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<SEC-DOCUMENT>0000788965-08-000002.txt : 20080328
<SEC-HEADER>0000788965-08-000002.hdr.sgml : 20080328
<ACCEPTANCE-DATETIME>20080327181453
ACCESSION NUMBER:		0000788965-08-000002
CONFORMED SUBMISSION TYPE:	10KSB
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20071231
FILED AS OF DATE:		20080328
DATE AS OF CHANGE:		20080327

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			HALLADOR PETROLEUM CO
		CENTRAL INDEX KEY:			0000788965
		STANDARD INDUSTRIAL CLASSIFICATION:	CRUDE PETROLEUM & NATURAL GAS [1311]
		IRS NUMBER:				841014610
		STATE OF INCORPORATION:			CO
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10KSB
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-14731
		FILM NUMBER:		08716219

	BUSINESS ADDRESS:	
		STREET 1:		1660 LINCOLN ST STE 2700
		CITY:			DENVER
		STATE:			CO
		ZIP:			80264
		BUSINESS PHONE:		3038395505

	MAIL ADDRESS:	
		STREET 1:		1660 LINCOLN STREET
		STREET 2:		SUITE 2700
		CITY:			DENVER
		STATE:			CO
		ZIP:			80264

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	KIMBARK OIL & GAS CO /CO/
		DATE OF NAME CHANGE:	19900102

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	KIMBARK INC
		DATE OF NAME CHANGE:	19860624
</SEC-HEADER>
<DOCUMENT>
<TYPE>10KSB
<SEQUENCE>1
<FILENAME>dec10k2007.htm
<DESCRIPTION>DECEMBER 31, 2007 FORM 10-KSB
<TEXT>
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    <title>dec10k2007.htm</title>
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    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font>

      <div>
        <hr style="COLOR: black" align="left" noshade size="3" width="100%">
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 11pt; FONT-FAMILY: Arial, sans-serif">&#160;&#160;UNITED
STATES</font></div>
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AND EXCHANGE COMMISSION</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 11pt; FONT-FAMILY: Arial, sans-serif">Washington,
D. C. 20549</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 11pt; FONT-FAMILY: Arial, sans-serif">FORM
10-KSB</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
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          <tr>
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      x ]</font></div>
            </td>
            <td align="left" valign="top" width="88%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">ANNUAL
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934</font></div>
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          </tr>
          <tr>
            <td align="left" valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">For
      the fiscal year ended: <font style="DISPLAY: inline; FONT-WEIGHT: bold">December 31,
      2007</font></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
            </td>
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          <tr>
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      ]</font></div>
            </td>
            <td align="left" valign="top" width="88%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="top" width="88%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="top" width="88%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Commission
      file number: 0-14731</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="top" width="88%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;&#160;
      </font></td>
            <td valign="top" width="88%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">HALLADOR
      PETROLEUM COMPANY</font></div>
            </td>
          </tr>
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    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br>&#160;</div>
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            <tr>
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                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(State
      of incorporation)</font></div>
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                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(IRS
      Employer Identification No.)</font></div>
              </td>
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                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif"><font style="DISPLAY: inline">1660 Lincoln Street, Suite 2700, Denver,
      Colorado</font></font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(Address
      of principal executive offices)</font></div>
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    </font></td>
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      Code)</font></div>
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              <td align="left" valign="top" width="55%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
              <td align="left" valign="top" width="7%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
              <td align="left" valign="top" width="38%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            </tr>
            <tr>
              <td valign="top" width="55%" style="BORDER-BOTTOM: black 2px solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Issuer's
      telephone number<font style="DISPLAY: inline">:
      303.839.5504</font></font></div>
              </td>
              <td align="left" valign="top" width="7%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
              <td valign="top" width="38%" style="BORDER-BOTTOM: black 2px solid">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Fax:
      <font style="DISPLAY: inline">303.832.3013</font></font></div>
              </td>
            </tr>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Arial, sans-serif">Securities
registered under Section 12(b) of the Exchange Act:&#160;&#160;NONE</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Arial, sans-serif">Securities
registered under Section 12(g) of the Exchange Act: &#160;Common Stock, $.01 par
value</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Arial, sans-serif">Check
whether the issuer is not required to file reports pursuant to Section 13 or
15(d) of the Exchange Act. [&#160; ]</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Arial, sans-serif">Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes [x] &#160;&#160;No [
]</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Arial, sans-serif">Check
if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Arial, sans-serif">Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).&#160; Yes [ ]&#160;&#160; No [x]</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Arial, sans-serif">Our
revenue for the year ended December 31, 2007 was about $30 million.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Arial, sans-serif">At
March 27, 2008, we had 16,362,528 shares outstanding and the aggregate market
value of such shares held by non-affiliates was about $7 million based on a
closing price of $4.35.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Arial, sans-serif">DOCUMENTS
INCORPORATED BY REFERENCE: NONE</font></div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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</font></div>
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      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">1</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">PART
1</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">ITEM
1.&#160; DESCRIPTION OF BUSINESS</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; TEXT-DECORATION: underline">General Development of
Business</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Hallador Petroleum
Company (Hallador), a Colorado corporation, was organized by our predecessor in
1949.&#160;&#160;Over 90% of our stock is closely held, see Item 11 of this Form
10-KSB for a listing of our major shareholders.&#160;&#160;Our stock is thinly
traded on the OTC Bulletin Board.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">In
late 2006, we concluded to deemphasize our oil and gas operations and
concentrate our efforts in the coal business.&#160; In July 2007, we sold our
San Juan gas properties; our remaining oil and gas properties are not
significant.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">With that in mind,
the following events have occurred during the last two years:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">In
early January 2006, we signed a letter of intent with Sunrise Coal, LLC
(Sunrise) to affect a reorganization/merger between Hallador and Sunrise, a
private company not affiliated with the Yorktown group of
companies.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">During the first
quarter of 2006, we loaned Sunrise $7 million in order for Sunrise to begin
development of their second coal mine (the "Carlisle mine").&#160;&#160;Their
first mine, Howesville, began producing coal in November 2005.&#160;&#160;Both
mines are located in western Indiana.&#160;&#160;During the second quarter of
2006, Sunrise entered into a $30 million line of credit with two Indiana banks,
and our $7 million was repaid. We are the guarantor of this line of
credit.&#160;&#160;On May 1, 2006, Sunrise informed us that they intend to shut
down the Howesville mine effective June 10, 2006 due to safety
reasons.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Due to the shut
down of the Howesville mine, all of our previous agreements with Sunrise were
voided, and on July 31, 2006, we entered into a joint venture with Sunrise (JV)
to develop the Carlisle mine.&#160;&#160;Sunrise contributed all of their assets
for a 40% interest and we agreed to a $20.5 million funding commitment (which we
fulfilled during 2007) and guaranteed the aforementioned line of credit for a
60% interest.&#160;&#160;&#160;Through approximately 88% of the JV's cash flow
we are to receive $20.5 million plus interest at
10%.&#160;&#160;&#160;Thereafter, cash flow will be distributed 60% to us and
40% to the original Sunrise members.&#160;&#160;On July 31, 2006 (date of
acquisition), we began consolidating the Sunrise joint venture.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Carlisle
Mine</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">We
sell all of our coal to producers of electric power.&#160;&#160;&#160;Currently,
we have only one mine (Carlisle) and three mid-west electric utility
customers.&#160;&#160;The Carlisle mine is located in western Indiana and was in
the development stage through January 31, 2007.&#160;&#160;First commercial
production began February 5, 2007 and we sold 972,500 tons during 2007 at an
average price of $28/ton FOB (freight on board) the mine.</font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">We
are talking to other coal purchasers about additional contracts, and if the rise
in coal prices continues, we believe&#160;our coal production could peak at
about 2.5 to 3 million tons per year in five or six
years.&#160;&#160;Recoverable reserves that are presently leased are about 36
million tons.&#160;&#160;Additional unleased reserves that could be mined in the
future are about 18 million tons.&#160;&#160;There can be no assurance that we
will be able to obtain suitable lease terms.</font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Our coal operations
have about 148 employees, and are running three shifts to develop and mine the
Carlisle reserves. The Carlisle mine is non-union.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
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      </div>
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        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; TEXT-DECORATION: underline">The Coal
Industry</font></font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">During 2007, we
sold substantially all of our coal to two utilities.&#160;&#160;&#160;We
currently have three contracts with three different utilities ranging from one
year to six years.</font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">We
believe that rapid economic expansion in developing nations, particularly China
and India, has increased global demand for coal. We expect coal exports from the
United States to increase in response to growing global coal demand,
particularly as some of the traditional coal export nations experience mine,
port, and rail and labor challenges. We estimate that higher domestic demand for
coal and higher U.S.&#160;coal exports will positively influence domestic coal
demand. Additionally, we expect decreased production, particularly in the
Central Appalachian region of the United States, to adversely impact domestic
coal supply in the coming years. We anticipate continuing demand growth and
weaker coal supplies to exert upward pressure on coal pricing in the future. As
a result, we have not yet priced a large portion of our total reserves in order
to take advantage of expected price increases.</font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Demand for coal is
broadly influenced by weather. Weather patterns requiring greater use of
air-conditioning or heating, translate into greater demand for coal-based
electricity generation.</font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Coal is expected to
remain the fuel of choice for domestic power generation through at least 2030,
according to the Energy Information Administration (EIA). Through that time, we
expect new technologies intended to lower emissions of mercury, sulfur dioxide,
nitrogen oxide and particulate matter will be introduced into the power
generation industry. We believe these technological advancements will help coal
retain its role as a key fuel for electric power generation well into the
future.</font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Prices for oil and
natural gas in the United States have reached record levels because of
increasing demand and tensions regarding international supply. Historically high
oil and gas prices and global energy security concerns have increased government
and private sector interest in converting coal into liquid fuel, a process known
as liquefaction. Liquid fuel produced from coal can be refined further to
produce transportation fuels, such as low-sulfur diesel fuel, gasoline and other
oil products, such as plastics and solvents. Several coal-to-liquids projects
are in the process of development.&#160;&#160;We also expect advances in
technologies designed to convert coal into electricity through coal gasification
processes and to capture and sequester carbon dioxide emissions from electricity
generation and other sources. These technologies have garnered greater attention
in recent years due to developing concerns about the impact of carbon dioxide on
the global climate. We believe the advancement of coal-conversion and other
technologies represents a positive development for the long-term demand for
coal.</font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; TEXT-DECORATION: underline">U.S.&#160;Coal
Production</font></font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">The United States
produces approximately one-fifth of the world&#8217;s coal production and is the
second largest coal producer in the world, exceeded only by China. Coal in the
United States represents approximately 94% of the domestic fossil energy
reserves with over 250&#160;billion tons of recoverable coal, according to the
U.S.&#160;Geological Survey. The U.S.&#160;Department of Energy estimates that
current domestic recoverable coal reserves could supply enough electricity to
satisfy domestic demand for more than 200&#160;years. Coal production in the
United States has increased from 434&#160;million tons in 1960 to approximately
1.2&#160;billion tons in 2007 based on information provided by
EIA.</font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">The Illinois basin
includes Illinois, Indiana and western Kentucky and is the major coal production
center in the interior region of the United States. Coal from the Illinois basin
varies in heat value and has high sulfur content. Despite its high sulfur
content, coal from the Illinois basin can generally be used by some <font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">electric power
generation facilities that have installed pollution control devices, such as
scrubbers, to reduce emissions. We anticipate that Illinois basin coal will play
an increasingly vital role in the U.S.&#160;energy markets in future
periods.</font><br></font></div>
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      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Safety and Environmental
Regulations</font></font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Our operations,
like operations of other coal companies, are subject to regulation, primarily by
federal and state authorities, on matters such as: air quality standards;
reclamation and restoration activities involving our mining properties; mine
permits and other licensing requirements; water pollution; employee health and
safety; management of materials generated by mining operations; storage of
petroleum products; protection of wetlands and endangered plant and wildlife
protection.&#160;&#160;Many of these regulations require registration,
permitting, compliance, monitoring and self-reporting and may impose civil and
criminal penalties for non-compliance.</font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Additionally, the
electric generation industry is subject to extensive regulation regarding the
environmental impact of its power generation activities, which could affect
demand for our coal over time. The possibility exists that new legislation or
regulations may be adopted or that the enforcement of existing laws could become
more stringent, causing coal to become a less attractive fuel source and
reducing the percentage of electricity generated from coal. Future legislation
or regulation or more stringent enforcement of existing laws may have a
significant impact on our mining operations or our customers&#8217; ability to use
coal.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">While it is not
possible to accurately quantify the expenditures we incur to maintain compliance
with all applicable federal and state laws, those costs have been and are
expected to continue to be significant. Federal and state mining laws and
regulations require us to obtain surety bonds to guarantee performance or
payment of certain long-term obligations, including mine closure and reclamation
costs.</font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Mining Permits and
Approvals</font></font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Numerous
governmental permits or approvals are required for mining operations. When we
apply for these permits and approvals, we may be required to prepare and present
data to federal, state or local authorities data pertaining to the effect or
impact that any proposed production or processing of coal may have upon the
environment. The authorization, permitting and implementation requirements
imposed by any of these authorities may be costly and time consuming and may
delay commencement or continuation of mining operations. Regulations also
provide that a mining permit or modification can be delayed, refused or revoked
if an officer, director or a shareholder with a 10% or greater interest in the
entity is affiliated with another entity that has outstanding permit violations.
Thus, past or ongoing violations of federal and state mining laws could provide
a basis to revoke existing permits and to deny the issuance of additional
permits.</font></div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">In
order to obtain mining permits and approvals from state regulatory authorities,
mine operators must submit a reclamation plan for restoring, upon the completion
of mining operations, the mined property to its prior condition, productive use
or other permitted condition. Typically, we submit the necessary permit
applications several months or even years before we plan to begin mining a new
area. Some of our required permits are becoming increasingly more difficult and
expensive to obtain, and the application review processes are taking longer to
complete and becoming increasingly subject to challenge.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Under some
circumstances, substantial fines and penalties, including revocation or
suspension of mining permits, may be imposed under the laws described above.
Monetary sanctions and, in severe</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">circumstances,
criminal sanctions may be imposed for failure to comply with these
laws.&#160;&#160;Compliance with these laws has increased the cost of coal
mining for domestic coal producers.</font></div>
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      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Mine Health and Safety
Laws</font></font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Stringent safety
and health standards have been imposed by federal legislation since Congress
adopted the Mine Safety and Health Act of 1969. The Mine Safety and Health Act
of 1977 significantly expanded the enforcement of safety and health standards
and imposed comprehensive safety and health standards on all aspects of mining
operations. In addition to federal regulatory programs, the state in which we
operate also has programs for mine safety and health regulation and
enforcement.&#160;&#160;In reaction to several mine accidents in recent years,
federal and state legislatures and regulatory authorities have increased
scrutiny of mine safety matters and passed more stringent laws governing mining.
For example, in 2006, Congress enacted the Mine Improvement and New Emergency
Response Act of 2006, which we refer to as the MINER Act. The MINER Act imposes
additional obligations on coal operators including, among other things, the
following:</font></div>
    </div>
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    </font></td>
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    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="top" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#8226;&#160;</font></div>
            </td>
            <td align="left" valign="top" width="87%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">development
      of new emergency response plans that address post-accident communications,
      tracking of miners, breathable air, lifelines, training and communication
      with local emergency response personnel;</font></div>
            </td>
          </tr>
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    </font></td>
            <td valign="middle" width="87%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="top" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#8226;&#160;</font></div>
            </td>
            <td align="left" valign="top" width="87%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">establishment
      of additional requirements for mine rescue teams;</font></div>
            </td>
          </tr>
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    </font></td>
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    </font></td>
            <td valign="middle" width="87%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
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    </font></td>
            <td align="left" valign="top" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#8226;&#160;</font></div>
            </td>
            <td align="left" valign="top" width="87%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">notification
      of federal authorities in the event of certain events;</font></div>
            </td>
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    </font></td>
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    </font></td>
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    </font></td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#8226;&#160;</font></div>
            </td>
            <td align="left" valign="top" width="87%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">increased
      penalties for violations of the applicable federal laws and
      regulations;&#160;and</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="middle" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="middle" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="middle" width="87%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="top" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#8226;&#160;</font></div>
            </td>
            <td align="left" valign="top" width="87%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">requirement
      that standards be implemented regarding the manner in which closed areas
      of underground mines are sealed.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Coal Mining
Methods</font></font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">The geological
characteristics of coal reserves largely determine the coal mining method
employed. There are two primary methods of mining coal:&#160;&#160;surface
mining and underground mining.&#160;&#160;&#160;The Carlisle mine is an
underground mine, and is operated using room-and-pillar
mining.</font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Room-and-pillar
mining is effective for small blocks of thin coal seams. In room-and-pillar
mining, we cut a network of rooms into the coal seam, leaving a series of
pillars of coal to support the roof of the mine. We use continuous mining
equipment to cut the coal from the mining face and battery shuttle cars to
transport the coal to a conveyor belt for further transportation to the surface.
