Equity Method Investments and Joint Ventures Disclosure [Text Block] | Note 3 — Current Projects Zao Zhuang Joint Venture Joint Venture Agreement On July 6, 2006, the Company entered into a cooperative joint venture contract with Shandong Hai Hua Coal & Chemical Company Ltd., or Hai Hua, which established Synthesis Energy Systems (Zao Zhuang) New Gas Company Ltd., or the ZZ Joint Venture, a joint venture company that has the primary purposes of (i) developing, constructing and operating a syngas production plant utilizing the U-GAS ® On July 24, 2013, the ZZ Joint Venture entered into a cooperation agreement (the “ZZ Cooperation Agreement”) with Xuecheng Energy and its parent company, Shandong Xuejiao Chemical Co., Ltd. (collectively referred to as “Xuejiao”), which serves to supersede the existing syngas purchase and sale agreement among the parties dated October 22, 2006 and supplemented previously in 2008. The ZZ Cooperation Agreement, which became effective on October 31, 2013, represents the basis for an integrated syngas to methanol operation and resolution of the nonpayment of the contractual capacity fees by Xuejiao. Under the terms of the ZZ Cooperation Agreement, Xuejiao will (i) provide the ZZ Joint Venture with use of their methanol plant for ten years at no cost to the ZZ Joint Venture, (ii) provide a bank loan guarantee of approximately $3.3 million for a majority of the financing necessary for the ZZ Joint Venture for the retrofit and related costs of the ZZ Joint Venture plant, (iii) waive certain advances previously made to the ZZ Joint Venture and (iv) supply discounted coke oven gas produced by its existing coke ovens to be used in combination with synthesis gas to produce refined methanol from the new ZZ Joint Venture integrated syngas methanol operation. The new integrated operation will be managed by the ZZ Joint Venture. Effective October 31, 2013, the ZZ Joint Venture terminated and waived its claims to past due capacity fees owed by Xuejiao under the prior syngas purchase and sale agreement. Pursuant to the ZZ Cooperation Agreement, prior payments of approximately $1.8 million were applied to settling the prior payments due under the syngas purchase and sale agreement. The ZZ Joint Venture began producing and selling methanol in November 2013 and sold 49,705 metric tons of methanol during the year ended June 30, 2015 generating approximately $15 million of revenue. The Company assumed operational control of the integrated methanol production facility in October 2013 under a restructured commercial arrangement. The ZZ Joint Venture has worked to complete the plant retrofits and equipment upgrades to enable increased methanol production from integrated syngas and coke oven gas feedstock. The ZZ Joint Venture is now operating an integrated plant which has two operating modes where it (i) converts coke oven gas directly to methanol and (ii) converts coal to syngas, then blends the syngas and coke oven gas at a specific ratio to produce additional quantities of methanol. The ZZ Joint Venture began producing and selling methanol in November 2013 from coke oven gas. The ZZ Joint Venture restarted its syngas plant for approximately two weeks during December 2013. The ZZ Joint Venture intends to manage syngas production in order to optimize results. The syngas facility will generally operate when adequate coke oven gas supplies are available to achieve the correct syngas to coke oven gas blend ratio. Effective June 26, 2015, the Company entered into a Share Purchase and Investment Agreement (the “SPA”) with Rui Feng Enterprises Limited (“Rui Feng”), whereby Rui Feng will acquire a controlling interest in Synthesis Energy Systems Investments Inc. (”SESI”), a wholly owned subsidiary of the Company which owns the Company’s interest in the ZZ Joint Venture. Under the terms of the SPA, SESI will sell an approximately 61% equity interest to Rui Feng in exchange for $10 million. This amount shall be paid in four installments, with the first installment of approximately $1.6 million paid on June 26, 2015. Since we retain control of SESI, the proceeds received from the first installment are accounted for as an equity transaction with no gain or loss recognized. We have allocated the proceeds received between additional paid in capital and non-controlling interest based on the interest acquired by Rui Feng and the carrying value of our investment in SESI. Rui Feng shall receive equity interest in SESI proportionate to its installment payments. After the four installment payments have been made, if Rui Feng invests an additional amount of 40 million