This project continues to progress forward. All previous milestones have been met on time and on budget. In accordance with the agreement, the site selection has been finalized and the process design package has been delivered to Dynamic Fuels by our engineers. The Front End Engineering and Design (FEED) package outlining the estimated capital budget was delivered to each party in May of 2008. Upon completion of this final activity, the parties met to approve plant sanction based upon the capital budget for plant design and construction. Both parties approved plant sanction in July of 2008 and committed to funding $20.0 million each for project construction before December 31, 2008. Both parties contributed $14.0 million of this total commitment in July of 2008 to allow construction to proceed immediately. The official groundbreaking occurred on October 6, 2008. Dynamic Fuels received approval from the Louisiana State Bond Commission to issue $100.0 million in Gulf Opportunity Revenue Bonds (the "Bonds"). This debt financing obtained by Dynamic Fuels has reduced the amount of equity contributions for each member proportionately. The entire $100.0 million in Bonds were issued and sold on October 21, 2008. Based on the current cost estimate stated above each party will be required to fund their remaining estimated $5.0 million in capital contributions in 2009. Based on this timeline, the plant is expected to begin commercial operations by the second quarter of 2010.

                                                                              Synm
 Proceeds - Debt and Equity Contributions (in Millions)        Dynamic       Portion
 Funded Proceeds from Debt Issuance*                           $  100.0             -
 Funded Equity Contributions from Members - July 2008          $   28.0     $    14.0
 Committed Equity Contributions from Members - December 2008   $   12.0     $     6.0
 Scheduled Equity Contributions from Members - 2009            $   10.0     $     5.0

 Total Proceeds - Debt and Equity Contributions                $  150.0     $    25.0

* Interest during construction is calculated based on the daily interest rate stated at closing of 1.30 percent for 15 months. The interest rate for the bonds is a daily floating interest rate and may change significantly from this amount.

Issuance of the Bonds occurred subsequent to the quarter ended September 30, 2008 and required a letter of credit in the amount of $100 million to guarantee Dynamic Fuels' obligations under the Bonds. Tyson agreed under the terms of the Warrant Agreement with us dated June 30, 2008, to provide credit support for our 50% share of the guarantee. Tyson posted the required credit support upon the funding of the Bonds and received 8.0 million fully-vested warrants to purchase the Company's common stock on October 21, 2008. The exercise price of the warrants is $0.01 per share. Warrants are transferable by Tyson subject to the right of first offer in favor of us. The warrants were, and the underlying shares will be, issued to Tyson in an unregistered private transaction and will be subject to the terms of a registration rights agreement between the parties. The warrants will expire on October 21, 2012. We expect to expense approximately $8.6 million in non-cash equity expense related to the vesting of these warrants in the fourth quarter ended December 31, 2008.
Based upon current pricing of the feedstock slate expected to be delivered by Tyson and the natural gas used in the Bio-Synfining™ Process and our expectations regarding other operating costs, we expect unit costs on a per gallon basis for the initial Bio-Synfining™ plant, if it were operating today, would be feedstock costs of approximately $2.46 per gallon and operating costs (excluding depreciation) of $0.55 per gallon of feedstock. Based on current diesel prices and government subsidies the operating cash margin is expected to be $0.97 per gallon. These prices are based on annual averages. Actual costs will vary according to changes in feedstock and other resources, the performance of the plant, plant operating conditions, cost variations in the components of operating costs and other factors, and are likely to fluctuate substantially from these indicative amounts.
Following on the success of our delivery to the Department of Defense of the Syntroleum S-8 aviation grade FT research fluid, we signed a further contract in June 2007 to produce an initial 500 gallons of aviation grade renewable research fluid (Syntroleum® R-8, a product of Bio-Synfining™) for analysis by the same group in the Department of Defense that previously tested Syntroleum® S-8. This contract was later expanded to include production of an additional 100 gallons of R-8 and test quantities of same fuel derived from seaweed oil. The Syntroleum R-8 produced by our Bio-Synfining™ Technology from waste fats and greases was found to exhibit substantially similar properties to our Syntroleum® S-8 produced by our Synfining® Process under comparative analysis of the two products. We expect this testing to be completed in the fourth quarter of 2008. We anticipate further requests for evaluation of Syntroleum® R-8 produced by our Bio-Synfining™ Technology as interest grows in renewable sources of aviation fuel and the prospect for the domestic manufacture and supply of such fuel. Discontinued Operations
International Oil and Gas
In March 2008, we received final payment of $5,766,000 from the sale of stock of various subsidiaries, including Syntroleum Nigeria Limited, which held our interests in the Ajapa and Aje fields offshore Nigeria, to African Energy Equity Resources Limited ("AEERL"), a direct wholly owned subsidiary of Energy Equity Resources (Norway) Limited ("EERNL"). On April 30, 2008 the Company received $1,500,000 from AEERL in settlement of future payment that would have been calculated on first gross revenues received from the Ajapa interests. We received $14,266,000 in total from the sale of these interests including the collection of interest and reimbursement of legal fees. The results of international oil and gas operations are presented as discontinued operations in the accompanying consolidated financial statements and prior periods have been reclassified for comparability in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("SFAS 144"). Domestic Oil and Gas
We actively sought interested parties for the sale of our remaining gas processing plant and related equipment. These assets were fully impaired in 2007. We finalized the sale of these assets in the amount of $90,000 in February of 2008. The results of operations of the domestic oil and gas segment are presented as discontinued operations in the accompanying consolidated financial statements in accordance with SFAS 144.
Research and Development
We sold our Technology Center facility for $1,250,000 in March of 2008. We impaired the building to the contract price less closing transaction costs in 2007 resulting in no gain from the sale of the building for the period ending September 30, 2008. The results of our research and development activities are presented as discontinued operations in the accompanying consolidated financial statements and prior periods have been reclassified for comparability in accordance with SFAS 144.

