<SUBMISSION>
<ACCESSION-NUMBER>0001000096-07-000112
<TYPE>10-K
<PUBLIC-DOCUMENT-COUNT>14
<PERIOD>20061231
<FILING-DATE>20070327
<DATE-OF-FILING-DATE-CHANGE>20070327
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>ADA-ES INC
<CIK>0001223112
<ASSIGNED-SIC>2890
<IRS-NUMBER>841457335
<STATE-OF-INCORPORATION>CO
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-K
<ACT>34
<FILE-NUMBER>000-50216
<FILM-NUMBER>07722177
</FILING-VALUES>
<MAIL-ADDRESS>
<STREET1>8100 SOUTHPARK WAY B
<CITY>LITTLETON
<STATE>CO
<ZIP>80120
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>ada12312006.htm
<DESCRIPTION>FORM 10-K  (12-31-2006)
<TEXT>
<HTML>
<HEAD>
<TITLE>AutoCoded Document</TITLE>
</HEAD>
<BODY>


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<A NAME="A001"></A>
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>United States<BR>
SECURITIES AND EXCHANGE COMMISSION<BR>Washington, D.C. 20549</B></FONT></FONT> </P>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="3"><B>Form 10-K</B></FONT></FONT> </P>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>ANNUAL
REPORT UNDER SECTION 13 OR 15(d) <BR>OF THE SECURITIES EXCHANGE ACT OF 1934</B></FONT></FONT></P>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="3">For  the
fiscal year ended December 31, 2006</FONT></FONT> </P>

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<A NAME="A002"></A>
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Commission
file number 000-50216</FONT></FONT> </P>

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<A NAME="A003"></A>
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="4"><B>ADA-ES, INC.
</B></FONT><BR><FONT SIZE="2">(Name of registrant as specified in its charter)</FONT></FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="450" ALIGN="CENTER">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;Colorado</FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">84-1457385</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TD WIDTH="64%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(State of incorporation)</FONT></TD>
     <TD WIDTH="11%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="23%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(IRS Employer</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Identification No.)</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
</TABLE>

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<A NAME="A004"></A>
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>
8100 SouthPark Way, B, Littleton, Colorado &nbsp;&nbsp;&nbsp;80120</B><BR>(Address of principal executive offices)&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Zip Code)</FONT></FONT></P>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(Registrant's
telephone number, including area code): (303) 734-1727</FONT></FONT> </P>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Securities
registered under Section 12(b) of the Exchange Act:</FONT></FONT> </P>

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<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TD WIDTH="41%" ALIGN="center"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Title of class</FONT></TD>
     <TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="51%" ALIGN="center"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Name of each exchange on which registered</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="center"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Common Stock, no par value</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="center"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>NASDAQ Capital Market</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
</TABLE>


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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><BR>Securities
registered under Section 12(g) of the Exchange Act: None</FONT></FONT> </P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. [&nbsp;&nbsp;&nbsp;] Yes [&nbsp;X&nbsp;] No</FONT></FONT></P>



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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Exchange <BR>Act. [&nbsp;&nbsp;&nbsp;] Yes [&nbsp;X&nbsp;] No</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Indicate
by check mark whether the registrant (1) has 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. [&nbsp;X&nbsp;]
Yes [&nbsp;&nbsp;&nbsp;] No</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Indicate
by check mark if disclosure of delinquent filers in response to Item 405 of
Regulation S-K is not contained here, and will not be contained, to the best of
registrant&#146;s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [&nbsp;&nbsp;&nbsp;] Yes [&nbsp;X&nbsp;] No</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of
&#145;accelerated filer and large accelerated filer&#148; in Rule 12b-2 of the
Exchange Act.</FONT></FONT></P>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><BR>Large
accelerated filer  [&nbsp;&nbsp;&nbsp;]  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accelerated filer  [&nbsp;X&nbsp;]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-accelerated filer  [&nbsp;&nbsp;&nbsp;]</FONT></FONT> </P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act.) [&nbsp;&nbsp;&nbsp;] Yes [&nbsp;X&nbsp;]
No</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
aggregate market value of the voting stock held by non-affiliates as of June 30,
2006 was $96,503,000</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">As of
March 15, 2007, there were outstanding 5,635,137 shares of the Common Stock,
no par value.</FONT></FONT></P>

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<A NAME="A014"></A>
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>DOCUMENTS
INCORPORATED BY REFERENCE:</B></FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In
Part III of this Annual Report on Form 10-K, portions of the registrant&#146;s
definitive proxy statement for the 2007 Annual Meeting of Shareholders currently
scheduled to be held on June 19, 2007, are incorporated by reference.</FONT></FONT></P>


<P style="PAGE-BREAK-BEFORE: always">
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<A NAME="A015"></A>
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>PART
I</B></FONT></FONT></P>

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<A NAME="A016"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item 1.
Business</B></FONT></FONT></P>

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<A NAME="A017"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Abbreviations
We Use in this Report</B></FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;ADA-ES,&#148;
&#147;the Company,&#148; &#147;we,&#148; &#147;us,&#148; or &#147;our&#148;
refer to ADA-ES, Inc., a Colorado corporation, and its consolidated
subsidiaries. Other abbreviations we use in this Report include:</FONT></FONT></P>

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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">ACI
= activated carbon injection</FONT></FONT> </P></TD>
</TR>
</TABLE>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> ADA-249M
= our patented slag viscosity modifying compound</FONT></FONT> </P></TD>
</TR>
</TABLE>

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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">CAMR
= Clean Air Mercury Rule</FONT></FONT> </P></TD>
</TR>
</TABLE>

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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">CEMS
=  continuous emission monitoring system</FONT></FONT> </P></TD>
</TR>
</TABLE>


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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">DOE
= the United States Department of Energy</FONT></FONT> </P></TD>
</TR>
</TABLE>


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     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">EPA
=  United Stated Environmental Protection Agency</FONT></FONT> </P></TD>
</TR>
</TABLE>


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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">EPRI
= the Electric Power Research Institute</FONT></FONT> </P></TD>
</TR>
</TABLE>


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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">ESP
= electrostatic precipitator</FONT></FONT> </P></TD>
</TR>
</TABLE>


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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> FGC<I> =
</I>flue gas conditioning</FONT></FONT> </P></TD>
</TR>
</TABLE>


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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">MEC
<I>= </I>mercury emission control</FONT></FONT> </P></TD>
</TR>
</TABLE>


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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">PAC
=  powdered activated carbon</FONT></FONT> </P></TD>
</TR>
</TABLE>


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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">PRB
= Powder River Basin</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>


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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Business Purpose and Strategy</B><BR>ADA-ES,
Inc. was incorporated in Colorado in 1997, and develops and implements
proprietary environmental technology and provides specialty chemicals that
enable coal-fueled power plants to enhance existing air pollution control
equipment, maximize capacity and improve operating efficiencies. We are
positioned to capitalize on the emerging market for mercury emission controls
(MEC) through the supply of powdered activated carbon, injection systems,
mercury measurement instrumentation, and related services. We have established
key business relationships with Arch Coal, Inc., NexGen Resources Corporation
(&#147;NexGen&#148;) and Thermo Electron Corporation (&#147;Thermo&#148;).
ADA-ES became a &#147;stand-alone&#148; public company through a
&#147;spin-off&#148; from its parent company, Earth Sciences, Inc. in September
2003. We have one wholly-owned subsidiary called ADA Environmental Solutions
LLC, in which all of our business is performed.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Our
approach to technology development, implementation and commercialization
involves taking technology to full-scale as quickly as we can, and testing and
improving the technology under actual power plant operating conditions. The most
significant benefit of this method is that we begin working early and closely
with power companies to optimize the technology to meet their specific needs.
For example, while some mercury control technologies are being developed in the
isolation of a laboratory without feedback from users, we work on full-scale
mercury control systems that are installed on plants operated by several of the
largest power companies in North America. We assist electric utility companies
to remain competitive while meeting environmental regulations.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Our
major activities include sales of equipment, field testing and services related
to the emerging market for mercury emission control (&#147;<I>MEC</I>&#148;) for
coal-fired boilers used in electric generation, development and marketing of our
refined coal technology in a joint venture with NexGen called Clean Coal
Solutions, LLC, the sale of flue gas conditioning equipment and chemicals, and
other chemicals and technologies for such boilers (<I>&#147;FGC&#148;</I>).</FONT></FONT></P>


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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Overview of
the Last Five Years</B><BR>During
our last five fiscal years, we (a) substantially increased our MEC business
through government and industry funded field demonstration contract work,
including work under existing and new contracts and a growing number of
commercial activities; (b) in 2006 entered into a joint venture with NexGen to
develop and market our refined coal technology; (c) continued our position in
the FGC business through continued chemical sales and service; and (d) provided
other chemicals and technologies for coal-fired boilers.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In
August 2004 and October 2005, we sold shares of our common stock to a limited
number of private investors. We were granted a listing on what is now called the
NASDAQ Capital Market (formerly the NASDAQ Small Cap) shortly after completion
of the private share offering in 2004.</FONT></FONT></P>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2</FONT></FONT> </P>


<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Thus
far in 2007, we (a) commenced work on five additional activated carbon injection
(&#147;ACI&#148;) systems to be delivered later in 2007 and in 2008, and
continued work on eight (8) other ACI systems to be delivered at various times
in 2007 and 2008, (b) continued work on government- and industry-supported
contracts for field testing, installation and evaluation of mercury control
systems at several sites, (c) continued to supply FGC chemicals to several
plants and began preparations to demonstrate FGC technology at an additional
plant, and (d) through a joint venture with NexGen, commenced development and
marketing of our refined coal technology. We describe these activities and those
in the preceding paragraphs in greater detail below.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Financial
Information for Industry Segments</B><BR>We
have two reportable segments: MEC and FGC and other. Financial information
concerning these reportable segments can be found in the Financial Statements
filed as a part of this Report, in Footnotes 1 &#150; Segment Information, and
11 &#150; Business Segment Information, and that information is incorporated by
reference here.</FONT></FONT></P>

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<A NAME="A021"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Our Business
in Detail</B></FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Market for
Our Products and Services</B><BR>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, the 2005 Clean Air Mercury Rule
(&#147;CAMR&#148;), various state regulations and permitting requirements for
new power plants are requiring utilities to reduce emission of pollutants, such
as sulfur dioxide, nitrogen oxides, and mercury. Mercury regulations at the
national and state levels are expected to require large mercury emission
reductions at the nation&#146;s 1,100-plus coal-fired units, which emit
approximately 48 tons of mercury per year. Based on a 2005 National Coal Council
report, coal powers more than 50% of all electricity produced in the United
States, and the United States reserves are estimated to be capable of serving
demand for the next 250 years. Early DOE studies indicate that the estimated
cost to control these emissions will be $2-$5 billion annually. We are
positioning ourselves to be a key supplier of equipment and services to the
market that first began in 2005, and is developing rapidly as a result of this
regulatory environment. The markets that will be affected by new regulations are
the same ones in which we currently operate. In addition, the systems and
products required for mercury controls fit well with our existing products and
capabilities.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Following
widespread disappointment and legal challenges to CAMR, in November 2005 the
State and Territorial Air Pollution Program Administrators and the Association
of Local Air Pollution Control Officials (STAPPA/ALAPCO), the two national
associations of air pollution control agencies throughout the United States,
have developed a model rule entitled, &#147;Mercury from Power Plants: A Model
Rule for States and Localities&#148; in response to concern that CAMR was
inconsistent with the requirements of the Clean Air Act, and would not result in
adequate reductions in emissions of mercury from coal-fired power plants to
protect public health. The STAPPA/ALAPCO model rule provides state and local
governments with the tools needed to obtain reductions in mercury emissions
necessary to meet the requirements of the Clean Air Act. Specifically, the model
describes two options for state and local governments that wish to develop
utility mercury rules that are more protective of public health and the
environment than EPA&#146;s regulation, and contains model rule language for
both. The phased timing proposed in the model rule allows power generators to
consider mercury specific control technologies, or alternatively, control
technologies that reduce mercury as an added benefit when reducing other air
pollution emissions. The model rule provides compliance options using two
phases, the use of annual rolling averages, and averaging of emissions across
sources at a facility; and may well provide the flexibility to prevent any
threat to a source&#146;s ability to continue to generate power. As compared
with either maximum achievable control technology (MACT) regulation, or CAMR, we
believe the STAPPA/ALAPCO model rule better reflects the capabilities of mercury
control technologies that are commercially available today and gives power
generators options in selecting the most cost effective approach for each plant.
As of mid-February 2007, there are 12 states with mercury control rules and 13
states considering regulations more stringent than CAMR.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">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 on to 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) mercury
control technology that has been demonstrated to effectively reduce mercury
emission over a broad range of plant configurations and coal types, (2) our  proprietary chemical conditioner that offers both
technical and </FONT></FONT></P>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">3</FONT></FONT> </P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">  economic  advantages over the hazardous chemicals that have been and
continue to be in  use, and (3) products, such as Cyclean, that provide utilities
flexibility in choosing the grade of fuel they can burn. The Company has  established
itself as a leader in the mercury control market, received ten new  orders for commercial
mercury control systems in 2006, and has commenced work on  an additional five new
systems through February, 2007. Our programs have been  demonstrated to be effective,
even in difficult application, and have also been  shown to be cost effective, in many
cases reducing the costs associated with  mercury control to less than 20% of initial
cost estimates.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Government
and Industry-Supported Contracts</B><BR>The  United States Department of Energy (DOE) issues
solicitations from time to time  for various development and demonstration projects. DOE
solicitations range in  subject matter, and we submit bids for those solicitations that
fit our 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. We are currently participants in six such  agreements and will
participate with another company as a subcontractor.  Generally, the agreements cover the
development and/or demonstration of air  pollution control technologies for coal-fired
power generating 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 we submit on a prescribed schedule.
The  agreements require us to perform the negotiated scope of work, which includes
testing/demonstrating various air pollution control technologies. The agreements  with
the DOE provide that any inventions we create as a result of the work  become our
property. We also expect to act as a subcontractor on a DOE contract  to develop and
demonstrate a novel process to capture carbon dioxide from  coal-fired power plants. The
project is expected to start in the next few months  and last for three years.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">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
industry cost share percentages on the mercury projects in which we are involved
range from 25% 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&#146;s interest in these and future projects to
continue to grow.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">We
currently participate in DOE and industry contracts totaling $32.3 million, of
which $15.5 million represents contracts directly with DOE. We recognized
revenues in 2006, 2005 and 2004 from these DOE/industry-funded contracts
totaling $7.0 million, $4.3 million and $4.2 million, respectively, which
comprised 45%, 39% and 49% of our total revenues for those respective periods.
Of these amounts, $3.7 million, $2.3 million and $2.4 million in 2006, 2005 and
2004, respectively, were revenues directly from DOE. We retain the rights to
commercialize any products we develop under the activities of these contracts.
These contracts are subject to audit and potential adjustment as to amounts
already received. The Company has not been affected materially by adjustments
mandated by government audits; however, government audits for the years 2002
through 2006 have not yet been finalized. These contracts are also subject to
annual appropriation of funds by Congress, and although continued funding is
considered probable, we cannot be certain that the government will continue to
approve funding for these contracts in future budgets or at similar levels.
Assuming no changes in funding, future revenues from current contracts in
progress total $13.2 million, of which we expect to recognize approximately $7.0
million in 2007.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Commercial
Mercury Emissions Control</B><BR>During  2006, we signed contracts for ten activated carbon
injection (ACI) systems for  mercury emission control, and thus far in 2007 we have
commenced work on five  additional ACI systems under &#147;notices to proceed,&#148; with
the  expectation that final contracts will be signed within the next month. We expect  to
receive additional orders for up to six more systems, based on options for  those systems
which we believe the customers will exercise as part of those  contracts. The contracts
contain delivery milestones, which we expect to meet.  Certain of the agreements provide
for liquidated damages if we are unable to  meet certain delivery obligations, except for
delivery failures that are out of  our control. Since the market for commercial systems
commenced in 2005 we have  met all of the delivery milestones under our contracts. If a
customer elects  early termination of an agreement not due to any fault of ours, we will
be  entitled to reimbursement for all costs incurred in performing the agreements
through the date of termination, including costs incurred in terminating our  performance
and costs incurred to any subcontractors. We are recognizing revenue  on these agreements
on the percentage of completion method. The value of the  uncompleted portion of
outstanding contracts at December 31, 2006, totaled $3.3 million,  all of which is expected to be
recognized in 2007.</FONT></FONT></P>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4</FONT></FONT> </P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In
December we terminated our Market Development Agreement (&#147;MDA&#148;) with
Norit Americas, Inc. (&#147;Norit&#148;). Under the MDA, we had been working
exclusively with Norit to develop the North American market for powdered
activated carbon injection systems and sorbents for purposes of reducing mercury
emissions from coal-fired boilers. During 2006 we also terminated our exclusive
marketing arrangement for ACI systems with ALSTOM Environmental Control Systems
(&#147;Alstom&#148;). The joint activities conducted separately with Norit and
Alstom were not meeting the expectations of the parties.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In
March 2007, we executed a Memorandum of Understanding (&#147;MOU&#148;) with
Calgon Carbon Corporation (&#147;Calgon Carbon&#148;). Under the MOU we will
collaborate on an exclusive basis with Calgon Carbon to jointly develop products
and services for the control of mercury emissions from coal-fired power plants.
We believe this relationship will assist us in meeting the near term needs of
our customers.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">We
believe that the terminations of the MDA with Norit and the marketing
arrangement with Alstom will not have a material adverse effect on our business
or results of operations. (See &#147;Key Business Relationships,&#148; below.)</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Clean Coal
Solutions</B><BR>On  November 3, 2006, we established a joint venture (&#147;JV&#148;) with
NexGen  Refined Coal, LLC, an affiliate of NexGen Resources Corporation  (&#147;NexGen&#148;),
to market our patented refined coal technology  (&#147;Refined Coal Technology&#148;),
which reduces emissions of nitrogen  oxides and mercury from certain, treated coals (&#147;Refined
Coal&#148;). The  JV will be carried out through a Colorado limited liability company
called Clean  Coal Solutions, LLC (&#147;Clean Coal&#148;). The JV&#146;s primary
opportunity  is based on tax credits available under Section 45 of the Internal Revenue
Code  (&#147;Section 45 Tax Credits&#148;), as it was amended by the American Jobs
Creation Act of 2004 (the &#147;2004 Act&#148;) for qualifying Refined Coal.  Under the
2004 Act, a tax credit with a current value of approximately $5.60 per  ton of Refined
Coal can be earned for a period of ten years ending in or before  2019. Our Refined Coal
Technology incorporates our patented chemical, which we  developed for slagging boilers
(see discussion of AD-249M below), and our  expertise with sorbent-based mercury control
technology. NexGen&#146;s  affiliates have extensive experience and expertise with
Section 29 tax credits  (which apply to the development of syn-fuels), and we anticipate
that  NexGen&#146;s experience and expertise in this area will serve as a template for
monetization of Section 45 Tax Credits in the Refined Coal area. We believe that  our
Refined Coal Technology is applicable to a target market of approximately 60  million
tons of Refined Coal per year, which would amount to a market potential  to Clean Coal of
approximately $150 million a year.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">We
formed Clean Coal on October 31, 2006, and shortly thereafter sold a 50%
interest in Clean Coal to NexGen&#146;s affiliate for which we were paid
$900,000. This $900,000 payment was in addition to a $100,000 non-refundable
down payment NexGen paid us upon signing a Joint Venture Proposal on June 26,
2006. The detailed report of a successful demonstration of the Refined Coal
Technology, which was a prerequisite to execution of final documentation, was
also completed in the third quarter of 2006. The $900,000 payment received on
November 3, 2006 is non-refundable. The total payment of $1 million, net of an
estimated tax and the minority interest in the JV amounting to $381,000, has
been included in our shareholders&#146; equity. Included in our operating loss
for 2006 are net costs totaling $486,000 related to our Refined Coal effort,
which from a cash flow standpoint were offset by the non-refundable payments
from NexGen, but no gain or revenue was recorded as a result of those payments.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The JV
will initially operate a business supplying chemicals, additives, equipment and
technical services to cyclone fired boiler users (a &#147;Chemicals
Business&#148;), but the JV&#146;s primary purpose is to seek and obtain
approval from the United States Internal Revenue Service to qualify ADA Refined
Coal for Section 45 Tax Credits (a &#147;Section 45 Business&#148;). If the JV
succeeds in obtaining that approval and becomes a Section 45 Business, NexGen
has the right to maintain its 50% interest by paying us an additional $4
million, in 8 quarterly payments of $500,000 each, beginning in the fourth
quarter of 2007. NexGen is not obligated to make those payments, but it if does
not do so, it will forfeit a part of its interest in Clean Coal in direct
proportion to the amount of the $4 million that it elects not to pay. Once it
fails to make any one payment, it cannot come back and reclaim its interest by
making later payments.</FONT></FONT></P>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">5</FONT></FONT> </P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Simultaneously
with the execution of the Purchase and Sale Agreement, the parties entered into
an Amended and Restated Operating Agreement governing the operation of Clean
Coal, which requires NexGen and ADA-ES to each pay 50% of the costs of operating
the JV, and specifies certain duties that ADA-ES and NexGen are obligated to
perform as members of Clean Coal to further the business purposes of the JV. Our
share of these costs amounted to less than $10,000 in 2006. We estimate that our
share of those costs will average approximately $25,000 per month for the next
several months. We also entered into a License Agreement with Clean Coal
pursuant to which we licensed certain patents and know-how (the &#147;Licensed
Property&#148;) to Clean Coal on a fully paid-up, royalty-free, non-transferable
and exclusive basis, to allow it to exploit our Refined Coal Technology for the
cyclone-fired boiler market. Pursuant to the License Agreement, we are required
to provide technical assistance without charge to the JV relating to the
development, marketing and deployment of the Licensed Property and, with certain
limitations, to prosecute, maintain and defend the patents that are a part of
the Licensed Property, take appropriate steps to protect the know-how and trade
secrets comprising a part of the Licensed Property, and indemnify and hold Clean
Coal harmless in the event the Licensed Property infringes the intellectual
property of any third party.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Finally,
we entered into a Chemicals, Equipment and Technical Services Supply Agreement
with Clean Coal pursuant to which we will supply the JV with certain chemicals,
additives, equipment and technical services to facilitate the purposes of the
JV. Clean Coal will pay us standard charges for the chemicals, additives, and
technical services we supply to the JV. If we choose to supply equipment to the
JV we have agreed to do so at our cost.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Current
activities of the JV include marketing calls and visits to numerous potential
customers, planning for two product demonstrations expected to be conducted in
2007 and work to obtain clarification of the Section 45 Tax Credits details.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>FGC</B><BR>We
have developed technologies for conditioning flue gas streams from coal-fired  combustion
sources that allow existing air pollution control devices to operate  more efficiently.
Through various suppliers and contractors, we are able to  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 allows for  more effective collection of fly ash particles that would
otherwise escape into  the atmosphere. Our technology also has application in the cement
and petroleum  refining industries where particulate emissions are being or need to be
controlled. We are not currently pursuing the non-utility markets aggressively  since the
profit margin potential for these customers is considered to be less  as a result of
lower chemical usage by these industries.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">We
currently have three operating FGC units installed at coal-fired utilities in
Illinois, Iowa and Louisiana. Revenues from sales of equipment and chemicals to
FGC customers in 2006, 2005 and 2004 and other FGC contract work totaled $1.7
million, $1.9 million and $2.1 million, respectively. One FGC customer has
informed us that they intend to minimize their chemical purchases commencing in
2007, with the expectation that they will cease chemical usage altogether once
they complete anticipated equipment changes.<B> </B>As such, revenues related to
FGC are expected to decrease to approximately $1.1 million in 2007. We expect to
perform a demonstration during 2007 that may result in future purchases of
chemicals. We cannot be certain that the demonstration will be successful or
that future revenues will result from that demonstration.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>ADA-249M</B><BR>Since
2000, we have produced and sold a specialty chemical, called ADA-249M, which is  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. We expect that Clean Coal will pursue  future applications for
ADA-249M that are a part of our Refined Coal Technology  as applied to cyclone coal-fired
boilers.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">ADA-249M
is a patented product designed to modify slag viscosity. ADA-249M 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-249M is conveyed
mechanically from a supply delivered via dump truck to a hopper. From there
ADA-249M is fed by screw and belt conveyors to the coal feeders. The addition of
ADA-249M to the coal results in more coal burning in the cyclone, less carbon in
the fly ash, 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. During 2006 we ended the joint venture we had established
with Arch Coal Inc. to jointly market the ADA-249M product.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Sales
related to ADA-249M are recorded in the FGC and Other segment and were $60,000,
$327,000 and $355,000 in 2006, 2005 and 2004, respectively.</FONT></FONT></P>


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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6</FONT></FONT> </P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Key Business
Relationships</B><BR>Over
the past several years we had developed key relationships with companies in our
industry that are much larger than us (e.g. ALSTOM Environmental Control Systems
(&#147;Alstom&#148;), Norit, Thermo Fisher Scientific Inc. (&#147;Thermo&#148;),
and Arch Coal), and entered into agreements that defined those relationships.
All of those agreements could be terminated by the passage of time, through
notification from the other party or our failure to obtain a certain share of
the market defined in the agreements. During 2006, at our election, we
terminated the agreements with Alstom, Norit and Arch Coal. Although we had
expected these relationships to bolster the position we believe we hold in the
industry, we found that such agreements were in fact serving to limit our
flexibility and commitment to the large market that appears to be emerging from
regulations to limit mercury emissions from coal burning power plants. We do not
believe the loss of these relationships will impede our ability to secure
business from the emerging mercury control market. (See the discussion above
under the captions &#147;ADA-249M&#148; and &#147;Commercial Mercury Emissions
Control.&#148;)</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Cooperative
Agreement with Thermo Fisher Scientific Inc. </B><BR>In April of 2004 we entered
into a cooperative agreement with Thermo to develop a continuous emission
monitoring system (&#147;CEMS&#148;) 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, designed and manufactured the mercury CEMS. We
conducted extensive field validation prior to the product&#146;s
commercialization in late 2005, and we continue to test and provide feedback
regarding the CEMS. The Federal legislation for reducing power plant mercury
emissions, which is being litigated by several states and environmental groups,
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&#146;s mercury CEMS.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Under
the terms of the agreement with Thermo:</FONT></FONT></P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Thermo
is responsible for design of hardware, firmware software and overall  product development
as well as manufacture of commercial versions of the CEMS;</FONT></FONT> </P></TD>
</TR>
</TABLE>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">we
are responsible for field validation and performance feedback and, during 2006,  2005 and
2004 paid Thermo $781,000, $271,000,and $168,000, respectively, for  technical services
and hardware;</FONT></FONT> </P></TD>
</TR>
</TABLE>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> activities
under the Cooperative Agreement were completed in May 2005, although  we continue to test
and provide feedback on the CEMS, Thermo is now  manufacturing, marketing and selling
mercury CEMS and we have the ability to  purchase from Thermo all of our requirements for
mercury CEMS;</FONT></FONT> </P></TD>
</TR>
</TABLE>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> under
a separate distribution arrangement, we may sell the Thermo CEMS only in  conjunction
with our mercury control technology and will receive a 25% discount  from Thermo&#146;s
published price list; and</FONT></FONT> </P></TD>
</TR>
</TABLE>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> either
party may terminate the distribution arrangement upon 120 days written  notice to the
other party.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Other
Consulting Services</B><BR>We  also offer consulting services to assist utilities in planning
and implementing  strategies to meet new government emission standards requiring
reductions in  sulfur dioxide, nitrogen oxide, particulates and mercury. We are 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. We
received funding for a portion of the development and testing activities from an
industry partner that has a strategic interest in the technology. Total revenues  from
other consulting services approximated $1.5 million, $3.0 million and  $600,000 in 2006,
2005 and 2004, respectively, most of which related to the  mercury emission control
segment.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Competition</B><BR>The
commercial mercury control market for existing coal-fired electric utilities is  emerging
as a result of the enactment of state and federal regulations that for  the first time in
U.S. history are requiring those utilities to control 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 these
regulations. Regulations currently  exist that require new coal-fired plants to control
mercury emissions. There are  as many as 50 new coal-fired power plants in the United
States under various  stages of development, all of which have requirements for mercury
emission  control. Through 2006, our mercury control technology has been demonstrated on
a  full scale at over 30 plants, generally yielding over 90% mercury control on  most
applications. In addition, our approach to mercury control is quite cost  effective, in
many cases reducing costs associated with mercury control to less  than 20% of initial
cost estimates. Our experience in installing full scale  demonstration plants, together with
our practice of </FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">providing users
with  performance guarantees, as well as the cost  effectiveness of our methodology,  are
our principal methods of competing in this market.  We have responded to  several hundred
bid requests for activated carbon injection  systems, over one  hundred of which we
believe are likely to proceed to orders between  now and  2010. The capital equipment
expected to be required by each unit ranges from  approximately $750,000 to $1 million,
and the sorbent requirements per unit are  estimated to range from approximately $1 to $2
million per year. We are aware of  other  companies, including Babcock Power,
Wheelabrator and Sorbent Technologies,  that have  responded to requests for commercial
bids for mercury control systems.  With the new work  commenced in 2007 we believe we
have greater than 50% of the  existing market. As this  market matures, we expect
competition will increase,  primarily in the sorbent supply  arena (activated carbon or
other). See the  discussion above under the caption &#147;Market  for Our Products and
Services.&#148;</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Our
primary competition in the FGC arena is conventional FGC technology using either
sulfur trioxide or a combination of sulfur trioxide and ammonia. This technology
has been available commercially since the 1970&#145;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
electrostatic precipitator (ESP). Sulfur trioxide conditioning loses its
effectiveness in applications 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 is typically $200,000-300,000.
A typical ADA-ES system costs between $300,000-600,000. We have 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 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 different products in
the industry which aid ESP performance primarily compete on the basis of
performance and price. We usually arrange for a full-scale demonstration of our
products to potential customers prior to selling our systems and chemicals for
use on a continual basis.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">With
respect to our Refined Coal Technology and ADA-249M, there are no major barriers
to use 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. Potential competition for these products may
be magnetite, iron ore and coal blends. Even though there is currently no
significant competition, the market for this product has been slow to emerge but
is expected to accelerate as recent consent decrees requiring mercury emission
control in several states are beginning to impact the market.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Patents</B><BR>We
have received eight patents and have an additional five patent applications
pending relating to different aspects of our technology. The Company&#146;s
existing patents have terms of 17 years measured from the application date, the
earliest of which was in 1995. 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, with the exception of the patents and intellectual
property rights licensed to Clean Coal Solutions as noted above.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Supply of
Chemicals for Our Customers</B><BR>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. We have operated under these arrangements since the spring
of  1999. They are generally renewed on an annual basis. We are investigating  several
near-term and long-term alternatives to assure the supply of activated  carbon to our
customers.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Development
of Proposed Activated Carbon Manufacturing Facility</B><BR>We  believe that the supply of
activated carbon (&#147;AC&#148;) needed for the  developing mercury emissions control
market will be unable to meet the demand  for the material as early as 2010. We
commissioned a market study from a third  pary to address the current worldwide
production and expected future demand for  activated carbon in both the conventional
water treatment markets and the  developing mercury control market. This study documented
that the current U.S.  market for activated carbon, which is primarily for water
treatment, is  approximatedly $200 million per year. With regulations in place today to
reduce  mercury emmisions, this could more than double by 2010, and in addition, if a
more stringent federal regulation comes into effect, the demand could more than  triple
by that time. As a result, we have been investigating the possibility of  either
purchasing or developing a facility to manufacture activated carbon. We  are currently
advancing plans to develop such a facility &#147;from  scratch,&#148; while pursuing the
parallel possibility of entering into a  collaborative project with an existing AC
manufacturer to increase capacity. We  have committed approximately $4 million for the
preparatory phase of this  project, including plant location, design and permitting, as
well as determining  and sourcing key capital equipment that would be required for such a
facility. A  large-scale production facility, which is expected to cost in excess of $200
million to develop, and which will have the capacity to produce approximately  $100
million on activiated carbon per year, is being designed to maximize  efficiency and
produce the most cost-effective product for the MEC market. Such  a project will require
supplementary financing, and we are pursuing that during  the preparatory phases as well.
We anticipate that financing will involve a  combination of equity and debt funding from
financial and strategic partners.</FONT></FONT></P>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">8</FONT></FONT> </P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Raw
Materials, Contract Installation and Working Capital Practices</B><BR>We  purchase equipment
from a variety of vendors including Norit, for the engineered  ACI systems, components
and other equipment we manufacture and/or provide. 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 located near the work  site. We purchase our proprietary FGC, Refined Coal and
ADA-249M chemicals  through negotiated blending contracts with chemical suppliers
generally located  near each major customer. The chemicals used are readily available,
and there  are several chemical suppliers that can provide us with our requirements. We
do  not maintain any significant amounts of inventory for any of our business  segments,
nor do we provide any extended payment terms to our customers. We  typically provide
equipment warranties and performance guarantees related to our  ACI systems (see the
discussion below under &#147;Risk Factors&#148; and  Footnote 7 &#150; Commitments and
Contingencies in the Financial Statements  filed as a part of this Report).</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Seasonality
of Activities</B><BR>The  sale of FGC chemicals depends 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. The other aspects of our business are not seasonal  in any
material way.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Dependence
on Major Customers</B><BR>During  2006, we recognized 45% of our revenue from services
provided directly or as a  subcontractor under contracts to the U.S. government and
industry as discussed  above under &#147;Government and Industry-Supported Contracts&#148;,
involving  mercury control systems. (See also Notes 4 and 8 to the Consolidated Financial
Statements included elsewhere in this Report). In 2006, we supplied ACI systems  to six
customers. We recognized 15% of our revenue in 2006 from The Babcock  &amp; Wilcox
Company in Ohio and 11% from PSEG Fossil LLC in New Jersey.  ADA-ES&#146; own sales staff
markets our technology through trade shows,  mailings and direct contact with potential
customers.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Backlog
Orders</B><BR>As of  December 31, 2006, we had contracts in progress for supply of ACI
systems  totaling approximately $3.3 million which we expect to complete and realize in
2007. As noted above with regard to our DOE and industry funded R&amp;D  contracts,
assuming no changes in funding, future revenues from current  contracts in progress total
$13.2 million, of which we expect to recognize  approximately $7.0 million in 2007.
Contracts in progress for other consulting  work totaled approximately $464,000 at year&#150;end,
all of which are expected  to be completed in 2007. All of these amounts relate to our
MEC segment as FGC  orders are generally filled as submitted and do not typically give
rise to  backlog.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">As of
December 31, 2005, we had contracts in progress for supply of ACI systems
totaling approximately $1 million which we completed and realized in 2006. With
regard to our DOE and industry funded R&amp;D contracts, contracts in progress
totaled $19.4 million at year-end 2005 Contracts in progress for other
consulting work total approximately $120,000 at year&#150;end, all of which were
completed in 2006. All of these amounts relate to our MEC segment.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Research and
Development Activities</B><BR>The  Company is involved in several R&amp;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 2006, 2005 and 2004 our direct cost
share of R&amp;D in our DOE related contracts approximated $481,000, $273,000  and
$348,000, respectively. In addition, we spent approximately $983,000,  $704,000 and
$467,000 on our own behalf on research and development activities  related to further
development of our technologies during 2006, 2005 and 2004,  respectively. Approximately
85% of the amounts expended on our own behalf relate  to our MEC segment.</FONT></FONT></P>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">9</FONT></FONT> </P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Employees</B><BR>As of
December 31, 2006 we employed a total of 42 full-time personnel. Included in
this number are 36 people employed at our offices in Littleton, Colorado, 2 in
Alabama, 1 in Pennsylvania, 2 in Maryland and 1 in Texas. In addition, other
personnel were employed on a contract basis for specific project tasks during
the year.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Copies of
Reports</B><BR>The  periodic and current reports of the Company filed with the SEC pursuant
to  Section&nbsp;13(a) of the Securities Exchange Act of 1934, and amendments  thereto,
are available free of charge, as soon as reasonably practicable after  the same are filed
with or furnished to the SEC, at the Company&#146;s website  at www.adaes.com.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Copies of
Corporate Governance Documents</B><BR>The  following Company corporate governance documents
are available free of charge at  the Company&#146;s website at www.adaes.com and such
information is available in  print to any shareholder who requests it by contacting the
Secretary of the  Company at 8100 SouthPark Way Unit B, Littleton, CO 80120.</FONT></FONT></P>