The pillars generated as part of this mining method can constitute up to 50% of
the total coal in a seam.</font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Coal
Preparation</font></font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Coal extracted from
Carlisle contains impurities, such as rock and sulfur impurities, and comes in a
variety of different-sized fragments.&#160;&#160;We use a coal preparation plant
located at the mine. Our coal preparation plant allows us to treat the coal we
extract from Carlisle to ensure a consistent quality.</font></div>
    </div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">5</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Transportation</font></font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">We
sell our coal FOB the mine.&#160;&#160;The electric utilities are currently
using trucks to transport the coal.&#160;&#160;Rail and trucks will be used in
the future.</font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Sales, Marketing and
Customers</font></font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Coal prices are
influenced by a number of factors and vary dramatically by region. As a result
of these regional characteristics, prices of coal by product type within a given
major coal producing region tend to be relatively consistent with each
other.&#160;&#160;The price of coal within a region is influenced by market
conditions, mine operating costs, coal quality, transportation costs involved in
moving coal from the mine to the point of use and the costs of alternative
fuels.</font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">In
addition to the cost of mine operations, the price of coal is also a function of
quality characteristics such as heat value, sulfur, ash and moisture
content.</font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Competition</font></font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
      <div style="DISPLAY: block; TEXT-INDENT: 0pt">
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">The coal industry
is intensely competitive.&#160;&#160;The most important factors on which we
compete are coal quality, transportation costs from the mine to the customer and
the reliability of supply. Most of our competitors are larger than us and have
greater financial resources and larger reserve bases.</font></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Additionally, coal
competes with other fuels, such as nuclear energy, natural gas, hydropower, and
petroleum for steam and electrical power generation. Costs and other factors,
such as safety and environmental considerations, relating to these alternative
fuels affect the overall demand for coal as a fuel.</font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Carlisle is a new
mine and is operating in compliance with all local, state, and federal
regulations.&#160;&#160;&#160;Since Carlisle is new, we have no old mine
properties to reclaim, other than the Howesville mine, which also was a new mine
and operated for only eight months before it was closed.&#160;&#160;During 2007,
we finished Phase I of the reclamation of the Howesville mine.&#160;&#160;To
reach final reclamation we must raise commercial crops for a period of five
years.</font></div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Our 45% Interest in Savoy
Energy, L.P.</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">On
December 31, 2005, we acquired a 32% interest in Savoy Energy, L.P. (Savoy), a
private company engaged in the oil and gas business primarily in the State of
Michigan.&#160; A value of $6.1 million was assigned for this
investment.&#160;&#160;We account for our interest in Savoy using the equity
method of accounting.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">On
October 5, 2007, we sold 3,564,517 shares of our common stock for about $11
million cash ($3.10 per share).&#160;&#160;The shares were sold to our existing
investors in a private placement transaction.&#160;&#160;The proceeds from the
sale were used to purchase an additional 13% interest in Savoy for $6 million
which brings our total ownership to about 45%.&#160;&#160;The remaining $5
million will be used for general corporate purposes.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Savoy's oil and gas
properties are located primarily in the State of Michigan.&#160; Savoy's
condensed financial statements and reserve information are presented in Note 6
to our financial statements.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">6</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Other</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">We
have no significant patents, trademarks, licenses, franchises or
concessions.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Other than the coal
employees in Indiana,&#160;we have four full-time employees and two part-time
employees in Denver.&#160; When needed we also engage consultants, accountants
and attorneys on a fee basis.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Our office is
located at 1660 Lincoln Street, Suite 2700, Denver, Colorado 80264, phone
303.839.5504, fax 303.832.3013.&#160; Sunrise Coal, LLC is located at 6641 S.
St. Rd. 46, Terre Haute, Indiana 47802, phone 812.894.3480, fax
812.894.3665.&#160;&#160;&#160;Terre Haute is approximately 70 miles west of
Indianapolis, Indiana.&#160;&#160;We have no website.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">ITEM
2.&#160; &#160;DESCRIPTION OF PROPERTY</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">The Carlisle mine,
located near the town of Carlisle in Sullivan County, Indiana, is an underground
mine which became operational in January 2007; during 2006 the mine was under
development.&#160;&#160;The coal is accessed with a slope to a depth of
340'.&#160;&#160;&#160;The coal is mined in the Indiana Coal V seam which is
high volatile B bituminous coal.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Current mine plans
indicates 13,500 acres of mineable coal greater than 4' thickness in the project
area.&#160;&#160;Of the 13,500 acres, 8,900 are currently under lease to
Sunrise.&#160;&#160;The Indiana V seam has been extensively mined by underground
and surface methods in the general area and is the most economically significant
coal in Indiana.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Findings are based
on generally accepted engineering principles and professional experience in the
mining industry.&#160;&#160;All judgments are based on the facts that are
available at this time.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Sunrise currently
has approximately 3,575 acres under an approved Indiana permit.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Coal Reserve
Estimates</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">The Mine Reserve
estimate for the 8,900 leased acres was made utilizing Carlson mining 2007
(software developed by Carlson Software).&#160;&#160;To convert volumes of coal
to an in-place tonnage, a weight of 80 pounds/cubic foot was used.&#160;&#160;To
convert to product tonnage, a 55% mine recovery and an average of 79% washed
recovery (coal only recovery, no out-of- seam dilution included) were
used.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Example:&#160;&#160;In-place
tonnage x 55% x 79% = product tonnage.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Standards set forth
by the United States Geological Survey were used to place areas of the mine
reserves into the Proven (measured) and Probable (indicated)
categories.&#160;&#160;Under these standards, coal within 1,320' of a data point
is considered to be proven, and coal within 1,320'&#160;&#160;to 3,960' is
placed in the Probable category.&#160;&#160;All reserves are stated as a final
salable product.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">7</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
    </div><br>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">ADDITIONAL
DISCLOSURES</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">1.</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">The Carlisle
      mine currently has road frontage on State Highway 58, and is adjacent to
      the CSX railroad.&#160;&#160;Construction of a double 100 car loop
      facility is ongoing, and construction is planned to be completed during
      the second quarter 2008.&#160;&#160;Currently, coal is being trucked from
      the Carlisle mine.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">2.</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Currently
      only the Indiana V seam is planned to be mined, and all of the controlled
      tonnage is leased to Sunrise.&#160;&#160;Most leases have unlimited terms
      once mining has begun, and yearly payments or earned royalties are kept
      current.&#160;&#160;Mineable coal thickness used is greater than four
      feet.&#160;&#160;The current Carlisle mine plan is broken into four areas
      &#8211; North Main &#8211; South Main &#8211; West&#160;&#160;Main &#8211; 2 South
      Main.&#160;&#160;Approximately 66% of the total mine plan is currently
      under lease ("controlled").&#160;&#160;It is believed that all additional
      property that would be required to access all lease areas can be obtained
      but, if some properties cannot be leased, some modification of the current
      mine plan would be required.&#160;&#160;All coal should be mined within
      the terms of the leases. Leasing programs are continuing by Sunrise
      staff.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">3.</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Mine
      construction began in 2006 and the first coal sales were in February
      2007.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">4.</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">The Carlisle
      mine has a dual use slope for the main coal conveyor, the moving of
      supplies and personnel without a hoist.&#160;&#160;There are two 8'
      diameter shafts at the base of the slope for mine
      ventilation.&#160;&#160;The slope is 18' wide with concrete and steel arch
      construction.&#160;&#160;All underground mining equipment is powered with
      electricity and underground compliant
diesel.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">5.</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Current
      production capabilities are 1,600,000 tons per year.&#160;&#160;Additional
      equipment is planned to increase production to 2 million tons per year by
      2009.&#160;&#160;Total reserves in the current mine plan (both controlled
      and uncontrolled) indicates approximately 28 years production at 2 million
      tons per year.&#160;&#160;&#160;The mine plan is a basic room and pillar
      mine using a synchronized continuous miner section with no retreat
      mining.&#160;&#160;Plans are for 60'x80'&#160;&#160;pillars with 18'
      entries for our mains, and 60'x60' pillars with 20' entries in the
      rooms.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">6.</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">The Carlisle
      mine has been in production since January 2007.&#160;&#160;The North Main
      and Sub Main #1 have been developed with both units currently setting up
      the first panels.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">7.</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Quality
      specifications for saleable product are 13-16% moisture; 10,900-11,400
      BTU; 8-10% ash; and 5-6.5 LB SO2.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">8.</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">The Carlisle
      mine has a 400 tons/hour raw feed wash plant.&#160;&#160;&#160;The wash
      plant is modular in construction and was designed and constructed on site
      so that capacity could be doubled if sales
  dictate.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">9.</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Mine dilution
      is assumed to be from 6% to 10% depending on seam
  height.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">10.</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Proven
      (measured) reserves are 21.9 million tons and probable (indicated)
      reserves are 14.6 million tons.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">8</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
    </div><br>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold">ITEM 3.&#160;&#160;&#160; LEGAL
PROCEEDINGS</font>: &#160;None</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold">ITEM 4.&#160;&#160;&#160; SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS: </font>None</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 54pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">&#160;
      </font></div>
            </td>
            <td>
              <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">PART
      II</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 54pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font size="3">ITEM
      5.&#160;</font></font></font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">MARKET
      FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
      ISSUER PURCHASES OF EQUITY
SECURITIES</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Our common stock is
traded on the OTC Bulletin Board under the symbol &#8220;HPCO.OB&#8221;.&#160; The following
table sets forth the high and low sales price for the periods
indicated:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="bottom" width="65%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="middle" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td colspan="2" valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">High</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td colspan="2" valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Low</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: arial">2008</font></div>
            </td>
            <td align="left" valign="middle" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;&#160;&#160;
      (January 1 through March 27, 2008)</font></div>
            </td>
            <td align="left" valign="middle" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">$</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">4.50</font></div>
            </td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">$</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">3.75</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: arial">2007</font></div>
            </td>
            <td align="left" valign="middle" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;&#160;&#160;&#160;
      First quarter</font></div>
            </td>
            <td align="left" valign="middle" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">3.25</font></div>
            </td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">2.50</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;&#160;&#160;&#160;
      Second quarter</font></div>
            </td>
            <td align="left" valign="middle" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">3.50</font></div>
            </td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">2.50</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;&#160;&#160;&#160;
      Third quarter</font></div>
            </td>
            <td align="left" valign="middle" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">3.25</font></div>
            </td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">2.85</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;&#160;&#160;&#160;&#160;Fourth
      quarter</font></div>
            </td>
            <td align="left" valign="middle" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
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            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
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            <td align="left" valign="bottom" width="65%">
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            <td align="left" valign="middle" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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      First quarter</font></div>
            </td>
            <td align="left" valign="middle" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
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            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;&#160;&#160;&#160;
      Second quarter</font></div>
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            <td align="left" valign="middle" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">5.00</font></div>
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            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
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            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;&#160;&#160;&#160;
      Third quarter</font></div>
            </td>
            <td align="left" valign="middle" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
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            </td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">3.25</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
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            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;&#160;&#160;&#160;
      Fourth quarter</font></div>
            </td>
            <td align="left" valign="middle" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">3.45</font></div>
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    </font></td>
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    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">3.00</font></div>
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="middle" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">During the last two
years no dividends were paid.&#160; We have no present intention to pay any
dividends in the foreseeable future.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">At
March 27, 2008, we have about 400 shareholders of record of our common stock and
the last recorded sales price was $4.35<font style="DISPLAY: inline; FONT-WEIGHT: bold">.</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Equity Compensation Plan
Information</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">We
have 550,000 options outstanding, at a weighted average exercise price of $2.30
and 200,000 options are available to be issued in the future.&#160;&#160;Our
stock option plan was not approved by security holders.</font></div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">9</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
    </div><br>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">ITEM
6.&#160;&#160;&#160; MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Overview</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Our consolidated
financial statements should be read in conjunction with this discussion.&#160;
Our primary operating property is the Carlisle coal mine located in western
Indiana of which we own a 60% interest.&#160;&#160;The Carlisle mine was in the
development stage through January 31, 2007.&#160;&#160;Commercial coal
production began February 5, 2007.&#160;&#160;&#160;We also have a 45% equity
interest in Savoy Energy, L.P., an oil and gas company which has operations in
Michigan.&#160; Over 90% of our stock is closely held, see Item 11 of this Form
10-KSB for a listing of our major shareholders.&#160;&#160;Our stock is thinly
traded on the OTC Bulletin Board.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">In
late 2006, we concluded to deemphasize our oil and gas operations and
concentrate our efforts in the coal business.&#160; In July 2007, we sold our
San Juan gas properties; our remaining oil and gas properties are not
significant.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">With that in mind,
the following events have occurred during the last two years:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">In
early January 2006, we signed a letter of intent with Sunrise Coal, LLC
(Sunrise) to affect a reorganization/merger between Hallador and Sunrise, a
private company not affiliated with the Yorktown group of
companies.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">During the first
quarter of 2006, we loaned Sunrise $7 million in order for Sunrise to begin
development of their second coal mine (the "Carlisle mine").&#160;&#160;Their
first mine, Howesville, began producing coal in November 2005.&#160;&#160;Both
mines are located in western Indiana.&#160;&#160;During the second quarter of
2006, Sunrise entered into a $30 million line of credit with two Indiana banks,
and our $7 million was repaid. We are a guarantor of this line of
credit.&#160;&#160;On May 1, 2006, Sunrise informed us that they intend to shut
down the Howesville mine effective June 10, 2006 due to safety
reasons.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: justify" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Due to the shut
down of the Howesville mine, all of our previous agreements with Sunrise were
voided, and on July 31, 2006, we entered into a joint venture with Sunrise (JV)
to develop the Carlisle mine.&#160;&#160;Sunrise contributed all of their assets
for a 40% interest and we agreed to a $20.5 million funding commitment (which we
fulfilled during 2007) and guaranteed the aforementioned line of credit for a
60% interest.&#160;&#160;&#160;Through approximately 88% of the JV's cash flow
we are to receive $20.5 million plus interest at
10%.&#160;&#160;&#160;Thereafter, cash flow will be distributed 60% to us and
40% to the original Sunrise members.&#160;&#160;On July 31, 2006 (date of
acquisition), we began consolidating the Sunrise joint venture.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">We
have entered into significant equity transactions with Yorktown and other
entities that invest with Yorktown.&#160; Yorktown, our largest shareholder,
owns about 55% of our common stock and represents one of the five seats on our
board.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Liquidity and Capital
Resources</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">In
late June 2007,&#160;our Indiana banks agreed to increase the Sunrise line of
credit (LOC) from $30 million to $40 million. The additional funds were used to
purchase certain mining equipment, build a rail loop, and for working
capital.&#160;&#160;Our current production capacity is 1,600,000 tons per
year.&#160;&#160;As of December 31, 2007, we have drawn down about $35.4
million; plus we have outstanding letters of credit for another $3 million that
leaves us with about $1 million left on the $40 million LOC.&#160;&#160;The
current interest rate is LIBOR (3.15%) plus 3.55% or 6.7%.&#160;&#160;As
discussed below, </font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Sunrise entered
into two interest rate swaps. Under the LOC with the banks no principal payments
are due until the end of July 2008; assuming the full $40 million LOC is drawn,
we will begin making monthly payments (principal and interest) of about $600,000
through June 2015.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">10</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">We
have entered into two interest rate swap agreements swapping variable rates for
fixed rates. The first swap agreement is relative to the $30 million LOC and is
effective commencing July 15, 2007 and matures on July 15, 2012. The second swap
agreement relates to the additional $10 million that increased Sunrise's LOC to
$40 million. This second swap agreement went into effect on December 28, 2007
and matures on December 28, 2011.&#160;&#160;The two swap agreements fix our
interest rate at about 8.8%. At December 31, 2007, we recorded the estimated
fair value of the two swaps as a $1.18 million liability with a corresponding
charge to interest expense.&#160;&#160;At March 20, 2008<font style="DISPLAY: inline; FONT-WEIGHT: bold">,</font> the estimated fair value of
the interest rate swaps was a liability of about $2.2 million.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Accounting rules
require us to recognize all derivatives on the balance sheet at estimated fair
value. Derivatives that are not hedges must be adjusted to estimated fair value
through earnings. We have no derivatives designated as a hedge.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">We
have no off-balance sheet arrangements.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Advances to
Sunrise</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">In
order to expand coal production at the Carlisle mine, additional capital is
necessary to purchase&#160;&#160;mining equipment.&#160;&#160;We are in
discussions to advance $2-$3 million to Sunrise during 2008 and enter into a
separate loan agreement with our banks for an additional $2-$3
million.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Terms for the new
short-term line of credit are being discussed among Sunrise, us, and the
banks.&#160;&#160;In early February 2008, we advanced Sunrise $1 million pending
finalization of the terms for this new line.&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><br>&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Results of
Operations&#160;</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Coal sales began in
February 2007 and for the year 2007 we sold 972,500 tons at an average selling
price of about $28/ton.&#160;&#160;During the periods 2008 - 2013, we have
contracts with three utilities.&#160;&#160;We anticipate our sales under these
contracts to range from 1.4 million tons per year to 1.9 million tons per
year.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">We
had no coal operations for the comparable periods in 2006; therefore, there is
no need to discuss changes in these accounts.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">The increase in
property sales was due to the sale of our San Juan reserves as discussed
below.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Interest income was
less due to a significantly lower amount of investable funds during the
year.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">G&amp;A increased
due to the restricted stock grants to Mr. Stabio, our CEO, and Mr. Bilsland,
Sunrise's President, which were about $1.8 million.&#160;&#160;In addition,
G&amp;A related to our coal operations were about $900,000 during 2007; we had
no such expenses in 2006.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">The interest
expense relates solely to the debt connected with the Sunrise
acquisition.</font></div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">11</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
    </div><br>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">The income tax
benefit of $118,000 in 2006 was a result of an over-accrual of the 2005 tax
provision.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">On
July 31, 2006 (date of acquisition), we began consolidating the Sunrise JV;
because, at the date of acquisition, the original Sunrise members had not
contributed capital in excess of accumulated losses (resulting primarily from
the Howesville mine closure), we have reflected Sunrise's entire losses for the
period since the acquisition. In the first quarter 2007, sufficient capital
contributions were made so that we began recording a minority interest of 12% of
the Sunrise losses.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">The reduction in
the equity in Savoy was due to (i) a $550,000 reduction in Savoy's net income of
which we had a 32% share through September 30, 2007 and a 45% share thereafter;
and (ii) in 2006 we amortized the difference between the purchase price and our
pro rata share of our equity in Savoy using proved reserves and for 2007 we
amortized such amounts using proved developed reserves.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Sale of Oil and Gas
Properties</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">In
early July 2007 we sold our interest in the San Juan properties for $2.3
million.&#160;&#160;We recognized a gain of about $1.7
million.&#160;&#160;During 2007, certain unproved properties were sold resulting
in a gain of about $200,000.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Other than our
equity investment in Savoy, our remaining oil and gas properties are not
significant and we will be making minimal disclosures, if any, regarding
them.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Critical Accounting Estimate
and Significant Accounting Policies</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">We
believe that the estimate of our coal reserves is our only critical accounting
estimate.&#160;&#160;Since the Carlisle mine has only been in production since
February 2007, we do not have a long history to rely on.&#160;&#160;Our engineer
that prepared the reserve estimates does have over 20 years of
experience.&#160;&#160;The reserve estimates are used in the DD&amp;A
calculation and in our impairment test.&#160;&#160;If these estimates turn out
to be materially under or over-stated then our DD&amp;A expense and impairment
test would be affected.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Our significant
accounting policies are set forth in Note 1 to the Financial
Statements.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; TEXT-DECORATION: underline">New Accounting
Pronouncements</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Other than SFAS
160, none of the recent FASB pronouncements had, or will have any material
effect on us.&#160;&#160;In December 2007, the FASB issued SFAS No.&#160;160,
Noncontrolling Interests in Consolidated Financial Statements, an amendment of
Accounting Research Bulletin No.&#160;51. This statement requires an entity to
separately disclose non-controlling interests as a separate component of equity
in the balance sheet and clearly identify on the face of the income statement
net income related to non-controlling interests. This statement is effective for
financial statements issued for fiscal years beginning after December&#160;15,
2008. The adoption of this statement will change how we present our
consolidation with Sunrise.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div><br>
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      <div id="FTR">
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</font></div>
      </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">12</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
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        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
    </div><br>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">ITEM
7.&#160; FINANCIAL STATEMENTS</font></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td>
              <div align="left">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td>
              <div align="left">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="81%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Report of
      Independent Registered Public Accounting Firm</font></div>
            </td>
