Synthesis Energy Systems, Inc. Reports Fiscal 2014 Second Quarter Financial
Results and Provides Business Update
Company Reports $5.9 Million Revenue for the Quarter Versus $13,000 for the
Prior Year Same Quarter
HOUSTON, Jan. 29, 2014 (GLOBE NEWSWIRE) -- Synthesis Energy Systems, Inc.
(SES) (Nasdaq:SYMX) today reported financial and operating results for its
fiscal 2014 second quarter, ended December 31, 2013.
"During the fiscal second quarter and into the new calendar year, we have
advanced towards our stated key objectives of achieving meaningful revenues
for the company. Revenues from our Zao Zhuang joint venture's methanol
operation (ZZ JV), after we took operational control on October 31, 2013, were
approximately $4.4 million. This quarterly revenue was based on operating for
the months of November and December, and producing methanol from coke oven gas
(COG). In December we also operated for two weeks using syngas plus COG
feedstock. We demonstrated our ability to meet and slightly exceed the
facility's approximate 300 tonnes per day expected methanol production
capacity, achieving a maximum daily methanol output of 320 tonnes. We are very
pleased with this progress at our ZZ JV facility," said Robert Rigdon, SES
President and CEO.
"We have also entered the next stage of commercialization of our power
business vertical for the first distributed power plant based on our
gasification technology and GE's aero-derivative gas turbine power generation
system. Together with our partners, we have entered into an exclusive Letter
of Intent (LOI) with the Karachi Electric Supply Company, a large electric
utility in Pakistan, which spells out and initiates commercial and technical
development steps required for the parties to enter into negotiations for a
definitive power plant purchase contract," said Rigdon. "We believe this is
the first of several potential small- to medium-scale power projects that we
can secure together with GE, ISTROENERGO GROUP and TUTEN.
"Also on the near-term horizon, we continue to make progress on our
anticipated China partnership to advance our Chinese business platform across
multiple industrial sectors in the chemicals, fertilizers, power, natural gas,
fuels and DRI steel markets," continued Rigdon. "We have made significant
headway during the past three months towards securing a Chinese partner that
meets our key objectives.
"With concrete progress at our ZZ methanol operations, the advancement on the
distributed power business, and our China partnering initiative, we believe
that we are rapidly moving forward with our strategy of most effectively
deploying our proprietary advanced syngas technology, which enables the
economical production of cleaner, high-value energy from abundant low-grade,
low-cost natural resources worldwide. Through our partners, we are, in effect,
bolting our technology and engineering expertise onto leading large,
capitalized companies in different business verticals, such as power and
industrial equipment, and adding value into such initiatives," added Rigdon.
Recent Corporate Highlights
*Zao Zhuang Joint Venture Methanol Plant – The handover of the Xuecheng
Energy (XE) Methanol Plant to the ZZ JV was completed on October 31, 2013,
giving the ZZ JV control of XE's adjacent methanol production plant and
methanol product sales. The ZZ JV's methanol operation produced refined
methanol at an average rate of approximately 185 tonnes per day utilizing
primarily COG. Completed sales for the limited-run quarter were 10,127
tonnes of methanol. In December, SES initiated test production of
additional syngas feedstock produced by the SES gasification system at the
ZZ plant, and expects annual methanol production rates to ramp up to
90,000 tonnes per year when operating at full rates using syngas-COG
*Yima Joint Venture Methanol Plant – The Yima JV completed commissioning of
the refined methanol section of the facility. The JV operated at average
80% capacity for the fiscal second quarter. SES owns 25% of the Yima JV
and will not report income from the Yima JVs until dividends are paid.
*Distributed Power Business - SES, along with co-marketing partner, GE
Packaged Power, and regional collaborators, ISTROENERGO GROUP and TUTEN,
signed its first Letter of Intent (LOI) with Karachi Electric. Karachi
Electric is a large electric utility company in Karachi, Pakistan, with
over 2.3 GW of installed electric generating capacity. The exclusive LOI
calls for the engineering and financial feasibility evaluation of a coal
gasification power generation plant with a gross capacity between 90 and
200 MW to be constructed near Karachi.
*Hongye Glycol Plant Project - SES entered into a Memorandum of
Understanding (MOU) with Hongye International Investment Group Co., Ltd.
for the supply of SES gasification technology, equipment and services to
Hongye's 600,000 tonnes-per-year glycol plant to be built in the Inner
Mongolia Autonomous Region of China, through subsidiary company, SES New
Energy Technologies (Shanghai) Co., Ltd.
*Hulunbeier Tianfu Energy City Gas Project - SES signed an MOU for an
exclusive agreement with Hulunbeier Tianfu Energy to supply SES
gasification technology, equipment and services to its 1 billion
normal-cubic-meters per-year city gas project to be built in Hulunbeier,
Inner Mongolia, China. Tianfu has completed the required Feasibility Study
Report and Environmental Impact Assessment for the SES technology
conversion of Inner Mongolian lignite resources to syngas.
Second Quarter Fiscal 2014 Financial Results (Unaudited)
The Company reported $5.9 million of revenue for the three months ended
December 31, 2013, versus $13,000 for the three months ended December 31,
2012. The Company's ZZ JV operated in November and December generating $4.4
million from sales of 10,127 tonnes of methanol produced using XE's coke oven
gas supply as a result of assuming operational control of XE's methanol plant
assets on October 31, 2013. In addition, approximately $1.5 million of
advances paid to ZZ from XE and its affiliate were recognized as revenue
during the quarter due to settling amounts due to ZZ under the prior syngas
purchase and sale agreement.
