,
     you must cost share a minimum of 27.6 percent of the total allowable
     Project Costs (Total allowable Project Costs are the sum of the Government
     share and the Recipient share of allowable project costs). Your cost share
     must come from non-Federal sources. By accepting federal funds under this
     award, you agree that you are liable for your percentage share of the total
     allowable Project Costs incurred even if the project is terminated early or
     is not funded to its completion.

b.   Total Estimated Project Cost is the sum of the Government share and
     Recipient share of the estimated project costs. This cost is shared as
     follows:

           Total Estimated Cost of Project:          $5,447,910
                                    DOE:             $3,946,323        72.4%
                                    Participant:      1,501,588        27.6%

c.   If you discover that you may be unable to provide cost sharing of at least
     the amount identified in paragraph b of this article, you should
     immediately provide written notification to the DOE Award Administrator
     identified in Block 12 of the Notice of Financial Assistance Award
     indicating whether you will continue or phase out the project. If you plan
     to continue the project, the notification must describe how replacement
     cost sharing will be secured.

d.   You must maintain records of all project costs that you claim as cost
     sharing, including in-kind costs, as well as records of costs to be paid by
     DOE. Such records are subject to audit.

e.   Failure to provide the cost sharing required in paragraphs a and b may
     result in the subsequent recovery by DOE of some or all the funds provided
     under the award.

INCREMENTAL FUNDING (OCT 2004)
------------------------------

This budget period is funded on an incremental basis. The maximum obligation of
the DOE is limited to $600,000.00 (the amount shown in Block 16.b. (3)
"CUMULATIVE DOE OBLIGATIONS Project Period to Date" on the Notice of Financial
Assistance Award). You are not obligated to continue performance of the project

                                       5
<PAGE>

beyond the total amount shown in Block 16.b. (3) and your pro rata share of the
project costs, if cost sharing is required. Subject to the availability of
additional funds, DOE anticipates obligating the total amount shown in Block
16.a. (4) for the current budget period.

STATEMENT OF FEDERAL STEWARDSHIP (OCT 2004)
-------------------------------------------

DOE will exercise normal Federal stewardship in overseeing the project
activities performed under this award. Stewardship activities include, but are
not limited to, conducting site visits; reviewing performance and financial
reports; providing technical assistance and/or temporary intervention in unusual
circumstances to correct deficiencies which develop during the project; assuring
compliance with terms and conditions; and reviewing technical performance after
project completion to insure that the award objectives have been accomplished.

STATEMENT OF SUBSTANTIAL INVOLVEMENT (OCT 2004)
-----------------------------------------------


RECIPIENT'S RESPONSIBILITIES.  The Recipient is responsible for:

     Performing the activities supported by this award, including providing the
     required personnel, facilities, equipment, supplies and services;

     Defining approaches and plans, submitting the plans to DOE for review, and
     incorporating DOE comments;

     Managing and conducting the project activities;

     Attending semiannual program review meetings and reporting project status;

     Submitting technical reports and incorporating DOE comments; and;

     Presenting the project results at appropriate technical conferences or
     meetings as directed by the DOE Project Officer.

DOE  RESPONSIBILITIES.  DOE is responsible for:

     Reviewing in a timely manner project plans, including technology transfer
     plans, and redirecting the work effort if the plans do not address critical
     programmatic issues;

     Conducting semiannual program review meetings to ensure adequate progress
     and that the work accomplishes the program and project objectives.
     Redirecting work or shifting work emphasis, if needed;

     Promoting and facilitating technology transfer activities, including
     disseminating program results through presentations and publications; and

     Serving as scientific/technical liaison between awardees and other program
     or industry staff.

SITE VISITS (OCT 2004)
----------------------

                                       6
<PAGE>

DOE's authorized representatives have the right to make site visits at
reasonable times to review project accomplishments and management control
systems and to provide technical assistance, if required. You must provide and
must require your subawardees to provide reasonable facilities and assistance
for the safety and convenience of the government representatives in the
performance of their duties. All site visits and evaluations must be performed
in a manner that does not unduly interfere with or delay the work.

REPORTING REQUIREMENTS (OCT 2004)
---------------------------------

a.   Requirements. The reporting requirements for this award are identified on
     the Federal Assistance Reporting Checklist, DOE F 4600.2, attached to this
     award. Failure to comply with these reporting requirements is considered a
     material noncompliance with the terms of the award. Noncompliance may
     result in withholding of future payments, suspension or termination of the
     current award, and withholding of future awards. A willful failure to
     perform, a history of failure to perform, or unsatisfactory performance of
     this and/or other financial assistance awards, may also result in a
     debarment action to preclude future awards by Federal agencies.

b.   Dissemination of scientific/technical reports. Scientific/technical reports
     submitted under this award will be disseminated on the Internet via the DOE
     Information Bridge (www.osti.gov/bridge), unless the report contains
     patentable material, protected data or SBIR/STTR data. In addition, these
     reports must not contain any limited rights data (proprietary data),
     classified information, information subject to export control
     classification, or other information not subject to release. Citations for
     journal articles produced under the award will appear on the DOE Energy
     Citations Database (www.osti.gov/ecd).

PUBLICATIONS (OCT 2004)
-----------------------

a.   You are encouraged to publish or otherwise make publicly available the
     results of the work conducted under the award.

b.   An acknowledgment of Federal support and a disclaimer must appear in the
     publication of any material, whether copyrighted or not, based on or
     developed under this project, as follows:

     Acknowledgment: "This material is based upon work supported by the
     Department of Energy [National Nuclear Security Administration] [add
     name(s) of other agencies, if applicable] under Award Number(s) [enter the
     award number(s)]."

     Disclaimer: "This report was prepared as an account of work sponsored by an
     agency of the United States Government. Neither the United States
     Government nor any agency thereof, nor any of their employees, makes any
     warranty, express or implied, or assumes any legal liability or
     responsibility for the accuracy, completeness, or usefulness of any
     information, apparatus, product, or process disclosed, or represents that
     its use would not infringe privately owned rights. Reference herein to any
     specific commercial product, process, or service by trade name, trademark,
     manufacturer, or otherwise does not necessarily constitute or imply its
     endorsement, recommendation, or favoring by the United States Government or
     any agency thereof. The views and opinions of authors expressed herein do
     not necessarily state or reflect those of the United States Government or
     any agency thereof."

                                       7
<PAGE>

FEDERAL, STATE, AND MUNICIPAL REQUIREMENTS (OCT 2004)
-----------------------------------------------------

You must obtain any required permits and comply with applicable federal, state,
and municipal laws, codes, and regulations for work performed under this award.

INTELLECTUAL PROPERTY PROVISIONS (DEC 2004)
-------------------------------------------

The intellectual property provisions applicable to this award are provided in
Section II of this award.

NATIONAL SECURITY: CLASSIFIABLE RESULTS ORIGINATING UNDER AN AWARD (OCT 2004)
-----------------------------------------------------------------------------

a.   This award is intended for unclassified, publicly releasable research. You
     will not be granted access to classified information. DOE does not expect
     that the results of the research project will involve classified
     information. Under certain circumstances, however, a classification review
     of information originated under the award may be required. The Department
     may review research work generated under this award at any time to
     determine if it requires classification.

b.   Executive Order 12958 (60 Fed. Reg. 19,825 (1995)) states that basic
     scientific research information not clearly related to the national
     security shall not be classified. Nevertheless, some information concerning
     (among other things) scientific, technological, or economic matters
     relating to national security or cryptology may require classification. If
     you originate information during the course of this award that you believe
     requires classification under this Executive order, you must promptly:

     1.   Notify the DOE Project Officer identified in Block 11 and the DOE
          Award Administrator identified in Block 12 of the Notice of Financial
          Assistance Award;

     2.   Submit the information by registered mail directly to the Director,
          Office of Classification and Information Control, SO-10.2; U.S.
          Department of Energy; P.O. Box A; Germantown, MD 20875-0963, for
          classification review.

     3.   Restrict access to the information to the maximum extent possible
          until you are informed that the information is not classified, but no
          longer than 30 days after receipt by the Director, Office of
          Classification and Information Control.

c.   If you originate information concerning the production or utilization of
     special nuclear material (i.e., plutonium, uranium enriched in the isotope
     233 or 235, and any other material so determined under section 51 of the
     Atomic Energy Act) or nuclear energy, you must:

     1.   Notify the DOE Project Officer identified in Block 11 and the DOE
          Award Administrator identified in Block 12 of the Notice of Financial
          Assistance Award.

     2.   Submit the information by registered mail directly to the Director,
          Office of Classification and Information Control, SO-10.2; U.S.
          Department of Energy; P. O. Box A; Germantown, MD 20875-0963 for
          classification review within 180 days of the date the recipient first
          discovers or first has reason to believe that the information is
          useful in such production or utilization.

                                       8
<PAGE>

     3.   Restrict access to the information to the maximum extent possible
          until you are informed that the information is not classified, but no
          longer than 90 days after receipt by the Director, Office of
          Classification and Information Control.

d.   If DOE determines any of the information requires classification, you agree
     that the Government may terminate the award by mutual agreement in
     accordance with 10 CFR 600.25(d). All material deemed to be classified must
     be forwarded to the DOE, in a manner specified by DOE.

e.   If DOE does not respond within the specified time periods, you are under no
     further obligation to restrict access to the information.

LOBBYING RESTRICTIONS (OCT 2004)
--------------------------------

By accepting funds under this award, you agree that none of the funds obligated
on the award shall be made available for any activity or the publication or
distribution of literature that in any way tends to promote public support or
opposition to any legislative proposal on which Congressional action is not
complete. This restriction is in addition to those prescribed elsewhere in
statute and regulation.

NOTICE REGARDING THE PURCHASE OF AMERICAN-MADE EQUIPMENT AND PRODUCTS -- SENSE
OF CONGRESS (OCT 2004)
------------------------------------------------------------------------------

It is the sense of the Congress that, to the greatest extent practicable, all
equipment and products purchased with funds made available under this award
should be American-made.

COMPLIANCE WITH BUY AMERICAN ACT (OCT 2004)
-------------------------------------------

By accepting funds under this award, you agree to comply with sections 2 through
4 of the Act of March 3, 1933 (41 U.S.C. 10a - 10c, popularly known as the "Buy
American Act"). You should review the provisions of the Act to ensure that
expenditures made under this award are in accordance with it.

ANNUAL INDIRECT COST PROPOSAL AND RECONCILIATION (OCT 2004)
-----------------------------------------------------------

a.   In accordance with the applicable cost principles, you must submit an
     annual indirect cost proposal, reconciled to your financial statements,
     within six months after the close of each fiscal year, unless you have
     negotiated a predetermined or fixed indirect rate(s), or fixed amount for
     indirect or facilities and administration (F&A) costs.

b.   You should submit your annual indirect cost proposal directly to the
     cognizant agency for negotiating and approving indirect costs. If DOE is
     the cognizant agency, send your proposal to the Cognizant Department of
     Energy Office (CDO). If you do not have a cognizant agency or if you do not
     know your DOE CDO, contact the DOE Award Administrator identified in Block
     12 of the Notice of Financial Assistance Award.

REAL PROPERTY - NONE (JAN 1999)
-------------------------------

                                       9
<PAGE>

No real property may be acquired under this award.

RECIPIENT ACQUIRED PROPERTY - FOR-PROFIT ORGANIZATIONS (JAN 2004)
-----------------------------------------------------------------

Reference Attachment D for a listing of property authorized for acquisition
under this award. Property acquired by the Recipient under this award shall be
managed in accordance with 10 CFR 600.320 to 10 CFR 600.325, and reported as
prescribed in Attachment B, Federal Assistance Reporting Checklist.

FEDERALLY OWNED PROPERTY (GOVERNMENT-FURNISHED) - NONE (JAN 1999)
-----------------------------------------------------------------

No Government-furnished property is provided under this award.

ACKNOWLEDGMENT OF FEDERAL FUNDING (NOV 1998)
--------------------------------------------

When issuing statements, press releases, requests for proposals, bid
solicitations, and other documents describing this project, the Recipient shall
clearly state (1) the percentage of the total cost of the project which will be
financed with Federal money, and (2) the dollar amount of Federal funds for the
project.

PUBLIC ACCESS TO INFORMATION (APR 2000)
---------------------------------------

The Freedom of Information Act, as amended, and the DOE implementing regulations
(10 CFR 1004) require DOE to release certain documents and records regarding
awards to any person who provides a written request. The intended use of the
information will not be a criterion for release.

NOTICE REGARDING UNALLOWABLE COSTS AND LOBBYING ACTIVITIES (NOV 1998)
---------------------------------------------------------------------

Recipients of financial assistance are cautioned to carefully review the
allowable cost and other provisions applicable to expenditures under their
particular award instruments. If financial assistance funds are spent for
purposes or in amounts inconsistent with the allowable cost or any other
provisions governing expenditures in an award instrument, the government may
pursue a number of remedies against the Recipient, including in appropriate
circumstances, recovery of such funds, termination of the award, suspension or
debarment of the Recipient from future awards, and criminal prosecution for
false statements.

Particular care should be taken by the Recipient to comply with the provisions
prohibiting the expenditure of funds for lobbying and related activities.
Financial assistance awards may be used to describe and promote the
understanding of scientific and technical aspects of specific energy
technologies, but not to encourage or support political activities such as the
collection and dissemination of information related to potential, planned or
pending legislation.

RECIPIENT PRESS RELEASES (APR 1998)
-----------------------------------

The DOE policy and procedure on planned press releases requires that all
Recipient press releases be reviewed and approved by DOE prior to issuance.
Therefore, the Recipient shall, at least ten (10) days prior to the planned
issue date, submit a draft copy to the Contracting Officer of any planned press
releases related to work performed under this award. The Contracting Officer
will then obtain necessary reviews and clearances and provide the Recipient with
the results of such reviews prior to the planned issue date.

                                       10
<PAGE>

HAZARDOUS WASTES MANIFESTS AND LABELS (MAR 2003)
------------------------------------------------

The Recipient shall not identify, on wastes manifests or container labels or
otherwise, the DOE or the NETL as the owner or generator of hazardous wastes
without written permission, signed by either the NETL Director or both the NETL
Contracting Officer and the NETL ES&H Division Director, unless expressly and
specifically permitted by the award.





















                                       11
<PAGE>

                  SECTION II - INTELLECTUAL PROPERTY PROVISIONS
                  ---------------------------------------------

INTELLECTUAL PROPERTY PROVISIONS  (JAN 2004)
--------------------------------  ----------

The patent and technical data clauses included in this section apply to this
award. As used in these applicable clauses, the term "Patent Counsel" refers to
the following point of contact:

                           Intellectual Property Law Division
                           U.S. Department of Energy
                           Chicago Operations Office
                           9800 South Cass Avenue
                           Argonne, IL 60439

In reading these provisions, any reference to "contractor" shall mean
"recipient", and any reference to "contract" or "subcontract" shall mean "award"
or "subaward".

The Recipient shall include intellectual property clauses in any subaward in
accordance with requirements of the clauses in this section and of 10 CFR Parts
600.136 or 600.325 as appropriate.

CONFIDENTIAL BUSINESS INFORMATION (JAN 2004)
--------------------------------------------

Information represented to the Department as being confidential business
information, and which does not include "Technical Data" as that term is defined
in the "Rights in Data" clause in this agreement, shall be submitted as an
attachment to the required reports and will be withheld from disclosure outside
the U.S. Government to the extent permitted by law. Such attachment and each
page therein shall be stamped with the following legend and no other:

                        CONFIDENTIAL BUSINESS INFORMATION

     The Recipient considers the material furnished herein to contain
     confidential business information which is to be withheld from disclosure
     outside the U.S. Government to the extent permitted by law.

52.227-1 AUTHORIZATION AND CONSENT (JUL 1995) - ALTERNATE I (APR 1984)
----------------------------------------------------------------------

(a)  The Government authorizes and consents to all use and manufacture of any
     invention described in and covered by a United States patent in the
     performance of this contract or any subcontract at any tier.

(b)  The Contractor agrees to include, and require inclusion of, this clause,
     suitably modified to identify the parties, in all subcontracts at any tier
     for supplies or services (including construction, architect-engineer
     services, and materials, supplies, models, samples, and design or testing
     services expected to exceed the simplified acquisition threshold); however,
     omission of this clause from any subcontract, including those at or below
     the simplified acquisition threshold, does not affect this authorization
     and consent.

52.227-2 NOTICE AND ASSISTANCE REGARDING PATENT AND COPYRIGHT INFRINGEMENT (AUG
1996)
-------------------------------------------------------------------------------

(a)  The Contractor shall report to the Contracting Officer, promptly and in
     reasonable written detail, each notice or claim of patent or copyright
     infringement based on the performance of this contract of which the
     Contractor has knowledge.

                                       12
<PAGE>

(b)  In the event of any claim or suit against the Government on account of any
     alleged patent or copyright infringement arising out of the performance of
     this contract or out of the use of any supplies furnished or work or
     services performed under this contract, the Contractor shall furnish to the
     Government, when requested by the Contracting Officer, all evidence and
     information in possession of the Contractor pertaining to such suit or
     claim. Such evidence and information shall be furnished at the expense of
     the Government except where the Contractor has agreed to indemnify the
     Government.

(c)  The Contractor agrees to include, and require inclusion of, this clause in
     all subcontracts at any tier for supplies or services (including
     construction and architect-engineer subcontracts and those for material,
     supplies, models, samples, or design or testing services) expected to
     exceed the simplified acquisition threshold at FAR 2.101.

PATENT RIGHTS (SMALL BUSINESS FIRMS AND NONPROFIT ORGANIZATIONS) (OCT 2003)
---------------------------------------------------------------------------

(a)  Definitions

     Invention means any invention or discovery which is or may be patentable or
     otherwise protectable under title 35 of the United States Code, or any
     novel variety of plant which is or may be protected under the Plant Variety
     Protection Act (7 U.S.C. 2321 et seq.). Made when used in relation to any
     invention means the conception or first actual reduction to practice of
     such invention.

     Nonprofit organization means a university or other institution of higher
     education or an organization of the type described in section 501(c)(3) of
     the Internal Revenue Code of 1954 (26 U.S.C. 501(c)) and exempt from
     taxation under section 501(a) of the Internal Revenue Code (26 U.S.C.
     501(a)) or any nonprofit scientific or educational organization qualified
     under a State nonprofit organization statute.

     Practical application means to manufacture in the case of a composition or
     product, to practice in the case of a process or method, or to operate in
     the case of a machine or system; and, in each case, under such conditions
     as to establish that the invention is being utilized and that its benefits
     are to the extent permitted by law or Government regulations available to
     the public on reasonable terms.

     Small business firm means a small business concern as defined at section 2
     of Public Law 85-536 (16 U.S.C. 632) and implementing regulations of the
     Administrator of the Small Business Administration. For the purpose of this
     clause, the size standards for small business concerns involved in
     Government procurement and subcontracting at 13 CFR 121.3 through 121.8 and
     13 CFR 121.3 through 121.12, respectively, will be used.

     Subject invention means any invention of the Recipient conceived or first
     actually reduced to practice in the performance of work under this award,
     provided that in the case of a variety of plant, the date of determination
     (as defined in section 41(d) of the Plant Variety Protection Act, 7 U.S.C.
     2401(d) must also occur during the period of award performance.

                                       13
<PAGE>

(b)  Allocation of Principal Rights

     The Recipient may retain the entire right, title, and interest throughout
     the world to each subject invention subject to the provisions of this
     Patent Rights clause and 35 U.S.C. 203. With respect to any subject
     invention in which the Recipient retains title, the Federal Government
     shall have a non-exclusive, nontransferable, irrevocable, paid-up license
     to practice or have practiced for or on behalf of the U.S. the subject
     invention throughout the world.

(c)  Invention Disclosure, Election of Title and Filing of Patent Applications
     by Recipient

     (1)  The Recipient will disclose each subject invention to DOE within two
          months after the inventor discloses it in writing to Recipient
          personnel responsible for the administration of patent matters. The
          disclosure to DOE shall be in the form of a written report and shall
          identify the award under which the invention was made and the
          inventor(s). It shall be sufficiently complete in technical detail to
          convey a clear understanding to the extent known at the time of
          disclosure, of the nature, purpose, operation, and the physical,
          chemical, biological or electrical characteristics of the invention.
          The disclosure shall also identify any publication, on sale or public
          use of the invention and whether a manuscript describing the invention
          has been submitted for publication and, if so, whether it has been
          accepted for publication at the time of disclosure. In addition, after
          disclosure to DOE, the Recipient will promptly notify DOE of the
          acceptance of any manuscript describing the invention for publication
          or of any on sale or public use planned by the Recipient.

     (2)  The Recipient will elect in writing whether or not to retain title to
          any such invention by notifying DOE within two years of disclosure to
          DOE. However, in any case where publication, on sale, or public use
          has initiated the one-year statutory period wherein valid patent
          protection can still be obtained in the U.S., the period for election
          of title may be shortened by the agency to a date that is no more than
          60 days prior to the end of the statutory period.

