SYNTHESIS ENERGY SYSTEMS INC (Form: SB-2/A, Received: 03/30/2007 18:18:10)

Delaware

20-2110031

(State or jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification No.)

As filed with the Securities and Exchange Commission on March 30, 2007

Registration Statement No. 333-140367

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 1

FORM SB-2

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

SYNTHESIS ENERGY SYSTEMS, INC.

(Name of small business issuer in its charter)

6330 West Loop South, Suite 300

Houston, Texas 77401

(713) 579-0600

(Address and telephone number of principal executive offices)

Timothy E. Vail

President and Chief Executive Officer

Synthesis Energy Systems, Inc.

6330 West Loop South, Suite 300

Houston, Texas 77401

Telephone: (713) 579-0600

Facsimile: (713) 579-0610

(Name, address and telephone number of agent for service)

Copies to:

Robert G. Reedy

Porter & Hedges, L.L.P.

1000 Main Street, 36 ^th Floor

Houston, Texas 77002

Telephone: (713) 226-6000

Facsimile: (713) 228-1331

Approximate date of proposed sale to the public: As soon as practicable after the effective date of the registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box: [X]

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.[_]

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_]

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. [_]

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities

To be Registered

Amount to be

Registered (1)

Proposed Maximum

Offering Price

Per Share (1)

Proposed Maximum

Aggregate Offering

Price

Amount of

Registration

Fee

Common Stock, $.01 par value per share

8,000,000 shares

$5.75

$46,000,000

$4,922.00

(1)

Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c) under the Securities Act of 1933, based on the average of the minimum and the maximum proposed initial offering prices of $3.50 and $8.00, respectively, for the shares of common stock offered for resale hereby.

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. The selling stockholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to completion dated March 30, 2007

Preliminary Prospectus

8,000,000 Shares

[REGISTRATIONSTATEMENTFORM002.GIF]

Synthesis Energy Systems, Inc.

Common Stock

_______________________________________

This prospectus relates to the sale or other disposition of up to 8,000,000 shares of our issued and outstanding common stock, or interests therein, by the selling stockholders identified in this prospectus. The selling stockholders may, from time to time, sell, transfer or otherwise dispose of any or all of their shares of common stock or interests in shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These dispositions may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated prices. Because there is no trading market in our common stock as of the date of this prospectus, the selling stockholders intend to sell any shares in the public market at prices ranging from $3.50 to $8.00 per share until a public market develops for the common stock. Once a public market develops for the common stock, the selling stockholders may sell their shares of common stock in the public market based on the market price at the time of sale or at negotiated prices. The selling stockholders may also sell their shares in transactions that are not in the public market in the manner set forth under “Plan of Distribution.”

We are not offering any shares of our common stock for sale under this prospectus, and we will not receive any of the proceeds from the sale or other disposition of the shares covered hereby, or interests therein, by the selling stockholders.

Our common stock is traded on the Pink Sheets under the symbol “SYMX.” The last reported sale price for our common stock on the Pink Sheets on March 27, 2007 was $6.75.

Investing in our common stock involves significant risks that are described in the “Risk Factors” section beginning on page 2 of this prospectus.

_______________

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is ________, 2007

TABLE OF CONTENTS

Page

PROSPECTUS SUMMARY

RISK FACTORS

FORWARD LOOKING STATEMENTS

BUSINESS

DESCRIPTION OF PROPERTY

DIRECTORS AND EXECUTIVE OFFICERS

CORPORATE GOVERNANCE

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

EXECUTIVE COMPENSATION

INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

DESCRIPTION OF COMMON STOCK

RELATIONSHIPS WITH ISSUER OF EXPERTS NAMED IN REGISTRATION STATEMENT

LEGAL PROCEEDINGS

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION OF SECURITIES ACT LIABILITIES 46

LEGAL MATTERS

EXPERTS

INDEX TO FINANCIAL STATEMENTS

F-1

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different information. We are not making an offer of our common stock in any state where the offer is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus.

PROSPECTUS SUMMARY

The following summary should be read together with the information contained in other parts of this prospectus and the documents we incorporate by reference to fully understand the offering as well as the other considerations that are important to you in making a decision about whether to invest in our common stock. As used in this prospectus, unless the context otherwise requires, “we,” the “Company,” “us,” “our” or “Synthesis” refers to Synthesis Energy Systems, Inc. and its consolidated subsidiaries unless otherwise indicated or the context requires otherwise. We have provided definitions for some of the industry terms used in this registration statement in the “Glossary of Terms” in Appendix A.

Our Company

We are an emerging development stage company involved in the global development and commercialization of gasification technology. As described further herein, our principal asset is an exclusive license with the Gas Technology Institute (“GTI”), a U.S. based non-profit research and development organization, for their U-GAS ^® coal gasification technology.

Our principal executive offices are located at 6330 West Loop South, Suite 300, Houston, Texas 77401, and our phone number is (713) 579-0600. Our website address is www.synthesisenergy.com. Information on our website is not incorporated by reference into this prospectus and does not constitute part of this prospectus.

The Offering

Common stock offered:


By us	None
By the selling stockholders	8,000,000 shares
Common stock outstanding after the offering	28,183,715 shares ⁽¹⁾
Pink Sheets symbol	SYMX
Use of proceeds	We will not receive any of the proceeds from the sale or other disposition of the shares covered hereby, or interests therein, by the selling stockholders. See “Use of Proceeds.”
Risk Factors	See “Risk Factors” beginning on page 3 and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our common stock.

(1)

The number of shares shown to be outstanding is based on the number of shares of our common stock outstanding as of February 28, 2007, and does not include shares reserved for issuance upon the exercise of options granted or available under our stock incentive plan. As of February 28, 2007, we had outstanding options to purchase 5,367,500 shares of our common stock with a weighted average exercise price of $3.24 per share.

RISK FACTORS

An investment in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below and the other information included in, or incorporated by reference into, this prospectus, including our financial statements and related notes, before deciding to invest in our common stock. If any of the following risks or uncertainties actually occurs, our business, financial condition and operating results would likely suffer. In that event, the market price of the offered securities could decline and you could lose all or part of the money you paid to buy our common stock.

Risks Related to our Business

We are a newly organized company and our business plans and strategies may not be accepted in the marketplace.

We began operations in November of 2003 as Synthesis Energy Systems, Inc., a corporation formed under the laws of the British Virgin Islands, and have a limited operating history. Our proposed business plans and strategies described in this registration statement incorporate our senior management’s current best analysis of potential markets, opportunities and difficulties that face us. No assurance can be given that the underlying assumptions accurately reflect current trends in the energy services industry or our consumers’ reaction to our products and services or that such will be successful. In addition, our plans may and likely will change substantially from time to time as our senior management reassesses its opportunities and reallocates its resources, and any such plans may be changed or abandoned at any time. Our strategies remain untested and there is no assurance that our business plans and strategies can be successfully implemented and executed.

We will utilize a technology with a limited commercial history. If the U-GAS ^® technology fails to gain or loses market acceptance, our business will suffer.

Although GTI is one of the world’s leading energy research and development organizations with well-equipped research facilities, it does not have marketing resources to fully commercialize its U-GAS® technology. To date, U-GAS® technology has not been used in a large number of commercial facilities. There is a risk that the U-GAS ^® technology will not meet reliability or efficiency targets. If U-GAS ^® technology is not generally accepted as a low cost energy alternative and we are unable to effectively manage the implementation of the U-GAS ^® technology, our business and operating results could be seriously harmed.

We may require additional funding, and our failure to raise additional capital necessary to support and expand our operations could reduce our ability to compete and could harm our business.

We have spent or plan to spend the following within the next twelve months; (i) approximately $12.4 million related to construction of a coal gasification plant through our joint venture with Hai Hua (described under “Business—Current Projects”), which includes a $9.1 million equity contribution by the Company and a loan by the Company to our joint venture with Hai Hua of $3.3 million; (ii) approximately $2.2 million of operating costs; and (iii) approximately $800,000 of project development expenses. On March 22, 2007 we completed a loan transaction with the Industrial and Commercial Bank of China (“ICBC”) to fund (i) above. See “Plan of Operations” for more on this loan. As of March 30, 2007, we had approximately $3 million of cash in our banks, in addition to approximately $18.4 million of cash in the Joint Venture.

As described in more detail in “Plan of Operations,” over the next twelve months, we also plan to continue to advance the commercial development of U-GAS® based projects in China and selected locations in the United States, and to further expand our global engineering and project execution team to complete future projects which are currently contemplated. In the next few months, we plan to raise

approximately $25 million to $50 million in order to implement these strategies in furtherance of our business plan. We may need to raise additional funds sooner in order to fund more rapid expansion, cover unexpected construction costs or delays, replace flawed equipment, develop new or enhanced energy services or products, respond to competitive pressures or to acquire complementary energy related products, services, businesses or technologies. We intend to rely on commercial banks to finance or refinance some portion of our project costs. We may also offer debt or equity securities to fulfill our other cash requirements. There can be no assurances that financing will be available to us in the future on acceptable terms or at all. If we cannot raise required funds on acceptable terms, we may not be able to, among other things (i) develop, implement or enhance our energy related products and services; (ii) negotiate and enter into new gasification plant development contracts; (iii) expand our operations; (iv) hire and train employees; or (v) respond to competitive pressures or unanticipated capital requirements.

The termination of our license agreement with GTI or our joint venture with Hai Hua could materially adversely affect our business and results of operations.

Our license agreement with GTI for the U-GAS ^® technology (described under “Business—GTI License Agreement”) and our joint venture with Hai Hua (described under “Business—Current Projects”) are essential to the Company and its future development. The license agreement terminates on August 31, 2016, but may be terminated by GTI upon certain events of default if not cured by the Company within specified time periods. In addition, after the two extension periods provided under the license agreement, there is no assurance that we will succeed in obtaining an extension of the term of the license in the future at a royalty rate that we believe to be reasonable or at all. Our joint venture with Hai Hua terminates on July 6, 2056, but may be terminated due to certain events of bankruptcy and if the purchase and sale contract for syngas is terminated. The purchase contract terminates on October 22, 2026, but may be terminated by Hai Hua upon certain events of default. Termination of the joint venture would require us to seek another collaborative relationship in that territory. There is no assurance that a suitable alternative third party would be identified, and even if identified, there is no assurance that the terms of any new relationship would be commercially acceptable to us.

Our lack of an operating history, any significant assets or any meaningful revenue or profits makes it difficult to evaluate our business prospects and there can be no assurance of our future profitability.

We are a development stage company and our lack of operating history precludes us from forecasting operating expenses based on historical results. We do not have any significant assets, other than our license agreement with GTI for the U-GAS ^® technology (described under “Business—GTI License Agreement”), and have not generated any revenues from our business. If we are unable to develop the U-GAS ^® technology and successfully enter into and implement contracts with industrial complexes, and provide energy services to these customers and reduce their energy costs and manage our business and operations, we may never achieve profitability. You should evaluate our business and prospects given the risks, difficulties, expenses and challenges we may encounter because we are a development stage company in a rapidly evolving market. Even if we do achieve profitability, it may not be sustainable, and we cannot predict the level of such profitability.

Our products and services are in an early stage of development and we may never be able to reach agreement regarding the completion of a project.

All of our other potential development opportunities are in the early stages of development and/or contract negotiations. Our joint venture with Hai Hua discussed herein under “Business – Current Projects” is currently our only negotiated contract. We must undertake the time-consuming and costly process of fulfilling the requirements of requests for proposals and negotiating contracts before offering our services to industrial complexes. We are unsure of when, if ever, many of these contracts will be negotiated, executed and implemented. There are many reasons that we may fail in our efforts to negotiate, execute and implement contracts with our target customers to provide cost efficient energy services, including the possibility that: (i) our products and services will be ineffective; (ii) our products

and services will be cost prohibitive or will not achieve broad market acceptance; (iii) competitors will offer superior products and services; or (iv) competitors will offer their products and services at a lower cost.