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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Audit
Committee Charter</FONT></FONT> </P></TD>
</TR>
</TABLE>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Compensation
Committee Charter</FONT></FONT> </P></TD>
</TR>
</TABLE>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Nominating
and Governance Committee Charter</FONT></FONT> </P></TD>
</TR>
</TABLE>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Code
of Conduct</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<A NAME="A042"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Forward-Looking
Statements Found in this Report</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>This  Annual
Report contains 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 are found in this Part 1 and under  the heading &#147;Management&#146;s
Discussion and Analysis or Plan of  Operation.&#148; Words or phrases such as &#147;anticipates,&#148; &#147;believes,&#148; &#147;hopes,&#148; &#147;expects,&#148; &#147;intends,&#148; &#147;plans&#148; or
similar expressions are used in this  Report to identify forward-looking statements, and
such forward-looking  statements include, but are not limited to, statements or
expectations regarding  (a) impact of national and state mercury regulations on the nation&#146;s
1,100-plus coal-fired units; (b) capability of U.S. coal reserves to serve  demand for
the next 250 years, (c) future estimated costs to control mercury  emissions, (d) the
rapid development of the mercury emission control market, (e)  expected growth in the
power industry&#146;s interest in DOE projects, (f)  amounts and timing of and changes in
future revenues, research and development  expenses, costs of operating Clean Coal,
annual lease costs and other  expenditures and gross margins, (g) our ability to meet
contract delivery  milestones, (h) the size of the applicable target market and market
potential  for Refined Coal, (i) timing of completion of projects and future
demonstrations, (j) procession of outstanding bid requests to orders between now  and
2010, (k) the range of costs for capital equipment expected to be required  by each
coal-fired unit and range of sorbent requirements per unit; (l) market  for our Refined
Coal Technology and ADA-249M, (m) inability of the supply of  activated carbon to meet
market demand as early as 2010, (n) potential costs for  development of a Greenfield
activated carbon facility, (o) appropriation of  funds by Congress for DOE projects, (p)
immateriality of any future adjustments  due to DOE audits, and (r) our ability to meet a
significant portion of the  expected shortage in activated carbon supply. Our
expectations are based on  certain assumptions, including without limitation, that (a) we
will become a key  supplier of equipment and services to the coal-fired power generation
industry  as it seeks to implement reduction of mercury in flue gases, (b) contracts we
have with the DOE, which generate a significant part of our revenue, will  continue to be
funded at expected levels and that we will be chosen to  participate in additional
contracts of a similar nature, (c) current  environmental laws and regulations requiring
reduction of mercury from  coal-fired boiler flue gases will be upheld and/or
strengthened in pending court  proceedings and/or by pending state legislation, and such
laws and regulations  will not be materially weakened or repealed by courts or
legislation in the  future, (d) we will be able to meet any performance guarantees we
make with  respect to levels of mercury reduction from systems that we install, (e) we
will  be able to obtain adequate resources and personnel to meet anticipated growth,  (f)
we will be able to retain our key business relationships with companies with  which we
have established such relationships, (g) orders we anticipate receiving  will in fact be
received, (h) the power industry will continue to participate in  mercury abatement test
projects, (i) we will continue to be able to meet our  obligations under contracts as
required by those contracts, (j) governmental  audits of our performance under DOE
contracts will not result in material  adjustments to amounts we have previously received
under those contracts, (k) we  will be able to </B></FONT></FONT></P>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10</FONT></FONT> </P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>formulate
new chemicals and  blends that will be useful to, and  accepted by, the coal-fired boiler
power generation  business, (l) we will be  able to effectively compete against others
who may choose to  participate in our  areas of business, (m) adequate supplies of coal
will be available to  power  generators, (n) we will be able to meet any technical
requirements of projects  we  undertake, (o) we will be able to obtain adequate supplies
of the materials  and supplies  needed in our business, including activated carbon, (p)
our efforts  to market activated  carbon sorbents with industry partners will be
successful,  (q) our FGC segment will  remain attractive to the power generation
industry, (r)  our stock price will not be  negatively affected by our retaining earnings
for  future expansion rather than paying  dividends to shareholders and (s) we will  have
access to adequate capital to meet our  needs. The forward-looking  statements involve
risks and uncertainties that could cause  actual results to  differ materially from the
anticipated results we discuss in this  Report.  Although forward-looking statements
provide additional information about us,  investors should keep in mind that
forward-looking statements are only  predictions, at a  point in time, and are inherently
less reliable than  historical information. We do not  guarantee future results, levels
of activity,  performance or achievements and we do not  assume responsibility for the
accuracy  and completeness of these statements. You are  cautioned not to place undue
reliance on the forward-looking statements made in this  Annual Report, and to  consult
any later filings we may make with the Securities and  Exchange  Commission for
additional risks and uncertainties that may apply to our  business  and the ownership of
our securities. The forward-looking statements contained  in  this Annual Report on Form&nbsp;10-K
are made and based on information as of the  date of this report. We assume no obligation
to update any of these statements  based on  information after the date of this report.
In evaluating these  statements, you should  specifically consider the risks outlined
under &#147;Risk  Factors&#148; in Item&nbsp;1A,  including the following: changes in
existing and  planned environmental laws, changes in  government funding, loss of key
relationships, technical problems with activated carbon  injection systems sold,
non-compliance with guarantees on activated carbon injection  systems, decrease  in
demand for coal, lack of management expertise, inability to obtain  funding  and other
risks relating to the development of a Greenfield activated carbon  facility, seasonality
of our business, inadequate supply of activated carbon,  inadequate  supply of coal, lack
of or mismanagement of resources to support  future growth, loss of  key personnel,
changes in taxation rules or financial  accounting standards, dilution  resulting from
future sales of common stock or  other securities, and lack of dividend  payments to
shareholders. These risk  factors may cause our actual results to differ  materially from
any  forward-looking statement.</B></FONT></FONT></P>

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<A NAME="A043"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item 1A.
Risk Factors.</B></FONT></FONT></P>

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<A NAME="A044"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>RISKS
RELATING TO OUR BUSINESS</B></FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>IF
EXISTING AND PLANNED ENVIRONMENTAL LAWS ARE RESCINDED OR SUBSTANTIALLY CHANGED,
OUR BUSINESS WOULD BE ADVERSELY AFFECTED </B><BR>A significant market driver for our
existing products and services, and those planned in the future, are the
environmental laws that limit emissions from power plants. In the event that
such laws were rescinded or substantially changed, our business would be
adversely affected by declining demand for such products and services. Demand
for the Company&#146;s FGC and ADA 249M 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&#146;s existing customers and those expected in the
near-term are believed to desire the Company&#146;s products for mitigation of
operating problems, we expect that any softening of existing air pollution
control requirements would slow expected growth for these products. Demand for
the Company&#146;s MEC technology and Refined Coal Technology is being driven
almost exclusively by legislation requiring mercury emission control. Mercury
has been identified as a toxic substance and pursuant to a court order the EPA
issued the CAMR for its control in March 2005. CAMR is being contested by as
many as fourteen different states and four environmental groups for its failure
to meet court-mandated standards. In response to the uncertainty surrounding
CAMR, several states have entered into consent decrees, have passed, or are
expected to pass, legislation requiring such control, including Arizona,
Colorado, Connecticut, Illinois, Maine, Massachusetts, Minnesota, Montana, New
Hampshire, New Jersey, New York, North Carolina, Wisconsin and Pennsylvania.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The  impact of
various state and federal regulations on the future of our business,  and the long-term
growth of the MEC market for the electric utility industry  will most likely depend on
the final outcome of the CAMR court action and how  industry chooses to respond to final
CAMR and other 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  </FONT></FONT></P>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11</FONT></FONT> </P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">meet  more
stringent  requirements that are likely to include  controlling mercury emissions. For
the  near-term, our revenues from this market will  depend on (i) DOE- and
industry-funded contracts, (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. We do not expect  significant  revenue growth
unless and until federal regulations and/or state  regulations impact a  significant
portion of existing boilers. Delays in, or  derailment of, the passage of  state mercury
control legislation, or undue delay  in resolution of the CAMR court  action, would
likely impede our expected growth  in the mercury control market.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>IF
THE DEPARTMENT OF ENERGY (DOE) DISCONTINUES FUNDING OF EXISTING AND PLANNED
CLEAN COAL TECHNOLOGY PROGRAMS, OUR BUSINESS WOULD BE HARMED </B><BR>In 2006, 2005
and 2004, 45%, 39% and 49%, respectively of our revenues were derived from or
related to DOE programs. Our revenues from government contracts would be
adversely impacted by any material decrease in funding for the projects in which
we are involved. In addition, we look to DOE funding as a significant means to
further develop our technology and intellectual property in the areas of mercury
emissions control and flue gas conditioning additives 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 funding being provided by the DOE. President Bush&#146;s currently
proposed federal budget for fiscal year 2008 does not contain any funding for
the types of DOE projects we have historically participated in. Although we
believe Congress will appropriate funds consistent with past practice, we cannot
be sure that this will occur, and failure to appropriate such funds would be
likely to have a material adverse effect on our business.</FONT></FONT></P>


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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>INADEQUATE
SUPPLIES OF ACTIVATED CARBON COULD ADVERSELY AFFECT OUR PROFITABILITY</B><BR>We  expect the
demand for activated carbon to increase as power plants begin to use  ACI systems to
control mercury emissions. If the production of activated carbon,  which is currently
outside our control, does not increase to meet the increased  demand, the inadequate
supplies of activated carbon could harm our results of  operations and business.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>DEVELOPMENT
OF A GREENFIELD ACTIVATED CARBON FACILITY TO SUPPLY THE EMERGING MERCURY
EMISSION CONTROL MARKET COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION </B><BR>We
have committed significant resources to the development of a Greenfield
activated carbon production facility that will require extensive development
work including environmental and other permitting, and material funding
requirements well beyond our present capabilities. Although we have employees
and have and expect to hire consultants who have past experience in such
matters, our management has no past experience in undertaking such a complex
project. In addition to the several inherent development risks of such a
project, maintaining an acceptable schedule and budget, as well as attainment of
anticipated production levels and acceptable operating costs are all significant
factors in the overall financial viability of the project. The inability to
obtain additional financing or any significant deviation in such factors from
our planning model would hamper the advancement of the project and would likely
have a material adverse effect on our business and financial condition.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>THE
MARKET FOR OUR PLANNED REFINED COAL PRODUCT AND QUALIFICATION FOR THE SECTION 45
TAX CREDIT ARE UNSURE AND COULD ADVERSELY AFFECT OUR FUTURE GROWTH AND
PROFITABILITY </B><BR>The ability of Clean Coal Solutions to sell its planned
Refined Coal product and qualify for the expected Section 45 tax credits depends
on several conditions, including meeting the requirements of a presently unclear
law, selling the Refined Coal at the required mark-up, contracting with
monetizers to facilitate the sale of the required facilities, and completing and
making operational such facilities prior to the January 1, 2009 date presently
required by in the law. The inability of Clean Coal Solutions to successfully
resolve and/or complete any of these conditions would likely have an adverse
effect on our future growth and profitability.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>THE LOSS OF
KEY RELATIONSHIPS WOULD ADVERSELY AFFECT OUR SALES AND FINANCIAL CONDITION</B><BR>We  have
developed key industry relationships with companies much larger than  ourselves (e.g. B&amp;W
and Thermo). Subject to the terms of the agreement with  Thermo, the relationship may be
terminated by the passage of time or through  notification from the other party. We
believe these relationships bolster our  position in the market to limit mercury
emissions from coal-fueled power plants.  The loss of these relationships could impede
our ability to secure business from  that market.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">12</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

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<!-- MARKER PAGE="sheet: 10; page: 10" -->

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>TECHNICAL
OR OPERATIONAL PROBLEMS WITH LONG-TERM OPERATION OF ACTIVATED CARBON INJECTION
SYSTEMS COULD RESULT IN DELAYS THAT ADVERSELY AFFECT OUR FINANCIAL CONDITION
</B><BR>Our ACI systems have been demonstrated for several months at certain power
plants and we are starting to install them on a permanent basis for the first
time. We cannot assure you that there will be not be technical or operational
problems with our ACI systems from long-term operations. Any such problems could
result in delays in, or postponement or cancellation of, expected installations
at power plants, and would likely have a material adverse effect on our
business.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>THE
EFFECT OF ISSUING PERFORMANCE GUARANTEES FOR COMMERCIAL ACTIVATED CARBON
INJECTION SYSTEMS IS UNKNOWN AND COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION
</B><BR>The market for commercial ACI systems to control mercury emissions is
emerging as state consent decrees and state and federal regulations are being
formulated and finalized. Performance guarantees have been and will likely
continue to be an integral part of successful sales of our ACI systems. Such
guarantees typically require levels of mercury removal efficiency based on
stated injection rates of a specified or approved activated carbon given other
operating parameters, including the nature of the coal burned. Provisions of
such guarantees generally require us to spend amounts up to the value of the
sales contract to &#147;make right&#148; the performance of the ACI, if the
guaranteed level of performance is not achieved. Any substantial payments under
such guarantees would have an adverse effect on our financial condition and our
ability to generate future sales.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>ANY
DECREASE IN THE USE OF COAL OR INCREASE IN THE USE OF ALTERNATIVE ENERGY SOURCES
BY ELECTRIC UTILITY COMPANIES COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION AND
BUSINESS </B><BR>Our business depends substantially on providing air pollution and
operating cost solutions to coal-fueled power plants. If the demand for coal
declines as a result of increases in the use of alternative fuels or alternative
energy sources, technological developments or general economic conditions, the
Company&#146;s financial condition and business could be materially adversely
affected.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>OUR
FINANCIAL RESULTS MAY FLUCTUATE AS A RESULT OF SEASONALITY AND OTHER FACTORS,
INCLUDING THE DEMAND FOR ENVIRONMENTAL TECHNOLOGY AND SPECIALTY CHEMICALS, WHICH
MAKES IT DIFFICULT TO PREDICT OUR FUTURE PERFORMANCE </B><BR>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.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>INADEQUATE
SUPPLIES OF COAL COULD ADVERSELY AFFECT OUR PROFITABILITY</B> <BR>Our profitability
depends on working with coal-fueled power plants. If economically recoverable
coal reserves are not available or if coal cannot be readily supplied to power
plants because of transportation, labor or other issues, such unavailability
could adversely affect our profitability and impede the growth of our business.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">13</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

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<!-- MARKER PAGE="sheet: 11; page: 11" -->

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>WE ARE AN
EMERGING COMPANY IN A NEW INDUSTRY, WHICH ENTAILS RISKS THAT COULD IMPAIR OUR BUSINESS</B><BR>We
intend to pursue a growth strategy for the foreseeable future by expanding our
environmental technology/specialty chemicals business into the emerging MEC  market. We
anticipate that future operations will place a strain on management,  information systems
and other resources. We must attract and integrate new  personnel, improve existing
procedures and controls and implement new ones to  support future growth. Any inability
to meet our future hiring needs and to  adapt our procedures and controls accordingly
could have a material adverse  effect on our results of operations, financial condition
and business prospects.  In addition, if we make strategic acquisitions, we must
successfully integrate  the acquired operations in a timely manner. We cannot assure you
that we will be  able to manage expected growth, and our inability to do so could
materially  adversely affect our results of operations and business.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>WE DEPEND ON
KEY PERSONNEL</B><BR>We  depend on the performance of our senior management team &#151; including
Jonathan Barr, C. Jean Bustard, Dr. Michael Durham, Mark McKinnies, Rich Miller,  Richard
Schlager and Sharon Sjostrom, and their direct reports and other key  employees,
particularly highly skilled engineers. Our success depends on our  ability to attract,
retain and motivate these individuals. We do not have any  binding agreements with any of
our employees that prevent them from leaving our  company at any time without any
restrictions on their competing against us after  their employment terminates. We compete
heavily for these types of personnel. In  addition, although we maintain key person life
insurance on certain of our  executives, the loss of the services of any of our key
employees or our failure  to attract, retain and motivate key employees, could harm our
business.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>MATERIAL
ADJUSTMENTS PURSUANT TO DOE AUDITS OF OUR PAST PERFORMANCE COULD HAVE A
DETRIMENTAL IMPACT ON OUR BUSINESS </B><BR>We have participated in eight contracts
awarded by the U.S. Department of Energy (DOE) and industry that are subject to
adjustment as a result of government audits. These contracts contributed a total
of $7.0 million, $4.3 million and $4.2 million to revenues in 2006, 2005 and
2004, respectively, of which $3.7 million, $2.3 million and $2.4 million,
respectively, were directly from DOE. Including two contracts negotiated in
2006, the total approved budgets for these contracts combined are $39.8 million,
$10.0 million of which is the cost-share portion for us and our industry
partners. The remaining unearned amount of the contracts was $13.2 million as of
December 31, 2006, and we expect to recognize $7.0 million of that amount in
2007 (including cash contributions by other industry partners). Our historical
experience with these audits has not resulted in significant adverse adjustments
to amounts previously received, however the audits for the years 2002 through
2006 have not been finalized. If audits for open years were to require us to
repay material amounts, our results of operations and business would likely
suffer material adverse impacts.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>CHANGES IN
TAXATION RULES OR FINANCIAL ACCOUNTING STANDARDS COULD ADVERSELY AFFECT OUR RESULTS OF
OPERATIONS</B><BR>Changes in taxation rules and accounting pronouncements (and changes in
interpretations of accounting pronouncements) have occurred and may occur in the future.
A change in existing taxation rules or accounting standards could have an adverse
effect on our reported results of operations.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A046"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>RISKS
RELATING TO OUR COMMON STOCK</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>A
SIGNIFICANT PORTION OF OUR OUTSTANDING SHARES OF COMMON STOCK MAY BE SOLD IN THE
PUBLIC MARKET, WHICH COULD LOWER THE MARKET PRICE OF OUR STOCK </B><BR>As of
December 31, 2006, we had 5,635,137 shares of common stock issued and
outstanding. We sold 789,089 shares of common stock in a private placement
offering in October, 2005, and those shares are no longer restricted from resale
in the public market. Sales of substantial amounts of our common stock, or the
perception that such sales will occur, may have a material adverse effect on our
stock price.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>THE
ISSUANCE OF ADDITIONAL SECURITIES IN THE FUTURE COULD HARM THE BOOK VALUE OF THE
OUTSTANDING SHARES OF COMMON STOCK </B><BR>To the extent our future funding
requirements dictate the issuance of convertible securities, preferred stock or
debt instruments having liquidation, dividend and other preferences and
priorities over those of our common stock, the shares of common stock may suffer
a decline in book value. Subject to requirements of our NASDAQ Stock Market
listing, our Board of Directors has the authority to offer and sell additional
securities without the vote of or notice to existing shareholders. It is likely
that additional securities may be issued to provide future financing or in
connection with acquisitions. The issuance of additional securities could dilute
the percentage interests and per share book value of existing shareholders, and
have a detrimental impact on the market for our common stock.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">14</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

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<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>LACK OF
EXPECTED DIVIDENDS MAY MAKE OUR STOCK LESS ATTRACTIVE AS AN INVESTMENT</B><BR>We intend to
retain all future earnings for the foreseeable future for use in the development of our
business. We therefore do not anticipate paying any cash dividends on our common stock
for the foreseeable future. Generally, stocks which pay regular dividends command higher
market trading prices, and our stock price may therefore be lower as a result of our
dividend policy.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A047"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item 1B.
Unresolved Staff Comments.</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">None.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item
2. Properties.</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Office Leases</B><BR>We
lease approximately 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 lease 440 square  feet of office
space in Columbia and Maryland, on a month to month basis.  While&nbsp;our total current
leased&nbsp;space is sufficient for  our&nbsp;immediate needs, we expect to require
additional space as our personnel  levels increase to support growth. In the near-term,
we believe that sufficient  space is available at reasonable rates in areas where we do
business. We do not  own any real property, but lease all of our office facilities.
Future annual  lease costs are expected to amount to approximately $170,000 through 2009.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item
3. Legal Proceedings.</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">There
are no reportable pending legal proceedings involving the Company or our
subsidiaries.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item
4. Submission of Matters to a Vote of Security Holders.</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">No
matters were submitted to a vote of the security holders, through the
solicitation of proxies or otherwise, during the quarter ended December 31,
2006.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A049"></A>
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>PART
II</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item
5. Market for Registrant&#146;s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities.</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><B>Market
for  Common Equity and Related Stockholder Matters</B></B></FONT></FONT></P>


<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>(a) Market Information.</B><BR>Registrant&#146;s
common stock commenced trading on the NASDAQ Capital (formerly 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. During 2006, 2005 and 2004
closing price ranges were as follows:</FONT></FONT></P>


<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="3"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2006</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="4"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2005</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="5"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2004</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">High</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Low</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">High</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Low</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">High</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Low</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="26%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1st Quarter</FONT></TD>
     <TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;24</FONT></TD>
        <TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">.14</FONT></TD>
     <TD WIDTH="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21</FONT></TD>
        <TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">.68</FONT></TD>
     <TD WIDTH="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;31</FONT></TD>
        <TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">.38</FONT></TD>
     <TD WIDTH="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;22</FONT></TD>
        <TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">.40</FONT></TD>
     <TD WIDTH="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9</FONT></TD>
        <TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">.75</FONT></TD>
     <TD WIDTH="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">.60</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2nd Quarter</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;22</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">.28</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">.15</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">.22</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">.51</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">.50</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">.51</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">3rd Quarter</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">.44</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">.00</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;24</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">.00</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">.55</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">.40</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">.25</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4th Quarter</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">.60</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">.95</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">.50</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">.40</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;28</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">.21</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">.80</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">15</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 13; page: 13" -->

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
price ranges shown in the above table are based on NASDAQ quoted sales prices
for all of 2006 and 2005, and the fourth quarter of 2004, 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.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(b)<B>Holders.</B><BR>The
number of record holders of our common stock as of December 31, 2006 was  approximately
1,650; the approximate number of beneficial shareholders is  estimated at 8,000.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(c)<B>
Dividends.</B><BR>We
have not paid dividends since inception and we have no plans for paying
dividends in the foreseeable future.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(d)
<B>Securities authorized for issuance under equity compensation plans. </B><BR>The
disclosure required by this Item is included under Item 11 of this Report.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A053"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>RECENT SALES
OF UNREGISTERED SECURITIES</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<A NAME="A054"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">None</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Purchases of
Equity Securities by the Company and Affiliated Purchasers</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Neither
we nor any &#147;affiliated purchaser,&#148; as defined in SEC Rule
10b-18(a)(3), purchased any of our equity securities during the years ended
December 31, 2006 and 2005.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item
6. Selected Financial Data.</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A055"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>FIVE-YEAR
SUMMARY OF SELECTED FINANCIAL DATA</B></FONT></FONT></P>



<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="9"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Years Ended December 31,</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="1"><I>(Dollars in thousands, except per share data)</I></FONT></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2006</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2005</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2004</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2003</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2002</FONT><HR WIDTH="1000%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="51%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><U>Income Statement Data:</U></B></FONT></FONT></TD>
     <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD WIDTH="0%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Net Sales</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;15,488</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;11,028</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;8,417</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;5,863</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;5,700</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Income (loss) from continuing operations</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;377</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;663</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;336</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;409</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;470</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Income  (loss) from continuing operations, per</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">common share, basic and diluted</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.07</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.13</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.08</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.12</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.14</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Dividends declared per common share</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-0-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-0-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-0-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-0-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-0-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
</TABLE>



<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Balance Sheet Data (at year end):</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="9"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">As at December 31,</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="51%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Total Assets</FONT></TD>
     <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;31,754</FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;28,716</FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$13,080</FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;4,700</FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$3&nbsp;,974</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Long-term Debt</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-0-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-0-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-0-</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;796</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Stockholders&#146; Equity</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;27,641</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;25,856</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$12,010</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;2,973</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;2,950</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">See
the audited financial statements attached hereto under Item 8 for additional
information.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A056"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>QUARTERLY
FINANCIAL DATA &#150; UNAUDITED</B></FONT></FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2006</FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2005</FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="1"><I>(Dollars in thousands except per share data)</I></FONT></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">1st<BR>Quarter</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">2nd<BR>Quarter</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">3rd<BR>Quarter</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">4th<BR>Quarter</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">1st<BR>Quarter</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">2nd<BR>Quarter</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">3rd<BR>Quarter</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">4th<BR>Quarter</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="40%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Net revenues</B></FONT></FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="5%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$3,649</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="5%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$3,306</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;4,448</FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="5%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$4,085</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="5%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$2,172</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="5%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$2,474</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="5%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$3,115</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="5%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$3,267</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Gross margin</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$1,378</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$1,144</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;1,290</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$2,094</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;907</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;924</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$1,246</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$1,210</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Net income (loss)</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;238</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;44</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;(128</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;223</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;95</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;107</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;248</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;213</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><U>Common Stock Data</U></B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Basic and Diluted:</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Net income (loss) per share</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;.04</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;.01</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;(.02</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;.04</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;.02</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;.02</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;.05</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;.04</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Average common shares</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">outstanding:</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Basic</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5,616</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5,624</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5,627</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5,631</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4,811</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4,822</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4,819</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5,411</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Diluted</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5,834</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5,875</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5,627</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5,708</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5,029</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4,939</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4,977</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5,666</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><BR>16</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

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<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item
7. &nbsp;&nbsp;Management&#146;s Discussion and Analysis of Financial Condition and Results
of Operation.</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Overview</B><BR>We
provide environmental technologies and specialty chemicals to the coal-burning
electric utility industry. Revenues are generated through (1) time and materials
and fixed-price contracts for the emerging mercury emission control (MEC)
market, several of which are co-funded by government (Department of Energy
&#151; DOE) and industry and (2) the sale of specialty chemicals and services
for flue gas conditioning (FGC) and other applications.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Mercury
has been identified as a toxic substance and, pursuant to a court order, the EPA
issued regulations for its control in March 2005. The long-term growth of the
MEC market for the electric utility industry will most likely depend on how
industry chooses to respond to federal and state regulations, which are in
various stages of enactment and challenge in the courts. As many as 1,100
existing coal-fired boilers may be affected by such regulations, if and when
they are fully implemented. We have recently seen a significant increase in new
plant projects. DOE&#146;s latest report issued in 2006 includes 153 potential
new projects totaling 93GW of capacity. 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 mentioned 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. State regulations and increasing numbers of consent decrees are
becoming the largest market driver for this part of our business. Although we
expect this market to show steady growth over the next several years, we believe
the most significant revenue growth will occur when final federal regulations
impact a significant portion of previously uncontrolled, existing boilers.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
market for our FGC chemicals and services is relatively flat and is expected to
continue to decline in the near-term. Margins on these products are typically
higher than what we recognize for our present MEC sales and represent an
important but decreasing contribution to the overall profitability of the
Company.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In
2006, we signed contracts for ten ACI systems to be delivered in 2006 and 2007,
bringing the total number of ACI systems installed or in process as of December
31,2006 to twelve. Thus far in 2007 we have commenced work on five additional
systems, with the expectation that six more systems will be ordered by customers
exercising options for these systems under the contracts. In addition, one
system was installed in partnership with a third party for whom we provided
design services through a DOE contract. Revenue from ACI system contracts
totaled $5.2 million for the year ended December 31, 2006 and $3.3 million is
remaining to be recognized on those contracts.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In
2006, we also signed two development and testing contracts with DOE with
revenues totaling approximately $7.5 million, including industry cost share
amounts, the services for which are expected to be performed over the period
from contract signing through the fall of 2008. We were also awarded a $100,000
research grant from DOE in 2006 to develop an improved activated carbon
manufacturing process, which activities are expected to be concluded by the end
of the first quarter of 2007, at which time we expect to submit an application
to DOE for additional funding to continue the work. Assuming no changes in
government funding, we expect to recognize over the next several years the
remaining revenue on the in-progress totaling $13.2 million as of December 31,
2006. We recognized $7.0 million related to DOE and industry co-funded contracts
in 2006. We expect to recognize revenue from these contracts of approximately
$7.0 million in total for 2007. 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. We expect DOE programs
to represent a decreasing percentage of revenues over the next few years as we
focus more on market growth for ACI systems for mercury control.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">On
November 3, 2006, we closed the sale of a 50% interest in a joint venture with
NexGen Refined Coal, LLC, an affiliate of NexGen Resources Corporation, to
market our refined coal technology as further described in Part I, Item 1 above.
We received a $100,000 non-refundable down payment from NexGen upon signing a
Joint Venture Proposal on June 26, 2006. At closing, NexGen paid us $900,000 for
its 50% interest. This payment is non-refundable. ADA has the obligation to fund
its share of operating costs for the venture, and we expect our portion of these
costs to average approximately $25,000 a month in 2007. Included in our
operating loss for 2006 are net costs totaling approximately $486,000 related to
our Refined Coal effort, which from a cash flow standpoint were offset by the
non-refundable payments from NexGen, but no gain or revenue was recorded as a
result of those payments. If the JV succeeds in obtaining approval for the
anticipated tax credits, NexGen has the right to maintain its 50% interest by
paying us an additional $4 million, in 8 quarterly payments of $500,000 each,
beginning the later of the 4<SUP>th</SUP> quarter of 2007 or when qualification
for the tax credit is obtained.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">17</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

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<!-- MARKER PAGE="sheet: 15; page: 15" -->

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">As
part of our strategy to address the growing MEC market, we are not only pursuing
internal, organic growth, but we have also been and expect to be engaged in
merger and acquisition (M&amp;A) activities, particularly with respect to the
vertical integration of our business to establish an invested role in the
production and supply of activated carbon and in the manufacture of ACI systems.
The major revenue sources from the growing MEC market are expected to include
engineering services, equipment sales and activated carbon supply. Our M&amp;A
activities have been and will likely be focused on candidates engaged in those
businesses. The costs we incur in our M&amp;A activities may be significant.
Such costs are generally deferred and either (a) expensed when it has been
determined they are no longer of future value, or (b) capitalized as part of an
acquisition and then subject to future impairment evaluations. During the
quarter ended September 30, 2006 we determined that deferred charges amounting
to approximately $411,000 related to our M&amp;A activities incurred earlier in
the year were no longer of future value and were therefore expensed. Such
charges are included in Interest and other expense for the year ended December
31, 2006 in the accompanying consolidated financial statements.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In
2006 we incurred $911,000 for project development costs, which costs have been
deferred and are classified on the balance sheet and included with Other Assets.
Such development costs are generally deferred and either (a) expensed when it
has been determined they are no longer of future value, or (b) capitalized as
part of long-term assets and then subject to future impairment evaluations.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In
February 2007, our Board of Directors committed the necessary resources to
continue the development of an activated carbon manufacturing facility.
Previously, we had announced that in order to stay ahead of an expected billion
dollar market, we had undertaken preliminary activities for a new
&#147;Greenfield&#148; plant including plant design, initial permitting,
securing key lignite reserves, and third-party market analysis. We have now
committed approximately $4 million from internal funds, expected to be expended
over the five months beginning in March, 2007, to move the project forward in a
manner that we expect will position us to meet a significant portion of the
shortage in activated carbon supply for this rapidly expanding market. Approved
and funded activities include plant design, securing options on various
desirable properties for the plant, and permitting, as well as specifying and
sourcing of key capital equipment, and negotiating with potential financial
partners.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Results of
Operations &#150; 2006 versus 2005</B><BR>Revenues  totaled $15,488,000 for 2006 versus
$11,028,000 in 2005, representing an  increase of 40%. Revenues in our MEC segment for
2006 increased by $4,823,000  (55%), and FGC and other activities decreased by ($363,000)
(16%). We have been  hiring personnel in response to the growth we have realized in the
past and  expect to achieve in 2007, and adequate resources of skilled labor have been
and  are expected to be available to meet anticipated needs.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Revenues
in 2006 from the MEC segment were comprised of government and industry-supported
contracts (51%), sales and installation of activated carbon injection (ACI)
systems (38%) and consulting services (11%), compared to 54%, 21% and 25%,
respectively, in 2005. For the year, our DOE and industry demonstration contract
revenues totaled $7.0 million representing an increase of 46% from 2005
revenues. The remaining unearned amount of the contracts was $13.2 million as of
December 31, 2006, of which $7.0 million is expected to be recognized by the
Company in 2007 (including cash contributions by other industry partners). ACI
systems contributed approximately $5.2 million to MEC revenues recognized for
the year, increasing 178% from the 2005 contribution to revenue of $1.9 million.
We had contracts in progress at year-end for supply of ACI systems totaling
approximately $3.3 million which we expect to complete and realize in 2007.
While the dollar amount of revenues from both the government and
industry-supported contracts and the ACI systems sales increased from 2005 to
2006, the most significant growth occurred in the sales and installations of ACI
systems, which increased $3.3 million and is the result of an increasing number
of system sales as noted above. We expect growth in 2007 in the MEC segment to
result primarily from an increasing number of ACI systems sales in response to
mercury emission control legislation and from existing government and
industry-supported contracts. Activities in two of our DOE contracts were behind
the original planned schedule in 2006 due to the unavailability of one of the
host sites and test results that did not meet project goals.&nbsp; Discussions
with DOE have resulted in reallocating&nbsp;a portion of the remaining contract
amounts&nbsp;to our other activities. Our contracts with the government are
subject to audit by the federal government, which could result in adjustment(s)
to previously recognized revenue. We believe, however, that we have complied
with all requirements of the contracts and future adjustments, if any, will not
be material. In addition, the federal government must appropriate funds on an
annual basis to support these DOE contracts, and funding is always subject to
unknown and uncontrollable contingencies. Revenues from consulting services
included in the MEC segment decreased approximately $690,000, from 2005 to 2006,
as a greater amount of work was performed in our DOE contracts in 2006 than
under commercial contracts.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">18</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

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<!-- MARKER PAGE="sheet: 16; page: 16" -->