            <td valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">14</font></div>
            </td>
            <td align="right" valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="81%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="81%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Consolidated
      Balance Sheet</font></div>
            </td>
            <td valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">15</font></div>
            </td>
            <td align="right" valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="81%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="81%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Consolidated
      Statement of Operations</font></div>
            </td>
            <td valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">16</font></div>
            </td>
            <td align="right" valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="81%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="81%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Consolidated
      Statement of Cash Flows</font></div>
            </td>
            <td valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">17</font></div>
            </td>
            <td align="right" valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td valign="top" width="81%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="81%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Statement of
      Stockholders' Equity</font></div>
            </td>
            <td valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">18</font></div>
            </td>
            <td valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="81%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="top" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="81%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Notes to
      Consolidated Financial Statements</font></div>
            </td>
            <td valign="top" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">19</font></div>
            </td>
            <td align="right" valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial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
160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">13</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
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        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
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      </div>
    </div><br>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">REPORT
OF INDEPENDENT REGISTERED</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">PUBLIC
ACCOUNTING FIRM</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">To
the Board of Directors and Stockholders</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Hallador Petroleum
Company</font></div>
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Colorado</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">We
have audited the consolidated balance sheet of Hallador Petroleum Company and
Subsidiaries as of December 31, 2007 and the consolidated statements of
operations, cash flows and stockholders' equity for the years ended December 31,
2007 and 2006.&#160;&#160;These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">We
conducted our audits in accordance with 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 the
consolidated financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company&#8217;s internal control
over financial reporting. Accordingly, we express no such opinion. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">In
our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial condition of Hallador Petroleum
Company and Subsidiaries, as of December 31, 2007 and the results of their
operations and their cash flows for the years ended December 31, 2007 and 2006,
in conformity with accounting principles generally accepted in the United States
of America.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">/s/ Ehrhardt Keefe
Steiner &amp; Hottman PC</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">March 25,
2008</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Denver,
Colorado</font></div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">14</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 11pt; FONT-FAMILY: Arial, sans-serif">Consolidated
Balance Sheet</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Arial, sans-serif">December
31, 2007</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Arial, sans-serif">(in
thousands)</font></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">ASSETS</font></div>
            </td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Current
      assets:</font></div>
            </td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Cash
      and cash equivalents</font></div>
            </td>
            <td align="left" valign="bottom" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: right" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">$</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">6,978</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Certificate
      of deposit &#8211; restricted</font></div>
            </td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">1,800</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Accounts
      receivable</font></div>
            </td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">2,361</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Coal
      inventory</font></div>
            </td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">92</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Other</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">861</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Total
      current assets</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">12,092</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Coal
      properties, at cost</font></div>
            </td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">64,685</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Less
      &#8211; accumulated depreciation, depletion, and amortization</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(2,743</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">61,942</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Investment
      in Savoy</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">11,893</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Other
      assets</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">1,330</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: right" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">$</font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 4px double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">87,257</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">LIABILITIES
      AND STOCKHOLDERS' EQUITY</font></div>
            </td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Current
      liabilities:</font></div>
            </td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Current
      portion of long-term debt</font></div>
            </td>
            <td align="left" valign="bottom" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: right" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">&#160;$</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">1,893</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Accounts
      payable and accrued liabilities</font></div>
            </td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">5,550</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Interest
      rate swaps, at estimated fair value</font></div>
            </td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">1,181</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Other</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">620</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Total
      current liabilities</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">9,244</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Long-term
      liabilities:</font></div>
            </td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Bank
      debt, net of current portion</font></div>
            </td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">33,464</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Asset
      retirement obligations</font></div>
            </td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">646</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Contract
      termination obligation</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">4,346</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Total
      long-term liabilities</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">38,456</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Total
      liabilities</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">47,700</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Minority
      interest</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">384</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Commitments
      and Contingencies</font></div>
            </td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Stockholders'
      equity:</font></div>
            </td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Preferred
      stock, $.10 par value, 10,000,000 shares authorized; none
      issued</font></div>
            </td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Common
      stock, $.01 par value, 100,000,000 shares authorized; 16,362,528 shares
      issued</font></div>
            </td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">163</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Additional
      paid-in capital</font></div>
            </td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">44,990</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Accumulated
      deficit</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(5,980</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Total
      stockholders' equity</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">39,173</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="76%" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: right" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">$</font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 4px double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">87,257</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Arial, sans-serif">See
accompanying notes.</font></div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">15</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 11pt; FONT-FAMILY: Arial, sans-serif">Consolidated
Statement of Operations</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Arial, sans-serif">For the
years ended December 31,</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Arial, sans-serif">(in
thousands, except per share data)</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="bottom" width="66%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td colspan="2" valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">2007</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td colspan="2" valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">2006</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="66%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="66%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Revenue:</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="66%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Coal
      sales</font></div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">$</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">27,228</font></div>
            </td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">$</font></div>
            </td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="66%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Gain
      on sale of oil and gas properties</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">1,933</font></div>
            </td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">378</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="66%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Equity
      income &#8211; Savoy</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">35</font></div>
            </td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">353</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="66%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Interest
      income</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">244</font></div>
            </td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">804</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="66%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Other</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">289</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">153</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="66%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">29,729</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">1,688</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="66%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="66%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Costs
      and expenses:</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="66%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Cost
      of coal sales</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">21,866</font></div>
            </td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="66%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">DD&amp;A</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">2,420</font></div>
            </td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="66%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">G&amp;A</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">4,161</font></div>
            </td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">1,935</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="66%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Interest</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">4,113</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">695</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="66%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">32,560</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">2,630</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="66%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="66%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Loss
      before minority interest and income taxes</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(2,831</font></div>
            </td>
            <td align="left" valign="bottom" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(942</font></div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="66%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="66%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Minority
      interest</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">416</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="66%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Loss
      before income taxes</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(2,415&#160;</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(942</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="66%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="66%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Income
      tax benefit</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">118</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="66%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="66%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Net
      loss</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">$</font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 4px double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(2,415</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">$</font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 4px double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(824</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="66%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="66%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Net
      loss per share, basic</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">$</font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 4px double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(0.18</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">$</font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 4px double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(.07</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="66%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="66%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="66%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Weighted
      average shares outstanding-basic</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 4px double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">13,300</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 4px double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">11,715</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Arial, sans-serif">See
accompanying notes.</font></div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">16</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 11pt; FONT-FAMILY: Arial, sans-serif">Condensed
Consolidated Statement of Cash Flows</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Arial, sans-serif">For the
years ended December 31,</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Arial, sans-serif">(in
thousands)</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="bottom" width="65%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td colspan="2" valign="bottom" width="9%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">2007</font></div>
            </td>
            <td align="left" valign="bottom" width="4%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td colspan="2" valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">2006</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Operating
      activities:</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Net
      loss</font></div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">$</font></div>
            </td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(2,415</font></div>
            </td>
            <td align="left" valign="bottom" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">$</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(824</font></div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Minority
      interest</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(416</font></div>
            </td>
            <td align="left" valign="bottom" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Equity
      income of Savoy</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(35</font></div>
            </td>
            <td align="left" valign="bottom" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(353</font></div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Gain
      on sale of oil and gas properties</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(1,933</font></div>
            </td>
            <td align="left" valign="bottom" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)&#160;</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(378</font></div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Depreciation,
      depletion, and amortization</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">2,420</font></div>
            </td>
            <td align="left" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Change
      in fair value of interest rate swaps</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">1,181</font></div>
            </td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Stock-based
      compensation</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">1,899</font></div>
            </td>
            <td align="left" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">460</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Other</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">195</font></div>
            </td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(59</font></div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Change
      in current assets and liabilities:</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Accounts
      receivable</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(2,361</font></div>
            </td>
            <td align="left" valign="bottom" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Inventory</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(92</font></div>
            </td>
            <td align="left" valign="bottom" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Accounts
      payable and accrued liabilities</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">1,368</font></div>
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            <td align="left" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(779</font></div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Other</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(136</font></div>
            </td>
            <td align="left" valign="bottom" width="4%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)&#160;</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(165</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Cash
      used in operating activities</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(325&#160;</font></div>
            </td>
            <td align="left" valign="bottom" width="4%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">&#160;)</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(2,098</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Investing
      activities:</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Certificate
      of deposit</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(1,800</font></div>
            </td>
            <td align="left" valign="bottom" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Capital
      expenditures for coal properties</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(17,244</font></div>
            </td>
            <td align="left" valign="bottom" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(10,215</font></div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Sales
      of oil and gas properties</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">2,548</font></div>
            </td>
            <td align="left" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">3,423</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Investment
      in Savoy</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(6,020</font></div>
            </td>
            <td align="left" valign="bottom" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Distributions
      from Savoy</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">211</font></div>
            </td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">518</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Investment
      in Sunrise, net of acquired cash of $1,892</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(5,895</font></div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Other</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">88</font></div>
            </td>
            <td align="left" valign="bottom" width="4%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">32</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Cash
      used in investing activities</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(22,217</font></div>
            </td>
            <td align="left" valign="bottom" width="4%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(12,137</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Financing
      activities:</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Proceeds
      from bank debt</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">10,140</font></div>
            </td>
            <td align="left" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">2,180</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Stock
      sale to related parties</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">11,050</font></div>
            </td>
            <td align="left" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">7,000</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Capital
      contributions from Sunrise minority owners</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">800</font></div>
            </td>
            <td align="left" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Proceeds
      from exercise of stock options</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">460</font></div>
            </td>
            <td align="left" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Other</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(136</font></div>
            </td>
            <td align="left" valign="bottom" width="4%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">&#160;&#160;&#160;&#160;&#160;
      Cash provided by financing activities</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">22,314</font></div>
            </td>
            <td align="left" valign="bottom" width="4%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">9,180</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Decrease
      in cash and cash equivalents</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(228&#160;</font></div>
            </td>
            <td align="left" valign="bottom" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)&#160;</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(5,055</font></div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Cash
      and cash equivalents, beginning of year</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">7,206&#160;</font></div>
            </td>
            <td align="left" valign="bottom" width="4%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">12,261</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Cash
      and cash equivalents, end of year</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">$</font></div>
            </td>
            <td align="right" valign="bottom" width="8%" style="BORDER-BOTTOM: black 4px double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">6,978&#160;</font></div>
            </td>
            <td align="left" valign="bottom" width="4%" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">$</font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 4px double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">7,206</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Cash
      paid for interest (net of amount capitalized)</font></div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">$</font></div>
            </td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">-2,290</font></div>
            </td>
            <td align="left" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">$</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">695</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Cash
      paid for income taxes</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="8%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">$</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">439</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="65%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Non-cash
      investing activity -accounts payable for coal properties</font></div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">$</font></div>
            </td>
            <td align="right" valign="bottom" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">2,136</font></div>
            </td>
            <td valign="bottom" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Arial, sans-serif">&#160;&#160;</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Arial, sans-serif">See
accompanying notes</font></div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">17</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
    </div><br>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 11pt; FONT-FAMILY: Arial, sans-serif">Statement
of Stockholders' Equity</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: normal; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(in
thousands)</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="bottom" width="40%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td colspan="2" valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid">
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            </td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td colspan="2" valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid">
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Paid-I</font><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">n
      Capital</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td colspan="2" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Accumulated</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Deficit</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td colspan="2" valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Total</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="40%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
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          <tr>
            <td align="left" valign="bottom" width="40%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Balance
      December 31, 2005</font></div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">$</font></div>
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            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">90</font></div>
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            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">$</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">24,194</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: right" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">$</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(2,741</font></div>
            </td>
            <td align="left" valign="bottom" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">$</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">21,543</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="40%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="40%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Stock
      sale to Yorktown and others (3,181,816 shares)</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">31</font></div>
            </td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">6,969</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">7,000</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="40%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="40%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Stock-based
