Synthesis Energy Systems, Inc.
Feb 8, 2011

Synthesis Energy Systems, Inc. Announces Financial Results for the Second Quarter of Fiscal 2011

Reports Improved Operating Performance

HOUSTON, Feb. 8, 2011 /PRNewswire via COMTEX/ --

Synthesis Energy Systems, Inc. (Nasdaq: SYMX), a global energy and gasification technology company that provides products and solutions to the energy and chemicals industries, today announced financial results and improved operating performance for the second quarter of fiscal 2011 ended December 31, 2010.

"We continue to make progress in our operating performance and in our licensing business," stated Robert Rigdon, President and CEO. "Our licensing business is being bolstered by technology advancements that we have demonstrated on a commercial scale at our Zaozhuang (ZZ) joint venture plant in China. Our partners, customers and licensees, as well as other groups we're talking to in China and other emerging markets, are taking note of the significant competitive advantages of our technology, including reduced emissions and improved margins."

Second Quarter 2011 Financial Results (Unaudited)

Total revenue increased $0.3 million for the three months ended December 31, 2010, to $2.9 million, versus $2.6 million for the three months ended December 31, 2009.

Product sales from the Company's ZZ joint venture plant increased to $2.6 million for the three months ended December 31, 2010, compared to $2.5 million for the three months ended December 31, 2009. For the three month periods ended December 31, 2010 and 2009, the plant operated for 73% and 83% of the time, respectively. For both of the three month periods ended December 31, 2010 and 2009, the plant's availability for production was 97%.

Technology licensing and related services revenues for the three months ended December 31, 2010 were $0.3 million, reflecting the value of the coal contributed by Ambre Energy in exchange for testing of the coal at the ZZ joint venture plant. There were no technology licensing and related services revenues for the three month ended December 31, 2009.

There were no other revenues for the three months ended December 31, 2010. There were $0.1 million of other revenues for the three months ended December 31, 2009, related to a sponsorship grant pertaining to lignite testing at the ZZ joint venture plant.

The Company reduced its operating loss for the second quarter of fiscal 2011 to $3.5 million, a decrease from the $11.1 million reported in the second quarter of fiscal 2010. The $7.6 million improvement was primarily due to a $6.6 million asset impairment loss recorded in the prior year second fiscal quarter related to our Golden Concord joint venture project, an improved operating margin at the ZZ joint venture plant, and lower project and technical development and stock-based compensation expenses. These items were partially offset by an increase in G&A expenses resulting from new business development activities.

The net loss attributable to stockholders for the second quarter of fiscal 2011 declined to $3.6 million, or $0.07 per share, versus a net loss of $8.2 million, or $0.17 per share, for the prior year's second quarter.

At December 31, 2010, the Company had cash and cash equivalents of $34.2 million and working capital of $31.1 million.

Corporate Highlights

Conference Call Information

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

To access the live webcast, please log on to the Company's Web site at www.synthesisenergy.com. Alternatively, domestic callers may participate in the live conference call by dialing (800) 860-2442 and international callers should dial (412) 858-4600. An archived version of the webcast will be available on the SES Web site through March 8, 2011. A telephone replay of the conference call will be available approximately one hour after the completion of the call through Tuesday, March 8, 2011. Domestic callers can access the replay by dialing (877) 344-7529. International callers should dial (412) 317-0088. The PIN access number for the live call and the replay is 447750#.

About Synthesis Energy Systems, Inc.