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">FGC
and other revenues decreased due to fewer shipments of chemical and revenues
related to continuing customers. We expect FGC and other revenues in 2007 to be
significantly lower than 2006, as we believe that planned customer purchases for
2007 will be less than such purchases made in 2006. Included in this
segment&#146;s revenues for 2006 are approximately $60,000 of chemical sales
that accrue to the benefit of Clean Coal Solutions in 2007 and future periods.
Under the existing arrangements we will continue to sell such chemicals to the
JV at a minor discount and so the impact to our future revenues is not expected
to be material.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Cost
of revenues increased by $2,841,000 or 42% in 2006 from 2005 primarily as a
result of increased revenues for the same periods. Gross margins were 38% for
the year as compared to 39% in 2005. The decrease is a result of decreased
margins in both the MEC and FGC and other segments as discussed below.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Cost
of revenues for the MEC segment increased by $2,704,000 in 2006 or 47%, as
compared to the same periods in 2005 primarily as a result of the increased
revenue generating activities noted above. Gross margins for this segment were
38% for the year as compared to 35% for 2005. The improvement in gross margins
from the prior year resulted from higher margins on DOE contracts as our cost
share percentage on those contracts has decreased, offset by lower margins on
ACI system sales as that market is developing. The changes in MEC segment
profits from 2005 to 2006 are a result of the same factors.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Cost
of revenues for the FGC and other segment increased by $137,000 or 13% in 2006,
as compared to 2005 as a result of increased costs for development projects
included in this segment. Gross margins for this segment were 39% for 2006 as
compared to 55% in 2005. The decrease in gross margins from 2005 to 2006 is a
result of increased FGC sales of a product we license from ARKAY Technologies,
which carry a lower margin than historical FGC sales, lower margins typically
recognized on the demonstration projects we carried out in 2006, and the
increased costs in development projects noted above. FGC revenues represent
primarily chemical sales, which carry a higher margin than the typical fixed
price and time and materials sales in MEC revenues. FGC and other revenues
comprised 12% of total revenues in 2006, compared to 20% in 2005. The changes in
the FGC segment profits from 2005 to 2006 are a result of the same factors.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">We
expect the amount of fixed price and time and materials work in the MEC segment
for the near term to represent an increasing source of revenue. Overall gross
margins for 2007 are therefore expected to decline somewhat from the levels
achieved in 2006, as a result of an increasing proportion of fixed price and
time and materials work, our assumption of an increasing share of costs in the
field demonstration projects in which we have elected to participate and pricing
pressure caused by increased competition.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">General
and administrative expenses increased by $1,668,000 or 67% to $4,170,000 in
2006. The dollar increase in 2006 resulted primarily from compensation expenses
related to the implementation of Statement of Financial Accounting Standards
(SFAS) No. 123R, <I>Share-Based Payment </I>($331,000 for 2006); legal and
increased director fees and expenses incurred to maintain compliance with public
company regulations (approximately $160,000 for the year); accounting and
consulting fees related to SOX 404 compliance ($270,000) and facilities,
benefits and other overhead expenses resulting from increases in number of
employees (approximately $313,000 for year). Included in our general and
administrative expense for 2006 is $65,000 related to directors and officers
insurance for the period from June 2006 through the end of the year.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Research
and development expenses increased by $487,000 or 50% in 2006 as compared to
2005. We incur R&amp;D expenses not only on direct activities we conduct but
also by sharing a portion of the costs in the government and industry programs
in which we participate. 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 continue to grow at a rate of about 10% annually
for the next several years. Of the amount incurred in 2006, $481,000 was
directly related to DOE contracts.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">MEC
segment profits increased by $1.3 million or 73% to $3.0 million as compared to
2005. The increase was primarily a result of increased MEC segment revenues and
improved margins on our DOE contracts as described above. FGC and other segment
profits decreased by $728,000 or 72% to $282,000 as compared to 2005. The
decrease was primarily the result of increasing project development costs
incurred during the year, lower margin chemical sales and decreasing segment
revenues.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">19</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 17; page: 17" -->

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Included
in interest and other expenses, we recognized $411,000 of deferred costs related
to our M&amp;A activities as noted above. The Company had net interest and other
income of $909,000 in 2006, as compared to $357,000 for 2005. Interest and other
income increased in 2006 due to an increase in invested balances and increasing
interest rates.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
deferred income tax provision for 2006 represents an effective tax rate of
approximately 22%, which is less than the rate of 34% we recognized for 2005.
The decrease is primarily the result of larger impact of R&amp;D tax credits for
2006 as compared to 2005.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Unrealized
gains, net of tax, on investments in debt and equity securities amounted to
$134,000 for 2006 as compared to a loss of ($1,000) for 2005. The gains recorded
in 2006 are the result of increases in the market value of our equity
investments. The loss incurred in 2005 was primarily the result of increasing
interest rates, which correspondingly tend to result in a decrease in the market
value of our investments in longer-term fixed-rate debt securities.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Results of
Operations &#150; 2005 versus 2004</B><BR>Revenues  totaled $11,028,000 for 2005 versus
$8,417,000 for 2004, or an increase of 31%.  Revenues in the MEC segment for 2005
increased by $2,844,000 (48%), which was  offset by decreases of $233,000 (9%) in FGC and
other activities.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Revenues
from the MEC segment were comprised of 54% government and industry-supported
contracts, 21% sales and installation of activated carbon injection (ACI)
systems and 25% consulting services, as compared to 70%, 14% and 16%,
respectively in 2004. Increases in the dollar amount of sales in all of these
products contributed to the increase in MEC revenue in 2005. Our contracts with
the government are subject to audit by the federal government, which could
result in adjustment(s) to previously recognized revenue. We believe, however,
that we have complied with all the requirements of the contracts and future
adjustments, if any, will not be material. In addition, the federal government
must appropriate funds on an annual basis to support these DOE contracts, and
funding is always subject to unknown and uncontrollable contingencies. FGC and
other revenues decreased due to an FGC customer discontinuing further purchases.
Revenues from consulting services included in the MEC segment increased
approximately $1.2 million from 2004 to 2005, due to an increased number of
commercial contracts for evaluation of mercury emissions were conducted in 2005.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Cost
of revenues increased by $1,721,000 in 2005, as compared to 2004 as a result of
the increased revenue generating activities. Gross margins for MEC activities
decreased from 36% in 2004 to 35% in 2005 and gross margins for FGC and other
increased from 51% in 2004 to 55% in 2005. Overall gross margins were fairly
stable at 39% in 2005 as compared to 40% in 2004.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Research
and development expenses increased in 2005 by $162,000 to $977,000 from 2004,
which reflects almost a 20% increase over 2004. We incur R&amp;D expenses not
only on direct activities we conduct but also by sharing a portion of the costs
in the government and industry programs in which we participate.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">MEC
segment profits increased by $742,000 or 74% to $1.7 million as compared to
2004. The increase was primarily a result of increased MEC segment revenues as
described above. FGC and other segment profits increased by only $12,000 or
about 1% to $1,010,000 as compared to 2004. The increase was primarily the
result of slightly improved margins on chemical sales even though segment
revenues decreased.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">General
and administrative expenses increased by $456,000 to $2,502,000 in 2005, which
reflects an increase of 22% over 2004. The increase in 2005 resulted primarily
from legal and director fees incurred to attain compliance with public company
regulations that we became subject to during the year; consultant fees incurred
to launch services related to mercury measurement and demonstrations; and
increases in staff, benefits, recruiting and related costs as we prepared for
the anticipated growth in the mercury control market.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
Company had net interest and other income of $348,000 in 2005, as compared to
interest expense in 2004 of $15,000. Interest and other income increased in 2005
due to invested cash balances that were invested for only part of the year in
2004. In addition, interest expense decreased in 2005 as a result of the payoff
of all long-term debt in 2004.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">20</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>


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<!-- MARKER PAGE="sheet: 18; page: 18" -->

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
deferred tax provision for 2005 increased from an effective rate of 16% in 2004
to a rate of 34% in 2005. In 2004, since our net income was less than in 2005,
the research and development credit for which we qualify and is a permanent
difference, had a more significant impact in reducing our effective rate.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Liquidity
and Capital Resources</B><BR>We had  a positive working capital of $18.5 million at December
31, 2006, compared to  working capital of $17.0 million at December 31, 2005. The
increase resulted  from an increase in cash and accounts receivable, offset by a decrease
in  short-term investments due to liquidation of certificates of deposit and  increases
in current liabilities in the normal course of business. In addition  to working capital,
we had long-term investments in securities, accounted for as  &#147;available-for-sale&#148; investments,
of approximately $5.3 million and  $5.7 million at December 31, 2006 and 2005,
respectively. We intend to retain a  portion of these investments to demonstrate strength
in our financial position  to support performance guarantees we have been and will likely
continue to  provide on sales of ACI systems. We expect to use a portion of such
investments  and cash on hand to fund growth of the Company, which are expected to
include  development projects for activated carbon production and may include expansion
of product offerings and strategic acquisitions. We believe that existing and  expected
future working capital, which we expect to come from positive cash  flow, will be
sufficient to meet the anticipated operating needs of the Company  for the next twelve
months. However, we cannot be certain that positive cash  flow that we have achieved
historically will continue, and it is possible that  we could be required to expend some
of our current working capital to fund  operations, although we consider this unlikely.
In addition, we will likely need  to raise additional capital to fund strategic
development and/or acquisitions.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Our
principal source of liquidity is our existing working capital and positive
operating cash flow. The continuation of positive cash flow is somewhat
dependent upon the continuation of chemical sales and operations of the three
flue gas conditioning (FGC) units currently in-place. Each of these units
provided an average monthly cash flow of approximately $21,000 in 2006. One of
these customers is performing a process upgrade that was expected to be
completed in 2006 that we expect will reduce or eliminate the requirement for
FGC. During 2006, we performed a successful demonstration project at one plant
that has resulted in continued chemical sales, although at a lower level and
with a lower gross margin than existing customers. Unsatisfactory results for
any of our FGC customers, which could be caused by a single factor (or some
combination of factors) such as changes in coal, mechanical difficulties
(whether in the FGC unit or otherwise), changes in regulations, and/or overall
cost/benefit analysis, at any of those units, are likely to result in a decrease
or termination of the sale of chemicals for such units and a reduction in the
cash flow we have historically received, thereby reducing that portion of our
liquidity that has been provided by positive cash flow.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">We
have planned capital expenditures to sustain and improve ongoing operations for
2007 estimated at $400,000, which includes planned expenditures for build-out of
space and office equipment to accommodate new employees, replacement of obsolete
computers and office equipment and field equipment. We expect to fund these
requirements out of existing working capital and cash flow from operations. This
amount does not include amounts we may choose to spend on specific development
projects to secure our position in the activated carbon market for which the
Board has committed approximately $4 million from internal funds, expected to be
expended over the next five months to move the project forward in a manner that
we believe will position us to meet a significant portion of the shortage in
activated carbon supply that we expect for this rapidly expanding market.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Under
our defined contribution and 401(k) pension plan, we match up to 5% of salary
amounts deferred by employees in the Plan and contribute certain amounts based
on the profits of the Company, which amounts are determined annually by our
Board of Directors. During 2006 and 2005, we recognized $114,000 and $98,000,
respectively, of matching expense. In the past, the Company has also made
discretionary contributions to the Plan and employees. Based on results for
2005, the amount paid to the plan totaled $108,000 and was paid in the form of
cash to the accounts of all eligible employees in February 2006. Based on
results for 2006, the Company has paid and/or accrued a total of approximately
$123,000 for such payments.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">We
recorded net deferred tax liabilities of ($133,000) and net deferred tax assets
of $340,000 as of December 31, 2006 and 2005, respectively.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">21</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

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<!-- MARKER PAGE="sheet: 19; page: 19" -->

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Cash
flow from operations totaled $1,821,000 for 2006 compared to $1,209,000 for
2005. Cash flow from operations in 2006 increased from 2005 primarily as a
result of net income of $377,000 and adjustments for non-cash expenses which
included, expenses paid with stock and stock options, depreciation and
amortization, and deferred tax expense. The 2006 operating cash flow was reduced
by increases in our accounts receivable ($508,000), and additional prepaid
expenses and other assets totaling ($82,000) as a result of increases in prepaid
insurance, which changes correspond with our growth in business. The 2006
operating cash flow increased as a result of an increase in accounts payable and
accrued expenses totaling $720,000 and an increase in deferred revenue and
accrued warranty costs totaling $395,000, which changes also correspond to our
overall growth in business and in particular with increasing ACI system sales.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Net
cash used by investing activities was ($817,000) for 2006 compared to cash used
in investing activities of ($2,128,000) in 2005. In 2006, certificates of
deposit totaling $800,000 were liquidated and held as cash equivalents, whereby
proceeds from sales of securities exceeded investments in securities. Such
excess was offset somewhat by changes to our investment portfolio to maintain a
targeted balance and maximize earnings, as well as re-investment of gains that
occurred during the period. The net increase in cash from investment activity
was offset by a use of cash for purchases of property and equipment for the
build-out of additional space in our current headquarters location to
accommodate new employees and field equipment, and amounts invested in our
project development costs, particularly for development of a long-term activated
carbon supply.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Cash
provided by financing activities was $1,099,000 and $12,837,000 in 2006 and
2005, respectively. The decrease from 2005 was due to the exercise of fewer
stock options in 2006 and registration costs incurred in 2006 but related to
stock sold in 2005. Included in cash provided in 2006 is the $1 million in
proceeds from the sale of an interest in Clean Coal Solutions, LLC discussed
above. In 2005 we sold stock and recorded net proceeds of $12.5 million as
further described below. We may likely require additional debt or equity
financing to support future anticipated growth, including potential acquisitions
and/or for the development of the Greenfield activated carbon manufacturing
facility discussed above.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In
August 2004 we entered into several Subscription and Investment Agreements and
privately sold one million shares of our common stock to a limited number of
institutional investors at a price of $8.00 per share. The net proceeds to us
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% of the
gross offering proceeds. 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. We registered the shares for resale by the purchasers under the
Securities Act of 1933 in October, 2004.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In
October 2005, we entered into several Subscription and Investment Agreements and
privately sold 789,089 shares of our common stock to a limited number of
institutional accredited investors at a price of $17.00 per share. We received
net proceeds of approximately $12.5 million from the sale of the shares.
Pritchard Capital Partners LLP and Adams Harkness, Inc. acted as the placement
agents for the sales and received a fee of approximately 6% of the gross
proceeds of the offering, as well as reimbursement for certain offering
expenses. The shares also carry certain &#147;piggy-back&#148; and other
registration rights. A majority of the proceeds from the offering have been
invested in collateralized interest-bearing term deposits. We registered the
shares for resale by the purchasers under the Securities Act of 1933 in August,
2006.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">We had
the following contractual commitments as of December 31, 2006:</FONT></FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="9"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Payments Due by Period</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Total</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2007</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2008 and 2009</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2010 and 2011</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2011 and Beyond</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="36%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Operating lease obligations</FONT></TD>
     <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="11%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;383,000</FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="11%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;130,000</FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;125,000</FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;128,000</FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="7%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Purchase obligations</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,308,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,308,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#151;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#151;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#151;</FONT></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;1,691,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;1,438,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;125,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;128,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Critical
Accounting Policies and Estimates</B><BR>Revenue  Recognition &#150; ADA follows the
percentage of completion method of accounting  for all significant contracts excluding
government contracts and chemical sales.  The percentage of completion method of
reporting income takes into account the  estimated costs to complete and estimated gross
margin for contracts in  progress. The Company recognizes revenue on government contracts
based on the  time and expenses incurred to date.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">22</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 20; page: 20" -->

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Significant
estimates are used in preparation of our financial statements and include (1)
our allowance for doubtful accounts, which is based on historical experience;
(2) our valuation and classification of investments as
&#147;available-for-sale&#148; securities, which is based on estimated fair
market value; and (3) our percentage of completion method of accounting for
significant long-term contracts, which is based on estimates of gross margins
and of the costs to complete such contracts. In addition, amounts invoiced for
government contracts are subject to change based on the results of future audits
by the federal government. We have not experienced significant adjustments in
the past, and we do not expect significant adjustments will be required in the
future. We also use our judgment to support the current fair value of goodwill
and other intangible assets of $2.3 million on the consolidated balance sheets.
Management believes the fair value of other recorded intangibles is not
impaired, although market demand for our products and services could change in
the future, which would require a write-down in recorded values. As with all
estimates, the amounts described above are subject to change as additional
information becomes available, although we are not aware of anything that would
cause us to believe that any material changes will be required in the near term.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Recently
Issued Accounting Policies</B><BR>In  June 2006, the FASB issued FASB Interpretation No. 48 (&#147;FIN
48&#148;),  <I>Accounting for Uncertainty in Income Taxes &#150; an Interpretation of
FASB  Standard No. 109</I>. FIN 48 prescribes a recognition threshold and measurement
attribute for financial statement recognition and measurement of a tax position  taken or
expected to be taken in a tax return, and also provides guidance on  de-recognition,
classification, interest and penalties, accounting in interim  periods, disclosure and
transition. FIN 48 is effective for fiscal years  beginning after December 15, 2006. The
Company is in the process of evaluating  the financial impact of adopting FIN 48.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In
September 2006, the FASB issued SFAS No. 157, <I>Fair Value Measurements, </I>to
define fair value, establish a framework for measuring fair value under
generally accepted accounting principles, and expand disclosures about fair
value measurements. Having a single definition of fair value, together with a
framework for measuring fair value, is designed to result in increased
consistency and comparability in fair value measurements. This FASB is effective
for reporting periods beginning after November 15, 2007. The Company is
evaluating its impact and does not expect that adoption of this FASB will have a
material impact on its financial statements.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In
February 2007, the FASB issued SFAS 159, <I>The Fair Value Option for Financial
Assets and Financial Liabilities</I>. SFAS 159 permits the measurement of
certain financial instruments at fair value. Entities may choose to measure
eligible items at fair value at specified election dates, reporting unrealized
gains and losses on such items at each subsequent reporting period. SFAS 159 is
effective for fiscal years beginning after November 15, 2007. The Company has
not evaluated the potential impact of the fair value option.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item 7A.
Quantitative and Qualitative Disclosures About Market Risk. <BR>Commodity Price Risk<BR></B>In
the  normal course of its business, the Company is exposed to market risk or price
fluctuations related to the goods and services it procures related to its  revenue
producing activities. Components of ACI systems and consulting services,  which are
significant to such revenue producing activities, have market prices  that fluctuate
regularly, but not widely. In most cases we can pass on to our  customers such price
fluctuations. Based on the estimated 2006 procurement of  ACI components and consulting
services, a hypothetical 10% increase (or  decrease) in the price of ACI components and
consulting services, if such  fluctuations could not be passed on to our customer, would
result in a pretax  loss or gain of $370,000, respectively.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Interest
Rate Risk</B><BR>Approximately  $16.1 million of the cash and cash equivalents are invested
in interest bearing  accounts. A hypothetical change of 10% in the Company&#146;s
effective interest  rate from the year-end 2006 rate would increase or decrease interest
income by  $81,000.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">23</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 21; page: 21" -->

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item  8.
Financial Statements and Supplementary Data.Our  Financial Statements can be found at
pages F-1 through F-18 of this report.</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<A NAME="A064"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Index to
Financial Statements<BR>Report of Independent Registered Public Accounting Firm<BR>Financial Statements:</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent Level 2" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">ADA-ES,
Inc. and Subsidiaries  <BR>Consolidated Balance Sheets, December 31, 2006 and 2005<BR>
Consolidated Statements of Income, For the Years Ended December 31, 2006, 2005 and 2004<BR>
Consolidated Statements of Changes in Stockholders&#146; Equity,
For the Years Ended December  31, 2006, 2005 and 2004  <BR>Consolidated Statements of Cash
Flows, For the Years  Ended December 31, 2006, 2005 and 2004 <BR>Notes to Consolidated
Financial  Statements</FONT></FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item 9.
Changes In and Disagreements With Accountants on  Accounting and Financial  Disclosure.</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">None.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A067"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item 9A.
Controls and Procedures.</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A068"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><U>Evaluation
of Disclosure Controls and Procedures</U></B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">We conducted an
evaluation under the supervision and with the participation of  our management, including
our Chief Executive Officer and Chief Financial  Officer, of the effectiveness of the
design and operation of our disclosure  controls and procedures. The term &#147;disclosure
controls and  procedures,&#148; as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities and Exchange Act of 1934, as amended (&#147;Exchange Act&#148;),  means
controls and other procedures of a company that are designed to ensure  that information
required to be disclosed by the company in the reports it files  or submits under the
Exchange Act is recorded, processed, summarized and  reported, within the time periods
specified in the Securities and Exchange  Commission&#146;s rules and forms. Disclosure
controls and procedures also  include, without limitation, controls and procedures
designed to ensure that  information required to be disclosed by a company in the reports
that it files  or submits under the Exchange Act is accumulated and communicated to the
company&#146;s management, including its principal executive and principal  financial
officers, or persons performing similar functions, as appropriate, to  allow timely
decisions regarding required disclosure. Based on this evaluation,  our Chief Executive
Officer and Chief Financial Officer concluded as of December  31, 2006 that our
disclosure controls and procedures were not effective at the  reasonable assurance level
due to the material weaknesses discussed immediately  below.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A069"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Management&#146;s
Report on Internal Control Over Financial Reporting</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Our management
is responsible for establishing and maintaining adequate internal  control over financial
reporting. Internal control over financial reporting (as  defined in Exchange Act Rules&nbsp;13a-15(f)
and 15(d)-15(f)) and includes those  policies and procedures that: (a)&nbsp;pertain to
the maintenance of records  that, in reasonable detail, accurately and fairly reflect the
transactions and  dispositions of the assets of the company; (b)&nbsp;provide reasonable
assurance  that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (c)&nbsp;provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the company&#146;s assets that could have a  material
effect on the financial statements.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><BR>Our  management
assessed our internal control over financial reporting as of  December&nbsp;31,  2006.
Management based its assessment on criteria set forth in  the framework in <I>Internal
Control-Integrated Framework </I>issued by the  Committee of Sponsoring Organizations of
the Treadway Commission.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><BR>A  material
weakness is a control deficiency, or combination of control  deficiencies, that  result
in more than a remote likelihood that a material  misstatement of annual or  interim
financial statements will not be prevented or  detected. Management&#146;s  assessment
concluded that the Company did not  maintain effective internal control over  financial
reporting as of  December&nbsp;31, 2006 as a result of the following identified  material
weaknesses:</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">24</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 22; page: 22" -->

<!-- MARKER FORMAT-SHEET="Para Hang Roman In 1" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">1. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
Company did not have a sufficient complement of personnel with appropriate  training and
experience in generally accepted accounting principles  (&#147;GAAP&#148;), or adequate
controls over the resolution of GAAP accounting  issues.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman In 1" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
Company&#146;s controls over the collection and recording of accounts payable  did not
operate effectively.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman In 1" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">3. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
Company did not maintain adequate controls over the reconciliation of accounts
receivable and deferred revenue.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Management&#146;s
assessment of the effectiveness of our internal control over financial reporting  as of
December 31, 2006, has been audited by Hein &amp; Associates LLP, our  independent
registered public accounting firm, as stated in their report which  appears herein.</FONT></FONT></P>


<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><I>Remediation
of Material Weakness</I></B><BR>The  following provides details
of the remedial actions taken  and planned as of the  date of this report, to address the
material weaknesses identified  above:</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang Roman In 1" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">1. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> During
the second half of 2006, and through December 31, 2006, the Director of  Financial
Planning and Internal Control position was vacant. We have hired an  experienced
individual who is expected to provide additional review over our  presentation and
disclosure in financial statements and to provide further  technical accounting expertise
in applying generally accepted accounting  principles;</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman In 1" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">We
are evaluating the scope of our engagement with an outside accounting firm to  assist in
preparing our financial statements and providing technical expertise  in the proper
application of generally accepted accounting principles to various  transactions and
other financial statement matters.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman In 1" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">3. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">We
intend to enhance the training of our staff to ensure proper application of  generally
accepted accounting principles to various transactions and other  financial statement
matters.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman In 1" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">We
have systemized the collection and recordkeeping of invoices</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman In 1" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">5. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">We
have  established monthly revenue and expense review meetings with business process
owners</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman In 1" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">We
have revised our chart of accounts to ensure proper balance sheet  classifications of
accounts receivable and deferred revenue.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">We  anticipate
the actions described above and resulting improvements in controls  will strengthen our
internal control over financial reporting and will, over  time, address the related
material weaknesses that we identified as of December  31, 2006.&nbsp; However, because
many of the controls in our system of internal  controls rely extensively on manual
review and approval, the successful  operation of these controls for, at least, several
quarters may be required  prior to management being able to conclude that the material
weakness has been  remediated.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A071"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Changes in
Internal Control Over Financial Reporting</B><BR>Except
as otherwise discussed herein, there have been no changes in our internal  control over
financial reporting during the most recently completed fiscal  quarter that have
materially affected, or is reasonably likely to materially  affect, our internal control
over financial reporting.</FONT></FONT></P>


<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">25</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 23; page: 23" -->

<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A072"></A>
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A073"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">To the Board
of Directors<BR>ADA-ES, Inc. and Subsidiaries<BR>Littleton, Colorado</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">We
have audited management&#146;s assessment, included in the accompanying
Management&#146;s Report on Internal Control over Financial Reporting, that
ADA-ES, Inc. and Subsidiaries (&#147;Company&#148;) internal control over
financial reporting was not effective as of December&nbsp;31, 2006, because of
the effect of material weaknesses described therein, based on criteria
established in Internal Control&#151;Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(&#147;COSO&#148;). The Company&#146;s management is responsible for maintaining
effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting. Our
responsibility is to express an opinion on management&#146;s assessment and an
opinion on the effectiveness of the Company&#146;s internal control over
financial reporting based on our audit.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, evaluating management&#146;s assessment, testing and
evaluating the design and operating effectiveness of internal control, and
performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our
opinion.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">A
company&#146;s internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with accounting principles generally accepted in the United States of America. A
company&#146;s internal control over financial reporting includes those policies
and procedures that (i)&nbsp;pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii)&nbsp;provide reasonable
assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with accounting principles generally accepted
in the United States of America, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and
directors of the company; and (iii)&nbsp;provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition
of the company&#146;s assets that could have a material effect on the financial
statements.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">A
material weakness is a significant control deficiency, or combination of
significant control deficiencies, that results in more than a remote likelihood
that a material misstatement of the annual or interim financial statements will
not be prevented or detected. The following material weaknesses have been
identified and included in management&#146;s assessment as of December&nbsp;31,
2006:</FONT></FONT></P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">1. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
Company did not have a sufficient complement of personnel with appropriate  training and
experience in generally accepted accounting principles  (&#147;GAAP&#148;), or adequate
controls over the resolution of GAAP accounting  issues.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
Company&#146;s controls over the collection and recording of accounts payable  did not
operate effectively.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">3. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
Company did not maintain adequate controls over the reconciliation of accounts
receivable and deferred revenue.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">26</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

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<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">These
material weaknesses were considered in determining the nature, timing and extent
of audit tests applied in our audit of the 2006 financial statements, and this
report does not affect our report dated March 26, 2007 on those financial
statements.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In our
opinion, management&#146;s assessment that the Company did not maintain
effective internal control over financial reporting as of December&nbsp;31, 2006
is fairly stated, in all material respects, based on the COSO framework. Also,
in our opinion, because of the effect of the material weaknesses described above
on the achievement of the objectives of the control criteria, the Company has
not maintained effective internal control over financial reporting as of
December&nbsp;31, 2006, based on the COSO framework.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">We do
not express an opinion or any other form of assurance on management&#146;s
statements referring to new controls being implemented after December&nbsp;31,
2006.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">We
have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated financial
statements of ADA-ES, Inc. and Subsidiaries and our report dated March 26, 2007
expressed an unqualified opinion.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">/s/ HEIN &amp; ASSOCIATES
LLP</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A074"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Denver,
Colorado<BR>March 26, 2007</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A075"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item 9B.
Other Information.</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Date of Next
Annual Meeting of  Shareholders  and  Information  Concerning  Shareholder  Proposals for
Presentation at the Next Annual Meeting of Shareholders</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Our
next Annual Meeting of Shareholders will be held on June 19, 2007, which is
approximately one month later than we originally expected to hold the meeting.
If a shareholder has not submitted a proposal to be considered at the meeting by
December 11, 2006, the date stated in last year&#146;s proxy statement for
submitting such proposals, and the shareholder fails to notify the Company of
such proposal on or before April 2, 2007, then the proxies appointed by the
Company&#146;s management will be allowed to use their discretionary voting
authority when the proposal is raised at the Annual Meeting, without any
discussion of the matter in the proxy statement. The proponent of any such
proposal must own shares of Common Stock equal to the lesser of (a) 1% or more
of the outstanding shares as of December 31, 2006, or (b) shares having a market
value of at least $2,000, and must have continuously owned such shares for one
year and intend to continue to hold such shares through the date of the Annual
Meeting in order to present a shareholder proposal to the Company.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A077"></A>
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>PART
III</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item  10.
Directors, Executive Officers, and Corporate Governance.</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Information
regarding our directors is incorporated by reference from the information
contained under the caption &#147;Election of Directors&#148; in our Proxy
Statement for the 2007 Annual Meeting of Stockholders (&#147;2007 Proxy
Statement&#148;) to be filed pursuant to Regulation 14A promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934
within 120 days after the end of our fiscal year ended December 31, 2006.
Information regarding our audit committee, including our audit committee
financial expert, is incorporated by reference from the information contained
under the caption &#147;Audit Committee&#148; in our 2007 Proxy Statement and
information regarding executive officers is incorporated by reference from the
information contained under the caption &#147;Executive Officers&#148; in our
2007 Proxy Statement. Information regarding Section 16 reporting compliance is
incorporated by reference from information contained under the caption
&#147;Executive Compensation &#151; Section 16(a) Beneficial Ownership Reporting
Compliance&#148; in our 2007 Proxy Statement.</FONT></FONT></P>


<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">27</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

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<!-- MARKER PAGE="sheet: 2; page: 2" -->

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Code of
Ethics</B><BR>We  adopted a Code of Conduct that applies to our officers, directors and
employees,  including the principal executive officer, principal financial officer,
principal accounting officer or controller or other persons performing similar
functions, and includes a code of ethics as defined in Item 406(b) of Regulation  S-K. A
copy of our Code of Conduct is available on our website at www.adaes.com.  We intend to
disclose any amendments to certain provisions of our Code of  Conduct, or waivers of such
provisions granted to executive officers and  directors, on our website.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item
11. Executive Compensation.</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
information required by this item is incorporated by reference from the
information contained under the captions &#147;Compensation Committee,&#148;
&#147;Executive Compensation,&#148; &#147;Director Compensation&#148; and
&#147;Stock Incentive Plans&#148; in our 2007 Proxy Statement.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item
12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
information required by this item is incorporated by reference from the
information contained under the caption &#147;Security Ownership of Principal
Stockholders and Management and Related Stockholder Matters&#148; and
&#147;Equity Compensation Plan Information&#148; in our 2007 Proxy Statement.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item
13. Certain Relationships and Related Transactions and Director Independence.</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
information required by this item is incorporated by reference from the
information contained under the caption &#147;Certain Relationships and Related
Transactions and Director Independence&#148; in our 2007 Proxy Statement.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item
14. Principal Accountant Fees and Services.</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
information required by this item is incorporated by reference from the
information contained under the caption &#147;Relationship with Independent
Certified Public Accountants&#148; in our 2007 Proxy Statement.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A079"></A>
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>PART
IV</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Item
15. Exhibits and Financial Statement Schedules.</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(a)&nbsp;&nbsp;
The following documents are filed as part of this Annual Report on Form 10-K:</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang Roman In 1" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(1) </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Financial
Statements &#150; see Part II, Item 8, which is incorporated herein by this reference;</FONT></FONT> </P></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Roman In 1" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(2) </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Financial
Statement Schedules &#150; None required or applicable; and</FONT></FONT> </P></TD>
</TR>
</TABLE>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(3) </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Exhibits
&#150; as described in the following index.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A080"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Index to
Exhibits.</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A081"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>No.</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Description</U></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">3.1 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Amended
and Restated Articles of Incorporation of ADA-ES (1)</FONT></FONT> </P></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">3.2 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Amended
and Restated Bylaws of ADA-ES (2)</FONT></FONT> </P></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4.1 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Form
of Specimen Common Stock Certificate (3)</FONT></FONT> </P></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4.2 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Registration
Rights Agreement dated October 21, 2005 (4)</FONT></FONT> </P></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4.3 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Registration
Rights Agreement between ADA-ES, Inc. and Arch Coal, Inc. dated March 19, 2003 (16)</FONT></FONT> </P></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4.4 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Standstill
and Registration Rights Agreements dated August 3-6, 2004 (6)</FONT></FONT> </P></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.1 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Distribution
Agreement dated as of March 17, 2003 between Earth Sciences, Inc. and ADA-ES, Inc. (7)</FONT></FONT> </P></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.2 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> 2003
ADA-ES, Inc. Stock Option Plan** (5)</FONT></FONT> </P></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.6 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Securities
Subscription and Investment Agreement between ADA-ES, Inc. and Arch Coal, Inc.  dated
July 7, 2003 (7)</FONT></FONT> </P></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.7 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> U.S.
Department of Energy Cooperative Agreement No. DE-FC26-00NT41004 &quot;Field Test Program
to Develop Comprehensive Design,  Operating, and Cost Data for Mercury Control
Systems&quot; (7)</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">28</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 3; page: 3" -->


<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.8 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">U.S.
Department of Energy Cooperative Agreement No. DE-FC26-00NT40755 &quot;Advanced Flue  Gas
Conditioning as a Retrofit Upgrade to Enhance PM collection from Coal-Fired Electric
Utility  Boilers&quot; (7)</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.10 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Tax
Sharing Agreement between ADA-ES, Inc. and Earth Sciences, Inc. dated March 17, 2003 (5)</FONT></FONT> </P></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.11 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> U.S.
Department of Energy Cooperative Agreement No. DE-FC26-02NT41591 &quot;Long-Term
Operation of a COHPAC System for Removing Mercury from Coal-Fired Flue Gas&quot; (7)</FONT></FONT> </P></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.12 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Amendment
No. 1 to Distribution Agreement by and between ADA-ES, Inc. and Earth Sciences, Inc.
dated  August 15, 2003 (8)</FONT></FONT> </P></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.13 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> 2003
Stock Compensation Plan #1** (9)</FONT></FONT> </P></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.14 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> 2003
Stock Compensation Plan #2** (10)</FONT></FONT> </P></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.15 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> U.S.
Department of Energy Cooperative Agreement No. DE-FC26-03NT41986 &quot;Evaluation of
Sorbent Injection for Mercury Control&quot;  (11)</FONT></FONT> </P></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.16 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Purchase
Order #4500589101 signed 3/18/04 from We Energies (12)  </FONT></FONT> </P></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.17 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Clean
Coal Power  Initiative Repayment Agreement between the U.S. Department of Energy and
ADA-ES, Inc.  dated April 6, 2004  (12)</FONT></FONT> </P></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.18 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> TOXECON
Sorbent Sales Repayment Agreement by and between Norit America Inc. and ADA-ES, Inc.
dated February 18, 2004 (12)</FONT></FONT> </P></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.19 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Development
and Field Validation Agreement between Thermo Environmental Instruments Inc. and ADA-ES,
Inc. dated April 16,  2004 (12)</FONT></FONT> </P></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.20 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Distribution
Agreement between Thermo Environmental Instruments Inc. and ADA-ES, Inc. dated April 16,
2004 (12)</FONT></FONT> </P></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.21 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> ADA-ES,
Inc. 2004 Executive Stock Option Plan** (13)</FONT></FONT> </P></TD>
</TR>
</TABLE>


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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.22 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> U.S.
Department of Energy Cooperative Agreement No. DE-FC26-05NT42307 &#147;Low-Cost Options
for Moderate Levels of Mercury  Control&#148; (14)</FONT></FONT> </P></TD>
</TR>
</TABLE>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.23 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Employment
Agreement dated May 1, 1997 between C. Jean Bustard and ADA Environmental Solutions, LLC
(assigned to ADA-ES,  Inc.) ** (14)</FONT></FONT> </P></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.24 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Employment
Agreement dated May 1, 1997 between Michael D. Durham and ADA Environmental Solutions,
LLC (assigned to ADA-ES,  Inc.) ** (14)</FONT></FONT> </P></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.25 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Employment
Agreement dated January 2, 2000 between Mark H. McKinnies and ADA Environmental
Solutions, LLC (assigned to  ADA-ES, Inc.) ** (14)</FONT></FONT> </P></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.26 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Employment
Agreement dated January 1, 2000 between Richard J. Schlager and ADA Environmental
Solutions, LLC (assigned to  ADA-ES, Inc.) ** (14)</FONT></FONT> </P></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.27 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> 2004
Stock Compensation Plan #2 and model stock option agreements** (13)</FONT></FONT> </P></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.28 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> 2004
Directors Stock Compensation Plan #1** (15)</FONT></FONT> </P></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.29* </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="2%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> 2005
Directors&#146; Compensation Plan**(16)</FONT></FONT> </P></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.30 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> License
Agreement dated as of November 3, 2006 by and between ADA-ES, Inc. and ADA-NexCoal, LLC.
(17)</FONT></FONT> </P></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.31 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Chemicals,
Equipment, and Technical Engineering Services Supply Agreement dated as of November 3,
2006  by and between  ADA-ES, Inc. and ADA-NexCoal, LLC. (18)</FONT></FONT> </P></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.32 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Purchase
and Sale Agreement dated as of November 3, 2006 by and among ADA-ES, Inc., NexGen Refined
Coal, LLC and  ADA-NexCoal, LLC. (19)</FONT></FONT> </P></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.33 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Amended
and Restated Operating Agreement of ADA-NexCoal, LLC dated as of November 3, 2006 by and
among ADA-ES, Inc., NexGen  Refined Coal, LLC and ADA-NexCoal, LLC. (20)</FONT></FONT> </P></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.34* </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="2%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Employment
Agreement dated March 1, 2003 between Sharon M. Sjostrom and ADA  Environmental
Solutions, LLC (assigned to ADA-ES, Inc.)**</FONT></FONT> </P></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.35* </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="2%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Executive
Compensation Plan**</FONT></FONT> </P></TD>
</TR>
</TABLE>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.36* </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="2%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Memorandum
of Understanding dated March 20<SUP>th</SUP>, 2007, between Calgon  Carbon Corporation
and ADA-ES, Inc.</FONT></FONT> </P></TD>
</TR>
</TABLE>


