Synthesis Energy Systems, Inc.
Feb 8, 2010

Synthesis Energy Systems Announces Second Quarter 2010 Financial Results

Conference call scheduled for 4:30 p.m. Eastern Today

HOUSTON, Feb 08, 2010 /PRNewswire via COMTEX/ -- Synthesis Energy Systems, Inc. (the "Company") (Nasdaq: SYMX), a global energy and gasification technology company, today announced results for the quarter ended December 31, 2009.

"I am pleased to report that revenue from product sales at our Hai Hua joint venture plant increased by almost a million dollars during the second quarter of fiscal 2010 compared to the first quarter. Additionally, our U-GAS® technology continues to perform very well, achieving high availability while consistently meeting Hai Hua's syngas quality requirements," said Robert Rigdon, President and CEO of the Company.

"Our technology licensing business continues to move ahead. We believe sales related to technology licensing and equipment components will be a near-term revenue generator and long-term value driver for us. Our recent strategic alliance with Coalworks and our collaboration with East China Engineering Corporation, both announced in December 2009, are significant achievements as we build out this business segment," Rigdon added.

"As we have previously disclosed, we have been seeking additional partners who would invest in and bring debt guarantees for our Golden Concord joint venture methanol and DME production project. Based on what we have learned from this effort, combined with the growing interest in our capability to gasify the lignite coals of this region, we have now refocused our efforts with the parties who have expressed interest in moving forward with us and have a broader goal of value creation from Inner Mongolia lignite into high value products such as SNG or olefins. As a result, during the second quarter we determined that the joint venture's assets including the original engineering design and initial construction work were impaired. This decision resulted in a non-cash asset impairment loss of $6.6 million. We continue to believe that this site holds promise due to its close proximity to very low cost lignite fuels, and we are actively engaged with these interested parties to align around a path forward for the development of a project on a larger scale and with a focus on energy or chemical products such as SNG or olefins," stated Rigdon.

Second Quarter Financial Results (Unaudited)

For the quarter ended December 31, 2009, the Company reported total revenue of $2.6 million. These results included revenue for product sales at the Hai Hua joint venture plant of $2.4 million, which is an increase of $0.8 million from the prior quarter. Product revenues have increased at the plant due to the plant's increased syngas volume offtake by its customer, Hai Hua, and increased byproduct sales, including sales of the Company's excess oxygen to Hai Hua under its ASU cost-sharing arrangement, which began in September 2009. Additionally, the Company reported other revenues of $0.2 million for the quarter ended December 31, 2009, which was generated primarily from a sponsorship grant related to lignite testing at the Hai Hua joint venture plant.

Cost of product sales and plant operating expenses were $2.6 million for the quarter ended December 31, 2009, an increase of $0.9 million from the prior quarter. The plant's operating costs, including coal, power and other materials' consumption, increased due to a 40% increase in syngas production compared to the prior quarter.

General and administrative expenses were $2.9 million during the quarter ended December 31, 2009, a decrease of $0.2 million from the prior quarter.

Project and technical development expenses were $0.5 million for the quarter ended December 31, 2009 and were related to U-GAS® technology development and product feasibility studies for a possible expansion of the Hai Hua joint venture plant.

The Company's operating loss for the quarter, which included $7.7 million of non-cash expenses comprised of the impairment loss, stock-based compensation expense and depreciation and amortization, was $11.1 million, compared to an operating loss of $4.9 million for the first quarter of fiscal 2010, which included $1.3 million of non-cash expenses.

Net loss attributable to noncontrolling interests was $2.3 million for the quarter ended December 31, 2009 and related to the remaining noncontrolling interest balance of the Company's joint venture partner in its Golden Concord joint venture. Golden Concord's equity contributions of $3.1 million were previously reduced by its 49% share of the operating losses of the Golden Concord joint venture to date.

At December 31, 2009, the Company had cash and cash equivalents of $50.9 million and working capital of $45.2 million.

Conference Call Information

Senior management will hold a conference call today at 4:30 p.m. Eastern Time to review the Company's financial results for the quarter ended December 31, 2009 and provide an update on corporate developments.

To access the live webcast, please log on to the Company's website at www.synthesisenergy.com. Alternatively, callers may participate in the conference call by dialing (612) 234-9960. An archived version of the webcast will be available on the website through March 8, 2010. A telephone replay of the conference call will be available approximately two hours after the completion of the call through Sunday, February 14, 2010. Callers can access the replay by dialing (320) 365-3844; the PIN access number is 144633.

About Synthesis Energy Systems, Inc.

The Company 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 the Company 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. The Company currently has offices in Houston, Texas and Shanghai, China. For more information on the Company, 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 the Company's early stage of development, its estimate of the sufficiency of existing capital sources, its ability to raise additional capital to fund cash requirements for future operations, its ability to reduce operating costs, the limited history and viability of its technology, the effect of the current international financial crisis on its business, commodity prices and the availability and terms of financing opportunities, its results of operations in foreign countries and its ability to diversify, its ability to maintain production from its first plant in the Hai Hua joint venture project, approvals and permits for its 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 the Company believes that in making such forward-looking statements its 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. The Company cannot assure you that the assumptions upon which these statements are based will prove to have been correct.



