Synthesis Energy Systems Announces First Quarter 2010 Financial Results

Oct 29, 2009

Synthesis Energy Systems Announces First Quarter 2010 Financial Results

Synthesis Energy Systems Announces First Quarter 2010 Financial Results

HOUSTON, Oct 29, 2009 /PRNewswire-FirstCall via COMTEX/ -- Synthesis Energy Systems, Inc. (the "Company") (Nasdaq: SYMX), an energy and gasification technology company, today announced results for the quarter ended September 30, 2009.

"We are pleased to start fiscal 2010 with solid operations from our Hai Hua joint venture plant," said Robert Rigdon, President and CEO of the Company. "We have laid the groundwork to drive continued improvement in our operating performance and are now seeing the results of our efforts with revenue for product sales at the Hai Hua joint venture plant increasing over 40% compared to the fourth quarter of fiscal 2009. During the remainder of fiscal 2010, we will focus on the execution of our Yima project and developing our technology licensing business in regions such as Australia, India, China and the U.S. for coal and biomass to energy projects which we believe will bring near-term value," Rigdon added.

First Quarter Financial Results (Unaudited)

For the quarter ended September 30, 2009, the Company reported total revenue of $2.3 million. This included revenue for product sales at the Hai Hua joint venture plant of $1.6 million, which is an increase of $0.4 million from the fourth quarter of fiscal 2009, due to the plant's increased availability for production and due to sales of oxygen under the cost-sharing arrangement with Hai Hua. Additionally, the Company reported other revenues of $0.7 million which was primarily for engineering services related to the Yima project.

Cost of sales and plant operating expenses were $1.7 million, a decrease of $0.5 million from the fourth quarter of fiscal 2009. The plant's operating costs, including coal, power and other materials' consumption, improved on a per unit cost of syngas production due to more efficient operations and cost controls.

General and administrative expenses were $3.1 million, a decrease of $0.2 million, or 5%, from the fourth quarter of fiscal 2009.

Project and technical development expenses were $1.0 million for the quarter and included a $0.9 million charge for a consulting fee related to the financial closing of Yima.

The Company's operating loss for the quarter, which included $1.3 million of non-cash expenses which are comprised of stock-based compensation and depreciation and amortization, was $(4.9) million, compared to an operating loss of $(6.6) million for the fourth quarter of fiscal 2009 which included $1.0 million of non-cash expenses and a $1.25 million impairment loss.

At September 30, 2009, the Company had cash and cash equivalents of $55.0 million and working capital of $48.8 million. During the quarter, the Company invested $29.3 million of cash into the Yima project.

Conference Call Information

Senior management will hold a conference call today at 8:00 a.m. Eastern Time to review the Company's financial results for the quarter and year ended September 30, 2009 and provide an update on corporate developments.

To access the live webcast, please log on to the Company's website at Alternatively, callers may participate in the conference call by dialing (612) 288-0329. An archived version of the webcast will be available on the website through November 29, 2009. A telephone replay of the conference call will be available approximately two hours after the completion of the call through Thursday, November 5, 2009. Callers can access the replay by dialing (320) 365-3844; the PIN access number is 120409.

About Synthesis Energy Systems, Inc.

SES is an energy and technology company that builds, owns and operates coal gasification plants that utilize its proprietary U-GAS® fluidized bed gasification technology to convert low rank coal and coal wastes into higher value energy and chemical products, such as transportation fuel, substitute natural gas, fuel gas, methanol and ammonia. The U-GAS® technology, which SES licenses from the Gas Technology Institute, gasifies coal without many of the harmful emissions normally associated with coal combustion plants. The primary advantages of U-GAS® relative to other gasification technologies are (a) greater fuel flexibility provided by our ability to use all ranks of coal (including low rank, high ash and high moisture coals, which are significantly cheaper than higher grade coals), many coal waste products and biomass feed stocks; and (b) our ability to operate efficiently on a smaller scale, which enables us to construct plants more quickly, at a lower capital cost, and, in many cases, in closer proximity to coal sources. SES currently has offices in Houston, Texas and Shanghai, China. For more information on SES, visit or call (713) 579-0600.