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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.37* </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="2%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> 2006
Profit Sharing Plan**</FONT></FONT> </P></TD>
</TR>
</TABLE>


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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">21.1* </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Subsidiaries
of ADA-ES, Inc.</FONT></FONT> </P></TD>
</TR>
</TABLE>


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<A NAME="A082"></A>
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">23.1* </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Consent
of Hein &amp; Associates LLP</FONT></FONT> </P></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">31.1* </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Certification
of Chief Executive Officer of ADA-ES, Inc. Pursuant to 17 CFR 240.13a-14(a) or 17 CFR
240.15d-14(a)</FONT></FONT> </P></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">31.2* </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Certification
of Chief Financial Officer of ADA-ES, Inc. Pursuant to 17 CFR 240.13a-14(a) or 17 CFR
240.15d-14(a)</FONT></FONT> </P></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">32.1* </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Certification
of Chief Executive Officer of ADA-ES, Inc. Pursuant to 18 U.S.C Section 1350, as Adopted
Pursuant to Section  906 of the Sarbanes-Oxley Act of 2002</FONT></FONT> </P></TD>
</TR>
</TABLE>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">29</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

<!-- *************************************************************************** -->
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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">32.2* </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Certification
of Chief Financial Officer of ADA-ES, Inc. Pursuant to 18 U.S.C Section 1350, as Adopted
Pursuant to Section  906 of the Sarbanes-Oxley Act of 2002</FONT></FONT> </P></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">*
&#150; &nbsp;filed herewith.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">**
&#150; &nbsp;Management contract or compensatory plan or arrangement.</FONT></FONT></P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(1) </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Incorporated
by reference to Exhibit 3.1 to the Form 10-QSB for the quarter  ended September 30, 2005
filed on November 10, 2005 (File No. 000-50216).</FONT></FONT> </P></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(2) </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Incorporated
by reference to Exhibit 3.2 to the Form 8-K dated December 1, 2005  filed on December 5,
2005 (File No. 000-50216).</FONT></FONT> </P></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(3) </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Incorporated
by reference to Exhibit 4.1 to the Form 8-K dated October 21, 2005  filed on October 26,
2005 (File No. 000-50216).</FONT></FONT> </P></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(4) </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Incorporated
by reference to Exhibit 10.1 to the Form 8-K dated October 21, 2005  filed on October 26,
2005 (File No. 000-50216).</FONT></FONT> </P></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(5) </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Incorporated
by reference to the same numbered Exhibit to the Form 10-KSB for  the year ended December
31, 2005 filed on March 30, 2006 (File No. 000-50216).</FONT></FONT> </P></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(6) </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Incorporated
by reference to Exhibit A to Exhibit 10.1 to the Form S-3 filed on  October 18, 2004
(File No. 333-119795).</FONT></FONT> </P></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(7) </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Incorporated
by reference to the same numbered Exhibit to the Form 10-SB/A-3  filed on July 28, 2003
(File No. 000-50216).</FONT></FONT> </P></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(8) </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Incorporated
by reference to the same numbered Exhibit to the Form 10-SB/A-4  filed on August 24, 2003
(File No. 000-50216).</FONT></FONT> </P></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(9) </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Incorporated
by reference to Exhibit 99.2 to the Form S-8 filed on November 14,  2003 (File No.
333-110479).</FONT></FONT> </P></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(10) </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Incorporated
by reference to Exhibit 99.1 to the Form S-8 filed on February 6,  2004 (File No.
333-112587).</FONT></FONT> </P></TD>
</TR>
</TABLE>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(11) </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Incorporated
by reference to the same numbered Exhibit to the Form 10-KSB for  the year ended December
31, 2003 filed on March 30, 2004 (File No. 000-50216).</FONT></FONT> </P></TD>
</TR>
</TABLE>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(12) </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Incorporated
by reference to the same numbered Exhibit to the Form 10-QSB for  the quarter ended March
31, 2004 filed on May 13, 2004 (File No. 000-50216).</FONT></FONT> </P></TD>
</TR>
</TABLE>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(13) </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Incorporated
by reference to the same numbered Exhibit to the Form 10-KSB for  the year ended December
31, 2005 filed on March 30, 2006 (File No. 000-50216).</FONT></FONT> </P></TD>
</TR>
</TABLE>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(14) </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Incorporated
by reference to the same numbered Exhibit to the Form 10-KSB for  the year ended December
31, 2004 filed on March 30, 2005 (File No. 000-50216).</FONT></FONT> </P></TD>
</TR>
</TABLE>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(15) </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Incorporated
by reference to Exhibit 99.1 to the Form S-8 filed on April 16,  2004 (File No.
333-114546).</FONT></FONT> </P></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(16) </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Re-filing
to correct a typographical error in the original filing.</FONT></FONT> </P></TD>
</TR>
</TABLE>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(17) </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Incorporated
by reference to Exhibit 10.1 to the Form 10-Q for the quarter ended September  30, 2006
filed on November 8, 2006 (File No. 000-50216).</FONT></FONT> </P></TD>
</TR>
</TABLE>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(18) </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Incorporated
by reference to Exhibit 10.2 to the Form 10-Q for the quarter ended  September 30, 2006
filed on November 8, 2006 (File No. 000-50216).</FONT></FONT> </P></TD>
</TR>
</TABLE>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(19) </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Incorporated
by reference to Exhibit 10.3 to the Form 10-Q for the quarter ended  September 30, 2006
filed on November 8, 2006 (File No. 000-50216).</FONT></FONT> </P></TD>
</TR>
</TABLE>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(20) </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Incorporated
by reference to Exhibit 10.4 to the Form 10-Q for the quarter ended  September 30, 2006
filed on November 8, 2006 (File No. 000-50216).</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<A NAME="A083"></A>
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>(b)</B></FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>See
(a)(3) above.</B></FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<A NAME="A084"></A>
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>(c)</B></FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>See
(a)(2)  above.</B></FONT></FONT> </P></TD>
</TR>
</TABLE>


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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">30</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 5; page: 5" -->

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<A NAME="A085"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>SIGNATURES</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Pursuant
to the requirements of 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.</FONT></FONT></P>


<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TD WIDTH="53%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><U>ADA-ES, Inc.</U></B></FONT></FONT></TD>
     <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="42%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>(Registrant)</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">By <U>/s/ Mark H. McKinnies</U></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>/s/ Michael D. Durham</U></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Mark H. McKinnies, Senior Vice</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Michael D. Durham</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">President and Chief Financial Officer</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">President (Chief Executive Officer)</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(Principal Financial and Accounting Officer)</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Date:  <U>March 27 , 2007</U></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>March 27 , 2007</U></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
</TABLE>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Pursuant
to the requirements of 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.</FONT></FONT></P>


<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TD WIDTH="45%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>/s/ John W. Eaves</U></FONT></FONT></TD>
     <TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="48%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>/s/ Rollie J. Peterson</U></FONT></FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">John W. Eaves, Director</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Rollie J. Peterson, Director</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Date: <U>March 27 , 2007</U></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Date: <U>March 27 , 2007</U></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>/s/ Jeffrey C. Smith</U></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>/s/ Michael D. Durham</U></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Jeffrey C. Smith, Director</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Michael D. Durham, Director</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Date: <U>March 27, 2007</U></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Date: <U>March 27 , 2007</U></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>/s/ Mark H. McKinnies</U></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>/s/ Ronald B. Johnson</U></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Mark H. McKinnies, Director</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Ronald B. Johnson, Director</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Date: <U>March 27 , 2007</U></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Date: <U>March 27 , 2007</U></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>/s/ Robert N. Caruso</U></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>/s/ Richard Swanson</U></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Robert N. Caruso, Director</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Richard Swanson, Director</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Date: <U>March 27, 2007</U></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Date: <U>March 27, 2007</U></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>/s/ Derek C. Johnson</U></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Derek C. Johnson, Director</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Date: <U>March 27, 2007</U></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
</TABLE>



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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">31</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>


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<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A086"></A>
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>INDEX
TO FINANCIAL STATEMENTS</B></FONT></FONT></P>




<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">PAGE</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TD WIDTH="92%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Report of Independent Registered Public Accounting Firm</B></FONT></FONT></TD>
     <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">F-2</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Consolidated Balance Sheets</B> &#150; December 31, 2006 and 2005</FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">F-3</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Consolidated Statements of Income</B> &#150; For the Years Ended December 31, 2006, 2005, and 2004</FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">F-4</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Consolidated Statements of Changes in Stockholders&#146; Equity</B> &#150; For the Years Ended December 31,</FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2006, 2005, and 2004</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">F-5</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Consolidated Statements of Cash Flows</B> &#150; For the Years Ended December 31, 2006, 2005, and 2004</FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">F-6</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Notes to Consolidated Financial Statements</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">F-7</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">F-1</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 7; page: 7" -->

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A087"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A088"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">To the Board
of Directors and Stockholders<BR>ADA-ES, Inc and Subsidiaries<BR>Littleton, Colorado</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">We
have audited the consolidated balance sheets of ADA-ES, Inc and Subsidiaries as
of December&nbsp;31, 2006 and 2005, and the related consolidated statements of
income, changes in stockholders&#146; equity and cash flows for each of the
three years in the period ended December&nbsp;31, 2006. These financial
statements are the responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">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.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of ADA-ES, Inc and Subsidiaries
as of December&nbsp;31, 2006 and 2005, and the results of their operations and
their cash flows for each of the three years in the period ended
December&nbsp;31, 2006, in conformity with U.S. generally accepted accounting
principles.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">We
also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of ADA-ES, Inc and
Subsidiaries internal control over financial reporting as of December 31, 2006,
based on c<I>riteria established in Internal Control&#151;Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO)</I> and our report dated March 26, 2007 expressed an unqualified opinion
on management&#146;s assessment of the effectiveness of ADA-ES, Inc and
Subsidiaries internal control over financial reporting and an adverse opinion on
the effectiveness of ADA-ES, Inc and Subsidiaries internal control over
financial reporting.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">As
discussed in note 1 to the accompanying consolidated financial statements,
effective January&nbsp;1, 2006, the Company adopted Statement of Financial
Accounting Standards No.&nbsp;123(R), <I>Share-Based Payment</I>.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">/s/&nbsp;&nbsp;HEIN &amp; ASSOCIATES
LLP</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A089"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">DENVER,
COLORADO<BR>March 26, 2007</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">F-2</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 8; page: 8" -->

<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A090"></A>
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><I>ADA-ES,
INC AND SUBSIDIARIES</I><BR>CONSOLIDATED BALANCE SHEETS</B><BR><I>(Dollars in thousands)</I></FONT></FONT></P>


<!-- MARKER FORMAT-SHEET="Para Flush In 2" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="30%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><U>ASSETS</U></B></FONT></FONT> </P></TD>
</TR>
</TABLE>


<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="3"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">DECEMBER 31</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2006</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2005</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="75%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>CURRENT ASSETS:</B></FONT></FONT></TD>
     <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Cash and cash equivalents</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;16,129</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;14,026</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Trade receivables, net of allowance for doubtful accounts of $4</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">3,522</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">3,014</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Investments in securities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,427</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,515</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Prepaid expenses and other</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">361</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">283</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;22,439</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;19,838</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>PROPERTY AND EQUIPMENT,</B> at cost</FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,830</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,663</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Less accumulated depreciation and amortization</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(1,033</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(1,013</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net property and equipment</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">797</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">650</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>GOODWILL,</B> net of $1,556 in amortization</FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,024</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,024</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>INTANGIBLE ASSETS,</B> net of $57 and $44 in amortization, respectively</FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">241</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">156</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>INVESTMENTS IN SECURITIES</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5,322</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5,663</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>OTHER ASSETS</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">931</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">385</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>TOTAL ASSETS</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;31,754</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;28,716</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><U>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</U></B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>CURRENT LIABILITIES:</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Accounts payable</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,352</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,706</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Accrued payroll and related liabilities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">618</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">516</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Accrued expenses</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">161</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">138</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Deferred revenue and other</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">761</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">460</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">3,892</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,820</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>LONG-TERM LIABILITIES:</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Accrued  warranty and other</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">184</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">40</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4,076</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,860</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>MINORITY INTEREST</B> (Note 5)</FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">37</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>COMMITMENTS AND CONTINGENCIES</B> (Notes 5 and 7)</FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>STOCKHOLDERS&#146; EQUITY:</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Preferred stock; 50,000,000 shares authorized, none outstanding</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Common stock; no par value, 50,000,000 shares authorized, 5,635,137 and</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;5,610,267 shares issued and outstanding</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">27,592</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">26,318</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Accumulated other comprehensive income</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">167</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">33</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Accumulated deficit</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(118</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(495</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total stockholders&#146; equity</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">27,641</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">25,856</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>TOTAL LIABILITIES AND STOCKHOLDERS&#146; EQUITY</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;31,754</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;28,716</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
</TABLE>


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<A NAME="A093"></A>
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><I>See
accompanying notes to these consolidated financial statements.</I></B></FONT></FONT></P>


<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">F-3</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 9; page: 9" -->

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<A NAME="A094"></A>
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><I>ADA-ES,
INC AND SUBSIDIARIES</I><BR>CONSOLIDATED STATEMENTS OF INCOME</B><BR><I>(Dollars in thousands, except per share data)</I></FONT></FONT></P>


<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="5"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">FOR THE YEARS ENDED DECEMBER 31,</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2006</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2005</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2004</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="66%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>REVENUE:</B></FONT></FONT></TD>
     <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD WIDTH="0%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Mercury emission control</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;13,607</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8,784</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,940</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Flue gas conditioning and other</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,881</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,244</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,477</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total net revenues</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">15,488</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">11,028</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">8,417</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>COST OF REVENUES:</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Mercury emission control</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">8,426</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5,722</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">3,817</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Flue gas conditioning and other</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,156</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,019</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,203</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total cost of revenues</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">9,582</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">6,741</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5,020</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>GROSS MARGIN</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5,906</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4,287</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">3,397</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>OTHER COSTS AND EXPENSES:</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;General and administrative</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4,170</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,502</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,046</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Research and development</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,464</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">977</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">815</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Depreciation and amortization</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">284</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">157</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">153</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total expenses</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5,918</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">3,636</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">3,014</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>OPERATING (LOSS) INCOME</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(12</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">651</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">383</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>OTHER INCOME (EXPENSE):</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Interest and other expense</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(412</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(9</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(34</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Interest and other income</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">909</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">357</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">49</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total other income</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">497</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">348</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">15</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>INCOME BEFORE INCOME TAX PROVISION</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">485</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">999</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">398</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>DEFERRED INCOME TAX PROVISION</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(108</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(336</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(62</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>NET INCOME</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">377</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">663</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">336</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>UNREALIZED GAINS AND (LOSSES) ON INVESTMENTS IN</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;<B>DEBT AND EQUITY SECURITIES,</B> net of tax</FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">134</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(1</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">34</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>COMPREHENSIVE INCOME</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;511</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;662</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;370</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>NET INCOME PER COMMON SHARE BASIC AND DILUTED</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.07</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.13</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.08</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>WEIGHTED AVERAGE COMMON SHARES OUTSTANDING</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5,624</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4,966</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4,126</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>WEIGHTED AVERAGE DILUTED COMMON SHARES OUTSTANDING</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5,729</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5,137</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4,193</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A097"></A>
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><I>See
accompanying notes to these consolidated financial statements.</I></B></FONT></FONT></P>


<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">F-4</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 10; page: 10" -->

<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A098"></A>
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><I>ADA-ES,
INC AND SUBSIDIARIES</I><BR>CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS&#146; EQUITY<BR>FOR
THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004</B><BR><I>(Dollars in thousands)</I></FONT></FONT></P>






<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="630">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"></FONT></TH>
     <TH COLSPAN="3"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Common Stock</FONT><HR WIDTH="80%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Accumulated<BR>Other&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<BR>Comprehensive</FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accumulated</FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Shares</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Amount</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Income</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Deficit</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Total</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="42%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>BALANCES,</B> January 1, 2004</FONT></FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">3,582,230</FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="9%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,467</FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="11%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#150;</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="11%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1,494</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)&nbsp;</FONT></TD>
     <TD WIDTH="7%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;2,973</FONT></TD>
        <TD WIDTH="0%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Stock issued to employees and directors for</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD ALIGN="RIGHT"></TD><TD></TD>
     <TD ALIGN="RIGHT"></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;expenses</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">25,716</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">181</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">181</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Issuance of stock for cash, net</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,000,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">7,620</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">7,620</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Issuance of stock on exercise of options</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">173,265</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">435</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">435</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Issuance of stock on conversion of debt</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">14,500</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">36</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">36</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Tax benefit of stock transactions</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">395</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">395</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Unrealized holding gains on investments</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">54</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">54</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Income tax effect</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(20</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)&nbsp;</FONT></TD>
     <TD ALIGN="right"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(20</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Net income</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">336</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">336</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt" ALIGN="RIGHT">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt" ALIGN="RIGHT">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>BALANCES,</B> December 31, 2004</FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4,795,711</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">13,134</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">34</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(1,158</FONT></TD>
    <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">12,010</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt" ALIGN="RIGHT">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt" ALIGN="RIGHT">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Stock and stock options issued to</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;consultant and directors for expenses</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4,221</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">75</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">75</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
 <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD ALIGN="RIGHT"></TD><TD></TD>
     <TD ALIGN="RIGHT"></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Issuance of stock for cash, net</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">789,089</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">12,538</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">12,538</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Issuance of stock on exercise of options</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">40,976</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">303</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">303</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Tax benefit of stock transactions</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">268</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">268</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Return of shares from escrow</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(19,730</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Unrealized holding losses on investments</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(34</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(34</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Investment reclassification adjustments to</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD ALIGN="RIGHT"></TD><TD></TD>
     <TD ALIGN="RIGHT"></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;income</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">32</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">32</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Income tax effect</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Net income</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">663</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">663</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt" ALIGN="RIGHT">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt" ALIGN="RIGHT">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>BALANCES,</B> December 31, 2005</FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5,610,267</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">26,318</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">33</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(495</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">25,856</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt" ALIGN="RIGHT">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt" ALIGN="RIGHT">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Stock and stock options issued to</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>

</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;consultant and directors for expenses</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">7,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">164</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">164</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
<TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD ALIGN="RIGHT"></TD><TD></TD>
     <TD ALIGN="RIGHT"></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Stock based compensation</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">331</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">331</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Issuance of stock on exercise of options</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">17,870</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">116</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">116</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Tax benefit of stock transactions</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">56</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">56</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Expense of stock issuance</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(12</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(12</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Sale of JV interest, net of $343 tax</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">656</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">656</FONT></TD>
<TD ALIGN="RIGHT"></TD><TD></TD>
     <TD ALIGN="RIGHT"></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Minority Interest</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(37</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
<TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(37</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
<TD ALIGN="RIGHT"></TD><TD></TD>
     <TD ALIGN="RIGHT"></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Unrealized holding gains on investments</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">214</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">214</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Income tax effect</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(80</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(80</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Net income</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#150;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">377</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">377</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt" ALIGN="RIGHT">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt" ALIGN="RIGHT">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>BALANCES,</B> December 31, 2006</FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5,635,137</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;27,592</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;167</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(118</FONT></TD>
<TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;27,641</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt" ALIGN="RIGHT">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt" ALIGN="RIGHT">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD ALIGN="RIGHT"></TD><TD></TD>
     <TD ALIGN="RIGHT"></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A102"></A>
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><I>See
accompanying notes to these consolidated financial statements.</I></B></FONT></FONT></P>


<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">F-5</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

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<!-- MARKER PAGE="sheet: 11; page: 11" -->

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<A NAME="A104"></A>
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><I>ADA-ES,
INC AND SUBSIDIARIES</I><BR>CONSOLIDATED STATEMENTS OF CASH FLOWS</B><BR><I>(Dollars in thousands)</I></FONT></FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="5"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">FOR THE YEARS ENDED DECEMBER 31,</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2006</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2005</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2004</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="68%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>CASH FLOWS FROM OPERATING ACTIVITIES</B></FONT></FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Net income</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;377</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;663</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;336</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Adjustments to reconcile net income to net cash provided by</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating activities:</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">284</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">157</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">153</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss on asset dispositions and securities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">32</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">104</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">24</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Write off of inventory</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#151;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">28</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#151;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Expenses paid with stock and stock options</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">495</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">75</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">181</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred tax expense</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">108</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">336</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">62</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Changes in operating assets and liabilities:</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trade receivables</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(508</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(1,816</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(133</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(82</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(103</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(94</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">646</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,273</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">271</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">74</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">222</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">190</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred revenue and other</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">395</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">270</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(159</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by operating activities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,821</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,209</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">831</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>CASH FLOWS FROM INVESTING ACTIVITIES:</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Capital expenditures for equipment, patents and development</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;projects</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(1,431</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(374</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(212</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Investment in securities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(7,054</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(10,753</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(8,068</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Proceeds from asset dispositions</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#151;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#151;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">60</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Proceeds from sale of securities and certificates of deposit</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">7,668</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">8,999</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,587</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in investing activities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(817</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(2,128</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(6,633</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>CASH FLOWS FROM FINANCING ACTIVITIES:</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Payments on debt and notes payable</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(5</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(4</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(922</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Proceeds from sale of JV interest</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#151;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#151;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Exercise of stock options</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">104</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">303</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">435</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Sale of stock</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#151;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">12,538</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">7,620</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by financing activities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,099</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">12,837</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">7,133</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>INCREASE IN CASH AND CASH EQUIVALENTS</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,103</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">11,918</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,331</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>CASH AND CASH EQUIVALENTS,</B> beginning of year</FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">14,026</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,108</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">777</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>CASH AND CASH EQUIVALENTS,</B> end of year</FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;16,129</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;14,026</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;2,108</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Cash payments for interest</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;34</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Transfer of inventory to property</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;39</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Tax benefit of stock option exercises</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;56</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;268</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;395</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Stock issued in conversion of debt</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;36</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
</TABLE>

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<A NAME="A107"></A>
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><I>See
accompanying notes to these consolidated financial statements.</I></B></FONT></FONT></P>


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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">F-6</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

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<A NAME="A108"></A>
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><I>ADA-ES,
INC. AND SUBSIDIARIES</I><BR><BR>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></FONT></FONT></P>

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<A NAME="A109"></A>
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B></B></FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">1.&nbsp;&nbsp;&nbsp;
<B><U>SUMMARY OF NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING
POLICIES</U></B>:</FONT></FONT></P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I><U>Nature
of Operations</U></I>&#150; The accompanying consolidated financial  statements  include
the accounts of ADA-ES, Inc. (ADA), its wholly owned  subsidiary, ADA Environment
Solutions, LLC (ADA LLC), and Clean Coal Solutions,  LLC (&#147;Clean Coal&#148;). ADA&#146;s
only asset is its investment in its  wholly owned subsidiary, ADA LLC. As of and for the
year ended December 31,  2006, Clean Coal had no significant assets, liabilities or
operations (see Note  5). All significant intercompany transactions have been eliminated.
Collectively, ADA and ADA-ES are referred to as the Company.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
Company is principally engaged in providing environmental technologies and  specialty
chemicals to the coal-burning utility industry. The Company generates  a substantial part
of its revenue from contracts co-funded by the government and  industry. The Company&#146;s
sales occur principally throughout the United  States.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I><U>Cash
Equivalents</U> </I>&#150; 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 in deposit accounts  collateralized by U.S. Treasury
Securities. The amount on deposit at December  31, 2006 and 2005 was held in one
commercial bank and was in excess of the  insurance limits of the Federal Deposit
Insurance Corporation.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I><U>Receivables
and Credit Policies </U></I><U></U>&#150; Trade receivables are uncollateralized
customer obligations due under normal trade terms requiring payment within 30  days from
the invoice date. Management reviews trade receivables periodically  and reduces the
carrying amount by a valuation allowance that reflects  management&#146;s best estimate
of the amount that may not be collectible.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I><U>Investments
</U></I><U></U>&#150; Investments in securities include certificates of deposit,  common
stock and debt securities. All investments are classified as  available-for-sale
securities, and are recorded at fair value in investments in  securities, 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 investments in debt
securities are amortized over the  contractual lives of those securities.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I><U>Inventories</U></I><U></U> &#150; Inventories,
which are included in prepaid expenses and other, are stated  at the lower of cost or
market, determined by the first-in, first-out method and  consist of supplies.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I><U>Revenue
Recognition</U></I><U></U> &#150; ADA follows the percentage of completion  method of
accounting for all significant contracts excluding government  contracts and chemical
sales. The percentage of completion method of reporting  income takes into account the
estimated costs to complete and estimated gross  margin for contracts in progress. The
Company recognizes revenue on government  contracts based on the time and expenses
incurred to date. As of December 31,  2006 and 2005, costs incurred in excess of billings
totaled $1,422,000 and  $142,000, respectively, and are included in accounts receivable,
net, in the  accompanying Balance Sheets. Billings in excess of recognized income totaled
$761,000 and $135,000 as of December 31, 2006 and 2005, respectively, and are  included
in deferred revenue and other in the accompanying Balance Sheets.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">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&#146;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.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Consulting
revenue is recognized as services are performed and collection is assured.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I><U>Property
and Equipment</U> </I>&#150; 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.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">F-7</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>


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<!-- MARKER FORMAT-SHEET="Head Major" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><I>ADA-ES,
INC. AND SUBSIDIARIES</I><BR><BR>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></FONT></FONT></P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I><U>Intangible
Assets</U></I><U></U> &#150; Intangible assets principally consist of 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, 2006,  2005 and 2004 was $13,000
$11,000 and $10,000 respectively. Based on the balance  of intangible assets as of
December 31, 2006, the Company anticipates  amortization expense over the next 5 years to
be approximately $18,000 per year.  The weighted average amortization period is 14 years.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Intangible
assets consist of: </FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="450" ALIGN="CENTER">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="3"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">At December 31,</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2006</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2005</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="4"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>(In thousands)</I></FONT></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="64%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD WIDTH="8%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Patents:</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;298</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;200</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Less: Accumulated Amortization</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(57</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(44</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;241</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;156</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I><U>Goodwill</U> &#150; </I>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&nbsp;31,
2001 and is attributable to the  Company&#146;s FGC reporting segment. As of January 1,
2002, goodwill is no  longer amortized, but subject to an impairment evaluation, which is
performed in  the fourth quarter of each year. As a result of this evaluation, which was
performed on the FGC reporting segment, the Company concluded that no impairment  of its
goodwill was required.</FONT></FONT> </P></TD>
</TR>
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<BR>

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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I><U>Cost
of Revenues </U></I><U></U>&#151; Costs of revenues include all labor, fringe  benefits,
subcontract labor, chemical costs, materials, equipment, supplies and  travel costs
directly related to the Company&#146;s production of revenue.</FONT></FONT> </P></TD>
</TR>
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<BR>

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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I><U>General
and Administrative</U></I><U></U> &#150; General and administrative costs  include
personnel related fringe benefits, sales and administrative staff labor  costs, facility
costs and other general costs of conducting business.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I><U>Warranty
Costs &#150;</U></I><U></U> Under certain contracts the Company may grant  performance
guarantees for a specified period and the achievement of a certain  plant operating
conditions. In the event the equipment fails to perform as  specified, the Company is
obligated to correct or replace the equipment.  Estimated warranty costs are recorded at
the time of sale based on current  industry factors.</FONT></FONT> </P></TD>
</TR>
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<BR>

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<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I><U>Net
Income Per Share</U></I><U></U> &#150; Basic EPS is calculated by dividing the  income
available to common stockholders 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 104,000, 171,000
and 67,000 shares in 2006, 2005 and 2004,  respectively, to the weighted average number
of common shares outstanding used  in calculation of diluted EPS. A total of 43,300
outstanding stock options were  excluded from the 2006 calculation of diluted shares as
their inclusion would be  anti-dilutive.</FONT></FONT> </P></TD>
</TR>
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<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I><U>Impairment
of Long-Lived Assets</U></I><U></U> &#150; In the event that facts and  circumstances
indicate that the carrying value of assets or intangible assets  may be impaired, an
evaluation of recoverability would be performed. Based on  the Company&#146;s evaluation
as of December 31, 2006 and 2005, no impairment of  value existed.</FONT></FONT> </P></TD>
</TR>
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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I><U>Fair
Value of Financial Instruments</U></I><U></U> &#150; The carrying amounts of  financial
instruments, including cash, cash equivalents, accounts receivable,  accounts payable and
accrued expenses approximate 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.</FONT></FONT> </P></TD>
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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I><U>Income
Taxes</U> </I>&#150; The Company accounts for income taxes under the liability  method
whereby deferred tax assets and liabilities are determined based on tax  rates and laws
enacted as of the balance sheet date. A valuation allowance is  provided when deferred
tax assets are not expected to be realized.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>


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<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>


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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><I>ADA-ES,
INC. AND SUBSIDIARIES</I><BR><BR>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></FONT></FONT></P>

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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I><U>Research
and Development Costs</U> </I>&#150; Research and development costs are charged  to
operations in the period incurred.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I><U>Stock-Based
Compensation</U></I><U></U> &#150; Effective January 1, 2006, the Company  adopted
Statement of Financial Accounting Standards No. 123R (SFAS No. 123R),  <I>Share-Based
Payment</I>, which requires the Company to record equity  compensation to employees at
fair value. Prior to January 1, 2006, the Company  elected to use APB 25, which required
expense to be recognized only to the  extent the exercise price of the stock-based
compensation was below the market  price on the date of grant. The modified prospective
approach was used in  adopting SFAS No. 123R; therefore, results prior to January 1, 2006
have not  been restated. For the year ended December 31, 2006, $331,000 was charged to
expense for equity compensation, which amounted to $299,000, after tax and  ($0.05) of
basic and diluted earnings per share.</FONT></FONT> </P></TD>
</TR>
</TABLE>
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     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">If
compensation cost for the Company&#146;s stock-based compensation plans had been
determined based on the fair value at the grant dates for awards under those  plans
consistent with the method of SFAS No. 123R during 2005, then the  Company&#146;s net
income per share for the years ended December 31, 2005 and  would have been adjusted to
the pro forma amounts indicated below:</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>



<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="500" ALIGN="CENTER">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="4"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Years Ended December 31,</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2005</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2004</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="9"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">(In thousands, except per share data)</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="66%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Net income:</FONT></TD>
     <TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">As reported</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;663</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp; 336</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Fair value of stock based compensation, net of tax</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(147</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(48</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Pro forma</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;516</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp; 288</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Net income per share &#150; basic and diluted:</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">As reported</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.13</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.08</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Fair value of stock based compensation</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(0.03</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(0.01</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Pro forma &#150; basic and diluted</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.10</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.07</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
</TABLE>


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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
options granted in 2004 and 2005 had exercise prices equal to the market price  on the
date of the grants. Prior to the third quarter of 2005, the Company  showed expense
related to stock options in the period of grant. The presentation  above, including 2004
amounts, shows expense amortized over the estimated  service period, as required under
SFAS No. 123, <I>Accounting </I> <I>for  Stock-Based Compensation</I>. The average fair
value of each employee option  granted in 2005 and 2004 was approximately $2.18 and
$1.38, respectively, and  was estimated on the date of grant using the Black-Scholes
option-pricing model  with the following weighted average assumptions:</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>



<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="500" ALIGN="CENTER">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="4"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Years Ended December 31,</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2005</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2004</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="68%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Expected volatility</FONT></TD>
     <TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">41%</FONT></TD>
        <TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">35%</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Risk-free interest rate</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2.6%</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2.5%</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Expected life of options (in years)</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4.8</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4.4</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Expected dividends</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">0&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">0&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
</TABLE>


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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I><U><BR>Use
of Estimates</U> </I>&#150; The preparation of the Company&#146;s consolidated  financial
statements in conformity with generally accepted accounting principles  requires the
Company&#146;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: 1)
the impairment of and the remaining  realizability of its intangibles; 2) estimates of
certain overhead and other  rates on research contracts with the U.S. Government, which
are subject to  future audits; 3) fair value of stock options; 4) warranty costs. At this
time,  the Company does not believe any future government audit will result in material
adjustment to previously recorded revenues; 3) the allowance for doubtful  accounts,
which is based on historical experience; 4) the valuation and  classification of
investments in available-for-sale securities, which is based  on estimated fair market
value; and 5) the percentage of completion method of  accounting for significant
long-term contracts, which is based on estimates of  gross margins and of the costs to
complete such contracts.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>


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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">F-9</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

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<!-- MARKER FORMAT-SHEET="Head Major" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><I>ADA-ES,
INC. AND SUBSIDIARIES</I><BR><BR>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></FONT></FONT></P>

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<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I><U>Comprehensive
Income</U></I><U></U> &#150; Comprehensive income is defined to include all  changes in
equity except those resulting from investments by owners and  distributions to owners.
For the years ended December 31, 2006, 2005 and 2004,  comprehensive income includes net
unrealized gains (losses) on investments, net  of income tax expense, of $134,000,
($1,000) and $34,000, respectively.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I><U>Segment
Information</U></I><U></U> &#150; The Company follows established 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. These standards 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 two reportable segments: mercury emission controls  (MEC)
and flue gas conditioning and other (FGC).</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I><U>Recently
Issued Accounting Pronouncements</U></I> &#150;</FONT></FONT> </P></TD>
</TR>
</TABLE>




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<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In
June 2006, the FASB issued FASB Interpretation No. 48 (&#147;FIN 48&#148;),  <I>Accounting
for Uncertainty in Income Taxes &#150; an </I> <I>Interpretation  of FASB Standard No. 109</I>.
FIN 48 prescribes a recognition threshold and  measurement attribute for financial
statement recognition and measurement of a  tax position taken or expected to be taken in
a tax return, and also provides  guidance on de-recognition, classification, interest and
penalties, accounting  in interim periods, disclosure and transition. FIN 48 is effective
for fiscal  years beginning after December 15, 2006. The Company is in the process of
evaluating the financial impact of adopting FIN 48.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In
September 2006, the FASB issued SFAS No. 157, <I>Fair Value Measurements, </I>to  define
fair value, establish a framework for measuring fair value in generally  accepted
accounting principles (GAAP), and expand disclosures about fair value  measurements.
Having a single definition of fair value, together with a  framework for measuring fair
value, is designed to result in increased  consistency and comparability in fair value
measurements. This FASB is effective  for reporting periods beginning after November 15,
2007. The Company is  evaluating its impact and does not expect that adoption of this
FASB will have a  material impact on its financial statements.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In
February 2007, the FASB issued SFAS 159, <I>The Fair Value Option for Financial  Assets
and Financial Liabilities</I>. SFAS 159 permits the measurement of  certain financial
instruments at fair value. Entities may choose to measure  eligible items at fair value
at specified election dates, reporting unrealized  gains and losses on such items at each
subsequent reporting period. SFAS 159 is  effective for fiscal years beginning after
November 15, 2007. The Company has  not evaluated the potential impact of the fair value
option.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>


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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">F-10</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>