The Company's operating loss for the second quarter of fiscal 2014 was reduced
by two-thirds to $1.3 million versus an operating loss of $3.9 million for the
second quarter of fiscal 2013. The decrease in operating loss was primarily
due to the margin on ZZ's revenues including the $1.5 million of prior
advances recognized during the quarter, and a $1.0 million, or 30% reduction
in overall general and administrative expenses, offset, in part, by an
increase in non-cash stock-based compensation expenses.
The net loss attributable to stockholders for the second quarter of fiscal
2014 was $1.4 million, or $0.02 per share, versus a loss of $4.4 million, or
$0.07 per share, for the prior year's second quarter.
As of December 31, 2013, the Company had cash and cash equivalents of $12.4
million, including $2.6 million held by the ZZ JV.
Conference Call Information
SES's President and CEO, Robert W. Rigdon, and CFO, Charles Costenbader, will
hold a conference call to review the Company's financial results for this
period and provide an update on corporate developments beginning at 4:15 p.m.
EST on January 29.
To access the live webcast, please log on to www.synthesisenergy.com.
Alternatively, interested parties may participate in the SES telephone
conference call by phoning (866) 250-8117 (U.S) or (412) 317-6011 (Int'l).
Callers should request the "Synthesis Energy Systems, Inc. call." Interested
parties can pre-register for the call at: http://dpregister.com/10040205.
An archived version of the SES conference call webcast will be available on
thecompany's website through March 2, 2014. A telephone replay of the call
will be available beginning approximately one hour after its completion and
will be available through March 2, 2014. Interested parties can access the
telephonic replay by phoning (877) 344-7529 (U.S.) or (412) 317-0088 (Int'l).
The PIN access code for both the live call and replay is: 10040205.
About Synthesis Energy Systems, Inc.
Synthesis Energy Systems is a Houston-based technology company focused on
bringing cleaner high-value energy to developing countries from low-grade coal
and biomass natural resources through its proprietary fluidized bed
gasification technology. The technology, which is licensed from the Gas
Technology Institute, enables greater fuel flexibility and efficient
smaller-scale operations close to fuel sources. Fuel sources include low-rank,
low-cost high ash, high moisture coals, which are significantly cheaper than
higher grade coals, many coal waste products, and biomass feed stocks. For
more information, please visit synthesisenergy.com.
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 development stage of the operations
of Synthesis Energy Systems; the ability of the ZZ joint venture to
effectively operate XE's methanol plant and produce methanol; the ability of
the Yima project to produce earnings and pay dividends; the ability of SES to
secure a partner for its China business initiative; the ability of SES to
develop its power business unit and marketing arrangement with GE and its
other business verticals, steel and renewables; the ability of SES to
successfully develop its licensing business; its ability to reduce operating
costs; the limited history and viability of its technology; commodity prices
and the availability and terms of financing opportunities;its ability to
obtain the necessary approvals and permits for future projects; its ability to
raise additional capitaland its estimate of the sufficiency of existing
capital sources; the sufficiency of internal controls and procedures; and its
results of operations in foreign countries where it is developing projects,
such as India. Although Synthesis Energy Systems 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.
Synthesis Energy Systems 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 Statements of Operations
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
December 31, December 31,
2013 2012 2013 2012
Product sales $ 5,914 $ — $ 5,914 $ —
Technology licensing and related — 13 — 84
Total revenue 5,914 13 5,914 84
Costs and Expenses:
Costs of sales and plant operating 4,030 133 4,127 264
General and administrative expenses 2,183 3,141 4,605 6,223
Stock-based compensation expense 472 109 1,518 272
Depreciation and amortization 565 570 1,130 1,146
Total costs and expenses 7,250 3,953 11,380 7,905
Operating loss (1,336) (3,940) (5,466) (7,821)
Non-operating (income) expense:
Equity in losses of joint ventures — 400 1 917
Foreign currency gains (31) (85) (43) (48)
Interest income (11) (15) (16) (28)
Interest expense 122 78 192 174
Net loss (1,416) (4,318) (5,600) (8,836)
Less: net (earnings) loss attributable (19) (85) 3 (52)
to noncontrolling interests
Net loss attributable to stockholders $ (1,435) $ (4,403) $ (5,597) $ (8,888)
Net loss per share:
Basic and diluted $ (0.02) $ (0.07) $ (0.09) $ (0.16)
Weighted average common shares
Basic and diluted 63,720 61,899 63,695 57,116
SYNTHESIS ENERGY SYSTEMS, INC.
(A Development Stage Enterprise)
Consolidated Balance Sheets
December 31, June 30,
Cash and cash equivalents $ 12,428 $ 15,870
Accounts receivable, net 93 2
Prepaid expenses and other currents assets 4,645 2,636
Inventory 542 —
Total current assets 17,708 18,508
Property, plant and equipment, net 32,795 32,641
Intangible assets, net 1,020 1,060
Investment in joint ventures 34,856 33,311
Other long-term assets 2,458 2,844
Total assets $ 88,837 $ 88,364
LIABILITIES AND EQUITY
Accrued expenses and accounts payable $ 9,709 $ 7,632
Short-term loan 3,280 —
Current portion of long-term bank loan 1,197 2,428
Total current liabilities 14,186 10,060
Total liabilities 14,186 10,060
Common stock, $0.01 par value: 200,000 shares
authorized: 63,720 and 63,583 shares issued and 637 636
Additional paid-in capital 225,954 224,337
Deficit accumulated during development stage (157,338) (151,741)
Accumulated other comprehensive income 6,287 5,958
Total stockholders' equity 75,540 79,190
Noncontrolling interests in subsidiaries (889) (886)
Total equity 74,651 78,304
Total liabilities and equity $ 88,837 $ 88,364
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