     (3)  The Recipient will file its initial patent application on an invention
          to which it elects to retain title within one year after election of
          title or, if earlier, prior to the end of any statutory period wherein
          valid patent protection can be obtained in the U.S. after a
          publication, on sale, or public use. The Recipient will file patent
          applications in additional countries or international patent offices
          within either ten months of the corresponding initial patent
          application, or six months from the date when permission is granted by
          the Commissioner of Patents and Trademarks to file foreign patent
          applications when such filing has been prohibited by a Secrecy Order.

     (4)  Requests for extension of the time for disclosure to DOE, election,
          and filing under subparagraphs (c) (1), (2), and (3) of this clause
          may, at the discretion of DOE, be granted.

(d)  Conditions When the Government May Obtain Title

     The Recipient will convey to DOE, upon written request, title to any
     subject invention:

                                       14
<PAGE>

     (1)  If the Recipient fails to disclose or elect the subject invention
          within the times specified in paragraph (c) of this patent rights
          clause, or elects not to retain title; provided that DOE may only
          request title within 60 days after learning of the failure of the
          Recipient to disclose or elect within the specified times;

     (2)  In those countries in which the Recipient fails to file patent
          applications within the times specified in paragraph (c) of this
          Patent Rights clause; provided, however, that if the Recipient has
          filed a patent application in a country after the times specified in
          paragraph (c) of this Patent Rights clause, but prior to its receipt
          of the written request of DOE, the Recipient shall continue to retain
          title in that country; or

     (3)  In any country in which the Recipient decides not to continue the
          prosecution of any application for, to pay the maintenance fees on, or
          defend in a reexamination or opposition proceeding on, a patent on a
          subject invention.

(e)  Minimum Rights to Recipient and Protection of the Recipient Right To File

     (1)  The Recipient will retain a non-exclusive royalty-free license
          throughout the world in each subject invention to which the Government
          obtains title, except if the Recipient fails to disclose the subject
          invention within the times specified in paragraph (c) of this Patent
          Rights clause. The Recipient's license extends to its domestic
          subsidiaries and affiliates, if any, within the corporate structure of
          which the Recipient is a party and includes the right to grant
          sublicenses of the same scope of the extent the Recipient was legally
          obligated to do so at the time the award was awarded. The license is
          transferable only with the approval of DOE except when transferred to
          the successor of that part of the Recipient's business to which the
          invention pertains.

     (2)  The Recipient's domestic license may be revoked or modified by DOE to
          the extent necessary to achieve expeditious practical application of
          the subject invention pursuant to an application for an exclusive
          license submitted in accordance with applicable provisions at 37 CFR
          part 404 and the agency's licensing regulation, if any. This license
          will not be revoked in that field of use or the geographical areas in
          which the Recipient has achieved practical application and continues
          to make the benefits of the invention reasonably accessible to the
          public. The license in any foreign country may be revoked or modified
          at discretion of the funding Federal agency to the extent the
          Recipient, its licensees, or its domestic subsidiaries or affiliates
          have failed to achieve practical application in that foreign country.

     (3)  Before revocation or modification of the license, the funding Federal
          agency will furnish the Recipient a written notice of its intention to
          revoke or modify the license, and the Recipient will be allowed thirty
          days (or such other time as may be authorized by DOE for good cause
          shown by the Recipient) after the notice to show cause why the license
          should not be revoked or modified. The Recipient has the right to
          appeal, in accordance with applicable regulations in 37 CFR Part 404
          and the agency's licensing regulations, if any, concerning the
          licensing of Government-owned inventions, any decision concerning the
          revocation or modification of its license.

                                       15
<PAGE>

(f)  Recipient Action To Protect Government's Interest

     (1)  The Recipient agrees to execute or to have executed and promptly
          deliver to DOE all instruments necessary to:

          (i)  Establish or confirm the rights the Government has throughout the
               world in those subject inventions for which the Recipient retains
               title; and

          (ii) Convey title to DOE when requested under paragraph (d) of this
               Patent Rights clause, and to enable the government to obtain
               patent protection throughout the world in that subject invention.

     (2)  The Recipient agrees to require, by written agreement, its employees,
          other than clerical and non-technical employees, to disclose promptly
          in writing to personnel identified as responsible for the
          administration of patent matters and in a format suggested by the
          Recipient each subject invention made under this award in order that
          the Recipient can comply with the disclosure provisions of paragraph
          (c) of this Patent Rights clause, and to execute all papers necessary
          to file patent applications on subject inventions and to establish the
          Government's rights in the subject inventions. The disclosure format
          should require, as a minimum, the information requested by paragraph
          (c)(1) of this Patent Rights clause. The Recipient shall instruct such
          employees through the employee agreements or other suitable
          educational programs on the importance of reporting inventions in
          sufficient time to permit the filing of patent applications prior to
          U.S. or foreign statutory bars.

     (3)  The Recipient will notify DOE of any decision not to continue
          prosecution of a patent application, pay maintenance fees, or defend
          in a reexamination or opposition proceeding on a patent, in any
          country, not less than 30 days before the expiration of the response
          period required by the relevant patent office.

     (4)  The Recipient agrees to include, within the specification of any U.S.
          patent application and any patent issuing thereon covering a subject
          invention, the following statement: "This invention was made with
          Government support under (identify the award) awarded by (identify
          DOE). The Government has certain rights in this invention."

(g)  Subaward/Contract

     (1)  The Recipient will include this Patent Rights clause, suitably
          modified to identify the parties, in all subawards/contracts,
          regardless of tier, for experimental, developmental or research work
          to be performed by a small business firm or nonprofit organization.
          The subrecipient/contractor will retain all rights provided for the
          Recipient in this Patent Rights clause, and the Recipient will not, as
          part of the consideration for awarding the subcontract, obtain rights
          in the subcontractors' subject inventions.

     (2)  The Recipient will include in all other subawards/contracts,
          regardless of tier, for experimental, developmental or research work,
          the patent rights clause required by 10 CFR 600.325(c).

                                       16
<PAGE>

     (3)  In the case of subawards/contracts at any tier, DOE, the Recipient,
          and the subrecipient/contractor agree that the mutual obligations of
          the parties created by this clause constitute a contract between the
          subrecipient/contractor and DOE with respect to those matters covered
          by the clause.

(h)  Reporting on Utilization of Subject Inventions

     The Recipient agrees to submit on request periodic reports no more
     frequently than annually on the utilization of a subject invention or on
     efforts at obtaining such utilization that are being made by the Recipient
     or its licensees or assignees. Such reports shall include information
     regarding the status of development, date of first commercial sale or use,
     gross royalties received by the Recipient and such other data and
     information as DOE may reasonably specify. The Recipient also agrees to
     provide additional reports in connection with any march-in proceeding
     undertaken by DOE in accordance with paragraph (j) of this Patent Rights
     clause. As required by 35 U.S.C. 202(c)(5), DOE agrees it will not disclose
     such information to persons outside the Government without the permission
     of the Recipient.

(i)  Preference for United States Industry.

     Notwithstanding any other provision of this Patent Rights clause, the
     Recipient agrees that neither it nor any assignee will grant to any person
     the exclusive right to use or sell any subject invention in the U.S. unless
     such person agrees that any products embodying the subject invention or
     produced through the use of the subject invention will be manufactured
     substantially in the U.S. However, in individual cases, the requirement for
     such an agreement may be waived by DOE upon a showing by the Recipient or
     its assignee that reasonable but unsuccessful efforts have been made to
     grant licenses on similar terms to potential licensees that would be likely
     to manufacture substantially in the U.S. or that under the circumstances
     domestic manufacture is not commercially feasible.

(j)  March-in-Rights

     The Recipient agrees that with respect to any subject invention in which it
     has acquired title, DOE has the right in accordance with procedures at 37
     CFR 401.6 and any supplemental regulations of the Agency to require the
     Recipient, an assignee or exclusive licensee of a subject invention to
     grant a non-exclusive, partially exclusive, or exclusive license in any
     field of use to a responsible applicant or applicants, upon terms that are
     reasonable under the circumstances and if the Recipient, assignee, or
     exclusive licensee refuses such a request, DOE has the right to grant such
     a license itself if DOE determines that:

     (1)  Such action is necessary because the Recipient or assignee has not
          taken or is not expected to take within a reasonable time, effective
          steps to achieve practical application of the subject invention in
          such field of use;

     (2)  Such action is necessary to alleviate health or safety needs which are
          not reasonably satisfied by the Recipient, assignee, or their
          licensees;

     (3)  Such action is necessary to meet requirements for public use specified
          by Federal regulations and such requirements are not reasonably
          satisfied by the Recipient, assignee, or licensee; or

                                       17
<PAGE>

     (4)  Such action is necessary because the agreement required by paragraph
          (i) of this Patent Rights clause has not been obtained or waived or
          because a licensee of the exclusive right to use or sell any subject
          invention in the U.S. is in breach of such agreement.

(k)  Special Provisions for Awards With Nonprofit Organizations

     If the Recipient is a nonprofit organization, it agrees that:

     (1)  Rights to a subject invention in the U.S. may not be assigned without
          the approval of DOE, except where such assignment is made to an
          organization which has as one of its primary functions the management
          of inventions, provided that such assignee will be subject to the same
          provisions as the Recipient;

     (2)  The Recipient will share royalties collected on a subject invention
          with the inventor, including Federal employee co-inventors (when DOE
          deems it appropriate) when the subject invention is assigned in
          accordance with 35 U.S.C. 202(e) and 37 CFR 401.10;

     (3)  The balance of any royalties or income earned by the Recipient with
          respect to subject inventions, after payment of expenses (including
          payments to inventors) incidental to the administration of subject
          inventions, will be utilized for the support of scientific or
          engineering research or education; and

     (4)  It will make efforts that are reasonable under the circumstances to
          attract licensees of subject inventions that are small business firms
          and that it will give preference to a small business firm if the
          Recipient determines that the small business firm has a plan or
          proposal for marketing the invention which, if executed, is equally
          likely to bring the invention to practical application as any plans or
          proposals from applicants that are not small business firms; provided
          that the Recipient is also satisfied that the small business firm has
          the capability and resources to carry out its plan or proposal. The
          decision whether to give a preference in any specific case will be at
          the discretion of the Recipient. However, the Recipient agrees that
          the Secretary of Commerce may review the Recipient's licensing program
          and decisions regarding small business applicants, and the Recipient
          will negotiate changes to its licensing policies, procedures or
          practices with the Secretary when the Secretary's review discloses
          that the Recipient could take reasonable steps to implement more
          effectively the requirements of this paragraph (k)(4).

(l)  Communications

     All communications required by this Patent Rights clause should be sent to
     the DOE Patent Counsel address listed in the Award Document.

(m)  Electronic Filing

     Unless otherwise Specified in the award, the information identified in
     paragraphs (f)(2) and (f)(3) may be electronically filed.

                                       18
<PAGE>

RIGHTS IN DATA - GENERAL (OCT 2003)
-----------------------------------

(a)  Definitions

     Computer Data Bases, as used in this clause, means a collection of data in
     a form capable of, and for the purpose of, being stored in, processed, and
     operated on by a computer. The term does not include computer software.

     Computer software, as used in this clause, means (i) computer programs
     which are data comprising a series of instructions, rules, routines or
     statements, regardless of the media in which recorded, that allow or cause
     a computer to perform a specific operation or series of operations and (ii)
     data comprising source code listings, design details, algorithms,
     processes, flow charts, formulae, and related material that would enable
     the computer program to be produced, created or compiled. The term does not
     include computer data bases.

     Data, as used in this clause, means recorded information, regardless of
     form or the media on which it may be recorded. The term includes technical
     data and computer software. The term does not include information
     incidental to administration, such as financial, administrative, cost or
     pricing, or management information.

     Form, fit, and function data, as used in this clause, means data relating
     to items, components, or processes that are sufficient to enable physical
     and functional interchangeability, as well as data identifying source,
     size, configuration, mating, and attachment characteristics, functional
     characteristics, and performance requirements; except that for computer
     software it means data identifying source, functional characteristics, and
     performance requirements but specifically excludes the source code,
     algorithm, process, formulae, and flow charts of the software.

     Limited rights, as used in this clause, means the rights of the Government
     in limited rights data as set forth in the Limited Rights Notice of
     subparagraph (g)(2) if included in this clause.

     Limited rights data, as used in this clause, means data (other than
     computer software) developed at private expense that embody trade secrets
     or are commercial or financial and confidential or privileged.

     Restricted computer software, as used in this clause, means computer
     software developed at private expense and that is a trade secret; is
     commercial or financial and is confidential or privileged; or is published
     copyrighted computer software; including minor modifications of such
     computer software.

     Restricted rights, as used in this clause, means the rights of the
     Government in restricted computer software, as set forth in a Restricted
     Rights Notice of subparagraph (g)(3) if included in this clause, or as
     otherwise may be provided in a collateral agreement incorporated in and
     made part of this contract, including minor modifications of such computer
     software.

                                       19
<PAGE>

     Technical data, as used in this clause, means data (other than computer
     software) which are of a scientific or technical nature. Technical data
     does not include computer software, but does include manuals and
     instructional materials and technical data formatted as a computer data
     base.

     Unlimited rights, as used in this clause, means the right of the Government
     to use, disclose, reproduce, prepare derivative works, distribute copies to
     the public, and perform publicly and display publicly, in any manner and
     for any purpose, and to have or permit others to do so.

(b)  Allocations of Rights

     (1)  Except as provided in paragraph (c) of this clause regarding
          copyright, the Government shall have unlimited rights in -

          (i)  Data first produced in the performance of this agreement;

          (ii) Form, fit, and function data delivered under this agreement;

          (iii) Data delivered under this agreement (except for restricted
               computer software) that constitute manuals or instructional and
               training material for installation, operation, or routine
               maintenance and repair of items, components, or processes
               delivered or furnished for use under this agreement; and

          (iv) All other data delivered under this agreement unless provided
               otherwise for limited rights data or restricted computer software
               in accordance with paragraph (g) of this clause.

     (2)  The Recipient shall have the right to -

          (i)  Use, release to others, reproduce, distribute, or publish any
               data first produced or specifically used by the Recipient in the
               performance of this agreement, unless provided otherwise in
               paragraph (d) of this clause;

          (ii) Protect from unauthorized disclosure and use those data which are
               limited rights data or restricted computer software to the extent
               provided in paragraph (g) of this clause;

          (iii) Substantiate use of, add or correct limited rights, restricted
               rights, or copyright notices and to take over appropriate action,
               in accordance with paragraphs (e) and (f) of this clause; and

          (iv) Establish claim to copyright subsisting in data first produced in
               the performance of this agreement to the extent provided in
               subparagraph (c)(1) of this clause.

(c)  Copyright

     (1)  Data first produced in the performance of this agreement. Unless
          provided otherwise in paragraph (d) of this clause, the Recipient may
          establish, without prior approval of the Contracting Officer, claim to
          copyright subsisting in data first produced in the performance of this

                                       20
<PAGE>

          agreement. When claim to copyright is made, the Recipient shall affix
          the applicable copyright notices of 17 U.S.C. 401 or 402 and
          acknowledgement of Government sponsorship (including agreement number)
          to the data when such data are delivered to the Government, as well as
          when the data are published or deposited for registration as a
          published work in the U.S. Copyright Office. For such copyrighted
          data, including computer software, the Recipient grants to the
          Government, and others acting on its behalf, a paid-up nonexclusive,
          irrevocable worldwide license in such copyrighted data to reproduce,
          prepare derivative works, distribute copies to the public, and perform
          publicly and display publicly, by or on behalf of the Government.

     (2)  Data not first produced in the performance of this agreement. The
          Recipient shall not, without prior written permission of the
          Contracting Officer, incorporate in data delivered under this
          agreement any data not first produced in the performance of this
          agreement and which contains the copyright notice of 17 U.S.C. 401 or
          402, unless the Recipient identifies such data and grants to the
          Government, or acquires on its behalf, a license of the same scope as
          set forth in subparagraph (c)(1) of this clause; provided, however,
          that if such data are computer software the Government shall acquire a
          copyright license as set forth in subparagraph (g)(3) of this clause
          if included in this agreement or as otherwise may be provided in a
          collateral agreement incorporated in or made part of this agreement.

     (3)  Removal of copyright notices. The Government agrees not to remove any
          copyright notices placed on data pursuant to this paragraph (c), and
          to include such notices on all reproductions of the data.

(d)  Release, Publication and Use of Data

     (1)  The Recipient shall have the right to use, release to others,
          reproduce, distribute, or publish any data first produced or
          specifically used by the Recipient in the performance of this
          agreement, except to the extent such data may be subject to the
          Federal export control or national security laws or regulations, or
          unless otherwise provided in this paragraph of this clause or
          expressly set forth in this agreement.

     (2)  The Recipient agrees that to the extent it receives or is given access
          to data necessary for the performance of this award, which contain
          restrictive markings, the Recipient shall treat the data in accordance
          with such markings unless otherwise specifically authorized in writing
          by the contracting officer.

(e)  Unauthorized Marking of Data

     (1)  Notwithstanding any other provisions of this agreement concerning
          inspection or acceptance, if any data delivered under this agreement
          are marked with the notices specified in subparagraph (g)(2) or (g)(3)
          of this clause and use of such is not authorized by this clause, or if
          such data bears any other restrictive or limiting markings not
          authorized by this agreement, the Contracting Officer may at any time
          either return the data to the Recipient or cancel or ignore the
          markings. However, the following procedures shall apply prior to
          canceling or ignoring the markings.

                                       21
<PAGE>

          (i)  The Contracting Officer shall make written inquiry to the
               Recipient affording the Recipient 30 days from receipt of the
               inquiry to provide written justification to substantiate the
               propriety of the markings;

          (ii) If the Recipient fails to respond or fails to provide written
               justification to substantiate the propriety of the markings
               within the 30-day period (or a longer time not exceeding 90 days
               approved in writing by the Contracting Officer for good cause
               shown), the Government shall have the right to cancel or ignore
               the markings at any time after said period and the data will no
               longer be made subject to any disclosure prohibitions.

          (iii) If the Recipient provides written justification to substantiate
               the propriety of the markings within the period set in
               subparagraph (e)(1)(i) of this clause, the Contracting Officer
               shall consider such written justification and determine whether
               or not the markings are to be cancelled or ignored. If the
               Contracting Officer determines that the markings are authorized,
               the Recipient shall be so notified in writing. If the Contracting
               Officer determines, with concurrence of the head of the
               contracting activity, that the markings are not authorized, the
               Contracting Officer shall furnish the Recipient a written
               determination, which determination shall become the final agency
               decision regarding the appropriateness of the markings unless the
               Recipient files suit in a court of competent jurisdiction within
               90 days of receipt of the Contracting Officer's decision. The
               Government shall continue to abide by the markings under this
               subparagraph (e)(1)(iii) until final resolution of the matter
               either by the Contracting Officer's determination becoming final
               (in which instance the Government shall thereafter have the right
               to cancel or ignore the markings at any time and the data will no
               longer be made subject to any disclosure prohibitions), or by
               final disposition of the matter by court decision if suit is
               filed.

     (2)  The time limits in the procedures set forth in subparagraph (e)(1) of
          this clause may be modified in accordance with agency regulations
          implementing the Freedom of Information Act (5 U.S.C. 552) if
          necessary to respond to a request thereunder.

(f)  Omitted or Incorrect Markings

     (1)  Data delivered to the Government without either the limited rights or
          restricted rights notice as authorized by paragraph (g) of this
          clause, or the copyright notice required by paragraph (c) of this
          clause, shall be deemed to have been furnished with unlimited rights,
          and the Government assumes no liability for the disclosure, use, or
          reproduction of such data. However, to the extent the data has not
          been disclosed without restriction outside the Government, the
          Recipient may request, within 6 months (or a longer time approved by
          the Contracting Officer for good cause shown) after delivery or such
          data, permission to have notices placed on qualifying data at the
          Recipient's expense, and the Contracting Officer may agree to do so if
          the Recipient:

          (i)  Identifies the data to which the omitted notice is to be applied;

                                       22
<PAGE>

          (ii) Demonstrates that the omission of the notice was inadvertent;

          (iii) Establishes that the use of the proposed notice is authorized;
               and

          (iv) Acknowledges that the Government has no liability with respect to
               the disclosure, use, or reproduction of any such data made prior
               to the addition of the notice or resulting from the omission of
               the notice.

     (2)  The Contracting Officer may also:

          (i)  Permit correction at the Recipient's expense of incorrect notices
               if the Recipient identifies the data on which correction of the
               notice is to be made, and demonstrates that the correct notice is
               authorized, or

          (ii) Correct any incorrect notices.

(g)  Protection of Limited Rights Data and Restricted Computer Software

     When data other than that listed in subparagraphs (b)(1)(i), (ii), and
     (iii) of this clause are specified to be delivered under this agreement and
     qualify as either limited rights data or restricted computer software, if
     the Recipient desires to continue protection of such data, the Recipient
     shall withhold such data and not furnish them to the Government under this
     agreement. As a condition to this withholding, the Recipient shall identify
     the data being withheld and furnish form, fit, and function data in lieu
     thereof. Limited rights data that are formatted as a computer data base for
     delivery to the Government are to be treated as limited rights data and not
     restricted computer software.

