UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Act of 1934
Date of Report (Date of earliest event reported): October 31, 2016
Synthesis Energy Systems, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 001-33522 | 20-2110031 |
(State or other jurisdiction | (Commission | (I.R.S. Employer |
of incorporation) | File Number) | Identification No.) |
Three Riverway, Suite 300 Houston, Texas | 77056 |
(Address of principal executive offices) | (Zip Code) |
(713) 579-0600
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CRF 240.133-4(c))
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Item 2.01 Completion of Acquisition or Disposition of Assets
On October 31, 2016, Synthesis Energy Systems, Inc. (“SES” or the “Company”) received final government approval of the plan to restructure and transfer a significant portion of the interest in Synthesis Energy Systems (Zao Zhuang) New Gas Company Ltd. (“ZZ Joint Venture”) to Shandong Hai Hua Xuecheng Energy Co., Ltd. (“Xuecheng Energy”).
The Company and Xuecheng Energy originally entered into a Definitive Agreement in August 2016 to restructure the ZZ Joint Venture. The partners intend to evaluate a new ZZ syngas facility in the Zouwu Industrial Park in Shandong Province.
SES will retain an approximate nine percent ownership in the ZZ Joint Venture asset, and Xuecheng Energy has agreed to assume all outstanding liabilities of the ZZ Joint Venture, including payables related to the Cooperation Agreement with Xuecheng Energy signed in 2013.
During the second quarter of fiscal 2017, the Company will deconsolidate the ZZ Joint Venture and will account for the Company’s investment under the cost method.
Because the agreement results in a deconsolidation, and meets the significance tests specified in Item 2.01 of Form 8-K, the Company is filing as Exhibit 99.1 to this Form 8-K unaudited pro forma financial information for SES as of June 30, 2016 as well as for the years ended June 30, 2016 and 2015.
Item 9.01 Financial Statements and Exhibits.
(b) | Pro Forma Financial information | |||
On November 4, 2016, SES released unaudited pro forma consolidated balance sheet of SES as of June 30, 2016 and the unaudited pro forma combined statements of operations of SES for the years ended June 30, 2016 and 2015. These statements are filed as Exhibit 99.1 to this Current Report on Form 8-K and are incorporated by reference in this Item 9.01 | ||||
(d) | Exhibits | |||
10.1 | Cooperation Agreement among SES (Zao Zhuang) New Gas Co., Ltd., Shandong Weijiao Group Xuecheng Energy Co., Ltd. and Shandong Xuejiao Chemical Co., Ltd. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on July 26, 2013).* | |||
99.1 | Unaudited pro forma consolidated balance sheet of SES as of June 30, 2016 and the unaudited pro forma combined statements of operations of SES for the years ended June 30, 2016 and 2015. | |||
* Portions of this exhibit have been omitted pursuant to a request for confidential treatment accepted by the Securities and Exchange Commission and this exhibit has been filed separately with the Securities and Exchange Commission in connection with such request. |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Synthesis Energy Systems, Inc. | ||
Dated: November 4, 2016 | /s/ Scott Davis | |
Scott Davis | ||
Chief Accounting Officer and Corporate Secretary |
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Exhibit 99.1
UNAUDITED PRO FORMA FINANCIAL INFORMATION
On October 31, 2016, Synthesis Energy Systems, Inc. (“SES” or the “Company”) received final government approval of the plan to restructure and transfer a significant portion of the interest in Synthesis Energy Systems (Zao Zhuang) New Gas Company Ltd. (“ZZ Joint Venture”) to Shandong Hai Hua Xuecheng Energy Co., Ltd. (“Xuecheng Energy”).
The Company and Xuecheng Energy originally entered into a Definitive Agreement in August 2016 to restructure the ZZ Joint Venture. The partners intend to evaluate a new ZZ syngas facility in the Zouwu Industrial Park in Shandong Province.
SES will retain an approximate nine percent ownership in the ZZ Joint Venture asset, and Xuecheng Energy has agreed to assume all outstanding liabilities of the ZZ Joint Venture, including payables related to the Cooperation Agreement with Xuecheng Energy signed in 2013.
During the second quarter of fiscal 2017, the Company will deconsolidate the ZZ Joint Venture and will account for the Company’s investment under the cost method (the “Deconsolidation”).