Results of Operations
Consolidated Unaudited Results for the Three Months Ended,

                                                Three Months Ended
                                        September 30,        September 30,
          Revenues                          2008                 2007
                                                  (In Thousands)
          Technical Services Revenue               882                  643
          Other                                    565                  383

          Total Revenues               $         1,447      $         1,026

Technical Services Revenue. Revenues from contracted engineering services for a process design package for Dynamic Fuels and other separately contracted engineering services for technical work were $882,000 and $643,000 for the quarters ended September 30, 2008 and 2007, respectively. The Company expects to continue to provide engineering services to Dynamic Fuels and other customers throughout 2008.
Other Revenue. Other revenues were $565,000 for the three months ended September 30, 2008 compared to $383,000 for the three months ended September 30, 2007. These revenues included $440,000 of recognized revenue in the three months ended September 30, 2008 for the completion of the third milestone for our work with the Department of Defense in testing 500 gallons of renewable jet fuel compared to $220,000 for the completion of the first milestone in the three months ended September 30, 2007. The fourth milestone will be completed and recognized in the fourth quarter of 2008 in the amount of $110,000 plus additional revenues for increased fuel shipments. We also recognized revenue for certain site license reservation agreements in both quarters.

                                                       Three Months Ended
                                               September 30,        September 30,
   Operating Costs and Expenses                    2008                 2007
                                                         (in thousands)
   Engineering                                            946                1,743
   Depreciation, depletion and amortization               133                  183
   Non-cash equity compensation                           180                 (300 )
   General and administrative and other                 1,504                2,291

   Total Operating Costs and Expenses         $         2,763      $         3,917

Engineering. Expenses from engineering activities were $946,000 for the quarter ended September 30, 2008 compared to $1,743,000 during the same period in 2007. The decrease primarily relates to a decreased number of engineering staff and the retention incentive agreement plan initiated in December of 2006 paid out in 2007 and 2008, which was recognized over the requisite service period for 2007 and 2008 and was completed on July 1, 2008.
Non-cash Equity Compensation. Non-cash equity compensation for the quarter ended September 30, 2008 was $180,000 compared to $(300,000) for the same period in 2007. The 2008 expense relates to expense of remaining service based options and restricted stock granted in prior years. The decrease for the three months ended September 30, 2007 resulted from expenses reversed out for modifications to performance/market based stock options.
General and Administrative and Other. General and administrative expenses for the quarter ended September 30, 2008 were $1,504,000 compared to $2,291,000 during the same period in 2007. The significant decrease resulted from a decrease in expenditures associated with personnel, professional consultants, travel and insurance expenditures. These cost reductions were in line with the Company's cost reduction plan. The Company expects general and administrative expenses to continue at this decreased level for the remainder of 2008 and for 2009. The Company also incurred increased severance expense in 2007 for future payments under retirement agreements with former officers.

