March 2, 2007
By facsimile to (713) 228-1331 and U.S. Mail
Mr. Timothy E. Vail
President and Chief Executive Officer
Synthesis Energy Systems, Inc.
6330 West Loop South, Suite 300
Houston, TX 77401
Re: Synthesis Energy Systems, Inc.
Registration Statement on Form SB-2
Filed January 31, 2007
File No. 333-140367
Dear Mr. Vail:
We reviewed the filing and have the comments below.
Where indicated, we think that you should revise the document
in
response to the comments. If you disagree, we will consider your
explanation why a comment is inapplicable or a revision is
unnecessary. Be as detailed as necessary in your explanation. To
understand better your disclosure, we may ask you in some comments
to
provide us supplemental information. We may raise additional
comments after reviewing this information.
Our review`s purpose is to assist you in your compliance
with
applicable disclosure requirements and to enhance the overall
disclosure in your document. We look forward to working with you
to
achieve these objectives. We welcome any questions that you may
have
about comments or any other aspect of our review. You may call us
at
the telephone numbers listed at the end of this letter.
Registration Statement`s Facing Page
1. Since Synthesis Energy Systems, Inc. or SES is relying on Rule
415
of Regulation C under the Securities Act for the securities being
offered for resale, add a Rule 415 box to the form. See telephone
interpretation 36 in section D. of our July 1997 "Manual of
Publicly
Available Telephone Interpretations" that is available on the
Commission`s website at http://www.sec.gov.
Prospectus Cover Page
2. We note that you intend that selling shareholders may sell at
market prices. Please note that unless there is an established
trading market for securities, shares resold by stockholders in a
public offering must sell at fixed price or range until such time
as
a market is established. We do not consider the Pink Sheets as an
established trading market for this purpose, although quotation on
OTCBB would serve this purpose. Therefore, please fix a price or
a
price range for resales under this registration statement and
disclose it on your cover page. If you intend to contact a
sponsor
for quotation on OTCBB, please make this clear. If that is the
case,
you may also say that selling shareholders will sell at the fixed
price or within the fixed range until the shares are quoted on the
OTCBB, and that shareholders may thereafter sell at prevailing
market
prices or privately negotiated prices.
Forward Looking Statements, page 2
3. Move this section so that it follows the summary and risk
factors
sections. See Item 503(c)(2) of Regulation S-B.
4. Since SES is not subject to the reporting requirements of
section
13(a) or section 15(d) of the Exchange Act and the registration
statement in essence relates to an initial public offering, SES is
ineligible to rely on the safe harbor provision for forward-
looking
statements. See section 27A(b)(2)(D) of the Securities Act and
section 21E(b)(2)(D) of the Exchange Act. Delete the phrase
"within
the meaning of Section 27A of the Securities Act of 1933, as
amended
(the "Securities Act"), and Section 21E of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")." Alternatively,
state
explicitly that SES is ineligible to rely on the safe harbor
provision for forward-looking statements.
We may require additional funding..., page 3
5. Quantify the known or estimated amount of additional capital
that
SES will need to implement its business plan and strategies. We
note
the disclosures on pages 20 and 23 that SES has agreed to
contribute
$9.3 million in capital for its ownership shares in the
cooperative
joint venture contract with Shandong Hai Hua Coal & Chemical
Company
Ltd. and that the projected construction cost of the joint
venture`s
plant is $24 million.
We may have a contingent liability..., page 8
6. We note that you contemplate that resales of outstanding shares
may be made pursuant to Rule 144. Disclosure here and elsewhere
indicates that Tamborine Holdings, Inc. was a shell company
trading
on the Pink Sheets before its April 15, 2005 merger with Synthesis
Energy Holdings, Inc., a private company. Our view is that both
before and after the transaction promoters or affiliates and their
transferees are underwriters of the securities issued. Our view
also
is that Rule 144 would be unavailable for resale transactions in
this
situation, regardless of technical compliance with the rule. See
our
Worm no-action letter, publicly available January 21, 2000. As
appropriate, revise the disclosure in the registration statement
to
make clear that:
* Promoters or affiliates and their transferees are underwriters
of
the securities issued.
* Rule 144 is unavailable for resale transactions in this
situation.
7. We note that you intend to contact all stockholders who
purchased
shares in your May 2005 and August 2006 private placements and
offer
to rescind those sales. Please clarify what your exposure would
be
if all of the holders accepted this offer. Please also tell us
what
consideration you have given to whether this rescission offer
would
be registered under the Securities Act.
Our common stock may be subject to the "penny stock" rules...,
page
11
8. Since SES` common stock is not traded on a national securities
exchange or listed on an automated quotation system sponsored by a
registered national securities association, SES` common stock is a
penny stock. See Rule 3a51-1 under the Exchange Act, and revise.
Plan of Operations, page 23
9. Please expand your discussion to quantify the amounts you
expect
to spend during the next twelve months to advance and complete the
development of the current and future projects you disclose.
