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Synthesis Energy Systems Announces Fourth Quarter and Fiscal Year Ended June 30, 2008 Financial Results

September 15, 2008

HOUSTON, Sept. 15 /PRNewswire-FirstCall/ — Synthesis Energy Systems, Inc. (“the Company”) , a global industrial gasification company, today announced results for the fourth quarter and fiscal year ended June 30, 2008.

Additionally, the Company announced the commencement of a pre-feasibility study to explore the development of a coal-based gasification facility utilizing SES’s proprietary U-GAS(R) technology with coal supplies from The North American Coal Corporation’s (“NAC”), a subsidiary of NACCO Industries, Inc. , Otter Creek reserves in North Dakota. Following the early feasibility work at NAC’s Red Hills Mine in Mississippi, the Company and NAC determined that the U-GAS(R) technology could also be implemented near the Otter Creek reserves given the larger lignite reserve base and attractive coal characteristics for gasification. If constructed, it is expected the facility will produce synthetic gasoline, chemical feedstocks and/or synthetic natural gas. Following the completion of the feasibility study, the Company and NAC will determine if they will enter into a joint venture agreement and engage in a front-end engineering design study. Aker Solutions has been engaged to perform the pre-feasibility work.

“Fiscal 2008 was an extremely productive year for SES, as the Company celebrated the achievement of several major milestones,” stated Tim Vail, President and CEO of Synthesis Energy Systems. “Clearly the most significant event for SES was the initial syngas sales from our first U-GAS(R) plant in China. We are very proud of this achievement as it signals our ability to build, own and operate coal gasification plants utilizing low rank coal,” Vail added.

Additional milestones during the year included listing of the Company’s common stock on NASDAQ, the successful completion of two public equity offerings, the advancement of the U.S. joint venture project with CONSOL Energy, continued development of projects in China with partners YIMA and Golden Concord and the establishment of an engineering cooperation agreement with China National Chemical Engineering Corporation.

“Looking ahead to fiscal 2009, we are very excited about the growth opportunities for our business,” commented Vail. “Today’s Otter Creek announcement illustrates the proactive and productive nature of our work with resource partners. In this case, our partner, NAC, appreciated the opportunity that our U-GAS(R) technology could provide to supplement their current operations, and as a result, decided to move forward with initial studies for a larger potential project than initially anticipated,” Vail added.

Fourth Quarter Financial Results (Unaudited)

For the fourth quarter of fiscal 2008, the Company reported revenue of $288,226, predominately from syngas sales from the Hai Hua joint venture plant in China as well as project development fees.

Cost of goods sold during the quarter was $2.7 million, which included approximately $1 million in direct materials, primarily coal costs, $700,000 of electricity, $550,000 of plant depreciation expense and $450,000 of other production overhead costs.

Project and technical development expenses for the fourth quarter totaled $2.7 million, which reflects increased expenditures related to projects with CONSOL Energy, Hai Hua, Golden Concord and North American Coal, and the amortization of the GTI facility reservation and use fee.

General and administrative expenses were $4.8 million during the quarter reflecting an increase in salaries and incentive wages as a result of increased staffing levels. Also included are costs associated with Sarbanes Oxley compliance, system enhancements and increased project activities.

   Fourth quarter net loss was $11.9 million, or $0.32 per share.    Fiscal 2008 Financial Results  

For the fiscal year ended June 30, 2008, SES reported revenue of $328,105. SES had no revenue during fiscal 2007.

Fiscal 2008 cost of goods sold was $3.1 million; there was no cost of goods sold during fiscal 2007.

Project and technical development expenses increased 394.4% from $1.1 million during fiscal 2007 to $5.6 million during fiscal 2008.

General and administrative expenses increased 132.1% from $5.9 million during fiscal 2007 to $13.6 million in fiscal 2008.

There was no interest expense recorded during fiscal 2007 compared to $0.4 million in fiscal 2008. Prior to the Hai Hua plant being placed into service, interest expense related to the Hai Hua joint venture’s outstanding loan with the Industrial and Commercial Bank of China (“ICBC”) was capitalized. The Hai Hua plant was placed into service in February 2008 and interest on the ICBC loan has been expensed from that point forward.

Net loss for fiscal 2008 was $27.4 million, or $0.80 per share, compared to a net loss of $13.1 million, or $0.47 per share, during fiscal 2007.

Net cash used in operating activities was $18.8 million during fiscal 2008 compared to net cash used in operating activities of $5.0 million in the prior year.

At June 30, 2008, the Company had cash and cash equivalents of $127.9 million compared to $6.2 million at June 30, 2007 as a result of equity financing activities in November 2007 and June 2008. In November 2007, SES received net proceeds of $49.2 million from a public offering of 5,951,406 shares of common stock at a price to the public of $9.00 per share. In June 2008, SES received net proceeds of $99.2 million from a public offering of 11,500,000 shares of common stock at a price to the public of $9.25 per share.

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 year ended June 30, 2008 and provide an update on corporate developments.

To access the live webcast, please log on to the Company’s website at http://www.synthesisenergy.com/. Alternatively, callers may participate in the conference call by dialing (612) 332-0637. An archived version of the webcast will be available on the website through October 15, 2008. A telephone replay of the conference call will be available approximately two hours after the completion of the call through Monday, September 22, 2008. Callers can access the replay by dialing (320) 365-3844; the PIN access number is 959723.