      compensation</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">460</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">460</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="40%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="40%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Net
      loss</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(824</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(824</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="40%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
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    </font></td>
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Exercise
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="right" valign="bottom" width="10%">
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="left" valign="bottom" width="40%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Stock-based
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            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">502</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="40%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="40%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Net
      loss</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(2,415</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(2,415</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="40%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="40%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Balance
      December 31, 2007</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">$</font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 4px double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">163</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">$</font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 4px double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">44,990</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: right" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">$</font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 4px double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">(5,980</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">)</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">$</font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 4px double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">39,173</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: Arial, sans-serif">See
accompanying notes.</font></div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">18</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">(1)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Summary
of Significant Accounting Policies</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-STYLE: italic; FONT-FAMILY: Arial">Basis
of Presentation and Consolidation</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">The accompanying
consolidated financial statements include the accounts of Hallador Petroleum
Company and its subsidiaries.&#160; All significant intercompany accounts and
transactions have been eliminated.&#160; We are engaged in the production of
coal from a shallow underground mine located in western Indiana.&#160;&#160;We
also own a 45% equity interest in Savoy Energy, L.P., a private oil and gas
company which has operations in Michigan.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">We
have entered into significant equity transactions with Yorktown and other
entities that invest with Yorktown.&#160; Yorktown currently owns about 55% of
our common stock and represents one of the five seats on our board.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-STYLE: italic; FONT-FAMILY: Arial">Reclassification</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Certain amounts in
the 2006 financial statements have been reclassified to conform with the
classifications in the current year's statement with no effect on
previously-reported net income.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-STYLE: italic; FONT-FAMILY: Arial">Consolidation</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">The consolidated
financial statements include the accounts of Hallador Petroleum Company (the
Company) and its majority-owned subsidiary Sunrise Coal, LLC
(Sunrise).</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-STYLE: italic; FONT-FAMILY: Arial">Inventories</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Coal and supplies
inventories are valued at the lower of average cost or market. Coal inventory
costs include labor, supplies, equipment costs and overhead.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-STYLE: italic; FONT-FAMILY: Arial">Advance
Royalties</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Rights to develop
leased coal lands may require payments of advance royalties. When those advance
royalties may be recouped through future production, the payments are reflected
as current or long-term assets, depending on the expected recovery period. As
coal is produced, the payments are statutorily amortized and reflected as cost
of coal sales in the consolidated statements of operations.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-STYLE: italic; FONT-FAMILY: Arial">Property,
Plant and Equipment</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Property, plant and
equipment are recorded at cost. Interest costs applicable to major asset
additions are capitalized during the construction period. Expenditures that
extend the useful lives of existing property, plant and equipment or increase
the productivity of the assets are capitalized. The cost of maintenance and
repairs that do not extend the useful lives or increase the productivity of the
assets are expensed as incurred. Property, plant and equipment are depreciated
using the units of production method over the estimated recoverable
reserves.</font></div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">19</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">If
facts and circumstances suggest that a long-lived asset may be impaired, the
carrying value is reviewed for recoverability. If this review indicates that the
carrying value of the asset will not be recoverable through estimated
undiscounted future net cash flows related to the asset over its remaining life,
then an impairment loss is recognized by reducing the carrying value of the
asset to its estimated fair value.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">For the period from
July 31, 2006 (date of Sunrise acquisition) through December 31, 2006, we
capitalized $403,000 of interest.&#160;&#160;During 2007 we capitalized
$148,000&#160;of interest.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="bottom" width="64%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Coal
      properties, at cost:</font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="64%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;&#160;Coal
      lands and mineral rights</font></div>
            </td>
            <td align="left" valign="bottom" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: right" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">$</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">15,545</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="64%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;&#160;Plant
      and equipment</font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">32,123</font></div>
            </td>
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          <tr>
            <td align="left" valign="bottom" width="64%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;&#160;Deferred
      mine development</font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
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            </td>
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          <tr>
            <td valign="bottom" width="64%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">64,685</font></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="64%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="64%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;&#160;&#160;Less
      - accumulated depreciation, depletion, and amortization</font></div>
            </td>
            <td valign="bottom" width="3%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(2,743)</font></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="64%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: right" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">$</font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 4px double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">61,942</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-STYLE: italic; FONT-FAMILY: Arial">Deferred
Mine Development</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Costs of developing
new coal mines, including asset retirement obligation assets, or significantly
expanding the capacity of existing mines, are capitalized and amortized using
the units of production method over estimated recoverable (proved and probable)
reserves.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-STYLE: italic; FONT-FAMILY: Arial">Coal
Land and Mineral Rights</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Certain of our coal
reserves were obtained through leases. The cost of those leases is capitalized
and will be depleted using the units of production method over estimated
recoverable (proved and probable) reserves.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-STYLE: italic; FONT-FAMILY: Arial">Asset
Retirement Obligations</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">At
the time they are incurred, legal obligations associated with the retirement of
long-lived assets are reflected at their estimated fair value, with a
corresponding charge to asset retirement obligation assets. Obligations are
typically incurred when we commence development of underground mines, and
include reclamation of support facilities, refuse areas and slurry
ponds.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Obligations are
reflected at the present value of their discounted cash flows.&#160;&#160;We
reflect accretion of the obligations for the period from the date they are
incurred through the date they are extinguished. The asset retirement obligation
assets are amortized using the units of production method over estimated
recoverable (proved and probable) reserves.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Our asset
retirement obligations (ARO) arise from the federal Surface Mining Control and
Reclamation Act of 1977 (SMCRA) and similar state statutes. SMCRA and states
require that mines be reclaimed to their previous condition in accordance with
specific standards and approved reclamation plans, as outlined in mining
permits. Activities include reclamation of pit and support acreage at surface
mines, sealing portals at underground mines, and reclamation of refuse areas and
slurry ponds.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">20</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">We
assess our ARO at least annually, and reflect revisions for permit changes, as
granted by state authorities, for revisions to the estimated reclamation costs,
and for revisions to the timing of those costs.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">The following table
reflects the changes to our ARO:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="bottom" width="74%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Balance,
      January 1, 2007</font></div>
            </td>
            <td align="left" valign="middle" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: right" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">$</font></div>
            </td>
            <td align="right" valign="bottom" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">912</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="74%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Accretion</font></div>
            </td>
            <td align="left" valign="middle" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="6%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">38</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="74%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Settlements</font></div>
            </td>
            <td align="left" valign="middle" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="6%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;&#160;&#160;(304</font></div>
            </td>
            <td align="left" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">)</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="74%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Balance,
      December 31, 2007</font></div>
            </td>
            <td align="left" valign="middle" width="2%" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: right" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">$</font></div>
            </td>
            <td align="right" valign="bottom" width="6%" style="BORDER-BOTTOM: black 4px double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;646</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="74%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="middle" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="6%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">&#160;&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-STYLE: italic; FONT-FAMILY: Arial">Customers</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Coal sales began in
February 2007 and for the year 2007 we sold 972,500 tons at an average selling
price of about $28/ton to three customers.&#160;&#160;One customer purchased 55%
and another purchased 38%.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-STYLE: italic; FONT-FAMILY: Arial">Statement
of Cash Flows</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Cash equivalents
include investments, which includes mutual funds, with maturities when purchased
of three months or less.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-STYLE: italic; FONT-FAMILY: Arial">Income
Taxes</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Income taxes are
provided based on the liability method of accounting pursuant to SFAS 109,
Accounting for Income Taxes.&#160; The provision for income taxes is based on
pretax financial taxable income.&#160; Deferred tax assets and liabilities are
recognized for the future expected tax consequences of temporary differences
between income tax and financial reporting and principally relate to differences
in the tax basis of assets and liabilities and their reported amounts, using
enacted tax rates in effect for the year in which differences are expected to
reverse.&#160; We have concluded it is more likely than not that none of our
deferred tax assets will be realized.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-STYLE: italic; FONT-FAMILY: Arial">Earnings
per Share</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">We
follow the provisions of SFAS 128, Earnings Per Share.&#160;&#160;Basic earnings
per share are computed based on the weighted average number of common shares
outstanding.&#160; Diluted earnings per share are computed based on the weighted
average number of common shares outstanding adjusted for the incremental shares
attributed to outstanding stock options.&#160;&#160;Diluted earnings per share
for the year ended December 31, 2007 excludes 750,000 shares issuable for
outstanding stock options as their effect was antidilutive.</font></div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">21</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-STYLE: italic; FONT-FAMILY: Arial">Use
of Estimates in the Preparation of Financial Statements</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">The preparation of
financial statements in conformity with generally accepted accounting principles
requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of revenue and
expenses during the reporting period.&#160; Actual amounts could differ from
those estimates.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-STYLE: italic; FONT-FAMILY: Arial">Revenue
Recognition</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">We
recognize revenue from coal sales at the time risk of loss passes to the
customer at contracted amounts.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-STYLE: italic; FONT-FAMILY: Arial">Concentration
of Credit Risk</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">We
market our coal to three electric utilities in Indiana.&#160;&#160;We are paid
every two to four weeks and do not expect any credit losses.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-STYLE: italic; FONT-FAMILY: Arial">Long-term
Contract</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">The Carlisle mine,
our primary asset, was under development during 2006 and first sales occurred in
February 2007. A large portion of our current production capacity is contracted
with two utilities for six years.&#160;&#160;One of our coal contracts is
contracted at market prices that were in effect at July 1, 2005.&#160;&#160;The
second contract, our most recent contract, is contracted at current market
prices and we started shipments in January 2008.&#160;&#160;We are talking to
other coal purchasers about additional contracts, and if coal prices continue to
rise, we believe coal production could peak at about 3 million tons per year in
five or six years. Recoverable reserves that are presently leased are about 36
million tons.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-STYLE: italic; FONT-FAMILY: Arial">Transportation</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Currently, we
depend on truck transportation to deliver coal to our
customers.&#160;&#160;During 2008, we will use both truck and rail
transportation.&#160;&#160;Disruption of these services due to weather,
mechanical issues, strikes, lockouts, bottlenecks and other events may have a
temporary adverse impact on shipments and, consequently, to coal
sales.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-STYLE: italic; FONT-FAMILY: Arial">Stock
Based Compensation</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Effective January
1, 2006, we adopted the fair value recognition provisions of SFAS 123R, using
the modified prospective transition method.&#160; Future amortization of
transitional stock based compensation expense is expected to be $120,000 for
2008.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">We estimated the
fair value of the option grant using the Black-Scholes option-pricing model,
with the following assumptions: (i) risk free interest rate of 4.24%; (ii)
expected life of 10 years; (iii) expected volatility of 120%; and (iv) expected
default rate of 5%, and (v) no dividend yield.&#160; At December 31, 2007, our
550,000 outstanding stock options had a remaining contractual maturity of eight
years and an aggregate intrinsic value of about $660,000. At December 31, 2007,
300,000 stock options were vested and exercisable with an aggregate intrinsic
value of approximately $360,000.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">22</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">The compensation
expense related to this plan was $478,000 for 2007 and $460,000 for 2006. The
impact on earnings per share was $.04 for each year. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><br>&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">No
options were granted during 2006 and 2007.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-STYLE: italic; FONT-FAMILY: Arial">New
Accounting Pronouncements</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Other than SFAS
160, none of the recent FASB pronouncements had, or will have any material
effect on us.&#160;&#160;In December 2007, the FASB issued SFAS No.&#160;160,
Noncontrolling Interests in Consolidated Financial Statements, an amendment of
Accounting Research Bulletin No.&#160;51. This statement requires an entity to
separately disclose non-controlling interests as a separate component of equity
in the balance sheet and clearly identify on the face of the income statement
net income related to non-controlling interests. This statement is effective for
financial statements issued for fiscal years beginning after December&#160;15,
2008. The adoption of this statement will change how we present our
consolidation with Sunrise.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">(2)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Income
Taxes (in thousands)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">We
had no tax provision for 2007 and our 2006 provision was a federal benefit of
$118,000.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Our income tax is
different than the expected amount computed using the applicable federal and
state statutory income tax rates.&#160;&#160;The reasons for and effects of such
differences are as follows:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="55%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="top" width="12%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">2007</font></div>
            </td>
            <td align="left" valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="top" width="12%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">2006</font></div>
            </td>
            <td align="left" valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="55%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="top" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="top" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="55%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Expected
      amount</font></div>
            </td>
            <td align="right" valign="top" width="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">$</font></div>
            </td>
            <td align="right" valign="top" width="12%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 14.1pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(821)</font></div>
            </td>
            <td align="right" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">$</font></div>
            </td>
            <td align="right" valign="top" width="12%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 15.35pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(320)</font></div>
            </td>
            <td align="right" valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="55%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">State income
      taxes, net of federal benefit</font></div>
            </td>
            <td align="right" valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="top" width="12%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 14.1pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(70)</font></div>
            </td>
            <td align="right" valign="top" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="top" width="12%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 15.35pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(31)</font></div>
            </td>
            <td align="right" valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="55%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Change in
      valuation allowance</font></div>
            </td>
            <td valign="top" width="5%" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="top" width="12%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 14.1pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">915&#160;
      </font></div>
            </td>
            <td valign="top" width="3%" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="top" width="12%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 15.35pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">123&#160;
      </font></div>
            </td>
            <td valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="55%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Other</font></div>
            </td>
            <td align="right" valign="top" width="5%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="top" width="12%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 14.1pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(24)</font></div>
            </td>
            <td align="right" valign="top" width="3%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="top" width="12%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 15.35pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">110&#160;
      </font></div>
            </td>
            <td align="right" valign="top" width="4%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="55%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="top" width="5%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">$</font></div>
            </td>
            <td align="right" valign="top" width="12%" style="BORDER-BOTTOM: black 4px double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 14.1pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">0</font></div>
            </td>
            <td align="right" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">$</font></div>
            </td>
            <td align="right" valign="top" width="12%" style="BORDER-BOTTOM: black 4px double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 15.35pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(118)</font></div>
            </td>
            <td align="right" valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">23</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
    </div><br>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">The deferred tax
assets and liabilities resulting from temporary differences between book and tax
basis are comprised of the following at December 31, 2007:</font></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="bottom" width="71%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="middle" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td colspan="2" valign="bottom" width="14%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="71%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Long-term
      deferred tax assets:</font></div>
            </td>
            <td align="left" valign="middle" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="71%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Federal net
      operating loss carry forwards</font></div>
            </td>
            <td align="left" valign="middle" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: right" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;$</font></div>
            </td>
            <td align="right" valign="bottom" width="12%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 18pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">2,734</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="71%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Stock-based
      compensation</font></div>
            </td>
            <td align="left" valign="middle" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="12%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 18pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">219</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="71%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Investment in
      Savoy</font></div>
            </td>
            <td valign="middle" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="12%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 18pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">567</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="71%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Other</font></div>
            </td>
            <td valign="middle" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="12%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 18pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">313</font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="71%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Valuation
      allowance</font></div>
            </td>
            <td align="left" valign="middle" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 18.1pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;(1,257)</font></div>
            </td>
            <td valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="71%">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;Net
      long-term deferred tax assets</font></div>
            </td>
            <td align="left" valign="middle" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="12%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 18pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">2,576</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="71%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Long-term
      deferred tax liabilities:</font></div>
            </td>
            <td align="left" valign="middle" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="71%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Investment in
      Sunrise Coal</font></div>
            </td>
            <td align="left" valign="middle" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 18pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">2,576</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td valign="bottom" width="71%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="middle" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="71%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Net</font></div>
            </td>
            <td valign="middle" width="1%" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="2%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: right" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">$</font></div>
            </td>
            <td align="right" valign="bottom" width="12%" style="BORDER-BOTTOM: black 4px double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 18pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">-</font></div>
            </td>
            <td valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">At
December 31, 2007, we had federal net operating loss carry forwards of about
$8.8 million.&#160;&#160;&#160;These NOLs will expire from 2026 to
2027.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">(3)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Restricted
Stock and Stock Options</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-STYLE: italic; FONT-FAMILY: Arial">Restricted
Stock</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">On
June 20, 2007, our Board authorized and granted the issuance of 600,000 shares
of restricted stock.&#160;&#160;Victor Stabio, our CEO, received 390,000 shares,
Brent Bilsland, Sunrise&#8217;s President, received 165,000 shares and two consultants
received 45,000 shares.&#160;&#160;The Board allowed Mr. Stabio's shares to vest
on July 9, 2007.&#160;&#160;Mr. Stabio's shares for GAAP accounting purposes
were valued at $3.25 on the date of grant based on the closing price on that
date.&#160;&#160;The Board allowed Mr. Bilsland's shares to vest on August 9,
2007.&#160;&#160;Mr. Bilsland's shares for GAAP accounting purposes were valued