yuan equivalent in U.S. dollars for the construction of an expansion to the ZZ Joint Venture, Rui Feng will receive an additional 14% interest in SESI, for a total of 75%. Once Rui Feng acquires a controlling interest in the subsidiary, the Company will deconsolidate our investment in the subsidiary which holds our investment in the ZZ Joint Venture. Additionally, in connection with the transaction, Saikong, an affiliate of Rui Feng, will assume all profits and losses from the ZZ Joint Venture during the expansion of the facility, and Rui Feng will receive 90% of the profits and losses for the first three years of operations after the completion of the expansion. After each installment payment, Rui Feng shall be entitled to appoint one director on the board of SESI, such that after the four installments are paid, the board shall consist of seven directors, with four appointed by Rui Feng and the balance appointed by SESI. Rui Feng shall also be entitled to appoint directors of the ZZ Joint Venture as the installment payments are made, such that when all installment payments are made, Rui Feng will have three directors, SESI shall have two directors and Xuecheng Energy shall have one director on the ZZ Joint Venture board. In connection with entering into the SPA, the ZZ Joint Venture, SESI and Rui Feng also entered into a separate Operation and Management Agreement (the “OMA”) with Shandong Saikong Automation Equipment Co. Ltd. (“Saikong”), an affiliate of Rui Feng, to achieve our strategic aim of repurposing and expanding ZZ Joint Venture facility. Under the terms of the OMA, the two existing SES gasification systems will be refurbished and prepared for full capacity operation and the syngas will be used for the production of 100,000 tons per year of acetic acid, as well as a secondary product of propionic acid. The expansion is expected to be completed within 24 months. In addition, the ZZ Joint Venture plant will continue to generate methanol from Xuecheng Energy's coke oven gas under the terms of the existing Cooperation Agreement. In 2010, the ZZ Joint Venture received the necessary government approval for an expansion into monoethylene glycol production. This expansion project remains under evaluation by us. The Company is also evaluating certain new downstream technologies to produce high value products. Although the Company intends for the ZZ Joint Venture to sustain itself through its own earnings, the Company has no intentions on providing additional contributions to the ZZ Joint Venture. Saikong has committed to providing required funding, but the Company has no assurances that they will honor that commitment. If the ZZ Joint Venture does not have adequate funds to repay the ZZ Working Capital Loan and the ZZ Line of Credit Agreement, and the Company or Saikong does not make additional capital contributions or loans, the Company runs the risk of forfeiting its interest in the ZZ Joint Venture facility including the related $1.6 million restricted certificate of deposit. In September 2014, the Company made a capital contribution of $1.5 million to the ZZ Joint Venture. This capital contribution was used to pay a portion of the ZZ Short-term Loan, which was due on September 9, 2014. During the three months ended December 31, 2014, there was a significant decline in methanol prices in the China commodity market, which put significant pressure on our methanol production margins at the ZZ Joint Venture plant. Accordingly, the Company evaluated the ongoing value of the ZZ Joint Venture facility and based on this evaluation, the Company determined that the $32 million carrying value of the ZZ Joint Venture facility was no longer entirely recoverable. Due to this impairment, the Company wrote down the value of the facility to its estimated fair value of $11 million and recognized an impairment expenses of $20.9 million as of December 31, 2014, and fair value was based on expected future cash flows using Level 3 inputs under ASC 820. At June 30, 2015, there were no indications of further impairment for ZZ Joint Venture facility. Although methanol prices have begun to increase slightly and further changes in market conditions for methanol in China may increase the Company’s operating margins, any further degradation in methanol prices, as well as changes in assumptions used to test for recoverability and to determine fair value, could result in additional impairment charges in the future for the ZZ Joint Venture facility. Short-term Loan Agreement with Zao Zhuang Bank Co., Ltd On September 10, 2013, the ZZ Joint Venture entered into a short-term loan agreement