(h)  Subaward/Contract

     The Recipient has the responsibility to obtain from its
     subrecipients/contractors all data and rights therein necessary to fulfill
     the Recipient's obligations to the Government under this agreement. If a
     subrecipient/contractor refuses to accept terms affording the Government
     such rights, the Recipient shall promptly bring such refusal to the
     attention of the Contracting Officer and not proceed with the
     subaward/contract award without further authorization.

(i)  Additional Data Requirements

     In addition to the data specified elsewhere in this agreement to be
     delivered, the Contracting Officer may, at anytime during agreement
     performance or within a period of 3 years after acceptance of all items to
     be delivered under this agreement, order any data first produced or
     specifically used in the performance of this agreement. This clause is
     applicable to all data ordered under this subparagraph. Nothing contained
     in this subparagraph shall require the Recipient to deliver any data the
     withholding of which is authorized by this clause, or data which are
     specifically identified in this agreement as not subject to this clause.
     When data are to be delivered under this subparagraph, the Recipient will
     be compensated for converting the data into the prescribed form, for
     reproduction, and for delivery.

                                       23
<PAGE>

(j)  The recipient agrees, except as may be otherwise specified in this award
     for specific data items listed as not subject to this paragraph, that the
     Contracting Officer or an authorized representative may, up to three years
     after acceptance of all items to be delivered under this award, inspect at
     the Recipient's facility any data withheld pursuant to paragraph (g) of
     this clause, for purposes of verifying the Recipient's assertion pertaining
     to the limited rights or restricted rights status of the data or for
     evaluating work performance. Where the Recipient whose data are to be
     inspected demonstrates to the Contracting Officer that there would be a
     possible conflict of interest if the inspection were made by a particular
     representative, the Contracting Officer shall designate an alternate
     inspector.

LIMITED RIGHTS DATA (JAN 2004)
------------------------------

(a)  The limited rights data subject to the "Rights in Data" clause in this
     award are listed below. This listing of data, which are asserted by the
     Recipient to be limited rights data, does not constitute an admission by
     the Government that the data is in fact limited rights data.

          1.   Sorbent injection system (design of sorbent storage and sorbent
               feeding equipment); and
          2.   Sorbents (manufacturing process and composition).

(b)  If a patent is issued by the United States Patent and Trademark Office or
     the patent office of any foreign country based on any information asserted
     to be limited rights data, the Government will no longer treat any data
     contained in such issued patent as limited rights data. In addition, if any
     information asserted to be limited rights data results in or becomes a
     Subject Invention, as that term is defined in the patent rights clause of
     this agreement, the Government will only treat such data as limited rights
     data until the Recipient has filed its initial patent application.

(c)  The Recipient shall not introduce or utilize any limited rights data not
     identified in paragraph (a) above in the performance of the award without
     the expressed written permission of the Contracting Officer.

(d)  Minimum technical data deliverable with unlimited rights. Not withstanding
     any other provision of this award, the following technical data first
     produced under this award as a minimum, shall be delivered to the DOE with
     unlimited rights:

     1.   Sorbent Injection System (operating parameters-throughput, airflow
          rate, location of injection ports, number of injection locations,
          general process diagram)
     2.   Sorbents
               a.   performance at removing mercury from flue gas (% removal)
               b.   physical properties (particle size distribution, pore size,
                    surface area, iodine numbers, sorption capacity)
               c.   conditions of use (temperature, use rate, concentrations of
                    gas components treated)
               d.   impacts of fly ash (if tested)

                                       24
<PAGE>

52.227-23 RIGHTS TO PROPOSAL DATA (TECHNICAL). (JUN 1987)
---------------------------------------------------------

Except for data contained in pages [None], it is agreed that as a condition of
award of this contract, and notwithstanding the conditions of any notice
appearing thereon, the Government shall have unlimited rights (as defined in the
"Rights in Data - General" or the "Rights in Data - Programs Covered Under
Special Data Statutes" clause contained in this contract) in and to the
technical data contained in the proposal dated 04/30/04, upon which this
contract is based.








                                       25
<PAGE>

                        SECTION III - LIST OF ATTACHMENTS
                        ---------------------------------


Attachment A -- Statement of Project Objectives

Attachment B -- Federal Assistance Reporting Checklist

Attachment C -- Budget Page(s)

Attachment D -- Recipient Acquired Property





                                       26
<PAGE>

                 ATTACHMENT A -- STATEMENT OF PROJECT OBJECTIVES
                 -----------------------------------------------

            "Low-Cost Options for Moderate Levels of Mercury Control"

     A. OBJECTIVES

     The purpose of the proposed test program is to evaluate two technologies
that utilize the injection of sorbent materials to remove mercury from
coal-fired power plant flue gas--TOXECON IITM and high-temperature sorbents.

     Key objectives of the program are to:

     o    lessen the cost of mercury control,
     o    test control technology that is applicable to a different power plant
          configuration that is currently not adequately addressed (hot-side
          ESP),
     o    test technology that is applicable to the largest population of power
          plant configurations, and
     o    expand the database of what is known about mercury and control
          systems.

     The program will test TOXECON IITM at AEP Gavin (high S bituminous), and
Entergy Independence (PRB). The program will test high-temperature sorbents at
MidAmerican Council Bluffs and Louisa (PRB). In addition to the mentioned host
sites, EPRI, Dynegy, and Oglethorpe Power are supporting the program with
financial commitments.

     Because these technologies have not had previous widespread testing at
plants burning different ranks of coal, tests are suggested at both low rank and
bituminous burning plants to evaluate whether rank makes a difference in
performance of the technology. These technologies are directly applicable to
coal-fired power plant sites that employ electrostatic precipitators (ESPs) as
the primary particulate removal system. This configuration represents
approximately 797 plants that produce a combined 277,000 MW, or approximately
72% of existing coal-fired generating capacity and potentially a significant
portion of new plants. These sites will allow documentation of sorbent
performance on the following configurations:

     o    PRB coal with ESP
     o    Bituminous coal with ESP
     o    PRB coal with hot-side ESP
          The secondary objectives of this program are to:
     o    accelerate the scale-up and availability of commercial mercury control
          systems for subbituminous- and bituminous-fired plants with standard
          particulate control systems;
     o    evaluate technological advancements likely to improve performance and
          reduce costs associated with mercury control;
     o    obtain data on operability, maintainability, and reliability;
     o    document technology to reduce impacts on coal utilization byproducts;
     o    determine maximum mercury removal for various plant configurations;
          and
     o    determine the total costs associated with mercury control as a
          function of fuel and plant characteristics.

     B. TEST SITES

Testing is planned for four host sites. TOXECON IITM will be tested at two sites
and high-temperature sorbents will be tested at two sites. The characteristics
and virtues of each site are itemized in Tables 1, 2 and 3.

                                       26
<PAGE>
<TABLE>
<CAPTION>

                         Table 1. Matrix Identifying Host Site with NETL Area of Interest
<S>                       <C>         <C>           <C>          <C>         <C>          <C>
------------------------- ----------- ------------ ------------ ------------ ----------- ----------- ----------------
Area of Interest             AEP                     Entergy                 MidAm CB      MidAm
                            Gavin                   Indepen.                    (1)      Louisa (1)
========================= =========== ============ ============ ============ =========== =========== ================
Technology to be
evaluated                                   TOXECON II(TM)                          High-Temperature Sorbents
------------------------- -------------------------------------------------- ----------------------------------------
Approximate number of
units of applicability                           715                                           82
------------------------- ------------ ----------- ------------- ----------- ------------- ------------- ------------
Low rank fuels                                          X                         X             X
------------------------- ------------ ----------- ------------- ----------- ------------- ------------- ------------
Bituminous fuels               X
------------------------- ------------ ----------- ------------- ----------- ------------- ------------- ------------
Blended fuels
------------------------- ------------ ----------- ------------- ----------- ------------- ------------- ------------
Test size (MW)                200                      210                        88           350
------------------------- ------------ ----------- ------------- ----------- ------------- ------------- ------------
Longer-term tests
(1-2 months)                   X                        X                     See Note 1    See Note 1
------------------------- ------------ ----------- ------------- ----------- ------------- ------------- ------------

Note 1. Dry sorbents will be tested at Council Bluffs and liquid sorbents will
be tested at Louisa. Sorbents will be tested at each site through the parametric
testing phase where performance will me measured as a function of several
operating parameters. Depending on the parametric tests, long-term testing will
be performed at only the site exhibiting the better sorbent performance. In
other words, long-term testing of high temperature sorbents will occur at only
one site.

                 Table 2. Host Site Key Descriptive Information
----------------- ------------- ------------- ------------- -------------
                      AEP         Entergy        MidAm         MidAm
                     Gavin        Indepen.         CB          Louisa
================= ============= ============= ============= =============
Unit No.             1 or 2          1             2             1
----------------- ------------- ------------- ------------- -------------
Size (MW)            1,200          842            88           700
----------------- ------------- ------------- ------------- -------------
Test Portion          200           210            88           350
(MW)
----------------- ------------- ------------- ------------- -------------
Coal                  Bit           PRB           PRB           PRB
----------------- ------------- ------------- ------------- -------------
   Heating           11,111        8,870         8,425         8,500
   Value
   (as rec'd.)
----------------- ------------- ------------- ------------- -------------
   Sulfur             3.9           0.32          0.32          0.32
   (% by
   weight)
----------------- ------------- ------------- ------------- -------------
   Chlorine          1,333           50          50-100        50-100
   (ppm)
----------------- ------------- ------------- ------------- -------------
   Mercury            0.17          0.04          0.08          0.08
   ((mu)g/g)
----------------- ------------- ------------- ------------- -------------
Particulate          CSESP         CSESP         HSESP         HSESP
Control
----------------- ------------- ------------- ------------- -------------
SCA/fields           430/6         542/8        224/(4)        459/5
(ft2/kacfm)
----------------- ------------- ------------- ------------- -------------
Sulfur Control        Wet       Compl. Coal   Compl. Coal   Compl. Coal
                      FGD
----------------- ------------- ------------- ------------- -------------
Disposition of      Disposed        Sold       Some sold        Sold
Ash
----------------- ------------- ------------- ------------- -------------
Typical Inlet
Mercury              13-18          6-7        11.1-13.5     11.1-13.4
((mu)g/dncm)
----------------- ------------- ------------- ------------- -------------
Typical Mercury     0% (ESP)      10%-20%        0%-10%        0%-10%
Removal             70%+ in
                     (FGD)
----------------- ------------- ------------- ------------- -------------

                                       28
<PAGE>

                          Table 3. Measured and Predicted Mercury Concentrations and Removal

-------------------------------------- ------------------------ ----------------------- ------------------------------
                                                Inlet                   Outlet               Removal Efficiency
-------------------------------------- ------------------------ ----------------------- ------------------------------
Gavin(a)
-------------------------------------- ------------------------ ----------------------- ------------------------------
Particulate ((mu)g/dncm)                          0                       0
-------------------------------------- ------------------------ ----------------------- ------------------------------
Oxidized ((mu)g/dncm)                             2                       2
-------------------------------------- ------------------------ ----------------------- ------------------------------
Elemental ((mu)g/dncm)                           13                       13
-------------------------------------- ------------------------ ----------------------- ------------------------------
Total ((mu)g/dncm)                               15                       15                    0% across ESP
-------------------------------------- ------------------------ ----------------------- ------------------------------
Independence(b)
-------------------------------------- ------------------------ ----------------------- ------------------------------
Particulate ((mu)g/dncm)                       0.8-1.0                    0                         >99%
-------------------------------------- ------------------------ ----------------------- ------------------------------
Oxidized ((mu)g/dncm)                          1.0-1.2                 0.8-1.1
-------------------------------------- ------------------------ ----------------------- ------------------------------
Elemental ((mu)g/dncm)                         4.0-4.9                 3.2-4.4
-------------------------------------- ------------------------ ----------------------- ------------------------------
Total ((mu)g/dncm)                             6.0-7.0                 4.8-6.3                     10-20%
-------------------------------------- ------------------------ ----------------------- ------------------------------
Council Bluffs(c)
-------------------------------------- ------------------------ ----------------------- ------------------------------
Particulate ((mu)g/dncm)                       1.4-1.8                    0                         >99%
-------------------------------------- ------------------------ ----------------------- ------------------------------
Oxidized ((mu)g/dncm)                          1.9-2.4                 1.7-2.4
-------------------------------------- ------------------------ ----------------------- ------------------------------
Elemental ((mu)g/dncm)                         7.5-9.6                 6.7-9.6
-------------------------------------- ------------------------ ----------------------- ------------------------------
Total ((mu)g/dncm)                            11.1-13.5               10.0-13.5                     0-10%
-------------------------------------- ------------------------ ----------------------- ------------------------------
Louisa(c)
-------------------------------------- ------------------------ ----------------------- ------------------------------
Particulate ((mu)g/dncm)                       1.4-1.7                    0                         >99%
-------------------------------------- ------------------------ ----------------------- ------------------------------
Oxidized ((mu)g/dncm)                          1.9-2.4                 1.7-2.4
-------------------------------------- ------------------------ ----------------------- ------------------------------
Elemental ((mu)g/dncm)                         7.5-9.6                 6.7-9.6
-------------------------------------- ------------------------ ----------------------- ------------------------------
Total ((mu)g/dncm)                            11.1-13.4               10.0-13.4                     0-10%
-------------------------------------- ------------------------ ----------------------- ------------------------------

a.   Mercury measurements during EPRI testing 2001.

b.   Mercury speciation and concentration estimated based on coal analysis.
     Removal efficiency estimated from similar configurations and using actual
     test site outlet data.

c.   Mercury speciation and concentration estimated based on coal analysis.
     Removal efficiency estimated from similar configurations.

                                       29
</TABLE>
<PAGE>

C.  SCOPE OF WORK

To achieve the overall objective of this program an extensive field-test program
is proposed for each site. A team of experienced personnel has been assembled to
conduct the primary tasks. This approach will minimize the challenges associated
with installing the technologies and assure the same quality data and execution
as previous tests that ADA-ES has performed. The key components are summarized
below.

     o    The use of a semi-continuous mercury analyzer (SCEM) similar to the
          design used during sorbent injection field-testing at the seven
          full-scale coal-fired power plants under EPRI and DOE/NETL programs in
          2001 through 2003. During previous programs, the analyzer demonstrated
          reliable performance when operated by a skilled engineer and could be
          quickly repaired if problems occurred. ADA-ES personnel will operate
          the SCEM.
     o    Injection equipment will be operated and maintained by experienced
          engineers who can quickly determine and fix operating problems.
     o    Results will be analyzed and reviewed daily by engineers experienced
          in parametric evaluations of new pollution control technologies.

The field-tests will be accomplished through a series of tasks. The tasks are
independent from each other in that they each have specific goals and tests
associated with them. However, they are also interdependent, as the results from
each task will influence the test parameters of subsequent tasks. A summary of
each task is presented.
ADA-ES engineers will coordinate with plant personnel to retrieve the necessary
plant operating data files. An example of the operating data is included in
Table 4. These data will be integrated into the sorbent injection and mercury
control data. Data will be reviewed daily if it can be provided by the plant
daily. ADA-ES site engineers will work closely with plant operators to monitor
plant operation in real-time during testing. If at any time the performance of
the existing pollution control equipment degrades or if there is a measurable
increase in outlet emissions that becomes a concern, testing will be halted.

The primary extraction locations for the mercury SCEMs will be across the entire
air pollution control train, and at the inlet and outlet of the ESP. Triplicate
manual mercury samples using the draft Ontario Hydro Method will be collected at
the inlet and outlet locations. One set of triplicate measurements will be done
during baseline testing and three sets of triplicate measurements will be made
during the long-term testing phase (near the beginning, middle and end of the
long-term tests). Because of the influence of HCl on sorbent effectiveness, HCl
measurements will be made at each site to better characterize the flue gas. The
extraction location will be identified after a full velocity and temperature
traverse to indicate a representative duct average mercury concentration.

                                       30
<PAGE>
<TABLE>
<CAPTION>

                                Table 4. Typical Data Collected During Field-Testing
<S>                              <C>                                            <C>           <C>
   ----------------------------- --------------------------------------------- --------------- ---------------------
                                                                                               Parametric/
   Parameter                     Sample/Signal/Test                               Baseline     Long-Term

   ----------------------------- --------------------------------------------- --------------- ---------------------
   Coal                          Batch sample                                       Yes                Yes
   ----------------------------- --------------------------------------------- --------------- ---------------------
   Coal                          Plant signals:                                     Yes                Yes
                                    burn rate (lb/hr)
                                    quality (lb/MMBTU, % ash)
   ----------------------------- --------------------------------------------- --------------- ---------------------
   Fly ash                       Batch sample                                       Yes                Yes
   ----------------------------- --------------------------------------------- --------------- ---------------------
   Wet scrubber blowdown,        Batch sample                                       Yes               No/Yes
   solids discharge and feed
   limestone
   ----------------------------- --------------------------------------------- --------------- ---------------------
   Unit operation                Plant Signals:                                     Yes                Yes
                                    Boiler load
                                    Measure of flow for partial unit
                                    test (e.g., fan amps)
   ----------------------------- --------------------------------------------- --------------- ---------------------
   Temperature                   Plant signal at particulate collector inlet        Yes                Yes
                                 and outlet
   ----------------------------- --------------------------------------------- --------------- ---------------------
   Temperature                   Full traverse, inlet and outlet                    Yes                 No
   ----------------------------- --------------------------------------------- --------------- ---------------------
   Duct Gas Velocity             Full traverse, inlet and outlet                    Yes                 No
   ----------------------------- --------------------------------------------- --------------- ---------------------
   Mercury (total and            Au-CVAAS SCEM                                      Yes                Yes
   speciated)
   ----------------------------- --------------------------------------------- --------------- ---------------------
   Mercury (total and            Ontario Hydro, inlet and outlet                Yes (1 set)      No/Yes (2 sets)
   speciated)
   ----------------------------- --------------------------------------------- --------------- ---------------------
   Multi-Metals Emissions        Method 29                                      Yes, outlet       No/Yes, outlet
   ----------------------------- --------------------------------------------- --------------- ---------------------
   Sorbent Injection Rate        PLC, lbs/min                                        No                Yes
   ----------------------------- --------------------------------------------- --------------- ---------------------
   Plant CEM data (NOx, O2,      Plant data--stack                                   Yes               Yes
   SO2)
   ----------------------------- --------------------------------------------- --------------- ---------------------
   HCl                           EPA Method 26A                                     Yes                Yes
   ----------------------------- --------------------------------------------- --------------- ---------------------
   Stack Opacity                 Plant data                                         Yes                Yes
   ----------------------------- --------------------------------------------- --------------- ---------------------
   Pollution control equipment   Plant data (ESP power, baghouse cleaning,          Yes                Yes
   operation                     etc.)
   ----------------------------- --------------------------------------------- --------------- ---------------------

Figures 1 and 2 below show general configurations of power plant to be tested
for TOXECON IITM and the high-temperature sorbents. The figures show sampling
locations and types of samples to be collected.


                                       31
</TABLE>
<PAGE>




-- GRAPHIC ON FILE --



Figure 1. General arrangement and samples to be collected in TOXECON II(TM)
tests.



Figure 2 (below). General arrangement and samples to be collected in
high-temperature sorbent tests.



-- GRAPHIC ON FILE --





                                       32
<PAGE>

     D.   TASKS TO BE PERFORMED

A work plan is proposed that will effectively accomplish the objectives and
perform long-term testing at the optimum conditions. The program will be
accomplished by following a series of technical tasks:

     Task 1.  Site Coordination, Kickoff Meeting, Test Plan and QA/QC Plan
     Task 2.  Design and Install Site Specific Equipment
     Task 3.  Field-Tests-Sorbent Screening
     Task 4.  Field-Tests-Baseline Tests
     Task 5.  Field-Tests-Parametric Tests
     Task 6.  Field-Tests-Long-Term Tests
     Task 7.  Data Analysis
     Task 8.  Sample Evaluation
     Task 9.  Site Report
     Task 10.  Technology Transfer
     Task 11.  Management and Reporting
     Task 12.  Ash Processing/Sorbent Recycling Options

     Tasks 1-11 will be repeated for each test site with modifications designed
to address the specific configurations, needs and challenges of each host site.
The field-testing tasks are the heart of the program where mercury controls are
actually tested and operating experience is gained.

     Task 1. Site Coordination, Kickoff Meeting, Test Plan and QA/QC Plan

Efforts within this task include planning the site-specific tests with the host
site, DOE/NETL and contributing team members. The planning process includes
meeting with plant personnel, corporate, and environmental personnel to discuss
and agree upon the overall scope of the program for that particular site, the
potential impact on plant equipment and operation, and to gather preliminary
information necessary to develop a detailed draft test plan and scope of work.
Efforts include identifying any permit requirements, developing a quality
assurance/quality control plan, finalizing the site-specific scope for each of
the team members, and putting subcontracts in place for Ontario Hydro mercury
measurement services.
A key component of the planning process for these evaluations is identifying
potential sorbents for testing. The test program at each site allows for the
evaluation of different sorbents because of the economic impact of sorbent cost
on the overall cost of mercury control and disposal considerations. In addition,
sorbents that have the potential to capture mercury at the low HCl conditions
typical of subbituminous units will be evaluated. NORIT DARCO FGD will be one of
the sorbents tested because of its benchmark qualities as being tested widely in
previous DOE/EPRI/EPA-sponsored testing. Because of the economic impact of
sorbent cost on the overall cost of mercury control and disposal considerations,
it is desirable to find less expensive sorbents and non-carbon-based sorbents.