We will manage the design, procurement and construction of our plants. If our management of these issues fails, our business and operating results could suffer.

For our joint venture with Hai Hua (described under “Business—Current Projects”), and possibly for other projects we may work on in the future, we are managing plant design, procurement of equipment, and supervising construction. Most of this work has been subcontracted to third parties with the Company coordinating and supervising these tasks. The Company believes that this is the most time and cost effective way to build gasification plants in China and elsewhere, but the Company does bear the risk of cost and schedule overruns and quality control. If we do not properly manage the design, procurement and construction of our plants, our business and operating results could be seriously harmed.

Our results of operations could be negatively affected by potential fluctuations in exchange rates with China .

Any decrease in the value of the U.S. dollar in relation to foreign currencies could increase the cost of the services provided to us upon contract expirations. There can be no assurance that we will be able to offset any such increases and any failure to do so could have a material adverse effect on our business, financial condition and results of operations. We may in the future engage in hedging activities to protect operations and future obligations in foreign currencies, which could adversely affect our business and operating results.

We are also exposed to foreign currency exchange rate risks as a result of our business in China. Although the Chinese Yuan has historically been largely pegged to the U.S. dollar, which has minimized our foreign currency exchange rate risk in China, recently, the Chinese Yuan has been allowed to float against to the U.S. dollar, and therefore, we will be exposed to additional foreign currency exchange rate risk. This risk will also increase as we continue to increase our activities in other foreign countries.

Our operations in China may be adversely affected by evolving economic, political and social conditions.

Our operations are subject to risk inherent in doing business internationally. Such risks include the adverse effects on operations from war, international terrorism, civil disturbances, political instability, governmental activities and deprivation of contract and property rights. In particular, since 1978, the Chinese government has been reforming its economic and political systems, and we expect this to continue. Although we believe that these reforms have had a positive effect on the economic development of China and have improved our ability to do business in China, we cannot assure you that these reforms will continue or that the Chinese government will not take actions that impair our operations or assets in China. In addition, periods of international unrest may impede our ability to do business in other countries and could have a material adverse effect on our business and results of operations.

Long-term offtake agreements could be difficult to enforce because of China’s underdeveloped legal system.

Our project level subsidiary revenues may be derived from long-term offtake agreements for syngas, power and other commodities. If a commodity purchaser ceases payment, there is less certainty under China’s legal system to seek remedies as compared to Western countries. We will seek to mitigate this risk by (i) obtaining all requisite government approvals, (ii) developing projects with good underlying economics, (iii) developing modular plants that can be moved away in an extreme circumstance, (iv) using local banks to finance a majority of our project costs, and (v) including enforceable arbitration provisions in all project agreements. The success of our business depends in part on our ability to successfully negotiate, implement and manage the offtake agreements. As a result, our business and

financial condition would be materially adversely affected if we are unable to mitigate the offtake agreement risks.

A portion of our revenues will be derived from the merchant sales of commodities and our inability to obtain satisfactory prices could have a material adverse effect on our business.

In addition to long-term offtake agreements, in certain circumstances, we plan to sell hydrogen, nitrogen, elemental sulfur, ash and other commodities into the merchant market. These sales may not be subject to long-term offtake agreements and the price will be dictated by the then prevailing market price. Revenues from such sales may fluctuate and may not be consistent or predictable. Our business and financial condition would be materially adversely affected if we are unable to obtain satisfactory prices for these commodities or if prospective buyers do not purchase these commodities.

Our results of operations may fluctuate.

Our operating results have varied on a quarterly basis during our short operating history and may fluctuate significantly as a result of a variety of factors, many of which are outside our control. Factors that may affect our quarterly operating results include: (i) our ability to retain new customers; (ii) the announcement or introduction of services and products by us or our competitors; (iii) the success and acceptance of U-GAS ^® technology; (iv) pricing competition; (v) shortages of equipment, raw materials, or fuel; (vi) approvals by various government agencies; (vii) the inability to obtain land use rights for our projects; and (viii) general economic conditions as well as economic conditions specific to the energy industry.

We are dependent on key personnel who would be difficult to replace.

Our performance is substantially dependent on the continued services and on the performance of our senior management and other key personnel. Our performance also depends on our ability to retain and motivate our officers and key employees. The loss of the services of any of our executive officers or other key employees could have a material adverse effect on our business, results of operations and financial condition. Although we have employment agreements, which include non-competition provisions, with Timothy Vail, our President and Chief Executive Officer, David Eichinger, our Chief Financial Officer and certain other of our key employees, as a practical matter, those agreements will not assure the retention of our employees and we may not be able to enforce all of the provisions in either employment agreement, including the non-competition provisions. Our future success also depends on our ability to identify, attract, hire, train, retain and motivate other highly skilled technical, managerial, marketing and customer service personnel. Competition for such personnel is intense, and there can be no assurance that we will be able to successfully attract, integrate or retain sufficiently qualified personnel. In addition, because a large portion of operations are currently in China, we will be required to retain personnel who reside in, or are willing to travel to, and who speak the language and understand the customs of, China. Our inability to retain these types of individual could have a material adverse effect on our business, results of operations and financial condition.

Our success will depend in part on our ability to grow and diversify, which in turn will require that we manage and control our growth effectively.

Our business strategy contemplates growth and diversification. As we add to our services, our number of customers, and our marketing and sales efforts, our operating expenses and capital requirements will increase. Our ability to manage growth effectively will require that we continue to expend funds to improve our operational, financial and management controls, as well as reporting systems and procedures. In addition, we must effectively expand, train and manage our employees. We will be unable to manage our business effectively if we are unable to alleviate the strain on resources caused by growth in a timely and successful manner. There can be no assurance that we will be able to manage our growth and a failure to do so could have a material adverse effect on our business.

We face intense competition. If we cannot gain a market share among our competition, we may not earn revenues and our business may be harmed.

The business of providing energy is highly competitive. In the gasification market, large multi-national industrial companies such as General Electric, Shell, ConocoPhillips, Siemens, and small Chinese firms (with fluidized beds and fixed bed technologies) offer coal gasification equipment and services. Although we do not directly compete with the multi-national firms, their activities in the marketplace may negatively impact our operations and our ability to attract quality projects. In addition, new competitors, some of whom may have extensive experience in related fields or greater financial resources, may enter the market. Increased competition could result in a loss of contracts and market share. Either of these results could seriously harm our business and operating results. In addition, there are a number of gasification and conventional, non-gasification, coal-based alternatives for producing heat and power that could compete with our technology in specific situations. If we are unable to effectively compete with other sources of energy, our business and operating results could be seriously harmed.

In our areas of operation, the projects we intend to build will face rigorous environmental regulations, review and approval. There is no assurance that we will be able to obtain such approvals or maintain them once granted.

Our operations are subject to stringent federal, state and local laws and regulations governing the discharge of materials into environment or otherwise relating to environmental protection. Numerous governmental agencies, such as the U.S. Environmental Protection Agency and various Chinese authorities, issue regulations to implement and enforce such laws, which often require difficult and costly compliance measures that carry substantial administrative, civil and criminal penalties or may result in injunctive relief for failure to comply. These laws and regulations may require the acquisition of a permit before operations at a facility commence, restrict the types, quantities and concentrations of various substances that can be released into the environment in connection with such activities, limit or prohibit construction activities on certain lands lying within wilderness, wetlands, ecologically sensitive and other protected areas, and impose substantial liabilities for pollution resulting from our operations. We believe that we are in substantial compliance with current applicable environmental laws and regulations and we have not experienced any material adverse effect from compliance with these environmental requirements.

In China, developing and constructing gasification facilities is highly regulated. In the development stage of a project, the key government approvals are the project’s environmental impact assessment report, feasibility study (also known as the project application report) and, in the case of a Sino-foreign joint venture, approval of the joint venture company’s joint venture contract and articles of association. Approvals in China are required at the municipal, provincial and/or central government levels depending on the total investment in the project.

Although we have been successful in obtaining the permits that are required at this stage of our development, any retroactive change in regulations or an opinion that the approvals that have been obtained are inadequate, either at the federal, provincial or state level, could require us to obtain additional or new permits or spend considerable resources on complying with such regulations. Other developments, such as the enactment of more stringent environmental laws and regulations, could require us to incur significant capital expenditures.

We may have difficulty managing the government approval process which could delay the implementation of our business plan.

Selling syngas, electricity and other commodities is highly regulated in many markets around the world. We believe our projects will be supported by the governmental agencies in which they will operate because coal-based technologies, which put less of a burden on the environment, are generally encouraged by most governments. However, in China and other developing markets, the regulatory environment is often uncertain and can change quickly, often with contradictory regulations being issued. In some cases, government officials have different interpretations of such regulations and project approvals that are obtained by the Company could later be deemed to be inadequate or new regulations could require that additional levels of approval be obtained. If we are unable to effectively manage the government approval process in the markets in which we intend to operate, our business prospects and operating results could be seriously harmed.

We are dependent on the availability and cost of fuel supplies and our inability to obtain a low-cost source could have an impact on our business.

Our projects may depend on the supply of low cost fuel, the supply of which could be interrupted by shortages and/or transportation bottlenecks. We intend to locate projects in areas where low cost fuels are available, or where low cost fuels can be moved to a project site by bulk commodity transport services, thereby eliminating transportation bottlenecks. If we are unable to effectively obtain a source of low-cost feedstock for our projects, our business and operating results could be seriously harmed.

We face the potential inability to protect our intellectual property rights which could have a material adverse effect on our business.

We rely on proprietary technology from GTI. Our license agreement with GTI for the U-GAS ^® technology (described under “Business—GTI License Agreement”) is a critical component of our business. GTI’s proprietary technical know-how is critical to the use of the technology and certain of the patents granted around the U-GAS® technology have expired. We are improving the technology and we plan to create new technologies around the core U-GAS ^® technology and to seek patent protections for these improvements and new technologies. Proprietary rights relating to the U-GAS ^® technology are protected from unauthorized use by third parties only to the extent that they are covered by valid and enforceable patents or are maintained in confidence. There can be no assurance that patents will be issued from any pending or future patent applications owned by or licensed to the Company or that the claims allowed under any issued patents will be sufficiently broad to protect the Company’s technology. In the absence of patent protection, the Company may be vulnerable to competitors who attempt to copy the Company’s technology or gain access to its proprietary information and technical know-how. In addition, the Company relies on proprietary information and technical know-how that it seeks to protect, in part, by confidentiality agreements with its collaborators, employees, and consultants. There can be no assurance that these agreements will not be breached, that the Company would have adequate remedies for any breach, or that the Company’s trade secrets will not otherwise become known or be independently developed by competitors.

Proceedings initiated by the Company to protect its proprietary rights could result in substantial costs to the Company. There can be no assurance that competitors of the Company will not initiate litigation to challenge the validity of the Company’s patents, or that they will not use their resources to design comparable products that do not infringe upon the Company’s patents. There may also be pending or issued patents held by parties not affiliated with the Company that relate to the Company’s products or technologies. The Company may need to acquire licenses to, or contest the validity of, any such patents. There can be no assurance that any license required under any such patent would be made available on acceptable terms or that the Company would prevail in any such contest. The Company could incur substantial costs in defending itself in suits brought against it or in suits in which the Company may assert its patent rights against others. If the outcome of any such litigation is unfavorable to the Company, the Company’s business and results of operations could be materially and adversely affected.

Foreign laws may not afford us sufficient protections for our intellectual property, and we may not be able to obtain patent protection outside the United States.