at $3.25 on the date of grant based on the closing price on that
date.&#160;&#160;The other shares vest at the end of three years.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">We
took a charge of about $1.8 million for these vested shares.&#160;&#160;We will
amortize $146,000 to expense over 36 months for the other shares.&#160;&#160;We
recorded stock based compensation of $24,000 related to the 45,000 shares issued
to consultants which are not yet vested.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Of
the 390,000 shares granted to Mr. Stabio, 125,000 shares were relinquished back
to the company as consideration for the income taxes due.&#160;&#160;Mr. Stabio
also exercised 200,000 of his 400,000 options at an exercise price of $2.30 per
share.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-STYLE: italic; FONT-FAMILY: Arial">Stock
Options</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">In
April 2005, we granted 750,000 options at an exercise price of
$2.30.&#160;&#160;These options vest at 1/3 per year from the date of grant and
expire in April 2015.&#160;&#160;On July 9, 2007 Mr. Stabio, our CEO, exercised
200,000 options, which are now available for re-issuance.&#160;&#160;During 2006
no options were exercised nor granted and no options were granted during
2007.</font></div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">24</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">(4)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Sunrise
Coal Acquisition</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">In
early January 2006, we signed a letter of intent with Sunrise Coal, LLC
(Sunrise) to affect a reorganization/merger between Hallador and Sunrise, a
private company not affiliated with the Yorktown group of
companies.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">During the first
quarter of 2006, we loaned Sunrise $7 million in order for Sunrise to begin
development of their second coal mine (the "Carlisle mine").&#160;&#160;Their
first mine, Howesville, began producing coal in November 2005.&#160;&#160;Both
mines are located in western Indiana.&#160;&#160;During the second quarter of
2006, Sunrise entered into a $30 million line of &#160;credit with two Indiana
banks, and our $7 million was repaid. We are a guarantor of this line of
credit.&#160;&#160;On May 1, 2006, Sunrise informed us that they intend to shut
down the Howesville mine effective June 10, 2006 due to safety
reasons.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Due to the shut
down of the Howesville mine, all of our previous agreements with Sunrise were
voided, and on July 31, 2006, we entered into a joint venture with Sunrise to
develop the Carlisle mine.&#160;&#160;Sunrise contributed all of their assets
for a 40% interest and we agreed to a $20.5 million funding commitment (which we
fulfilled during 2007) and guaranteed the aforementioned line of credit for a
60% interest.&#160;&#160;&#160;Through approximately 88% of the JV's cash flow
we are to receive $20.5 million plus interest at
10%.&#160;&#160;&#160;Thereafter, cash flow will be distributed 60% to us and
40% to the original Sunrise members.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">On
July 31, 2006 (date of acquisition), we began consolidating the Sunrise JV;
because, at the date of acquisition, the original Sunrise members had not
contributed capital in excess of accumulated losses (resulting primarily from
the Howesville mine closure), we have reflected Sunrise's entire losses for the
period since the acquisition. In the first quarter 2007, sufficient capital
contributions were made so that we began recording a minority interest of 12% of
the Sunrise losses.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">The following table
summarizes the costs and allocations of the Sunrise acquisition:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="bottom" width="74%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Acquisition
      costs:</font></div>
            </td>
            <td align="left" valign="middle" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="74%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;&#160;&#160;Cash
      consideration</font></div>
            </td>
            <td align="left" valign="middle" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">$</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">7,500</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="74%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;&#160;&#160;Direct
      acquisition costs</font></div>
            </td>
            <td align="left" valign="middle" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">308</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="74%" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="middle" width="2%" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">$</font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 4px double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">7,808</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="74%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="middle" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="74%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Allocation of
      acquisition costs:</font></div>
            </td>
            <td align="left" valign="middle" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="74%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;&#160;&#160;Current
      assets</font></div>
            </td>
            <td align="left" valign="middle" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="1%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">$</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">1,892</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="74%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;&#160;&#160;Coal
      properties</font></div>
            </td>
            <td align="left" valign="middle" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">35,400</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="74%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;&#160;&#160;Other
      assets</font></div>
            </td>
            <td align="left" valign="middle" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">192</font></div>
            </td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="74%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;&#160;&#160;Liabilities
      assumed</font></div>
            </td>
            <td align="left" valign="middle" width="2%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(29,676</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">)</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="74%" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="middle" width="2%" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">$</font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 4px double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">7,808</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="74%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="middle" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Included in
liabilities assumed for the Sunrise acquisition is the estimated present value
of the possible contract termination obligation (about $4 million; $4.3 million
considering accretion charges) with the utility that was to purchase the coal
from the Howesville mine; such mine was closed for safety reasons in June
2006.&#160;&#160;This obligation was based on an offer made to the utility at
the time, but such offer was never accepted and has since been
withdrawn.&#160;&#160;Our legal counsel has advised us that we have a strong
force majeure case regarding the closing of the mine since it was closed for
safety reasons.&#160;&#160;&#160;This same utility is one of the major customers
of the Carlisle mine.&#160;&#160;Although we believe we have a strong force
majeure case, we have decided to leave the $4.3 million obligation on our
balance sheet pending a final resolution of this matter.&#160;&#160;At this
point we have no offer on the table to the utility; however, negotiations
continue with the utility.&#160;&#160;Beginning January 1, 2008 we will cease
recording accretion charges.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">25</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">(5)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Notes
Payable</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">In
late June 2007,&#160;our Indiana banks agreed to increase the Sunrise line of
credit (LOC) from $30 million to $40 million.&#160;&#160;We are the guarantor of
this LOC. The additional funds were used to purchase certain mining equipment,
build a rail loop, and for working capital. As of December 31, 2007, we have
drawn down about $35.4 million; plus we have outstanding letters of credit for
another $3 million that leaves us with about $1 million left on the $40 million
LOC.&#160;&#160;The current interest rate is LIBOR (3.15%) plus 3.55% or
6.7%.&#160;&#160;As discussed below, Sunrise entered into two interest rate
swaps.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Under the LOC no
principal payments are due until the end of July 2008; assuming the full $40
million LOC is drawn, we will begin making monthly payments (principal and
interest) of about $600,000 through June 2015.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">We
have entered into two interest rate swap agreements swapping variable rates for
fixed rates. The first swap agreement is relative to the $30 million LOC and is
effective commencing July 15, 2007 and matures on July 15, 2012. The second swap
agreement relates to the additional $10 million that increased Sunrise's LOC to
$40 million. This second swap agreement is effective commencing December 28,
2007 and matures on December 28, 2011. The two swap agreements fix our interest
rate at about 8.8%. At December 31, 2007, we recorded the estimated fair value
of the two swaps as a $1.18 million liability with a corresponding charge to
interest expense.&#160;&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Accounting rules
require us to recognize all derivatives on the balance sheet at estimated fair
value. Derivatives that are not hedges must be adjusted to estimated fair value
through earnings. We have no derivatives designated as a hedge.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Aggregate
contractual maturities of debt are $1,893,000 in 2008, $4,035,000 in 2009,
$4,389,000 in 2010, $4,775,000 in 2011, $5,194,000 in 2012 and $15,071,000
thereafter.</font></div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">26</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">(6)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Equity
Investment in Savoy</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">On
December 31, 2005, we acquired a 32% interest in Savoy Energy L.P., a private
company engaged in the oil and gas business primarily in the State of
Michigan.&#160; A value of $6.1 million was assigned for this
investment.&#160;&#160;&#160;On October 5, 2007, we acquired for $6 million an
additional 13% interest in Savoy, bringing our total interest to about
45%.&#160;&#160;We account for our interest in Savoy using the equity method of
accounting.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Below (in
thousands) are:&#160;&#160; (i) a condensed balance sheet at December 31, 2007,
and (ii) a condensed statement of operations for the years ended December 31,
2007 and 2006.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Condensed Balance
Sheet</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td valign="bottom" width="8%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="37%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td valign="bottom" width="8%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="37%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td valign="bottom" width="8%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="37%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Current
      assets</font></div>
            </td>
            <td align="left" valign="bottom" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: right" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">$</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.6pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">14,600</font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td valign="bottom" width="8%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="37%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">PP&amp;E,
      net</font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.6pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">10,700</font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td valign="bottom" width="8%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="37%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: right" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">$</font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 4px double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.6pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">25,300</font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td valign="bottom" width="8%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="37%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td valign="bottom" width="8%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="37%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Total
      liabilities</font></div>
            </td>
            <td align="left" valign="bottom" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: right" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">$</font></div>
            </td>
            <td align="right" valign="bottom" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.6pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">3,900</font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td valign="bottom" width="8%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="37%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Partners'
      capital</font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.6pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">21,400</font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td valign="bottom" width="8%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="37%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: right" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">$</font></div>
            </td>
            <td align="right" valign="bottom" width="10%" style="BORDER-BOTTOM: black 4px double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.6pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">25,300</font></div>
            </td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Condensed Statement of
Operations</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td valign="bottom" width="13%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="44%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="11%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial"><font style="DISPLAY: inline">2007</font></font></div>
            </td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial"><font style="DISPLAY: inline">2006</font></font></div>
            </td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td valign="bottom" width="13%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="44%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="11%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="11%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td valign="bottom" width="13%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="44%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Revenue</font></div>
            </td>
            <td align="left" valign="bottom" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: right" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">$</font></div>
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            <td align="right" valign="bottom" width="11%">
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: right" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">$</font></div>
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            <td align="right" valign="bottom" width="12%">
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            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
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          <tr>
            <td valign="bottom" width="13%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="44%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Expenses</font></div>
            </td>
            <td valign="bottom" width="11%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(5,270)</font></div>
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(5,350)</font></div>
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            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td valign="bottom" width="13%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="bottom" width="44%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Net
      income</font></div>
            </td>
            <td align="left" valign="bottom" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: right" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">$</font></div>
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            <td align="right" valign="bottom" width="11%" style="BORDER-BOTTOM: black 4px double">
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            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
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            <td align="left" valign="bottom" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: right" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">$</font></div>
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            <td align="right" valign="bottom" width="12%" style="BORDER-BOTTOM: black 4px double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 3.6pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">1,500</font></div>
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            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
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          <tr>
            <td valign="bottom" width="13%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="44%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="11%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="11%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="3%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
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    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">For 2007, the
difference between the purchase price and our pro rata share of the equity of
Savoy was amortized based on Savoy's units of production rate using proved
developed oil and gas reserves.&#160;&#160;Such amount was $279,000 for 2007 and
$127,000 for 2006. For 2006 such amounts were amortized using proved
reserves.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-STYLE: italic; FONT-FAMILY: Arial">Unaudited</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Our 45% equity
interest in Savoy's proved developed oil and gas reserves at December 31, 2007
were 86,000 barrels and 581,000 mcf, respectively.&#160;&#160;&#160;Our equity
interest in Savoy's standardized measure of discounted future net cash flows at
December 31, 2007 was about $5.7 million.</font></div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">27</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
    </div><br>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">(7)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Commitments
and Contingencies</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">During the fourth
quarter we entered into a lease agreement with Joy Manufacturing for a flexible
conveyor train (FCT). A FCT operates in a way that eliminates the need for
underground coal-hauling trucks.&#160;&#160;The original intent was for the FCT
to be placed in service during the fourth quarter 2008.&#160;&#160;Recently, we
have encountered mining conditions that are not compatible with an FCT and are
in discussions with Joy to delay the commencement of the lease for two
years.&#160;&#160;In December 2007, we made a $100,000 deposit and annual lease
payments could be in the $2 - $3 million range based upon quantities of coal
produced.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">(8)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Sale
of Oil and Gas Properties</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">In
early July 2007 we sold our interest in the San Juan properties for $2.3
million.&#160;&#160;We recognized a gain of about $1.7
million.&#160;&#160;During 2007, certain unproved properties were sold resulting
in a&#160;gain of about $200,000.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">(9)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Subsequent
Events</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">In
order to expand coal production at the Carlisle mine, additional capital is
necessary to purchase mining equipment.&#160;&#160;We are in discussions to
advance $2-$3 million to Sunrise during 2008 and enter into a separate loan
agreement with our banks for an additional $2-$3 million.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Terms for the new
short-term line of credit are being discussed among Sunrise, us, and the
banks.&#160;&#160;In early February 2008, we advanced Sunrise $1 million pending
finalization of the terms for this new line.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">On
March 24, 2008, our Board authorized the creation of a restricted stock units
plan.&#160;&#160;The Board authorized up to 450,000 units to be issued over the
next several years.&#160;&#160;These units are to be granted to certain key
employees of Sunrise.&#160;&#160;The terms and grant dates are yet to be
determined.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 72pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">ITEM
      8.</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Not applicable<font style="DISPLAY: inline; FONT-WEIGHT: bold">.</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">ITEM
8A(T).&#160;&#160;CONTROLS AND PROCEDURES</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Disclosure
Controls</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">We
maintain a system of disclosure controls and procedures that are designed for
the purposes of ensuring that information required to be disclosed in our SEC
reports is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and communicated to our CEO as appropriate to allow timely decisions regarding
required disclosure.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">As
of the end of the period covered by this report, we carried out an evaluation,
under the supervision and with the participation of our CEO of the effectiveness
of the design and operation of our disclosure controls and procedures. Based
upon that evaluation, our CEO, who is also our CFO, concluded that our
disclosure controls and procedures are effective for the purposes discussed
above.</font></div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">28</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Internal Control Over
Financial Reporting (ICFR)</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">We
are responsible for establishing and maintaining adequate ICFR.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">We
assessed the effectiveness of our ICFR based on criteria for effective ICFR
described in Internal Control- Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Based on our
assessment, we concluded that we maintained effective ICFR as of December 31,
2007.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">There has been no
change in our internal control over financial reporting during the quarter ended
December 31, 2007 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">This annual report
does not include an attestation report from EKS&amp;H, our auditors, regarding
ICFR.&#160;&#160;Our report was not subject to attestation by EKS&amp;H pursuant
to temporary rules of the SEC that permit us to provide only our report in this
annual report.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">ITEM
8B.&#160;&#160;&#160;&#160;&#160;&#160; OTHER INFORMATION</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">None.</font></div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">29</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
    </div><br>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 54pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">&#160;
      </font></div>
            </td>
            <td>
              <div align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">PART
      III</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 75px">
              <div style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold"><font size="3">ITEM
      9.&#160;</font></font></font></div>
            </td>
            <td width="906">
              <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE;
      COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
  ACT</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br>&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">CORTLANDT S.
DIETLER, 86, has served as a director since 1995 and is currently the owner of
Poison Spider Oil Company LLC.&#160;&#160;From April 1995 through September 1,
2006, he was Chairman of the Board of TransMontaigne, Inc. and&#160;Chief
Executive Officer of TransMontaigne from April 1995 through September
1999.&#160;&#160;Mr. Dietler is also a director of Cimarex Energy Co., Ellora
Energy, and National Energy Resources Acquisition Company.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">DAVID HARDIE, 57,
is the Chairman of the Board and has served as a director since July 1989.&#160;
He is the President of Hallador Investment Advisors Inc., which manages Hallador
Equity Fund, Hallador Fixed Income Fund, Hallador Alternative Assets Fund and
Hallador Balance Fund; he also is a General Partner of Hallador Venture Partners
LLC, the General Partner of Hallador Venture Fund II &amp; III.&#160; Mr. Hardie
is and serves as a director and partner of other private entities that are owned
by members of his family and is also a director of Sunrise Coal, LLC. Mr. Hardie
is a graduate of California Polytechnic University, San Luis
Obispo.&#160;&#160;He also attended the Owner/President Management program
offered by Harvard Business School.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">STEVEN HARDIE, 54,
has been a director since 1994.&#160;&#160;He and David Hardie are
brothers.&#160;&#160;For the last 24 years he has been a private investor.&#160;
He is the Vice- President of Hallador Investment Advisors, which manages
Hallador Equity Fund, Hallador Fixed Income&#160;Fund, Hallador Alternative
Assets Fund and Hallador Balance Fund. He also serves as a director and partner
of other private entities that are owned by members of his family.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">BRYAN H. LAWRENCE,
65, has been one of our directors since November 1995.&#160; He is a founder and
senior manager of Yorktown Partners LLC which manages investment partnerships
formerly affiliated with Dillon, Read &amp; Co. Inc., an investment-banking firm
(Dillon Read).&#160; He had been employed with Dillon, Read since 1966, serving
most recently as a Managing Director until the merger of Dillon, Read with SBC
Warburg in September 1997.&#160; He also serves as a Director of Approach
Resources, Inc.,&#160;&#160;Star Gas Partners, L.P., Crosstex Energy, Inc. and
Crosstex Energy, L.P. (each a United States public company), Winstar Resources
Ltd. (a Canadian Public Company) and certain non-public companies in the energy
industry in which Yorktown partnership holds equity interests, one of which is
Sunrise Coal, LLC.&#160;&#160;Mr. Lawrence is a graduate of Hamilton College and
has a MBA from Columbia University.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">VICTOR P. STABIO,
60, is our President, CEO, CFO and a director.&#160; He joined us in March 1991
as our President and CEO and has been active in the oil and gas business for the
past 32 years. Mr. Stabio is a director of Sunrise Coal, LLC.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">BRENT K. BILSLAND,
34, has been President and a director of Sunrise Coal, LLC since July 31, 2006.
&#160; Previously, Mr. Bilsland was Vice President of Knapper Corporation, a
family owned farming business from 1998 to 2004.&#160;&#160;Mr. Bilsland is a
graduate of Butler University located in Indianapolis, Indiana.&#160;&#160;Mr.
Bilsland is a 4% owner of Sunrise Coal, LLC.</font></div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">30</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
    </div><br>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">LARRY MARTIN, 42,
was appointed Chief Financial Officer of Sunrise Coal, LLC on January 29,
2008.&#160;&#160;Prior to his employment with Sunrise in October 2007, he worked
11 years for Clifton Gunderson (12th largest U.S. Public Accounting Firm) from
January 1989 to October 2007.&#160;&#160;Mr. Martin was a Senior Manager in Tax
for the previous 6 years and an Audit Senior Manager for the 5 preceding
years.&#160;&#160;&#160;Mr. Martin is a graduate from Indiana State University
and has his Bachelor of Science in Accounting.&#160;&#160;He received his C.P.A
in 1991.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Section
16(a) Beneficial Ownership Reporting Compliance</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Our directors,
executive officers and 10% shareholders are required to report any stock
transactions in a timely manner on Forms 3, 4 or 5.&#160;&#160;&#160;The table
below lists the persons or entities that had late filings for transactions
during 2007.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td valign="bottom" width="34%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Name and
      principal position</font></div>
            </td>
            <td valign="top" width="19%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Number
      of</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">late
      reports</font></div>
            </td>
            <td valign="top" width="18%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Transactions
      not</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">timely
      reported</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="34%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Yorktown
      Energy VII, LP</font></div>
            </td>
            <td valign="middle" width="19%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">1</font></div>
            </td>
            <td valign="middle" width="18%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">1</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="34%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Cortlandt S.