with Zaozhuang Bank Co., Ltd. (the “ZZ Short-term Loan”) and received approximately $3.3 million of loan proceeds for the retrofit and related costs contemplated by the ZZ Cooperation Agreement, the principal was repaid on the due date, September 9, 2014. Working Capital Loan Agreement with Zaozhuang Bank Co., Ltd On October 2, 2014, the ZZ Joint Venture replaced the above ZZ Short-term Loan with a new working capital loan agreement with the ZZ Bank (the “ZZ Working Capital Loan”), and received approximately $3.3 million of loan proceeds. Key terms of the ZZ Working Capital Loan are as follows: • Term of the loan is one year, due on September 23, 2015; • Interest is payable monthly at an annual rate of 9%; • Xuecheng Energy is the guarantor of the loan; • Certain assets of the ZZ Joint Venture, including land use rights and the administration building, are pledged as collateral for the loan; and • Subject to customary events of default which, should one or more of them occur and be continuing, would permit Zaozhuang Bank Co., Ltd. to declare all amounts owing under the agreement to be due and payable immediately. Line of Credit (Deposit Secured Loan) with Zaozhuang Bank Co., Ltd On October 8, 2014, the ZZ Joint Venture entered a Line of Credit Agreement with the ZZ Bank, and received a line of credit of approximately $2.5 million. On October 9, 2014, the ZZ Joint Venture entered an additional Line of Credit Agreement with ZZ Bank and received a line of credit of approximately $0.8 million (collectively, the “ZZ Line of Credit Agreement”). Key terms of the ZZ Line of Credit Agreement are as follows: • The ZZ Joint Venture is required to deposit 50% of the total face amount, or approximately $1.6 million, to the ZZ Bank for the line of credit as a security deposit; • Term of the lines of credit is six months, due on April 8 and April 9, 2015 respectively, and can be renewed for another six months term with bank approval; • Service fee is 0.05% of the face amount for each renewal; • Xuecheng Energy is the guarantor of the line of credit; • Certain assets of the ZZ Joint Venture, including land use rights and the administration building, are pledged as collateral for the lines of credit; and • Subject to customary events of default which, should one or more of them occur and be continuing, would permit the ZZ Bank to declare all amounts owing under the agreements to be due and payable immediately. Xuecheng Energy’s combined guarantee for both the ZZ Working Capital Loan and the ZZ Line of Credit Agreement is limited to approximately $3.3 million. In April 2015, the Company repaid the ZZ Line of Credit Agreement and renewed the agreement for $3.3 million under the same terms for an additional six months. The ZZ Line of Credit Agreement is now due on various dates in October and November 2015. Yima Joint Ventures In August 2009, the Company entered into amended joint venture contracts with Yima, replacing the prior joint venture contracts entered into in October 2008 and April 2009. The joint ventures were formed for each of the gasification, methanol/methanol protein production, and utility island components of the plant, or collectively, the Yima Joint Ventures. The amended joint venture contracts provide that: (i) the Company and Yima contribute equity of 25% and 75%, respectively, to the Yima Joint Ventures; (ii) Yima will guarantee the repayment of loans from third party lenders for 50% of the project’s cost and, if debt financing is not available, Yima is obligated to provide debt financing via shareholder loans to the project until the project is able to secure third-party debt financing; and (iii) Yima will supply coal to the project from a mine located in close proximity to the project at a preferential price subject to a definitive agreement to be subsequently negotiated. In connection with entering into the amended contracts, the Company and Yima contributed remaining cash equity contributions of $29.3 million and $90.8 million, respectively, to the Yima Joint Ventures during the three months ended September 30, 2009. The Company and Yima share the profits, and bear the risks and losses, of the joint ventures in proportion to our respective ownership interests. In exchange for such capital contributions, the Company owns a 25% interest in each joint venture and Yima owns a 75% interest. Notwithstanding this, in connection with an expansion of the project, the Company has the option to contribute a greater percentage of capital for the expansion, such that as a result, the Company would have up to a 49% ownership interest in the Yima Joint Ventures. The