Despite continuing international pressure on the Chinese government, intellectual property rights protection continues to present significant challenges to foreign investors, and, increasingly, Chinese companies. China has put in place a comprehensive system of intellectual property laws; however, incidents of infringement are common and enforcement of rights can, in practice, be difficult. With the assistance of our Chinese and US intellectual property counsel, we have developed a strategy for managing our intellectual property rights in China, the United States and elsewhere. Even though our first-mover advantage is our best protection against intellectual property rights infringements and/or competitive threats, we have the option to take some or all of the following steps: (i) place tangible protections on intellectual property, especially GTI’s know-how, including compartmentalization of information and tracking access to sensitive design information, which may include restricting access to computer systems by locking disc drives, installing security systems on computers that would not allow files to be copied or uploaded for e-mail transmission, restricting a computer user’s ability to print sensitive files, and/or using encryption, (ii) designate a special project room with security and limited access for design work, (iii) develop a solid patent registration portfolio, (iv) register technology licenses with the appropriate authorities, and use contractual mechanisms consistent with Chinese law to provide a basis for enforcement, (v) conduct thorough due diligence of any partners with whom technology will be shared or licensed and ensure alignment of economic interests with such partners, (vi) copyright all engineering design and product design blueprints, (vii) enter into strict confidentiality agreements, (viii) aggressively monitor the market for infringements, (ix) take swift and immediate action at the first signs of infringement, or (x) develop relationships with local authorities where intellectual property rights are licensed or otherwise used. If we are unable to manage our intellectual property rights, our business and operating results may be seriously harmed.

Risks Related to our Common Stock

We may have a contingent liability arising out of the issuance of shares by Tamborine.

As discussed elsewhere herein, Synthesis Energy Systems, Inc., a corporation formed under the laws of the British Virgin Islands (“Synthesis BVI”), and Synthesis Energy Systems, LLC, a West Virginia limited liability company (“Synthesis LLC”), were formed as sister companies in November of 2003 to engage in the business of development and commercialization of the U-GAS ^® technology. The founders of Synthesis BVI believed that it was important to be a publicly traded company in order to obtain the capital necessary to engage in this business. Tamborine Holdings, Inc., a shell company trading on the Pink Sheets (“Tamborine”), a centralized quotation service that collects and publishes market maker quotes for securities traded in the over-the-counter market (the “Pink Sheets”), was receptive to a combination transaction with Synthesis BVI. As such, on April 18, 2005, pursuant to the terms of an Agreement and Plan of Merger (the “Agreement”), SES Acquisition Corporation, a wholly-owned subsidiary of Tamborine, merged with and into Synthesis Energy Holdings, Inc., a Florida corporation (“Synthesis Florida”), whereby the holders of common stock of Synthesis Florida became shareholders of, and Synthesis Florida became a wholly-owned subsidiary of, Tamborine. As a condition of the above merger, Synthesis Florida completed a restructuring whereby each of Synthesis BVI and Synthesis LLC became wholly owned subsidiaries of Synthesis Florida. On April 27, 2005, Tamborine changed its name to “Synthesis Energy Systems, Inc.” and on June 27, 2005, reincorporated in the state of Delaware. At the time of the merger, there were 100,000,000 shares of Tamborine common stock outstanding, 94,000,000 of which were cancelled in connection with the merger. The remaining 6,000,000 shares became shares of the Company as the surviving entity as a result of the name change and the reincorporation. An additional 21,000,000 “restricted” shares were issued as consideration in the merger to former shareholders of Synthesis Florida, all of whom were accredited investors.

Tamborine made numerous representations and warranties in the Agreement, including a representation that all prior offers and sales of its common stock were duly registered or exempt from the registration requirements of the Securities Act or any applicable state securities laws. As noted above, one of the principal reasons that Synthesis Florida completed the merger was to have access to a public trading market, and Tamborine had represented that its shares were eligible for trading, and in fact were trading, on the Pink Sheets. The Company’s current management team, which took office beginning in May of 2006, re-examined the facts surrounding the Tamborine issuances prior to the merger and now believes that Tamborine’s representation in the Agreement as to its compliance with federal and state securities laws was incorrect. Although the Company’s current management has not been able to locate any definitive records regarding the prior issuances of Tamborine, they have been able to determine the following details.

Tamborine was formed in May 2004, and in connection with its formation, issued 100,000,000 shares of its common stock to its three founders, including IFG Investment Services, Inc. (“IFG”). The certificates issued to two of the three founders contained the appropriate restrictive legend limiting transfer of the shares as is customary in an unregistered private placement. However, the certificate issued to IFG for 7,500,000 shares was apparently issued without such restrictive legends. In June 2004, IFG delivered its certificate to Transfer Online, which thereafter began acting as the transfer agent for Tamborine’s common stock. Subsequently, on December 2, 2004, IFG sold these shares to Ford Allen, Inc., and 1,500,000 of these shares were subsequently cancelled by the Company. In January 2005, a broker-dealer diligence form was filed by Tamborine with the Pink Sheets under Rule 15c2-11 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) stating that 6,000,000 shares of Tamborine common stock had been sold in 2004 pursuant to an exemption from registration under Rule 504 of the Securities Act of 1933, as amended (the “Securities Act”). It is our belief that this Rule 15c2-11 form was filed to permit trading of the common stock of Tamborine on the Pink Sheets. On March 29, 2005, a second Rule 15c2-11 filing was made by Tamborine which stated that there were 7,500,000 freely tradable shares in the “float,” meaning that those shares could be traded on the Pink Sheets, and also stating that 6,000,000 shares had been sold in 2004 to three investors in Texas under Rule 504.

It is our belief that 6,000,000 shares of the 7,500,000 shares that were represented to be “freely tradable” in Tamborine’s second 15c2-11 filing, and which remained outstanding after the merger, were not in fact freely tradable when issued. As noted above, there are no available definitive records, other than the two Rule 15c2-11 filings, regarding the issuance of those shares or the possible exemptions from registration under federal and state securities laws that were used to issue the shares or permit trading of the shares on the Pink Sheets. IFG has not provided an opinion of counsel confirming that these shares were issued, and subsequently transferred, subject to an available exemption. Moreover, the representation in the 15c2-11 filing that issuing these shares under Rule 504 permits those shares to become “freely tradable” is likely not correct. Under Rule 504, any shares sold thereunder are “restricted” shares and may not be sold in the public markets without the use of an exemption from registration. We believe that IFG may have based its view on an incorrect and outdated interpretation of Rule 504. This means that resales of these shares by IFG and subsequently Ford Allen, Inc. on the Pink Sheets may have been in violation of applicable securities laws because the shares were in fact restricted. Trading by subsequent holders may have been in accordance with applicable securities laws based on other available exemptions, but we do not have any documentation to confirm any such conclusions.

We are currently taking a number of steps to deal with these issues. We have notified our transfer agent to cease any further transfers of our common stock without the approval of management. Additionally, we may request that Ford Allen, Inc. surrender its remaining shares of common stock in return for restricted shares and/or for cancellation. We have no reason to believe, at this time, that Ford Allen, Inc. will respond to our request. We also contacted all stockholders who purchased shares of common stock in our May 2005 and August 2006 private placements to inform them of these issues and gave them the opportunity to have the aggregate purchase price that they paid returned, plus interest. The offer period expired on March 20, 2007, and none of the stockholders elected to accept the offer. We are also filing this registration statement on Form SB-2 to (a) cause the Company to become a reporting company under the Exchange Act, which simplifies the use of Rule 144 to trade Company securities for

eligible stockholders, provides information that is more complete to stockholders and is a key requirement for listing on a national securities exchange, and (b) register resales of shares held by investors in the private placements noted above, which provides them with an opportunity to dispose of shares using the registration statement without any limitations on volume or concerns about the issues noted above. Lastly, the Company has filed an updated 15c2-11 filing on August 11, 2006 and intends to file another updated 15c2-11 filing in connection with the filing of the registration statement to provide current and correct information about the Company and the above matters. Tamborine’s ‘‘promoters’’ or their ‘‘affiliates’’ and their transferees, within the meaning of the Securities Act, both before and after the Merger (as described in “Business–General”), are deemed to be ‘‘underwriters’’ within the meaning of the Securities Act. Any commissions or discounts given to any such broker-dealer may be regarded as underwriting commissions or discounts under the Securities Act. As such, regardless of technical compliance with Rule 144 under the Act, because Tamborine was a shell company prior to the Merger, Rule 144 will be unavailable to its promoters and affiliates and their transferees.

As noted above, many aspects of these events cannot be corroborated by documentary evidence or otherwise. In addition, there is not sufficient evidence relating to the trading history of our common stock to analyze the range of potential damages, if any, arising out of these events. In fact, the trading price for our stock has generally increased since it began trading on the Pink Sheets, and we have made progress in executing its business plan, so it is possible that these events have not generated significant liabilities. Of course, federal and state regulatory agencies could also examine these events and commence proceedings against the Company, its officers and directors (former and current) and the other individuals involved. We do maintain officer and director liability insurance, and would of course utilize that coverage, if it is available under the terms of the policy, in the event any liabilities are assessed against officers and directors. Given the above facts, it is not possible at this time to predict the likelihood that the Company will in fact have any liability arising out of these events or the amount of such liability, if any.

Our historic stock price has been volatile and the future market price for our common stock is likely to continue to be volatile. Furthermore, the limited market for our shares could make our price more volatile. This may make it difficult for you to sell our common stock for a positive return on your investment.

The public market for our common stock has historically been very volatile. Any future market price for our shares is likely to continue to be very volatile. During the twelve months ended December 31, 2006, our common stock has traded at prices as low as $3.00 per share and as high as $9.75 per share. This price volatility may make it more difficult for you to sell shares when you want at prices you find attractive. We do not know of any one particular factor that has caused volatility in our stock price. However, the stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies. Broad market factors and the investing public’s negative perception of our business may reduce our stock price, regardless of our operating performance.

Further, the market for our common stock is limited and we cannot assure you that a larger market will ever be developed or maintained. The average daily trading volume of our common stock has historically been insignificant and on some trading days, we have had no volume in our common stock. Market fluctuations and volatility, as well as general economic, market and political conditions, could reduce our market price. Should additional equity be issued by us in the future, we cannot assure you that a more active trading market will develop. As a result, this may make it difficult or impossible for you to sell our common stock or to sell our common stock for a positive return on your investment.

Our securities have been thinly traded on the Pink Sheets, which may not provide liquidity for our investors.

Our securities are quoted on the Pink Sheets. The Pink Sheets are an inter-dealer, over-the-counter market that provides significantly less liquidity than national or regional exchanges. Securities traded on the Pink Sheets are usually thinly traded, highly volatile, have fewer market makers and are not followed by analysts. The order handling rules of the Securities and Exchange Commission (“SEC”) do not apply to securities quoted on the Pink Sheets. Quotes for stocks included on the Pink Sheets are not listed in newspapers. Therefore, prices for securities traded solely on the Pink Sheets may be difficult to obtain and holders of our securities may be unable to resell their securities at or near their original acquisition price, or at any price. We cannot give any assurance that we will be able to meet, or, if met, maintain, the listing standards of any national or regional exchanges.

Investors must contact a broker-dealer to trade over-the-counter bulletin board securities. As a result, you may not be able to buy or sell our securities at the times that you may wish.

Even though our securities are quoted on the Pink Sheets, the Pink Sheets may not permit our investors to sell securities when and in the manner that they wish. Because there are no automated systems for negotiating trades on the Pink Sheets, they are conducted via telephone or the Internet. In times of heavy market volume, the limitations of this process may result in a significant increase in the time it takes to execute investor orders. Therefore, when investors place market orders an order to buy or sell a specific number of shares at the current market price it is possible for the price of a stock to go up or down significantly during the lapse of time between placing a market order and its execution.

Our common stock is subject to the “penny stock” rules of the SEC and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.

The SEC has adopted Rule 3a51-1 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that (i) has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, or (ii) is not registered on a national securities exchange or listed on an automated quotation system sponsored by a national securities exchange. Although our common stock currently trades for more than $5.00 per share, it has traded below this threshold at various periods of time in the past. For any transaction involving a penny stock, unless exempt, Rule 15g-9 of the Exchange Act requires:

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that a broker or dealer approve a person’s account for transactions in penny stocks; and

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the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:

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obtain financial information and investment experience objectives of the person; and

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make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form:

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sets forth the basis on which the broker or dealer made the suitability determination; and

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attests that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading, and about the commissions payable to both the broker-dealer and the registered representative. Current quotations for the securities and the rights and remedies and to be available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.