The unaudited pro forma financial information is based on financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In addition, the unaudited pro forma financial information is based upon information and assumptions that the Company believes to be reasonable and created for the sole purpose of developing such unaudited pro forma financial information for illustrative purposes in compliance with the disclosure requirements of the Securities and Exchange Commission (“SEC”). The unaudited pro forma balance sheet gives effect to the Deconsolidation as if it had occurred on June 30, 2016. The unaudited pro forma statements of operations for the years ended June 30, 2016 and 2015 gives effect to the Deconsolidation as if it had occurred on July 1, 2015 and 2014, respectively.
The unaudited pro forma financial information is based on various assumptions. The actual results reported by the Company in periods following the Deconsolidation may differ significantly from that reflected in this unaudited pro forma financial information. As a result, the unaudited pro forma financial information does not purport to project the future financial conditions or results of operations of SES. The pro forma assumptions and adjustments are described in the accompanying schedules. Pro Forma adjustments are those that are directly attributable to the transaction and are factually supportable and with respect to the unaudited pro forma Statement of Operations, are expected to have a continuing impact on the consolidated results.
The unaudited pro forma financial information should be read in conjunction with SES’ audited consolidated financial statements and accompanying notes for the fiscal year ended June 30, 2016, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in SES’ Annual Report on Form 10-K for the fiscal year ended June 30, 2016, which was filed with the SEC on September 29, 2016.
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SYNTHESIS ENERGY SYSTEMS, INC.
Unaudited Pro Forma Consolidated Balance Sheets
(In thousands, except per share amounts)
As of June 30, 2016 | Histroical SES | Pro Forma Adjustments (1) | Pro Forma SES | |||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 13,819 | $ | (12 | ) | $ | 13,807 | |||||
Certificate of deposit- restricted | 2,262 | (2,262 | ) | - | ||||||||
Accounts receivable- related party, net | 27 | - | 27 | |||||||||
Prepaid expenses and other currents assets | 1,157 | (329 | ) | 828 | ||||||||
Inventory | 122 | (79 | ) | 43 | ||||||||
Total current assets | 17,387 | (2,682 | ) | 14,705 | ||||||||
Property, plant and equipment, net | 9,002 | (8,948 | ) | 54 | ||||||||
Intangible asset, net | 898 | - | 898 | |||||||||
Investment in joint ventures | 26,201 | - | (3) | 26,201 | ||||||||
Other long-term assets | 1,693 | (1,032 | ) | 661 | ||||||||
Total assets | $ | 55,181 | $ | (12,662 | ) | $ | 42,519 | |||||
LIABILITIES AND EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Accrued expenses and accounts payable | $ | 3,353 | $ | (1,698 | ) | $ | 1,655 | |||||
Accrued expenses and accounts payable- related party | 4,853 | (4,853 | ) | - | ||||||||
Line of credit | 3,770 | (3,770 | ) | - | ||||||||
Short-term bank loan | 3,016 | (3,016 | ) | - | ||||||||
Total current liabilities | 14,992 | (13,337 | ) | 1,655 | ||||||||
Shareholders’ Equity: | ||||||||||||
Common stock, $0.01 par value - 200,000 shares authorized – 86,984 issued and outstanding | 870 | - | 870 | |||||||||
Additional paid-in capital | 261,225 | - | 261,225 | |||||||||
Accumulated deficit | (226,938 | ) | 2,766 | (4) | (224,172 | ) | ||||||
Accumulated other comprehensive income | 6,586 | (2,759 | ) | 3,827 | ||||||||
Total stockholder’s equity attributable to SES | 41,743 | 7 | 41,750 | |||||||||
Noncontrolling interests in subsidiaries | (1,554 | ) | 668 | (886 | ) | |||||||
Total stockholders’ equity | 40,189 | 675 | 40,864 | |||||||||
Total liabilities and stockholders’ equity | $ | 55,181 | $ | (12,662 | ) | $ | 42,519 |
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SYNTHESIS ENERGY SYSTEMS, INC.