As part of the proposed scope, Quality Assurance and Quality Control (QA/QC)
will be documented and specific procedures adhered to. The primary objectives of
the QA/QC effort at each proposed site will be to control, evaluate, and
document data quality to ensure that data generated are of sufficient quality to
meet program objectives. Specific key parts of the QA/QC plan will include:

     o    QA/QC in sample collection, analytical and data analysis,
     o    Integral performance evaluation and verification of Hg removal,
     o    Procedural remedies for identified data deficiencies, and

                                       33
<PAGE>

     o    Oversight and documentation of all QA/QC.
     o
A draft test plan will be presented at a kickoff meeting at the plant site. The
test plan and supporting documents will be available for host site personnel to
use when addressing permitting, scheduling and operating issues. Following the
kickoff meeting, the final test plan will be developed with input and approval
from both the host site and DOE.

     Task 2. Design and Install Site-Specific Equipment

Some components are site-specific and, by necessity, will be provided by the
host utility. These are components that must be sized and designed for the
specific plant arrangements and ductwork configurations. Site-specific equipment
includes the sorbent distribution manifold and sorbent injectors (if possible
these components will be re-used at multiple sites). Required site support
includes installation of the injection and sampling ports (if not available),
installation of required platforms and scaffolding, compressed air, electrical
power, wiring plant signals including boiler load to the injection skid and
control trailer, and balance of plant engineering.

ADA-ES engineers will work with plant engineers to develop an installation and
contractor bid package for installation activities, and work with the
installation contractors. The host utility will be responsible for all
permitting and any variance requirements. In addition, the host utility will
make arrangements to isolate fly ash from the test unit during sorbent
injection.
Silo systems from previous Phase I and II testing will be used as much as
possible on the testing proposed here. The equipment will cover the expected
range of plant sizes and flue gas conditions described in this proposal. In
summary, the equipment will include a sorbent injection system with a
bulk-storage silo and twin blower/feeder trains. Sorbent is metered by variable
speed screw feeders into eductors that provide the motive force to carry the
sorbent to the injection point. Flexible hose carries the sorbent from the
feeders to distribution manifolds located on the flue gas duct, feeding the
injection probes. Silo systems will be used at all plants except MidAmerican
Louisa. A liquid sorbent will be used at Louisa, and the site is already
equipped with a liquid injection system for flue gas conditioning, therefore new
lances and distribution systems will not be required.

PAC is delivered in bulk pneumatic trucks and loaded into the silo, which is
equipped with a bin vent bag filter. From the two discharge legs of the silo,
the sorbent is metered by variable speed screw feeders into eductors that
provide the motive force to carry the sorbent to the injection point.
Regenerative blowers provide the conveying air. A PLC system is used to control
system operation and adjust injection rates. Figure 3 is a photograph of the
sorbent silo and feed train designed to treat a 150-MW boiler on a unit with an
ESP. Flexible hose carries the sorbent from the feeders to distribution
manifolds located on the flue gas ducts, feeding the injection probes. Each
manifold supplies up to six injectors.

ADA-ES will oversee installation and system checkout of the mercury control
equipment. Procedures followed in this task will be similar to those used in the
previous full-scale mercury control programs ADA-ES conducted for DOE (Phase I
testing). If necessary, ADA-ES is capable of taking responsibility for all
phases of the installation, except for final connections into plant utilities.
ADA-ES will work with the host utility to assure that the equipment is installed
in an efficient manner, within the resources available at the site.

ADA-ES will be responsible for the final checkout of all systems and for the
general maintenance of the systems during testing. At least one engineer or
technician who is solely dedicated to the operation of the equipment will be
on-site for all tests. The actual equipment installation, not including
preparation tasks, is estimated to take three weeks. This includes time for
checkout and troubleshooting. ADA-ES will also install the mercury SCEMs at the
host utility.

                                       34
<PAGE>

-- GRAPHIC ON FILE --

Figure 3. Carbon injection storage silo and feeder trains for 150 MWs (Phase I
System).

Special consideration for site-specific equipment will be made for injection and
sampling locations for the high-temperature sorbent test sites given the extreme
temperature conditions. Reaction Engineering will be contracted to perform
computational fluid dynamic modeling of the high-temperature zones in order to
aid in the optimal siting of the injection lances.
For the TOXECON IITM sites, ESP designs will be studied thoroughly to evaluate
proper siting of the injection lances between collection fields. In addition,
hopper sections and ash handling systems will be evaluated for potential
modifications to maximize the segregation of clean ash from the ash that
contains sorbent.

     Task 3. Field-Tests - Sorbent Screening (HT Sorbents Sites Only)

At the Council Bluffs site (the Louisa site may be substituted as a surrogate
for the Council Bluffs site for the sorbent screening testing because flue gas
characteristics are similar and test locations may have easier access), selected
dry sorbents will be screened on actual flue gas. ADA-ES has successfully used a
process in past projects where sorbent suppliers and developers are solicited to
provide samples of material for the screening tests. Qualification criteria are
used to down-select sorbents based on projected commercial prices and the
vendor's ability to produce sorbents in quantities required for full-scale runs.
Results on screening tests will be used by the team to select alternative
sorbents.

Sorbent screening tests are not planned for the TOXECON IITM sites because a
considerable amount of sorbent information will have been collected from other
Phase II plants that ADA-ES is testing during 2004 under similar cold-side ESP
flue gas conditions (20-30 sorbents have been screened at Sunflower Holcomb in
Spring 2004).

                                       35
<PAGE>

ADA-ES has developed a sorbent screening fixture that can be used to evaluate
three sorbents at a time. Flue gas from the host site is drawn through a fixture
where it is split into three streams, each containing a bed of sorbent. An
analyzer is used to measure inlet and outlet mercury concentrations from each
sorbent bed. The fixture was used to evaluate more than 20 different sorbents in
a matter of just a few days recently as part of the Phase II testing being
conducted at Sunflower Electric's Holcomb Station.

     Task 4. Field-Tests - Baseline Tests

Once the equipment is installed, a set of baseline tests will be conducted just
prior to the parametric testing. Ontario Hydro mercury measurements will be
conducted in conjunction with SCEM measurements during this task. Unit operation
will be set at conditions expected during the parametric tests. It is
anticipated that boiler load will be held constant at full-load and that the air
pollution equipment will be operated under standard full-load conditions (e.g.,
standard soot blowing and ESP rapping sequences will be used).

     Task 5. Field-Tests - Parametric Tests

The goals of this task are to define the quantity of sorbent required to obtain
different levels of mercury removal, such as 30%, 50% and 70% of the remaining
mercury. Up to four weeks of parametric testing will be conducted, depending on
the host site test plan.

The first week of parametric testing at the TOXECON II sites will be conducted
using the benchmark sorbent, FGD. The second week typically evaluates alternate
sorbents at injection concentrations determined in the week one tests. The third
and fourth weeks will be used to evaluate additional sorbents and varying
operating conditions. A condition is typically tested for about 8 hours, and
then the system is shut down and allowed to return to baseline conditions before
the next parametric test.

     Several liquid sorbents will also be tested at Louisa. This will be done by
preparing several different formulations of liquid chemicals and spraying these
chemicals into the Louisa flue gas using the existing equipment at the site.
Mercury measurements will be made upstream and downstream of the liquid
injection location. to measure mercury removal rates.

     Task 6. Field-Tests - Long-Term Tests

Long-term testing will be conducted at the "optimum" settings as determined in
the parametric tests and approved by both DOE and the host utility. The goal of
this task is to obtain sufficient operational data on removal efficiency over
time (this will be done for at least 4 continuous weeks), determine the effects
on the particulate control device, determine the effects on the sulfur control
equipment (if any), determine effects on byproducts, and determine impacts to
the balance of plant equipment to prove viability of the process and determine
the economics. During this test, Ontario Hydro measurements will be conducted at
the inlet and outlet of the pollution control device(s) on three occasions
(beginning, middle and end of the long term test phase). This task is the single
most important step in gaining acceptance from the utility industry as to the
practical implementation of mercury removal technologies on coal-fired power
plants.

                                       36
<PAGE>

     Task 7. Data Analysis

Data collection and analysis for this program is designed to measure the effect
of sorbent injection on mercury control and the impact on the existing pollution
control equipment. The mercury levels and plant operation will be characterized
without sorbent injection and with various sorbents and injection rates and
possible combustion modifications as defined by the final test plan, and a
long-term evaluation to identify effects that may not be immediate.
Many signals typically archived by the plant will be monitored to determine if
any correlation exists between changes in mercury concentration with measured
plant operation. A correlation is not unusual between temperature and load for
example.
Because of the apparent influence of HCl on sorbent effectiveness, HCl
measurements will be conducted and samples analyzed to determine if a
correlation between sorbent effectiveness and HCl concentrations.

     Task 8. Sample Evaluation

Coal and combustion byproduct samples collected throughout the field-test will
be analyzed in this task. During all test phases, samples of coal, fly ash and
scrubber waste will be collected for analysis. Dr. Connie Senior of Reaction
Engineering International will head up this task.
A full analysis of the coal will be conducted including the mercury, sulfur
levels, chlorine and other halogens. Sorbent injection will result in the fly
ash and scrubber materials being mixed with mercury-containing sorbent. The ash
samples will be analyzed at a minimum for mercury and LOI. Scrubber solids
discharge material as well as reagent feed will be analyzed for mercury. Because
of the apparent influence of different halogens on sorbent effectiveness, gas
phase measurements of the various halogens such as chlorine, bromine and
fluorine will be conducted and samples analyzed to determine if there is a
correlation between sorbent effectiveness and halogen concentrations. Actual
number and types of tests are determined in the final test plan for each host
site.

Although previous tests from a number of programs have shown that the byproducts
mixed with activated carbon are highly stable, it is important to continue
evaluating these byproducts for each condition using well-established and
documented techniques and new techniques designed to perform even more robust
analyses of the byproducts. Standard test methods will include the Toxicity
Characteristic Leaching Procedure (TCLP, SW846-1311), synthetic groundwater
leaching procedure (SGLP), concrete acceptability tests under ASTM Specification
C618, and air entrainment tests. Additional ash and scrubber samples will be
collected and archived for other tests, including tests requested by EPA, DOE,
and independent companies approved by DOE.

Microbeam Technologies, Inc. (MTI) will be one of the subcontractors under this
task. Dr. Steve Benson will coordinate the activities of MTI and act as a
technical consultant to the program. MTI specializes in the analysis of ash
produced as a result of combustion and gasification of fossil fuels using a
variety of analytical methods. Additional analytical organizations may be
contracted with to provide specific analytical services (e.g., EERC, CTL
Thompson).

                                       37
<PAGE>
<TABLE>
<CAPTION>

Table 5 summarizes the testing to be conducted under this task and Table 6 shows
the sampling frequency and total volume of samples to be collected from each
site.

                                  Table 5. Summary of Waste Characterization Testing

<S>          <C>                      <C>                              <C>
------------ ------------------------ ------------------------------- -----------------------------------------------
  Series     Test Purpose              Test Method                     Comments
------------ ------------------------ ------------------------------- -----------------------------------------------
                                                                       Measures leachable Hg, As, Ba, Cd, Cr, Pb,
     1       Ash Disposal              TCLP (SW846-1311)               Se, Ag
------------ ------------------------ ------------------------------- -----------------------------------------------
                                                                       Measures LOI, total oxides, sulfur trioxide,
             Cement Additive           ASTM C618                       moisture, available alkalines, fineness,
     2       Suitability               Air Entrainment Shaker Test     pozzolanic activity, autoclave soundness,
                                                                       specific gravity, air entrainment
------------ ------------------------ ------------------------------- -----------------------------------------------
             Environmental                                             Measures leachable Hg at 18 hrs, 2 weeks,
             Stability - Leaching      EERC SGLP                       and 4 weeks
     3
             Environmental
             Stability - Air Release                                   Measures Hg release as a function of
                                       EERC Thermal Desorption         temperature up to 500oC
------------ ------------------------ ------------------------------- -----------------------------------------------
                                                                       As needed for troubleshooting or
     4       Special Testing           Various                         site-specific information needs
------------ ------------------------ ------------------------------- -----------------------------------------------


                          Table 6. Ash Sampling Schedule and Volumes - Each Test Site

-------------------------------- ------------------------------------------------ -----------------------------------
Test Condition                   Frequency                                        Comments
-------------------------------- ------------------------------------------------ -----------------------------------
Baseline                         Grab samples Daily during tests                  ~30-gallon sample
-------------------------------- ------------------------------------------------ -----------------------------------
Parametric Test #1               Grab Samples Daily for 1 week                    ~30-gallon total sample
-------------------------------- ------------------------------------------------ -----------------------------------
Parametric Test #2               Grab Samples Daily for 1 week                    ~30-gallon total sample
-------------------------------- ------------------------------------------------ -----------------------------------
Parametric Test #3               Grab Samples Daily for 1 week                    ~30-gallon total sample
-------------------------------- ------------------------------------------------ -----------------------------------
Long-term Test                   Grab Samples Daily for 2 weeks                   ~200-gallon total sample
-------------------------------- ------------------------------------------------ -----------------------------------
</TABLE>

     Task 9. Site Report

This task provides time for performing an economic analysis for each site test
and completing a topical report for each site.

After completion of testing and analysis of the data at each plant, the
requirements and costs for full-scale permanent commercial implementation of the
selected mercury control technology will be determined. The program team will
meet with the host utility plant and engineering personnel to develop
plant-specific design criteria. Process equipment will be sized and designed
based on test results and the plant-specific requirements (e.g., reagent storage
capacity, plant arrangement, retrofit issues, winterization, controls
interface). A conceptual design document will be developed. This may include
modifications to the particulate collector, ash handling system, compressed air
supply, electric power capacity, other plant auxiliary equipment, utilities and
other balance of plant engineering requirements.

Finally, a budget cost estimate will be developed to implement the control
technology. This will include capital cost estimates for mercury control process
equipment as well as projected annual operating costs. Where possible,
order-of-magnitude estimates will be included for plant modifications and
balance of plant items.

                                       38
<PAGE>

The site report will include test procedures, analyses, and results obtained.
This report is intended to be a stand-alone document providing a comprehensive
review of the work at each site.

     Task 10. Technology Transfer

Presentations will be made at selected conferences, with DOE approval, to
increase exposure of the test results and receive comments on the applicability
of the technology to the industry. Transferring the information generated during
this program to the coal-fired utility customers will be an important part of
the program. Dr. Durham, who led the technology transfer activities during the
Phase I program, will lead this important activity. The ultimate goal of
technology transfer is to make results available to the public as quickly,
comprehensively and accurately as possible. Technology transfer activities
performed in the previous tests included participating in DOE/NETL-sponsored
meetings, EPA Hg MACT Stakeholder meetings, presentations at more than 50 events
or companies, hosting a Web site for project team members and presentation of
project information, and publication of more than 100 technical papers. ADA-ES
will work with NETL in determining and supporting the key meetings,
presentations and publications. ADA-ES will also establish a Web site for the
project and participants. ADA-ES has done this on other NETL projects very
successfully.

     Task 11. Management and Reporting

This task provides time for overall program management, and preparation of
financial and administrative reports. This task will also support periodic
meetings with DOE to discuss progress and obtain overall direction of the
program from the DOE project manager.

     Table 7 provides a summary of the reporting activities to be conducted
under the program.

        Table 7. Summary of Reporting and Technology Transfer Activities

================================================================================
                        Activity or Report                    Frequency
--------------------------------------------------------------------------------

                   Program/Project Management
Federal Assistance Program/Project Status Report              Quarterly
Financial Status Report                                       Quarterly

                           Technical
Technical Progress Report                                     Quarterly
Topical Report                                                As Required
Final Report                                                  Final

                         Environmental
Hazardous Substance Plan                                      Once After Award
Hazardous Waste Report                                        Final

                           Property
Report of Termination or Completion Inventory                 Final

                           Exception
Hot Line Report                                               As Required
Journal Articles/Conference Papers and Proceedings            As Required

                  Technical Exchange Meetings
Contractor Review Meetings                                    Yearly
Technical Conferences (e.g., A&WMA, Specialty Conferences)    Semiannual

                      Other Deliverables
Mercury Control Cost Data                                     Final


                                       39
<PAGE>

     Task 12. Ash Processing and Sorbent Recycling Options

The purpose of this task is to investigate the recycling of sorbent in TOXECON
IITM. If recycling sorbent is technically feasible, considerable economic
benefit can result. During this task, a quantity of downstream ESP catch
(sorbent mixed with fly ash) will be collected for one day during a long-term
test series at one of the TOXECON IITM test sites. This will provide enough
material to be able to re-inject for at least an 8-hour period. Once the
long-term testing series is completed and the silo is empty of pure sorbent, it
will be filled with the recycle material for injection into the ESP. The
material will be fed at the same normalized sorbent concentration as that
established for the long-term testing. Mass balance calculations show that the
recycle mixture is expected to be slightly more than 50% sorbent content. This
means that the mixture will need to be injected at twice the feed rate as pure
sorbent in order to maintain the same normalized sorbent feed rate as when
feeding pure sorbent. The sorbent silo system is capable of providing this
turndown without significant modifications. Mercury measurements will be taken
upstream and downstream of the ESP using the same equipment that was used for
the long-term testing.

This task will be headed by Rui Afonso of Energy and Environmental Strategies,
an expert in ash processing technology assessment. Mr. Afonso will evaluate the
technical data and perform an economic analysis of recycling.

The budget for this task includes site modifications that will allow hopper
catch from downstream ESP fields to be collected easily. In addition, the budget
includes an allowance for vacuum trucks to remove the recycle material from the
hoppers, and conveying equipment to load the material into the sorbent silo.

     E. DELIVERABLES

There will be a number of reports of different varieties prepared throughout the
project. Depending on the specific report or presentation, test results and data
analysis will be the focus for most. In addition, numerous technical papers will
be generated as a result of the work performed on the project. Again, these will
focus on the technical aspects of the effort (equipment, materials, test
protocols, test results, and data analysis). Equipment design parameters and
economic analysis of mercury control equipment and operation will also be
prepared.


     F. BRIEFINGS AND TECHNICAL PRESENTATIONS

     ADA-ES will prepare  detailed  briefings for presentation to the COR at the
COR's  facility  located  in  Pittsburgh,   Pennsylvania,  or  Morgantown,  West
Virginia. Briefings will cover the plans, progress, and results of the technical
effort.

                                       40
<PAGE>

     In  addition,  ADA-ES  will  provide and  present  technical  papers at the
DOE/NETL  Annual  Contractor's  Review  Meeting to be held at the NETL  facility
located in Pittsburgh, Pennsylvania, or Morgantown, West Virginia.

















                                       41
<PAGE>
<TABLE>
<CAPTION>

                                             ATTACHMENT B
                                             ------------

DOE F 4600.2
(10/2001)
(All Other Editions are Obsolete)
                                      U.S. Department of Energy
                               FEDERAL ASSISTANCE REPORTING CHECKLIST

-----------------------------------------------------------------------------------------------------------
<C>                                                <C>
1. Identification Number: DE-FC26-05NT42307        2. Program/Project Title: "Low-Cost
                                                      Options for Moderate Levels of Mercury Control"
-----------------------------------------------------------------------------------------------------------
3. Recipient: ADA-ES, Inc.
-----------------------------------------------------------------------------------------------------------
4. Reporting Requirements:                         Frequency     No. of Copies            Addresses
                                                   --------------------------------------------------------
I. MANAGEMENT REPORTING

  |X| Progress Report                                  Q               2          NETL AAD DOCUMENT CONTROL
  |X| Special Status Report                            A               2                  BLDG. 921
                                                                                  U.S. DEPARTMENT OF ENERGY
                                                                                       NATIONAL ENERGY
II. SCIENTIFIC/TECHNICAL REPORTING *                                               TECHNOLOGY LABORATORY
                                                                                        P.O. BOX 10940
  |X| Final Scientific/Technical Report               FG               1         PITTSBURGH, PA 15236-0940
  |X| Topical Report                                   A               2
  |X| Journal Articles/Conference Papers/Proceedings   A               2
  | | DOE 421.4, Software/Manual
  | | Conference Record

III. FINANCIAL REPORTING

  |X| SF-269 or SF-269A, Financial Status Report
  | | SF-272, Federal Cash Transactions Report       Q, FG             3

IV. CLOSEOUT REPORTING

  |X| DOE F 2050.11, Patent Certification
  |X| NETL F 580.1-9, Property Certificate             FC              3
  | | SF-120, Report of Excess Personal Property       FC              3

V. OTHER REPORTING

  | | NETL F 580.1-8, Annual Report of Property in the Custody of
        Contractors
  | | NETL F 580.1-25, High Risk Property Report
  | | Environmental Compliance Plan
  | | Environmental Monitoring Plan
  | | Environmental Status Report
  | | Other

-----------------------------------------------------------------------------------------------------------
FREQUENCY CODES AND DUE DATES:

     A - As required; see attached text for applicability.
     FG - Final; within ninety (90) calendar days after the project period ends.
     FC - Final - End of Effort.
     Q - Quarterly; within thirty (30) calendar days after end of the calendar quarter or portion thereof.
     S - Semiannually; within thirty (30) calendar days after end of project year and project half-year.
     YF - Yearly; 90 calendar days after the end of project year.
     YP - Yearly Property - due 15 days after period ending 9/30.