Also,
please quantify the amount of debt financing you are seeking. In
addition, please discuss how long you believe you can satisfy your
cash requirements and disclose the amount of additional funds you
believe you will have to raise in the next twelve months.
10. To the extent applicable, discuss any off-balance sheet
arrangements, as required by Item 303(c) of Regulation S-B.
Selling Stockholders, page 24
11. We note the disclosure in footnote (6) to the table that SES
plans to include six million shares of common stock that are
eligible
for trading on the Pink Sheets and will include the names of the
selling stockholders in an amendment to the registration
statement.
Allow us sufficient time to review the amended disclosure before
requesting acceleration of the registration statement`s
effectiveness.
12. For shares to be offered for resale by each of ATC Trustees,
MD
Investments, Silo Investments and Zahaca Enterprises, disclose the
natural person or persons who exercise the sole or shared voting
and
dispositive powers for the shares to be offered by that
stockholder.
13. Describe briefly how each selling stockholder acquired the
securities being offered for resale.
14. State any position, office, or other material relationship
that
each selling stockholder has had within the past three years with
SES
or any of its predecessors or affiliates and any such continuing
relationship. See Item 507 of Regulation S-B.
15. If a selling stockholder is a broker-dealer, tell us whether
the
selling stockholder acquired its securities as compensation for
underwriting activities. Unless a broker-dealer acquired the
securities as compensation for underwriting activities, SES must
identify the broker-dealer as an underwriter in the prospectus.
Language such as "may be deemed to be" an underwriter is
unacceptable
if the selling stockholder is a broker-dealer.
16. If a selling stockholder is a broker-dealer`s affiliate,
include
disclosure that this broker-dealer`s affiliate:
* Purchased the securities to be resold in the ordinary course of
business.
* Had no agreements or understandings, directly or indirectly,
with
any person to distribute the securities at the time of their
purchase.
If SES is unable to make the representations noted above in the
prospectus, SES must state in the prospectus that the selling
stockholder is an underwriter. Language such as "may be deemed to
be" an underwriter is unacceptable if the selling stockholder is
an
affiliate of an underwriter that cannot make these
representations.
17. Disclose that SES will file a prospectus supplement to name
successors to any named selling stockholders who are able to use
the
prospectus to resell the securities.
Description of Common Stock, page 38
18. Delete in the first paragraph the qualification of the
description to documents outside the prospectus. The
qualification
is permitted under Rule 411(a) of Regulation C under the
Securities
Act only where a summary of a particular document is required or
contemplated by the form.
Changes in and Disagreements with Accountants, page 40
19. We note you provided disclosures pursuant to Item 304 of
Regulation S-B. Please provide a letter from your former auditor,
as
required by Item 304(a)(3) of Regulation S-B, or tell us why it is
not required.
Legal Matters, page 40
20. Include the address of counsel giving the legal opinion. See
Schedule A(23) to the Securities Act.
Undertakings
21. Include the second paragraph of the undertaking required by
Item
512(e) of Regulation S-B.
Financial Statements, page F-1
General
22. Please revise your Form SB-2 to include unaudited interim
financial statements and related disclosures for the period ended
December 31, 2006 as required by Item 310(g) of Regulation S-B.
Consolidated Statements of Stockholders` Equity, pages F-5 and F-
21
23. Please revise your annual and interim statements of equity to
include the number of shares issued for cash and other
consideration,
as required by paragraph 11(d) of SFAS 7.
Note 1 - Summary of Significant Accounting Policies, (a)
Organization
and description of business, page F-7
24. Please help us understand how you determined that the merger
between a wholly owned subsidiary of Tamborine Holdings, Inc. and
Synthesis Energy Holdings, Inc. is a business combination under
SFAS
141. Based on your description of this transaction, it appears to
us
that it is a merger of an operating company into a non-operating
shell company and is outside the scope of SFAS 141. It appears to
us
that this transaction is, in substance, a capital transaction and
is
equivalent to Synthesis Energy Holdings, Inc. issuing stock for
the
net monetary assets of Tamborine Holdings, Inc, accompanied by a
recapitalization. Please advise or clarify your disclosures
accordingly.
25. Please tell us the ownership interests of Synthesis Energy
Systems, Inc., International Hydrogen Technologies, Inc.,
Innovative
Engines, Inc., and Synthesis Energy Systems, LLC prior to the
restructuring that formed Synthesis Florida and demonstrate that
these entities were under common control for all periods
presented.
Note 9 - Commitment and Contingencies, Tamborine merger related
representations and warranties, page F-13
26. We note your disclosures regarding potential violations of
securities laws. Please quantify the dollar amount of securities
that could be subject to a rescission offer, and the related
potential damages, or explain to us why you are unable to do so.