Substantial sales of our common stock by the selling stockholders or us could cause our stock price to decline and issuances by us may dilute your ownership interest in our company.

The 8,000,000 shares covered by this prospectus represents approximately 28% of our outstanding common stock on a fully diluted basis. We are unable to predict the amount or timing of sales by the selling stockholders of our common stock. Any sales of substantial amounts of our common stock in the public market by the selling stockholders or us, or the perception that these sales might occur, could lower the market price of our common stock. As described in more detail in “Plan of Operations,” in the next few months, we plan to raise approximately $25 million to $50 million through debt or equity financing in order to implement strategies in furtherance of our business plan. If we issue additional equity securities to raise this additional capital, your ownership interest in the Company may be diluted and the value of your investment may be reduced.

The market valuation of our business may fluctuate due to factors beyond our control and the value of your investment may fluctuate correspondingly.

The market valuation of energy companies, such as us, frequently fluctuate due to factors unrelated to the past or present operating performance of such companies. Our market valuation may fluctuate significantly in response to a number of factors, many of which are beyond our control, including:

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changes in securities analysts' estimates of our financial performance, although there are currently no analysts covering our stock;

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fluctuations in stock market prices and volumes, particularly among securities of energy companies;

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changes in market valuations of similar companies;

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announcements by us or our competitors of significant contracts, new technologies, acquisitions, commercial relationships, joint ventures or capital commitments;

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variations in our quarterly operating results;

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fluctuations in oil and natural gas prices;

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loss of a major customer or failure to complete significant commercial contracts;

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loss of a relationship with a partner; and

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additions or departures of key personnel.

As a result, the value of your investment in us may fluctuate.

Investors should not look to dividends as a source of income.

In the interest of reinvesting initial profits back into our business, we do not intend to pay cash dividends in the foreseeable future. Consequently, any economic return will initially be derived, if at all, from appreciation in the fair market value of our stock, and not as a result of dividend payments.

FORWARD LOOKING STATEMENTS

This registration statement on Form SB-2 includes “forward-looking statements” within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act. 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 our early stage of development, our estimate of the sufficiency of existing capital sources, our ability to raise additional capital to fund cash requirements for future operations, the limited history and viability of our technology, our results of operations in foreign countries and our ability to diversify. Although we believe that in making such forward-looking statements our 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. We cannot assure you that the assumptions upon which these statements are based will prove to have been correct.

When used in this registration statement on Form SB-2, the words “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Because these forward-looking statements involve risks and uncertainties, actual results could differ materially from those expressed or implied by these forward-looking statements for a number of important reasons, including those discussed under “Plan of Operation,” and elsewhere in this registration statement on Form SB-2.

You should read these statements carefully because they discuss our expectations about our future performance, contain projections of our future operating results or our future financial condition, or state other “forward-looking” information. Before you invest in our common stock, you should be aware that the occurrence of certain of the events described in this registration statement on Form SB-2 could substantially harm our business, results of operations and financial condition and that upon the occurrence of any of these events, the trading price of our common stock could decline, and you could lose all or part of your investment.

We cannot guarantee any future results, levels of activity, performance or achievements. Except as required by law, we undertake no obligation to update any of the forward-looking statements in this registration statement on Form SB-2 after the date hereof.

As we are not subject to the reporting requirements of Section 13(a) or Section 15(d) of the Exchange Act, we are ineligible to rely on the safe harbor provisions of the Securities Act and the Exchange Act relating to forward-looking statements. However, once we become subject to such reporting requirements, we will be eligible to, and we intend to, rely on such safe harbor provisions.

BUSINESS

General

We are an emerging development stage company involved in the global development and commercialization of gasification technology. We have not earned any operating revenue as of the date of this filing. As described further herein, our principal asset is an exclusive license with GTI for their U-GAS ^® gasification technology. Our license agreement with GTI has an initial term of ten years beginning on August 31, 2006, but may be extended for two additional ten years terms at the option of the Company. See “License Agreement with GTI” for more information.

We have provided definitions for some of the industry terms used in this registration statement, and in particular, this “Business” section, in the “Glossary of Terms” in Appendix A

Overview of Gasification Technology and U-GAS ^®

Gasification is a technology which converts solid hydrocarbon fuels such as coal, biomass or petroleum coke into synthesis gas, a mixture of hydrogen, carbon monoxide and other products, otherwise referred to as “syngas.”

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Gasification plants are extremely low emitters of certain regulated emissions, such as sulfur, nitrous oxides and particulates and allow, if desired, for the low cost capture of greenhouse gases such as carbon dioxide from the effluent steam. Typically, integrated gasification combined cycle (“IGCC”) power plants are more efficient than conventional combustion coal power plants. According to Green Car Congress, an energy product, policies and issues publication, conventional coal power plants have an

efficiency of approximately 30%-35% while new IGCC power plants have achieved 38%-45% efficiency with efficiency targets of 50%-60%. In addition to power and steam production, such plants can supply a slate of chemical products including hydrogen, carbon monoxide, oxygen, nitrogen and steam to chemical plants, petrochemical facilities, oil refineries and other industrial complexes.

Technology

Over the past 30 years, GTI has developed a fluidized bed gasification technology trademarked U-GAS ^® . In January 2004 we obtained a ten-year exclusive license to the medium and high-pressure U-GAS ^® applications for certain geographic areas from GTI. As described further below, we entered into an Amended and Restated License Agreement with GTI in August 2006 which grants us an exclusive license to manufacture, make, use and sell U-GAS ^® systems using the technology of GTI worldwide as to coal (and as to biomass blends made of up to 40% biomass) gasification systems and a non-exclusive license to manufacture, make, use and sell biomass gasification systems worldwide.

The primary advantage of U-GAS ^® relative to other leading gasification technologies is the ability to efficiently gasify a wide array of fuels including wastes from coal processing facilities, high ash coals and lignite coals. These “low rank” fuels may cost as little as $0.25-1.20 per MMBtu while higher rank coals typically required by other gasification technologies can cost significantly more than $1.50 per MMBtu. In addition, U-GAS ^® systems have been in operation worldwide for over 30 years, with the most recent project being a $12 million facility at GTI’s Chicago technical campus built in 2004.

U-GAS ^® Gasification Process

The U-GAS ^® gasification process is based on a single-stage fluidized-bed technology for production of low-to-medium heating value syngas from a wide array of biomass feedstocks and coals (including high-ash fuels). The U-GAS ^® technology was developed for gasification of all ranks of coal as well as coal and biomass blends.

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In the U-GAS ^® gasification process, fuel is processed and conveyed into the gasifier vessel. Within the fluidized bed, the fuel reacts with steam, air and/or oxygen at a temperature of 840 ° C to 1100 ° C (1550 ° F to 2000 ° F). The temperature for gasification depends on the type of fuel used and is controlled to maintain high carbon conversion and non-slagging conditions for the ash. The U-GAS ^® process accomplishes four important functions in a single-stage fluidized bed gasifier: it decakes, devolatilizes, and gasifies fuel, and if necessary, agglomerates and separates ash from the reacting coal. The operating pressure of the gasifier depends on the end use for the syngas and may vary from 3 to 30 bars (40 to 435 psia) or more. After cleaning, the product gas can be used as industrial fuel gas for

process heating, syngas for production of methanol, ammonia, hydrogen or liquids, and for power generation and fuel cells.

During operation, fuel is gasified rapidly within the fluidized bed and produces a gaseous mixture of hydrogen, carbon monoxide, carbon dioxide, water vapor and methane, in addition to small amounts of hydrogen sulfide and other trace impurities. If the operating temperature required to achieve acceptable carbon conversion exceeds the fuel ash softening temperature, the ash concentration of the fluidized bed is allowed to increase until a condition is reached that allows the ash particles to agglomerate into larger particles. The agglomerated particles are denser than the surrounding bed material and can thus be selectively removed from the bottom of the bed.

Reactant gases, including steam, air, and/or oxygen are introduced into the gasifier in two areas: 1) through a sloping distribution grid at the bottom of the bed and 2) through a terminal velocity-controlled ash discharge port at the center of the distribution grid. In both agglomerating and non-agglomerating operating modes, ash is removed by gravity from the fluidized bed and discharged into a lockhopper system for depressurization and disposal. In both operating modes, the gasifier maintains a low level of carbon in the bottom ash discharge stream, making overall carbon conversion of 95% or higher possible. Cold gas efficiencies of over 80% have been repeatedly demonstrated.

Fines purified from the fluidized bed are typically separated from the product syngas by up to three stages of external cyclone separators, one or two of which return the fines to the fluidized bed for increased carbon conversion. The product syngas is essentially free of tars and oils due to the temperature and residence time of the gases in the fluidized bed, simplifying downstream heat recovery and gas cleaning operations.

When used to gasify biomass or highly reactive wastes, an inert material such as sand, limestone or dolomite is used to maintain the fluidized bed. In this case, most of the ash from the fuel leaves the fluidized bed with the product syngas, with the bottom ash discharge serving primarily to discharge tramp material entering with the biomass or waste feed.

U-GAS ^® Installation History

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Initial Test Facility in Chicago . GTI built a large-scale U-GAS ^® test facility in the Chicago area and completed installation and testing in the late 1970s. GTI continued periodic development of U-GAS ^® at this facility into the 1980’s and early 1990’s with a focus on biomass. These facilities ran for

thousands of hours and demonstrated the technical and economic viability of the technology. This facility has since been decommissioned to make way for a more modern test facility.

U-GAS ^® Facility in Finland . In 1989, the U-GAS ^® technology for biomass fuels (and coal blends with over 40% biomass) was licensed to Tampella Power Inc., which built a multi-fuel pressurized pilot plant in Tampere, Finland to further develop and demonstrate the technology for air-blown IGCC power generation with coal and biomass. This fully integrated plant includes all gasification island components from fuel presentation through waste heat recovery and hot gas clean-up. The facility can process up to 42 tons/day of coal and 60 tons/day of biomass at pressures up to 435 psia. At the time of this filing, the plant has logged over 3,800 hours of operations with 5,900 tons of fuel processed in 26 test runs. The tested fuels include biomass and mixtures of coal and biomass.

Biomass Demonstration Project in Hawaii . In early 1990, GTI built a demonstration project in Hawaii in conjunction with the U.S. Department of Energy (“DOE”). The project involved building a medium pressure gasifier to convert sugarcane waste produced from a local sugar processing facility. The plant was fully constructed and was successfully tested and commissioned. However, after a period of successful operations, the local sugar grower changed the sugarcane harvesting process resulting in a waste product that would not flow through the originally designed fuel handling system. The DOE chose not to fund the fuel handling upgrade that was required to process the new fuel type citing that the test was successful and the required data was gathered. Currently the plant has been shutdown awaiting further funding.

Large Commercial Facility for Shanghai Coking and Chemical . A large low pressure, commercial installation at Shanghai Coking and Chemical (“SCC”) was developed in 1994 that included eight gasifiers with a capability at full pressure of producing over 160,000 normal cubic meter/hr of syngas. The SCC facility, which was conceived and designed as a seasonal peaking facility, entered commercial operation in 1995 and remained in service supplying syngas to a large chemical complex until, in 2000, a free source of waste fuel gas became available from a neighboring sister facility. During its six years of operations, the SCC installation experienced some operational challenges dealing with improper coal purchasing and preparation. Despite these problems, three SCC gasifiers reached 8,000 operating hours each by 1998, three more in 1999 and a seventh in 2000. Total SCC gasifier operating hours exceeded 76,000 hours.