                          SYNTHESIS ENERGY SYSTEMS, INC.
                         (A Development Stage Enterprise)

                            Consolidated Balance Sheets
                                  (In thousands)
                                   (Unaudited)


                                              December 31,   June 30,
                                                  2009         2009
                                              ------------   --------
    ASSETS

    Current assets:
      Cash and cash equivalents                   $50,876     $90,420
      Accounts receivable                           2,362       1,333
      Prepaid expenses and other currents
       assets                                         942         689
      Inventory                                       858         780
                                                      ---         ---
        Total current assets                       55,038      93,222
    Construction-in-progress                          572       6,078
    Property, plant and equipment, net             36,846      37,713
    Intangible asset, net                           1,305       1,386
    Investment in Yima joint ventures              32,238       1,500
    Other long-term assets                          3,284       6,237
                                                    -----       -----
        Total assets                             $129,283    $146,136
                                                 ========    ========

    LIABILITIES AND STOCKHOLDERS' EQUITY

    Current liabilities:
      Accrued expenses and accounts payable        $7,573      $8,828
      Current portion of long-term bank loan        2,255       2,254
                                                    -----       -----
        Total current liabilities                   9,828      11,082
    Long-term bank loan                             7,835       8,958
                                                    -----       -----
        Total liabilities                          17,663      20,040

    Commitments and contingencies

    Stockholders' Equity:
      Common stock, $0.01 par value: 200,000
       and 100,000 shares authorized: 48,218
       and 48,118 shares issued and
       outstanding, respectively                      482         481
      Additional paid-in capital                  197,432     196,441
      Deficit accumulated during development
       stage                                      (88,300)    (74,701)
      Accumulated other comprehensive income        1,610       1,598
                                                    -----       -----
        Total Synthesis Energy Systems, Inc.
         stockholders' equity                     111,224     123,819
                                                  -------     -------
    Noncontrolling interests in
     subsidiaries                                     396       2,277
                                                      ---       -----
        Total stockholders' equity                111,620     126,096
                                                  -------     -------
        Total liabilities and stockholders'
         equity                                  $129,283    $146,136
                                                 ========    ========





                         SYNTHESIS ENERGY SYSTEMS, INC.
                        (A Development Stage Enterprise)

                      Consolidated Statements of Operations
                     (In thousands, except per share amounts)
                                   (Unaudited)

                                                    Three Months Ended
                                                    ------------------
                                          Dec.              Sep.         Dec.
                                           31,               30,          31,
                                          2009              2009         2008
                                          ----              ----         ----
    Revenue:
       Product sales                     $2,423            $1,644        $483
       Other                                184               657           -
                                            ---               ---         ---
    Total revenue                         2,607             2,301         483

    Costs and Expenses:
       Costs of sales and
        plant operating
        expenses                          2,609             1,737       2,915
       General and
        administrative
        expenses                          2,921             3,081       4,742
       Project and technical
        development expenses                535             1,020       1,371
       Stock-based
        compensation expense                366               598       1,252
       Asset impairment loss              6,575                 -           -
       Depreciation and
        amortization                        720               722         722
                                            ---               ---         ---

    Total costs and
     expenses                            13,726             7,158      11,002
                                         ------             -----      ------

    Operating loss                      (11,119)           (4,857)    (10,519)

    Non-operating
     (income) expense:
       Equity in losses-
        Yima joint ventures                  50                 -           -
       Interest income                      (13)              (38)       (687)
       Interest expense                     164               180         258
                                            ---               ---         ---

    Net loss                            (11,320)           (4,999)    (10,090)

    Less: net loss
     attributable to
     noncontrolling
     interests                            2,299               422         338
                                          -----               ---         ---
    Net loss attributable
     to stockholders                    $(9,021)          $(4,577)    $(9,752)
                                        =======           =======     =======
    Net loss per share
     attributable to
     stockholders:
       Basic and diluted                 $(0.19)           $(0.10)     $(0.20)
                                         ======            ======      ======

    Weighted average
     common shares
     outstanding
       Basic and diluted                 48,183            48,148      48,011
                                         ======            ======      ======






                         SYNTHESIS ENERGY SYSTEMS, INC.
                        (A Development Stage Enterprise)

                     Consolidated Statements of Operations
                    (In thousands, except per share amounts)
                                  (Unaudited)

                                        Six Months Ended
                                        ----------------
                                      Dec. 31,       Dec. 31,
                                        2009           2008
                                     ---------      ---------
    Revenue:
       Product sales                    $4,067          $608
       Other                               841             -
                                           ---           ---
    Total revenue                        4,908           608

    Costs and Expenses:
       Costs of sales and plant
        operating expenses               4,346         4,338
       General and
        administrative expenses          6,004         9,301
       Project and technical
        development expenses             1,555         1,941
       Stock-based compensation
        expense                            964         3,383
       Asset impairment loss             6,575             -
       Depreciation and
        amortization                     1,442         1,502
                                         -----         -----

    Total costs and expenses            20,886        20,465
                                        ------          ----

    Operating loss                     (15,978)      (19,857)

    Non-operating (income)
     expense:
       Equity in losses -Yima
        joint ventures                      50             -
       Interest income                     (52)       (1,463)
       Interest expense                    344           536
                                           ---           ---

    Net loss                           (16,320)      (18,930)

    Less: net loss
     attributable to
     noncontrolling interests            2,721           662
                                         -----           ---
    Net loss attributable to
     stockholders...............      $(13,599)     $(18,268)
                                      ========      ========
    Net loss per share
     attributable to
     stockholders:
       Basic and diluted                $(0.28)       $(0.38)
                                         ======        ======

    Weighted average common
     shares outstanding
       Basic and diluted                48,183        48,011
                                        ======        ======





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