                                                           Three Months Ended
                                                   September 30,        September 30,
Other Income and Expenses and Net Income (Loss)        2008                 2007
                                                             (in thousands)
Investment and Interest Income                    $            87      $           357
Other Income (Expense)                                         41                  (38 )
Foreign Currency Exchange                                   2,106                 (594 )
Minority Interest                                               -                  706
Income (Loss) from Discontinued Operations                    (80 )               (599 )


Net Income (Loss)                                 $           838      $        (3,059 )

Investment and Interest Income. Investment and interest income was $87,000 in the quarter ended September 30, 2008 compared to $357,000 during the same period in 2007 due to decreased interest income earned on a lower cash balance and lower interest rates.

Other Income (Expense) and Foreign Currency Exchange. Other Income was $41,000 in the quarter ended September 30, 2008 compared to expense of $38,000 in the quarter ended September 30, 2007. The increase results from our investment in Dynamic Fuels. Changes in the Dynamic Fuels investment result from project development, site selection, equipment evaluation, and government relations. The joint venture capitalizes costs associated with the construction of the plant and we expect to see income from this investment in 2010 upon the start up of commercial operations. Foreign Currency Exchange generated income of $2,106,000 for the quarter ended September 30, 2008 compared to expense of $594,000 for the same quarter in 2007. This increase in income resulted from foreign currency gains due to the fluctuation in the value of the Australian dollar compared to the U.S. Dollar. The foreign currency changes result from translation adjustments from our license with the Commonwealth of Australia which is denominated in Australian dollars.
Minority Interest. Minority Interest for the three months ended September 30, 2008 was $0 compared to income of $706,000 for the same period in 2007. The amount recorded in 2007 resulted from the dissolution of ECT Merchant Corporation's interest in conjunction with the termination of the Sweetwater Project. The minority interest was not recorded as a gain upon termination of the Sweetwater Project due to bankruptcy proceedings surrounding ECT Merchant Corporation.
Income (Loss) from Discontinued Operations. Loss from discontinued operations for the quarter ended September 30, 2008 was $80,000 compared to a loss of $599,000 for the same period in 2007. The decrease in loss is primarily due to the operations of research and development activities in the third quarter of 2007. The same period in 2008 represents minimal costs in closing research and development activities. Portions of the loss from research and development activities in 2007 are offset from gains from the renegotiation of a receivable amount of $2,000,000 for the sale of certain Nigerian assets. We do not expect to receive or expend significant cash flow from our discontinued international oil and gas activities or our discontinued research and development activities for the remainder of 2008 and future years.
Consolidated Unaudited Results for the Nine Months Ended,

                                                         September 30,        September 30,
Revenues                                                     2008                 2007
                                                                   (in thousands)
Licensing Revenue from Marathon                         $             -      $        13,665
Technical Services and Joint Development Revenue                  2,541                  944
Other Revenue                                                     1,355                  668

Total Revenues                                          $         3,896      $        15,277

