Synthesis Energy Systems, Inc.
Nov 10, 2010

Synthesis Energy Systems Announces First Quarter 2011 Financial Results

HOUSTON, Nov. 10, 2010 /PRNewswire via COMTEX/ --

Synthesis Energy Systems, Inc. (Nasdaq: SYMX), an advanced technology company that provides equipment, technology and engineering services for the conversion of ultra low cost feed stocks into high value energy and chemical products, today announced financial results for the first quarter of fiscal 2011 ended September 30, 2010.

"During the first quarter, our Zao Zhuang plant operated well at 100% availability and with continued operating margin improvement. We also continued to advance the construction progress on our Yima joint venture project," stated Robert Rigdon, President and CEO. "Governments and commercial interests in China, India, and other emerging markets have identified our technology as a potential high-value solution to the twin challenges of rising demand for clean energy and the need for energy security based on reliable domestic resources. Based on our current discussions with these interested parties, we remain confident that our commercialization strategy will succeed in generating significant additional revenues over the coming months and years."

First Quarter 2011 Financial Results (Unaudited)

Total revenue for the three months ended September 30, 2010, was $1.6 million, a decrease of $0.7 million compared to the $2.3 million in revenue reported for the three months ended September 30, 2009.

Product sales from the Company's Zao Zhuang joint venture plant were $1.4 million for the three months ended September 30, 2010, compared to $1.6 million for the three months ended September 30, 2009. For the three-month period ended September 30, 2010 and 2009, the plant operated for 31% and 54% of the time, respectively as a result of extended shut downs by its customer during the period. Accordingly, product sales decreased due to reduced syngas production and oxygen sales. For the three months ended September 30, 2010 and 2009, the plant's availability for production was 100% and 98%, respectively, resulting in capacity fee revenue of $0.9 million and $0.7 million, respectively.

Other revenues for the three months ended September 30, 2009 of $0.6 million were generated from engineering services provided to the Yima joint ventures.

Technology licensing and related services revenues for the three months ended September 30, 2010 and 2009, were $0.2 million and $0.1 million, respectively, and were generated from coal testing, feasibility studies and other technical services provided in association with the Company's technology licensing business.

The Company's operating loss for the first quarter of fiscal 2011 was $3.9 million compared to an operating loss of $4.9 million for the first quarter of fiscal 2010. The $1.0 million improvement in the operating loss was due to a $0.9 million consulting fee expense recorded in the first quarter of fiscal 2010, an improved operating margin at the Zao Zhuang joint venture plant, and lower stock-based compensation expense. These items were partially offset by the fiscal 2010 period's engineering services revenue of $0.6 million earned from Yima Coal Industry (Group) Co., Ltd. and an increase in G&A expenses resulting from royalty payments to GTI and new business development activities.

The net loss for the first quarter of fiscal 2011 was $3.8 million, or ($0.08) per share, versus a net loss of $5.0 million, or ($0.10) per share, for the prior year's first quarter.

At September 30, 2010, the Company had cash and cash equivalents of $37.7 million and working capital of $34.2 million.

Corporate Highlights:

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 first quarter of fiscal 2011 ended September 30, 2010, and provide an update on corporate developments.

To access the live webcast, please log onto the Company's website at www.synthesisenergy.com. Alternatively, callers may participate in the conference call by dialing (800) 230-1096. An archived version of the webcast will be available on the Company's website through December 31, 2010. A telephone replay of the conference call will be available approximately two hours after the completion of the call through Friday, November 19, 2010. Callers can access the replay by dialing (800) 475-6701; the PIN access number is 176821.

About Synthesis Energy Systems, Inc.

Synthesis Energy Systems provides advanced technology products, including its U-GAS® fluidized bed gasification technology and related services and equipment, to enable the clean conversion of low cost coal and biomass feed stocks into high value energy and chemical products, such as transportation fuel and ammonia. U-GAS® technology, which the Company licenses from the Gas Technology Institute, 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 Company's 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) the Company's ability 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. The Company 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 Company's early stage of development, 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 Zao Zhuang joint venture, its ability to complete the expansion of the Zao Zhuang 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 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)




September 30,

2010

June 30,

2010

ASSETS






Current assets:



Cash and cash equivalents

$ 37,654

$ 42,573

Accounts receivable

2,298

2,672

Prepaid expenses and other currents assets

1,759

1,875

Inventory

1,090

983

Total current assets

42,801

48,103

Construction-in-progress

508

565

Property, plant and equipment, net

35,249

35,316

Intangible asset, net

1,233

1,272

Investment in Yima joint ventures

32,734

32,430

Other long-term assets

2,845

2,895

Total assets

$ 115,370

$ 120,581




LIABILITIES AND EQUITY






Current liabilities:



Accrued expenses and accounts payable

$ 5,789

$ 7,008

Deferred revenue

497

522

Current portion of long-term bank loan

2,298

2,268

Total current liabilities

8,584

9,798

Long-term bank loan

5,686

6,744

Total liabilities

14,270

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

198,994

198,720

Deficit accumulated during development stage

(100,191)

(96,449)

Accumulated other comprehensive income

2,391

1,836

Total stockholders' equity

101,678

104,590

Noncontrolling interests in subsidiaries

(578)

(551)

Total equity

101,100

104,039

Total liabilities and equity

$ 115,370

$ 120,581


SYNTHESIS ENERGY SYSTEMS, INC.

(A Development Stage Enterprise)


Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)



Three Months Ended

September 30,


2010

2009

Revenue:



Product sales and other - related parties

$ 1,417

$ 2,236

Technology licensing and related services

205

65

Total revenue

1,622

2,301




Costs and Expenses:



Costs of sales and plant operating expenses

1,307

1,737

General and administrative expenses

3,186

3,081

Project and technical development expenses

85

1,020

Stock-based compensation expense

227

598

Depreciation and amortization

680

722




Total costs and expenses

5,485

7,158




Operating loss

(3,863)

(4,857)




Non-operating (income) expense:



Equity in losses of Yima joint ventures

54

--

Foreign currency gain

(255)

--

Interest income

(39)

(38)

Interest expense

146

180




Net loss

(3,769)

(4,999)

Less: net loss attributable to noncontrolling interests

27

422

Net loss attributable to stockholders

$ (3,742)

$ (4,577)




Net loss per share:



Basic and diluted

$ (0.08)

$ (0.10)




Weighted average common shares outstanding:



Basic and diluted

48,352

48,148


SOURCE Synthesis Energy Systems, Inc.