Please clarify whether you have initiated a rescission offer and
explain the specific nature of your "contact" with the private
placement stockholders. Since shares subject to a rescission
offer
may be required to be redeemed in cash based on factors outside
your
control, you are required to evaluate and substantiate your
current
presentation of these shares in permanent equity rather than
temporary equity. If you have not initiated a rescission offer,
your
classification should be based on the probability that a
shareholder
would pursue rescission and would prevail in asserting a right of
action against you for rescission based on the criteria in SFAS 5.
If you conclude that you meet the requirements of SFAS 5, you
should
reclassify shares subject to a "probable" rescission to temporary
equity. If you conclude that don`t meet the requirements of SFAS
5,
you should explain your conclusion and the factors that support
it.
If you have initiated a rescission offer, you should reclassify
all
shares subject to rescission outside of permanent equity until the
offer has terminated.
Note 10 -Shareholders equity, page F-15
27. Please help us understand the facts and circumstances related
to
the surrender of 4,352,500 shares of your common stock during the
year ended June 30, 2006, including when, to whom and for what
they
were originally issued.
Note 3 - Intangible Asset, page F-27
28. Please tell us how you determined the value assigned to your
restricted shares issued as part of the consideration for the
amended
and restated license agreement with GTI, including if and how you
considered the cash price related to the private placement in
August
2006.
Exhibit Index
29. Expand the disclosure under the asterisk to indicate that the
omitted portions of the exhibits subject to the confidential
treatment application are filed separately with the Commission.
Exhibit 10.1
30. We note that the exhibit is the April 4, 2005 amended and
restated agreement and plan of merger among Tamborine Holdings,
Inc.,
SES Acquisition Corporation, Synthesis Energy Holdings, Inc., and
the
Shareholders of Synthesis Energy Holdings, Inc. Item 601(b)(2) of
Regulation S-B permits omission of schedules or attachments if
they
are listed in the index and provided to the Commission upon
request.
Please refile the exhibit to include a list of the omitted
schedules
or attachments.
Exhibit 10.7
31. Absent an order granting confidential treatment, Item
601(b)(10)
of Regulation S-B requires the filing of material contracts,
including attachments, in their entirety. Attachments include,
for
example, annexes, appendices, exhibits, and schedules. Since you
did
not file schedule 2 to the exhibit, please refile the exhibit in
its
entirety.
Exhibits 10.3 and 10.6
32. We note that you submitted an application for confidential
treatment. We intend to process concurrently the application and
the
registration statement. Before requesting acceleration of the
registration statement`s effectiveness, you must resolve any issue
concerning the application and file publicly the portions for
which
you are not requesting confidential treatment.
Closing
File an amendment to the SB-2 in response to the comments.
To
expedite our review, SES may wish to provide us three marked
courtesy
copies of the amendment. Include with the filing any supplemental
information requested and a cover letter tagged as correspondence
that keys the responses to the comments. If SES thinks that
compliance with any of the comments is inappropriate, provide the
basis in the letter. We may have additional comments after review
of
the amendment, the responses to the comments, and any supplemental
information.
We urge all persons responsible for the accuracy and adequacy
of
the disclosure in the registration statement reviewed by us to
ensure
that they have provided all information investors require for an
informed decision. Since SES and its management are in possession
of
all facts relating to the disclosure in the registration
statement,
they are responsible for the adequacy and accuracy of the
disclosures
that they have made.
If SES requests acceleration of the registration statement`s
effectiveness, SES should furnish a letter at the time of the
request, acknowledging that:
* Should the Commission or the staff acting by delegated authority
declare the registration statement effective, it does not
foreclose
the Commission from taking any action on the filing.
* The action of the Commission or the staff acting by delegated
authority in declaring the registration statement effective does
not
relieve SES from its full responsibility for the adequacy and
accuracy of the registration statement`s disclosures.
* SES may not assert our comments or the declaration of the
registration statement`s effectiveness as a defense in any
proceedings initiated by the Commission or any person under the
United States` federal securities laws.
The Commission`s Division of Enforcement has access to all
information that SES provides us in our review of the registration
statement or in response to our comments on the registration
statement.
We will consider a written request for acceleration of the
registration statement`s effectiveness under Rule 461 of
Regulation C
under the Securities Act as confirmation that those requesting
acceleration are aware of their responsibilities under the
Securities
Act and the Exchange Act as they relate to the proposed public
offering of the securities specified in the registration
statement.
We will act on the request and by delegated authority grant
acceleration of the registration statement`s effectiveness.
You may direct questions on accounting comments to Dale A.
Welcome, Staff Accountant, at (202) 551-3865 or Anne M. McConnell,
Senior Staff Accountant, at (202) 551-3709. You may direct
questions
on other comments and disclosure issues to Edward M. Kelly, Senior
Counsel, at (202) 551- 3728 or me at (202) 551-3760.
Very truly yours,
Pamela A. Long
Assistant Director
cc: Robert G. Reedy, Esq.
Porter & Hedges, L.L.P.
1000 Main Street, 36th Floor
Houston, TX 77002
Mr. Timothy E. Vail
March 2, 2007
Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-7010
DIVISION OF
CORPORATION FINANCE