remaining capital for the project has been funded with project debt obtained by the Yima Joint Ventures. Yima agreed to guarantee the project debt in order to secure debt financing from domestic Chinese banking sources. The Company has agreed to pledge to Yima its ownership interests in the joint ventures as security for the Company’s obligations under any project guarantee. In the event that the necessary additional debt financing is not obtained, Yima has agreed to provide a loan to the joint ventures to satisfy the remaining capital needs of the project with terms comparable to current market rates at the time of the loan. Under the terms of the joint venture agreements, the Yima Joint Ventures are to be governed by a board of directors consisting of eight directors, two of whom were appointed by the Company and six of whom were appointed by Yima. The joint ventures also have officers that are nominated by the Company, Yima and/or the board of directors pursuant to the terms of the joint venture contracts. The Company and Yima shall share the profits, and bear the risks and losses, of the joint ventures in proportion to their respective ownership interests. The term of the joint venture shall commence upon each joint venture company obtaining its business operating license and shall end 30 years after commercial operation of the plant. The Yima Joint Venture plant generated its first methanol production in December 2012. The Yima Joint Venture plant’s refined methanol section was fully commissioned in December 2013, and has operated at limited capacity since that date. The plant is designed to produce 300,000 metric tons per year of methanol from operating two of its three available gasifiers and has achieved 100% peak syngas production levels and 80% peak methanol production levels. This plant is intended to provide a commercial demonstration of the Company’s technology as deployed on a much larger scale than the ZZ Joint Venture plant. The Yima Joint Venture initiated an outage in April 2015 that was intended to allow the plant to make broad and miscellaneous improvements to many areas of the entire methanol producing facility which had not been completed or properly installed. Many of these improvements were punch-list items left over from construction, along with improvements which have been learned from the past year’s operation at the plant. Additionally, it was identified during this time that the Yima Joint Venture had not installed all of the required units related to removal of sulfur compounds from syngas. The plant continues to run at approximately 50% of design capacity as data is gathered and as repairs and construction continues at the facility. In addition, the permits for methanol production have been under review and the local government is requiring the Yima Joint Venture make preparations to produce the methanol protein, which was the primary product planned when the permits were secured. The Company has included approximately $3.0 million of royalty costs due to GTI for the Yima Joint Ventures’ U-GAS ® Until May 31, 2013, the Company accounted for its equity interest in the Yima Joint Ventures under the equity method of accounting. Under this method, the Company recorded its proportionate share of the Yima Joint Ventures’ net income or loss based on the Yima Joint Venture’s financial results. As of June 1, 2013, the Company changed to the cost method of accounting because the Company concluded that it is unable to exercise significant influence over the Yima Joint Ventures. The Company’s conclusion regarding its lack of significant influence is based on its interactions with the Yima Joint Ventures related to the start-up and operations and due to various other circumstances including limited participation in operating and financial policymaking processes and the Company’s limited ability to influence technological decisions. There was no equity in losses of the Yima Joint Ventures recognized for financial reporting purposes for the years ended June 30, 2015 and 2014 since the Company changed from the equity method to the cost method of accounting as of June 1, 2013. The carrying value of the Company’s interest in the Yima Joint Venture as of June 31, 2015 and 2014 was $34.8 million. Additionally, in January 2011, the Company signed gasifier sales agreements with the Yima Joint Ventures to sell gasifiers and gasifier related equipment for an aggregate contract price of $3.0 million. A portion of the equipment associated with these orders was ordered from SST (as defined under “Tianwo-SES Joint Venture”). The gasifiers were completed