Forward Looking Statements

This press release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those projected. Among those risks, trends and uncertainties are our early stage of development, our estimate of the sufficiency of existing capital sources, our ability to raise additional capital to fund cash requirements for future operations, our ability to reduce operating costs, the limited history and viability of our technology, the effect of the current international financial crisis on our business, commodity prices and the availability and terms of financing opportunities, our results of operations in foreign countries and our ability to diversify, our ability to maintain production from our first plant in the Hai Hua joint venture project, approvals and permits for our Yima project and other future projects, the estimated timetables for achieving mechanical completion and commencing commercial operations for the Yima project, and the sufficiency of internal controls and procedures. Although we believe that in making such forward-looking statements our expectations are based upon reasonable assumptions, such statements may be influenced by factors that could cause actual outcomes and results to be materially different from those projected. We cannot assure you that the assumptions upon which these statements are based will prove to have been correct.

                          SYNTHESIS ENERGY SYSTEMS, INC.
                      Consolidated Statements of Operations
                     (In thousands, except per share amounts)

                                                 Three Months Ended
                                        September 30,  June 30,  September 30,
                                            2009         2009        2008
                                            ----         ----        ----
      Product sales                         $1,644      $1,168        $125
      Other                                    657           -           -
                                               ---         ---         ---
    Total revenue                            2,301       1,168         125

    Costs and Expenses:
      Costs of sales and plant operating
       expenses                              1,737       2,207       1,422
      General and administrative expenses    3,081       3,245       4,559
      Project and technical development
       expenses                              1,020       1,362         570
      Stock-based compensation expense         598         283       2,132
      Depreciation and amortization            722         718         779
                                               ---         ---         ---
    Total costs and expenses                 7,158       7,815       9,462
                                             -----       -----       -----
    Operating loss                          (4,857)     (6,647)     (9,337)

    Non-operating (income) expense:
      Interest income                          (38)        (84)       (776)
      Interest expense                         180         179         278
                                               ---         ---         ---
    Net loss                                (4,999)     (6,742)     (8,839)

    Less: net loss attributable to
     noncontrolling interests                  422          49         323
                                               ---         ---         ---
    Net loss attributable to stockholders  $(4,577)    $(6,693)    $(8,516)
                                           =======     =======     =======
    Net loss per share:
      Basic and diluted                     $(0.10)     $(0.14)     $(0.18)
                                            ======      ======      =======
    Weighted average common shares
      Basic and diluted                     48,148      48,037      48,011
                                            ======      ======      ======

                           SYNTHESIS ENERGY SYSTEMS, INC.
                            Consolidated Balance Sheets
                                  (In thousands)

                                                      September 30,   June 30,
                                                          2009          2009
                                                          ----          ----
    Current assets:
      Cash and cash equivalents                         $54,961      $90,420
      Accounts receivable                                 1,919        1,333
      Prepaid expenses and other currents assets          1,044          689
      Inventory                                             711          780
                                                            ---          ---

        Total current assets                             58,635       93,222

      Construction-in-progress                            5,499        6,078
      Property, plant and equipment, net                 37,715       37,713
      Intangible asset, net                               1,344        1,386
      Investment in Yima joint venture                   32,288        1,500
      Other long-term assets                              4,808        6,237
                                                          -----        -----

        Total assets                                   $140,289     $146,136
                                                       ========     ========


    Current liabilities:
      Accrued expenses and accounts payable              $7,627       $8,828
      Current portion of long-term bank loan              2,255        2,254
                                                          -----        -----

        Total current liabilities                         9,882       11,082
    Long-term bank loan                                   7,834        8,958
                                                          -----        -----

        Total liabilities                                17,716       20,040

    Stockholders' Equity:
      Common stock, $0.01 par value: 100,000 shares
       authorized: 48,218 and 48,118 shares issued
       and outstanding, respectively                        482          481
      Additional paid-in capital                        197,066      196,441
      Deficit accumulated during development stage      (79,278)     (74,701)
      Accumulated other comprehensive income              1,608        1,598
                                                          -----        -----
        Total Synthesis Energy Systems, Inc.
         stockholders' equity                           119,878      123,819
      Noncontrolling interests in subsidiaries            2,695        2,277
                                                          -----        -----
        Total stockholders' equity
                                                        122,573      126,096
                                                        -------      -------

          Total liabilities and stockholders' equity   $140,289     $146,136
                                                       ========     ========

SOURCE Synthesis Energy Systems, Inc.