      Dietler</font></div>
            </td>
            <td valign="middle" width="19%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">1</font></div>
            </td>
            <td valign="middle" width="18%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">1</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="34%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Victor P.
      Stabio</font></div>
            </td>
            <td valign="middle" width="19%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">1</font></div>
            </td>
            <td valign="middle" width="18%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">3</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="34%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Brent
      Bilsland</font></div>
            </td>
            <td valign="middle" width="19%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">1</font></div>
            </td>
            <td valign="middle" width="18%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">1</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="34%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="middle" width="19%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="middle" width="18%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Our Code of Ethics
is filed as Exhibit 14 to this Form 10-KSB. &#160;</font></div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">31</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
    </div><br>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold">ITEM
10.&#160;&#160;&#160;&#160;&#160;&#160;&#160; EXECUTIVE
COMPENSATION</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td valign="bottom" width="20%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="8%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="13%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="18%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td valign="top" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Name&#160;&#160;&#160;and
      Principal Position</font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Year</font></div>
            </td>
            <td valign="top" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Salary</font></div>
            </td>
            <td valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Bonus</font></div>
            </td>
            <td valign="top" width="12%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Stock
      Awards</font></div>
            </td>
            <td valign="top" width="18%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">All&#160;&#160;Other</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Compensation</font></div>
            </td>
            <td valign="top" width="12%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Total</font></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="20%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(a)</font></div>
            </td>
            <td valign="bottom" width="8%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(b)</font></div>
            </td>
            <td valign="bottom" width="13%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(c
      )</font></div>
            </td>
            <td valign="bottom" width="9%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(d)</font></div>
            </td>
            <td valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(e)<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">
      (1)</font></font></div>
            </td>
            <td valign="bottom" width="18%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(i)<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">
      (2)</font></font></div>
            </td>
            <td valign="bottom" width="12%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(j)</font></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="20%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="8%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="13%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="18%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="bottom" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Victor
      P. Stabio, CEO</font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">2007</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">2006</font></div>
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
            </td>
            <td valign="top" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">$144,000</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">&#160;&#160;140,000</font></div>
            </td>
            <td valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">$36,000</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">&#160;&#160;50,000</font></div>
            </td>
            <td valign="top" width="12%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">$1,268,000</font></div>
            </td>
            <td valign="top" width="18%">
              <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;$245,000<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(2)</font></font></div>
            </td>
            <td valign="top" width="12%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">$
      1,448,000</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">&#160;&#160;&#160;&#160;&#160;&#160;435,000</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="20%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">Brent
      Bilsland, President - Sunrise</font></div>
            </td>
            <td valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">2007</font></div>
            </td>
            <td valign="top" width="13%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">&#160;&#160;&#160;&#160;90,000</font></div>
            </td>
            <td valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">&#160;&#160;15,000</font></div>
            </td>
            <td valign="top" width="12%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">&#160;&#160;&#160;&#160;536,000</font></div>
            </td>
            <td valign="top" width="18%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
      3,000</font></div>
            </td>
            <td valign="top" width="12%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 11pt; FONT-FAMILY: arial, sans-serif">&#160;&#160;&#160;&#160;&#160;644,000</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(1</font><font style="FONT-SIZE: 70%; VERTICAL-ALIGN: super">)&#160;</font>&#160;These
restricted stock grants fully vested during 2007.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(2)</font>
Represents a cash payment under a compensation plan relating to an option to
purchase an interest in Hallador Petroleum, LLP which was liquidated in
2005.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">In
April 2005, we granted 750,000 options at an exercise price of $2.30 per share
to our employees of which 400,000 were issued to Mr. Stabio.&#160; On July 9,
2007 Mr. Stabio exercised 200,000 options at an exercise price of
$2.30.&#160;&#160;&#160;No options were granted or exercised in
2006.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">At December 31,
2007, Mr. Stabio's in-the-money value of his exercisable (66,666) and
unexercisable (133,334) options was about $240,000.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Compensation of
Directors</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Our directors are
not compensated for sitting on our&#160;board.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">32</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
    </div><br>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 95px">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">&#160;<font style="DISPLAY: inline; FONT-WEIGHT: bold"><font size="3">ITEM
      11.&#160;&#160;&#160;</font></font></font></div>
            </td>
            <td width="886">
              <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">The following table
is as of March 27, 2008<font style="DISPLAY: inline; FONT-WEIGHT: bold">.</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="92%">
          <tr>
            <td valign="top" width="62%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: arial">Name</font></div>
            </td>
            <td valign="top" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: arial">No.
      Shares<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">
      (1)</font></font></div>
            </td>
            <td valign="top" width="5%"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;</font></td>
            <td valign="top" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: arial">%
      of Class <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(1)</font></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="62%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="top" width="14%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;</font></td>
            <td valign="top" width="14%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="62%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Bryan H.
      Lawrence&#160; <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(2)</font></font></div>
            </td>
            <td align="right" valign="top" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">9,026,521</font></div>
            </td>
            <td align="right" valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;</font></td>
            <td align="right" valign="top" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">55</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="62%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="top" width="14%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;</font></td>
            <td valign="top" width="14%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="62%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">David Hardie
      and Steven Hardie as Nominee for Hardie Family Members <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(3)</font></font></div>
            </td>
            <td align="right" valign="top" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">3,550,370</font></div>
            </td>
            <td align="right" valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;</font></td>
            <td align="right" valign="top" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">22</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="62%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="top" width="14%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;</font></td>
            <td align="right" valign="top" width="14%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="62%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Victor P.
      Stabio<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(4)</font></font></div>
            </td>
            <td align="right" valign="top" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">671,093</font></div>
            </td>
            <td align="right" valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;</font></td>
            <td align="right" valign="top" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;
      4</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="62%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="top" width="14%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;</font></td>
            <td align="right" valign="top" width="14%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="62%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Brent K.
      Bilsland</font></div>
            </td>
            <td align="right" valign="top" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;&#160;&#160;&#160;&#160;165,000</font></div>
            </td>
            <td align="right" valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;</font></td>
            <td align="right" valign="top" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;
      1</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="62%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="top" width="14%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;</font></td>
            <td valign="top" width="14%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="62%" style="PADDING-BOTTOM: 2px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Cortlandt S.
      Dietler</font></div>
            </td>
            <td align="right" valign="top" width="14%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial"><font style="DISPLAY: inline">&#160;&#160;&#160;&#160;&#160;&#160;&#160;96,129</font></font></div>
            </td>
            <td align="right" valign="top" width="5%" style="PADDING-BOTTOM: 2px"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;</font></td>
            <td align="right" valign="top" width="14%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial"><font style="DISPLAY: inline">&lt;1</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="62%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="top" width="14%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;</font></td>
            <td align="right" valign="top" width="14%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="62%" style="PADDING-BOTTOM: 4px">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">All directors
      and executive officers as a group</font></div>
            </td>
            <td align="right" valign="top" width="14%" style="BORDER-BOTTOM: black 4px double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial"><font style="DISPLAY: inline">13,515,863</font></font></div>
            </td>
            <td align="right" valign="top" width="5%" style="PADDING-BOTTOM: 4px"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;</font></td>
            <td align="right" valign="top" width="14%" style="BORDER-BOTTOM: black 4px double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial"><font style="DISPLAY: inline">&#160;82</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="62%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="top" width="14%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;</font></td>
            <td align="right" valign="top" width="14%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="62%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Lubar &amp;
      Associates <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(5)</font></font></div>
            </td>
            <td align="right" valign="top" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">1,493,018</font></div>
            </td>
            <td align="right" valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;</font></td>
            <td align="right" valign="top" width="14%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">9</font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="62%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="top" width="14%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;</font></td>
            <td valign="top" width="14%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td>
              <div align="left">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="right" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial"><font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(1)</font></font></div>
            </td>
            <td align="left" valign="top" width="97%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Based on
      total outstanding shares of 16,362,528.&#160; Beneficial ownership of
      certain shares has been, or is being, specifically disclaimed by certain
      directors in ownership reports filed with the SEC.</font></div>
            </td>
          </tr>
          <tr>
            <td align="right" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial"><font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(2)</font></font></div>
            </td>
            <td align="left" valign="top" width="97%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Mr.
      Lawrence&#8217;s address is 410 Park Avenue, 19<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">th</font>
      Floor, New York, NY 10022.&#160; Mr. Lawrence owns 50,000 shares directly,
      and the remainder is held by Yorktown Energy Partners VI, L.P., and
      Yorktown Energy Partners VII, L.P., both affiliated with Mr.
      Lawrence.</font></div>
            </td>
          </tr>
          <tr>
            <td align="right" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial"><font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(3)</font></font></div>
            </td>
            <td align="left" valign="top" width="97%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">The Hardie
      family business address is 3000 S Street, Suite 200, Sacramento,
      California, 95816.</font></div>
            </td>
          </tr>
          <tr>
            <td align="right" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial"><font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(4)</font></font></div>
            </td>
            <td align="left" valign="top" width="97%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Includes
      200,000 options exercisable within sixty days of March 27,
      2008.</font></div>
            </td>
          </tr>
          <tr>
            <td align="right" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial"><font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(5)</font></font></div>
            </td>
            <td align="left" valign="top" width="97%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Lubar &amp;
      Associates&#160;address is 700 North Water Street, Suite 1200, Milwaukee,
      WI 53202.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">33</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
    </div><br>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 81px">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold"><font size="3">ITEM
      12.&#160;</font></font></font></div>
            </td>
            <td width="900">
              <div align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">&#160;CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Our Audit Committee
consists of all board members other than Mr. Stabio.&#160;&#160;Our Compensation
Committee consists of Messrs. David and Steven Hardie and Mr.
Lawrence.&#160;&#160;We have no nominating committee.&#160;&#160;None of our
committees have charters.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">We
do not have an audit committee financial expert serving on our audit
committee.&#160; We believe that the additional costs to recruit a financial
expert exceed the benefits, if any.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">We
had three board meetings and four audit committee meetings during 2007 and all
members attended at least 75% of the meetings.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">We
have entered into significant equity transactions with Yorktown and other
entities that invest with Yorktown.&#160; Yorktown, our largest shareholder,
owns about 55% of our common stock and represents one of the five seats on our
board.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">34</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">ITEM
13.&#160;&#160;&#160;&#160;&#160;&#160;&#160; EXHIBITS</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">(a)&#160;&#160;&#160;&#160;&#160;&#160;
Exhibits</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">3.1</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Restated
      Articles of Incorporation of Kimbark Oil and Gas Company, effective
      September 24, 1987&#160; <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(1)</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">3.2</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Articles of
      Amendment to Restated Articles of Incorporation of Kimbark Oil &amp; Gas
      Company, effective December 14, 1989, to effect change of name to Hallador
      Petroleum Company and to change the par value and number of authorized
      shares of common stock <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(1)</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">3.3</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Amendment to
      Articles of Incorporation dated December 31, 1990 to effect the
      one-for-ten reverse stock split <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(2)</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">3.4</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">By-laws of
      Hallador Petroleum Company, effective November 9, 1993 <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(4)</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">10.1</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Composite
      Agreement and Plan of Merger dated as of July 17, 1989, as amended as
      of&#160;&#160; August 24, 1989, among Kimbark Oil &amp; Gas Company, KOG
      Acquisition, Inc., Hallador Exploration Company and Harco Investors, with
      Exhibits A, B, C and D <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(1)</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">10.2</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Hallador
      Petroleum Company 1993 Stock Option Plan *<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(5)</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">10.3</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">First
      Amendment to the 1993 Stock Option Plan <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">*(5)</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">10.4</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Stock
      Purchase Agreement with Yorktown dated November 15, 1995 <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(6)</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">10.5</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Hallador
      Petroleum, LLP Agreement <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(6)</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">10.6</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Subscription
      Agreement - by and between Hallador Petroleum Company and Yorktown Energy
      Partners VI, L.P, dated December 20, 2005.<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(7)</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">10.7</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Purchase and
      Sale Agreement dated December 31, 2005 between Hallador Petroleum Company,
      as Purchase and Yorktown Energy Partners II, L.P., as Seller relating to
      the purchase and sale of limited partnership interests in Savoy Energy
      Limited Partnership<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">
      (8)</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">10.8</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Letter of
      Intent dated January 5, 2006 between Hallador Petroleum Company and
      Sunrise Coal, LLC<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">
      (9)</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">10.9</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Subscription
      Agreement - by and between Hallador Petroleum Company and Yorktown Energy
      Partners VI, L.P., et al dated February 22, 2006.<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">
      (10)</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">10.10</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Subscription
      Agreement - by and between Hallador Petroleum Company and Hallador
      Alternative Assets Fund LLC dated February 14, 2006.<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">
      (11)</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">10.11</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Subscription
      Agreement - by and between Hallador Petroleum Company and Tecovas Partners
      V LP dated February 14, 2006.<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">
      (11)</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">10.12</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Subscription
      Agreement - by and between Hallador Petroleum Company and&#160;Lubar
      Equity Fund LLC dated February 14, 2006.<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">
      (11)</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">10.13</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Subscription
      Agreement - by and between Hallador Petroleum Company and Murchison
      Capital Partners LP dated February 14, 2006.<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">
      (11)</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">10.14</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Continuing
      Guaranty, dated April 19, 2006, by Hallador Petroleum Company in favor of
      Old National Bank <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(12)</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">10.15</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Collateral
      Assignment of Hallador Master Purchase/Sale Agreement, dated April 19,
      2006, among Hallador Petroleum Company, Hallador Petroleum, LLLP, and
      Hallador Production Company and Old National Bank <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(12)</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">10.16</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Reimbursement
      Agreement, dated April 19, 2006, between Hallador Petroleum Company and
      Sunrise Coal, LLC <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(12)</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">10.17</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Membership
      Interest Purchase Agreement dated July 31, 2006 by and between Hallador
      Petroleum Company and Sunrise Coal, LLC. <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(13)</font></font></div>
            </td>
          </tr>
      </table>
    </div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">35</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
    </div><br>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">10.18</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Subscription
      Agreement - by and between Hallador Petroleum Company and Yorktown Energy
      Partners VII, L.P., et al dated October 5, 2007<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">
      (14)</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">10.19</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Subscription
      Agreement - by and between Hallador Petroleum Company and Cortlandt S.
      Dietler dated October 5, 2007.<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">
      (14)</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">10.20</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Subscription
      Agreement - by and between Hallador Petroleum Company and Tecovas Partners
      V LP dated October 5, 2007.<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">
      (14)</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">10.21</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Subscription
      Agreement - by and between Hallador Petroleum Company and&#160;Lubar
      Equity Fund LLC dated October 5, 2007.<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">
      (14)</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">10.22</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Subscription
      Agreement - by and between Hallador Petroleum Company and Murchison
      Capital Partners LP dated October 5, 2007.<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">
      (14)</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">10.23</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Purchase and
      Sale Agreement dated effective as of October 5, 2007 between Hallador
      Petroleum Company, as Purchaser and Savoy Energy Limited Partnership, as
      Seller</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">10.24</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">First
      Amendment to Credit Agreement, Waiver and Ratification of Loan Documents
      dated June 28, 2007 by and between Sunrise Coal, LLC, Hallador Petroleum
      Company and Old National Bank (15)</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">10.25</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Amended and
      Restated Continuing Guaranty, dated as of June 28, 2007, between Hallador
      Petroleum Company, Sunrise Coal, LLC, and Old National Bank.
      (16)</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">10.26</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Hallador
      Petroleum Company Restricted Stock Unit Issuance Agreement dated as of
      June 28, 2007, between Hallador Petroleum Company and Victor P.