-----------------------------------------------------------------------------------------------------------

5. SPECIAL INSTRUCTIONS:

     * ONE PAPER COPY AND ONE ELECTRONIC PDF ELECTRONIC FILE COPY FOR ALL SCIENTIFIC/TECHNICAL REPORTS.
     --------------------------------------------------------------------------------------------------

     The forms identified in the checklist are available at
     www.netl.doe.gov/business/Financial Assistance/forms-fa.html . Alternate
     formats are acceptable provided the contents remain consistent with the form.

-----------------------------------------------------------------------------------------------------------

                                                  42
</TABLE>
<PAGE>

GENERAL INSTRUCTIONS FOR THE PREPARATION AND SUBMISSION OF REPORTS (JULY 2004)
------------------------------------------------------------------------------
The Recipient shall prepare and submit (postage prepaid) the reports indicated
on the "Federal Assistance Reporting Checklist" to:
                            NETL AAD DOCUMENT CONTROL
                                    BLDG. 921
                           U. S. DEPARTMENT OF ENERGY
                      NATIONAL ENERGY TECHNOLOGY LABORATORY
                                 P. O. BOX 10940
                            PITTSBURGH, PA 15236-0940

Failure to follow these instructions can delay data entry of the report(s) into
the FEDERAL INFORMATION TRACKING SYSTEM and result in the report being lost or
considered delinquent.

The level of detail the Recipient provides in the reports shall be commensurate
with the scope and complexity of the effort and shall be as delineated in the
guidelines and instructions contained herein. The prime Recipient shall be
responsible for acquiring data from any contractors or sub recipients and
ensuring that any information submitted is compatible with the requirements of
the DOE.

I.   MANAGEMENT REPORTING
     --------------------

     PROGRESS REPORT
     ---------------

     The Progress Report must provide a concise narrative assessment of the
     status of work and include the following information:

     1.   The DOE award number and name of the recipient.

     2.   The project title and name of the project director/principal
          investigator.

     3.   Date of report and period covered by the report.

     4.   Executive Summary- A well organized summary that highlights the
          important accomplishments and new knowledge realized from the project
          during the reporting period. It should be no less than one page and no
          more than two pages in length, and should be single spaced. This
          summary must be more comprehensive than the traditional "abstract" and
          identify noteworthy advancements in research, design, manufacture or
          commercialization of technology developments. Also, summarize
          important breakthroughs that resolve critical science and technology
          risks or development barriers.

     5.   Results of work during reporting period- A detailed discussion of the
          progress performance. The format will be determined by the DOE Project
          Officer. (This section should not contain any proprietary or
          classified data, or other information not subject to public release.
          If such information is important to reporting progress, follow the
          instructions in the clause entitled "Supplemental Guidelines"
          regarding submission of a separate appendix for this type of
          restricted data.). A suggested format is:

          Approach - this should describe, or reference all experimental,
          analytical and fabrication methods being used for the research and
          development efforts. It should also provide detail about materials and
          equipment being used. Standard methods can be referenced to the
          appropriate literature, where details can be obtained. Equipment
          should be described only if it is not standard, or if information is
          not available through the literature or other reference publications.

                                       43
<PAGE>

          Results and Discussion - It is extremely important that this section
          includes enough relevant data, especially statistical data, to allow
          the project manager to justify the conclusions. With the relevant
          data, explain how the data was interpreted and how it relates to the
          original purpose of the research. Be concise in the discussion on how
          this research effort solved or contributed to solving the original
          problem. When investigation methods and/or procedures are being
          utilized for the first time, they shall be described in detail. This
          description shall contain detailed information on equipment and
          procedures utilized, as well as providing a rationale for their use
          and the accuracy of the method.

          Conclusion - The conclusion should not simply reiterate what was
          already included in the "Results and Discussion" section. It should,
          however, summarize what has already been presented, and include any
          logical implications of how the successes are relevant to technology
          development in the future. This is extremely important, since
          "relevancy" continues to be a criterion of the program.

          This section should not contain any trade secrets, business sensitive
          or classified data, or other information not subject to public
          release. If such information is important to reporting project
          progress, it should be presented in a separate appendix, as requested
          by the DOE Project Officer.

     6.   Milestones that were not met during the reporting period and reasons
          why the established milestones were not met. Explanations should also
          provide an approximate date when the milestone will be met.

     7.   Cost and schedule status. Cost Status - show approved budget by budget
          period and actual costs incurred. If cost sharing is required break
          out by DOE share, awardee share, and total costs. Schedule Status -
          list milestones, anticipated completion dates and actual completion
          dates. Awardees may use project management software, such as Microsoft
          Project, to measure and report cost and schedule status.

     8.   A summary of all of the significant accomplishments during this
          reporting period. An "accomplishment" is a significant development or
          finding that advances the state-of-the-art with respect to the
          technology of interest or significantly contributes to the
          understanding of a concept or technology.

     9.   Actual or anticipated problems or delays and actions taken or planned
          to resolve them. Identify any event causing a significant schedule
          slippage or cost growth; an environmental, safety, or health
          violation; or the achievement of or problems encountered for an
          important performance objective.

     10.  A description of any technology transfer activities accomplished
          during this reporting period. Identify and describe any activities to
          transfer research results or developed technology to other research
          stakeholders or users of the technology.

     SPECIAL STATUS REPORT
     ---------------------

     The recipient must report the following events to the DOE Project Officer
     by e-mail as soon as possible after they occur: The e-mail correspondence
     should include:

                                       44
<PAGE>

     1.   Recipient's name and address;
     2.   Award title and number;
     3.   Date;
     4.   Brief statement of problem or event;
     5.   Anticipated impacts; and
     6.   Corrective action taken or recommended.

     The Special Status Report should document the incidents listed below:

     1.   Developments that have a significant favorable impact on the project.

     2.   Problems, delays, or adverse conditions which materially impair the
          recipient's ability to meet the objectives of the award or which may
          require DOE to respond to questions relating to such events from the
          public The recipient must report any of the following incidents and
          include the anticipated impact and remedial action to be taken to
          correct or resolve the problem/condition:

          a.   Any single fatality or injuries requiring hospitalization of five
               or more individuals.

          b.   Any significant environmental permit violation.

          c.   Any verbal or written Notice of Violation of any Environmental,
               Safety, and Health statutes.

          d.   Any incident which causes a significant process or hazard control
               system failure.

          e.   Any event which is anticipated to cause a significant schedule
               slippage or cost increase.

          f.   Any damage to Government-owned equipment in excess of $50,000.

          g.   Any other incident that has the potential for high visibility in
               the media.

          h.   Any incident which causes a significant process or hazard control
               system failure, or is indicative of one which may lead to any of
               the above defined incidents, is to be reported as soon as
               possible, but within 5 days of discovery.

     When an event results in the need to issue a written or verbal statement to
     the local media, the statement is to be cleared first; if possible, and
     coordinated with NETL Communications and Public Affairs Division, the DOE
     Project Officer and the Contracting Officer.

II.  SCIENTIFIC/TECHNICAL REPORTING
     ------------------------------

     Scientific/Technical Reporting includes: Final Scientific/Technical Report,
     Topical Reports, Journal Articles, Conference Proceedings and Papers,
     Software, and Conference Records.

     FINAL SCIENTIFIC/TECHNICAL REPORT
     ---------------------------------

     The Final Scientific/Technical Report shall document and summarize all work
     performed during the award period in a comprehensive manner. It shall also
     present findings and/or conclusions produced as a consequence of this work.
     This report shall not merely be a compilation of information contained in
     other reports, but shall present that information in an integrated fashion,
     and shall be augmented with findings and conclusions drawn from the
     research as a whole.

                                       45
<PAGE>

     TOPICAL REPORTS
     ---------------

     Topical reports are intended to provide a comprehensive statement of the
     technical results of the work performed for a specific task or subtask of
     the Statement of Project Objectives, or detail significant new scientific
     or technical advances. If required, DOE shall review and approve the report
     outline prior to submission of the report.

     GUIDELINES FOR ORGANIZATION OF FINAL SCIENTIFIC/TECHNICAL AND TOPICAL
     REPORTS
     ---------------------------------------------------------------------

     The following sections should be included (as appropriate) in the final
     scientific/technical report and topical reports in the sequence shown. Any
     section denoted by an asterisk is required in all technical reports.

          TITLE PAGE* - The Title Page of the report itself must contain the
          following information in the following sequence:

               Report Title
               Type of Report (Final Scientific/Technical or Topical)
               Reporting Period Start Date
               Reporting Period End Date
               Principal Author(s)
               Date Report was Issued (Month [spelled out] and Year
               [4 digits])
               DOE Award Number (e.g., DE-FG26-04NT12345) and if
               appropriate, task number
               Name and Address of Submitting Organization (This
               section should also contain the name and address of
               significant subcontractors/sub-recipients
               participating in the production of the report.)

          DISCLAIMER* -- The Disclaimer must follow the title page, and must
          contain the following paragraph:

               "This report was prepared as an account of work sponsored by an
               agency of the United States Government. Neither the United States
               Government nor any agency thereof, nor any of their employees,
               makes any warranty, express or implied, or assumes any legal
               liability or responsibility for the accuracy, completeness, or
               usefulness of any information, apparatus, product, or process
               disclosed, or represents that its use would not infringe
               privately owned rights. Reference herein to any specific
               commercial product, process, or service by trade name, trademark,
               manufacturer, or otherwise does not necessarily constitute or
               imply its endorsement, recommendation, or favoring by the United
               States Government or any agency thereof. The views and opinions
               of authors expressed herein do not necessarily state or reflect
               those of the United States Government or any agency thereof."

          ABSTRACT* - should be a brief, concise summary of the report.

          TABLE OF CONTENTS*

                                       46
<PAGE>

          EXECUTIVE SUMMARY* - this should be a well organized summary that
          highlights the important accomplishments of the research during the
          reporting period. It should be no less than one page and no more than
          two pages in length, and should be single spaced. This summary must be
          more comprehensive than the traditional "abstract."

          REPORT DETAILS - The body of the final scientific/technical or topical
          report should address topics such as the following:

               Experimental methods: Describe, or reference all experimental
               methods being utilized. Also provide detail(s) about materials
               and equipment used. Standard methods should reference the
               appropriate literature, where details can be obtained. Equipment
               should be described only if it is not standard, or if information
               is not available thru the literature or other reference
               publications.

               Results and discussions: This section should include enough
               relevant data, especially statistical data, to allow the project
               manager to justify the conclusions. Explain how the data was
               interpreted and how it relates to the original purpose of the
               research. Be concise in the discussion on how this research
               effort solved or contributed to solving the original problem.

               Conclusion: The conclusion should not simply reiterate what was
               already included in "Results and Discussion" but should summarize
               what has already been presented, and include any logical
               implications of how the successes are relevant to technology
               development in the future. This is extremely important, since
               "relevancy" continues to be a criterion of the program.

          GRAPHICAL MATERIALS LIST(S)
          REFERENCES
          BIBLIOGRAPHY
          LIST OF ACRONYMS AND ABBREVIATIONS
          APPENDICES (IF NECESSARY)

     SUPPLEMENTAL GUIDELINES
     -----------------------

     Technical reporting SHALL NOT include Limited Rights Data (such as
     restricted, proprietary or business sensitive information). Limited Rights
     Data shall be submitted in a separate appendix to the technical report.
     This appendix SHALL NOT be submitted in an electronic format but rather
     submitted in ONE ORIGINAL AND THREE (3) PAPER COPIES along with the paper
     version of the sanitized technical report deliverable. The appendix shall
     not be referenced in or incorporated into the sanitized technical report
     deliverable under the contract. The appendix must be appropriately marked
     and identified. Further, if this award authorizes the awardee under the
     provisions of The Energy Policy Act of 1992 to request protection from
     public disclosure for a limited period of time of certain information
     developed under this award, technical reports SHALL NOT contain such
     Protected EPAct Information. Such information shall be submitted in a
     separate appendix to the technical report that is suitable for release
     after the agreed upon period of protection from public disclosure has
     expired. The appendix shall not be referenced in or incorporated into the
     sanitized technical report deliverable under the contract. In accordance
     with the clause titled "Rights in data--programs covered under special data
     statutes," the appendix must be appropriately marked and identified

     Company Names and Logos -- Except as indicated above, company names, logos,
     or similar material should not be incorporated into reports.

                                       47
<PAGE>

     Copyrighted Material -- Copyrighted material should not be submitted as
     part of a report unless written authorization to use such material is
     received from the copyright owner and is submitted to DOE with the report.

     Measurement Units -- All reports to be delivered under this instrument
     shall use the SI Metric System of Units as the primary units of measure.
     When reporting units in all reports, primary SI units shall be followed by
     their U.S. Customary Equivalents in parentheses ( ). The Recipient shall
     insert the text of this clause, including this paragraph, in all
     subcontracts under this award. Note: SI is an abbreviation for "Le Systeme
     International d'Unites."

     ELECTRONIC MEDIA STANDARD FOR PREPARATION OF TECHNICAL REPORTS
     --------------------------------------------------------------

     PRESENTATION: The Recipient shall submit one quality permanent paper copy
     for storage (permanent or alkaline paper) and an electronic version of each
     technical report in PDF format. ELECTRONIC REPORTS MUST BE SUBMITTED IN THE
     ADOBE ACROBAT PORTABLE DOCUMENT FORMAT (PDF). REPORTS SUBMITTED IN A FORMAT
     OTHER THAN ADOBE WILL BE REJECTED, RETURNED AND CONSIDERED DELINQUENT. The
     report must be one complete integrated file containing all text, tables,
     diagrams, photographs, schematics, graphs, and charts. Multiple files for
     various report segments are unacceptable and will be rejected. The
     electronic file(s) may be submitted on an ISO9660-format CD-ROM.



     FORMAT: The electronic file(s) must be submitted on CD-ROM and labeled as
     follows:

          DOE Award Number
          Type/Frequency of Report(s)
          Reporting Period (if applicable)
          Name of submitting organization
          Name, phone number and fax number of preparer

     JOURNAL ARTICLES, CONFERENCE PAPERS AND PROCEEDINGS GENERATED BY A SMALL
     BUSINESS OR NONPROFIT ORGANIZATION FOR DOE REVIEW
     ------------------------------------------------------------------------

     The Recipient shall submit to DOE for review and approval all documents
     generated by the Recipient, or any subcontractor, which communicate the
     results of scientific or technical work supported by DOE under this award,
     whether or not specifically identified in the award, prior to submission
     for publication, announcement, or presentation. Such documents include
     journal articles, conference papers and proceedings, etc. The Recipient
     shall submit a draft version of the document to the DOE Project Officer
     prior to the publication, presentation, or announcement. The DOE Project
     Officer shall review the draft version of the document and notify the
     Recipient of approval or recommended changes. The final version shall be
     submitted to the NETL AAD Document Control Coordinator.

     The following information shall be provided for conference papers and
     proceedings, etc.

          -- Name of conference
          -- Location of conference (city, state, and country)
          -- Date of conference (month/day/year)
          -- Conference sponsor

                                       48
<PAGE>

III. FINANCIAL REPORTING
     -------------------

     FINANCIAL STATUS REPORT (STANDARD FORM 269 OR 269A)
     ---------------------------------------------------

     This report is used for the Recipient to provide regular periodic
     accounting of project funds expended. The accounting may be on either a
     cash or accrual basis. Actual total expenditures and obligations incurred,
     but not paid, are reported for each reporting period for each major
     activity. Provision is made to identify the Federal and non-Federal share
     of project outlays for each identified activity.

IV.  CLOSEOUT REPORTING
     ------------------

     PATENT CERTIFICATION (DOE F 2050.11)
     ------------------------------------

     This certificate submitted on DOE F 2050.11 is due immediately upon
     completion or termination of the award.

     PROPERTY CERTIFICATE (NETL F 580.1-9)
     -------------------------------------

     This certificate submitted on the NETL F 580.1-9 is due immediately upon
     completion or termination of the award. The recipient must attach to this
     certificate a final/completion inventory of all recipient acquired real
     estate, equipment, and materials/supplies as specified in the appropriate
     10 CFR 600 Financial Assistance Regulation.


V.   OTHER REPORTING - None
     ---------------




                                       49
<PAGE>

                          ATTACHMENT C - BUDGET PAGE(S)
                          -----------------------------

 DOE F 4600.4#              U.S. DEPARTMENT OF ENERGY             OMB Control No
 (09-92)                                                               1910-0400
 Replaces EIA-459CF
  All Other Editions
     Are Obsolete
                      Federal Assistance Budget Information
                         OMB Burden Disclosure Statement
                         -------------------------------

Public reporting burden for this collection of information is estimated to
average 1.87 hours per response, including the time for reviewing instructions,
searching existing data sources, gathering and maintaining the data needed, and
completing and reviewing the collection of information. Send comments regarding
this burden estimate or any other aspect of this collection of information,
including suggestions for reducing this burden, to Office of Information
Resources Management, AD-241.2 - GTN, Paperwork Reduction Project (1910-0400),
U.S. Department of Energy, 1000 Independence Avenue, S.W., Washington, DC 20585;
and to the Office of Management and Budget (OMB), Paperwork Reduction Project
(1910-0400), Washington, DC 20503.
<TABLE>
<CAPTION>
<C>                                                          <C>
---------------------------------------------------------------------------------------------------------------------------
1. Program/Project Identification No.                        2. Program/Project Title
     DE-FC26-05NT42307                                          "Low-Cost Options for Moderate Levels of Mercury Control"
---------------------------------------------------------------------------------------------------------------------------
3. Name and Address                                          4. Program/Project Start Date
   ADA-ES, Inc.                                                  02/**/05
   8100 SouthPark Way, Unit B                                --------------------------------------------------------------
   Littleton, CO 80120                                       5. Completion Date
                                                                02/**/08
---------------------------------------------------------------------------------------------------------------------------
                                                SECTION A - BUDGET SUMMARY
---------------------------------------------------------------------------------------------------------------------------
Grant Program
 Function or            Federal          Estimated Unobligated Funds                    New or Revised Budget
   Activity           Catalog No.      ------------------------------- ----------------------------------------------------
     (a)                  (b)              Federal       Non-Federal         Federal            Non-Federal        Total
------------------ ------------------- --------------- --------------- -------------------- -------------------- ----------
1.Year 1                81.089                                               $595,189             $203,331        $798,520
2.Year 2                                                                   $1,708,587             $690,720       $2,399,307
3.Year 3                                                                   $1,642,546             $607,537       $2,250,083
4.  TOTALS                                    $               $            $3,946,322           $1,501,588       $5,447,910
---------------------------------------------------------------------------------------------------------------------------

                                               SECTION B - BUDGET CATEGORIES
---------------------------------------------------------------------------------------------------------------------------
6. Object Class Categories      Grant Program, Function or Activity
---------------------------------------------------------------------------------------------------------------------------
                             (1) Year 1         (2) Year 2       (3) Year 3           (4) Year 4       Total (5)
---------------------------------------------------------------------------------------------------------------------------
a.  Personnel                $71,244            $219,849         $198,143             $                $489,236
---------------------------------------------------------------------------------------------------------------------------
b.  Fringe Benefits
    (included in j. below)
---------------------------------------------------------------------------------------------------------------------------
c.  Travel                   36,126             104,083          86,200                                226,409
---------------------------------------------------------------------------------------------------------------------------
d.  Equipment
---------------------------------------------------------------------------------------------------------------------------
e.  Supplies                                    47,100           38,380                                85,480
---------------------------------------------------------------------------------------------------------------------------
f.  Contractual              368,821            730,051          662,350                               1,761,222
---------------------------------------------------------------------------------------------------------------------------
g.  Construction
---------------------------------------------------------------------------------------------------------------------------
h.  Other                    7,322              314,244          327,419                               648,985
---------------------------------------------------------------------------------------------------------------------------
i.  Total Direct Charges     483,513            1,415,327        1,312,492                             3,211,332
---------------------------------------------------------------------------------------------------------------------------
j.  Indirect Charges         315,007            983,980          937,591                               2,236,578
---------------------------------------------------------------------------------------------------------------------------
k.  TOTALS                   $798,520           $2,399,307       $2,250,083           $                $5,447,910
---------------------------------------------------------------------------------------------------------------------------
7.  Program Income           $N/A               $N/A             $N/A                 $N/A             $
---------------------------------------------------------------------------------------------------------------------------

                                                     50
</TABLE>
<PAGE>

                   ATTACHMENT D -- RECIPIENT ACQUIRED PROPERTY
                   -------------------------------------------


DESCRIPTION OF PROPERTY                               ESTIMATED ACQUISITION COST
-----------------------                               --------------------------

EQUIPMENT                                             NONE
(Tangible, nonexpendable personal property
charged directly to the award having a useful
life of more than one year and an acquisition
cost of $5,000 or more per unit.)