Large-scale Test Gasifier in Chicago . With historically high natural gas prices in the U.S., GTI recently put renewed emphasis on U-GAS ^® technology and in 2004 completed a $12 million large-scale test gasifier facility on its technical campus northwest of Chicago. The facility evaluates advanced and innovative gasification processes using all ranks of coal and other low-cost solid fuels. The facility is also being used to facilitate commercialization of advanced gasification and other new technologies to improve the commercial competitiveness of U-GAS ^® technology. The facility’s flexible design allows testing of a variety of syngas cleanup systems, and the gasifier and feed system is configured to allow simultaneous co-firing of coal with biomass or other opportunity fuels.

License Agreement with GTI

Pursuant to the Amended and Restated License Agreement dated as of August 31, 2006 between Synthesis and GTI (the “License Agreement”), Synthesis has an exclusive global license to manufacture, make, use and sell U-GAS ^® systems for coal and coal and biomass blends made of up to 40% biomass and non-exclusive license to manufacture, make, use and sell U-GAS ^® systems for coal and biomass blends in excess of 40% biomass. The License Agreement has a term of ten years, but may be extended for two additional ten-year periods at the option of Synthesis.

As consideration for the license, Synthesis paid $500,000 cash, and issued 190,500 shares of restricted common stock, to GTI. Synthesis is also restricted from offering a competing gasification technology during the term of the license. Additionally, for each U-GAS ^® unit which Synthesis licenses, designs, builds or operates which uses coal, or a coal and biomass mixture, as the feed stock, Synthesis

must pay a royalty based upon a calculation using the per thermal megawatt/hr of dry syngas production of a rated design capacity, payable in installments at the beginning and at the completion of the project build. Synthesis must also provide GTI with a copy of each contract that Synthesis enters into relating to a U-GAS ^® system and report to GTI with their progress on development of the technology every six months. A failure to comply with any of the above requirements could result in the termination of the License Agreement by GTI if not cured by the Company within specified time periods.

In addition, Synthesis was required to (i) have a contract for the sale of a U-GAS ^® system with a customer in the territory covered by the License Agreement no later than August 31, 2007, (ii) fabricate and put into operation at least one U-GAS ^® system by July 31, 2008 and (iii) fabricate and put into operation at least one U-GAS ^® system for each calendar year of the License Agreement, beginning with the calendar year 2009. The Company has satisfied the obligation to have a contract for the sale of a U-GAS ^® system no later than August 31, 2007 through our contract with Hai Hua described below. Additionally, Synthesis is required to disclose to GTI any improvements related to the U-GAS® system which are developed and implemented by Synthesis and the manner of using and applying such improvements. Failure to satisfy the requirements as to these milestones could lead to the revocation of the license by GTI; provided, however, that GTI is required to give a twelve-month notice of termination and Synthesis is able to cure the default and continue the Agreement prior to the expiration of such time period.

During the term of the license, Synthesis has granted to GTI a royalty-free non-exclusive irrevocable license to make, manufacture, use, market, import, offer for sale and sell U-GAS ^® systems that incorporate the improvements of Synthesis. Such license only applies outside of the exclusive rights granted to Synthesis under the License Agreement. Without the prior written consent of GTI, Synthesis has no right to sublicense any U-GAS ^® system other than to customers for which Synthesis has constructed a U-GAS ^® system. For a period of ten years, Synthesis is restricted from disclosing any confidential information (as defined in the license) to any person other than employees of its affiliates or contractors who are required to deal with such information, and such persons will be bound by the confidentiality provisions of the license. Synthesis further indemnifies GTI and its affiliates from any liability or loss resulting from unauthorized disclosure or use of any confidential information that it receives.

Market Opportunity

Over the past decade developing economies such as China and India, as well as established economies such as the United States, have had increased demand for energy to fuel growth and many commercial opportunities to address energy related concerns have emerged. Some of the specific trends over the past several years include:

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Demand for natural gas is outpacing supply and resulting in higher prices and potential interruptions in supply due to technological innovations related to natural gas combustion (primarily for power generation).

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Increased attention on air quality and greenhouse gas emissions.

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Higher energy price environments resulting from the absorption of excess petroleum capacities.

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Recognition by policy makers of national security issues related to reliance on external energy sources.

Similar to the advances, such as increased efficiencies and reduced emissions, in natural gas turbine technologies, emerging technologies that efficiently and cleanly convert coal into fuels for power generation, chemical production and even transportation will experience rapid market acceptance. With the expectation that those technical improvements should be achieved, coal has become a larger part of the long-term supply plans for governments and major energy companies worldwide.

In particular, within the Chinese and U.S. markets, coal gasification represents an opportunity to improve air quality, economically capture greenhouse gas emissions and replace energy imports from politically unstable sources with indigenous coal supplies. The United States Department of Energy has stated that Chinese and U.S. coal reserves make up approximately 40% of the global totals. China and the U.S. are also the largest importers of petroleum products. We believe a significant commercial opportunity exists for companies that can successfully introduce clean coal technologies, to utilize these indigenous coal fuel sources.

We have elected to make China a priority market since China offers immediate opportunities to develop U-GAS ^® -based coal gasification projects and has a ready supply of low rank coal. According to The World Bank, China is the world’s second largest and fastest growing energy market. They estimate that over the next 25 years China will require two trillion dollars of investment in the power sector alone, more than any other country or region. They believe growth in manufacturing and the rise of China’s middle class are driving this demand, and this demand is far outstripping supply for electricity and other essential industrial commodities in China. The World Bank also believes that despite a 15% growth in electricity production and 100 million additional tons of coal mined in 2003, energy shortages in China will persist. Coal is China’s most abundant, indigenous energy resource and is in high demand, which in turn causes economic and environmental pressures and forces the Chinese government and Chinese industries to re-think the way coal is used. In order to meet the demand for clean energy and industrial commodities, China is in the process of finding environmentally acceptable methods to convert coal into energy and chemical commodities.

Our goal is to develop projects, technologies and systems to meet these needs and to establish U-GAS ^® as a reliable and efficient alternative source of power, hydrogen and other gasification products to manufacturers. The primary drivers for growth is a large indigenous coal supply, heightened awareness of environmental issues, and a desire to develop a diversified energy mix and mitigate over-reliance on natural gas and imported crude oil.

Targeted Customers

Chemical Plants, Petrochemical Plants and Refineries . We believe that many chemical, petrochemical plants and refineries are seeking a broad slate of products including electricity, steam, hydrogen, carbon monoxide, oxygen, nitrogen and compressed air. We also believe U-GAS ^® gasification systems provide an ideal solution for these plants and refineries because inherent integration opportunities allow these products to be produced with minimum additional capital and/or operating costs. Moreover, because such plants tend to be run on a continuous basis, low fuel cost is a key to economic competitiveness. General Electric and Shell have built multiple IGCC power or chemical feedstock facilities for petrochemical and refinery facilities around the world.

Large Manufacturers . Many manufacturers require power, steam and hot water as part of their production process. In addition, many industrial development zones are seeking co-generation facilities specially dedicated to manufacturers in that zone that require power, steam and hot water for industrial applications and for district heating and air conditioning. We believe that a clean U-GAS ^® facility can provide the necessary energy and chemical operating feedstocks in areas where scarcity or high prices of other energy sources make operations unprofitable.

Ammonia and Fertilizer Plants . Ammonia and fertilizer plants require large amounts of hydrogen, carbon monoxide, power and steam. We believe a significant opportunity exists for conversion of these plants to U-GAS ^® since most of these plants purchase power from the grid and produce their own syngas using old fixed bed gasification technology, which requires low ash and high priced coal for fuel. We also believe that, due to the wide use of inefficient fixed bed gasification systems, the vast majority of China’s fertilizer plants will require replacement of their entire gasification systems in the near future.

Alumina Refineries . The production of alumina from bauxite requires a great deal of energy that is currently being provided by natural gas or heavy fuel oil. The integration of a U-GAS ^® coal gasification facility into an alumina refinery can lower the cost of production by reducing the raw material costs for the energy required and increase the efficiency by which the refinery can produce alumina. There are many alumina refineries in our target markets that are actively seeking alternatives to their current high cost energy structure, which may include our U-GAS ^® technology.

Hydrogen Production . Around the world, most hydrogen is produced from natural gas. With increased natural gas prices, hydrogen production costs have risen dramatically. U-GAS ^® technology can produce hydrogen at a cost which is much lower than the cost of hydrogen based on production using natural gas as a feedstock. Increasingly heavy crude oils, as well as increased chemical plant utilization, has driven the demand for hydrogen to unprecedented levels. Coal gasification is a viable alternative for large scale production of hydrogen. We believe that the U-GAS ^® process will allow us to take advantage of this expanding marketplace by being the low cost provider of coal-derived hydrogen.

Coal-to-Liquids Plants . Many countries desire to avoid their dependence on imported oil and have taken steps to make coal-to–liquid technology a viable energy alternative for transportation fuels. Such plants will need large quantities of hydrogen, electricity, steam and oxygen, which we believe can be provided by U-GAS ^® gasification plants. For example, two of China’s largest coal companies are developing large coal-to-liquids facilities. Coal companies typically have substantial amounts of waste coal that are not adequately utilized. We believe the U-GAS ^® system could allow such a mining company to convert negative value waste into low cost feedstocks for these coal-to-liquid projects.

Integrated Projects . Projects with the highest margins will be located at, or within a very close distance to, opportunity fuels such as low-rank coals, lignites and other waste coals. Such projects typically require multiple gasification commodities, such as power, steam, hydrogen, carbon monoxide, and nitrogen, where an entire product’s value chain is integrated within one complex. For example, where a methanol complex is established at a coal mine, the basic structure of the project would be waste coal to power, steam, hydrogen, carbon monoxide, to methanol and then sales to domestic and international markets.

Competition

We will seek to deploy U-GAS ^® plants in areas where the maximum integration of the process is possible. In the world gasification market, the largest providers are General Electric, Shell, Siemens and ConocoPhillips. Shell’s gasification efforts remain focused on the production of syngas for chemical processes. Shell has recently announced a multi-million dollar contract to use its gasification technology to produce hydrogen for a large coal-to-liquids project in China. There are also several Chinese companies that utilize older, low pressure technologies, which utilize high-cost coals and are relatively immature, with low capital costs being their primary competitive advantage. In addition, there is a small Chinese coal gasification company that utilizes a low pressure fluidized bed technology which may compete with our U-GAS ^® technology. The following table depicts the U-GAS ^® process as compared to the other major coal gasification technologies.

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In general, we believe that the primary competitive advantages of U-GAS ^® relative to the other technologies are: (a) the potential for U-GAS ^® gasifiers to utilize low quality, low cost coals, (b) the inherent flexibility of the U-GAS ^® technology allows a project to change fuels or utilize a mix of fuels over the life of the project, and (c) the ability to economically build relatively smaller plants. This ability to build plants that are economical at sizes required by many industrial companies opens up a potentially large under served market. We believe that the lower capital costs, shorter site preparation and construction time periods may allow us to build projects where our larger competitors would be economically disadvantaged.

Current Projects

Our plan is to develop, finance, build, own and operate U-GAS ^® based coal gasification plants ranging in size from 20 MWs (equivalent) to greater than 250 MWs (equivalent) and at costs ranging from $20 million to several hundred million dollars. Our strategy is to sell the outputs of the plants, which can be syngas, power, steam and other products (e.g. sulfur, ash) under long-term contracts to industrial and wholesale customers. We may sell capacity in the plants outright or under tolling agreements as a way to insulate the Company from commodity price volatility. We also have the right to sublicense any U-GAS ^® system to customers for which we have constructed a U-GAS ^® system.