Unaudited Pro Forma Consolidated Statements of Operations
(In thousands, except per share amounts)
Year Ended June 30, 2016 | ||||||||||||
Historical SES | Pro Forma Adjustments (1) | Pro Forma SES | ||||||||||
Revenue: | ||||||||||||
Product sales and other — related parties | $ | 4,753 | $ | (4,753 | ) | $ | - | |||||
Technology licensing and related services | 300 | - | 300 | |||||||||
Related party consulting services | 938 | (588 | ) | 350 | ||||||||
Total revenue | 5,991 | (5,341 | ) | 650 | ||||||||
Costs and Expenses: | ||||||||||||
Costs of sales and plant operating expenses | 7,213 | (7,156 | ) | 57 | ||||||||
General and administrative expenses | 8,514 | (547 | ) | 7,967 | ||||||||
Stock-based expense | 3,317 | - | 3,317 | |||||||||
Depreciation and amortization | 869 | (652 | ) | 217 | ||||||||
Impairments | 8,613 | - | 8,613 | |||||||||
Total costs and expenses | 28,526 | (8,355 | ) | 20,171 | ||||||||
Operating loss | (22,535 | ) | 3,014 | (19,521 | ) | |||||||
Non-operating income (expense): | ||||||||||||
Equity in losses of joint venture | (244 | ) | - | (244 | ) | |||||||
Foreign currency gains (losses), net | (430 | ) | 177 | (253 | ) | |||||||
Interest income | 60 | (31 | ) | 29 | ||||||||
Interest expense | (439 | ) | 439 | - | ||||||||
Net loss | (23,588 | ) | 3,599 | (19,989 | ) | |||||||
Less: net income (loss) attributable to non-controlling interests | (516 | ) | 22 | (494 | ) | |||||||
Net loss attributable to SES stockholders | $ | (23,072 | ) | $ | 3,577 | $ | (19,495 | ) | ||||
Net loss per share: | ||||||||||||
Basic and diluted (2) | $ | (0.27 | ) | $ | (0.22 | ) | ||||||
Weighted average common shares outstanding: | ||||||||||||
Basic and diluted (2) | 86,776 | 86,776 |
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SYNTHESIS ENERGY SYSTEMS, INC.
Pro Forma Consolidated Statements of Operations
(In thousands, except per share amounts)
Year Ended June 30, 2015 | ||||||||||||
Historical SES | Pro Forma Adjustments (1) | Pro Forma SES | ||||||||||
Revenue: | ||||||||||||
Product sales and other — related parties | $ | 15,145 | $ | (15,145 | ) | $ | - | |||||
Related party consulting services | 372 | (203 | ) | 169 | ||||||||
Total revenue | 15,517 | (15,348 | ) | 169 | ||||||||
Costs and Expenses: | ||||||||||||
Costs of sales and plant operating expenses | 19,713 | (19,713 | ) | - | ||||||||
General and administrative expenses | 8,974 | (627 | ) | 8,347 | ||||||||
Stock-based expense | 2,586 | - | 2,586 | |||||||||
Depreciation and amortization | 1,603 | (1,368 | ) | 235 | ||||||||
Impairments | 20,914 | (20,914 | ) | - | ||||||||
Total costs and expenses | 53,790 | (42,622 | ) | 11,168 | ||||||||
Operating loss | (38,273 | ) | 27,274 | (10,999 | ) | |||||||
Non-operating income (expense): | ||||||||||||
Foreign currency gains (losses), net | 39 | (12 | ) | 27 | ||||||||
Interest income | 70 | (43 | ) | 27 | ||||||||
Interest expense | (372 | ) | 372 | - | ||||||||
Net loss | (38,536 | ) | 27,591 | (10,945 | ) | |||||||
Less: net income (loss) attributable to non-controlling interests | (654 | ) | 654 | - | ||||||||
Net loss attributable to SES stockholders | $ | (37,882 | ) | $ | 26,937 | $ | (10,945 | ) | ||||
Net loss per share: | ||||||||||||
Basic and diluted (2) | $ | (0.50 | ) | $ | (0.14 | ) | ||||||
Weighted average common shares outstanding: | ||||||||||||
Basic and diluted (2) | 75,699 | 75,699 |
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Notes to pro forma financial statements
(1) | Amounts relate directly to the operations of ZZ Joint Venture. |
(2) | The number of basic and diluted shares outstanding did not change as a result of the Deconsolidation. |
(3) | Upon deconsolidation, SES anticipates recording the investment under the cost method of accounting and expects the initial carrying value to be zero. |
(4) | Represents the estimated gain on the deconsolidation of the ZZ Joint Venture if it were to have occurred as of June 30, 2016 based upon the following calculation: |
Reduction of ZZ Joint Venture equity | $ | 3,960 | ||
Less: write off of SES intercompany receivables with the ZZ Joint Venture | (1,194 | ) | ||
Pro forma accumulated defecit | $ | 2,766 |
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