                                                                        TOTAL
                                                                      ----------
Non-Expendable Property
-----------------------
   Misc. M&S                                                          $        0
   Sorbent                                                            $        0
   Non-Expendable M&S Through Subcontractors (See Note 1)             $  471,466
   Non-Expendable M&S for ACI Equipment                               $        0
   NORIT Activated Carbon                                             $        0
   Other                                                              $        0

Expendable Materials and Supplies
---------------------------------
   Misc. M&S
      Fittings                                                        $    7,558
      Glassware                                                       $    2,790
      Chemicals                                                       $   38,823
      Tubing, heated lines                                            $   28,824
      Filters                                                         $    7,485
                                                                      ----------
      Subtotal Misc. M&S                                              $   85,480


   Sorbent                                                            $  242,123
   Expendable M&S Through Subcontractors (See Note 2)                 $  159,069
   Expendable M&S for ACI Equipment (See Note 3)                      $   33,300
   NORIT Activated Carbon                                             $   86,382
   Other                                                              $        0

   TOTAL                                                              $1,077,820

----------

Note 1. Misc. pipe fittings, steel, scaffolding, electricals, hardware,
platforms, etc.

Note 2. Misc. tubing, fittings, valves, chemicals, electrical parts, glassware,
hardware, etc.

Note 3. Misc. hardware and upgrade allowance for sorbent injection system.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.23
<SEQUENCE>3
<FILENAME>adaex.txt
<DESCRIPTION>AGREEMENT
<TEXT>
                                                                   EXHIBIT 10.23

                         ADA ENVIRONMENTAL SOLUTIONS LLC
                              EMPLOYMENT AGREEMENT


     THIS AGREEMENT made and entered into this day of May 1, 1997, by and
between ADA Environmental Solutions LLC a Colorado limited liability company,
whose principal offices are located at 304 Inverness Way South, Suite 365,
Englewood, Colorado 80112 (the "Company"), and C. Jean Bustard (the "Employee),
whose address is 9193 Buffalo Drive, Littleton, CO 80127.

                                    RECITALS:

     A.   The Company has made Employee an offer of employment.
     B.   Employee desires to accept the offer.
     C.   The Company and Employee desire to enter into this Agreement to set
          forth the terms and conditions of the employment.

     NOW, THEREFORE in consideration of the premises and the mutual covenants
and agreements hereinafter set forth and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
parties, intending to be legally bound, hereby agree as follows:

     1. Definitions.

     Capitalized terms are used herein with the meanings as specified in
Paragraph 7 hereof:

     2. Employment.

     The Company hereby employs the Employee and Employee hereby accepts such
employment upon the terms and conditions set forth herein.

     3. Term.

     (a) Initial Term.

     The initial Term of employment under this Agreement shall commence on the
date hereof and it shall continue for a period of three years from such date.
The Term shall be automatically extended for successive one-year periods. Either
party may terminate this Agreement for any reason by giving the other written
notice of its intent to terminate the Agreement not less than three months prior
to the intended date of termination. In addition, the Company may immediately
terminate this Agreement at any time "for cause" as defined below. The initial
Term and any such extensions are hereinafter referred to as the "Term."

     (b) For Cause.

     Notwithstanding any other provision of this Agreement, the Company may
terminate this Agreement for cause immediately upon notice to Employee. The
phrase "for cause" as used in this Agreement shall include, but not be limited
to, breach of any fiduciary duty to the Company, failure to perform Employee's
duties hereunder in a manner satisfactory to the majority of the managers of the
Company, death, permanent disability, or conviction in a criminal proceeding
(excluding traffic violations or similar misdemeanors). In the event that
Employee, during the Term of his employment, should die, become permanently
disabled, or have his employment terminated for cause by the Company, then
Employee shall be entitled to (x) all salary which may accrue to him through the
end of the last month during which he shall have been an employee of the
Company, and (y) such other benefits, if any, to which he is entitled in
accordance with any other section of this Agreement.

                                       1
<PAGE>

     4. Position, Duties and Authority.

     During the Term of this Agreement, Employee shall be employed as the
Executive Vice President of the Company. Employee shall report to the President
of the Company.

     5. Obligations of Employee.

     Employee hereby agrees that he will devote full-time to the fulfillment of
his obligations hereunder. Nothing contained in this agreement shall prevent the
Employee from pursuing the projects listed on the attached Exhibit A.

     6. Compensation and Benefits.

     In consideration of Employee's agreement to be employed by the Company and
as reasonable compensation for services to be rendered hereunder, the Company
agrees as follows:

     (a) Benefits.

     Employee shall be entitled to the standard benefits and perquisites from
time to time available to full-time employees of the Company. These benefits are
listed in Exhibit B. In addition, Employee shall accrue vacation at a rate of
4.62 hours per bi-weekly pay period. If the employee continues to work for the
Company on a full-time basis, the vacation accrual rate will be increased to
6.16 hours per bi-weekly pay period on August 11, 1997.

     (b) Compensation.

     The Company shall pay Employee bi-weekly compensation of $2884.62 during
the Term of employment as part of the Company's normal payroll procedures.
Increases in compensation, if any, shall be at the discretion of the Managers of
the Company.

     7. Definitions.

     (a) "Invention" shall mean any idea, discovery, article, process,
formulation, composition, combination, design, modification or improvement,
whether or not patentable.

     (b) "Copyright Works" shall mean all literary works, graphic works,
pictorial works and other creative works for which copyright protection may be
obtained, including without limitation proposals and computer
software/documentation.

     (c) "Confidential Subject Matter" shall mean all Inventions, Copyright
Works, data, specifications, know-how, lists, printed materials, technical
information, cost/pricing/marketing information and other subject matter that is
not available to the general public in a substantially identical form without
restriction.

                                       2
<PAGE>

     8. Disclosure/Ownership of Invention and Confidential Subject Matter.

     (a) During Employment.

     Employee agrees that during the term of Employee's employment with Company,
Employee will immediately disclose in writing to Company all Inventions and
Confidential Subject Matter which (i) is conceived or generated by Employee
alone and/or jointly with others, and (ii) relates to the actual or anticipated
business of the Company and/or relates to the actual or anticipated research or
development activities of the Company and/or is otherwise suggested by or
results from any activity performed on behalf of the Company. Employee
acknowledges and agrees that immediately upon conception or generation,
whichever occurs earlier, all Inventions and Confidential Subject Matter
disclosed and to be disclosed by Employee to Company during the term of
Employee's employment with Company will be the sole and exclusive property of
the Company.

     (b) Post Employment.

     Employee further agrees that, during the two (2) year period following any
termination of Employee's employment with the Company, Employee will immediately
disclose in writing to the Company all Inventions and Confidential Subject
Matter which (i) is conceived or generated by Employee alone and /or jointly
with others, and (ii) is based upon or otherwise derived from any Inventions
and/or Confidential Subject Matter of the Company. Employee acknowledges and
agrees that immediately upon conception or generation, whichever occurs earlier,
all Inventions and Confidential Subject Matter to be disclosed by Employee to
Company during the two (2) year period following the termination of Employee's
employment with Company will become the sole and exclusive property of the
Company.

     9. Assignment of Inventions and Confidential Subject Matter/Documentation/
Commercialization.

     (a) Assignment.

     Employee hereby assigns to Company the Employee's entire right, title and
interest in and to all Inventions and Confidential Subject Matter disclosed and
to be disclosed by Employee to Company pursuant to Sections 8 (a) and (b).

     (b) Documentation.

     Employee agrees to execute, cooperate in the preparation of and deliver to
the Company, both during the term of Employee's employment with the Company and
thereafter, any and all documents deemed necessary by the Company for the
Company to protect, maintain, preserve and enjoy the full right, title and
interest to all Inventions and Confidential Subject Matter disclosed and to be
disclosed by Employee to Company, including without limitation, the execution
and delivery of patent assignments and, at Company's legal expense, the
preparation of patent applications.

     (c) Commercialization.

     Employee acknowledges and agrees that with respect to all Inventions and
Confidential Subject Matter transferred by Employee to Company, Company is not
obligated to commercialize the same, and that if Employee desires to
independently commercialize any of said Inventions and/or Confidential Subject
Matter, Employee must request and obtain a written license from Company
beforehand, which license request may be declined by Company in its sole
discretion.

                                       3
<PAGE>

     10. Copyright Works.

     Employee agrees that all Copyright Works and contributions to Copyright
Works prepared by Employee within the scope of Employee's employment with the
Company will be deemed "works for hire" and will be owned by the Company, and
Employee agrees to execute all documents deemed necessary by the Company for the
Company to protect, maintain, preserve and enjoy the Company's rights in such
Copyright Works and contributions. Employee further agrees that unless expressly
authorized by the Company in writing, Employee will not independently prepare or
otherwise distribute or publish any Copyright Work that embodies any
Confidential Subject Matter owned by the Company or held in confidence by the
Company for any third-party, including without limitation, all Confidential
Subject Matter disclosed and to be disclosed by Employee to the Company.

     11. Written Records.

     Employee agrees that to the extent reasonably possible, Employee will
maintain written records of all Inventions and Confidential Subject Matter
conceived or generated by Employee in the course of Employee's performance of
services for the Company, which records will be the exclusive property of the
Company and will be available to the Company at all times.

     12. Restrictive Obligations Relating to Confidential Subject Matter.

     (a) Obligations to Company.

     Employee agrees to maintain in strict confidence, and agrees not to use,
disclose, reproduce or publish, except to the extent necessary in the course of
the Employee's performance of services for the company and/or as otherwise
authorized by Company, any Confidential Subject Matter owned by the Company or
held in confidence by the Company for any third-party, including without
limitation, all Confidential Subject Matter disclosed and to be disclosed by
Employee to the Company.

     (b) Prior Obligations to Third-Parties.

     Employee agrees that, in the course of Employee's employment with the
Company, Employee will not use or disclose any third-party Confidential Subject
Matter with respect to which Employee, prior to Employee's initiation of
employment with the Company, assumed obligations restricting such use or
disclosure.

     13. Conflicting Obligations.

     (a) Prior Obligations.

     Employee acknowledges and agrees that Employee is under no obligations to
any third party which conflict or may conflict, in any way, with any of the
Employee's obligations hereunder, except for actual and/or potentially
conflicting obligations identified by Employee on Exhibit A attached hereto.
Employee agrees to provide the Company with a copy of any written agreements
relating to any obligations identified in Exhibit A.

                                       4
<PAGE>

     (b) Assumption of Obligations.

     Employee agrees that Employee will not assume any obligations to any
third-party that would conflict with any of Employee's obligation hereunder.
Except for projects referred to in Exhibit A Employee further agrees that,
during the term of Employee's employment with the Company, Employee will not
compete, and will not provide services to others who compete with the Company in
the research, development, production, marketing or servicing of any product,
process or service with respect to which the Company is involved.

     14. Termination of Employment.

     (a) Continuing Obligations.

     Employee's obligations under Sections 8 through 12 of this Agreement will
continue after any termination of Employee's employment with the Company.

     (b) Submission of Materials.

     Upon any termination of Employee's employment with Company, Employee will
submit to the Company all materials within Employee's possession that constitute
or include Confidential Subject Matter owned by the Company or held in
confidence by the Company for any third-party.

     (c) Exit Interview.

     Upon the termination of Employee's employment with the company, Employee
will attend an exit interview with an appropriate representative of the Company
to review the continuing obligations of Employee hereunder.

     15. Miscellaneous.

     (a) Binding-Effect/Assignability.

     This Agreement is not assignable by Employee and will be binding upon
Employee's heirs, executors, administrators and other legal representatives.
Employee agrees that the Company may freely assign this Agreement to any
successor-in-interest of the Company.

     (b) Severability.

     Should any provision of this Agreement be determined by a court of
competent jurisdiction to violate or contravene any applicable law or policy,
such provision will be severed and modified to the extent necessary to comply
with the applicable law or policy, and such modified provision and the remainder
of the provisions hereof will continue in full force and effect.

     (c) Waiver.

     Any delay or omission on the part of Company to exercise any right under
this Agreement will not automatically operate as a waiver of such right or any
other right; and that a waiver of any right of the Company hereunder on one
occasion will not be construed as a bar to or waiver of any right on any future
occasion.

                                       5
<PAGE>

     (d) Controlling Law.

     This Agreement will be interpreted under and enforced in accordance with
the laws of the State of Colorado.

     (e) Modification.

     This Agreement may only be modified by the mutual written agreement of
Employee and Company.

     (f) Notices.

     Any notice or communication required or permitted to be given by this
Agreement shall be deemed given and effective when delivered personally, or when
sent by registered or certified mail, postage prepaid, addressed as follows
(such addresses for giving of notice may be changed by notice similarly given):

          (i) If to the Company:

              ADA Environmental Solutions LLC
              Attention:  Manager
              304 Inverness Way South, Suite 365
              Englewood, Colorado 80112

              (ii) If to Employee:

              C. Jean Bustard
              9193 Buffalo Drive, Littleton, CO 80127

     (g) Arbitration.

     Any difference, claims or matters in dispute arising between Employee and
the Company out of this Agreement or connected with Employee's employment shall
be submitted by Employee and the Company to binding arbitration by a single
arbitrator selected by the mutual agreement of the parties from members of the
Judicial Arbiter Group of Denver, Colorado, or its successor. The arbitration
shall be governed by the rules and regulations of the Judicial Arbiter Group or
its successor and the pertinent provisions of the laws of the State of Colorado
relating to arbitration. The decision of the arbitrator may be entered as a
judgment in any court in the State of Colorado or elsewhere. The prevailing
party shall be entitled to receive reasonable attorneys' fees incurred in
connection with such arbitration in addition to such other costs and expenses as
the arbitrator may award.

     (h) Entire Agreement.

     This Agreement together with the exhibits hereto constitute the entire
agreement between the parties and their affiliates with respect to the subject
matter hereof, supersedes all prior and contemporaneous agreements or
understandings relating to said subject matter, and no amendment hereof shall be
deemed valid unless in writing and signed by the parties hereto.

                                       6
<PAGE>

     IN WITNESS WHEREOF, the parties have signed or caused this Agreement to be
signed by their duly authorized officers as of the day and year first above
written.

                                              ADA Environmental Solutions LLC

                                              By:

                                              ----------------------------------
                                              Michael D. Durham, Manager



                                              ----------------------------------
                                              C. Jean
                                              Bustard, Employee




                                        7
<PAGE>

                                    EXHIBIT A

Projects to be pursued by Employee that are exempt from employee agreement:

1.   Work on technologies covered by previous employment Agreement with ADA
     Technologies.

2.   Baghouse related technologies and troubleshooting with skills obtained
     while employed with Southern Research Institute.






                                        8
<PAGE>

                                    EXHIBIT B

                        ADA Environmental Solutions, LLC

                   Summary of Employee Benefits - May 1, 1997

The following includes a brief description of the benefits package that is
offered by ADA Environmental Solutions, LLC (ADA-ES). These benefits are subject
to change at any time, and the provisions of the official plan documents, in
addition to ADA-ES Policies, shall govern in the even of any differences or
discrepancies. This summary is intended to be a brief overview of the benefits
currently offered by ADA Environmental Solutions and not a comprehensive source
of information concerning exemptions, limitations, and eligibility requirements.
All staff members are encouraged to periodically review ADA-ES's Employee
Handbook and the Group Insurance Benefits Handbook for a more complete
explanation of the benefits and their provisions. This summary does not
constitute a contract between ADA-ES employees and the Company.

Staff members share a portion of the cost of some of the benefits described.


Holidays

     10 Holidays

Vacation

     Full-time staff members are entitled to 12 days of vacation per year for
the first three years of employment with ADA-ES. Vacation time is increased to
15 days after 3 years, and 20 days after 9 years.

Sick and Personal Days

     Full-time employees may receive up to 8 Sick and Personal days per year.

Medical Insurance

Retirement Plan

Disability

Life Insurance

                                        9
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.24
<SEQUENCE>4
<FILENAME>adaexmd.txt
<DESCRIPTION>AGREEMENT
<TEXT>
                                                                   EXHIBIT 10.24

                         ADA ENVIRONMENTAL SOLUTIONS LLC
                              EMPLOYMENT AGREEMENT


     THIS AGREEMENT made and entered into this day of May 1, 1997, by and
between ADA Environmental Solutions LLC a Colorado limited liability company,
whose principal offices are located at 304 Inverness Way South, Suite 365,
Englewood, Colorado 80112 (the "Company"), and Michael D. Durham (the
"Employee), whose address is 5252 Lariat Road, Castle Rock, Colorado, 80104.

                                    RECITALS:

     A.   The Company has made Employee an offer of employment.
     B.   Employee desires to accept the offer.
     C.   The Company and Employee desire to enter into this Agreement to set
          forth the terms and conditions of the employment.

     NOW, THEREFORE in consideration of the premises and the mutual covenants
and agreements hereinafter set forth and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
parties, intending to be legally bound, hereby agree as follows:

     1. Definitions.

     Capitalized terms are used herein with the meanings as specified in
Paragraph 7 hereof:

     2. Employment.

     The Company hereby employs the Employee and Employee hereby accepts such
employment upon the terms and conditions set forth herein.

     3. Term.

     (a) Initial Term.

     The initial Term of employment under this Agreement shall commence on the
date hereof and it shall continue for a period of three years from such date.
The Term shall be automatically extended for successive one-year periods. Either
party may terminate this Agreement for any reason by giving the other written
notice of its intent to terminate the Agreement not less than three months prior
to the intended date of termination. In addition, the Company may immediately
terminate this Agreement at any time "for cause" as defined below. The initial
Term and any such extensions are hereinafter referred to as the "Term."

     (b) For Cause.

     Notwithstanding any other provision of this Agreement, the Company may
terminate this Agreement for cause immediately upon notice to Employee. The
phrase "for cause" as used in this Agreement shall include, but not be limited
to, breach of any fiduciary duty to the Company, failure to perform Employee's
duties hereunder in a manner satisfactory to the majority of the managers of the
Company, death, permanent disability, or conviction in a criminal proceeding
(excluding traffic violations or similar misdemeanors). In the event that
Employee, during the Term of his employment, should die, become permanently
disabled, or have his employment terminated for cause by the Company, then
Employee shall be entitled to (x) all salary which may accrue to him through the
end of the last month during which he shall have been an employee of the
Company, and (y) such other benefits, if any, to which he is entitled in
accordance with any other section of this Agreement.

                                       1
<PAGE>

     4. Position, Duties and Authority.

     During the Term of this Agreement, Employee shall be employed as the
Executive Vice President of the Company. Employee shall report to the President
of the Company.

     5. Obligations of Employee.

     Employee hereby agrees that he will devote full-time to the fulfillment of
his obligations hereunder. Nothing contained in this agreement shall prevent the
Employee from pursuing the projects listed on the attached Exhibit A.

     6. Compensation and Benefits.

     In consideration of Employee's agreement to be employed by the Company and
as reasonable compensation for services to be rendered hereunder, the Company
agrees as follows:

     (a) Benefits.

     Employee shall be entitled to the standard benefits and perquisites from
time to time available to full-time employees of the Company. These benefits are
listed in Exhibit B. In addition, Employee shall accrue vacation at a rate of
6.16 hours per bi-weekly pay period.

     (b) Compensation.

     The Company shall pay Employee bi-weekly compensation of $4,615.38 during
the Term of employment as part of the Company's normal payroll procedures.
Increases in compensation, if any, shall be at the discretion of the Managers of
the Company.

     7. Definitions.

     (a) "Invention" shall mean any idea, discovery, article, process,
formulation, composition, combination, design, modification or improvement,
whether or not patentable.

     (b) "Copyright Works" shall mean all literary works, graphic works,
pictorial works and other creative works for which copyright protection may be
obtained, including without limitation proposals and computer
software/documentation.

     (c) "Confidential Subject Matter" shall mean all Inventions, Copyright
Works, data, specifications, know-how, lists, printed materials, technical
information, cost/pricing/marketing information and other subject matter that is
not available to the general public in a substantially identical form without
restriction.

                                       2
<PAGE>

     8. Disclosure/Ownership of Invention and Confidential Subject Matter.

     (a) During Employment.

     Employee agrees that during the term of Employee's employment with Company,
Employee will immediately disclose in writing to Company all Inventions and
Confidential Subject Matter which (i) is conceived or generated by Employee
alone and/or jointly with others, and (ii) relates to the actual or anticipated
business of the Company and/or relates to the actual or anticipated research or
development activities of the Company and/or is otherwise suggested by or
results from any activity performed on behalf of the Company. Employee
acknowledges and agrees that immediately upon conception or generation,
whichever occurs earlier, all Inventions and Confidential Subject Matter
disclosed and to be disclosed by Employee to Company during the term of
Employee's employment with Company will be the sole and exclusive property of
the Company.

     (b) Post Employment.