For our first project, Synthesis Energy Systems Investments, Inc., a wholly-owned subsidiary of Synthesis Energy Holdings, Inc. (“SES Investments”), entered into a cooperative joint venture contract with Shandong Hai Hua Coal & Chemical Company Ltd. (“Hai Hua”) which established Synthesis Energy Systems (Zaozhuang) New Gas Company Ltd. (the “Joint Venture”), a joint venture company that has the primary purposes of (i) developing, constructing and operating a synthesis gas production plant utilizing the U-GAS ^® technology in Zaozhuang City, Shandong Province, China and (ii) producing and selling syngas, steam and the various byproducts of the plant, including ash, elemental sulphur, hydrogen and argon. Hai Hua is an independent producer of coke and coke oven gas and owns a subsidiary engaged in methanol production. Hai Hua processes its coal in its own coal washery prior to using such coal in its coke ovens. This coal washing process produces a byproduct which is the design fuel for the Joint Venture’s U-GAS ^® gasification plant. The technology will enable syngas to be produced from Hai Hua’s coal sources and such syngas will be used in Hai Hua’s methanol subsidiary, coke ovens and power plant. In exchange for their respective ownership shares in the Joint Venture, SES Investments contributed approximately $9.1 million in capital, and Hai Hua contributed approximately $480,000 in cash, land use rights to a parcel of land for construction of coal storage facilities and certain other

management services. The contribution of SES Investments is payable in installments, with approximately $3,800,000 being contributed as of December 31, 2006.

By November of 2006, the project had obtained approval of its feasibility study, environmental impact assessment and the Joint Venture was issued its business license. The groundbreaking for the plant took place on December 5, 2006. We entered into the primary construction contract in February 2007. Construction on the plant is expected to be completed in the second half of the calendar year 2007 at a projected cost of $24.4 million. As of March 22, 2007, these costs were funded through: (i) $9.1 million equity contribution by SES into the Joint Venture company, (ii) $3.3 million intercompany shareholder loan, and (iii) $12.0 million of bank debt. See “Plan of Operations” for a summary of the terms of the two loans. The plant will be built on a site adjacent to the Hai Hua coke and methanol facility. Hai Hua is obligated to grant rights of way for construction access and other on-going operations of the plant. The land was purchased from the Chinese government with the assistance of the Shandong Xue Cheng Economic Development Zone.

If either of SES Investments or Hai Hua desires to invest in another coal gasification project within Zaozhuang City, the other company has a right to participate in up to 25% of the investment. For the first twenty years, after the date that the plant becomes operational (the “Operational Date”), 95% of all net profits of the Joint Venture will be distributed to SES Investments. After the initial twenty years, the profit distribution percentages will be changed, with SES Investments receiving 10% of the net profits of the Joint Venture and Hai Hua receiving 90% of the Joint Venture’s net profits. The contract has a term of fifty years, subject to earlier termination if either SES Zaohuang files for bankruptcy or becomes insolvent or if the syngas purchase contract between the Joint Venture and Hai Hua (discussed in more detail below) is terminated. Hai Hua has also agreed that the License Agreement is the sole property of SES Investments and its affiliated entities and that it will not compete with SES Investments, or its affiliated entities, with respect to fluidized bed gasification technology for the term of the Joint Venture.

In addition, Hai Hua has agreed to purchase, once the plant is completed, syngas from the Joint Venture pursuant to the terms and conditions of a purchase and sale contract. Hai Hua will (i) pay a monthly capacity fee and a monthly energy fee; (ii) provide piping to the plant for the acceptance of steam and coke oven gas from Hai Hua and for the delivery of syngas from the Joint Venture to Hai Hua; and (iii) coordinate its operations and maintenance so as to ensure Hai Hua purchases as much syngas as possible. The energy fee is a per Ncum of syngas fee calculated by a formula which factors in the monthly averages of the prices of design base coal, coke, coke oven gas, power, steam and water, all of which are components used in the production of syngas. The capacity fee is paid based on the capacity of the plant to produce syngas, factoring in the number of hours (i) of production and (ii) of capability of production as compared to the guaranteed capacity of the plant, which for purposes of the contract is 22,000 Ncum per hour of syngas.

The Joint Venture is required to procure any other necessary consumables for operation of the plant, provided, however, the Joint Venture is entitled to reimbursement for these costs through the payment of the energy fee. As part of its registered capital contribution to the Joint Venture, Hai Hua shall, to the extent that it is required, contribute approximately $480,000 in cash, provide up to 100,000 Ncum of coke oven gas and up to 600 tons of coke free to the Joint Venture during the first year of operation as start-up fuels for the gasifiers. Any requirements for coke or coke oven gas above these amounts shall be paid for by the Joint Venture. If Hai Hua is unable or unwilling to provide the required coke or coke oven gas, the plant will be deemed to be able to produce for purposes of calculating the capacity fee and Hai Hua will not be relieved of its payment obligations. Pursuant to the terms of the contract, the value of the items provided by Hai Hua to the Joint Venture (including the coke, coke oven gas, piping and acreage for the storage facilities) shall not exceed 5% of the equity of the Joint Venture.

Hai Hua is required to annually provide to the Joint Venture a preliminary syngas usage plan for that year, provided, however, that in no event shall the usage plan require less than 19,000, or more than 22,000, Ncum per hour of syngas. In connection with this, the Joint Venture shall annually provide a generation plan to Hai Hua which sets forth the anticipated syngas generation for that year, and it shall

use its best efforts to match its generation plan with Hai Hua’s usage plan. If the Joint Venture produces more syngas than the capacity that Hai Hua is required to purchase under the contract, Hai Hua shall have a right of first refusal to purchase such excess amount.

The syngas to be purchased by Hai Hua is subject to certain quality component requirements set forth in the contract. All byproducts of the gasification process are the property of the Joint Venture. The Joint Venture is entitled to provide services and sell products which it produces other than syngas to third parties, but Hai Hua has a right of first refusal for any such sales. Hai Hua is obligated to pay the capacity fee regardless of whether they use the gasification capacity, subject only to availability of the plant and exceptions for certain events of force majeure.

The agreement terminates twenty years from the Operational Date. Upon termination of the agreement for any reason other than the expiration of the term, the Joint Venture will have the right to either produce syngas for other customers in its current location or dismantle the plant and move the plant to another location. Within two years of October 22, 2006, the date of the contract, Hai Hua may request that the Joint Venture expand its syngas production in order to assist in the production of methanol by a subsidiary of Hai Hua and the Joint Venture is required to negotiate such increased production in good faith. Hai Hua has made such a request and as of the date hereof, the Joint Venture is in negotiations regarding the details and pricing of the expansion project.

In addition to the Joint Venture, we have also entered into a Memorandum of Understanding with Golden Concord Holdings Ltd. for the construction of integrated coal gasification to methanol (ultimately into liquid dimethyl ether (“DME”)) plant in Inner Mongolia. We are currently negotiating various documents related to this project, including an agreement to form a joint venture company, operations and management agreement for the plant, coal purchase agreements, offtake agreements, and other related agreements, and the transaction remains subject to government approval and approval by the board of directors of each company.

Research and Development

During the fiscal year ended June 30, 2006 and 2005, we spent $373,282 and $87,954, respectively, for research and development mainly related to the development and fuel testing of coal as well as the development of engine generators using syngas as fuel. During the years ended June 30, 2006 and 2005 we spent $158,406 and $26,804 in engineering salaries, respectively. We plan to continue increasing internal research and development with a goal of offering our customers the best and most efficient clean coal solutions.

Governmental and Environmental Regulation

Our operations are subject to stringent federal, state and local laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. Numerous governmental agencies, such as the U.S. Environmental Protection Agency and various Chinese authorities, issue regulations to implement and enforce such laws, which often require difficult and costly compliance measures that carry substantial administrative, civil and criminal penalties or may result in injunctive relief for failure to comply. These laws and regulations may require the acquisition of a permit before operations at a facility commence, restrict the types, quantities and concentrations of various substances that can be released into the environment in connection with such activities, limit or prohibit construction activities on certain lands lying within wilderness, wetlands, ecologically sensitive and other protected areas, and impose substantial liabilities for pollution resulting from our operations. We believe that we are in substantial compliance with current applicable environmental laws and regulations and we have not experienced any material adverse effect from compliance with these environmental requirements.

In China, developing and constructing gasification facilities is highly regulated. In the development stage of a project, the key government approvals are of the project’s environmental impact

assessment report, feasibility study (also known as the project application report) and, in the case of a Sino-foreign joint venture, approval of the joint venture company’s joint venture contract and articles of association. Approvals in China are required at the municipal, provincial and/or central government levels depending on the total investment in the project.

Although we have been successful in obtaining the permits that are required at this stage of the project, any retroactive change in regulations or an opinion that the approvals that have been obtained are inadequate, either at the federal, provincial or state level, could require us to obtain additional or new permits or spend considerable resources on complying with such regulations. Other developments, such as the enactment of more stringent environmental laws and regulations, could require us to incur significant capital expenditures.

Employees

As of March 28, 2007, we had 30 employees. None of our employees is represented by any collective bargaining unit. We have not experienced any work stoppages, work slowdowns or other labor unrest. We believe that our relations with our employees are good.

DESCRIPTION OF PROPERTY

Our corporate office occupies approximately 3,000 square feet of leased office space in Houston, Texas. We also lease approximately 3,500 square feet of office space in Shanghai, China and we also lease small offices in Miami, Florida and Beijing, China. Over time, additional facilities may be required as we add personnel to advance our commercial and technical efforts.

PLAN OF OPERATIONS

The following plan of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this registration statement. We are a development stage enterprise and have not earned any operating revenue as of the date of this filing. Our principal asset is our License Agreement. If we are successful in the use of this license, our plants will provide our customers with molecular feedstocks (e.g. hydrogen, carbon monoxide) or energy services (e.g. power, compression, steam) integrated with engine and/or turbine generators for power and steam production. In connection with our molecular feedstock and energy supply business, we may also provide certain additional services relating to U-GAS ^® installation projects, including equipment procurement and supply services, technology licensing services, technology and engineering development services, and operations and maintenance services.

Our core business plan includes:

•

Completing engineering and construction of plants as well as creating modular gasification engineering blocks to speed the development of future U-GAS ^® based projects.

•

Building relationships with multi-national industrial concerns to provide U-GAS ^® solutions for their energy and chemical feedstock needs.

•

Expanding our experienced global engineering and project execution team to complete the development of current projects as well as future projects under development.

•

Protecting technology used and/or developed by the Company in the U.S. Patent and Trademark Office as well as similar agencies throughout the world.

Over the next twelve months, we are planning to develop relationships with energy and chemical feedstock customers. We plan to develop multi-megawatt facilities from which syngas or power could be sold into the wholesale energy and chemical markets. We intend to sell the outputs of the plant which can be syngas, power, steam and other products (e.g. sulfur, ash) under long term contracts to industrial and wholesale customers. In some cases, we may sell capacity in the plants outright or under tolling agreement contracts with coal providers and customers to mitigate commodity price risk. We will attempt to secure non-recourse debt financing in order to construct our plant facilities. Such financing will be used on a project basis to reduce the amount of equity capital required to complete the project.

For our first project, we established the Joint Venture for the primary purposes of (i) developing, constructing and operating a synthesis gas production plant (“Plant”) utilizing the U-GAS® technology in Zaozhuang City, Shandong Province, China and (ii) producing and selling syngas, steam and the various byproducts of the plant, including ash, elemental sulphur, hydrogen and argon. In exchange for their respective ownership shares in the Joint Venture, SES Investments agreed to contribute approximately $9.1 million in equity capital, and Hai Hua agreed to contribute approximately $480,000 in cash, land use rights to a parcel of land for construction of coal storage facilities and certain other management services.

In October of 2006, all necessary government approvals were received for the formation of the Joint Venture and construction of the Plant. The groundbreaking on the Plant took place on December 5, 2006 and we entered into the primary construction contract in February 2007. On March 22, 2007 we funded a loan in the amount of approximately $12 million from ICBC. Construction on the Plant is expected to be completed in the second half of the calendar year 2007 at a projected cost of $24 million.

We have spent or plan to spend the following within the next twelve months:

•

Approximately $12.4 million related to construction of the Plant, which includes a $9.1 million equity contribution by the Company and an intercompany loan by Synthesis Energy Systems Investments Inc. (“Synthesis Investments”) the Joint Venture of approximately $3.3 million.

•

Approximately $2.2 million of operating costs.