Licensing Revenue. Licensing revenue was $0 for the nine months ended September 30, 2008 compared to $13,665,000 for the nine months ended September 30, 2007. The 2007 non-cash licensing revenue related to the Consolidation and License Agreement granted to Marathon in January 2007 of $12,665,000 and the recognition of previously deferred license fee credits of $1,000,000. The licensing revenue did not result in cash flow to the Company. We do not anticipate receiving additional licensing revenue from Marathon in the near term.
Technical Services and Joint Development Revenue. Revenues from contracted engineering and technical services were $2,541,000 for the nine months ended September 30, 2008 compared to $944,000 for the same period in 2007. The increase in technical services revenues is primarily related to engineering services for a process design package for Dynamic Fuels. In both periods the Company provided services to other customers through engineering services for technical work. The Company expects to continue to provide engineering services to Dynamic Fuels and other customers throughout 2008.
Other Revenue. Other revenues were $1,355,000 for the nine months ended September 30, 2008 compared to $668,000 for the same period in 2007. The increase is primarily related to the completion of the second and third milestone for our work with the Department of Defense testing of 500 gallons of renewable jet fuel in the amount of $770,000 compared to $220,000 recognized in the same period 2007. We will receive an additional $210,000 from this contract in the fourth quarter of 2008. We also recognized revenue associated with a fuel shipment in 2008 from our excess fuel produced by our demonstration facility when it was in operations. We will continue to deliver fuel to the Tulsa Transit Authority in Oklahoma in accordance with our sub-agreement with the Department of Transportation for the remainder of 2008.

                                                         September 30,        September 30,
Operating Costs and Expenses                                 2008                 2007
                                                                   (in thousands)
Engineering                                                       3,274                4,407
Depreciation, depletion, amortization and impairment                436                  566
Non-cash equity compensation                                        914                4,897
General and administrative and other                              4,851               12,896

Total Operating Costs and Expenses                      $         9,475      $        22,766

Engineering. Expenses from engineering activities were $3,274,000 for the nine months ended September 30, 2008 compared to $4,407,000 for the same period last year. The decrease in expenditures primarily resulted from a decreased number of engineering staff and the retention incentive agreement plan initiated in December of 2006 and paid out in 2007 and 2008, which was recognized over the requisite service period for 2007 and 2008 and was completed on July 1, 2008.

Non-cash Equity Compensation. Non-cash equity compensation for the nine months ended September 30, 2008 was $914,000 compared to $4,897,000 for the same period in 2007. The decrease resulted from:
• A lower number of options outstanding and unvested due to a decrease in employees from the restructuring of the Company;

• An increase in 2007 related to performance vesting of restricted stock awards for executives based on achieving certain milestones associated with the Syntroleum Bio-Synfining™ Technology project during the nine months ended September 30, 2007; and,

• The grant of common stock under a retirement agreement to a former executive in lieu of a cash payment during the nine months ended September 30, 2007.

General and administrative and other. General and administrative expenses for the nine months ended September 30, 2008 were $4,851,000 compared to $12,896,000 during the same period in 2007. The decrease primarily resulted from the cost reduction plan initiated by the Company in the fourth quarter of 2007. The cost reduction plan significantly reduced personnel expenditures, travel, professional consultants, insurance premiums and other overhead related expenditures.

                                                   September 30,       September 30,
Other Income and Expenses and Net Income (Loss)        2008                2007
                                                            (in thousands)
Investment and Interest Income                    $           476     $         1,147
Other Income (Expense), net                                  (402 )              (141 )
Foreign Currency Exchange                                     833              (1,488 )
Minority Interest                                               -                 706
Income from Discontinued Operations                         1,387               9,373

Net Income (Loss)                                 $        (3,285 )   $         2,108

Investment and Interest Income. Investment and interest income was $476,000 in the nine months ended September 30, 2008 compared to $1,147,000 during the same period in 2007. The decrease primarily resulted from decreased interest income earned on a lower cash balance and lower interest rates for the nine months ended September 30, 2008 compared to cash balances for the same period in 2007. Other Income (Expense). Other Expense for the nine months ended September 30, 2008 was $402,000 compared to $141,000 during the same period in 2007. The increase in the loss primarily results from our investment in Dynamic Fuels. Dynamic Fuels losses result from project development, site selection, equipment evaluation, and government relations. The joint venture capitalizes costs associated with the construction of the plant and we expect to see income from this investment in 2010 upon the start up of commercial operations. Foreign Currency Exchange. Foreign currency exchange was a gain of $833,000 for the nine months ended September 30, 2008, compared to a loss of $1,488,000 during the same period in 2007. The increase in the gain primarily resulted from . . .