     Employee further agrees that, during the two (2) year period following any
termination of Employee's employment with the Company, Employee will immediately
disclose in writing to the Company all Inventions and Confidential Subject
Matter which (i) is conceived or generated by Employee alone and /or jointly
with others, and (ii) is based upon or otherwise derived from any Inventions
and/or Confidential Subject Matter of the Company. Employee acknowledges and
agrees that immediately upon conception or generation, whichever occurs earlier,
all Inventions and Confidential Subject Matter to be disclosed by Employee to
Company during the two (2) year period following the termination of Employee's
employment with Company will become the sole and exclusive property of the
Company.

     9. Assignment of Inventions and Confidential Subject Matter/Documentation/
Commercialization.

     (a) Assignment.

     Employee hereby assigns to Company the Employee's entire right, title and
interest in and to all Inventions and Confidential Subject Matter disclosed and
to be disclosed by Employee to Company pursuant to Sections 8 (a) and (b).

     (b) Documentation.

     Employee agrees to execute, cooperate in the preparation of and deliver to
the Company, both during the term of Employee's employment with the Company and
thereafter, any and all documents deemed necessary by the Company for the
Company to protect, maintain, preserve and enjoy the full right, title and
interest to all Inventions and Confidential Subject Matter disclosed and to be
disclosed by Employee to Company, including without limitation, the execution
and delivery of patent assignments and, at Company's legal expense, the
preparation of patent applications.

     (c) Commercialization.

     Employee acknowledges and agrees that with respect to all Inventions and
Confidential Subject Matter transferred by Employee to Company, Company is not
obligated to commercialize the same, and that if Employee desires to
independently commercialize any of said Inventions and/or Confidential Subject
Matter, Employee must request and obtain a written license from Company
beforehand, which license request may be declined by Company in its sole
discretion.

                                       3
<PAGE>

     10. Copyright Works.

     Employee agrees that all Copyright Works and contributions to Copyright
Works prepared by Employee within the scope of Employee's employment with the
Company will be deemed "works for hire" and will be owned by the Company, and
Employee agrees to execute all documents deemed necessary by the Company for the
Company to protect, maintain, preserve and enjoy the Company's rights in such
Copyright Works and contributions. Employee further agrees that unless expressly
authorized by the Company in writing, Employee will not independently prepare or
otherwise distribute or publish any Copyright Work that embodies any
Confidential Subject Matter owned by the Company or held in confidence by the
Company for any third-party, including without limitation, all Confidential
Subject Matter disclosed and to be disclosed by Employee to the Company.

     11. Written Records.

     Employee agrees that to the extent reasonably possible, Employee will
maintain written records of all Inventions and Confidential Subject Matter
conceived or generated by Employee in the course of Employee's performance of
services for the Company, which records will be the exclusive property of the
Company and will be available to the Company at all times.

     12. Restrictive Obligations Relating to Confidential Subject Matter.

     (a) Obligations to Company.

     Employee agrees to maintain in strict confidence, and agrees not to use,
disclose, reproduce or publish, except to the extent necessary in the course of
the Employee's performance of services for the company and/or as otherwise
authorized by Company, any Confidential Subject Matter owned by the Company or
held in confidence by the Company for any third-party, including without
limitation, all Confidential Subject Matter disclosed and to be disclosed by
Employee to the Company.

     (b) Prior Obligations to Third-Parties.

     Employee agrees that, in the course of Employee's employment with the
Company, Employee will not use or disclose any third-party Confidential Subject
Matter with respect to which Employee, prior to Employee's initiation of
employment with the Company, assumed obligations restricting such use or
disclosure.

     13. Conflicting Obligations.

     (a) Prior Obligations.

     Employee acknowledges and agrees that Employee is under no obligations to
any third party which conflict or may conflict, in any way, with any of the
Employee's obligations hereunder, except for actual and/or potentially
conflicting obligations identified by Employee on Exhibit A attached hereto.
Employee agrees to provide the Company with a copy of any written agreements
relating to any obligations identified in Exhibit A.

                                       4
<PAGE>

     (b) Assumption of Obligations.

     Employee agrees that Employee will not assume any obligations to any
third-party that would conflict with any of Employee's obligation hereunder.
Except for projects referred to in Exhibit A Employee further agrees that,
during the Term of Employee's employment with the Company, Employee will not
compete, and will not provide services to others who compete with the Company in
the research, development, production, marketing or servicing of any product,
process or service with respect to which the Company is involved.

     14. Termination of Employment.

     (a) Continuing Obligations.

     Employee's obligations under Sections 8 through 12 of this Agreement will
continue after any termination of Employee's employment with the Company.

     (b) Submission of Materials.

     Upon any termination of Employee's employment with Company, Employee will
submit to the Company all materials within Employee's possession that constitute
or include Confidential Subject Matter owned by the Company or held in
confidence by the Company for any third-party.

     (c) Exit Interview.

     Upon the termination of Employee's employment with the company, Employee
will attend an exit interview with an appropriate representative of the Company
to review the continuing obligations of Employee hereunder.

     15. Miscellaneous.

     (a) Binding-Effect/Assignability.

     This Agreement is not assignable by Employee and will be binding upon
Employee's heirs, executors, administrators and other legal representatives.
Employee agrees that the Company may freely assign this Agreement to any
successor-in-interest of the Company.

     (b) Severability.

     Should any provision of this Agreement be determined by a court of
competent jurisdiction to violate or contravene any applicable law or policy,
such provision will be severed and modified to the extent necessary to comply
with the applicable law or policy, and such modified provision and the remainder
of the provisions hereof will continue in full force and effect.

     (c) Waiver.

     Any delay or omission on the part of Company to exercise any right under
this Agreement will not automatically operate as a waiver of such right or any
other right; and that a waiver of any right of the Company hereunder on one
occasion will not be construed as a bar to or waiver of any right on any future
occasion.

                                       5
<PAGE>

     (d) Controlling Law.

     This Agreement will be interpreted under and enforced in accordance with
the laws of the State of Colorado.

     (e) Modification.

     This Agreement may only be modified by the mutual written agreement of
Employee and Company.

     (f) Notices.

     Any notice or communication required or permitted to be given by this
Agreement shall be deemed given and effective when delivered personally, or when
sent by registered or certified mail, postage prepaid, addressed as follows
(such addresses for giving of notice may be changed by notice similarly given):

           (i) If to the Company:

               ADA Environmental Solutions LLC
               Attention:  Manager
               304 Inverness Way South, Suite 365
               Englewood, Colorado 80112

          (ii) If to Employee:

               Michael D. Durham
               5252 Lariat Road, Castle Rock, Colorado, 80104

     (g) Arbitration.

     Any difference, claims or matters in dispute arising between Employee and
the Company out of this Agreement or connected with Employee's employment shall
be submitted by Employee and the Company to binding arbitration by a single
arbitrator selected by the mutual agreement of the parties from members of the
Judicial Arbiter Group of Denver, Colorado, or its successor. The arbitration
shall be governed by the rules and regulations of the Judicial Arbiter Group or
its successor and the pertinent provisions of the laws of the State of Colorado
relating to arbitration. The decision of the arbitrator may be entered as a
judgment in any court in the State of Colorado or elsewhere. The prevailing
party shall be entitled to receive reasonable attorneys' fees incurred in
connection with such arbitration in addition to such other costs and expenses as
the arbitrator may award.

     (h) Entire Agreement.

     This Agreement together with the exhibits hereto constitute the entire
agreement between the parties and their affiliates with respect to the subject
matter hereof, supersedes all prior and contemporaneous agreements or
understandings relating to said subject matter, and no amendment hereof shall be
deemed valid unless in writing and signed by the parties hereto.

                                       6
<PAGE>

     IN WITNESS WHEREOF, the parties have signed or caused this Agreement to be
signed by their duly authorized officers as of the day and year first above
written.

                                           ADA Environmental Solutions LLC

                                           By: Earth Sciences, Inc., Manager

                                           By:
                                               ---------------------------------
                                                Mark H. McKinnies

                                           Its: President

                                           ADA Technologies, Inc., Manager

                                           By:
                                               ---------------------------------
                                                Judith A. Armstrong

                                           Its: President

                                           ADA Environmental Solutions, LLC

                                           -------------------------------------
                                           Michael D. Durham, Manager


                                           -------------------------------------
                                           Michael D. Durham, Employee


                                        7
<PAGE>



                                   EXHIBIT A

Projects to be pursued by Employee that are exempt from employee agreement:

1.   Work on technologies covered by previous Employee Agreement with ADA
     Technologies.

2.   Potential business consulting to be provided to small businesses such as
     ADA Technologies, Sky+, LaserWave, and Poinsettia Group.

3.   Environmental consulting with the Happy Canyon Homeowners Association to
     halt proposed development.









                                        8
<PAGE>

                                    EXHIBIT B

                        ADA Environmental Solutions, LLC

                   Summary of Employee Benefits - May 1, 1997

The following includes a brief description of the benefits package that is
offered by ADA Environmental Solutions, LLC (ADA-ES). These benefits are subject
to change at any time, and the provisions of the official plan documents, in
addition to ADA-ES Policies, shall govern in the even of any differences or
discrepancies. This summary is intended to be a brief overview of the benefits
currently offered by ADA Environmental Solutions and not a comprehensive source
of information concerning exemptions, limitations, and eligibility requirements.
All staff members are encouraged to periodically review ADA-ES's Employee
Handbook and the Group Insurance Benefits Handbook for a more complete
explanation of the benefits and their provisions. This summary does not
constitute a contract between ADA-ES employees and the Company.

Staff members share a portion of the cost of some of the benefits described.


Holidays

     10 Holidays

Vacation

     Full-time staff members are entitled to 12 days of vacation per year for
the first three years of employment with ADA-ES. Vacation time is increased to
15 days after 3 years, and 20 days after 9 years.

Sick and Personal Days

     Full-time employees may receive up to 8 Sick and Personal days per year.

Medical Insurance

Retirement Plan

Disability

Life Insurance



                                        9
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.25
<SEQUENCE>5
<FILENAME>adaes10-25.txt
<DESCRIPTION>AGREEMENT
<TEXT>
Exhibit 10.25
Employment Agreement

                        ADA ENVIRONMENTAL SOLUTIONS, LLC
                              EMPLOYMENT AGREEMENT

     THIS AGREEMENT made and entered into this 2nd day of January, 2000, by and
between ADA Environmental Solutions, LLC, a Colorado limited liability company,
whose principal offices are located at 8100 SouthPark Way, B-2, Littleton,
Colorado 80120 (the "Company"), and Mark H. McKinnies (the "Employee") whose
address is 27638 Pine Grove Trail, Conifer, CO 80433.

                                    RECITALS:

     A.   The Company has made Employee an offer of employment.
     B.   Employee desires to accept the offer.
     C.   The Company and Employee desire to enter into this Agreement to set
          forth the terms and conditions of the employment.

     NOW, THEREFORE in consideration of the premises and the mutual covenants
and agreements hereinafter set forth and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
parties, intending to be legally bound, hereby agree as follows:

     1. Definitions.
        Capitalized terms are used herein with the meanings as specified in
Paragraph 7 hereof.

     2. Employment.
        The Company hereby employs the Employee and Employee hereby accepts such
employment upon the terms and conditions set forth herein.

     3. Initial

        a) Initial Term.
           The initial term of employment under this Agreement shall commence on
the date hereof and it shall continue for a period of three years from such
date. The term shall be automatically extended for successive one-year periods.
Either party may terminate this Agreement for any reason by giving the other
written notice of its intent to terminate the Agreement not less than three
months prior to the intended date of termination. In addition, the Company may
immediately terminate this agreement at any time "for cause" as defined below.
The initial term and any such extensions are hereinafter referred to as the
"Term."

        b) For Cause.
           Notwithstanding any other provision of this Agreement, the Company
may terminate this Agreement for cause immediately upon notice to Employee. The
phrase "for cause" as used in this Agreement shall include, but not be limited

<PAGE>

to, breach of any fiduciary duty to the Company, failure to perform Employee's
duties hereunder in a manner satisfactory to the majority of the managers of the
Company, death, permanent disability, or conviction in a criminal proceeding
(excluding traffic violations or similar misdemeanors). In the event that
Employee, during the term of his employment, should die, become permanently
disabled, or have his employment terminated for cause by the Company, then
Employee shall be entitled to (x) all salary which may accrue to him through the
end of the last month during which he shall have been an employee of the
Company, and (y) such other benefits, if any, to which he is entitled in
accordance with any other section of this Agreement.

     4. Position, Duties and Authority.
        During the term of this Agreement, Employee shall be employed as the
Chief Financial Officer of the Company. Employee shall report to the President
of the Company.

     5. Obligations of Employee.
        Employee hereby agrees that he will devote full-time to the fulfillment
of his obligations hereunder. Nothing contained in this agreement shall prevent
the Employee from pursuing the projects listed on the attached Exhibit A.

     6. Compensation and Benefits.
        In consideration of Employee's agreement to be employed by the Company
and as reasonable compensation for services to be rendered hereunder, the
Company agrees as follows:

        a) Benefits.
           Employee shall be entitled to the standard benefits and perquisites
from time to time available to full-time employees of the Company. These
benefits are listed in Exhibit B. In addition, Employee shall accrue vacation at
a rate of 9.23 hours per bi-weekly pay period.

        b) Compensation.
           The Company shall pay Employee bi-weekly compensation of $5,444.65
during the term of employment as part of the Company's normal payroll
procedures. Increases in compensation, if any, shall be at the discretion of the
Managers of the Company.

     7. Definitions.

        a) "Invention" shall mean any idea, discovery, article, process,
formulation, composition, combination, design, modification or improvement,
whether or not patentable.

        b) "Copyright Works" shall mean all literary works, graphic works,
pictorial works and other creative works for which copyright protection may be
obtained, including without limitation proposals and computer software
/documentation.

        c) "Confidential Subject Matter" shall mean all Inventions, Copyright
Works, data, specifications, know-how, lists, printed materials, technical
information, cost/pricing/marketing information and other subject matter that is
not available to the general public in a substantially identical form without
restriction.

<PAGE>

     8. Disclosure/Ownership of Invention and Confidential Subject Matter.

        a) During Employment.
           Employee agrees that during the term of Employee's employment with
Company, Employee will immediately disclose in writing to Company all Inventions
and Confidential Subject Matter which (i) is conceived or generated by Employee
alone and/or jointly with others, and (ii) relates to the actual or anticipated
business of the Company and/or relates to the actual or anticipated research or
development activities of the Company and/or is otherwise suggested by or
results from any activity performed on behalf of the Company. Employee
acknowledges and agrees that immediately upon conception or generation,
whichever occurs earlier, all Inventions and Confidential Subject Matter
disclosed and to be disclosed by Employee to Company during the term of
Employee's employment with Company will be the sole and exclusive property of
the Company.

        b) Post Employment.
           Employee further agrees that, during the two (2) year period
following any termination of Employee's employment with the Company, Employee
will immediately disclose in writing to the Company all Inventions and
Confidential Subject Matter which (i) is conceived or generated by Employee
alone and/or jointly with others, and (ii) is based upon or otherwise derived
from any Inventions and/or Confidential Subject Matter of the Company. Employee
acknowledges and agrees that immediately upon conception or generation,
whichever occurs earlier, all Inventions and Confidential Subject Matter to be
disclosed by Employee to Company during the two (2) year period following the
termination of Employee's employment with Company will become the sole and
exclusive property of the Company.

     9. Assignment of Inventions and Confidential Subject
Matter/Documentation/Commercialization.

        a) Assignment.
           Employee hereby assigns to Company the Employee's entire right, title
and interest in and to all Inventions and Confidential Subject Matter disclosed
and to be disclosed by Employee to Company pursuant to Sections 8 (a) and (b).

        b) Documentation.
           Employee agrees to execute, cooperate in the preparation of and
deliver to the Company, both during the term of Employee's employment with the
Company and thereafter, any and all documents deemed necessary by the Company
for the Company to protect, maintain, preserve and enjoy the full right, title
and interest to all Inventions and Confidential Subject Matter disclosed and to
be disclosed by Employee to Company, including without limitation, the execution
and delivery of patent assignments and, at Company's legal expense, the
preparation of patent applications.

        c) Commercialization.
           Employee acknowledges and agrees that with respect to all Inventions
and Confidential Subject Matter transferred by Employee to Company, Company is
not obligated to commercialize the same, and that if Employee desires to
independently commercialize any of said inventions and/or Confidential Subject
Matter, Employee must request and obtain a written license from Company
beforehand, which license request may be declined by Company in its sole
discretion.

<PAGE>

     10. Copyright Works.
         Employee agrees that all Copyright Works and contributions to Copyright
Works prepared by Employee within the scope of Employee's employment with the
Company will be deemed "works for hire" and will be owned by the Company, and
Employee agrees to execute all documents deemed necessary by the Company for the
Company to protect, maintain, preserve and enjoy the Company's rights in such
Copyright Works and contributions. Employee further agrees that unless expressly
authorized by the Company in writing, Employee will not independently prepare or
otherwise distribute or publish any Copyright Work that embodies any
Confidential Subject Matter owned by the Company or held in Confidence by the
Company for any third party, including without limitation, all Confidential
Subject Matter disclosed and to be disclosed by Employee to the Company.

     11. Written Records.
         Employee agrees that to the extent reasonably possible, Employee will
maintain written records of all Inventions and Confidential Subject Matter
conceived or generated by Employee in the course of Employee's performance of
services for the Company, which records will be the exclusive property of the
Company and will be available to the Company at all times.

     12. Restrictive Obligations Relating to Confidential Subject Matter.

        a) Obligations to Company.
           Employee agrees to maintain in strict confidence, and agrees not to
use, disclose, reproduce or publish, except to the extent necessary in the
course of the Employee's performance of services for the Company and/or as
otherwise authorized by Company, any Confidential Subject Matter owned by the
Company or held in confidence by the Company for any third-party, including
without limitation, all Confidential Subject Matter disclosed and to be
disclosed by Employee to the Company.

        b) Prior Obligations to Third-Parties.
           Employee agrees that, in the course of Employee's employment with the
Company, Employee will not use or disclose any third party Confidential Subject
Matter with respect to which Employee, prior to Employee's initiation of
employment with the Company, assumed obligations restricting such use or
disclosure.

     13. Conflicting Obligations.

        a) Prior Obligations.
           Employee acknowledges and agrees that Employee is under no
obligations to any third party which conflict or may conflict, in any way, with
any of the Employee's obligations hereunder, except for actual and/or
potentially conflicting obligations identified by Employee on Exhibit A attached
hereto. Employee agrees to provide the Company with a copy of any written
agreements relating to any obligations identified in Exhibit A.

<PAGE>

        b) Assumption of Obligations.
           Employee agrees that Employee will not assume any obligations to any
third- party that would conflict with any of Employee's obligation hereunder.
Except for projects referred to in Exhibit A Employee further agrees that,
during the term of Employee's employment with the Company, Employee will not
compete, and will not provide services to others who compete with the Company in
the research, development, production, marketing or servicing of any product,
process or service with respect to which the Company is involved.

     14. Termination of Employment.

        a) Continuing Obligations.
           Employee's obligations under Sections 8 through 12 of this Agreement
will continue after any termination of Employee's employment with the Company.

        b) Submission of Materials.
           Upon any termination of Employee's employment with Company, Employee
will submit to the Company all materials within Employee's possession that
constitute or include Confidential Subject Matter owned by the Company or held
in confidence by the Company for any third-party.

        c) Exit Interview.
           Upon termination of Employee's employment with the company, Employee
will attend an exit interview with an appropriate representative of the Company
to review the continuing obligations of Employee hereunder.

     15. Miscellaneous.

        a) Binding-Effect/ Assignability.
           This Agreement is not assignable by Employee and will be binding upon
Employee's heirs, executors, administrators and other legal representatives.
Employee agrees that the Company may freely assign this Agreement to any
successor-in-interest of the Company.

        b) Severability.
           Should any provision of this Agreement be determined by a court of
competent jurisdiction to violate or contravene any applicable law or policy,
such provision will be severed and modified to the extent necessary to comply
with the applicable law or policy, and such modified provision and the remainder
of the provisions hereof will continue in full force and effect.

        c) Waiver.
           Any delay or omission on the part of Company to exercise any right
under this Agreement will not automatically operate as a waiver of such right or
any other right; and that a waiver of any right of the Company hereunder on one
occasion will not be construed as a bar to or waiver of any right on any future
occasion.

<PAGE>

        d) Controlling Law.
           This Agreement will be interpreted under and enforced in accordance
with the laws of the State of Colorado.

        e) Modification.
           This Agreement may only be modified by the mutual written agreement
of Employee and Company.

        f) Notices.
           Any notice or communication required or permitted to be given by this
Agreement shall be deemed given and effective when delivered personally, or when
sent by registered or certified mail, postage prepaid, addressed as follows
(such addresses for giving of notice may be changed by notice similarly given):

                (i) If to the Company:

                ADA Environmental Solutions, LLC
                Attention:  Manager
                304 Inverness Way South, Suite 365
                Englewood, Colorado 80112


                (ii) If to Employee:

                Mark H. McKinnies
                27638 Pine Grove Trail
                Conifer, CO 80433

        g) Arbitration.
           Any difference, claims or matters in dispute arising between Employee
and the Company out of this Agreement or connected with Employee's employment
shall be submitted by Employee and the Company to binding arbitration by a
single arbitrator selected by the mutual agreement of the parties from members
of the Judicial Arbiter Group of Denver, Colorado, or its successor. The
arbitration shall be governed by the rules and regulations of the Judicial
Arbiter Group or it's successor and the pertinent provisions of the laws of the
State of Colorado relating to arbitration. The decision of the arbitrator may be
entered as a judgment in any court in the State of Colorado or elsewhere. The
prevailing party shall be entitled to receive reasonable attorneys' fees
incurred in connection with such arbitration in addition to such other costs and
expenses as the arbitrator may award.