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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><I>ADA-ES,
INC. AND SUBSIDIARIES</I><BR><BR>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.&nbsp;&nbsp;&nbsp;
<B><U>PROPERTY AND EQUIPMENT:</U></B></FONT></FONT></P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Property
and equipment consisted of the following at the dates indicated:</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>



<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="500" ALIGN="CENTER">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="4"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Years Ended December 31,</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Life in<BR>years</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2006</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2005</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="4"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="1"><I>(In thousands)</I></FONT></FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="60%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Machinery and equipment</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="10%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">3-10</FONT></TD>
     <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,357</FONT></TD>
        <TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,375</FONT></TD>
        <TD WIDTH="0%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Leasehold improvements</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">3 -7</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">326</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">210</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Furniture and fixtures</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">3-7</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">147</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">78</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,830</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,663</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Less accumulated depreciation and amortization</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(1,033</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(1,013</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total property and equipment, net</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;797</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;650</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
</TABLE>


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<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><BR>Depreciation
and amortization of property and equipment for the years ended December&nbsp;31,  2006,
2005 and 2004 was $271,000, $146,000 and $143,000, respectively.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">3.&nbsp;&nbsp;&nbsp;
<B><U>INVESTMENTS:</U></B></FONT></FONT></P>

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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Investments
in available-for-sale securities are reported at their fair value in investments  in
securities and are summarized as follows at December 31, 2006 and 2005:</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>








<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="500" ALIGN="CENTER">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Gross<BR>Unrealized Gain</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Gross<BR>Unrealized Loss</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Fair Value</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"></FONT></TH>
     <TH COLSPAN="5"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="1"><I>(In thousands)</I></FONT></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="40%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>2006</U></FONT></FONT></TD>
     <TD WIDTH="8%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="12%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD WIDTH="8%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="12%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD WIDTH="8%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Certificates of deposit</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">400</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Common stock</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;305</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(14</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,670</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Debt securities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">14</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(39</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5,679</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;319</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(53</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">7,749</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Less short-term portion</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(2,427</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD COLSPAN="2"></TD>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Long-term portion</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,322</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD COLSPAN="2"></TD>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>2005</U></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Certificates of deposit</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,200</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Common stock</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">142</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(18</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,444</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Debt securities</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(76</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5,534</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;146</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(94</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8,178</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Less short-term portion</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(2,515</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD COLSPAN="2"></TD>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Long-term portion</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,663</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD COLSPAN="2"></TD>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
</TABLE>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">F-11</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><I>ADA-ES,
INC. AND SUBSIDIARIES</I><BR><BR>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></FONT></FONT></P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Realized
gains and losses are determined on the basis of specific identification of the  security
sold. Realized gains and losses are included in Interest and Other  Income in the
accompanying Statements of Income. During 2006 and 2005,  information on securities sold
is as follows:</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="500" ALIGN="CENTER">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2006</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2005</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2004</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="5"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>(In thousands)</I></FONT></FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="54%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Carrying amount of securities sold</FONT></TD>
     <TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7,662</FONT></TD>
        <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9,031</FONT></TD>
        <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,598</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Sale proceeds</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7,668</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8,999</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,587</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Gross realized losses</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(77</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(60</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(12</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Gross realized gains</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;83</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;28</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
</TABLE>


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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><BR>Accumulated
other comprehensive income for 2006, 2005 and 2004 includes unrealized holding  gains,
net of tax, on securities of $167,000, $33,000 and $34,000, respectively.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Debt
securities will mature as follows:</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>


<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="450" ALIGN="CENTER">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Year(s)</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Amount</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="1"><I>(In thousands)</I></FONT></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="50%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2007</FONT></TD>
     <TD WIDTH="22%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="15%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;357</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2008-2011</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,817</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2012-2016</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,396</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Beyond 2016</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,109</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;Total</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$5,679</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
</TABLE>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><BR>4.&nbsp; &nbsp; &nbsp;<B><U>GOVERNMENT
AND INDUSTRY FUNDED CONTRACTS:</U></B></FONT></FONT></P>

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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">ADA
has performed activities under 7 contracts awarded by the Department of Energy  (the
&#147;DOE&#148;) that contributed a total of $6,957,000, $4,298,000 and  $4,163,000 to
revenues in 2006, 2005 and 2004, respectively. These amounts are  included in Mercury
emission control revenues. ADA typically invoices the DOE  and industry cost-share
partners monthly for labor and expenditures plus  estimated overhead factors, less cost
share amounts. The total approved DOE and  industry budgets amount to $32.3 million, of
which the Company&#146;s and  industry partners&#146; cost-share portion is $7.9 million.
The remaining  unearned amount of the contracts was $13.2 million as of December 31,
2006, of  which $7 million is expected to be recognized by the Company in 2007 (including
cash contributions by other industry partners). These contracts are subject to  audit and
future appropriation of funds by Congress. The Company&#146;s  historical experience has
not resulted in significant adverse adjustments to the  Company, however the government
audits for years ended 2006, 2005, 2004, 2003  and 2002 have not yet been finalized.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">5.&nbsp;&nbsp;&nbsp; <B><U>JOINT
VENTURE AND TRANSACTIONS WITH NEXGEN:</U></B></FONT></FONT></P>

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<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In
November  2006, the Company sold a 50% interest in its refined coal technology to a joint
venture called Clean Coal Solutions, LLC, which was formed in October 2006  (&#147;Clean
Coal&#148; or the &#147;JV&#148;), to be operated with NexGen  Refined Coal, LLC (&#147;NexGen&#148;),
to market such technology. During 2006  the Company received non-refundable payments
totaling $1,000,000 from NexGen.  The proceeds of the sale, net of the estimated tax
effect, in the amount of  $619,000 were recorded to Stockholders&#146; Equity. In order
to maintain its  50% interest in the JV, ADA is required to fund its 50% share of
operating costs  for the JV. In 2006 ADA&#146;s share of such cost amounted to less than
$10,000.  At present, ADA is considered the primary beneficiary of this variable interest
entity and will consolidate the accounts of the JV. As of December 31, 2006, the  JV had
no significant assets, liabilities or operations.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>


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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">F-12</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><I>ADA-ES,
INC. AND SUBSIDIARIES</I><BR><BR>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></FONT></FONT></P>

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<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
JV  will initially operate a business supplying chemicals, additives, equipment and
technical services to cyclone fired boiler users, but the JV&#146;s primary  purpose is
to seek and obtain approval from the United States Internal Revenue  Service to qualify
for Section 45 tax credits. If the JV succeeds in obtaining  that approval, NexGen has
the right to maintain its 50% interest by paying ADA  an additional $4 million, in 8
quarterly payments of $500,000 each, beginning  the later of the 4<SUP>th </SUP> quarter
of 2007 or when qualification for the  tax credit is obtained. NexGen can determine not
to make those payments, but it  if does so, it will forfeit a part of its interest in the
JV in direct  proportion to the amount of the $4 million that it elects not to pay. Once
NexGen fails to make any one payment, it cannot come back and reclaim its  interest by
making later payments. In no event is ADA required to refund any of  the payments made to
it by NexGen, even in the event of non-performance under  the agreements described below.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
agreements governing the operation of Clean Coal call for NexGen and ADA-ES to  each pay
50% of the costs of operating the JV to retain their respective 50%  interests, and
specify certain duties that ADA-ES and NexGen are obligated to  perform as members of
Clean Coal to further the business purposes of the JV. If  ADA determines not to make any
agreed upon contribution to the JV, its interest  will be diluted. ADA also entered into
a License Agreement with Clean Coal  pursuant to which it licensed certain patents and
know-how to Clean Coal, on an  exclusive basis, to allow it to exploit the refined coal
technology. Pursuant to  the License Agreement, ADA is required to provide technical
assistance without  charge to the JV relating to the development, marketing and
deployment of the  refined coal technology and, with certain limitations, to prosecute,
maintain  and defend the patents that are a part of that technology, take appropriate
steps to protect the know-how and trade secrets comprising a part of that  technology,
and indemnify and hold Clean Coal harmless in the event that  technology infringes the
intellectual property of any third party. ADA also  entered into a Supply Agreement with
Clean Coal pursuant to which it will supply  the JV with certain chemicals, additives,
equipment and technical services to  facilitate the purposes of the JV. Clean Coal will
pay ADA standard charges for  the chemicals, additives, and technical services it will
supply to the JV. ADA  will supply equipment to the JV at its cost.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6.&nbsp;&nbsp;&nbsp;
<B><U>STOCKHOLDERS&#146; EQUITY:</U></B></FONT></FONT></P>

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<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I><U>Shares
and Stock Options Issued for Pension Expenses and Directors&#146; and Consultant
Compensation</U></I><U></U> &#150; In 2004 the Company issued shares of its  common stock
for the payments of approximately $146,000 of ADA pension related  expenses (see Note 7)
and $35,000 of non-management directors&#146; compensation, based upon the per share
value of unrestricted common stock of ADA  at the time of exchanges. In 2006 and 2005,
the Company issued shares of its  common stock for compensation of $141,000 and $58,000,
respectively, to  non-management directors based on the market price of the common stock,
and  recorded $22,000 and $17,000, respectively, of expense related to stock options
issued to a consultant.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I><U>Sale
of Stock, Convertible Debenture and Grant of Option to Arch</U> &#150;</I> In  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 were
originally placed in escrow of which 19,730 shares  were returned to the Company during
2005 since the market price of the  Company&#146;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. As of December 31, 2006, all of the shares under the option are
available to be purchased.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I><U>Sale
of Stock in 2004 and 2005</U></I><U></U> &#151; In August 2004 and October 2005,  the
Company entered into several Subscription and Investment Agreements. Under  the August
2004 agreements, the Company 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.  Under the October 2005
agreements, the Company privately sold 789,089 shares of  its common stock to a limited
number of institutional investors at a price of  $17.00 per share. Net proceeds to the
Company totaled $12,538,000.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>


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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">F-13</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><I>ADA-ES,
INC. AND SUBSIDIARIES</I><BR><BR>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></FONT></FONT></P>

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<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I><U>Stock
Options</U> </I>&#150; During 2003 the Company adopted the 2003 ADA-ES, Inc  Stock Option
Plan and reserved 400,000 shares of common stock for issuance under  the plan. In
general, all options granted under the plan expire ten years from  the date of grant
unless otherwise specified by the Company&#146;s board of  directors. 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  2006,
19,900 options were granted under this plan.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">During
2004, the Company adopted the 2004 Executive Stock Option Plan. This plan  authorized the
grant of up to 200,000 options to purchase shares of the  Company&#146;s Common Stock to
executive officers of the Company, all of which  were granted in 2004. The option
exercise price of $8.60 per share was the  market price on the date of the grant. The
options are exercisable over a  ten 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. In January 2006, the Board of Directors authorized the vesting of  38,428
options under this plan with a fair value of $77,000. In 2006 1,000 of  such options were
exercised. At December 31, 2006, 39,228 options were  exercisable. In February 2007, the
Board authorized vesting of 17,258 options  under this plan with a fair value of $35,000.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">During
2004, the Company adopted a plan (the &#147;2004 Plan&#148;) for the issuance of  shares
and the grant of options to purchase shares of the Company&#146;s Common  Stock to the
Company&#146;s non-management directors. The 2004 Plan provided for  the award of stock
of 603 shares per individual non-management director or 4,221  shares in total, and the
grant of options of 5,000 per individual non-management  director or 35,000 in total, all
of which were formally granted and issued in  2005 after approval of the 2004 Plan by the
stockholders. The option exercise  price of $13.80 per share for the stock options
granted on November 4, 2004 was  the market price on the date of the grant. The options
are exercisable over a  period of five years and will vest over a three-year period,
one-third each year  for continued service on the Board. If such service is terminated,
the  non-vested portion of the option will be forfeited. During 2006, 15,000 of such
options were forfeited after the resignation of three directors. As of December  31,
2006, one-third of the remaining outstanding options, or a total of 5,000  options vested.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">During
2005 the Company adopted the 2005 Directors&#146; Compensation Plan (the  &#147;2005 Plan&#148;),
which authorized the issuance of shares of Common Stock  and the grant of options to
purchase shares of the Company&#146;s Common Stock  to non-management directors. The 2005
Plan provides a portion of the annual  compensation to non-management directors of the
Company in the form of awards of  shares of Common Stock and vesting of options to
purchase Common Stock of the  Company for services performed for the Company. Under the
2005 Plan, the award  of stock is limited to not more than 1,000 shares per individual
per year, and  the grant of options is limited to 5,000 per individual in total. The
aggregate  number of shares of Common Stock reserved for issuance under the 2005 Plan
totals 90,000 shares (50,000 in the form of stock awards and 40,000 in the form  of
options). The exercise price will be the market price on the date of grant,  the shares
of Stock underlying the option will vest for exercise at a rate of no  more than 1,667
shares per annual period per individual, and any unvested shares  of Stock that are
outstanding at the date the individual is no longer a director  will be forfeited. The
2005 Plan, if not terminated earlier by the Board, will  terminate ten years after the
date of its adoption. In January 2006, the Board  of Directors authorized the issuance of
1,000 shares of Common Stock each, or a  total of 7,000 shares, and in August the Board
authorized the grant of 15,000  options to the non-management directors of the Company.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">F-14</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

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<!-- MARKER FORMAT-SHEET="Head Major" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><I>ADA-ES,
INC. AND SUBSIDIARIES</I><BR><BR>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></FONT></FONT></P>

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<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Following
is a table of options activity for the three years ended December 31, 2006:</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>



<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="500" ALIGN="CENTER">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Employees and<BR>Directors<BR>Options</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Non-Employee<BR>Options</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Weighted<BR>Average<BR>Exercise Price</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="50%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Options Outstanding,</B> January 1, 2004</FONT></FONT></TD>
     <TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">187,310</FONT></TD>
        <TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">80,000</FONT></TD>
        <TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">3.94</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;Options granted</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">275,995</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#151;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">9.32</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;Options expired</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(7,800</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#151;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2.80</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;Options exercised</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(157,765</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(30,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2.51</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Options Outstanding,</B> December 31, 2004</FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">297,740</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">50,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">9.01</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;Options granted</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">96,900</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">30,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">15.29</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;Options expired</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(2,181</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#151;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">13.80</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;Options exercised</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(40,976</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#151;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">7.39</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Options Outstanding,</B> December 31, 2005</FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">351,483</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">80,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.99</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;Options granted</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">34,900</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#151;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.05</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;Options expired</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(23,544</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#151;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.68</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;Options exercised</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(17,870</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#151;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.63</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Options Outstanding,</B> December 31, 2006</FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">344,969</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">80,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.55</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><BR>The
weighted average remaining contractual life for all options as of December 31,  2006 was
approximately 7.5 years. At December 31, 2006, 193,319 options with a  weighted average
exercise price of $11.35 were fully vested and exercisable. Of  the remaining 231,650
options, 69,633 options with a weighted average exercise  price of $15.27 vest in 2007,
21,425 options with a weighted average exercise  price of $13.24 vest in 2008, 16,600
options with a weighted average exercise  price of $11.17 vest in 2009, and the remaining
123,992 options with a weighted  average exercise price of $9.54 vest at the discretion
of the board of directors  based on specific performance objectives of executive officers
and a consultant,  with minimum annual vesting of 11,500 and maximum annual vesting of
46,000.</FONT></FONT> </P></TD>
</TR>
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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
average fair value of each employee and director option granted in 2006 was
approximately $5.52 and was estimated on the date of grant using the  Black-Scholes
option-pricing model with the following weighted average  assumptions:</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>


<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="450" ALIGN="CENTER">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="80%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Expected volatility</FONT></TD>
     <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="15%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">38%-76%</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Risk-free interest rate</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4.0%</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Expected life of options (in years)</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4.0</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Expected dividends</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#151;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
</TABLE>



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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><BR>Following
is information related to options outstanding/exercisable at December 31, 2006:</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>


<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="500" ALIGN="CENTER">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"></FONT></TH>
     <TH COLSPAN="3"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Options Outstanding</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="4"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Options Exercisable</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Range</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Number of<BR>Options</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Weighted<BR>Average<BR>Exercise<BR>Price ($)</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Number of<BR>Options</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Weighted<BR>Average<BR>Exercise<BR>Price ($)</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Weighted<BR>Average<BR>Contractual<BR>Life (in years)</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="30%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$2.80</FONT></TD>
     <TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">11,665</FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2.80</FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">11,665</FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2.80</FONT></TD>
        <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">6.8</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$8.60 - $10.00</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">237,400</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">8.89</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">102,908</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">9.28</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">7.5</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$13.80 - $15.20</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">132,604</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">14.54</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">62,071</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">14.31</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">7.3</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$18.61 - $20.20</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">43,300</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">19.34</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">16,675</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">19.08</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">8.9</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">424,969</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">11.55</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">193,319</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">11.35</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">7.5</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><BR>The
aggregate intrinsic value of options exercised in years ended December 31, 2006,  2005
and 2004, based on an average market price of $18.09, $19.03 and $12.51,  respectively,
was $207,000, $477,000 and $1,733,000, respectively. The aggregate  intrinsic value of
options exercisable at December 31, 2006 was $938,000 based  on a market price of $16.20.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">F-15</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><I>ADA-ES,
INC. AND SUBSIDIARIES</I><BR><BR>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></FONT></FONT></P>

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     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">As
of  December 31, 2006, total compensation costs related to non-vested options, which  had
not yet been recognized was $414,000. The weighted average period over which  such
expense is expected to be recognized is 2.0 years.</FONT></FONT> </P></TD>
</TR>
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<BR>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">7.&nbsp;&nbsp;&nbsp;
<B><U>COMMITMENTS AND CONTINGENCIES:</U></B></FONT></FONT></P>

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     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I><U>Pension
Expense and Retirement Plan</U></I><U></U> &#150; The Company assumed a defined
contribution and 401(k) plan covering all eligible employees as of January 1,  2003. The
Company recognized contribution expense of $237,000, $206,000 and  $161,000 for 2006,
2005 and 2004, respectively, based on a percentage of the  eligible employees&#146; annual
compensation.</FONT></FONT> </P></TD>
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     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I><U>Performance
Guarantee Activated Carbon Injection Systems </U></I><U></U>&#150; Under  contracts to
supply activated carbon injection systems, the Company may grant  performance guarantees
to the owner of the power plants that guarantee the  performance of the associated
equipment for a specified period and the  achievement of a certain level of mercury
removal based upon the injection of a  specified quantity of activated carbon at a
specified rate given other plant  operating conditions. In the event the equipment fails
to perform as specified,  the Company is obligated to correct or replace the equipment.
In the event the  level of mercury removal is not achieved, the Company has a &#147;make
right&#148; obligation within the contract limits. As of December 31, 2006 and  2005,
$120,000 and $21,000, respectively has been accrued for such equipment  warranties and
performance guarantees. No charges against the accrued amount  were made in either year.</FONT></FONT> </P></TD>
</TR>
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     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I><U>Purchase
Obligations</U></I><U></U> &#150; The Company routinely issues purchase orders  for the
major components of the activated carbon injection systems it supplies  to customers. As
of December 31, 2006, the Company had purchase obligations  totaling $1,308,000 that it
expects to pay in 2007.</FONT></FONT> </P></TD>
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     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I><U>Operating
Leases </U></I><U></U>&#151; We lease office facilities under two noncancellable
operating lease agreements. Our facilities leases generally provide for periodic  rent
increases and renewal options. Annual minimum commitments under these  leases are shown
in the table below.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>



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<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Operating Lease<BR>Commitments<BR><I>(In thousands)</I></FONT></FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="70%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>Years ending December 31,</U></FONT></FONT></TD>
     <TD WIDTH="13%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="15%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2007</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;130</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2008</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">125</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2009</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">128</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
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     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;Total operating lease commitments</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;383</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
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     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><BR>Rent
expense totaled $187,000, $153,000, $158,000 in 2006, 2005 and 2004,  respectively.</FONT></FONT> </P></TD>
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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">8.&nbsp;&nbsp;&nbsp;
<B><U>MAJOR CUSTOMERS:</U></B></FONT></FONT></P>

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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Sales
to unaffiliated customers which represent 10% or more of the Company&#146;s  sales for
the years ended December&nbsp;31, 2006, 2005 and 2004 were as follows  (as a percentage
of each entity&#146;s sales):</FONT></FONT> </P></TD>
</TR>
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<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Customer</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2006</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2005</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2004</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="50%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">A (Governmental Contracts)</FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="12%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">24%</FONT></TD>
        <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD WIDTH="12%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">21%</FONT></TD>
        <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD WIDTH="12%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">28%</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">B</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">15%</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">11%</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">10%</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">C</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">11%</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">13%</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#151;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><BR>At
December&nbsp;31, 2006 and 2005, approximately 86% and 89% of the Company&#146;s  trade
receivables were from eight and five customers, respectively.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>


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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">F-16</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>




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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><I>ADA-ES,
INC. AND SUBSIDIARIES</I><BR><BR>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></FONT></FONT></P>

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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">A
significant portion of ADA&#146;s revenue is derived from contracts with the DOE  and
chemical and equipment sales to coal-burning electric power plants.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">9.&nbsp;&nbsp;&nbsp;
<B><U>INCOME TAXES:</U></B></FONT></FONT></P>

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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
following lists the Company&#146;s deferred tax assets and liabilities, which  are
included in Other Assets, Accrued Expenses and Long-term Liabilities,  respectively, in
the accompanying Balance Sheet:</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>





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     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="4"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">At December 31,</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2006</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2005</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="4"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="1"><I>(In thousands)</I></FONT></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="71%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Current assets (liabilities):</FONT></TD>
     <TD WIDTH="7%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD WIDTH="8%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="6%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp; (72</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;(39</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;Unrealized gains &#150; securities held for sale</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(98</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(19</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;Deferred revenues, compensation and other</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">87</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">30</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(83</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(28</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Non-current assets (liabilities)</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;Deferred compensation, warranty and other</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">61</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">9</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;Property and intangible asset differences</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(270</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(60</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;Net loss carryforward</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#151;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">318</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;Tax credits</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">159</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">101</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(50</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">368</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Net tax (liabilities) / assets</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;(133</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;340</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
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     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><BR>As
of  December 31, 2006 and 2005, the Company had approximately $-0- and $891,000 of  tax
loss carryforwards, respectively. Approximately $891,000 and $69,000 of tax  loss
carryforwards were used to reduce taxable income in 2006 and 2005,  respectively. The
Company&#146;s valuation allowance as of December 31, 2006 and  2005 was $-0-, as the
Company believes that it is more likely than not that its  deferred tax assets at those
dates would be realized in the future.</FONT></FONT> </P></TD>
</TR>
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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">At
December 31, 2006, 2005 and 2004, the Company&#146;s current tax provision was  reduced
by $56,000, $268,000 and $395,000, respectively, attributable to the tax  effects of
stock option exercises recorded in stockholders&#146; equity.</FONT></FONT> </P></TD>
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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
following is a reconciliation of the expected Federal tax rate to the actual  income tax
rate &#150; expense (benefit) as of December 31, 2006, 2005 and 2004,  which was
approximately 22%, 34% and 16%, respectively:</FONT></FONT> </P></TD>
</TR>
</TABLE>
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     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="5"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">As of December 31,</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2006</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2005</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2004</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="55%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Expected income tax rate - expense (benefit)</FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">34%</FONT></TD>
        <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">35%</FONT></TD>
        <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD WIDTH="10%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">34%</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Permanent differences</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2%</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(4%</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(4%</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Tax credits</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(9%</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(1%</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(17%</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">State income taxes</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">3%</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">3%</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">3%</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Other</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(8%</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1%</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&#151;</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Actual income tax rate</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">22%</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">34%</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">16%</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
</TABLE>



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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">F-17</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>




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<!-- MARKER PAGE="sheet: 23; page: 23" -->

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><I>ADA-ES,
INC. AND SUBSIDIARIES</I><BR><BR>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.&nbsp;&nbsp;&nbsp;
<B><U>RELATED PARTY TRANSACTIONS</U></B><U></U>:</FONT></FONT></P>

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<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">As
discussed above in Note 6, the Company executed a Securities Subscription and  Investment
Agreement with Arch Coal, Inc in 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&#146;s Common stock  and was also granted an
option to purchase 50,000 shares. The debenture and  accrued interest thereon was repaid
in 2004. In addition, the Company cancelled  a co-marketing agreement of its ADA-249
product and performs certain testing and  research projects under agreements with Arch in
2006. Under such arrangements,  the Company has recorded revenue of $261,000, $230,000
and $25,000 in 2006, 2005  and 2004, respectively. A designee of Arch has been appointed
a seat on the  Company&#146;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&#146;s common stock.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.&nbsp;&nbsp;&nbsp;
<B><U>BUSINESS SEGMENT INFORMATION:</U></B></FONT></FONT></P>

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<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
following information relates to the Company&#146;s two reportable segments: MEC and FGC.
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.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>



<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="500" ALIGN="CENTER">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="5"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Years Ended December 31,</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2006</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2005</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2004</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="5"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>(In thousands)</I></FONT></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="37%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Revenue:</B></FONT></FONT></TD>
     <TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="15%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="15%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="13%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">MEC</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13,607</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8,784</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,940</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">FGC</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,881</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,244</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2,477</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15,488</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11,028</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8,417</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Segment profit:</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">MEC</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,000</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,738</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;996</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">FGC</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">282</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">1,010</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">998</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,282</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,748</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,994</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
</TABLE>



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<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><BR>A
reconciliation of the reported total segment profit to net income for the  periods shown
above is as follows:</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>


<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="500" ALIGN="CENTER">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="5"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Years Ended December 31,</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2006</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2005</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">2004</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="5"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>(In thousands)</I></FONT></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD WIDTH="63%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Total segment profit</FONT></TD>
     <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;3,282</FONT></TD>
        <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;2,748</FONT></TD>
        <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="8%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;1,994</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Non-allocated general and administrative expenses</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(3,011</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(1,940</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(1,458</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Depreciation and amortization</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(284</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(157</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(153</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Interest, other income/expenses and tax</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM" BGCOLOR="#CCEEFF">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;(provision) benefit</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">390</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">12</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">(47</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">)</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Net income</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;377</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;663</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;336</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD COLSPAN="2"></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: #000000 4px double; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
</TABLE>


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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><BR>Non-allocated
general and administrative expenses include costs that benefit the business as a  whole
and are not directly related to one of our segments. Such costs include  but are not
limited to accounting and human resources staff, information systems  costs, facility
costs, audit fees and corporate governance expenses.</FONT></FONT> </P></TD>
</TR>
</TABLE>
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.29
<SEQUENCE>2
<FILENAME>adaex10-29.htm
<DESCRIPTION>2005 DIRECTORS' COMPENSATION PLAN
<TEXT>
<HTML>
<HEAD>
<TITLE>AutoCoded Document</TITLE>
</HEAD>
<BODY>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Exhibit&nbsp; 10.29</B></FONT></FONT></P>

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<A NAME="A001"></A>
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>ADA-ES,
INC.<BR>2005
Directors&#146; Compensation Plan</B></FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ADA-ES,
INC., a Colorado corporation (the &quot;Corporation&quot;), sets forth herein the terms
of the 2005 Directors Compensation  Plan (the &quot;Plan&quot;) as follows:</FONT></FONT></P>

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<A NAME="A003"></A>
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">1. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">PURPOSE</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Plan is intended to advance the interests of the Corporation by providing
eligible directors (as designated pursuant to Section 5 hereof) an opportunity
to acquire or increase a proprietary interest in the Corporation, which thereby
will create a stronger incentive to expend maximum effort for the growth and
success of the Corporation and will encourage such eligible individuals to
continue to service the Corporation.</FONT></FONT></P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> DEFINITIONS</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
purposes of interpreting the Plan and related documents (including Option
Agreements), the following definitions shall apply:</FONT></FONT></P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.1 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> &#147;Affiliate&#148; means
any company or other trade or business that is  controlled by or under common control
with the Corporation, (determined in  accordance with the principles of Section 414(b)
and 414(c) of the Code and the  regulations thereunder) or is an affiliate of the
Corporation within the meaning  of Rule 405 of Regulation C under the 1933 Act.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.2 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> &#147;Board&#148; means
the Board of Directors of the Corporation.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.3 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&#147;Cause&#148; means,
unless otherwise defined in an Option Agreement, (i) gross negligence or  willful
misconduct in connection with the performance of duties; (ii) conviction  of a criminal
offense (other than minor traffic offenses); or (iii) material  breach of any term of any
employment, consulting or other services,  confidentiality, intellectual property or
non-competition agreements, if any,  between Optionee and the Corporation or any of its
Subsidiaries or Affiliates.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.4 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> &#147;Code&#148; means
the Internal Revenue Code of 1986, as now in effect or as  hereafter amended.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.5 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> &#147;Committee&#148; means
the Compensation Committee of the Board, which must  consist of no fewer than two members
of the Board and shall be appointed by the  Board.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.6</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; &#147;Corporation&#148; means
ADA-ES, INC.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.7</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; &#147;Director&#148; means
a member of Board of Directors of the Corporation.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.8</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; &#147;Effective
Date&#148; means the date of adoption of the Plan by the Board.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.9</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; &#147;Employer&#148; means
ADA-ES, INC. or the Subsidiary or Affiliate of the Corporation, which employs the
designated recipient of an Option.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.10</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; &#147;Exchange
Act&#148; means the Securities Exchange Act of 1934, as now in effect or as  hereafter
amended.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.11</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; &#147;Fair
Market Value&#148; means the value of each share of Stock subject to the Plan  determined
as follows: if on the Grant Date or other determination date the shares of  Stock are
listed on an established national or regional stock exchange, are admitted to  quotation
on the National Association of Securities Dealers Automated Quotation System, or  are
publicly traded on an established securities market, the Fair Market Value of the  shares
of Stock shall be the closing bid price of the shares of Stock on such exchange or  in
such market (the highest such closing price if there is more than one such exchange or
market) on the trading day immediately preceding the Grant Date (or on the Grant Date, if
so specified by the Committee or the Board) or such other determination date or, if no
sale of the shares of Stock is reported for such trading day, on the next preceding day
on  which any sale shall have been reported. If the shares of Stock are not listed on
such an  exchange, quoted on such System or traded on such a market, Fair Market Value
shall be  determined by the Board in good faith.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">1</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>


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     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.12</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; &#147;Family
Member&#148; means a person who is a spouse, child, stepchild, grandchild,  parent,
stepparent, grandparent, sibling, niece, nephew, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive
relationships, of the Optionee, any person sharing the Optionee&#146;s household (other
than a tenant or employee), a trust in which these persons (or the Optionee) have more
than fifty percent of the beneficial interest, a foundation in which these persons (or
the  Optionee) control the management of assets, and any other entity in which these
persons  (or the Optionee) own more than fifty percent of the voting interests.</FONT></FONT> </P></TD>
</TR>
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     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.13</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; &#147;Option&#148; means
an option to purchase one or more shares of Stock pursuant to the  Plan.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.14</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; &#147;Option
Agreement&#148; means the written agreement evidencing the grant of an Option  hereunder.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.15</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; &#147;Option
Grant Date&#148; means the later of (i) November 4, 2004 and (ii) the date as  of which
the Optionee and the Corporation, Subsidiary or Affiliate enter the relationship
resulting in the Optionee being eligible for grants.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.16</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; &#147;Optionee&#148; means
a person who holds an Option under the Plan.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.17</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; &#147;Option
Period&#148; means the period during which Options may be exercised as defined in Section
11.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.18</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; &#147;Option
Price&#148; means the purchase price for each share of Stock subject to an  Option.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.19</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; &#147;Plan&#148; means
the ADA-ES, INC. 2005 Director Compensation Plan.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.20</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; &#147;1933
Act&#148; means the Securities Act of 1933, as now in effect or as hereafter amended.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.21</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; &#147;Service
Relationship&#148; means the provision of bona fide services to the  Corporation, a
Subsidiary, or an Affiliate as a director, employee or consultant.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.22 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; &#147;Stock&#148; means
the shares of Common Stock, no par value, of the  Corporation.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.23 </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> &#147;Stock
Award&#148; means the award of shares of Common Stock, no par value,  of the Corporation
under the Plan.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.24</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; &#147;Stock
Award Date&#148; means the later of (i) March 17, 2005 and (ii) the date as of  which the
Stock Recipient is awarded the right to receive Stock.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.25</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; &#147;Stock
Recipient&#148; means a person who receives an award of Stock subject to the  Plan.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.26</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; &#147;Subsidiary&#148; means
any &#147;subsidiary corporation&#148; of the Corporation  within the meaning of Section
425(f) of the Code.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">3. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; ADMINISTRATION</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<A NAME="A005"></A>
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">3.1. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Committee</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Plan shall be administered by the Committee appointed by the Board, which shall
have the full power and authority to take all actions and to make all
determinations required or provided for under the Plan or any Stock Award or
Option granted or Option Agreement entered into hereunder and all such other
actions and determinations not inconsistent with the specific terms and
provisions of the Plan deemed by the Committee to be necessary or appropriate to
the administration of the Plan or any Stock Award or any Option granted or
Option Agreement entered into hereunder. The interpretation and construction by
the Committee of any provision of the Plan or of any Stock Award or any Option
granted or Option Agreement entered into hereunder shall be final and
conclusive.</FONT></FONT></P>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>


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<A NAME="A006"></A>
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">3.2. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; No
Liability</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
member of the Board or of the Committee shall be liable for any action or
determination made, or any failure to take or make an action or determination,
in good faith with respect to the Plan or any Stock Award or any Option granted
or Option Agreement entered into hereunder.</FONT></FONT></P>

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<A NAME="A007"></A>
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">STOCK</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
stock that may be issued pursuant to Options granted under the Plan shall be
Stock, which shares may be treasury shares or authorized but unissued shares.
The number of shares of Stock that may be issued pursuant to Options granted
under the Plan shall not exceed in the aggregate 40,000 shares of Stock, which
number of shares is subject to adjustment as provided in Section 19 hereof. If
any Option or portion thereof is unearned, expires, terminates or is terminated
for any reason prior to exercise in full, the shares of Stock that were subject
to the unexercised portion of such Option shall be available for future Options
granted under the Plan. The number of shares of Stock that may be issued
pursuant to Stock Awards under the Plan shall not exceed in the aggregate 50,000
shares of Stock, which number of shares is subject to adjustment as provided in
Section 19 hereof. If any Stock Award or portion thereof is unearned, expires,
terminates or is terminated for any reason prior to issuance in full, the shares
of Stock of such portion of such Stock Award shall be available for future Stock
Award under the Plan.</FONT></FONT></P>

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<A NAME="A008"></A>
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">5. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> ELIGIBILITY</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock
Awards and Options may be granted under the Plan to any non-management Director
of the Corporation. An individual may not hold more than one Option, subject to
such restrictions as are provided herein.</FONT></FONT></P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> EFFECTIVE
DATE AND TERM</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<A NAME="A009"></A>
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6.1. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Effective
Date</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Plan shall become effective as of March 17, 2005, the date of adoption of the
final Plan by the Board, subject to stockholders&#146; approval of the Plan;
provided, however, that upon approval of the Plan by the stockholders of the
Corporation, all Stock Awards and Options granted under the Plan on or after the
effective date shall be fully effective as if the stockholders of the
Corporation had approved the Plan on the effective date. If the stockholders
fail to approve the Plan, any Stock Awards and Options granted hereunder shall
be null, void and of no effect.</FONT></FONT></P>