•

Approximately $800,000 of project development expenses.

On March 22, 2007 we received the proceeds from a bank loan pursuant to the terms of a Fixed Assets Loan Contract with ICBC for approximately $12 million. These proceeds completed the project funding needed for our Joint Venture to complete the Project. Key terms of the Fixed Assets Loan Contract are as follows:

•

Term of the loan is 7 years from the commencement date (March 22, 2007) of the loan.

•

Interest for the first year is 7.11% to be adjusted annually based upon the standard rate announced each year by the People’s Bank of China. Interest is payable monthly on the 20 ^th day of each month.

•

Principal payments of approximately $1.0 million are due in March and September of each year beginning on September 22, 2008 and end on March 21, 2014.

•

Hai Hua is a guarantor on the loan.

•

The Project assets are pledged as collateral on the loan.

•

The Company agreed to covenants that, among other things, prohibit pre-payment without the consent of ICBC and permit ICBC to be involved in the review and inspection of the Project.

•

The loan is subject to customary events of default which, should one or more of them occur and be continuing, would permit ICBC to declare all amounts owing under the contract to be due and payable immediately.

Additionally, on March 20, 2007, the Joint Venture entered into and funded a Shareholder’s Loan Agreement with Synthesis Investments for a loan of approximately $3.3 million (the “Shareholder Loan”). The Shareholder Loan bears interest per annum at a rate of 1-Year LIBOR plus 0.5% and is due and payable on the date which is 720 days after the ICBC loan described above is paid in full. The shareholder Loan is unsecured and is subordinated to the above described ICBC loan, and any other subsequent ICBC loans. The Joint Venture may not prepay the Shareholder Loan until the ICBC loan is either paid in full or is fully replaced by another loan. Proceeds of the Shareholder Loan may only be used for the purpose of developing, constructing, owning, operating and managing the Project.

As of March 30, 2007, we had approximately $3 million of cash in our banks, in addition to approximately $18.4 million of cash in the Joint Venture. Over the next twelve months, we also plan to continue to advance the commercial development of U-GAS ^® based projects in China and selected locations in the United States, and to further expand our global engineering and project execution team to complete future projects which are currently contemplated. We currently expect that we have sufficient funds to implement these strategies in furtherance of our business plan during the next twelve months. In the next few months, we plan to raise approximately $25 million to $50 million through debt or equity financing in order to implement strategies in furtherance of our business development and expansion. We intend to rely on commercial banks to finance or refinance some portion of our future project costs. We

may also offer debt or equity securities to fulfill our other cash requirements. See also “Risk Factors – We may require additional funding . . .” on page 2 for more information.

We do not have any off balance sheet financial arrangements.

SELLING STOCKHOLDERS

The following table sets forth certain information concerning the selling stockholders. Assuming that the selling stockholders offer all of their shares of our common stock, the selling stockholders will not have any beneficial ownership except as otherwise provided in the table below. The shares are being registered to permit the selling stockholders to sell or otherwise dispose of the shares covered hereby, or interests therein, from time to time. We will file a prospectus supplement to name successors to any named selling shareholders who are able to use the prospectus to resell the shares. Such prospectus supplement would be required to be delivered, together with this prospectus, to any purchaser of such shares. See “Plan of Distribution.”


Selling Stockholder	Number of Shares Owned and to be Owned Prior to Offering(1)	Number of Shares Being Offered(1)	Number of Shares Owned After Offering(2)	Percentage of Shares Owned After Offering(2)
ATC Trustees (Bahamas) Ltd. (3)	80,000	80,000	-	-
Thomas G. Bongard (3)	100,000	100,000	-	-
Frank J. Cadwell (3)	33,333	33,333	-	-
Ira Ronald Cadwell (3)	33,334	33,334	-	-
Stephanie Cadwell (3)	33,333	33,333	-	-
David A. Schwedel (3)	1,136,900 (5)	931,760	-	-
Adam M. Dernbach (3)	20,000	20,000	-	-
Jeremy Alan Dernbach (3)	20,000	20,000	-	-
Timothy A. Dernbach (4)	10,000	10,000	-	-
Theodore & Eve Golfinopoulos (3)	20,000	20,000	-	-
James D. Hanson, Jr. (4)	206,000	206,000	-	-
MD Investments Limited (3)(7)	40,000	40,000	-	-
John F. Michel, Jr. (3)	28,000	28,000	-	-
Thomas E. Puccio (3)	12,000	12,000	-	-
Renee Schwedel (3)	40,000	40,000	-	-
Silo Investments Limited (3)(8)	210,000	210,000	-	-
Michael G. Storey (3)	1,440,000 (6)	900,000	540,000	2.0%
Michael Tublin (4)	80,000	80,000	-	-
Travis & Edith Wichman (4)	80,000	80,000	-	-
Zahaca Enterprises USA LLC (3)(9)	80,000	80,000	-	-
(10)	5,088,240	5,088,240	-	-

___________________

Less than one percent, based on 28,183,715 shares outstanding as March 28, 2007.

(1)

Ownership is determined in accordance with Rule 13d-3 under the Exchange Act.

(2)

Assumes the sale of all of the shares offered hereby to persons who are not affiliates of the selling stockholders.

(3)

Each of these selling stockholders acquired the shares offered hereby on a private placement in May of 2005. Each selling stockholder purchased the shares offered hereby for their own account and not with a view toward distribution.

(4)

Each of these selling stockholders (i) acquired the shares offered hereby in private placement in May of 2005, and (ii) holds shares included in the 6,000,000 shares eligible for trading on the Pink Sheets described in Footnote 10. Each selling stockholder purchased the shares offered hereby for their own account and not with a view toward distribution.

(5)

Includes 205,200 shares held by the David A. Schwedel Living Trust, of which Mr. Schwedel is the beneficial owner.

(6)

Includes 40,000 shares of common stock issuable upon exercise of options which are currently exercisable or exercisable within 60 days hereof.

(7)

Mark Daeche, the Director of MD Investments Limited, exercises voting and investment authority over the shares held by this selling stockholder.

(8)

Marc Citron, the Director of Silo Investments Limited, exercises voting and investment authority over the shares held by this selling stockholder.

(9)

Marc A. Pearl, Managing Partner of Zahaca Enterprises USA LLC, exercises voting and investment authority over the shares held by the selling stockholder.

(10)

We also plan to include 6,000,000 shares of stock which are eligible for trading on the Pink Sheets. We plan to set a record date and include the names of the selling stockholders on such date in an amendment to this registration statement.

USE OF PROCEEDS

We will not receive any of the proceeds from the sale or other disposition of the shares covered hereby, or interests therein, by the selling stockholders.

PLAN OF DISTRIBUTION

The selling stockholders, which as used herein includes donees, pledgees, transferees or other successors-in-interest selling shares of common stock or interests in shares of common stock received after the date of this prospectus from a selling stockholder as a gift, pledge, partnership distribution or other transfer, may, from time to time, sell, transfer or otherwise dispose of any or all of their shares of common stock or interests in shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These dispositions may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated prices. Because there is no trading market in our common stock as of the date of this prospectus, the selling stockholders will sell any shares in the public market at prices ranging from $3.50 to $8.00 per share until a public market develops for the common stock. Once a public market develops for the common stock, the selling stockholders may sell their shares of common stock in the public market based on the market price at the time of sale or at negotiated prices.

Subject to the foregoing, the selling stockholders may use any one or more of the following methods when disposing of shares or interests therein:

•

ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

•

block trades in which the broker-dealer will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction;

•

purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

•

an exchange distribution in accordance with the rules of the applicable exchange;

•

privately negotiated transactions;

•

short sales effected after the date the registration statement, of which this prospectus is a part, is declared effective by the SEC;

•

through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

•

broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share; and

•

a combination of any such methods of sale.

The selling stockholders may, from time to time, pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock, from time to time, under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus. We will file a prospectus supplement to name successors to any named selling shareholders who are able to use the prospectus to resell the shares. Such prospectus supplement would be required to be delivered, together with this prospectus, to any purchaser of such shares.

In connection with the sale of our common stock or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they assume. The selling stockholders may also sell shares of our common stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities. The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

The aggregate proceeds to the selling stockholders from the sale of the common stock offered by them will be the purchase price of the common stock less discounts or commissions, if any. Each of the selling stockholders reserves the right to accept and, together with their agents from time to time, to reject, in whole or in part, any proposed purchase of common stock to be made directly or through agents. We will not receive any of the proceeds from this offering.

Certain of the selling stockholders also may resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the Securities Act, provided that they meet the criteria and conform to the requirements of that rule. However, Tamborine’s ‘‘promoters’’ or their ‘‘affiliates’’ and their transferees, within the meaning of the Securities Act, both before and after the Merger (as described in “Business–General”), are deemed to be ‘‘underwriters’’ within the meaning of the Securities Act. Any commissions or discounts given to any such broker-dealer may be regarded as underwriting commissions or discounts under the Securities Act. As such, regardless of technical compliance with Rule 144 under the Act, because Tamborine was a shell company prior to the Merger, Rule 144 will be unavailable to its promoters and affiliates and their transferees.

The other selling stockholders and any underwriters, broker-dealers or agents that participate in the sale of the common stock or interests therein may be “underwriters” within the meaning of Section 2(11) of the Securities Act. Any discounts, commissions, concessions or profit they earn on any resale of the shares may be underwriting discounts and commissions under the Securities Act. Selling stockholders who are “underwriters” within the meaning of Section 2(11) of the Securities Act will be subject to the prospectus delivery requirements of the Securities Act.

To the extent required, the shares of our common stock to be sold, the names of the selling stockholders, the respective purchase prices and public offering prices, the names of any agents, dealer or underwriter, any applicable commissions or discounts with respect to a particular offer will be set forth in an accompanying prospectus supplement or, if appropriate, a post-effective amendment to the registration statement that includes this prospectus.

In order to comply with the securities laws of some states, if applicable, the common stock may be sold in these jurisdictions only through registered or licensed brokers or dealers. In addition, in some states the common stock may not be sold unless it has been registered or qualified for sale or an exemption from registration or qualification requirements is available and is complied with.

We intend to advise the selling stockholders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of shares in the market and to the activities of the selling stockholders and their affiliates. In addition, to the extent applicable we will make copies of this prospectus (as it may be supplemented or amended from time to time) available to the selling stockholders for the purpose of satisfying the prospectus delivery requirements of the Securities Act. The selling stockholders may indemnify any broker-dealer that participates in transactions involving the sale of the shares against certain liabilities, including liabilities arising under the Securities Act.

The selling stockholders will not engage in any short sale of the securities offered by it pursuant to this prospectus until the registration statement of which this prospectus is a part has been declared effective by the SEC.

We have agreed to indemnify the selling stockholders against liabilities, including liabilities under the Securities Act and state securities laws, relating to the registration of the shares offered by this prospectus.

We have agreed with the selling stockholders to keep the registration statement of which this prospectus constitutes a part effective until the earlier of (1) such time as all of the shares covered by this prospectus have been disposed of pursuant to and in accordance with the registration statement or (2) the date on which the shares may be sold pursuant to Rule 144(k) of the Securities Act.