<PAGE>

        h) Entire Assignment.

           This Agreement together with the exhibits hereto constitute the
entire agreement between the parties and their affiliates with respect to the
subject matter hereof, supersedes all prior and contemporaneous agreements or
understandings relating to said subject matter, and no amendment hereof shall be
deemed valid unless in writing and signed by the parties hereto.

IN WITNESS WHEREOF, the parties have signed or caused this Agreement to be
signed by their duly authorized officers as of the day and year first above
written.

                                            ADA Environmental Solutions, LLC

                                            By:


                                            /s/ Michael D. Durham
                                            ---------------------
                                            Michael D. Durham, President


                                            /s/ Mark H. McKinnies
                                            ---------------------
                                            Mark H. McKinnies, Employee


<PAGE>

                                    EXHIBIT A

Projects to be pursued by Employee that are exempt from employee agreement:

none


<PAGE>

                                    EXHIBIT B

                        ADA Environmental Solutions, LLC

                   Summary of Employee Benefits - January 2000

The following includes a brief description of the benefits package that is
offered by ADA Environmental Solutions, LLC (ADA-ES). These benefits are subject
to change at any time, and the provisions of the official plan documents, in
addition to ADA-ES Policies, shall govern in the event of any differences or
discrepancies. This summary is intended to be a brief overview of the benefits
currently offered by ADA Environmental Solutions and not a comprehensive source
of information concerning exceptions, limitations, and eligibility requirements.
All staff members are encouraged to periodically review ADA-ES's Employee
Handbook and the Group Insurance Benefits Handbook for a more complete
explanation of the benefits and their provisions. This summary does not
constitute a contract between ADA-ES employees and the Company.

Staff members share a portion of the cost of some of the benefits described.


Holidays

     10 Holidays

Vacation

     Full-time staff members are entitled to 12 days of vacation per year for
the first three years of employment with ADA-ES. Vacation time is increased to
15 days after 3 years, and 20 days after 9 years.

Sick and Personal Days

     Full-time employees may receive up to 8 Sick and Personal days per year.

Medical Insurance

Retirement Plan


<PAGE>

                                    EXHIBIT B

                        ADA Environmental Solutions, LLC

                   Summary of Employee Benefits - May 1, 1997

The following includes a brief description of the benefits package that is
offered by ADA Environmental Solutions, LLC (ADA-ES). These benefits are subject
to change at any time, and the provisions of the official plan documents, in
addition to ADA-ES Policies, shall govern in the event of any differences or
discrepancies. This summary is intended to be a brief overview of the benefits
currently offered by ADA Environmental Solutions and not a comprehensive source
of information concerning exceptions, limitations, and eligibility requirements.
All staff members are encouraged to periodically review ADA-ES's Employee
Handbook and the Group Insurance Benefits Handbook for a more complete
explanation of the benefits and their provisions. This summary does not
constitute a contract between ADA-ES employees and the Company.

Staff members share a portion of the cost of some of the benefits described.


Holidays

     10 Holidays

Vacation

     As per Employee Agreement.

Sick and Personal Days

     Full-time employees may receive up to 8 Sick and Personal days per year.

Medical Insurance

Profit Sharing Retirement Plan

     Eligible to participate in the Plan after you attain age 21, work for the
Company at least 12 months and accumulate 1,000 Hours of Service during the
first 12 months of employment with the Company or during any calendar year that
begins after your employment with the Company begins.

Once you satisfy these requirements, you may become a Participant in the Plan on
the January 1 or July 1 coinciding with or immediately following the date you
satisfy these requirements.

     401k Plan
     Profit Sharing

Disability

Life Insurance
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.26
<SEQUENCE>6
<FILENAME>adaes10-26.txt
<DESCRIPTION>AGREEMENT
<TEXT>
Exhibit 10.26
Employment Agreement

                        ADA ENVIRONMENTAL SOLUTIONS, LLC
                              EMPLOYMENT AGREEMENT

     THIS AGREEMENT made and entered into this day of January 1, 2000, by and
between ADA Environmental Solutions, LLC, a Colorado limited liability company,
whose principal offices are located at 8100 SouthPark Way, B-2, Littleton,
Colorado 80120 (the "Company"), and Richard J. Schlager (the "Employee") whose
address is 16242 E. Prentice Lane, Aurora, CO 80015.

                                    RECITALS:

     A.   The Company has made Employee an offer of employment.
     B.   Employee desires to accept the offer.
     C.   The Company and Employee desire to enter into this Agreement to set
          forth the terms and conditions of the employment.

     NOW, THEREFORE in consideration of the premises and the mutual covenants
and agreements hereinafter set forth and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
parties, intending to be legally bound, hereby agree as follows:

     1. Definitions.
Capitalized terms are used herein with the meanings as specified in Paragraph 6
hereof.

     2. Employment.
        The Company hereby employs the Employee and Employee hereby accepts such
employment upon the terms and conditions set forth herein.

     3. Position, Duties and Authority.
        During the term of this Agreement, Employee shall be employed as the
Vice President of Contract Research and Development of the Company. Employee
shall report to the President of the Company.

     4. Obligations of Employee.
        Employee hereby agrees that he will devote a minimum of 40 hours per
week to the fulfillment of his obligations hereunder. Nothing contained in this
agreement shall prevent the Employee from pursuing the projects listed on the
attached Exhibit A.

     5. Compensation and Benefits.
        In consideration of Employee's agreement to be employed by the Company
and as reasonable compensation for services to be rendered hereunder, the
Company agrees as follows:

<PAGE>

        a) Benefits.
           Employee shall be entitled to the standard benefits and perquisites
from time to time available to full-time employees of the Company. These
benefits are listed in Exhibit B. In addition, Employee shall accrue vacation at
a rate of 20 days per year.

        b) Compensation.
           The Company shall pay Employee a salary of $92,000.00 per annum
during the Term of this Agreement payable bi-weekly as part of the Company's
normal payroll procedures. Increases in compensation, if any, shall be at the
discretion of the Managers of the Company.

     6. Definitions.
        a) "Invention" shall mean any idea, discovery, article, process,
formulation, composition, combination, design, modification or improvement,
whether or not patentable.

        b) "Copyright Works" shall mean all literary works, graphic works,
pictorial works and other creative works for which copyright protection may be
obtained, including without limitation proposals and computer
software/documentation.

        c) "Confidential Subject Matter" shall mean all Inventions, Copyright
Works, data, specifications, know-how, lists, printed materials, technical
information, cost/pricing/marketing information and other subject matter that is
not available to the general public in a substantially identical form without
restriction.

     7. Disclosure/Ownership of Invention and Confidential Subject Matter.

        a) During Employment.
           Employee agrees that during the term of Employee's employment with
Company, Employee will immediately disclose in writing to Company all Inventions
and Confidential Subject Matter which (i) is conceived or generated by Employee
alone and/or jointly with others, and (ii) relates to the actual or anticipated
business of the Company and/or relates to the actual or anticipated research or
development activities of the Company and/or is otherwise suggested by or
results from any activity performed on behalf of the Company. Employee
acknowledges and agrees that immediately upon conception or generation,
whichever occurs earlier, all Inventions and Confidential Subject Matter
disclosed and to be disclosed by Employee to Company during the term of
Employee's employment with Company will be the sole and exclusive property of
the Company.

        b) Post Employment.
           Employee further agrees that, during the two (2) year period
following any termination of Employee's employment with the Company, Employee
will immediately disclose in writing to the Company all Inventions and
Confidential Subject Matter which (i) is conceived or generated by Employee
alone and/or jointly with others, and (ii) is based upon or otherwise derived
from any Inventions and/or Confidential Subject Matter of the Company. Employee
acknowledges and agrees that immediately upon conception or generation,
whichever occurs earlier, all Inventions and Confidential Subject Matter to be
disclosed by Employee to Company during the two (2) year period following the
termination of Employee's employment with Company will become the sole and
exclusive property of the Company.

<PAGE>

     8. Assignment of Inventions and Confidential Subject Matter/ Documentation/
Commercialization.

        a) Assignment.
           Employee hereby assigns to Company the Employee's entire right, title
and interest in and to all Inventions and Confidential Subject Matter disclosed
and to be disclosed by Employee to Company pursuant to Sections 7 (a) and (b).

        b) Documentation.
           Employee agrees to execute, cooperate in the preparation of and
deliver to the Company, both during the term of Employee's employment with the
Company and thereafter, any and all documents deemed necessary by the Company
for the Company to protect, maintain, preserve and enjoy the full right, title
and interest to all Inventions and Confidential Subject Matter disclosed and to
be disclosed by Employee to Company, including without limitation, the execution
and delivery of patent assignments and, at Company's legal expense, the
preparation of patent applications.

        c) Commercialization.
           Employee acknowledges and agrees that with respect to all Inventions
and Confidential Subject Matter transferred by Employee to Company, Company is
not obligated to commercialize the same, and that if Employee desires to
independently commercialize any of said inventions and/or Confidential Subject
Matter, Employee must request and obtain a written license from Company
beforehand, which license request may be declined by Company in its sole
discretion.

     9. Copyright Works.
        Employee agrees that all Copyright Works and contributions to Copyright
Works prepared by Employee within the scope of Employee's employment with the
Company will be deemed "works for hire" and will be owned by the Company, and
Employee agrees to execute all documents deemed necessary by the Company for the
Company to protect, maintain, preserve and enjoy the Company's rights in such
Copyright Works and contributions. Employee further agrees that unless expressly
authorized by the Company in writing, Employee will not independently prepare or
otherwise distribute or publish any Copyright Work that embodies any
Confidential Subject Matter owned by the Company or held in Confidence by the
Company for any third party, including without limitation, all Confidential
Subject Matter disclosed and to be disclosed by Employee to the Company.

<PAGE>

     10. Written Records.
         Employee agrees that to the extent reasonably possible, Employee will
maintain written records of all Inventions and Confidential Subject Matter
conceived or generated by Employee in the course of Employee's performance of
services for the Company, which records will be the exclusive property of the
Company and will be available to the Company at all times.

     11. Restrictive Obligations Relating to Confidential Subject Matter.

        a) Obligations to Company.
           Employee agrees to maintain in strict confidence, and agrees not to
use, disclose, reproduce or publish, except to the extent necessary in the
course of the Employee's performance of services for the Company and/or as
otherwise authorized by Company, any Confidential Subject Matter owned by the
Company or held in confidence by the Company for any third-party, including
without limitation, all Confidential Subject Matter disclosed and to be
disclosed by Employee to the Company.

        b) Prior Obligations to Third-Parties.
           Employee agrees that, in the course of Employee's employment with the
Company, Employee will not use or disclose any third party Confidential Subject
Matter with respect to which Employee, prior to Employee's initiation of
employment with the Company, assumed obligations restricting such use or
disclosure.

     12. Conflicting Obligations.

        a) Prior Obligations.
           Employee acknowledges and agrees that Employee is under no
obligations to any third party which conflict or may conflict, in any way, with
any of the Employee's obligations hereunder, except for actual and/or
potentially conflicting obligations identified by Employee on Exhibit A attached
hereto. Employee agrees to provide the Company with a copy of any written
agreements relating to any obligations identified in Exhibit A.

        b) Assumption of Obligations.
           Employee agrees that Employee will not assume any obligations to any
third- party that would conflict with any of Employee's obligation hereunder.
Except for projects referred to in Exhibit A Employee further agrees that,
during the term of Employee's employment with the Company, Employee will not
compete, and will not provide services to others who compete with the Company in
the research, development, production, marketing or servicing of any product,
process or service with respect to which the Company is involved.

     13. Termination of Employment.

        a) Continuing Obligations.
           Employee's obligations under Sections 8 through 12 of this Agreement
will continue after any termination of Employee's employment with the Company.

        b) Submission of Materials.
           Upon any termination of Employee's employment with Company, Employee
will submit to the Company all materials within Employee's possession that
constitute or include Confidential Subject Matter owned by the Company or held
in confidence by the Company for any third-party.

<PAGE>

        c) Exit Interview.
           Upon termination of Employee's employment with the company, Employee
will attend an exit interview with an appropriate representative of the Company
to review the continuing obligations of Employee hereunder.

     14. Miscellaneous.

        a) Binding-Effect/ Assignability.
           This Agreement is not assignable by Employee and will be binding upon
Employee's heirs, executors, administrators and other legal representatives.
Employee agrees that the Company may freely assign this Agreement to any
successor-in-interest of the Company.

        b) Severability.
           Should any provision of this Agreement be determined by a court of
competent jurisdiction to violate or contravene any applicable law or policy,
such provision will be severed and modified to the extent necessary to comply
with the applicable law or policy, and such modified provision and the remainder
of the provisions hereof will continue in full force and effect.

        c) Waiver.
           Any delay or omission on the part of Company to exercise any right
under this Agreement will not automatically operate as a waiver of such right or
any other right; and that a waiver of any right of the Company hereunder on one
occasion will not be construed as a bar to or waiver of any right on any future
occasion.

        d) Controlling Law.
           This Agreement will be interpreted under and enforced in accordance
with the laws of the State of Colorado.

        e) Modification.
           This Agreement may only be modified by the mutual written agreement
of Employee and Company.

        f) Notices.
           Any notice or communication required or permitted to be given by this
Agreement shall be deemed given and effective when delivered personally, or when
sent by registered or certified mail, postage prepaid, addressed as follows
(such addresses for giving of notice may be changed by notice similarly given):

<PAGE>

                (i) If to the Company:

                ADA Environmental Solutions, LLC
                Attention:  Manager
                8100 SouthPark Way, B-2
                Littleton, Colorado 80120

                (ii) If to Employee:

                Richard J. Schlager
                16242 E. Prentice Lane
                Aurora, CO  80015

        g) Arbitration.
           Any difference, claims or matters in dispute arising between Employee
and the Company out of this Agreement or connected with Employee's employment
shall be submitted by Employee and the Company to binding arbitration by a
single arbitrator selected by the mutual agreement of the parties from members
of the Judicial Arbiter Group of Denver, Colorado, or its successor. The
arbitration shall be governed by the rules and regulations of the Judicial
Arbiter Group or it's successor and the pertinent provisions of the laws of the
State of Colorado relating to arbitration. The decision of the arbitrator may be
entered as a judgment in any court in the State of Colorado or elsewhere. The
prevailing party shall be entitled to receive reasonable attorneys' fees
incurred in connection with such arbitration in addition to such other costs and
expenses as the arbitrator may award.

        h) Entire Assignment.
           This Agreement together with the exhibits hereto constitute the
entire agreement between the parties and their affiliates with respect to the
subject matter hereof, supersedes all prior and contemporaneous agreements or
understandings relating to said subject matter, and no amendment hereof shall be
deemed valid unless in writing and signed by the parties hereto.



<PAGE>

IN WITNESS WHEREOF, the parties have signed or caused this Agreement to be
signed by their duly authorized officers as of the day and year first above
written.

                                            ADA Environmental Solutions, LLC

                                            By:


                                            /s/Michael D. Durham
                                            --------------------
                                            Michael D. Durham, President


                                            /s/ Richard J. Schlager
                                            -----------------------
                                            Richard J. Schlager, Employee


<PAGE>

                                    EXHIBIT A

Projects to be pursued by Employee that are exempt from employee agreement:

1. Assisting Andy Sappey in: the preparation of research proposals related to
instrumentation.


<PAGE>

                                    EXHIBIT B

                        ADA Environmental Solutions, LLC

                   Summary of Employee Benefits - May 1, 1997

The following includes a brief description of the benefits package that is
offered by ADA Environmental Solutions, LLC (ADA-ES). These benefits are subject
to change at any time, and the provisions of the official plan documents, in
addition to ADA-ES Policies, shall govern in the event of any differences or
discrepancies. This summary is intended to be a brief overview of the benefits
currently offered by ADA Environmental Solutions and not a comprehensive source
of information concerning exceptions, limitations, and eligibility requirements.
All staff members are encouraged to periodically review ADA-ES's Employee
Handbook and the Group Insurance Benefits Handbook for a more complete
explanation of the benefits and their provisions. This summary does not
constitute a contract between ADA-ES employees and the Company.

Staff members share a portion of the cost of some of the benefits described.


Holidays

     10 Holidays

Vacation

     As per Employee Agreement.

Sick and Personal Days

     Full-time employees may receive up to 8 Sick and Personal days per year.

Medical Insurance

Profit Sharing Retirement Plan

401k Plan

Disability

Life Insurance
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>7
<FILENAME>adaes23-1.txt
<DESCRIPTION>CONSENT
<TEXT>
Exhibit 23.1



CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


We consent to the incorporation by reference of our report dated February 16,
2005 accompanying the financial statements of ADA-ES, Inc. which are also
incorporated by reference in the following Registration Statements:

Form     Deemed/Declared Effective Date              File No.
----     ------------------------------              --------
S-8      November 13, 2003                           333-110479
S-8      February 6, 2004                            333-112587
S-8      April 16, 2004                              333-114546
S-3      October 29, 2004                            333-119795
S-8      December 14, 2004                           333-121234

of ADA-ES, Inc. and to the use of our name and the statements with
respect to us, as appearing under the heading "Exhibits" in such Registration
Statements.


/s/ Hein & Associates LLP
-------------------------
HEIN & ASSOCIATES
Denver, Colorado
March 24, 2005



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>8
<FILENAME>adaes31-1.txt
<DESCRIPTION>CERTIFICATION
<TEXT>

Exhibit 31.1


PRINCIPAL EXECUTIVE OFFICER CERTIFICATION
-----------------------------------------

I, Michael D. Durham, certify that:

1. I have reviewed this annual report on Form 10-KSB of ADA-ES, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the small business
issuer as of, and for, the periods presented in this report;

4. The small business issuer 's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and
have:

a) designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the small business issuer, including its
consolidated subsidiary, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

b) evaluated the effectiveness of the small business issuer 's disclosure
controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and

c) disclosed in this report any change in the small business issuer's internal
control over financial reporting that occurred during the small business
issuer's most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the small business issuer's internal
control over financial reporting; and;

5. The small business issuer's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the small business issuer 's auditors and the audit committee of
the small business issuer 's board of directors (or persons performing the
equivalent functions):

a) all significant deficiencies and material weaknesses in the design or
operation of internal controls over financial reporting which are reasonably
likely to adversely affect the small business issuer 's ability to record,
process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the small business issuer 's internal
control over financial reporting.

Date: March 25, 2005

/s/ Michael D. Durham
---------------------
Name: Michael D. Durham
Title: President and CEO

<PAGE>

PRINCIPAL FINANCIAL OFFICER CERTIFICATION
-----------------------------------------

I, Mark H. McKinnies, certify that:

1. I have reviewed this annual report on Form 10-KSB of ADA-ES, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the small business
issuer as of, and for, the periods presented in this report;

4. The small business issuer 's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and
have:

a) designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the small business issuer, including its
consolidated subsidiary, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

b) evaluated the effectiveness of the small business issuer 's disclosure
controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and

c) disclosed in this report any change in the small business issuer's internal
control over financial reporting that occurred during the small business
issuer's most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the small business issuer's internal
control over financial reporting; and;

5. The small business issuer 's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the small business issuer 's auditors and the audit committee of
the small business issuer's board of directors (or persons performing the
equivalent functions):

a) all significant deficiencies and material weaknesses in the design or
operation of internal controls over financial reporting which are reasonably
likely to adversely affect the small business issuer 's ability to record,
process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the small business issuer 's internal
control over financial reporting.

Date: March 25, 2005

/s/ Mark H. McKinnies
---------------------
Name: Mark H. McKinnies
Title: CFO

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>9
<FILENAME>adaes32-1.txt
<DESCRIPTION>CERTIFICATION
<TEXT>

Exhibit 32.1

Certification of Chief Executive and Chief Financial Officer of ADA-ES, Inc.
Pursuant to 18 U.S.C. Section 1350

I, Michael D. Durham, certify that:

In connection with the Annual Report on Form 10-KSB of ADA-ES, Inc. (the
"Company) for the period ended December 31, 2004 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, Michael D. Durham,
Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:

1) the Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended; and

2) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.

/s/ Michael D. Durham
---------------------
Name: Michael D. Durham
Title: President
Date: March 25, 2005


I, Mark H. McKinnies, certify that:

In connection with the Annual Report on Form 10-KSB of ADA-ES, Inc. (the
"Company) for the period ended December 31, 2004 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, Mark H. McKinnies,
Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:

1) the Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended; and

2) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.


/s/ Mark H. McKinnies
---------------------
Name: Mark H. McKinnies
Title: CFO
Date: March 25, 2005


</TEXT>
</DOCUMENT>
</SUBMISSION>