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<A NAME="A010"></A>
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6.2. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Term</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
not sooner terminated by the Board, the Plan shall terminate on the date 10
years after the effective date.</FONT></FONT></P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">7. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> STOCK
AWARDS AND ANNUAL LIMITATION</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to the terms and conditions of the Plan, the Committee may, at any time and from
time to time prior to the date of termination of the Plan, issue to such
eligible Directors a Stock Award. Such Stock Awards will be limited to not more
than 1,000 shares of Stock for any annual period of service per individual,
which number of shares is subject to adjustment as provided in Section 19
hereof. The Corporation may or may not register the Stock so issued for sale
with the U.S. Securities and Exchange Commission and is under no obligation to
do so.</FONT></FONT></P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">8. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> GRANT
OF OPTIONS</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to the terms and conditions of the Plan, the Committee may, at any time and from
time to time prior to the date of termination of the Plan, grant to such
eligible Directors Options to purchase such number of shares of Stock with the
following terms and conditions: the exercise price shall be the market price on
the date of grant, the shares of Stock underlying the Option will vest for
exercise at a rate of no more than 1,667 shares per annual period, and any
unvested shares of Stock that are outstanding at the date the Optionee no longer
is a Director of the Corporation or in a Service Relationship will be forfeited.
Without limiting the foregoing, the Committee may at any time, with the consent
of the Optionee, amend the terms of outstanding Options or issue new Options in
exchange for the surrender and cancellation of outstanding Options. The date on
which the Committee approves the grant of an Option (or such later date as is
specified by the Committee) shall be considered the date on which such Option is
granted. The maximum number of shares of Stock subject to Options that can be
awarded under the Plan to any person is 5,000 shares, which number of shares is
subject to adjustment as provided in Section 19 hereof.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">3</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>


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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">9. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> OPTION
AGREEMENTS</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
Options granted pursuant to the Plan shall be evidenced by written agreements to
be executed by the Corporation and the Optionee, in such form or forms as the
Committee shall from time to time determine. Option Agreements covering Options
granted from time to time or at the same time need not contain similar
provisions; provided, however, that all such Option Agreements shall comply with
all terms of the Plan.</FONT></FONT></P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> OPTION
PRICE</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
purchase price of each share of Stock subject to an Option shall be fixed by the
Committee and stated in each Option Agreement. As provided in Section 8 above,
the Option Price shall be not less than the fair market value of a share of the
Stock covered by the Option on the date the Option is granted (as determined in
good faith by the Committee).</FONT></FONT></P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> TERM
AND EXERCISE OF OPTIONS</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<A NAME="A011"></A>
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.1. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Term</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
Option granted under the Plan shall terminate and all rights to purchase shares
thereunder shall cease upon the expiration of 10 years from the date such Option
is granted, or on such date prior thereto as may be fixed by the Committee and
stated in the Option Agreement relating to such Option.</FONT></FONT></P>

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<A NAME="A012"></A>
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.2. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Exercise
by Optionee</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Only
the Optionee receiving an Option or a transferee of an Option pursuant to
Section 12 (or, in the event of the Optionee&#146;s legal incapacity or
incompetency, the Optionee&#146;s guardian or legal representative, and in the
case of the Optionee&#146;s death, the Optionee&#146;s estate) may exercise the
Option.</FONT></FONT></P>

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<A NAME="A013"></A>
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.3. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Option
Period and Limitations on Exercise</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
Option granted under the Plan shall be exercisable in whole or in part at any
time and from time to time over a period commencing on or after the date of
grant of the Option and ending upon the expiration or termination of the Option,
as the Committee shall determine and set forth in the Option Agreement relating
to such Option, but at no greater rate of vesting than set forth in Section 8
above. Without limitation of the foregoing, the Committee, subject to the terms
and conditions of the Plan, may in its sole discretion provide that an Option
may not be exercised in whole or in part for any period or periods of time
during which such Option is outstanding as the Committee shall determine and set
forth in the Option Agreement relating to such Option. Any such limitation on
the exercise of an Option contained in any Option Agreement may be rescinded,
modified or waived by the Committee, in its sole discretion, at any time and
from time to time after the date of grant of such Option. Notwithstanding any
other provisions of the Plan, no Option shall be exercisable in whole or in part
prior to the date the Plan is approved by the stockholders of the Corporation as
provided in Section 6.1 hereof.</FONT></FONT></P>

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<A NAME="A014"></A>
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.4. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Method
of Exercise</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An
Option that is exercisable hereunder may be exercised by delivery to the
Corporation on any business day, at its principal office addressed to the
attention of the Committee, of written notice of exercise, which notice shall
specify the number of shares for which the Option is being exercised, and shall
be accompanied by payment in full of the Option Price of the shares for which
the Option is being exercised. Payment of the Option Price for the shares of
Stock purchased pursuant to the exercise of an Option shall be made, as
determined by the Committee and set forth in the Option Agreement pertaining to
an Option by cash or by certified check payable to the order of the Corporation.
Payment in full of the Option Price need not accompany the written notice of
exercise provided the notice directs that the Stock certificate or certificates
for the shares for which the Option is exercised be delivered to a licensed
broker acceptable to the Corporation as the agent for the individual exercising
the Option and, at the time such Stock certificate or certificates are
delivered, the broker tenders to the Corporation cash (or cash equivalents
acceptable to the Corporation) equal to the Option Price plus the amount (if
any) of federal and/or other taxes which the Corporation may, in its judgment,
be required to withhold with respect to the exercise of the Option. An attempt
to exercise any Option granted hereunder other than as set forth above shall be
invalid and of no force and effect. Promptly after the exercise of an Option and
the payment in full of the Option Price of the shares of Stock covered thereby,
the individual exercising the Option shall be entitled to the issuance of a
Stock certificate or certificates evidencing such individual&#146;s ownership of
such shares. An individual holding or exercising an Option shall have none of
the rights of a stockholder until the shares of Stock covered thereby are fully
paid and issued to such individual and, except as provided in Section 19 hereof,
no adjustment shall be made for dividends or other rights for which the record
date is prior to the date of such issuance.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>


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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">12. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> TRANSFERABILITY
OF OPTIONS</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<A NAME="A015"></A>
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">12.1. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Transferability
of Options</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as provided in Section 12.2, during the lifetime of an Optionee, only the
Optionee (or, in the event of legal incapacity or incompetency, the
Optionee&#146;s guardian or legal representative) may exercise an Option. Except
as provided in Section 12.2, no Option shall be assignable or transferable by
the Optionee to whom it is granted, other than by will or the laws of descent
and distribution.</FONT></FONT></P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">12.2. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Family
Transfers.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to the terms of the applicable Option Agreement, an Optionee may transfer all or
part of an Option to any Family Member; provided that subsequent transfers of
transferred Options are prohibited except those in accordance with this Section
12.2 or by will or the laws of descent and distribution; and, provided further,
that, except with the consent of the Board or the Committee, there may be no
consideration for any transfer made pursuant to this section. Following
transfer, any such Option shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer, provided that for
purposes of Section 12.2 hereof the term &#147;Optionee&#148; shall be deemed to
refer to the transferee. The events of termination of the Service Relationship
of Sections 13 and 14 hereof shall continue to be applied with respect to the
original Optionee, following which the Option shall be exercisable by the
transferee only to the extent, and for the periods, specified in Section 11.3.</FONT></FONT></P>

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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">13. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> TERMINATION
OF SERVICE RELATIONSHIP</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
the termination of the Service Relationship of an Optionee with the Corporation,
a Subsidiary or an Affiliate, other than by reason of the death or
&#147;permanent and total disability&#148; (within the meaning of Section
22(e)(3) of the Code) of such Optionee or for Cause, any Option granted to an
Optionee pursuant to the Plan shall continue to be exercisable only to the
extent that it was exercisable immediately before such termination; provided,
however, such Option shall terminate thirty (30) days after the date of such
termination of Service Relationship, unless earlier terminated pursuant to
Section 11.1 hereof, and such Optionee shall have no further right to purchase
shares of Stock pursuant to such Option; and provided further, that the
Committee may provide, by inclusion of appropriate language in any Option
Agreement, that an Optionee may (subject to the general limitations on exercise
set forth in Section 11.3 hereof), in the event of termination of the Service
Relationship of the Optionee with the Corporation, a Subsidiary or an Affiliate,
exercise an Option, in whole or in part, at any time subsequent to such
termination of Service Relationship and prior to termination of the Option
pursuant to Section 11.1 hereof, either subject to or without regard to any
installment limitation on exercise imposed pursuant to Section 11.3 hereof, as
the Committee, in its sole and absolute discretion, shall determine and set
forth in the Option Agreement. Upon the termination of the Service Relationship
of an Optionee with the Corporation, a Subsidiary or an Affiliate for Cause, any
Option granted to an Optionee pursuant to the Plan shall terminate and such
Optionee shall have no further right to purchase shares of Stock pursuant to
such Option; and provided however, that the Committee may provide, by inclusion
of appropriate language in any Option Agreement, that an Optionee may (subject
to the general limitations on exercise set forth in Section 11.3 hereof), in the
event of termination of the Service Relationship of the Optionee with the
Corporation, a Subsidiary or an Affiliate for Cause, exercise an Option, in
whole or in part, at any time subsequent to such termination of Service
Relationship and prior to termination of the Option pursuant to Section 11.1
hereof, either subject to or without regard to any installment limitation on
exercise imposed pursuant to Section 11.3 hereof, as the Committee, in its sole
and absolute discretion, shall determine and set forth in the Option Agreement.
Whether a leave of absence or leave on military or government service shall
constitute a termination of Service Relationship for purposes of the Plan shall
be determined by the Committee, which determination shall be final and
conclusive. For purposes of the Plan, including without limitation this Section
13 and Section 14, unless otherwise provided in an Option Agreement, a
termination of Service Relationship with the Corporation, a Subsidiary or an
Affiliate shall not be deemed to occur if the Optionee immediately thereafter
has a Service Relationship with the Corporation, any other Subsidiary or any
other Affiliate.</FONT></FONT></P>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">5</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>


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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">14. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> RIGHTS
IN THE EVENT OF DEATH OR DISABILITY</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<A NAME="A016"></A>
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">14.1. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Death</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
an Optionee dies while in a Service Relationship with the Corporation, a
Subsidiary or an Affiliate or within the period following the termination of
such Service Relationship during which the Option is exercisable under Section
13 or 14.2 hereof, the executors, administrators, legatees or distributees of
such Optionee&#146;s estate shall have the right (subject to the general
limitations on exercise set forth in Section 11.3 hereof), at any time within
one year after the date of such Optionee&#146;s death and prior to termination
of the Option pursuant to Section 11.1 hereof, to exercise, in whole or in part,
any Option held by such Optionee at the date of such Optionee&#146;s death,
whether or not such Option was exercisable immediately prior to such
Optionee&#146;s death; provided, however, that the Committee may provide by
inclusion of appropriate language in any Option Agreement that, in the event of
the death of an Optionee, the executors, administrators, legatees or
distributees of such Optionee&#146;s estate may exercise an Option (subject to
the general limitations on exercise set forth in Section 11.3 hereof), in whole
or in part, at any time subsequent to such Optionee&#146;s death and prior to
termination of the Option pursuant to Section 11.1 hereof, either subject to or
without regard to any installment limitation on exercise imposed pursuant to
Section 11.3 hereof, as the Committee, in its sole and absolute discretion,
shall determine and set forth in the Option Agreement.</FONT></FONT></P>

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<A NAME="A017"></A>
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">14.2. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Disability</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
an Optionee terminates a Service Relationship with the Corporation, a Subsidiary
or an Affiliate by reason of the &#147;permanent and total disability&#148;
(within the meaning of Section 22(e)(3) of the Code) of such Optionee, then such
Optionee shall have the right (subject to the general limitations on exercise
set forth in Section 11.3 hereof), at any time within one year after such
termination of Service Relationship and prior to termination of the Option
pursuant to Section 11.1 hereof, to exercise, in whole or in part, any Option
held by such Optionee at the date of such termination of Service Relationship,
whether or not such Option was exercisable immediately prior to such termination
of Service Relationship; provided, however, that the Committee may provide, by
inclusion of appropriate language in any Option Agreement, that an Optionee may
(subject to the general limitations on exercise set forth in Section 11.3
hereof), in the event of the termination of the Service Relationship of the
Optionee with the Corporation or a Subsidiary by reason of the &#147;permanent
and total disability&#148; (within the meaning of Section 22(e)(3) of the Code)
of such Optionee, exercise an Option, in whole or in part, at any time
subsequent to such termination of Service Relationship and prior to termination
of the Option pursuant to Section 11.1 hereof, either subject to or without
regard to any installment limitation on exercise imposed pursuant to Section
11.3 hereof, as the Committee, in its sole and absolute discretion, shall
determine and set forth in the Option Agreement. Whether a termination of a
Service Relationship is to be considered by reason of &#147;permanent and total
disability&#148; for purposes of the Plan shall be determined by the Committee,
which determination shall be final and conclusive.</FONT></FONT></P>

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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">15. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> USE
OF PROCEEDS</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
proceeds received by the Corporation from the sale of Stock pursuant to Options
granted under the Plan shall constitute general funds of the Corporation.</FONT></FONT></P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">16. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> SECURITIES
LAWS</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Corporation shall not be required to sell or issue any shares of Stock under any
Stock Award or Option if the sale or issuance of such shares would constitute a
violation by the individual receiving the Stock Award or exercising the Option
or by the Corporation of any provisions of any law or regulation of any
governmental authority, including, without limitation, any federal or state
securities laws or regulations. If at any time the Corporation shall determine,
in its discretion, that the listing, registration or qualification of any shares
subject to the Stock Award or the Option upon any securities exchange or under
any state or federal law, or the consent of any government regulatory body, is
necessary or desirable as a condition of, or in connection with, the issuance or
purchase of shares, the Stock Award may not be issued or the Option may not be
exercised in whole or in part unless such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Corporation, and any delay caused thereby shall in no way
affect the date of termination of the Option. Specifically in connection with
the Securities Act, upon exercise of any Option or issuance of any Stock Award,
unless a registration statement under the Securities Act is in effect with
respect to the shares of Stock covered by such Option or Stock Award, the
Corporation shall not be required to sell or issue such shares unless the
Corporation has received evidence satisfactory to the Corporation that the
Optionee or Stock Recipient may acquire such shares pursuant to an exemption
from registration under the Securities Act. Any determination in this connection
by the Corporation shall be final and conclusive. The Corporation may, but shall
in no event be obligated to, register any securities covered hereby pursuant to
the Securities Act. The Corporation shall not be obligated to take any
affirmative action in order to cause the exercise of an Option or the issuance
of shares pursuant thereto or pursuant to a Stock Award to comply with any law
or regulation of any governmental authority. As to any jurisdiction that
expressly imposes the requirement that an issuance of a Stock Award or an Option
shall not be exercisable unless and until the shares of Stock covered by such
Stock Award or Option are registered or are subject to an available exemption
from registration, the Stock Award or exercise of such Option (under
circumstances in which the laws of such jurisdiction apply) shall be deemed
conditioned upon the effectiveness of such registration or the availability of
such an exemption.</FONT></FONT></P>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>


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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">17. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> EXCHANGE
ACT: RULE 16b-3</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<A NAME="A018"></A>
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">17.1. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; General</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Plan is intended to comply with Rule 16b-3 (&#147;Rule 16b-3&#148;) (and any
successor thereto) under the Exchange Act. Any provision inconsistent with Rule
16b-3 shall, to the extent permitted by law and determined to be advisable by
the Committee (constituted in accordance with Section 17.2 hereof), be
inoperative and void.</FONT></FONT></P>

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<A NAME="A019"></A>
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">17.2. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Compensation
Committee</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Committee appointed in accordance with Section 3.1 hereof shall consist of not
fewer than two members of the Board each of whom shall qualify (at the time of
appointment to the Committee and during all periods of service on the Committee)
in all respects as a &#147;non-employee director&#148; as defined in Rule 16b-3.</FONT></FONT></P>

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<A NAME="A020"></A>
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">17.3. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Restriction
on Transfer of Stock</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
Stock Recipient or Optionee who is considered an &#147;insider&#148; of the
Corporation subject to Section 16 of the Exchange Act shall be permitted to sell
Stock (which such &#147;insider&#148; had received in a Stock Award or upon
exercise of an Option) during the three months immediately following such Stock
Award or the grant of such Option.</FONT></FONT></P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">18. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> AMENDMENT
AND TERMINATION</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board may, at any time and from time to time, suspend or terminate the Plan and
make such changes in or additions to the Plan as it may deem proper, provided
that, if and to the extent provided by applicable law or regulation, no such
suspension or termination of, change in or addition to the Plan shall be made
unless such suspension or termination of, or change in or addition to the Plan
is authorized by the Company&#146;s stockholders. Except as permitted under
Section 19 hereof, no suspension or termination of the Plan or any change in or
addition to the Plan shall, without the consent of any Optionee who is adversely
affected thereby, alter any Options previously granted to the Optionee pursuant
to the Plan.</FONT></FONT></P>

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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">19. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> EFFECT
OF CHANGES IN CAPITALIZATION</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<A NAME="A021"></A>
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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">19.1. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Changes
in Stock</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the number of outstanding shares of Stock is increased or decreased or changed
into or exchanged for a different number or kind of shares or other securities
of the Corporation by reason of any recapitalization, reclassification, stock
split-up, combination of shares, exchange of shares, stock dividend or other
distribution payable in capital stock, or other increase or decrease in such
shares effected without receipt of consideration by the Corporation, occurring
after the effective date of the Plan, a proportionate and appropriate adjustment
shall be made by the Corporation in the number and kind of shares issuable and
exercisable under the Plan and for which Options are outstanding, so that the
proportionate interest of the Optionee immediately following such event shall,
to the extent practicable, be the same as immediately prior to such event. Any
such adjustment in outstanding Options shall not change the aggregate Option
Price payable with respect to shares subject to the unexercised portion of the
Option outstanding but shall include a corresponding proportionate adjustment in
the Option Price per share. Notwithstanding the foregoing, in the event of a
spin-off that results in no change in the number of outstanding shares of Stock
of the Corporation, the Corporation may, in such manner as the Corporation deems
appropriate, adjust (i) the number and kind of shares of Stock subject to
outstanding Options and/or (ii) the exercise price of outstanding Options.</FONT></FONT></P>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">7</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">19.2. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Reorganization
With Corporation Surviving</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to Section 19.3 hereof, if the Corporation shall be the surviving entity in any
reorganization, merger or consolidation of the Corporation with one or more
other entities, any Option theretofore granted pursuant to the Plan shall
pertain to and apply to the securities to which a holder of the number of shares
of Stock subject to such Option would have been entitled immediately following
such reorganization, merger or consolidation, with a corresponding proportionate
adjustment of the Option Price per share so that the aggregate Option Price
thereafter shall be the same as the aggregate Option Price of the shares
remaining subject to the Option immediately prior to such reorganization, merger
or consolidation.</FONT></FONT></P>

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<A NAME="A023"></A>
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">19.3. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Other
Reorganizations; Sale of Assets or Stock</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
the dissolution or liquidation of the Corporation, or upon a merger,
consolidation or reorganization of the Corporation with one or more other
entities in which the Corporation is not the surviving entity, or upon a sale of
substantially all of the assets of the Corporation to another person or entity,
or upon any transaction (including, without limitation, a merger or
reorganization in which the Corporation is the surviving entity) approved by the
Board that results in any person or entity (other than persons who are holders
of stock of the Corporation at the time the Plan is approved by the Stockholders
and other than an Affiliate) owning 80 percent or more of the combined voting
power of all classes of stock of the Corporation, the Plan and all Options
outstanding hereunder shall terminate, except to the extent provision is made in
connection with such transaction for the continuation of the Plan and/or the
assumption of the Options theretofore granted, or for the substitution for such
Options of new options covering the stock of a successor entity, or a parent or
subsidiary thereof, with appropriate adjustments as to the number and kinds of
shares and exercise prices, in which event the Plan and Options theretofore
granted shall continue in the manner and under the terms so provided. In the
event of any such termination of the Plan, each Optionee shall have the right
(subject to the general limitations on exercise set forth in Section 11.3 hereof
and except as otherwise specifically provided in the Option Agreement relating
to such Option), immediately prior to the occurrence of such termination and
during such period occurring prior to such termination as the Committee in its
sole discretion shall designate, to exercise such Option in whole or in part,
whether or not such Option was otherwise exercisable at the time such
termination occurs, but subject to any additional provisions that the Committee
may, in its sole discretion, include in any Option Agreement. The Committee
shall send written notice of an event that will result in such a termination to
all Optionees not later than the time at which the Corporation gives notice
thereof to its stockholders.</FONT></FONT></P>

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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">19.4. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Adjustments</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Adjustments
under this Section 19 relating to stock or securities of the Corporation shall
be made by the Committee, whose determination in that respect shall be final and
conclusive. No fractional shares of Stock or units of other securities shall be
issued pursuant to any such adjustment, and any fractions resulting from any
such adjustment shall be eliminated in each case by rounding downward to the
nearest whole share or unit.</FONT></FONT></P>

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<A NAME="A025"></A>
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">19.5. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> No
Limitations on Corporation</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
grant of an Option pursuant to the Plan shall not affect or limit in any way the
right or power of the Corporation to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge,
consolidate, dissolve or liquidate, or to sell or transfer all or any part of
its business or assets.</FONT></FONT></P>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">8</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>


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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">20. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> WITHHOLDING</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Corporation or a Subsidiary may be obligated to withhold federal and local
income taxes and Social Security taxes to the extent that an Optionee or Stock
Recipient realizes ordinary income in connection with a Stock Award or the
exercise of an Option. The Corporation or a Subsidiary may withhold amounts
needed to cover such taxes from payments otherwise due and owing to a Stock
Recipient or an Optionee, and upon demand the Stock Recipient or Optionee will
promptly pay to the Corporation or a Subsidiary having such obligation any
additional amounts as may be necessary to satisfy such withholding tax
obligation. Such payment shall be made in cash or cash equivalents.</FONT></FONT></P>

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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">21. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> DISCLAIMER
OF RIGHTS</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
provision in the Plan or in any Option granted or Option Agreement entered into
pursuant to the Plan shall be construed to confer upon any individual the right
to remain in the employ of the Corporation, any Subsidiary or any Affiliate, or
to interfere in any way with the right and authority of the Corporation, any
Subsidiary or any Affiliate either to increase or decrease the compensation of
any individual at any time, or to terminate any employment or other relationship
between any individual and the Corporation, any Subsidiary or any Affiliate. The
obligation of the Corporation to pay any benefits pursuant to the Plan shall be
interpreted as a contractual obligation to pay only those amounts described
herein, in the manner and under the conditions prescribed herein. The Plan shall
in no way be interpreted to require the Corporation to transfer any amounts to a
third party trustee or otherwise hold any amounts in trust or escrow for payment
to any participant or beneficiary under the terms of the Plan.</FONT></FONT></P>

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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">22. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> NONEXCLUSIVITY</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither
the adoption of the Plan nor the submission of the Plan to the stockholders of
the Corporation for approval shall be construed as creating any limitations upon
the right and authority of the Board to adopt such other incentive compensation
arrangements (which arrangements may be applicable either generally to a class
or classes of individuals or specifically to a particular individual or
individuals) as the Board in its discretion determines desirable, including,
without limitation, the granting of stock options otherwise than under the Plan.</FONT></FONT></P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">23. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> GOVERNING
LAW</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Plan and all Options to be granted hereunder shall be governed by the laws of
the State of Colorado (but not including the choice of law rules thereof).</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN
WITNESS WHEREOF, the Corporation has caused its duly authorized officer to
execute this Plan as of the 17th day of March, 2005 to evidence its adoption of
this Plan.</FONT></FONT></P>

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<A NAME="A027"></A>
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     <TD WIDTH="50%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">ADA-ES,
INC.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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     <TD WIDTH="50%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">By:<U>&nbsp;/s/ &nbsp;Michael D. Durham</U></FONT></FONT> </P></TD>
</TR>
</TABLE>

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<A NAME="A028"></A>
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     <TD WIDTH="55%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Michael
D.  Durham<BR>President</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>
<BR><BR><BR><BR><BR>
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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">9</FONT></FONT> </P>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.34
<SEQUENCE>3
<FILENAME>adaex10-34.htm
<DESCRIPTION>EMPLOYMENT AGREEMENT
<TEXT>
<HTML>
<HEAD>
<TITLE>AutoCoded Document</TITLE>
</HEAD>
<BODY>


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<A NAME="A002"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Exhibit 10.34</B></FONT></FONT></P>

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<A NAME="A003"></A>
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>ADA
ENVIRONMENTAL SOLUTIONS, LLC<BR>EMPLOYMENT AGREEMENT</B></FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS AGREEMENT
made and entered into this 1st day of March, 2003, by and between ADA
Environmental Solutions, LLC, a Colorado limited liability company, whose
principal offices are located at 8100 SouthPark Way, Unit B, Littleton, Colorado
80120 (the &#147;Company&#148;), and Sharon Sjostrom (the &#147;Employee&#148;)
whose address is 2416 Emerson Street, Denver, CO 80205.</FONT></FONT></P>

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<A NAME="A005"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>RECITALS:</B></FONT></FONT></P>

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     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">A. </FONT></FONT></TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> The
Company has made Employee an offer of employment.</FONT></FONT> </P></TD>
</TR>
</TABLE>

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     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">B. </FONT></FONT></TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Employee
desires to accept the offer.</FONT></FONT> </P></TD>
</TR>
</TABLE>

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     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">C. </FONT></FONT></TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> The
Company and Employee desire to enter into this Agreement to set forth the terms and
conditions of the employment.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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:</FONT></FONT></P>

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     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">1. </FONT></FONT></TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Definitions.</U></FONT></FONT> </P></TD>
</TR>
</TABLE>


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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Capitalized
terms are used herein with the meanings as specified in Paragraph 6 hereof.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2. </FONT></FONT></TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Employment.</U></FONT></FONT> </P></TD>
</TR>
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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The&nbsp; Company
hereby employs the Employee and Employee hereby accepts such employment upon the  terms
and conditions set forth herein.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">3. </FONT></FONT></TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Position,
Duties and Authority.</U></FONT></FONT> </P></TD>
</TR>
</TABLE>

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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">During
the term of this Agreement, Employee shall be employed as Director of Technology
Development.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4. </FONT></FONT></TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Obligations
of Employee.</U></FONT></FONT> </P></TD>
</TR>
</TABLE>

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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Employee
hereby agrees that he will devote a minimum of 40 hours per week to the  fulfillment of
his obligations hereunder.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">5. </FONT></FONT></TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Compensation
and Benefits.</U></FONT></FONT> </P></TD>
</TR>
</TABLE>

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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In
consideration of Employee&#146;s agreement to be employed by the Company and as
reasonable compensation for services to be rendered hereunder, the Company  agrees as
follows:</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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     <TD ALIGN="LEFT" WIDTH="6%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">a) </FONT></FONT></TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Benefits</U>.
<BR>Employee
shall be entitled to the standard benefits and perquisites from time to time  available
to full-time employees of the Company as outlined in the Policy and  Procedures Manual
and with additional details listed in 5c-f.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="6%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">b) </FONT></FONT></TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Regular
Compensation</U>. <BR>The
Company shall pay Employee an annualized salary  of $78,208.00, beginning March 31, 2003,
payable bi-weekly as part of the  Company&#146;s normal payroll procedures. On September
1, 2003, the six-month  anniversary of the acquisition of EMC Engineering, Company shall
raise  Employee&#146;s annual salary to $90,000, payable bi-weekly as part of the  Company&#146;s
normal payroll procedures. Increases in compensation, if any,  shall be at the discretion
of the Managers of the Company.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Page 1
of 9</I></FONT></FONT></P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

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     <TD ALIGN="LEFT" WIDTH="6%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">c) </FONT></FONT></TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Option
Benefit. Upon the execution of this agreement, Employee will receive an  option for 7,000
shares of Company stock at a set price of $2.50.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="6%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">d) </FONT></FONT></TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Health
Benefits. Company shall pay for the medical, dental, and vision insurance  of the
Employee according to the Company&#146;s health benefit plans available  to full-time
employees. Company will cover Employee dental expenses until the  employee is eligible to
join the dental plan beginning on the first of the month  following 3 months of
employment up to $1,000. The Employee shall also be  entitled to the standard benefits
and perquisites from time to time available to  full-time employees as outlined in the
Policy and Procedures Manual.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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     <TD ALIGN="LEFT" WIDTH="6%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">e) </FONT></FONT></TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Retirement
Benefits. Upon execution of this agreement, Employee will be  immediately vested in
Company&#146;s retirement plan.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="6%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">f) </FONT></FONT></TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Vacation.
As of March 1, 2003, Employee will receive seven years towards her  tenure and will be
awarded the amount of vacation awarded to any employee of  this tenure according to the
Policy and Procedures Manual.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6. </FONT></FONT></TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Definitions.</U></FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>


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<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="6%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">a) </FONT></FONT></TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> &#147;<U>Invention</U>&#148; shall
mean any idea, discovery, article, process,  formulation, composition, combination,
design, modification or improvement,  whether or not patentable.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="6%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">b) </FONT></FONT></TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> &#147;<U>Copyright
Works</U>&#148; 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.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="6%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">c) </FONT></FONT></TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> &#147;<U>Confidential
Subject Matter</U>&#148; 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.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">7. </FONT></FONT></TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Disclosure/Ownership
of Invention and Confidential Subject Matter.</U></FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>


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<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="6%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">a) </FONT></FONT></TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Prior
to Employment</U><BR>Employee
agrees that Attachment A provides adequate description and disclosure of  Inventions and
Confidential Information considered owned by Employee or  third-party with whom Employee
is contractually bound prior to becoming employed  by Company. Throughout the term of
this agreement and following its termination,  even in the case of breach of contract by
either party, the items identified in  Attachment A are considered the property of
Employee (&#147;Employee  Intellectual Property&#148;) or of a third-party (&#147;Third
Party Intellectual  Property&#148;). Although Attachment A may not be all inclusive of
all  intellectual property owned by Employee or third parties, any ownership rights
Employee wishes to defend must be itemized in Attachment A. Employee may amend
Attachment A at any time as long as the claim can be supported with  documentation
demonstrating the rightful ownership of the Employee or third  party.
</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Page 2
of 9</I></FONT></FONT></P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="6%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">b) </FONT></FONT></TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>During
Employment</U>.<BR> Employee agrees that during the term of  Employee&#146;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&#146;s employment with Company will be the sole and  exclusive property of the
Company.<BR><BR>In the
event that the Employee, during her term of employment at the Company, develops
a derivative of the Employee Intellectual Property, or an Invention of which the
Employee Intellectual Property is a component, the new Invention or Confidential
Subject Matter shall be considered the joint property of the Company and the
Employee and the parties must execute a separate agreement defining the Employee
and Company joint ownership and an agreed upon royalty-free license arrangement
for the new Invention/Confidential Subject Matter and any of its derivatives
(Joint Ownership Agreement).<BR><BR>In the
event that the Employee, during her term of employment at the Company, develops
a derivative of the Third Party Intellectual Property, or an Invention of which
the Third Party Intellectual Property is a component, the ownership of the new
Invention or Confidential Subject Matter defined by the pre-existing agreements
or obligations as defined in Attachment A, if any.
</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="6%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">c) </FONT></FONT></TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Post
Employment</U>. Employee further agrees that, during the two (2) year  period following
any termination of Employee&#146;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&#146;s employment with Company will become the
sole and  exclusive property of the Company.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="9%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">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&#146;s
employment with Company AND  which has no basis in  or connection to the Employee
Intellectual Property or Third Party  Intellectual  Property will become the sole and
exclusive property of the Company.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>



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<P ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Page 3
of 9</I></FONT></FONT></P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

<!-- *************************************************************************** -->
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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="8%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Company
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&#146;s  employment  with Company AND which has basis in or  connection to the
Employee  Intellectual Property  or any Company  Invention/Confidential Subject Matter
which is  based on or connected to  Employee  Intellectual Property will become the joint
property  of Employee and Company,  pursuant to the related Joint Ownership Agreement.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">8. </FONT></FONT></TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Assignment
of Inventions and Confidential Subject Matter/ Documentation/ Commercialization.</U></FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>


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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="6%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">a) </FONT></FONT></TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Assignment</U>.<BR>Employee
hereby assigns to Company the Employee&#146;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), (b) and (c).</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="6%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">b) </FONT></FONT></TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Documentation</U>.Employee
agrees to execute, cooperate in the preparation of and deliver to the Company,  both
during the term of Employee&#146;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&#146;s
legal expense, the  preparation of patent applications.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="6%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">c) </FONT></FONT></TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Commercialization</U>.<BR>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. If  this license request is for Inventions/Confidential Subject
Matter wholly owned  by the Company, the Company may decline such request at its sole
discretion. If  the license request is for Inventions/Confidential Subject Matter based
on or  derived from Employee Intellectual Property, the Company is obligated to honor
the license request pursuant to the terms outlined in the related Joint  Ownership
Agreement.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">9. </FONT></FONT></TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Copyright
Works.</U></FONT></FONT> </P></TD>
</TR>
</TABLE>


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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Employee
agrees that all Copyright Works and contributions to Copyright Works prepared by
Employee within the scope of Employee&#146;s employment with the Company will be  deemed
&#147;works for hire&#148; 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&#146;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.
Notwithstanding the foregoing, the Company may not prevent Employee from sharing
Employee Intellectual Property with any third party at her sole discretion.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Page 4
of 9</I></FONT></FONT></P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

<!-- *************************************************************************** -->
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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10. </FONT></FONT></TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Written
Records.</U></FONT></FONT> </P></TD>
</TR>
</TABLE>


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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">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&#146;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.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11. </FONT></FONT></TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Restrictive
Obligations Relating to Confidential Subject Matter.</U></FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>


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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="6%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">a) </FONT></FONT></TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Obligations
to Company</U>.<BR>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&#146;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.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>


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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="6%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">b) </FONT></FONT></TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Prior
Obligations to Third-Parties</U>.<BR>Employee  agrees that, in the course of Employee&#146;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&#146;s
initiation of  employment with the Company, assumed obligations restricting such use or
disclosure.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">12. </FONT></FONT></TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"> <FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>Conflicting
Obligations.</U></FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>


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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="6%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">a) </FONT></FONT></TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Prior
Obligations</U>. <BR>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&#146;s
obligations hereunder.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="6%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">b) </FONT></FONT></TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Assumption
of Obligations</U>.<BR>Employee  agrees that Employee will not assume any obligations to any
third-party that  would conflict with any of Employee&#146;s obligation hereunder.
Employee  further agrees that, during the term of Employee&#146;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.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<A NAME="A006"></A>
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">13. </FONT></FONT></TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Employer&#146;s
Obligations On Termination Of Employment</U></FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="6%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">a) </FONT></FONT></TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Upon
any termination of Employee&#146;s employment, company&#146;s obligations  under Sections
7 through 9 of this agreement will continue.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Page 5
of 9</I></FONT></FONT></P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

<!-- *************************************************************************** -->
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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">If
during the  first 180 days of the term of this agreement Employee should fail or  refuse
to perform  the services herein contemplated, or should engage in gainful  employment
with  another  employer both Company and Employee will be obligated to  negotiate the
reversal  of  Company&#146;s acquisition of EMC Engineering LLC  (Employee&#146;s prior
company)  pursuant to the terms defined in the Purchase  Agreement. This right to
negotiate  reversal of the acquisition will terminate at  an earlier time if Employee
exercises her  option benefit described in section  5c.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<A NAME="A007"></A>
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">14. </FONT></FONT></TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Employee
Obligations On Any Termination Of Employment</U></FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="6%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">a) </FONT></FONT></TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Continuing
Obligations</U>. <BR>Employee&#146;s obligations under Sections 7  through 11 of this
Agreement will continue after any termination of  Employee&#146;s employment with the
Company.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="6%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">b) </FONT></FONT></TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Submission
of Materials</U>.<BR>Upon  any termination of Employee&#146;s employment with Company,
Employee will submit  to the Company all materials within Employee&#146;s possession that
constitute  or include Confidential Subject Matter owned by the Company or held in
confidence by the Company for any third-party. Notwithstanding the foregoing,  Employee
may retain copies of materials related to Copyright Works, Inventions  and Confidential
Subject Matter that is legally considered to be joint property  of the Company and
Employee pursuant to this agreement or any subsequent Joint  Ownership Agreement.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="6%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">c) </FONT></FONT></TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Exit
Interview</U>. <BR>Upon termination of Employee&#146;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.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">15. </FONT></FONT></TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Miscellaneous.</U></FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>