      Stabio(16)*</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">10.27</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Hallador
      Petroleum Company Restricted Stock Unit Issuance Agreement dated as of
      June 28, 2007, between Hallador Petroleum Company and Brent
      Bilsland(17)*</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">14.</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Code Of
      Ethics For Senior Financial Officers. <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(14)</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">21.1</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">List of
      Subsidiaries<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">
      (2)</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">31</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">SOX 302
      Certification<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">
      (17)</font></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">32</font></div>
            </td>
            <td align="left" valign="top" width="79%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">SOX 906
      Certification <font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">(17)</font></font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: super">-----------------------------------------------</font></font></div>
            </td>
          </tr>
      </table>
    </div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="47%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(1)
      &#160;Incorporated by reference (IBR) to the 1989 Form
    10-K.</font></div>
            </td>
            <td align="left" valign="top" width="53%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: left" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(10) IBR to
      Form 8-K dated February 27, 2006</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="47%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(2)&#160; IBR
      to the 1990 Form 10-K.</font></div>
            </td>
            <td align="left" valign="top" width="53%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(11) IBR to
      the 2005 Form 10-KSB.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="47%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(3)&#160; IBR
      to the 1992 Form 10-KSB.</font></div>
            </td>
            <td align="left" valign="top" width="53%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(12) IBR to
      Form 8-K dated April 25, 2006</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="47%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(4)&#160; IBR
      to the 1993 Form 10-KSB.</font></div>
            </td>
            <td align="left" valign="top" width="53%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(13) IBR to
      Form 8-K dated August 1, 2006.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="47%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(5)&#160; IBR
      to the 1995 Form 10-KSB</font></div>
            </td>
            <td align="left" valign="top" width="53%">
              <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: -36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;&#160;
      (14) IBR to Form 10-QSB dated September 30, 2007</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="47%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(6)&#160; IBR
      to the 1997 Form 10-KSB.</font></div>
            </td>
            <td align="left" valign="top" width="53%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(15) IBR to
      Form 10-QSB dated June 30, 2007</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="47%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(7)&#160;&#160;IBR
      to Form 8-K dated December 31, 2005.</font></div>
            </td>
            <td align="left" valign="top" width="53%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(16) IBR to
      Form 8-K dated July 2, 2007.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="47%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(8)&#160;&#160;IBR
      to Form 8-K dated January 3, 2006</font></div>
            </td>
            <td align="left" valign="top" width="53%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 9pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(17) Filed
      herewith.</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="47%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">(9)&#160;&#160;IBR
      to Form 8-K dated January 6, 2006</font></div>
            </td>
            <td valign="top" width="53%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td valign="top" width="47%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="top" width="53%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="47%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">* <font style="DISPLAY: inline; FONT-SIZE: 10pt">Management contracts or
      compensatory plans.</font></font></div>
            </td>
            <td valign="top" width="53%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">36</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
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    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
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14.&#160;&#160;&#160;&#160;&#160;&#160;&#160; PRINCIPAL ACCOUNTANT FEES AND
SERVICES</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">The fees incurred
for 2007 and 2006 were:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="42%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="top" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">2007</font></div>
            </td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="top" width="11%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">2006</font></div>
            </td>
            <td align="left" valign="top" width="17%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="42%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="top" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="top" width="11%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="top" width="17%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="42%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Audit
      Fees</font></div>
            </td>
            <td align="left" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">$</font></div>
            </td>
            <td align="right" valign="top" width="10%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">150,500</font></div>
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            <td align="left" valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">$</font></div>
            </td>
            <td align="right" valign="top" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">130,000</font></div>
            </td>
            <td align="left" valign="top" width="17%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="42%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Audit related
      fees</font></div>
            </td>
            <td valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="top" width="10%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="top" width="11%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">40,000</font></div>
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            <td valign="top" width="17%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="42%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Tax
      fees</font></div>
            </td>
            <td align="left" valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="top" width="10%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">51,000</font></div>
            </td>
            <td align="left" valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="top" width="4%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="top" width="11%" style="BORDER-BOTTOM: black 2px solid">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">32,000</font></div>
            </td>
            <td align="left" valign="top" width="17%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="42%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Total
      fees</font></div>
            </td>
            <td align="left" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">$</font></div>
            </td>
            <td align="right" valign="top" width="10%" style="BORDER-BOTTOM: black 4px double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">201,500</font></div>
            </td>
            <td align="left" valign="top" width="2%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="top" width="4%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">$</font></div>
            </td>
            <td align="right" valign="top" width="11%" style="BORDER-BOTTOM: black 4px double">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">202,000</font></div>
            </td>
            <td align="left" valign="top" width="17%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Audit related fees
consist of fees paid related to the Sunrise Coal, LLC acquisition audit and
related SEC filings.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Pre-approval
Policy</font></font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">In
2003 the Audit Committee adopted a formal policy concerning approval of audit
and non-audit services to be provided by Ehrhardt Keefe Steiner &amp; Hottman PC
(EKSH).&#160; The policy requires that all services EKSH provides to us be
pre-approved by the Committee.&#160; The Committee approved all services
provided by EKSH during 2007 and 2006.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">37</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
</font></div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">SIGNATURES</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="34%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="top" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="top" width="54%">
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      PETROLEUM COMPANY</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="34%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="top" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="top" width="54%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="34%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="top" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="top" width="54%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="34%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="top" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="top" width="54%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="34%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Dated: March
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            </td>
            <td align="left" valign="top" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="top" width="54%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">BY:/S/ VICTOR
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
      VICTOR P. STABIO, CEO</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="34%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="top" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="top" width="54%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="39%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">/S/ DAVID
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;&#160;&#160;&#160;&#160;DAVID
      HARDIE</font></div>
            </td>
            <td align="left" valign="top" width="31%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Chairman</font></div>
            </td>
            <td align="right" valign="top" width="21%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">March 27,
      2008</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="39%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="top" width="31%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="top" width="21%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="39%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">/S/ VICTOR P.
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;&#160;&#160;&#160;&#160;VICTOR
      P. STABIO</font></div>
            </td>
            <td align="left" valign="top" width="31%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">CEO, CFO, CAO
      and Director</font></div>
            </td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">March 27,
      2008</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="39%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="top" width="31%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="top" width="21%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
          <tr>
            <td align="left" valign="top" width="39%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">/S/ BRYAN
      LAWRENCE</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;&#160;&#160;&#160;&#160;BRYAN
      LAWRENCE</font></div>
            </td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Director</font></div>
            </td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">March 27,
      2008</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="39%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="top" width="31%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="right" valign="top" width="21%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
          </tr>
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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">&#160;&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
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      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">38</font></div>
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</html>




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>2
<FILENAME>certification_302.htm
<DESCRIPTION>SOX 302 CERTIFICATION
<TEXT>
<html>
  <head>
    <title>Unassociated Document</title>
<!-- Licensed to: Hallador Petroleum Company-->
<!-- Document Created using EDGARizer 4.0.5.0 -->
<!-- Copyright 1995 - 2008 EDGARfilings, Ltd., an IEC company. All rights reserved -->
</head>
    <body bgcolor="#ffffff" style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font>

      <div>
        <hr style="COLOR: black" align="left" noshade size="3" width="100%">
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: arial">Exhibit
31</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold">CERTIFICATION</font></font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">I,
Victor P. Stabio, certify that:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">1.&#160;I have
reviewed this Annual Report on Form 10-KSB of Hallador Petroleum
Company;</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">2.&#160;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></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">3.&#160;Based on my
knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition and
results of operations of the issuer as of, and for, the periods presented in
this report;</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">4.&#160;&#160;&#160;I
am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules&#160;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></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 18pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">&#160;
      </font></div>
            </td>
            <td style="WIDTH: 27pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">(a)&#160;</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">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;
      and</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 18pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">&#160;
      </font></div>
            </td>
            <td style="WIDTH: 27pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">(b)&#160;</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">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<font style="DISPLAY: inline; FONT-FAMILY: Arial">&#160;</font>generally
      accepted accounting principles;</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 18pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">&#160;
      </font></div>
            </td>
            <td style="WIDTH: 27pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">(c)</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">Evaluated the
      effectiveness of the registrant&#8217;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></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 18pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">&#160;
      </font></div>
            </td>
            <td style="WIDTH: 27pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">(c)&#160;</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">Disclosed in
      this report any change in the registrant&#8217;s internal control over financial
      reporting that occurred during the registrant&#8217;s most recent fiscal quarter
      (the registrant&#8217;s fourth fiscal quarter in the case of an annual report)
      that has materially affected, or is reasonably likely to materially
      affect, the registrant&#8217;s internal control over financial
      reporting.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">5.&#160;I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant&#8217;s auditors and the audit committee of the
registrant&#8217;s board of directors (or persons performing the equivalent
functions):</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 18pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">&#160;
      </font></div>
            </td>
            <td style="WIDTH: 27pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">(a)&#160;</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">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&#8217;s ability to record,
      process, summarize and report financial information; and have identified
      for the registrant's auditors any material weakness in internal controls;
      and</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 18pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">&#160;
      </font></div>
            </td>
            <td style="WIDTH: 27pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">(b)&#160;</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">Any fraud,
      whether or not material, that involves management or other employees who
      have a significant role in the registrant&#8217;s internal control;
      and</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 18pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">&#160;
      </font></div>
            </td>
            <td style="WIDTH: 27pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">(c)</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">I have
      indicated in the report whether or not there were significant changes in
      internal controls or in other factors that could significantly affect
      internal controls subsequent to the date of their evaluation, including
      any corrective actions with regard to significant deficiencies and
      material weaknesses.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">Date:
March&#160;27, 2008</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: arial; TEXT-DECORATION: underline">/S/VICTOR
P. STABIO</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">Victor P.
Stabio</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">CEO and CFO
</font></div>
  </body>
</html>




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>3
<FILENAME>certification_906.htm
<DESCRIPTION>SOX 906 CERTIFICATION
<TEXT>
<html>
  <head>
    <title>exh32.htm</title>
<!-- Licensed to: Hallador Petroleum Company-->
<!-- Document Created using EDGARizer 4.0.5.0 -->
<!-- Copyright 1995 - 2008 EDGARfilings, Ltd., an IEC company. All rights reserved -->
</head>
    <body bgcolor="#ffffff" style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font>

      <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font>

        <div>
          <hr style="COLOR: black" align="left" noshade size="3" width="100%">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">EXHIBIT
32</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">CERTIFICATION
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">In
connection with the Annual Report of Hallador Petroleum Company (the "Company"),
on Form 10-KSB for the year ended December 31, 2007, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), the
undersigned, in the capacities and dates indicated below, hereby certifies
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that to his knowledge:</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 36pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">&#160;
      </font></div>
            </td>
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">(1)</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">The Report
      fully complies with the requirements of Section 13(a) or 15(d) of the
      Securities Exchange Act of 1934;
and</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">
          <tr valign="top">
            <td style="WIDTH: 36pt">
              <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">&#160;
      </font></div>
            </td>
            <td style="WIDTH: 36pt">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">(2)</font></div>
            </td>
            <td>
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">The
      information contained in the Report fairly presents, in all material
      respects, the financial condition and results of operations of the
      Company.</font></div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">
          <tr>
            <td align="left" valign="top" width="30%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">Dated: March
      27, 2008</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="top" width="9%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;By:</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="top" width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: arial">&#160;
    </font></td>
            <td align="left" valign="top" width="57%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;&#160;</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">/S/ VICTOR P.
      STABIO</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;&#160;&#160;&#160;
      VICTOR P. STABIO</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: arial">&#160;&#160;&#160;&#160;
      CEO and CFO</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
          </tr>
      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left"><font style="DISPLAY: inline; FONT-SIZE: 8pt; COLOR: #000000; FONT-FAMILY: Times New Roman">&#160;
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<DOCUMENT>
<TYPE>EX-10.27
<SEQUENCE>4
<FILENAME>exh1027.htm
<DESCRIPTION>RESTRICTED STOCK GRANT - BRENT BILSLAND
<TEXT>
<html>
  <head>
    <title>Unassociated Document</title>
<!-- Licensed to: Hallador Petroleum Company-->
<!-- Document Created using EDGARizer 4.0.5.0 -->
<!-- Copyright 1995 - 2008 EDGARfilings, Ltd., an IEC company. All rights reserved -->
</head>
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    <div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">HALLADOR
PETROLEUM COMPANY</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">RESTRICTED
STOCK UNIT ISSUANCE AGREEMENT</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">This RESTRICTED
STOCK UNIT ISSUANCE AGREEMENT (this &#8220;Agreement&#8221;) is made and entered into as of
July 19, 2007 by and between Hallador Petroleum Company, a Colorado corporation
(the &#8220;Corporation&#8221;), and Brent K. Bilsland, an individual
(&#8220;Participant&#8221;).</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">RECITALS</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">A.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Participant serves
as the President of Sunrise Coal, LLC, which is a Subsidiary of the Corporation,
and as such is to render valuable services to the Corporation, and this
Agreement evidences the special equity incentive award authorized by the
Corporation for Participant as an inducement to continue to provide such
services to the Corporation.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">B.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">&#160;All
capitalized terms in this Agreement shall have the meaning assigned to them in
the attached Appendix A.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold">NOW, THEREFORE</font>, it is hereby
agreed as follows:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">1.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Grant of
Restricted Stock Units</font>.&#160;&#160;The Corporation hereby awards to
Participant, as of the Award Date, Restricted Stock Units for the number of
shares of Common Stock indicated below. Each Restricted Stock Unit which vests
during Participant&#8217;s period of Service shall entitle Participant to receive one
share of Common Stock on the specified issue date.&#160;&#160;The number of
shares of Common Stock subject to the awarded Restricted Stock Units, the
applicable vesting schedule for those shares, the applicable date or dates on
which those vested shares shall become issuable to Participant and the remaining
terms and conditions governing the award (the &#8220;Award&#8221;) shall be as set forth in
this Agreement.</font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">July 19,
      2007</font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Number of
      Shares <font style="DISPLAY: inline">Subject to
    Award</font>:</font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">165,000
      shares of Common Stock (the &#8220;Shares&#8221;)</font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline">Vesting Schedule</font>:</font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">The Shares
      shall vest upon Participant&#8217;s completion of the three (3)-year period of
      Service measured from the Award Date.&#160;&#160;However, the Shares may
      be subject to accelerated vesting in accordance with the provisions of
      Paragraph 5 below.&#160;&#160;The Shares which vest hereunder shall be
      issued in accordance with the provisions of Paragraph 7 of this Agreement,
      subject to the Corporation&#8217;s collection of the applicable Withholding
      Taxes.</font></div>
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    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt">&#160;</div>
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    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">2.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Limited
Transferability</font>.&#160;&#160;Prior to actual receipt of the Shares which
vest and become issuable hereunder, Participant may not transfer any interest in
the Award or the underlying Shares. Any Shares which vest hereunder but which
otherwise remain unissued at the time of Participant&#8217;s death may be transferred
pursuant to the provisions of Participant&#8217;s will or the laws of inheritance or
to Participant&#8217;s designated beneficiary or beneficiaries of this
Award.&#160;&#160;Participant may make such a beneficiary designation at any
time by filing the appropriate form with the Board or its designee.</font></div>
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    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">3.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Cessation
of Service</font>.&#160;&#160;Should Participant cease Service for any reason
prior to vesting in the Shares subject to this Award, then the Restricted Stock
Units awarded hereunder shall be immediately cancelled, and Participant shall
thereupon cease to have any right or entitlement to receive any Shares under
those cancelled units.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">4.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Stockholder
Rights</font>.&#160;&#160;The holder of this Award shall not have any
stockholder rights, including voting, dividend or liquidation rights, with
respect to the Shares subject to the Award until the Participant becomes the
record holder of those Shares upon their actual issuance following the
Corporation&#8217;s collection of the applicable Withholding Taxes.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">5.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Reorganization/Change
in Control</font>.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">A.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Any Restricted
Stock Units subject to this Award at the time of a Reorganization may be assumed
by the successor entity or otherwise continued in full force and effect. In the
event of such assumption or continuation of the Award, no accelerated vesting of
the Restricted Stock Units shall occur at the time of the Reorganization; <font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-STYLE: italic">provided,
however, </font>that if the Reorganization event also constitutes a Change in
Control, then the special vesting acceleration provisions of Paragraph 5.C of
this Agreement shall be applicable.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">B.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">In the event the
Award is assumed or otherwise continued in effect, the Restricted Stock Units
subject to the Award will be adjusted immediately after the consummation of the
Reorganization so as to apply to the number and class of securities into which
the Shares subject to those units immediately prior to the Reorganization would
have been converted in consummation of that Reorganization had the Shares
actually been issued and outstanding at that time.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">C.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">If the Restricted
Stock Units subject to this Award at the time of the Reorganization are not
assumed or otherwise continued in effect in accordance with Paragraph 5.A above
or in event such Reorganization also constitutes a Change in Control, then those
units shall vest immediately upon the effective date of such Reorganization or
Change in Control.&#160;&#160;The Shares subject to those vested units shall be
issued on the closing date of the Change in Control or Reorganization
transaction triggering such accelerated vesting (or shall otherwise be converted
into the right to receive the same consideration per share of Common Stock
payable to the other stockholders of the Corporation in consummation of that
Reorganization or Change in Control and distributed at the same time as such
stockholder payments), subject to the Corporation&#8217;s collection of applicable
Withholding Taxes pursuant to the provisions of Paragraph 7.&#160;&#160;In no
event, however, shall the issuance of the vested Shares or the distribution of
any other consideration for those Shares be made to Participant later than the
<font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-STYLE: italic">later
</font>of (i) the close of the calendar year in which the Change in Control or
Reorganization transaction is effected, or (ii) the fifteenth (15th) day of the
third (3rd) calendar month following the effective date of such
transaction.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">D.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">This Agreement
shall not in any way affect the right of the Corporation to adjust, reorganize
or otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.</font></div>
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    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">6.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Adjustment
in Shares</font><font style="DISPLAY: inline; FONT-WEIGHT: bold">.</font>&#160;&#160;Should any change
be made to the Common Stock by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares, spin-off
transaction, extraordinary dividend or distribution or other similar change
affecting the outstanding Common Stock as a class without the Corporation&#8217;s
receipt of consideration, or should the value of outstanding shares of Common
Stock be substantially reduced as a result of a spin-off transaction or an
extraordinary dividend or distribution, or should there occur any merger,
consolidation or other reorganization, then equitable adjustments shall be made
to the total number and/or class of securities issuable pursuant to this Award.