and delivered in January 2012 to the Yima Joint Ventures. As of June 30, 2015, the Yima Joint Ventures had paid $2.4 million of the total contract price and still owed the remaining payment approximately of $0.67 million to the Company. The Company still owes a combined $0.67 million to both SST and an additional vendor associated with the equipment purchase, which is accrued as a current liability on the Company’s consolidated balance sheet. Yima paid the remaining payment of approximately $0.67 million to the Company in August 2015. During the latter part of 2014, there was a significant decline in methanol price in China commodity market, which put pressure on our Yima Joint Venture plant methanol production margins. Accordingly, the Company performed a fair value analysis as of December 31, 2014 based on expected future cash flows using Level 3 inputs under ASC 325. The results of the test indicated that the estimated current fair value of the Yima investment exceeded its book value, and as a result, no impairment was required as of December 31, 2014. At June 30, 2015, there are no indicators of triggering events or circumstances that indicate a potential impairment for Yima Joint Venture Plant. Tianwo-SES Joint Venture Joint Venture Contract On February 14, 2014, SES Asia Technologies Limited, one of the Company’s wholly owned subsidiaries, entered into a Joint Venture Contract (the “JV Contract”) with Zhangjiagang Chemical Machinery Co., Ltd., which subsequently changed its legal name to Suzhou Thvow Technology Co. Ltd. (“STT”), to form Jiangsu Tianwo-SES Clean Energy Technologies Limited (the “Tianwo-SES Joint Venture”). The purpose of the Tianwo-SES Joint Venture is to establish the Company’s gasification technology as the leading gasification technology in the Tianwo-SES Joint Venture territory (which is initially China, Indonesia, the Philippines, Vietnam, Mongolia and Malaysia) by becoming a leading provider of proprietary equipment for the technology. The scope of the Tianwo-SES Joint Venture is to market and license the Company’s gasification technology via project sublicenses; procurement and sale of proprietary equipment and services; coal testing; and engineering, procurement and research and development related to the technology. SST contributed 53,800,000 yuan in April 2014 and is required to contribute an additional 46,200,000 yuan within two years of contract execution for a total contribution of 100,000,000 yuan (approximately $16 million) in cash to the Tianwo-SES Joint Venture, and owns 65% of the Tianwo-SES Joint Venture. The Company has contributed an exclusive license to use of its technology in the Tianwo-SES Joint Venture territory pursuant to the terms of a Technology Usage and Contribution Agreement (the “TUCA”) entered into among the Tianwo-SES Joint Venture, SST and the Company on the same date. The Company owns 35% of the Tianwo-SES Joint Venture. Under the JV Contract, neither party may transfer their interests in the Tianwo-SES Joint Venture without first offering such interests to the other party. Notwithstanding this, the Company has the right until 30 days after the first project sublicense is entered into by the Tianwo-SES Joint Venture to transfer or sell 5% of its interest to a financial investor. If the Company elects not to transfer such 5% interest during that period, SST has the option to purchase such interest from the Company for 10,000,000 yuan (approximately $1.6 million). The JV Contract also includes a non-competition provision which requires that the JV be the exclusive legal entity within the Tianwo-SES Joint Venture territory for the marketing and sale of any gasification technology or related equipment that utilizes low quality coal feedstock. Notwithstanding this, SST has the right to manufacture and sell gasification equipment outside the scope of the Tianwo-SES Joint Venture within the Tianwo-SES Joint Venture territory. In addition, the Company has the right to develop and invest equity in projects outside of the Tianwo-SES Joint Venture within the Tianwo-SES Joint Venture territory. After the termination of the Tianwo-SES Joint Venture, SST must obtain written consent from the Company for the market development of any gasification technology that utilizes feedstock in the Tianwo-SES Joint Venture territory. The JV Contract may be terminated upon, among other things, (i) a material breach of the JV Contract which is not cured, (ii) a violation of the TUCA, (iii) the failure to obtain positive net income within 24 months of establishing the Tianwo-SES Joint Venture or (iv) mutual agreement of the