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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="6%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">a) </FONT></FONT></TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Binding-Effect/
Assignability</U>.<BR>This  Agreement is not assignable by Employee and will be binding upon
Employee&#146;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.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="6%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">b) </FONT></FONT></TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Severability</U>.<BR>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.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="6%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">c) </FONT></FONT></TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Waiver</U>.<BR>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.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Page 6
of 9</I></FONT></FONT></P>

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<HR align=center width="100%" color=#999999 SIZE=3>

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<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="6%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">d) </FONT></FONT></TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Controlling
Law</U>.<BR>This  Agreement will be interpreted under and enforced in accordance with the
laws of  the State of Colorado.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="6%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">e) </FONT></FONT></TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Modification</U>.<BR>This
Agreement may only be modified by the mutual written agreement of Employee and  Company.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="6%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">f) </FONT></FONT></TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Notices</U>.<BR>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):</FONT></FONT> </P></TD>
</TR>
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     <TD WIDTH="19%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(i)
If to the Company:</FONT></FONT> </P></TD>
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     <TD WIDTH="19%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">ADA
Environmental Solutions, LLC<BR>Attention: Human Resources<BR>8100 SouthPark  Way, Unit
B<BR>Littleton, Colorado 80120</FONT></FONT> </P></TD>
</TR>
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<BR>

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     <TD WIDTH="19%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">(ii)
If to Employee:</FONT></FONT> </P></TD>
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<A NAME="A009"></A>
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     <TD WIDTH="19%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Sharon
Sjostrom<BR>2416 Emerson Street<BR>Denver, CO 80205</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="6%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">g) </FONT></FONT></TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>Arbitration</U>.<BR>Any
difference, claims or matters in dispute arising between Employee and the  Company out of
this Agreement or connected with Employee&#146;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&#146;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&#146; fees
incurred in  connection with such arbitration in addition to such other costs and
expenses as  the arbitrator may award.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="LEFT" WIDTH="6%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">h) </FONT></FONT></TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> <U>At-Will
Employment</U>.<BR>Employment  with the Company is at will, meaning that both the Company and
the Employee have  the right to terminate the work relationship at any time and for any
reason.</FONT></FONT> </P></TD>
</TR>
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     <TD ALIGN="LEFT" WIDTH="6%">&nbsp;</TD>
     <TD ALIGN="LEFT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">i) </FONT></FONT></TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
<U>Entire Assignment.</U> <BR>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.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Page 7
of 9</I></FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.</FONT></FONT></P>



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     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif">
<FONT SIZE="2">ADA Environmental Solutions, LLC<BR>By:</FONT></FONT> </P></TD>
</TR>
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<BR>

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     <TD WIDTH="50%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>/s/ &nbsp;&nbsp;&nbsp;Michael D. Durham</U> <BR>Michael D. Durham, President</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>


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     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>/s/&nbsp;&nbsp;&nbsp;Sharon Sjostrom</U>
<BR>Sharon Sjostrom, Employee</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>



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<P ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I>Page 8
of 9</I></FONT></FONT></P>

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<A NAME="A012"></A>
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>EXHIBIT
A</B></FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Inventions
and Confidential Information considered owned by Employee or third-party with
whom Employee is contractually bound prior to becoming employed by Company<BR><BR>Employee:</FONT></FONT></P>


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     <TD WIDTH="3%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Control
logic, software, and mechanical design of mercury SCEMs designed by Employee  prior to
employment at Company</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Third Parties </FONT></FONT></P>

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     <TD WIDTH="3%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Apogee
Scientific:</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Information
related to Apogee&#146;s proprietary mercury sample conditioning system. In particular,
the catalyst design and operation.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Design
and operation of Apogee&#146;s QSIS mercury extraction probe.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<A NAME="A014"></A>
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     <TD WIDTH="3%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">EPRI:</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Data
collected and technology developed under EPRI contracts while employed at Apogee
Scientific or EMC Engineering. Technology includes:</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Mercury
Control by Adsorption Processes (MerCAP<FONT SIZE="1">TM</FONT></FONT><FONT SIZE="2">)</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Chemical&nbsp; additives
for enhanced mercury oxidation that have been evaluated during EPRI-funded  programs in
which employee participated</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Quick
SEM time averaging mercury monitor design</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Data
includes results from tests conducted during EPRI-funded evaluations</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>


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of 9</I></FONT></FONT></P>


</BODY>
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.35
<SEQUENCE>4
<FILENAME>adaesexh1035.htm
<DESCRIPTION>EXECUTIVE COMPENSATION PLAN
<TEXT>
<HTML>
<HEAD>
<TITLE>AutoCoded Document</TITLE>
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<A NAME="A001"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><BR>Exhibit 10.35</B></FONT></FONT></P>





<BR><BR><BR><BR><BR><P ALIGN="CENTER"><IMG SRC="image007.gif"></P>




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<A NAME="A002"></A>
<P ALIGN="CENTER"><FONT FACE="Arial, Helvetica, Sans-Serif"><FONT SIZE="4"><B><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>Executive
Compensation Plan</B></FONT></FONT></P>

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<A NAME="A003"></A>
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><I><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR>First
Edition<BR>November 4, 2004</I></FONT></FONT></P>





<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>



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<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TD WIDTH="62%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3">&nbsp;</FONT></TD>
     <TD WIDTH="16%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3">&nbsp;</FONT></TD>
     <TD WIDTH="22%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3">&nbsp;</FONT></TD>
     <TD WIDTH="0%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3"><IMG SRC="image008.gif"></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3">&nbsp;</FONT></TD>
     <TD ALIGN="right"><FONT FACE="Arial, Helvetica, Sans-Serif"><FONT SIZE="3"><B><I>ADA-ES, Inc.</I></B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Head Major" -->
<P ALIGN="CENTER"><FONT FACE="Arial, Helvetica, Sans-Serif"><FONT SIZE="3"><B>Table of
Contents</B></FONT></FONT></P>


<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TD WIDTH="93%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">A.  EXECUTIVE APPLICABILITY &amp; ELIGIBILITY</FONT></TD>
     <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">3</FONT></TD>
        <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">B.  COMPENSATION PHILOSOPHY</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">3</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">C.  ELEMENTS OF EXECUTIVE PAY</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Base Salary (Cash)</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Short and Long Term Incentives</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">4</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Equity Awards</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Severance Pay</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Recapture Incentive</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Executive Stock Ownership</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">5</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">D.  PROFIT SHARING POOL</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">6</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">E.  INTERRUPTION OF EMPLOYMENT</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">6</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Retirement, Disability, Leave of Absence and Death</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">6</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Termination</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">6</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">F.  CHANGE IN CONTROL</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">6</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">G.  PLAN DURATION, CHANGES &amp; OTHER</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">7</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">H.  APPENDIX</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">9</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Executive Compensation Plan Acknowledgement Receipt and Beneficiary Form</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">9</FONT></TD>
        <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
</TABLE>



<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>


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     <TH COLSPAN="2"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TD WIDTH="62%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3"><IMG SRC="image008.gif">&nbsp;</FONT></TD>
     <TD WIDTH="16%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3">&nbsp;</FONT></TD>
     <TD WIDTH="22%" ALIGN="right"><FONT FACE="Arial, Helvetica, Sans-Serif"><FONT SIZE="3"><B><I>ADA-ES, Inc.</I></B></FONT><FONT SIZE="3"></FONT></FONT></TD>
     <TD WIDTH="0%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3">&nbsp;</FONT></TD>
</TR>

</TABLE>

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<A NAME="A005"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="3"><B><BR><BR>A. &nbsp;&nbsp;&nbsp;EXECUTIVE
APPLICABILITY &amp; ELIGIBILITY</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">This
Executive Compensation Plan applies to the Executive Team, which includes the
President/Chief Executive Officer, the Chief Operating Officer, the Chief
Financial Officer, the Vice President of Contract Research and Development and
the Vice President of Sales, and may include other future executive officers of
the company.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Executives
become eligible to participate in this plan after completing 12 months of
continuous service with ADA-ES. This may be modified based on Board of Directors
approval.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A006"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="3"><B>B.&nbsp;&nbsp;&nbsp;
COMPENSATION PHILOSOPHY</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
ADA-ES compensation philosophy is designed to support our goals in creating a
reputation that can be leveraged to build our business and reward stockholders,
executives and employees.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
business goals include:</FONT></FONT></P>

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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Creating
a steady stream of new and profitable products </FONT></FONT> </P></TD>
</TR>
</TABLE>


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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Developing
sustainable, return business, </FONT></FONT> </P></TD>
</TR>
</TABLE>


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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Becoming
the first company called for pollution  control jobs, </FONT></FONT> </P></TD>
</TR>
</TABLE>


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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Becoming
a household name in the utility industry, and </FONT></FONT> </P></TD>
</TR>
</TABLE>


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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Ensuring
a reputation for outstanding service and value to customers.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Compensation
goals include:</FONT></FONT></P>

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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Linking
the interests of shareholders with the interests of executives.</FONT></FONT> </P></TD>
</TR>
</TABLE>


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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Maintaining
a reliable link to the market.</FONT></FONT> </P></TD>
</TR>
</TABLE>


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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Giving
the organization access to quality candidates.</FONT></FONT> </P></TD>
</TR>
</TABLE>


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<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Providing
pay recognition for executives as a result of business success.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Performance
Considerations:</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Business,
and related compensation decisions will be based on these considerations:</FONT></FONT></P>





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<TR VALIGN="BOTTOM">
     <TH COLSPAN="2" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Leveraged Reputation<BR>Goal</FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Quantitative/Qualitative<BR>Performance Metric</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TD WIDTH="49%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><BR>Creating a steady stream of new</FONT></TD>
     <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="46%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Product Performance and Effectiveness</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">and profitable products and chemicals,</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Developing sustainable, return business</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Reported Revenue &amp; Net Income</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
</TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TD WIDTH="30%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="30%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="32%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="0%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="center"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Page 3 of 9</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="right"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>November 2004</B></FONT></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
</TABLE>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>



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     <TH COLSPAN="2"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TD WIDTH="62%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3"><IMG SRC="image008.gif">&nbsp;</FONT></TD>
     <TD WIDTH="16%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3">&nbsp;</FONT></TD>
     <TD WIDTH="22%" ALIGN="right"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3"><B><I>ADA-ES, Inc.</I></B></FONT></TD>
     <TD WIDTH="0%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
</TABLE>


<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><BR>Leveraged Reputation<BR>Goal</FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Quantitative/Qualitative<BR>Performance Metric</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TD WIDTH="50%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><BR>Becoming the first company called</FONT></TD>
     <TD WIDTH="3%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="45%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Utility Industry and Sorbent Industry</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">for pollution control jobs</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Market Share</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Recognized  leader for the products and</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Government, Industry Partner and</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">services we supply in the utility industry</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Customer Relations</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Ensuring a reputation for outstanding</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Customer Satisfaction</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">service and value to customers</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
</TABLE>

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<A NAME="A007"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="3"><B>C.&nbsp;&nbsp;&nbsp;ELEMENTS
OF EXECUTIVE PAY</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A008"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Base Salary (Cash)</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Base
salary is defined as ongoing, cash compensation paid bi-weekly based on such
factors as job responsibilities, external competitiveness, and the
individual&#146;s experience and performance. (See also the ADA-ES Employee
Handbook.) Pay Ranges will be set based on the local market for similar
position, with consideration given to national rates of pay. ADA-ES will attempt
to ensure middle market pay for solid performers and consider higher levels of
pay for outstanding performers. ADA-ES does not intend to be a market leader in
base compensation.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A009"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Short and
Long Term Incentives</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Annual
incentives are designed to motivate the management team to achieve critical
short-term goals, typically one to two years, which are expected to contribute
to the long-term health and value of the organization. Incentives may be paid in
cash or equity as determined by the Board. It is expected that in the early
years of the plan, payment will be primarily in stock, either through options or
restricted shares.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Incentive
amounts will be set based on organization level and market practices. The plan
will focus on specific business objectives set at the beginning of each year.
Objectives will be those quantitative metrics, such as revenue, income, or
market share, which management and the Board determine are most important to the
short and long term health and value of the organization.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">From
time to time the Board may feel it necessary to recognize exemplary performance
of any executive with a cash award. Exemplary performance will be performance
that the Board determines to have required significant effort and commitment and
is determined to have had a significant positive impact on the current or future
performance of the organization.</FONT></FONT></P>


<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Annual
incentives, if any, are approved for payment by the Compensation Committee/Board
of Directors and are planned for payment by February 28<SUP>th</SUP> of the
calendar year following the incentive period. Incentives are subject to payroll
taxes. These incentives can be deferred and can be paid to a designated
beneficiary (see Section E).</FONT></FONT></P>


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     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TD WIDTH="30%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="30%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Page 4 of 9</B></FONT></FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="32%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>November 2004</B></FONT></FONT></TD>
     <TD WIDTH="0%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
</TABLE>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

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     <TH COLSPAN="2"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TD WIDTH="62%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3"><IMG SRC="image008.gif">&nbsp;</FONT></TD>
     <TD WIDTH="16%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3">&nbsp;</FONT></TD>
     <TD WIDTH="22%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3"><B><I>ADA-ES, Inc.</I></B>&nbsp;</FONT></TD>
     <TD WIDTH="0%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3">&nbsp;</FONT></TD>
</TR>

<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A010"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Equity Awards</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
use of equity payments is intended to link short term success to long term
performance and decision making, and to align management and shareholder
interests. Payments may be made in restricted shares or options, as determined
by the Board, considering accounting and regulatory restrictions, and the
financial condition of the company.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Restricted
shares, or options, awarded in the near term will increase or decrease in value
based on the performance of the company over time. Such holdings are personal
investments in the company since the awards might otherwise have been paid in
cash. Executives will be compelled to make decisions which are in the long term
best interest of shareholders in order to preserve the initial investment and to
create opportunities for growth of share value until such time as restrictions
expire or options vest. Options will be awarded with provisions for accelerated
vesting following outstanding performance years.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Executive
Stock Ownership requirements (discussed below) will strengthen the management
&#151; shareholder alignment. Unrestricted shares or vested options generally
can only be sold after ownership requirements are satisfied and only to the
extent that the remaining holdings continue to meet the ownership requirement.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A011"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Severance Pay</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">There
is no severance pay policy for any executive.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A012"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Recapture
Incentive</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In the
event of a restatement of income, any over-payments made to executives may be
reclaimed at the discretion of the Board of Directors.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A013"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Executive
Stock Ownership</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Executives
are required to own a number of shares of stock equal to a value of at least one
(1) times the annual base salary as a condition of continued employment with
ADA-ES. Executives shall have five (5) years from the date this program is
adopted to accomplish this level of ownership. Ownership will be calculated
considering holdings of restricted stock, whether or not the restrictions have
expired, private holdings, and shares held in retirement accounts. Holding of
options also will be considered in the ownership calculation by adding the value
of the spread of in-the-money options to the total value of other holdings.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">After
ownership requirements have been met, executives may sell unrestricted stock
they have owned for a period greater than 12 months, and may not exercise vested
stock options and sell shares to pay for the exercise price and withholding tax,
except as otherwise provided for in the underlying stock option agreement. Any
sale of stock options or shares of stock must be announced at least 30 days in
advance or be engaged in a pre-announced program sale in compliance with federal
securities laws. Executives leaving the company are required to hold their stock
in the company for at least 6-months after leaving the company.</FONT></FONT></P>

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     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TD WIDTH="30%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="30%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Page 5 of 9</B></FONT></FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="32%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>November 2004</B></FONT></FONT></TD>
     <TD WIDTH="0%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
</TABLE>


<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

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     <TH COLSPAN="2"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TD WIDTH="62%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3"><IMG SRC="image008.gif">&nbsp;</FONT></TD>
     <TD WIDTH="16%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3">&nbsp;</FONT></TD>
     <TD WIDTH="22%" ALIGN="right"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3"><B><I>ADA-ES, Inc.</I></B></FONT></TD>
     <TD WIDTH="0%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3">&nbsp;</FONT></TD>
</TR>

<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A014"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="3"><B>D.&nbsp;&nbsp;&nbsp;PROFIT
SHARING POOL</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Executives
may also be eligible to participate in the company&#146;s profit sharing pool.
See the current ADA-ES Profit Sharing Plan document.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A015"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="3"><B>E.&nbsp;&nbsp;&nbsp;
INTERRUPTION OF EMPLOYMENT</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A016"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Retirement,
Disability, Leave of Absence and Death</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">If an
executive&#146;s employment with the Corporation is suspended or terminates
during an Incentive period because of retirement, disability or death, or if the
employee takes any approved leave of absence as described in the ADA-ES Employee
Handbook, the executive, or the executive&#146;s designated beneficiary* in the
case of the employee&#146;s death, shall be entitled to a prorated incentive
payment. The prorated payment shall be determined at the end of the incentive
period. Such prorated award shall be determined by multiplying the incentive to
which the executive would otherwise have been entitled by a fraction &#150; the
numerator of which is the number of months the executive was employed during the
incentive period and the denominator of which is the total number of calendar
months in the incentive period. Awards may also be deferred as requested by the
executive (or the executive&#146;s beneficiary* in the case of the
employee&#146;s death) once approved by the Compensation Committee/Board of
Directors.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">*
Note: The Executive must complete an Executive Compensation Plan Beneficiary
Form (See Section H: Appendix.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A017"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Termination</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">If an
executive&#146;s employment with the Corporation terminates during an incentive
period for any reason other than retirement, disability or death, the award for
that incentive period shall be forfeited on the date of such termination.
However, the Board, at its sole discretion, may determine that the executive may
be entitled to a prorated incentive payment.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A018"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="3"><B>F.&nbsp;&nbsp;&nbsp;CHANGE IN
CONTROL</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Upon,
or in reasonable anticipation of, a change in control of the Corporation:</FONT></FONT></P>

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<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TD WIDTH="30%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="30%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Page 6 of 9</B></FONT></FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="32%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>November 2004</B></FONT></FONT></TD>
     <TD WIDTH="0%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
</TABLE>


<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

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<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TD WIDTH="62%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3"><IMG SRC="image008.gif">&nbsp;</FONT></TD>
     <TD WIDTH="16%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3">&nbsp;</FONT></TD>
     <TD WIDTH="22%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3"><B><I>ADA-ES, Inc.</I></B></FONT></TD>
     <TD WIDTH="0%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3">&nbsp;</FONT></TD>
</TR>

<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">1.</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
Approved incentive compensation awards may be made for the incentive period
during which the change in control occurs, and then paid immediately to a
trustee on such terms as the Chief Financial Officer or his/her successor shall
deem appropriate (including such terms as are appropriate to cause such payment,
if possible, not to be a taxable event to the executive). Terms of dispersal may
be written and provided by the Chief Financial Officer or his/her successor to
the executives affected. The terms outlined enable the incentive compensation
awards to be paid to executives either not later than the end of the first
calendar quarter following the end of the calendar year to which the incentive
compensation awards relate, or on a deferred basis in accordance with the
elections of the executives affected as to the timing of the receipt of
incentive compensation awards for such period.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
Executives who are eligible to receive an incentive compensation award for the
incentive period in which a change in control occurs may be eligible to receive
incentive compensation awards for the incentive plan year following the change
in control.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Guidelines
for determining the amount of the incentive compensation award payable to each
executive will include:</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang Roman In 1" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
One-half of the maximum incentive compensation award payable (reduced as deemed
appropriate by the Compensation Committee and approved by the Board of
Directors, if applicable) to the executive if the change in control occurs
during the first six months of the calendar year; or</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman In 1" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
The full maximum incentive compensation award payable (reduced as deemed
appropriate by the Compensation Committee and approved by the Board of
Directors, if applicable) to the executive if the change in control occurs
during the second six months of the calendar year.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">3.</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
All deferred amounts may be paid immediately to a trustee on such terms as the
Chief Financial Officer or his/her successor deem appropriate, including such
terms as are appropriate to cause such payment, if possible, not to be a taxable
event to the executive. Terms of dispersal may be written and provided to the
executives affected by the Chief Financial Office or his/her successor in order
to give effect to the elections of the executives with respect to the timing of
the receipt of any deferred amounts.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A019"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>G.&nbsp;&nbsp;&nbsp;PLAN
DURATION, CHANGES &amp; OTHER</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">This
plan may be revised, reviewed or eliminated at the discretion of the Board of
Directors at any time without notice. Only the Board of Directors has the
ability to make any changes or verbal commitments regarding the plan.</FONT></FONT></P>

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<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TD WIDTH="30%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="30%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Page 7 of 9</B></FONT></FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="32%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>November 2004</B></FONT></FONT></TD>
     <TD WIDTH="0%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
</TABLE>


<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

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<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TD WIDTH="62%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3"><IMG SRC="image008.gif">&nbsp;</FONT></TD>
     <TD WIDTH="16%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3">&nbsp;</FONT></TD>
     <TD WIDTH="22%" ALIGN="center"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3"><B><I>ADA-ES, Inc.</I></B></FONT></TD>
     <TD WIDTH="0%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3">&nbsp;</FONT></TD>
</TR>

<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
information in this document does not constitute a guarantee of work, job status
or employment for any period of time. Employment is at will and either the
executive or the company may terminate the relationship at any time. This
document is not intended to create a contract of employment express or implied.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">This
plan supersedes all previous plan documents.</FONT></FONT></P>

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     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TD WIDTH="30%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="30%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Page 8 of 9</B></FONT></FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="32%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>November 2004</B></FONT></FONT></TD>
     <TD WIDTH="0%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
</TABLE>



<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

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     <TH COLSPAN="2"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TD WIDTH="62%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3"><IMG SRC="image008.gif">&nbsp;</FONT></TD>
     <TD WIDTH="16%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3">&nbsp;</FONT></TD>
     <TD WIDTH="22%" ALIGN="center"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3"><B><I>ADA-ES, Inc.</I></B></FONT></TD>
     <TD WIDTH="0%" ALIGN="LEFT"><FONT FACE="Arial, Helvetica, Sans-Serif" SIZE="3">&nbsp;</FONT></TD>
</TR>

<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A020"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="3"><B>H.&nbsp;&nbsp;&nbsp;APPENDIX</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A021"></A>
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Executive
Compensation Plan Acknowledgement Receipt and Beneficiary Form</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><BR>Executive Name:
_______________________________________</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><BR>Executive
Title:  ________________________________________</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><BR>Social Security
Number  __________________________________</FONT></FONT></P>



<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">I
acknowledge receipt of the ADA-ES Executive Compensation Plan, commencing for me
on (date to be inserted here). Related to compensation as outlined in the Plan,
I further designate my beneficiary(ies) as shown below:</FONT></FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Beneficiary Name</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Relationship to<BR>Executive</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Annual Incentive/<BR>Long Term Incentive/<BR>All</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">% Proceeds</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TD WIDTH="20%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="20%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="20%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="20%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
</TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN=BOTTOM>
     <TD STYLE="Border-Top: Black 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
     <TD STYLE="Border-Top: Black 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD WIDTH="73%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Executive Signature</FONT></TD>
     <TD WIDTH="20%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="5%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Date</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN=BOTTOM>
     <TD STYLE="Border-Top: Black 1px solid; Font-Size: 4pt">&nbsp;</TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Print Name</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
</TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TD WIDTH="30%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="30%" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Page 9 of 9</B></FONT></FONT></TD>
     <TD WIDTH="4%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="32%" ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>November 2004</B></FONT></FONT></TD>
     <TD WIDTH="0%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
</TABLE>



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(.^^1)80``#L_
`
end
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.36
<SEQUENCE>7
<FILENAME>ada12312006exh1036.htm
<DESCRIPTION>MEMORANDUM OF UNDERSTANDING
<TEXT>
<HTML>
<HEAD>
<TITLE>AutoCoded Document</TITLE>
</HEAD>
<BODY>


<!-- MARKER FORMAT-SHEET="Head Minor" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><B>Exhibit&nbsp; 10.36</B></B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A001"></A>
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>MEMORANDUM
OF UNDERSTANDING</B></FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>THIS
MEMORANDUM OF UNDERSTANDING </B>(this &#147;Agreement&#148;) is made and entered
into this 20th day of March, 2007 by and between CALGON CARBON CORPORATION
(&#147;CCC&#148;) a Delaware corporation having a principal place of business at
400 Calgon Carbon Drive , Pittsburgh, Pennsylvania 15205 AND ADA-ES, Inc. a
Colorado corporation having a principal place of business at 8100 South Park
Way, Unit B, Littleton, Colorado 80120 (&#147;ADA&#148;) (individually or
collectively referred to in this Agreement as a &#147;Party&#148; or the
&#147;Parties&#148;).</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A002"></A>
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>BACKGROUND</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
Parties desire to work together to develop and jointly market Products, as
defined herein, to the electric utility industry and such other
industries/clients as the Parties may mutually agree in writing (the
&#147;Market&#148;). This joint effort to market and develop Products in the
Market is hereinafter referred to generally as the &#147;Project&#148; and is
more particularly outlined in Exhibit A. It is the goal of the Project to
capture a predominant market share for the Products within the Market, while
maximizing profit for the Parties. This Agreement sets forth the Parties&#146;
understandings, intentions and plans with respect to the first phase of the
Project, which is directed to joint marketing efforts, and outlines other phases
to follow should the parties mutually agree on subsequent phases.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>NOW
THEREFORE, </B>the Parties, in consideration of the mutual promises contained
herein and intending to be legally bound hereby, agree to the following:</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>1.0</B></FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
<B>GENERAL</B></FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">1.1</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
The Project will consist of Phases 1, 2 and 3 (the &#147;Phases&#148;), which
are detailed on Exhibit A hereto. The terms of this Agreement are intended to
cover the activities in Phase 1, the joint marketing phase.The items mentioned
in Exhibit A relative to Phase 2 (possible joint production of some or all
Products where Products are defined below) and Phase 3 (possible Joint Venture)
are intended to outline only the scope of potential agreements. In the event the
parties mutually agree to proceed with those Phases, the Parties will negotiate
in good faith for each of those Phases. It is expressly understood and agreed
that the specific terms set forth below apply only to Phase 1 and that any or
all terms set forth herein shall not necessarily apply in a subsequent phase
unless such term(s) is/are expressly incorporated in a subsequent agreement
mutually negotiated between the Parties for such subsequent Phase. This
Agreement shall commence on the date hereof and shall continue in effect until
the earlier of (a) July 31, 2008, (b) such time as the Project is completed, (c)
the execution of the Joint Marketing Agreement, JV Agreement or similar
agreement that supersedes this Agreement, or (d) the termination of this
Agreement as provided in Article 10 below. It is specifically understood and
agreed that this Agreement extends only to activities in connection with Phase 1
of the Project. However, the Parties will explore, in their discretion, further
avenues of cooperation with respect to the implementation the Project and to
other applications for the Product that both Parties may agree to work on
together.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>


<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 1; page: 1" -->

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">1.2</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
Subject to Section 5 below, each of the Parties will make available to each
other such Confidential Information as reasonably necessary to facilitate
achievement of the Project goals.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">1.3</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
CCC shall retain ownership of any existing CCC facilities dedicated to
manufacturing Products for the Project.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">1.4</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
For purposes of this Agreement only, the term &#147;Products&#148; shall mean
and include activated carbon products for the treatment of flue gas containing
mercury and related contaminants and specifically includes, without limitation,
the FLUEPAC MC and FLUEPAC MC PLUS activated carbon products produced by CCC and
any other appropriate modifications and/or replacements of such products.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>2.0</B></FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>PERSONNEL</B></FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.1</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
The Project will be managed jointly by the Parties. Each Party shall designate
in writing a primary and secondary contact person (the &#147;Project Team
Leaders&#148;) with respect to the Project.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.2</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
Each Party shall designate in writing such employees in addition to the Project
Team Leaders to be available to work on the Project that such Party in good
faith deems necessary to the success of the Project. Each Party shall, on a
regular basis but no more than quarterly, provide the other Party with a summary
of Project tasks completed and the cost incurred by the Party, with reasonable
explanation of the basis for calculating such cost. Employees designated to work
on the Project, including the Project Team Leaders, will constitute the
&#147;Project Team&#148; and will commit such time to the Project as directed by
their employer; provided however, that each Party shall promptly notify the
other Party if an employee designated to work on the Project becomes unavailable
to perform the work forecast for him to complete. Each Party will have the right
to approve the participation of the key personnel designated by the other Party.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.3</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
Each Party will make available to the Project the technical, marketing and
managerial advice and support of its organizations on an as-needed basis and at
its own cost.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.4</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
Personnel designated to work on the Project, whether on a temporary, limited or
full-time basis, will continue to be paid directly by their current
employer/client.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.5</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
Each Party agrees that during the term of this Agreement and for two (2) years
thereafter, such Party will not solicit, induce or otherwise offer employment to
employees of the other Party involved with the Project. The only exception to
this bar on employment of the other Party&#146;s employees shall be if a Party
gives express written permission to the other Party that it may solicit and hire
a particular employee(s).</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 2; page: 2" -->


<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>3.0</B></FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
<B>PLANNING AND EXECUTION OF PROJECT</B></FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">3.1</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
Upon execution of this Agreement and as often as may be required during the term
of this Agreement, but not less often than monthly, the Project Team Leaders
shall meet to discuss the direction and progress of the Project. The Project
Team Leaders shall endeavor to assign specific tasks to the Parties, as
appropriate, so as to maximize progress on the Project, avoid any duplication of
efforts and allocate the unreimbursed work among the Parties. Each Party
undertakes to carry out those tasks assigned to it in good faith with all
reasonable diligence.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">3.2</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
All work done in connection with the Project shall be carried out in material
compliance with all applicable laws, regulations, and guidelines.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>4.0</B></FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
<B>PROJECT REPORTS AND OWNERSHIP OF INTELLECTUAL PROPERTY</B></FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4.1</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
The Project Team shall prepare or cause to be prepared confidential
comprehensive written reports at least quarterly during the term of this
Agreement. These reports shall describe in detail the progress of the Project
and future direction of the Project and shall be distributed to each Party.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4.2</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
Each Party shall retain sole ownership of any and all technology or know how,
including without limitation, patents, trade secrets, products under
development, ideas, concepts, business methods, patent applications and the
like, and any improvements thereto, that the Party owns prior to the execution
of this Agreement (the &#147;Preexisting Technology&#148;), whether or not such
Preexisting Technology is related to the Products or the Project. In the event
that a dispute arises as to whether any technology was Preexisting Technology of
a Party, the Party claiming to own such technology must provide documentary
evidence showing the existence of such technology prior to the date of the
Agreement.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4.3</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
During Phase 1 which is covered by this Agreement, the Parties do not generally
intend to engage in joint development of technology but rather shall work
independently on technologies currently under consideration in their
organizations. The Parties specifically agree that they shall not jointly work
on development of technology related to production of Product and that each
party shall therefore retain sole ownership of its Preexisting Technology
related to production of Product. The only scenarios where the Parties will
cooperate in technology development are as follows:</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent Level 2" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">a.
CCC may, in its sole discretion, provide ADA with samples of Product under  development
by CCC for the purpose of asking ADA to test or otherwise evaluate  such samples. In any
case, such samples and associated technology and the  results of such testing or
evaluation shall remain the sole property of CCC.</FONT></FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent Level 2" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">b.
ADA may, in its sole discretion, suggest in writing potential formulas and  mixtures for
CCC to consider for Products and such suggested Products shall  remain the sole property
of ADA.</FONT></FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Indent Level 2" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">c.
The Parties may jointly meet to discuss technical improvements and any  technology
arising from such joint meetings shall be owned by CCC subject to the  terms of Section
4.4 below.</FONT></FONT></P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">3</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 3; page: 3" -->

<!-- MARKER FORMAT-SHEET="Para Flush In 2" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In
the event that either Party discloses to another Party technology that the Party
believes it has been independently developing, the Party shall so advise the  disclosing
Party of this position, and both Parties reserve their right to claim  ownership of
technology they have independently developed.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4.4</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
Any invention conceived by the Parties in collaboration during the term and in
accordance with Section 4.3 (c.) above (hereinafter such inventions are referred
to collectively as &#147;Joint Technology&#148;) shall be owned by CCC and all
inventions comprising Joint Technology shall be assigned without cost, to CCC
for all purposes. CCC shall have the right to file or cause to have filed a
patent application covering such inventions. In the event that CCC chooses not
to file a patent application on the invention in any country or countries, it
will notify ADA of the fact and ADA will be given the opportunity to pursue
patent protection on that invention at its own expense. In this case, rights
necessary to enable ADA to apply for the patent will be assigned to ADA, and CCC
shall fully cooperate and provide any assistance reasonably requested by ADA in
the preparation and prosecution of such patent application(s). CCC or ADA, as
the case may be, shall have a perpetual, royalty-free, non-exclusive licenses to
use, sell, practice, license and otherwise fully exploit any and all Joint
Technology not directly owned by the Party. . CCC or ADA, as the case may be,
shall own any such patent application and any patent or patents maturing
therefrom and shall have the right to enforce said patent or patent(s) in its
sole discretion and at its sole cost, provided, however, that if a Party who
owns a Joint Technology patent chooses not to pursue a potential infringer, the
other Party may at its sole cost elect to pursue such infringer and the owner of
such patent will assign the patent to the Party pursing the infringer.
Additionally, neither party shall license Joint Technology to any third parties
without the written consent of the other Party hereto, such consent not to be
unreasonably withheld. CCC or ADA, as the case may be,<B> </B>shall bear the
expenses incurred in the filing, prosecution, or maintenance of patent
applications or patents which are owned by or assigned to it, in accordance with
the foregoing. In any event, the Parties shall closely communicate and
coordinate with respect to the filing of patent applications and foreign
counterparts for Joint technology in order to promote comprehensive, cost
efficient patent coverage in their mutual interest.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4.5</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
Both ADA and CCC shall independently market the Products in the Market, and
the Parties shall cooperate by sharing marketing information, including leads
and otherwise working together so as to minimize sales cost and maximizing sales
coverage of the Market. It is understood, however, that since the Market is
ADA&#146;s principal market, ADA shall be responsible for providing marketing
leadership to the Project.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>5.0</B></FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
<B>CONFIDENTIALITY</B></FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang Roman" -->
<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">5.1</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
The term &#147;Confidential Information&#148; as used herein means the
Preexisting Technology, the New Product Technology and all of the information
related to the Project provided by either Party including without limitation,
business information, marketing data and plans, sales leads, financial
information, patent applications, trade secrets, processes, ideas, know-how,
copyright or any other form of non public intellectual property, whether
technical, engineering, operational, marketing, sales or economic in nature.
Confidential Information excludes however, any information (i) which is now or
hereafter becomes part of the public domain through no fault of the party
claiming waiver, (ii) which was known to the recipient Party prior to its
disclosure by the providing Party as evidenced by the receiving Party&#146;s
written records, (iii) is disclosed to the recipient Party by a third party
having a lawful right to make such disclosure, or (iv) was independently
developed by the receiving Party, without reference to any information or
materials disclosed by the disclosing Party, as evidenced by the receiving
Party&#146;s written records, or (v) is required by law to be disclosed,
provided that the Party so required to disclose information shall give the other
Party sufficient notice of the proposed disclosure to seek a protective order
for such information.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>