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(R) fluidized bed gasification technology to convert low rank coal and coal wastes into higher value energy products, such as transportation fuel and ammonia. The U-GAS(R) 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(R) 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 http://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 and Section 21E of the Exchange Act. 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, the limited history and viability of our technology, 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 project, our ability to obtain the necessary approvals and permits and to negotiate definitive agreements and financing arrangements for our YIMA, CONSOL, North American Coal and other future projects, 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.

                        Consolidated Balance Sheets                                                          June 30,                                                    2008           2007   ASSETS   Current assets:     Cash and cash equivalents                 $127,872,234     $6,202,628     Accounts receivable                            168,430              -     Prepaid expenses and other currents      assets                                      2,162,158        441,297     Inventory                                      516,258              -     Deferred financing costs                             -        142,848       Total current assets                     130,719,080      6,786,773     Restricted cash                                578,900     11,101,157     Intangible asset, net of accumulated      amortization of $348,437 and      $159,802, respectively                      1,546,124      1,726,561     Construction-in-progress                     2,407,672     15,168,509     Property, plant and equipment, net      of accumulated depreciation of      $1,045,193 and $60,485, respectively       37,569,640        331,410     Project prepayments                          1,424,085      2,478,088     Long-term land lease                         1,472,588        879,008     Other long-term assets                       2,028,752              -       Total assets                            $177,746,841    $38,471,506    LIABILITIES AND STOCKHOLDERS' EQUITY   Current liabilities:     Current portion of long-term bank loan      $2,245,193             $-     Accrued expenses and other payables         10,828,433      6,841,216       Total current liabilities                 13,073,626      6,841,216   Long-term liabilities:     Long-term bank loan                         11,167,646     12,080,625       Total liabilities                         24,241,272     18,921,841   Commitments and contingencies                          -              -   Minority interest                              2,968,525        454,800   Stockholders' Equity:     Common stock, $0.01 par value:      100,000,000 shares authorized:      48,010,921 and 30,187,615 shares      issued and outstanding, respectively          480,109        301,876     Additional paid-in capital                 194,617,168     37,300,927     Deficit accumulated during development      stage                                     (46,124,646)   (18,683,162)     Accumulated other comprehensive income       1,564,413        175,224       Total stockholders' equity               150,537,044     19,094,865       Total liabilities and stockholders'        equity                                 $177,746,841    $38,471,506                   Annual Consolidated Statements of Operations                                  Years Ended June 30,        November 4, 2003                                                              (inception) to                           2008          2007           2006   June 30, 2008    Revenue               $328,105           $-           $-     $328,105   Cost of goods sold:     Depreciation         732,490            -            -      732,490     Other              2,394,873            -            -    2,394,873     Total cost of      goods sold        3,127,363            -            -    3,127,363     Gross loss        (2,799,258)           -            -   (2,799,258)     General and      administrative      expenses and      other expenses:       General and        administrative        expenses       13,617,036    5,865,922    1,023,229   20,744,090       Stock-based        compensation        expenses        6,028,911    6,640,562    3,042,979   15,712,452       Project and        technical        development        expenses        5,615,232    1,135,679    1,245,164    8,127,708   Operating loss     (28,060,437) (13,642,163)  (5,311,372) (47,383,508)     Non-operating    (income) expense:     Interest Income     (396,927)    (462,979)    (128,996)  (1,002,525)     Interest expense     387,917            -            -      390,357   Net loss    before minority    interest          (28,051,427) (13,179,184)  (5,182,376) (46,771,340)    Minority interest      609,943       36,751            -      646,694     Net loss        $(27,441,484)$(13,142,433) $(5,182,376)$(46,124,646)    Net loss per share:     Basic and diluted     $(0.80)      $(0.47)      $(0.19)      $(1.59)    Weighted average    common shares    outstanding:     Basic and diluted 34,384,749   27,851,642   27,754,139   28,967,903                   Quarterly Consolidated Statements of Operations                                                           Three Months Ended                                                              June 30, 2008                                                               (unaudited)    Revenue                                                        $288,226   Cost of goods sold:     Depreciation                                                  553,962     Other                                                       2,197,368     Total cost of goods sold                                    2,751,330     Gross loss                                                 (2,463,104)     General and administrative expenses and other expenses:       General and administrative expenses                       4,809,274       Stock-based compensation expenses                         2,169,221       Project and technical development expenses                2,736,451   Operating loss                                              (12,178,050)    Non-operating (income) expense:     Interest Income                                              (205,024)     Interest expense                                              274,972   Net loss before minority interest                           (12,247,998)   Minority interest                                               338,240     Net loss                                                 $(11,909,758)   Net loss per share:     Basic and diluted                                              $(0.32)   Weighted average common shares outstanding:     Basic and diluted                                          37,010,974  

Synthesis Energy Systems, Inc.

CONTACT: Ann Tanabe, Vice President of Investor Relations of SynthesisEnergy Systems, Inc., +1-713-579-0600, Ann.tanabe@synthesisenergy.com

Web site: http://www.synthesisenergy.com/




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