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Synthesis Energy Systems' CEO Discusses Q3 2012 Results - Earnings Call Transcript

First, I’d like to turn the call over to Kevin for a review of our third quarter 2012 financial results.

Kevin Kelly

Thank you, Robert. Since late September 2011, we’ve kept the ZZ joint venture plant idle. As we’ve reported previously Hai Hua has not paid any of the capacity fees owed to the ZZ joint venture since April 2011 and we’ve not recognized any capacity fee revenues since then. For this reason we did not incur the normal operating cost associated with the ZZ plant or have any revenue from the plant during the quarter.

We continue to have discussions with Hai Hua, our joint venture partner, and we remain optimistic that a mutually beneficial joint venture agreement will be reached that can improve this plant’s financial performance. We intend to restart the plant when we complete the restructuring of the current business arrangement with Hai Hua to create integrated syngas to methanol operation.

We are working diligently on this restructuring. However, it is taking longer than expected due to a number of factors on the Hai Hua side, including our recent corporate restructuring of Hai Hua.

As a result, the third quarter of fiscal 2012 ended March 31, 2012 total revenue was a $100,000 versus $3.1 million for the third fiscal quarter of 2011. The amount of unrecognized capacity fees under the contract with Hai Hua totals approximately $3.6 million as of March 31st. And we are working to recover the value of these fees within the new commercial structure under development with Hai Hua.

Our operating cost decreased significantly due to the ZZ plant being idle and we continue to minimize expenses as much as possible.

Technology licensing and related services revenues for the three months ended March 31, 2012 were $100,000 versus $506,000 for the three months ended March 31, 2011. The change in licensing revenue was due mainly to timing of new orders and technology related services provided during the quarter.

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