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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">5.2</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
In consideration of each Party&#146;s willingness to disclose Confidential
Information to the other for the purposes of the Project, each Party agrees with
respect to Confidential Information provided to it by the other Party not to
make any use whatsoever of such Confidential Information except as necessary to
achieve the goals and purpose of the Project. The Parties further agree not to
use Confidential Information provided by the other Party in connection with any
other development activities conducted on behalf of the recipient Party, either
by itself or by any other person, firm or corporation,</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">5.3</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
The Parties agree with respect to all of the Confidential Information that they
will: (i) not reveal such Confidential Information to third parties, (ii) keep
all such Confidential Information strictly secret and confidential and prevent
unauthorized use or reproduction of all written Confidential Information by
causing it to be plainly marked as secret and confidential, (iv) return all
written, electronic or other tangible confidential Information materials to the
providing Party upon request by the providing Party and (v) limit access to
Confidential Information to those employees which are members of the Project
Team, or otherwise have a need to know such information in furtherance of the
Project. In any event, each Party shall treat Confidential Information with the
same care as regards confidentiality as it does its own proprietary technology
and information. Confidential Information may, however, be disclosed as
reasonably necessary to allow either Party and their employees, agents, and
consultants, to file and prosecute patent applications, or to comply with
governmental regulations.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">5.4</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
Each Party further agrees not to use any Confidential Information (including any
piece of equipment, component thereof, technology or software) made available to
it by the other Party during the course of the Project to reverse engineer any
products, methods or technology of the other Party.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">5.5</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
The confidentiality obligations of this Article 5 shall extend with respect to
Confidential Information so long as the particular information remains
confidential within the terms defined in paragraph 5.1 or for a period of five
years after termination or expiration of this Agreement, whichever period is
longer.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">5</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>6.0</B></FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
<B>PUBLICITY</B></FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6.1</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
The Parties shall work together for the purpose of facilitating their joint
marketing efforts and promoting sales of the Products during Phase 1. To this
end, the Parties will jointly prepare a press release to announce their
collaboration. The Parties may also agree to prepare additional press releases
to announce any developments in the Project, including, without limitation, the
entry into agreements between the Parties and any successful joint sales
efforts. The Parties specifically agree to issue a preliminary press release in
the form attached hereto as Exhibit B. Any press release proposed by either
party must be approved by the other party in writing prior to issue of the press
release.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>7.0</B></FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
<B>DISPUTE RESOLUTION</B></FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">7.1</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
Any dispute or claim arising between the Parties relating to interpretation of
the provisions of this Agreement or to performance of either of the Parties
hereunder which has not been resolved by the appropriate management level
personnel of the Parties, shall be referred to the CEO of each Party or such
other appropriate designee, and such individuals shall meet or confer as soon as
reasonably practicable.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">7.2</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
Claims made by either Party related to breach of Article 5 for which equitable
relief is sought or any claims otherwise seeking equitable relief or tort
damages must be brought in a court of competent jurisdiction.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>8.0</B></FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
<B>RECIPROCAL REPRESENTATIONS, WARRANTIES AND COVENANTS</B></FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">8.1</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
Each of the Parties represents and warrants to the other Party that: (a) such
Party is not a party to any contract or agreement that prevents such Party from
fulfilling all such Party&#146;s responsibilities and obligations hereunder, or
that impairs or may impair any responsibility or obligation of such Party
hereunder; (b) the execution, delivery or performance of this Agreement by such
Party does not result in the breach, violation or default of any other
agreement, commitment, obligation or other undertaking to which such Party is a
party; (c) such Party has full right, authority, and legal capacity to enter
into this Agreement and to perform its responsibilities and obligations
hereunder; (d) such Party is under no disability, restriction, or prohibition
regarding such Party&#146;s right to enter into and execute this Agreement or to
fully perform its terms and conditions; and (e) such party is acting hereunder
independently and shall not at any time indicate to anyone that the other Party
is the agent of such Party making the warranty and representation. In
furtherance of the foregoing clause (e)other than as reasonably necessary to
jointly market Products hereunder and otherwise fulfill the purpose of the
Project, each Party covenants and agrees that neither it nor any of its
affiliates shall use the name of or refer to the other Party or any affiliate of
the other party in any negotiations, research, dialogue, correspondence or other
interaction with any person, without the prior written consent of such other
Party, which may be withheld for any reason at the sole discretion of such other
Party.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>9.0</B></FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
<B>INDEMNIFICATION; DAMAGES; WARRANTIES</B></FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">9.1</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
If a third party claims that a portion of any intellectual property provided to
the Project during Phase 1 by either Party infringes such third party&#146;s
U.S. patent, copyright, trade secret or other intellectual property then the
providing Party will indemnify the other Party against the claim insofar as it
claims infringement by that portion of the intellectual property provided to the
Project by the providing Party. The indemnification of such Party shall be at
the providing Party&#146;s expense, and the providing party shall pay all costs,
damages and attorney&#146;s fees that a court finally awards or that are
directly related to settlement of such claim. If such claim is made or appears
likely to be made, the providing Party will, at its own expense and on
reasonable terms, (1) attempt to modify the intellectual party or replace it
with a functional equivalent, or (2) obtain a license for continued use of the
intellectual property by or on behalf of the Project. If the providing Party
determines that the alternative set forth above are not reasonably available,
the Parties agree to cease all use of the intellectual property and take
reasonable steps to return such intellectual property upon the providing
Party&#146;s written request.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">9.2</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
NEITHER PARTY SHALL BE LIABLE TO THE OTHER UNDER ANY CIRCUMSTANCES FOR
CONSEQUENTIAL, INDIRECT, SPECIAL, OR INCIDENTAL DAMAGES ARISING FROM OR IN
CONNECTION WITH THIS AGREEMENT.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">9.3</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
THE EXPRESS WARRANTIES AND REMEDIES SET OUT IN THIS AGREEMENT ARE THE ONLY
WARRANTIES AND REMEDIES APPLICABLE TO THIS AGREEMENT, AND SUCH WARRANTIES AND
REMEDIES ARE IN LIEU OF AND EXCLUDE ALL OTHER WARRANTIES NOT EXPRESSLY SET FORTH
HEREIN, WHETHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">9.4</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
In conjunction with any joint marketing efforts, ADA shall not misrepresent the
Products or modify or amend any warranty provided by CCC relative to such
Products.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>10.0</B></FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
<B>TERMINATION</B></FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.1</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
This Agreement may be terminated under any of the following circumstances:</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">a.</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
<U>Termination for Default</U>. If either Party shall default in a material
manner with respect to any material provision of this Agreement pertaining to
that Party, the other Party may give the defaulting Party written notice of such
default and the defaulting Party shall have twenty (20) days to cure such
default or if such default cannot reasonably be cured within twenty (20) days,
the defaulting Party shall have twenty (20) days to commence such cure and must
diligently complete such cure as soon as reasonably possible thereafter If such
default is not cured in accordance with the foregoing, the non-defaulting Party
shall have the right, upon notice to the defaulting Party and without prejudice
to any other rights the non-defaulting Party may have, to terminate this
Agreement.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">7</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">b.</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
<U>Insolvency. </U> Either Party may, in addition to any other remedies
available to it by law or in equity, terminate this Agreement by written notice
to the other Party in the event the other Party shall have become insolvent or
made an assignment for the benefit of its creditors, or there shall have been
appointed a trustee or receiver of the other Party or for all or a substantial
part of its property, or any case or proceeding shall have been voluntarily
initiated by or commenced against or other action taken by or against the other
Party in bankruptcy or seeking reorganization, liquidation, dissolution,
winding-up, arrangement, composition or readjustment of its debts or any other
relief under any bankruptcy, insolvency, reorganization or other similar act or
law of any jurisdiction now or hereafter in effect.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">c.</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
<U>For Convenience</U>. Either Party may, in addition to any other remedies
available to it by law or in equity, terminate this Agreement, without cause and
without penalty, by written notice to the other Party at least thirty (30) days
prior to the effective date of such termination; provided however, that neither
Party may terminate for convenience during Phase 1 prior to the expiration of
the Negotiating Target Period identified in Exhibit A.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10.2</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
All provisions of this Agreement shall survive any termination of this Agreement
as necessary to effectuate the Parties&#146; residual rights and obligations
following any such termination, according to the plain intent of such provisions
and legal custom. Without limiting the foregoing, (i) any expiration of
termination of this Agreement shall be without prejudice to any accrued rights
of the Parties, and (ii) the Parties&#146; ownership and rights with respect to
the Project Technology shall continue to be governed by Section 4 of this
Agreement.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>11.0</B></FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
<B>MISCELLANEOUS</B></FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.1</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
Except as may be agreed elsewhere in this Agreement, each Party hereto may have
other business interests and may engage in any other business or trade,
profession or employment whatsoever, on its own account, in partnership with, or
as an employee, officer, director, or shareholder of any other person, firm, or
corporation, and shall not be required to devote his entire time to the business
of this Agreement, but only so much time and attention as shall be reasonably
required for its necessary supervision, operation and management. No Party to
this Agreement shall be under any fiduciary or other duty to the other Party
which would otherwise prevent it from engaging in or enjoying the benefit of
competing endeavors within the general scope of the endeavors contemplated by
this Agreement. The legal doctrines of &#147;corporate opportunity&#148; or
&#147;business opportunity&#148; sometimes applied to persons occupying a joint
venture or fiduciary status shall not apply to the Parties to this Agreement.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">8</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

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     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.2</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
All notices, requests, demands and other communications under this Agreement
shall be given to or made upon the respective Parties as follows:</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<A NAME="A003"></A>
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     <TD WIDTH="6%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">CCC:<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Robert P O&#146;brien</U>
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Sr. Vice President</U>
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Phone: <U>412-787-4768</U>
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e-mail: <U>robrien@calgoncarbon-us.com</U></FONT></FONT></P></TD>
</TR>
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<BR>


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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
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     <TD WIDTH="6%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;cc
to: <BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>V.P. and General Counsel</U>
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Phone: <U>412-787-6786</U>
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e-mail: <U>dsheedy@calgoncarbon-us.com</U></FONT></FONT></P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">ADA:
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Mike D Durham &#151; President</U>
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>8100 South Park Way, B</U>
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Littleton, CO 80120</U>
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Phone: <U>303-734-1727</U>
<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;e-mail: <U>miked@adaes.com</U></FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD WIDTH="6%">&nbsp;</TD>
     <TD><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">All
notices, requests, demands and other communications given or made concerning the
provisions of this Agreement shall be in writing and shall be given either by  prepaid
registered or certified mail with return receipt requested, or by  telefax. All such
notices, requests, demands and other communications shall  become effective on the date
such notice was received if given by mail or on the  date of transmission if given by
telefax.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.3</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
This Agreement shall inure to the benefit of and be binding upon the Parties
hereto, their successors, assigns and legal representatives. Neither Party has
the right to assign the whole or any part of its rights and obligations in the
Project or to sublet its engagement to a third party without the prior written
consent by the other Party, except that either Party may without such consent
assign or sublet to a direct or indirect subsidiary or parent of such Party.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.4</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
This Agreement shall be governed by and construed according to the laws of the
Commonwealth of Pennsylvania, without regard to conflicts of laws principles.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.5</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
This Agreement may be executed in counterparts, each of which shall constitute
an original and all of which, when taken together, shall constitute one
Agreement, and any Party hereto may execute this Agreement by signing one or
more counterparts hereof. Signatures of the Parties transmitted by electronic
facsimile shall be valid and binding upon the Parties.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.6</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
Each Party shall comply with all applicable federal, state and local laws,
regulations and rules in carrying out any activity related, either directly or
indirectly, to the Project.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">9</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>


<!-- *************************************************************************** -->
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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.7</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
This Agreement constitutes the entire agreement and understanding between the
Parties with respect to the subject matter hereof. There are no promises,
representations, conditions, provisions or terms related to the subject matter
hereof other than those set forth in this Agreement. This Agreement supersedes
all prior understandings and agreements between the Parties, written or oral,
with respect to the subject matter hereof. This Agreement may not be changed,
modified or amended except by a writing signed by both Parties. Headings used in
this Agreement are for convenience only and shall not affect the interpretation
of this Agreement.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.8</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
During the term of this Agreement, each Party shall continuously maintain
insurance coverage against such risks and in such amounts as are generally
insured by prudent companies in similar circumstances carrying on similar
businesses and with insurers reasonably believed by such Party to be reputable
and financially sound.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.9</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
Notwithstanding any other provision herein, in the event of a Party&#146;s
actual or threatened breach of any material provision of this Agreement
adversely affecting another Party&#146;s Confidential Information or other
intellectual property rights, the Parties specifically agree that such Party
will incur incalculable and irreparable damage and that such Party has no
adequate remedy at law for such threatened or continuing breach. Therefore, such
Party shall be entitled to injunctive relief restraining the offending Party
from such threatened or continuing breach, in addition to all other remedies
available to the offended Party hereunder, at law or in equity (including
without limitation temporary restraining orders, preliminary and permanent
injunctions, specific performance and money damages).</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.10</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
The rights and remedies of the Parties hereto shall be construed cumulatively,
and none of their rights and remedies shall be exclusive of, or in lieu or
limitation of, any other right, remedy or priority allowed by law, unless
otherwise expressly stated herein to the contrary.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.11</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
The Parties hereto expressly disclaim and disavow any partnership, joint
venture, fiduciary, agency or employment status or relationship between them and
expressly affirm that they have entered into this Agreement as independent
contractors and that the same is in all respects an &#147;arms-length&#148;
transaction. No Party hereto has the authority to make any representation or
warranty or incur any obligation or liability on behalf of any other Party
hereto, nor shall they make any representation to any third party inconsistent
with this paragraph, except to the extent expressly permitted elsewhere in this
Agreement.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.12</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
All costs and expenses, including attorneys&#146; fees, incurred by each Party
in conjunction with the negotiation, preparation and execution of this Agreement
shall be paid solely by the Party incurring such costs and expenses.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.13</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
A waiver by any Party of any term or condition of this Agreement, whether in
writing or by course of conduct or otherwise, shall be valid only in the
instance for which it is given, and shall not be deemed a continuing waiver of
said provision, nor shall it be construed as a waiver of any other provision
hereof.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">10</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

<!-- *************************************************************************** -->
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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="3%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11.14</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="94%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
In the event that any provision of this Agreement, or any operation contemplated
hereunder, is found by arbitration or a court of competent jurisdiction to be
inconsistent with or contrary to any applicable law, ordinance, or regulation,
the latter shall be deemed to control and the Agreement shall be regarded as
modified accordingly, and the remainder of this Agreement shall continue in full
force and effect.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">IN
WITNESS WHEREOF, the Parties hereto have caused their duly authorized
representatives to execute this Agreement on the dates set forth below:</FONT></FONT></P>


<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TD WIDTH="48%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">CALGON CARBON CORPORATION</FONT></TD>
     <TD WIDTH="10%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="40%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">ADA-ES, Inc.</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">By: /s/ Robert P. O&#146;brien&nbsp;&nbsp;3/20/07</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">By:/s/ Mark H. McKinnies&nbsp;&nbsp;3/20/07</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Title: Sr. Vice President</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Title: Senior V.P &amp; CFO</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
</TABLE>


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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">11</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

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<A NAME="A012"></A>
<P ALIGN="right"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>Exhibit A</U></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A013"></A>
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
Project</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
envisioned work will consist of three Phases, 1, 2 and 3. All Phases will be
sequential with progression to a succeeding phase contingent on mutual agreement
by the Parties.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><BR>Phase 1&nbsp;-</FONT></FONT></P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">1.</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
ADA and CCC will conduct joint efforts to market the Products to the Market in
North America.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2.</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">
CCC will provide the Products for sale to the Market or other mutually
acceptable industries/clients exclusively through this joint marketing agreement
and will provide adequate quantities of Products at competitive market prices.
ADA will receive a commission for sales of Products; provided that ADA will not
be entitled to a commission for any sale to an existing CCC customer. The
commission shall be *% of the total sales price FOB CCC&#146;s plant for
untreated carbon products. The commission for treated/brominated carbons shall
be in accordance with the following scale:</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>


<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
     <TH COLSPAN="2"><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TD WIDTH="60%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Sale Price FOB CCC&#146;s Plant/lb of Product</FONT></TD>
     <TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="32%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Commission</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$0.85/lb or less</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">*%</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">$0.86 - $0.95/lb</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">*%</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&gt;$0.95 /lb</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">*%</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
<BR>



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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">3. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp; ADA
will take steps necessary to qualify, approve and promote the Products in the Market and
provide guidance to CCC to improve the Products.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; The
activities required under this Phase 1 shall be conducted under this Agreement.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">-----------------------------</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">* Confidential
Treatment Requested Pursuant to SEC Rule 24b-2. The confidential material has been filed
separately  with the Commission.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">12</FONT></FONT> </P>


<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

<!-- *************************************************************************** -->
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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">5. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> ADA
and CCC will function as two separate entities for Phase 1.  ADA and CCC shall bear all
of  their own costs in performing their obligations under Phase 1.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">6. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Prior
to entry into Phase 2, the Parties shall negotiate in good faith a Joint Production and
Marketing Agreement.  To facilitate this negotiation, ADA shall undertake to provide a
draft of  a Joint Production and Marketing Agreement within one (1) month of the
execution of this  Agreement and thereafter the parties shall endeavor to complete their
negotiations of the Joint  Production and Marketing Agreement in no more than three (3)
months from the date of delivery  of such draft (the &#147;Negotiating Target Period&#148; shall
be the sum of both of the foregoing  periods).  Neither party shall have the right to
terminate this Agreement for convenience prior  to the end of the Negotiating Target
Period.  The Joint Production and Marketing Agreement  shall set forth at a minimum: (a)
the level of investment required by ADA and the commitment of  plant/capital by CCC; (b)
the minimum Product inventory levels; (c) the sales and marketing  responsibilities of
each Party; and (d) the method of distributing the income, expenses, or  profits/loss
generated by the investments made by the Parties under the Joint Marketing and
Production Agreement.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Phase 2&nbsp;-</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The objective
of this Phase, subject to mutual agreement on the terms of the Joint Production and
Marketing  Agreement, shall be to enhance the Product to be marketed by the Parties by
developing enhanced production  capabilities and/or new Products.  Generally it is
envisioned that the Parties shall have the following  responsibilities in this Phase:</FONT></FONT></P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">1. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> CCC
will develop a design and cost estimate to perform the equipment upgrades and process
changes required to begin cost effective production of the Products on the idle B-Line at
the  CCC Big Sandy plant (the &#147;B-Line&#148;).  Notwithstanding the foregoing, it is
understood that the  Products are not required to be produced on the B-Line, and CCC may
propose an alternative  approach for consideration in the development of enhanced
production capabilities or Products  to support the Parties joint marketing efforts.  In
any case, CCC will, in its discretion,  identify and propose CCC physical plant resources
and personnel to be committed to production  of Products subject to investment by ADA in
such production resources.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> ADA
will provide capital to fund investment in production resources and will provide
suggestions regarding improvements in the Products.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">3. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp; CCC
will operate the production facilities agreed to be developed and will guarantee Product
unit costs based on specified minimum volume level throughputs for the B-line or
elsewhere  which costs shall be adjustable using a mutually acceptable index related to
the cost of raw  materials and energy.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">13</FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 13; page: 13" -->

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> CCC
and ADA shall jointly market the Products with an intent to maximize return on the joint
investment in enhanced production and/or Products</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>



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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Phase 3</FONT></FONT></P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">1. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Upon
mutual written agreement of the Parties, a Joint Venture (JV) will be formed.  The JV
will  be a separate entity to continue the goals established by the Parties for the
Project.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> The
Parties will determine a mutually acceptable ownership structure for the JV, taking into
consideration their respective investments and participation.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">3. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Funding
for the JV will be mutually determined by ADA and CCC.</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>



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<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">14</FONT></FONT> </P>


</BODY>
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.37
<SEQUENCE>8
<FILENAME>adaexh1037.htm
<DESCRIPTION>2006 PROFIT SHARING PLAN
<TEXT>
<HTML>
<HEAD>
<TITLE>AutoCoded Document</TITLE>
</HEAD>
<BODY>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<P ALIGN="RIGHT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Exhibit 10.37</B></FONT></FONT></P>


<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A001"></A>
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="3"><B>ADA-ES
2006 PROFIT SHARING<BR>PERFORMANCE
BASED SEMI-ANNUAL RATING FORM</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A004"></A>
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="3"><B>PROFIT SHARING
PLAN<BR>(For
Fiscal 2006)</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
ADA-ES Profit Sharing Plan enables each and every employee to share in the
profits of the company. The program is designed to promote teamwork, while
serving as a reminder to each employee that their individual contribution can
make a difference to the Company&#146;s overall profitability. In addition to
base salary, the matching portion of the ADA-ES Retirement Plan, and the
potential for individual bonuses for outstanding effort, this plan is an
integral part of an employee&#146;s overall compensation.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">In
2004, employees earned, on average, over $6,000 in gross annual income as
participants of this plan. Excluding executives and directors, earnings ranged
from approximately $2,800 to $7,300. Through October 31, 2005, the Company was
positioned to exceed 2004 actual.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">For
fiscal 2006 the Profit Sharing Plan (PSP) has been established as twenty-four
percent (24%) of net earnings before taxes and investment income at the end of
the fiscal/calendar year, representing approximately 10% of each employee&#146;s
salary. Plan distributions will be made by no later than February 15, 2007 as
follows:</FONT></FONT></P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">1. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> ADA-ES
Retirement Plan (50%)</FONT></FONT> </P></TD>
</TR>
</TABLE>


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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Company-Wide
Distribution (20%)</FONT></FONT> </P></TD>
</TR>
</TABLE>


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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="9%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">3. </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="88%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"> Performance
Based Distribution (30%)</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A006"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><U>ADA-ES
Retirement Plan (50%)</U></B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">This
portion of the Plan will be distributed among employees based on meeting the
participation requirements in the Company&#146;s current qualified ADA-ES
Retirement Plan as shown on page 3, item #2 of that plan. Individual
distributions will be pro-rated as a percent of total compensation as required
by the ADA-ES Retirement Plan.</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
distribution may be made in either stock or cash at the Board of Director&#146;s
discretion. Vesting rules as outlined in the current ADA-ES Retirement Plan
apply for these distributions to employees.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Employees
with less than a year of service and temporary employees, as defined in the
ADA-ES Retirement Plan, are not eligible for this portion of the Profit Sharing
Plan.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Should
an employee be promoted during the course of the year, for purposes of
calculating profit sharing, the employee&#146;s salary will be prorated based on
the number of months at the original rate and the number of months at the new
rate.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A007"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><U>Company-Wide
Distribution (20%)</U></B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">This
portion of the Plan will be distributed evenly among all full&#150;time
employees with the following exceptions:</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Eligibility
of a new full-time or part-time employee will begin on the first day of the
month following the third full-month of service. Such new employee will receive
a pro-rated distribution based on the eligible months of service for the year.
(e.g. hired in May, eligible in September &#150; 4 months employment / 12 months
total year = .33).</FONT></FONT></P>

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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Employees
terminated during 2006 will forfeit eligibility for this portion of the Plan.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Full-time employee
distributions will be based on full months of service. Part time employee
distributions will be pro-rated based on hours worked per month.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Temporary
employees are not eligible for this portion of the Plan.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">An
early distribution of this portion of the plan may be offered in December to
those eligible employees electing it.</FONT></FONT></P>


<!-- MARKER FORMAT-SHEET="Para Center" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>August 1, 2006</B></FONT></FONT> </P>

<P style="PAGE-BREAK-BEFORE: always">
<HR align=center width="100%" color=#999999 SIZE=3>

<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 1; page: 1" -->


<!-- MARKER FORMAT-SHEET="Head Major" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="3"><B>ADA-ES
2006 PROFIT SHARING  <BR>PERFORMANCE BASED SEMI-ANNUAL RATING FORM</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A008"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><U><BR>Performance
Based Distribution (30%)</U></B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">This
portion of the Plan will be distributed to all full-time and part-time employees
on a performance-based basis. Temporary employees are not eligible for this
distribution. Employees terminated during 2006 will forfeit eligibility for this
portion of the Plan.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Eligibility
of a new full-time or part-time employee will begin on the first day of the
month following the third full-month of service. Such new employee will receive
a pro-rated distribution based on the eligible months of service for the year.
(e.g. hired in May, eligible in September &#150; 4 months employment / 12 months
total year = .33).</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Full-time
employee distributions will be based on full months of service. Part time
employee distributions will be pro-rated based on hours worked per month.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Employees
will be evaluated semi-annually by their direct supervisor based informally on
criteria that may also be used in the formal performance appraisal, which is
generally conducted annually. The current criteria that may be used for the
evaluation includes, but is not limited to the following areas:</FONT></FONT></P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Job
Knowledge</FONT></FONT> </P></TD>
</TR>
</TABLE>


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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Communications</FONT></FONT> </P></TD>
</TR>
</TABLE>


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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Attitude
and Cooperation o Leadership</FONT></FONT> </P></TD>
</TR>
</TABLE>


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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Planning,
Judgment and Resourcefulness o Initiative and Responsibility</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
following rating system will be used for each criteria:</FONT></FONT></P>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o</FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">1
Point &#151; Poor Performance </FONT></FONT> </P></TD>
</TR>
</TABLE>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">2
Points &#151; Improvement Needed </FONT></FONT> </P></TD>
</TR>
</TABLE>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">3
Points  &#151; Achieving Expectations </FONT></FONT> </P></TD>
</TR>
</TABLE>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4
Points &#151; Exceeding Expectations </FONT></FONT> </P></TD>
</TR>
</TABLE>

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<TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
<TR VALIGN="TOP">
     <TD ALIGN="RIGHT" WIDTH="6%"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">o </FONT></FONT></TD>
     <TD ALIGN="LEFT" WIDTH="3%">&nbsp;</TD>
     <TD WIDTH="91%"><P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">5
Points &#151; Excellent Performance</FONT></FONT> </P></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">The
employee&#146;s supervisor will complete the Profit Sharing Performance Based
Rating form (see attached) with input from project managers or other personnel
to whom said employee supports. For ratings of 3 or above, comments are
preferred, but not necessary. For ratings of 2 or below, comments are required
as clear communication to the employee for improvement in deficient areas.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Should
an employee receive an average rating for the two rating periods during 2006 of
lower than 2.0, the employee will not be eligible to receive any distribution in
this portion of the Plan. A rating of less than 2.0 in any criteria area on any
Profit Sharing Performance Based Rating form will also be used as a tool for the
supervisor, employee and Human Resources to identify areas of concern and
develop an improvement implementation plan.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Distributions
will be made based on the ADA-ES commercial rate schedule in effect at the end
of the fiscal year covering the profit sharing distribution.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Should
an employee be promoted during the course of the year, for purposes of
calculating profit sharing, the employee&#146;s commercial rate will be prorated
based on the number of months at the original rate and the number of months at
the new rate.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major" -->
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>August 1,
2006</B></FONT></FONT></P>


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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21.1
<SEQUENCE>9
<FILENAME>adaexh211.htm
<DESCRIPTION>SUBSIDIARIES OF THE REGISTRANT
<TEXT>
<HTML>
<HEAD>
<TITLE>AutoCoded Document</TITLE>
</HEAD>
<BODY>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A001"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Exhibit 21.1</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A002"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Subsidiaries
of ADA-ES, Inc</B></FONT></FONT></P>




<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" WIDTH="600">
<TR VALIGN="BOTTOM">
     <TH COLSPAN="2" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Name*</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
     <TH COLSPAN="2" ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">State of Organization</FONT><HR WIDTH="100%" SIZE="1" COLOR="BLACK" NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
     <TD WIDTH="63%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="6%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="30%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD WIDTH="2%" ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="left"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">ADA Environmental Solutions, LLC</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="center"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Colorado</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Clean Coal Solutions, LLC</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
     <TD ALIGN="center"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Colorado</FONT></TD><TD ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
     <TD>&nbsp;</TD><TD></TD>
     <TD></TD><TD></TD>
</TR>
</TABLE>


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<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><BR><BR>* Each
subsidiary does business under its chartered name.</FONT></FONT></P>



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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>10
<FILENAME>ada12312006exh231.htm
<DESCRIPTION>CONSENTS OF EXPERTS AND COUNSEL
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<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A001"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Exhibit 23.1</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major" -->
<A NAME="A002"></A>
<P ALIGN="CENTER"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="3"><B>CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">We
consent to the incorporation by reference in Registration Statements (No.
333-110479, 333-112587, 333-114546, 333-121234) on Form S-8 and (No. 333-119795,
333-131085) on Form S-3 of ADA-ES, Inc. and Subsidiaries of our reports dated
March 26, 2007 relating to our audits of the consolidated financial statements
and internal control over financial reporting, which appear in this Annual
Report on Form 10-K of ADA-ES, Inc. and Subsidiaries for the year ended December
31, 2006.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A003"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><I>/s/ &nbsp;&nbsp;HEIN &amp;
ASSOCIATES LLP</I></B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor" -->
<A NAME="A004"></A>
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Denver,
Colorado<BR>March 26, 2007</FONT></FONT></P>



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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>11
<FILENAME>adaexh311.htm
<DESCRIPTION>RULE 13A-14(A)/15D-14(A) CERTIFICATIONS
<TEXT>
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<!-- MARKER FORMAT-SHEET="Head Minor" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Exhibit 31.1</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Certification
of Chief Executive Officer of ADA-ES, Inc. <BR>Pursuant to  Rules 13a-14(a) and 15d-14(a) of
the Securities Exchange Act of 1934, as  Amended</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">I, Michael  D.
Durham, President and Chief Executive Officer of ADA-ES, Inc. (the
&quot;registrant&quot;) certify that:</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><BR>1.&nbsp;&nbsp;&nbsp;I have
reviewed this Annual Report on  Form 10-K of ADA-ES, Inc.;</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><BR>2.&nbsp;&nbsp;&nbsp;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;</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><BR>3.&nbsp;&nbsp;&nbsp;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 registrant as of, and for, the  periods presented in
this  report;</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><BR>4.&nbsp;&nbsp;&nbsp;The
registrant&#146;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)) and internal control over financial reporting (as defined in
Exchange  Act Rules 13a-15(f) and 15d-15(f)) for the registrant and  have:</FONT></FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;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 registrant,  including its consolidated  subsidiaries, is  made known to
us by others within those  entities,  particularly during the period in  which this
report is being  prepared;</FONT></FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;Designed
such  internal control over financial reporting, or caused such internal control  over
financial reporting to be designed under our supervision, to provide  reasonable
assurance regarding the reliability of financial reporting and  the preparation of
financial statements for external purposes in  accordance with generally accepted
accounting  principles;</FONT></FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;
Evaluated the  effectiveness of  the registrant'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</FONT></FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;
Disclosed in this  report any  change in the registrant's internal control over financial
reporting that occurred  during the registrant's most recent fiscal quarter  (the
registrant&#146;s fourth fiscal  quarter in the case of an annual report)  that has
materially affected, or is reasonably  likely to materially  affect, the registrant&#146;s
internal control over financial  reporting;  and</FONT></FONT></P>


<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">5.&nbsp;&nbsp;&nbsp;The
registrant's other certifying  officer and I have disclosed, based on our most recent
evaluation of internal  control over financial reporting, to the registrant's auditors
and the audit  committee of the registrant&#146;s board of directors (or persons
performing the  equivalent functions):</FONT></FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;
All significant  deficiencies and  material weaknesses in the design or operation of
internal control over financial  reporting which are reasonably likely to  adversely
affect the registrant's ability to  record, process, summarize  and report financial
information;  and</FONT></FONT></P>


<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;
Any fraud, whether  or not  material, that involves management or other employees who
have a  significant role in the  registrant's internal control over financial  reporting.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Date:&nbsp; March
27, 2007</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>/s/&nbsp; Michael
D. Durham</U><BR>Name:&nbsp; Michael D.  Durham<BR>Title:&nbsp; President and Chief Executive
Officer</FONT></FONT></P>

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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>12
<FILENAME>adaexh312.htm
<DESCRIPTION>RULE 13A-14(A)/15D-14(A) CERTIFICATIONS
<TEXT>

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<!-- MARKER FORMAT-SHEET="Head Minor" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B>Exhibit 31.2</B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Certification
of Chief Financial Officer of ADA-ES, Inc. <BR>Pursuant to  Rules 13a-14(a) and 15d-14(a) of
the Securities Exchange Act of 1934, as  Amended</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">I, Mark H.
McKinnies, Chief Financial Officer of ADA-ES, Inc. (the &#147;registrant&#148;) certify
that:</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">1.  I have
reviewed this Annual Report on  Form 10-K of ADA-ES, Inc.;</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">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;</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">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 registrant as of, and for, the  periods presented in
this  report;</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">4.  The
registrant&#146;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)) and internal control over financial reporting (as defined in
Exchange  Act Rules 13a-15(f) and 15d-15(f)) for the registrant and  have:</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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 registrant, including its consolidated  subsidiaries, is
made known to us  by others within those entities,  particularly during the period in
which this report is  being  prepared;</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)
Designed such  internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide  reasonable
assurance regarding the reliability of financial reporting and  the preparation of
financial statements for external purposes in  accordance with generally accepted
accounting  principles;</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)
Evaluated the  effectiveness of the registrant&#146;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</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)
Disclosed in this  report any change  in the registrant&#146;s internal control over
financial  reporting that occurred during  the registrant&#146;s most recent fiscal
quarter  (the registrant&#146;s fourth fiscal  quarter in the case of an annual report)
that has materially affected, or is reasonably  likely to materially  affect, the
registrant&#146;s internal control over financial  reporting;  and</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">5.  The
registrant&#146;s other  certifying  officer and I have disclosed, based on our most
recent evaluation of internal  control over financial reporting, to the registrant&#146;s
auditors and the audit  committee of the registrant&#146;s board of directors (or persons
performing the  equivalent functions):</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)
All significant  deficiencies and material weaknesses in the design or operation of
internal control over  financial reporting which are reasonably likely to  adversely
affect the registrant&#146;s  ability to record, process, summarize  and report financial
information;  and</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)
Any fraud, whether  or not material, that involves management or other employees who have
a  significant role in the registrant&#146;s internal control over financial  reporting.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Date: &nbsp; March
27,  2007</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>/s/&nbsp; Mark
H. McKinnies</U><BR>Name:&nbsp; Mark H. McKinnies<BR>Title: &nbsp;Chief Financial Officer</FONT></FONT></P>

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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>13
<FILENAME>adaexh321.htm
<DESCRIPTION>SECTION 1350 CERTIFICATIONS
<TEXT>
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<!-- MARKER FORMAT-SHEET="Head Minor" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><B>Exhibit
32.1</B></B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Certification
of Chief Executive Officer Pursuant to 18 U.S.C. Section  1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of  2002</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Michael D.
Durham, as President and Chief Executive Officer of ADA-ES, Inc. (the  &#147;Company&#148;),
certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant  to Section 906 of the
Sarbanes-Oxley Act of 2002, that:</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)
the Company&#146;s Annual Report on Form  10-K for the year ended December 31, 2006 as
filed with the Securities and  Exchange Commission on the date hereof (the &#147;Report&#148;)
fully complies with the  requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934;  and</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)
the information contained in the Report  fairly presents, in all material respects, the
financial condition and results  of operations of the Company.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>/s/&nbsp; Michael
D. Durham</U><BR>Name:&nbsp; Michael D.  Durham<BR>Title:&nbsp;President and Chief Executive
Officer <BR>Date:&nbsp;March  27, 2007</FONT></FONT></P>

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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>14
<FILENAME>adaexh322.htm
<DESCRIPTION>SECTION 1350 CERTIFICATIONS
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<!-- MARKER FORMAT-SHEET="Head Minor" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><B><B>Exhibit
32.2</B></B></FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Certification
of Chief Financial Officer Pursuant to 18 U.S.C. Section  1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of  2002</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">Mark H.
McKinnies, as Chief Financial Officer of ADA-Es, Inc. (the &#147;Company&#148;),
certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section  906 of the
Sarbanes-Oxley Act of 2002, that:</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)
the Company&#146;s Annual Report on Form  10-K for the year ended December 31, 2006 as
filed with the Securities and  Exchange Commission on the date hereof (the &#147;Report&#148;)
fully complies with the  requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934;  and</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Indent" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)
the information contained in the Report  fairly presents, in all material respects, the
financial condition and results  of operations of the Company.</FONT></FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" -->
<P ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif"><FONT SIZE="2"><U>/s/&nbsp; Mark
H. McKinnies</U><BR>Name:&nbsp; Mark H.  McKinnies<BR>Title: &nbsp;Chief Financial Officer<BR>Date:
&nbsp;March 27,  2007</FONT></FONT></P>

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