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Synthesis Energy Systems Announces Third Quarter Financial Results

Posted on: Friday, 8 May 2009, 06:00 CDT

Conference call scheduled for 8:00 a.m. Eastern Today

HOUSTON, May 8 /PRNewswire-FirstCall/ -- Synthesis Energy Systems, Inc. (the "Company") (Nasdaq: SYMX), a global industrial gasification company, today announced results for the third quarter of fiscal 2009.

"We are making real progress toward reducing costs as our overall cash burn rate for this quarter was approximately half of each of the two prior quarters. In this quarter we experienced low demand for syngas from our Hai Hua JV related to Hai Hua's low methanol production levels. We expect Hai Hua syngas demand to remain low throughout the year and are working with Hai Hua to improve unit energy costs related to these low production rates," stated Robert Rigdon, President and CEO of the Company.

Third Quarter Financial Results (Unaudited)

For the third quarter of fiscal 2009, the Company reported revenue of $76,000 from syngas and by-product sales from the Hai Hua joint venture plant in China. The Hai Hua joint venture operated for approximately 13% of the quarter. Downtime was related to an unscheduled maintenance outage, repairs resulting from a power disruption, local government inspections and maintenance by Hai Hua. Although the Hai Hua joint venture began to invoice Hai Hua for the energy and capacity fees after declaring commercial operations, the revenue has not been received and was not recognized by the Hai Hua joint venture for the three months ended March 31, 2009 due to differing interpretations between Hai Hua and the Hai Hua joint venture regarding certain syngas quality component requirements under the syngas purchase and sale agreement. In April 2009, the Hai Hua joint venture and Hai Hua entered into a Supplementary Agreement to provide more clarity regarding the required syngas quality and volume to be delivered, recovery of the energy fee during turndown periods and operations coordination during unscheduled outages. Hai Hua will remain obligated to pay the full capacity fee to the Hai Hua joint venture notwithstanding such reduced syngas consumption, subject only to availability of the plant, quality of the syngas and exceptions for certain events of force majeure.

The Company also recorded $250,000 in project development fee revenue earned upon completion of the Otter Creek project pre-feasibility study for the North American Coal Company. Given the current commodity prices and financial market conditions in the U.S., the Company does not expect this project will be a viable development option in the near term.

Cost of sales and plant operating expenses were $0.9 million for the quarter, down $2.0 million compared to the Company's second quarter, due to the Hai Hua joint venture plant's downtime. The costs were comprised principally of the plant's electricity, coal consumption, and maintenance and other operating costs.

General and administrative expenses were $3.8 million for the quarter, down $0.9 million, or 19%, compared to the second quarter. The Company expects further G&A reductions in the fourth quarter resulting from further reductions in personnel and other costs.

Project and technical development expenses were $250,000 for the quarter and related principally to YIMA's development.

Stock based compensation was a credit of $1.8 million, compared to an expense of $1.3 million for the second quarter, resulting from a reduction of $3.4 million due to a reversal of previously recognized expense due to forfeitures of stock option awards.

Net loss for the third quarter of fiscal 2009 was approximately $3.6 million, or $0.08 per share.

At March 31, 2009, the Company had cash and cash equivalents of $98.6 million and working capital of $91.4 million.

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 ended March 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 June 5, 2009. A telephone replay of the conference call will be available approximately two hours after the completion of the call through Friday, May 15, 2009. Callers can access the replay by dialing (320) 365-3844; the PIN access number is 998340.

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 GTI, 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. The Company 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, 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 project, our ability to obtain the necessary approvals and permits and to negotiate definitive agreements and financing arrangements for our YIMA project 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.

SYNTHESIS ENERGY SYSTEMS, INC. (A Development Stage Enterprise) Consolidated Balance Sheets (In thousands, except per share amounts) (Unaudited) March 31, June 30, 2009 2008 ---- ---- ASSETS Current assets: Cash and cash equivalents $98,632 $127,872 Restricted cash 250 - Accounts receivable 175 169 Prepaid expenses and other currents assets 1,722 2,162 Inventory 735 516 --- --- Total current assets 101,514 130,719 Construction-in-progress 6,495 2,408 Property, plant and equipment, net 38,133 37,570 Intangible asset, net 1,433 1,546 Other long-term assets 3,973 5,504 ----- ----- Total assets $151,548 $177,747 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accrued expenses and accounts payable $7,860 $10,828 Current portion of long-term bank loan 2,253 2,245 ----- ----- Total current liabilities 10,113 13,073 Long-term bank loan 8,953 11,168 ----- ------ Total liabilities 19,066 24,241 Commitments and contingencies Minority interest 2,314 2,969 Stockholders' Equity: Common stock, $0.01 par value: 100,000 shares authorized: 48,011 shares issued and outstanding 480 480 Additional paid-in capital 196,107 194,617 Deficit accumulated during development stage (68,008) (46,125) Accumulated other comprehensive income 1,589 1,565 ----- ----- Total stockholders' equity 130,168 150,537 ------- ------- Total liabilities and stockholders' equity $151,548 $177,747 ======== ========

SYNTHESIS ENERGY SYSTEMS, INC. (A Development Stage Enterprise) Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited) Three Months Ended March 31, --------- 2009 2008 ---- ---- Revenue: Product sales $76 $40 Project development fees 250 - --- --- Total revenue 326 40 Costs and Expenses: Cost of sales and plant operating expenses 906 197 General and administrative expenses 3,841 3,802 Project and technical development expenses 251 1,700 Stock-based compensation expense (1,798) 1,675 Depreciation and amortization 685 293 --- --- Total costs and expenses 3,885 7,667 ----- ----- Operating loss (3,559) (7,627) Non-operating (income) expense: Interest income (195) (113) Interest expense 243 113 --- --- Net loss before minority interest (3,607) (7,627) Minority interest (8) 189 --- --- Net loss $(3,615) $(7,438) ======= ======= Net loss per share: Basic and diluted $(0.08) $(0.20) ====== ====== Weighted average common shares outstanding: Basic and diluted 48,011 36,419 ====== ======

SYNTHESIS ENERGY SYSTEMS, INC. (A Development Stage Enterprise) Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited) November 4, 2003 Nine Months Ended March 31, (inception) to --------------------------- March 31, 2009 2008 2009 ---- ---- ---- Revenue: Product sales $684 $40 $887 Project development fees and other 250 - 375 --- --- --- Total revenue 934 40 1,262 Costs and Expenses: Cost of sales and plant operating expenses 5,242 196 7,637 General and administrative expenses 13,142 8,516 32,858 Project and technical development expenses 2,193 2,879 10,649 Stock-based compensation expense 1,585 3,860 17,298 Depreciation and amortization 2,187 471 3,619 ----- --- ----- Total costs and expenses 24,349 15,922 72,061 ------ ------ ------ Operating loss (23,415) (15,882) (70,799) Non-operating (income) expense: Interest income (1,658) (192) (2,660) Interest expense 779 113 1,170 --- --- ----- Net loss before minority interest (22,536) (15,803) (69,309) Minority interest 654 271 1,301 --- --- ----- Net loss $(21,882) $(15,532) $(68,008) ======== ======== ======== Net loss per share: Basic and diluted $(0.46) $(0.46) $(2.15) ====== ====== ====== Weighted average common shares outstanding: Basic and diluted 48,011 33,520 31,610 ====== ====== ======

SOURCE Synthesis Energy Systems, Inc.

Source: PR Newswire

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