SES provides technology, equipment and engineering services for the conversion of low rank, low cost coal and biomass feedstocks into energy and chemical products. Its strategy is to create value through providing technology and equipment in regions where low rank coals and biomass feedstocks can be profitably converted into high value products through its proprietary U-GAS® fluidized bed gasification technology, which SES licenses from the Gas Technology Institute. U-GAS® gasifies coal cost effectively, 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 the ability of SES 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) the ability of SES to operate efficiently on a smaller scale, which enables the construction of 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 www.synthesisenergy.com 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 early stage of development of SES, its estimate of the sufficiency of existing capital sources, its ability to successfully develop its licensing business, its ability to raise additional capital to fund cash requirements for future investments and 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 ZZ joint venture, its ability to complete the expansion of the ZZ project, its ability to obtain the necessary 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, its ability to negotiate the terms of the conversion of the Yima project from methanol to glycol and the sufficiency of internal controls and procedures. Although SES 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. SES cannot assure you that the assumptions upon which these statements are based will prove to have been correct.

- TABLES FOLLOW -




SYNTHESIS ENERGY SYSTEMS, INC.

(A Development Stage Enterprise)


Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)













Three Months Ended


Six Months Ended




December 31,


December 31,




2010


2009


2010


2009


Revenue:










Product sales and other -- related parties


$ 2,579


$ 2,461


$ 3,997


$ 4,697


Technology licensing and related services


302


--


506


65


Other


--


146


--


146


Total revenue


2,881


2,607


4,503


4,908












Costs and Expenses:










Costs of sales and plant operating expenses


2,564


2,609


3,870


4,346


General and administrative expenses


3,131


2,922


6,318


6,005


Project and technical development expenses


44


535


129


1,555


Asset impairment losses


--


6,575


--


6,575


Stock-based compensation expense


37


366


264


964


Depreciation and amortization


650


720


1,330


1,442












Total costs and expenses


6,426


13,727


11,911


20,887












Operating loss


(3,545)


(11,120)


(7,408)


(15,979)












Non-operating (income) expense:










Equity in losses of Yima joint ventures


172


50


226


50


Foreign currency gains


(242)


(1)


(497)


(1)


Interest income


(51)


(13)


(91)


(52)


Interest expense


170


164


316


344












Net loss


(3,594)


(11,320)


(7,362)


(16,320)


Less: net loss attributable to noncontrolling interests


33


3,121


59


3,543


Net loss attributable to stockholders


$ (3,561)


$ (8,199)


$ (7,303)


$ (12,777)












Net loss per share:










Basic and diluted


$ (0.07)


$ (0.17)


$ (0.15)


$ (0.27)












Weighted average common shares outstanding:










Basic and diluted


48,429


48,183


48,390


48,183



SYNTHESIS ENERGY SYSTEMS, INC.

(A Development Stage Enterprise)


Consolidated Balance Sheets

(In thousands)

(Unaudited)




December 31,

2010


June 30,

2010

ASSETS








Current assets:




Cash and cash equivalents

$ 34,174


$ 42,573

Accounts receivable

2,554


2,672

Prepaid expenses and other currents assets

1,393


1,875

Inventory

1,037


983

Total current assets

39,158


48,103

Construction-in-progress

427


565

Property, plant and equipment, net

35,067


35,316

Intangible asset, net

1,256


1,272

Investment in Yima joint ventures

32,932


32,430

Other long-term assets

3,011


2,895

Total assets

$ 111,851


$ 120,581





LIABILITIES AND EQUITY








Current liabilities:




Accrued expenses and accounts payable

$ 5,244


$ 7,008

Deferred revenue

497


522

Current portion of long-term bank loan

2,325


2,268

Total current liabilities

8,066


9,798

Long-term bank loan

5,753


6,744

Total liabilities

13,819


16,542





Equity:




Common stock, $0.01 par value: 200,000 shares authorized: 48,429 and 48,337 shares issued and outstanding, respectively

484


483

Additional paid-in capital

199,030


198,720

Deficit accumulated during development stage

(103,752)


(96,449)

Accumulated other comprehensive income

2,880


1,836

Total stockholders' equity

98,642


104,590

Noncontrolling interests in subsidiaries

(610)


(551)

Total equity

98,032


104,039

Total liabilities and equity

$ 111,851


$ 120,581


SOURCE Synthesis Energy Systems, Inc.