Such adjustments shall be made in such manner as the Board deems appropriate in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.&#160;&#160;The determination of the Board shall be final,
binding and conclusive.&#160;&#160;In the event of a Change in Control or
Reorganization, the adjustments (if any) shall be made in accordance with the
provisions of Paragraph 5.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">7.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Issuance
of Shares of Common Stock/Collection of Withholding Taxes</font>.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">A.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">On the date on
which the Shares vest in accordance with the provisions of this Agreement or as
soon as administratively practicable following such vesting date, the
Corporation shall issue to or on behalf of Participant a certificate for those
vested Shares, subject to the Corporation&#8217;s collection of the applicable
Withholding Taxes and Participant&#8217;s delivery of any representations required of
him or her pursuant to Paragraph 8.B.&#160;&#160;Such issuance shall be effected
no later than the <font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-STYLE: italic">later</font> of
(i) the end of the calendar year in which the applicable vesting date occurs, or
(ii) the fifteenth (15th) day of the third (3rd) calendar month following such
vesting date, with the applicable Withholding Taxes to be collected on or before
such issuance.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">B.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Unless Participant
(i) otherwise makes satisfactory arrangements with the Corporation on or before
the date on which the Shares vest under this Award to pay the applicable
Withholding Taxes through the delivery of&#160;&#160;a check payable to the
Corporation in a dollar amount equal to the Withholding Taxes which the
Corporation must collect from Participant in connection with the vesting and
concurrent issuance of such Shares, and (ii) in fact delivers such check to the
Corporation not later than that vesting date, the Corporation shall collect the
applicable Withholding Taxes by withholding from the vested Shares otherwise
issuable to Participant at that time, a portion of those Shares with a Fair
Market Value (measured as of the vesting date) equal to the applicable
Withholding Taxes; <font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-STYLE: italic">provided,
however</font>, that the number of&#160;&#160;Shares so withheld shall not
exceed in Fair Market Value the amount necessary to satisfy the Corporation&#8217;s
required tax withholding obligations using the minimum statutory withholding
rates for federal and state tax purposes, including payroll taxes, that are
applicable to supplemental taxable income.</font></div>
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    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">C.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Except as otherwise
provided in Paragraph 5 and Paragraph 7.B, the settlement of all Restricted
Stock Units which vest under the Award shall be made solely in shares of Common
Stock.&#160;&#160;In no event, however, shall any fractional shares be issued.
Accordingly, the total number of shares of Common Stock to be issued pursuant to
that Award shall, to the extent necessary, be rounded down to the next whole
share in order to avoid the issuance of a fractional share.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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Compliance</font></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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under this Agreement will not be registered under the 1933 Act and will be
issued to Participant in reliance upon the private placement exemption from such
registration provided under Section 4(2) of the 1933 Act.&#160;&#160;Participant
hereby confirms that Participant has been informed that the issued Shares will
be restricted securities under the 1933 Act and may not be resold or transferred
unless those shares are first registered under the Federal securities laws or
unless an exemption from such registration is available.&#160;&#160;Accordingly,
Participant hereby acknowledges that Participant will acquire the Shares for
investment purposes only and not with a view to resale and will hold the Shares
for an indefinite period and that Participant is aware that SEC Rule 144 issued
under the 1933 Act which exempts certain resales of restricted securities will
require such shares to be held for a period of at least one year after their
issuance pursuant to this Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">B.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Upon demand by the
Corporation, Participant shall deliver to the Corporation a representation in
writing that Participant will acquire the Shares issued under this Agreement for
investment only and not for resale or with a view to distribution, and
containing such other representations and provisions with respect thereto as the
Corporation may require.&#160;&#160;Should the Corporation make such demand,
then delivery of such representation shall be a condition precedent to
Participant&#8217;s right to the issuance of the Shares.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">C.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Participant shall
make no disposition of the issued Shares unless and until there is compliance
with all of the following requirements:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 108pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">(i)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Participant shall
have provided the Corporation with a written summary of the terms and conditions
of the proposed disposition.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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have provided the Corporation with an opinion of counsel, in form and substance
satisfactory to the Corporation, that (i) the proposed disposition does not
require registration of the Shares under the 1933 Act, or (ii) all appropriate
action necessary for compliance with the registration requirements of the 1933
Act or any exemption from registration available under the 1933 Act (including
Rule 144) has been taken.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font id="TAB1" style="MARGIN-LEFT: 144pt"></font>The Corporation shall <font style="DISPLAY: inline; TEXT-DECORATION: underline">not</font> be required (i)
to transfer on its books any Shares issued pursuant to this Agreement which have
been sold or transferred in violation of the provisions of this Agreement, <font style="DISPLAY: inline; TEXT-DECORATION: underline">or</font> (ii) to treat as
the owner of those Shares, or otherwise to accord voting, dividend or
liquidation rights to, any transferee to whom the Shares have been transferred
in contravention of this Agreement.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br></div>
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certificates for any Shares issued under this Agreement shall be endorsed with
the following restrictive legend:</font></div>
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have not been registered under the Securities Act of 1933.&#160;&#160;The shares
may not be sold or offered for sale in the absence of (a) an effective
registration statement for the shares under such Act, (b) a &#8216;no action&#8217; letter
of the Securities and Exchange Commission with respect to such sale or offer or
(c) an opinion of counsel, in form satisfactory to the Corporation, that
registration under such Act is not required with respect to such sale or
offer.&#8221;</font></div>
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Limit.</font><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-STYLE: italic">&#160;</font>In
the event the vesting and issuance of the Shares subject to this Award would
constitute a parachute payment under Code Section 280G, the vesting and issuance
of those Shares shall be subject to reduction to the extent necessary to assure
that the number of Shares which vest and are issued under this Award will be
limited to the <font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-STYLE: italic">greater</font> of
(i)&#160;the number of Shares which can vest and be issued without triggering a
parachute payment under Code Section 280G, or (ii)&#160;the maximum number of
Shares which can vest and be issued under this Award so as to provide the
Participant with the greatest after-tax amount of such vested and issued Shares
after taking into account any excise tax the Participant may incur under Code
Section 4999 with respect to those Shares and any other benefits or payments to
which the Participant may be entitled in connection with any change in control
or ownership of the Corporation or the subsequent termination of the
Participant&#8217;s Service.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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with Other Laws and Regulations</font>.&#160;&#160;The issuance of shares of
Common Stock pursuant to the Award shall be subject to compliance by the
Corporation and Participant with all applicable requirements of law relating
thereto and with all applicable regulations of any Stock Exchange on which the
Common Stock may be listed for trading at the time of such
issuance.</font></div>
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notice required to be given or delivered to the Corporation under the terms of
this Agreement shall be in writing and addressed to the Corporation at its
principal corporate offices.&#160;&#160;Any notice required to be given or
delivered to Participant shall be in writing and addressed to Participant at the
address indicated below Participant&#8217;s signature line on this
Agreement.&#160;&#160;All notices shall be deemed effective upon personal
delivery or upon deposit in the U.S. mail, postage prepaid and properly
addressed to the party to be notified.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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and Assigns</font>.&#160;&#160;Except to the extent otherwise provided in this
Agreement, the provisions of this Agreement shall inure to the benefit of, and
be binding upon, the Corporation and its successors and assigns and Participant
and the legal representatives, heirs and legatees of Participant&#8217;s estate and
any beneficiaries of the Award designated by Participant.</font></div>
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interpretations and constructions of the provisions of this Agreement and all
determinations on any questions arising under this Agreement shall be made by
the Board, and its decisions on such matters shall be conclusive and binding on
all persons having an interest in this option.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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Law</font>.&#160;&#160;The interpretation, performance and enforcement of this
Agreement shall be governed by the laws of the State of Colorado without resort
to that State&#8217;s conflict-of-laws rules.</font></div>
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    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">15.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Employment
at Will</font>.&#160;&#160;Nothing in this Agreement shall confer upon
Participant any right to continue in Service for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the Corporation
(or any Subsidiary employing or retaining Participant) or of Participant, which
rights are hereby expressly reserved by each, to terminate Participant&#8217;s Service
at any time for any reason, with or without cause.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold">IN WITNESS WHEREOF</font>, the
parties have executed this Agreement on the day and year first indicated
above.</font></div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt">&#160;</div>
    <div style="DISPLAY: block; TEXT-INDENT: 0pt"><br>
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      <div>
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            <tr>
              <td valign="top" width="45%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">&#160;
    </font></td>
              <td valign="top" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">&#160;
    </font></td>
              <td valign="top" width="28%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">&#160;
    </font></td>
              <td valign="top" width="15%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">&#160;
    </font></td>
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            <tr>
              <td valign="top" width="45%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">&#160;
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              <td valign="top" width="12%">
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                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">By:</font></div>
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                <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: arial">&#160;
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                <div><font size="2" style="FONT-STYLE: italic"><font size="3"><font>/<font style="FONT-SIZE: 12pt; FONT-FAMILY: Arial">S/VICTOR P.
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    </font></td>
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                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Title:</font></div>
              </td>
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                <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">&#160;
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              </td>
              <td valign="top" width="15%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">&#160;
    </font></td>
            </tr>
            <tr>
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                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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            </tr>
            <tr>
              <td valign="top" width="45%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">&#160;
    </font></td>
              <td valign="top" width="12%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">&#160;
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              <td valign="top" width="28%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">&#160;
    </font></td>
              <td valign="top" width="15%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">&#160;
    </font></td>
            </tr>
            <tr>
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                <div><font size="2">4055 Ironwood Lane</font></div>
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              <td valign="top" width="28%" style="BORDER-BOTTOM: black 2px solid"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Arial">Terre Haute,
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    </font></td>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">APPENDIX
A</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">DEFINITIONS</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">The following
definitions shall be in effect under the Agreement:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">A.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Agreement</font><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font>shall mean this
Restricted Stock Unit Issuance Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">B.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Award</font>
shall mean the award of Restricted Stock Units made to Participant pursuant to
the terms of the Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">C.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Award
Date</font> shall mean the date the Restricted Stock Units are awarded to
Participant pursuant to the Agreement and shall be the date indicated in
Paragraph 1 of the Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">D.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Board</font>
shall mean the Corporation&#8217;s Board of Directors.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">E.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Change in
Control</font> shall mean any change in control or ownership of the Corporation
which occurs by reason of one or more of the following events:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">(i)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">the acquisition of
any person or group of related persons (as determined pursuant to section
13(d)(3) of the 1934 Act) of beneficial ownership of securities of the
Corporation representing fifty percent (50%) or more of the total number of
votes that may be cast for the election of Board members, or</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">(ii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">stockholder
approval of (A) any agreement for a merger or consolidation in which the
Corporation will not survive as an independent corporation or (B) any sale,
exchange or other disposition of all or substantially all of the Corporation&#8217;s
assets.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font id="TAB1" style="MARGIN-LEFT: 72pt"></font>In determining whether a subparagraph (i)
acquisition has occurred, the person acquiring beneficial ownership of the
securities must be someone other than a person or an affiliate of a person that,
as of January 15, 1993, is the beneficial owner of securities of the Corporation
representing twenty percent (20%) or more of the total number of votes that may
be cast for the election of Board members.&#160;&#160;The Board&#8217;s reasonable
determination as to whether a Change in Control event has occurred shall be
final and conclusive.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">F.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Code</font><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font>shall mean the Internal
Revenue Code of 1986, as amended.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">G.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Common
Stock</font> shall mean the shares of the Corporation&#8217;s common
stock.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">H.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Corporation</font>
shall mean Hallador Petroleum Company and any successor corporation to all or
substantially all of the assets or voting stock of Hallador Petroleum Company,
which shall by appropriate action assume the Award.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">I.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Employee</font>
shall mean an individual who is in the employ of the Corporation (or any Parent
or Subsidiary), subject to the control and direction of the employer entity as
to both the work to be performed and the manner and method of
performance.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">J.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Fair
Market Value</font> per share of Common Stock on any relevant date shall be
determined in accordance with the following provisions:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">(i)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">If the Common Stock
is listed upon one or more established Stock Exchanges, then the Fair Market
Value per share shall be deemed to be the averages of the quoted closing prices
of the Common Stock on such Stock Exchanges on the date for which the
determination is made, or if no sale shall have been made on any Stock Exchange
on that day, on the next preceding day on which there was such a
sale.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">(ii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">If the Common Stock
is not listed upon an established Stock Exchange but is actively traded on the
NASDAQ System, the Fair Market Value per share shall be deemed to be the last
reported sale price for the date for which the determination is made or (in the
absence of any sale on such date) the mean between the dealer &#8220;bid&#8221; and &#8220;ask&#8221;
closing prices of the Common Stock on the NASDAQ System on such day or, if there
shall have been no trading or quotes of the Common Stock on that day, on the
next preceding day on which there was such trading or quotes.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">(iii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">If none of the
foregoing apply, the Fair Market Value per share shall be deemed to be an amount
as determined in good faith by the Board by applying any reasonable valuation
method.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">K.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">1933
Act</font> shall mean the Securities Act of 1933, as amended.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">L.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">1934
Act</font> shall mean the Securities Exchange Act of 1934, as
amended.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">M.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Participant</font>
shall mean the person to whom the Award is made pursuant to the
Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">N.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Parent</font><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font>shall mean any
corporation (other than the Corporation) in an unbroken chain of corporations
ending with the Corporation, provided each corporation in the unbroken chain
(other than the Corporation) owns, at the time of the determination, stock
possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">O.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Restricted
Stock Unit</font><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font>shall mean each unit
subject to the Award which shall entitle Participant to receive one (1) share of
Common Stock upon the vesting of that unit.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 12pt; FONT-FAMILY: Arial">P.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Reorganization</font>
shall mean the occurrence of any of the following transactions:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">(i)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">the Corporation is
merged or consolidated with another corporation and the Corporation is not the
surviving corporation, or</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">(ii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">all or
substantially all of the assets of the Corporation are acquired by another
entity, or</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 72pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">(iii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">the Corporation is
liquidated or reorganized,</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">Q.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Service</font>
shall mean Participant&#8217;s performance of services for the Corporation (or any
Parent or Subsidiary) in the capacity of an Employee, a non-employee member of
the Board or a consultant or independent advisor.&#160;&#160;Participant shall
be deemed to cease Service immediately upon the occurrence of either of the
following events: (i) Participant no longer performs services in any of the
foregoing capacities for the Corporation (or any Parent or Subsidiary), or (ii)
the entity for which Participant performs such services ceases to remain a
Parent or Subsidiary of the Corporation, even though Participant may
subsequently continue to perform services for that entity.&#160;&#160;Service
shall not be deemed to cease during a period of military leave, sick leave or
other personal leave approved by the Corporation. Except to the extent otherwise
required by law or expressly authorized by the Board or the Corporation&#8217;s
written leave of absence policy, no Service credit shall be given for vesting
purposes for any period Participant is on a leave of absence.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">R.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Stock
Exchange</font><font style="DISPLAY: inline; FONT-WEIGHT: bold">&#160;</font>shall mean the American
Stock Exchange, the Nasdaq Global or Global Select Market or the New York Stock
Exchange.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">S.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Subsidiary</font>
shall mean any corporation (other than the Corporation) in an unbroken chain of
corporations beginning with the Corporation, provided each corporation (other
than the last corporation) in the unbroken chain owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt"><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial">T.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 12pt; FONT-FAMILY: Arial"><font style="DISPLAY: inline; FONT-WEIGHT: bold; TEXT-DECORATION: underline">Withholding
Taxes</font> shall mean (i) the employee portion of the federal, state and local
employment taxes required to be withheld by the Corporation in connection with
the vesting and concurrent issuance of the shares of Common Stock under the
Award and (ii) the federal, state and local income taxes required to be withheld
by the Corporation in connection with such vesting and issuance of those
shares.</font></div>
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