parties. On March 18, 2014, the Tianwo-SES Joint Venture received the required 20-year business license from the State Administration for Industry & Commerce of the People’s Republic of China (SAIC) in Zhangjiagang. On April 8, 2014, the Tianwo-SES Joint Venture transaction was completed and began operations. Technology Usage and Contribution Agreement Pursuant to the TUCA, the Company has contributed to the Tianwo-SES Joint Venture the exclusive right to the Company’s gasification technology in the Tianwo-SES Joint Venture territory, including the right to: (i) grant site specific project sub-licenses to third parties; (ii) use the Company’s marks for proprietary equipment and services; (iii) engineer and/or design processes that utilize the Company’s technology or other Company intellectual property; (iv) provide engineering and design services for joint venture projects and (v) take over the development of projects in the Tianwo-SES Joint Venture territory that have previously been developed by the Company and its affiliates. The Tianwo-SES Joint Venture will be the exclusive operational entity for business relating to the Company’s technology in the Tianwo-SES Joint Venture Territory. If the Tianwo-SES Joint Venture loses exclusivity due to a Company breach, SST is to be compensated for direct losses and all lost project profits. The Company will also provide training for technical personnel of the Tianwo-SES Joint Venture through the second anniversary of the establishment of the Tianwo-SES Joint Venture. The Company will also provide a review of engineering works for the Tianwo-SES Joint Venture. If modifications are suggested by the Company and not made, the Tianwo-SES Joint Venture bears the liability resulting from such failure. If the Company suggests modifications and there is still liability resulting from the engineering work, it is the liability of the Company. Any party making, whether patentable or not, improvements relating to the Company technology after the establishment of the Tianwo-SES Joint Venture, grants to the other Party an irrevocable, non-exclusive, royalty free right to use or license such improvements and agrees to make such improvements available to the Company free of charge. All such improvements shall become part of the Company’s technology and both parties shall have the same rights, licenses and obligations with respect to the improvement as contemplated by the TUCA. The Tianwo-SES Joint Venture will establish an Intellectual Property Committee, with two representatives from the Tianwo-SES Joint Venture and two from the Company. This Committee shall review all improvements and protection measures and recommend actions to be taken by the Tianwo-SES Joint Venture in furtherance thereof. Notwithstanding this, each party is entitled to take actions on its own to protect intellectual property rights. Any breach of or default under the TUCA which is not cured on notice entitles the non-breaching party to terminate. The parties can suspend performance of the TUCA in the event of a dispute if the dispute poses a significant adverse impact on performance. The Tianwo-SES Joint Venture indemnifies the Company for misuse of the Company’s technology or infringement of the Company’s technology upon rights of any third party. The following table presents summarized financial information for the Tianwo-SES Joint Venture (in thousands): Income Statement data: Year Ended June 30, 2015 Year Ended June 30, 2014 Revenue $ 8,161 $ — Operating loss (2,491 ) (466 ) Net loss (2,045 ) (466 ) Balance sheet data: Year Ended June 30, 2015 Year Ended June 30, 2014 Current assets $ 15,398 $ 8,573 Noncurrent assets 8,120 8,458 Current liabilities 8,434 3 Noncurrent liabilities — — Equity 15,084 17,028 Tianwo-SES Joint Venture is accounted for under the equity method. The Company’s capital contribution in the formation of the venture was the TUCA, which is an intangible asset. As such, the Company did not record a carrying value at the inception of the venture. Under the equity method of accounting, losses in the venture are not recorded if the losses cause the carrying value to be negative and there is no requirement of the Company to contribute additional capital. Under the Tianwo-SES Joint Venture, the Company is not required to contribute additional capital, therefore the Company is not recognizing losses in the venture, as this would cause the carrying value to be negative. Had the Company recognized its share of the losses related to the venture, the Company would have recognized losses of approximately $715,000 for the year ended June 30, 2015. |