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth information concerning our directors, executive officers and key employees as of March 16, 2007:


Name	Age	Position

Lorenzo Lamadrid	56	Chairman of the Board
Timothy Vail	44	President, Chief Executive Officer and Director
David Eichinger	41	Chief Financial Officer and Senior Vice President of Corporate Development
Donald Bunnell	41	President, Chief Executive Officer – Asia Pacific and Director
Gregory (“Bruce”) Golden	55	Chief Technologist
Carol Pearson	46	Corporate Controller and Corporate Secretary
Michael Storey	65	Director
Denis Slavich	67	Director
Harry Rubin	54	Director

Lorenzo Lamadrid . Mr. Lamadrid has been our Chairman since April of 2005. Since 2001, Mr. Lamadrid has also served as Chairman and Chief Executive of Globe Development Group, LLC, a firm specializing in international energy advisory, investment, and development of major energy and power projects. He is also a Managing Director and Founding Partner of the Worldwide Power Group, Ltd., a developer of large-scale energy and power generation projects in Asia and Latin America, and is also a member of the International Advisory Board and the Executive Committee of Sirocco Aerospace International, a marketer of aerospace products. From 1999 to 2001, Mr. Lamadrid was President and Chief Executive Officer of Arthur D. Little, Inc., a global management consulting firm. Prior to joining Arthur D. Little, from 1996 to 1999, Mr. Lamadrid was President of Western Resources International, Inc., a subsidiary of Western Resources, Inc., and Managing Director of The Wing Group, a subsidiary of Western Resources that develops large-scale international electric power projects. Prior to that, Mr. Lamadrid spent seven years with General Electric, the last two as a Corporate Officer. He served as Vice President and General Manager of GE Aerospace, where he was responsible for international operations, domestic marketing and business development activities, and strategy development for the overall Aerospace Group. While at General Electric, Mr. Lamadrid also served as Corporate Staff Executive for strategic planning and business development. Mr. Lamadrid also served on the Board of Directors of the General Electric Trading Company, GE/RCA Licensing Operation, Toshiba Electronic Systems Company (Japan), Ltd., and the Philadelphia World Affairs Council. Before joining General Electric, Mr. Lamadrid was a Manager at The Boston Consulting Group, and was also a founding investor of the Boston Beer Company. Mr. Lamadrid graduated from Yale University with a B.S. in Chemical Engineering and Administrative Sciences, Massachusetts Institute of Technology with a M.S. in Chemical Engineering, and Harvard with an M.B.A.

Timothy Vail. Mr. Vail is our President and Chief Executive Officer and is also a Director. Mr. Vail joined us as a Director on September 20, 2005, and accepted the President and Chief Executive Officer position on May 30, 2006. Prior to joining us, beginning in 2002, Mr. Vail served as the Director of Commercialization for Fuel Cell Development for General Motors Corporation (“GM”). At GM, Mr. Vail’s duties included the development of GM’s Shanghai fuel cell office as well as coordination of engineering facilities in the US, Germany, Japan and China. Prior to his position at GM, Mr. Vail was the Vice President of product development for The New Power Company, a start-up subsidiary of Enron Corporation, where he was responsible for the development of new products and services to be delivered to New Power’s customer bases. From 1995 until starting work for The New Power Company, Mr. Vail was a Vice President at Enron Energy Services. Mr. Vail was also a securities lawyer with Andrews

Kurth, LLP from 1990 to 1993. Mr. Vail holds a J.D. from the University of Houston Law Center and a B.A. in Economics from The University of Texas at Austin.

David Eichinger. Mr. Eichinger has served as our Chief Financial Officer and Senior Vice President of Corporate Development, since May 30, of 2006. Prior to joining us as an executive officer, Mr. Eichinger was a consultant to us since November 1, 2005, in which capacity he advised us on technology license negotiations and global expansion beyond the Chinese market. From 1991 to 1996, Mr. Eichinger spent five years in the Corporate Treasury function as an analyst in Corporate Finance and Tax at Exxon Corporation and Exxon Chemicals. From 1996 to 2000, Mr. Eichinger led merger and acquisition teams for Enron Corporation in the deregulating wholesale and retail markets in North and South America. In addition, Mr. Eichinger led the spin off of The New Power Company and served as an executive officer in charge of corporate development. Mr. Eichinger has also advised a number of energy related firms including CAM Energy (a New York based hedge fund) and General Hydrogen. Mr. Eichinger holds both a B.S. and M.S. in Chemistry from The College of William and Mary, and an M.B.A. from Carnegie Mellon.

Donald Bunnell . Mr. Bunnell is our President and Chief Executive Officer – Asia Pacific, a Director and a co-founder of our company. From 2001 until the creation of our company, Mr. Bunnell was the Asia Business Development Vice President for BHP Billiton’s aluminum group. Between 1997 and 2001, Mr. Bunnell served in various capacities, including Vice President in charge of Enron China’s power group, and Country Manager, with the power development team of Enron Corporation. During this time, Mr. Bunnell spent three years leading the Enron/Messer/Texaco consortium for the Nanjing BASF Project. From 1995 to 1997, Mr. Bunnell was a manager with Coastal Power Corporation (now part of El Paso Corporation) in Beijing, where he was involved in development of gas turbine power plants and other power projects. Mr. Bunnell is an attorney licensed to practice in the United States and has practiced law in Hong Kong, advising clients on China investments, prior to entering the power business. Mr. Bunnell is fluent in Mandarin Chinese, has lived in China for over 11 years, and has 10 years of experience in the China power industry developing projects and managing joint ventures. Mr. Bunnell graduated from Miami University with a B.A. and from the William & Mary School of Law with a J.D.

Gregory “Bruce” Golden . Mr. Golden is our Chief Technologist and a co-founder of the Company. Mr. Golden has 30 years of experience in the power industry developing, designing, building and operating power plants, including experience with IGCC power and utility plants. Mr. Golden worked for Enron Corporation from 1991 through 2001. From March to November 2001, Mr. Golden led Enron Corporation’s technical definition and estimate phase of a solid fuel power generation initiative. This solid fuel initiative helped Mr. Golden to better understand the competitiveness of IGCC power utility plants and led him to the U-GAS ^® technology. From 1997 to 2000, Mr. Golden led several technical proposal teams for “inside-the-fence” utility supply facilities and was also general manager of development engineering responsible for technical support for the development of several large power plants in China. From March 1994 to June 1996, Mr. Golden managed the construction of a 150 MW combined cycle gas turbine power plant in Hainan, China. Mr. Golden also assumed responsibility during this period for the review and oversight of a 550 MW poly-generation facility for the Saras Oil Refinery in Italy. When Mr. Golden joined Enron in 1991, he initially managed the development and construction of power plants in Guatemala, Nicaragua, El Salvador, and Honduras. Of Mr. Golden’s 30 years in the power industry, he has spent most of the past 10 years developing and building power and poly-generation plants. Mr. Golden graduated from Rice University with a B.S. in Mechanical Engineering.

Carol Pearson . Ms. Pearson has served as our Corporate Controller since July 27, 2006 and as our Corporate Secretary since October 11, 2006. From October 2005 to July 2006, she served as Corporate Controller for Cornell Companies Inc. Prior to that, Ms. Pearson served as Director of Internal Audit at Camden Property Trust, Inc. from May 2004 through August 2005. From January 2001 through May 2004, she was in charge of Financial Reporting and Compliance for EGL, Inc. Ms. Pearson previously served as an audit manager with Ernst & Young, LLP and a senior accountant with Coopers & Lybrand, LLP. She graduated from Northeast Louisiana University with a B.B.A. in accounting with Honors and is a Certified Public Accountant.

Michael Storey. Mr. Storey has served as one of our directors since November of 2005. From 2000 to 2004, he has served as President and CEO of Inmarsat Ventures, a global communications company. He resigned in March of 2004, but continues as an advisor. From 1993 to 1999, Mr. Storey ran several telecommunications businesses during European deregulation that became MCI Europe and is now Verizon Communications. In 1984, Mr. Storey established City Centre Communications, a business in the cable television and telecommunications industry. He grew his business and acquired several franchises before selling his interests in 1992 to Videotron and Bell Canada. He served as a Director and then Chairman of the Cable Communications Association from 1983 to 1990, representing all the investors in the U.K. cable industry. Starting in 1972, Mr. Storey served for 10 years as a Vice President and Partner of Booze Allen Hamilton International Management Consultants. Mr. Storey is a graduate of King’s Fund Administrative Staff College and has an M.B.A. from the University of Chicago. From 1958 to 1968, he worked in the healthcare industry, operating hospitals in the U.K., Middle East, and North America. He also holds two professional certifications: Professionally Qualified Hospital Administrator and Professionally Qualified Personnel Manager.

Denis Slavich. Mr. Slavich has served as a director since November of 2005 and currently serves as the Chairman of our Audit Committee. Mr. Slavich has over 35 years of experience in large-scale power generation development. He is currently an international consultant to a number of U.S. and China-based companies engaged in cross border transactions, as well as an advisor and board member for a number of additional firms. From 1998 to 2000 Mr. Slavich was the CFO and director of KMR Power Corporation and was responsible for the development of an international IPP company that developed projects in Columbia as well as other areas. Mr. Slavich also served as acting President for Kellogg Development Corporation, a division of M.W. Kellogg, during 1997. From 1991 to 1995, Mr. Slavich was also a Vice President of Marketing for Flour Daniel. From 1971 to 1991 Mr. Slavich served in various executive positions at Bechtel Corporation including Sr. VP, CFO, and director and Sr. VP and manager of the International Power Division. Mr. Slavich received his Ph.D. from Massachusetts Institute of Technology, M.B.A. from the University of Pittsburgh and his B.S. in Electrical Engineering from the University of California at Berkeley.

Harry Rubin. Mr. Rubin has been a Director since August 5, 2006. Mr. Rubin is currently Chairman of Henmead Enterprises, in which capacity he advises various companies regarding strategy, acquisitions and divestitures. He currently serves as a Director of Image-Metrics Plc, and has held board positions at a number of private and public companies such as the A&E Network, RCA/Columbia Pictures Home Video and the Genisco Technology Corporation. He was a founding partner of the Boston Beer Company. In the 12 years prior to 2006, Mr. Rubin held various senior management roles in the computer software industry, including Senior Executive Vice President and Chief Operating Officer of Atari, and President of International Operations and Chief Financial Officer for GT Interactive Software. Mr. Rubin entered the computer software business in 1993 when he became Executive VP for GT Interactive Software as a start-up company, and played a leadership role in GT’s progression as the company went public in 1995 and became one of the largest industry players. Prior to 1993, he held various senior financial and general management positions at RCA, GE and NBC. He is a graduate of Stanford University and Harvard Business School, and resides in New York City.

CORPORATE GOVERNANCE

The Company’s Board of Directors (the “Board”) has six directors and has established the Audit, Compensation, and Nominating and Governance Committees as its standing committees. The Board does not have an executive committee or any committees performing a similar function. We are not currently listed on a national securities exchange or in an inter-dealer quotation system that has requirements that a majority of the board of directors be independent, however, we have applied for a listing with the NASDAQ Stock Market, Inc. which has requirements that a majority of the board of directors be independent. The Board has determined that all members of the Board, other than Lorenzo Lamadrid, Chairman of the Board, Timothy Vail, the Company’s President and Chief Executive Officer and Donald Bunnell, President and Chief Executive Officer – Asia Pacific, are “independent” under the definition set forth in the listing standards of the NASDAQ Stock Market, Inc., which is the definition that the Board has chosen to use for the purposes of the determining independence, as the Pink Sheets does not provide such a definition. Therefore, only half of the Company’s current Board members are independent. The Company is utilizing the phase-in provisions of the NASDAQ rules for the majority independent requirement, which permits the Company to be listed if it has a majority of independent members within twelve months of the date of listing. The Board plans to appoint at least one more independent director as soon as practicable within this one-year period. In addition, the Board of Directors has determined that all members of the Company’s Audit Committee, in addition to meeting the above standards, also meet the criteria for independence for audit committee members which are set out in the Exchange Act.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information with respect to the beneficial ownership of our common stock as of March 28, 2007, by:

•

each person who is known by us to beneficially own 5% or more of the outstanding class of our capital stock;

•

each member of the Board;

•

each of our executive officers; and

•

all of our directors and executive officers as a group.

Beneficial ownership is determined in accordance with the rules of the SEC. To our knowledge, each of the holders of capital stock listed below has sole voting and investment power as to the capital stock owned unless otherwise noted.


Name and Address of Beneficial Owner	Numbers of Shares of Common Stock Beneficially Owned		% of Common Stock Outstanding ⁽¹⁾
Donald Bunnell		6,102,500		21.7%
Lorenzo Lamadrid (2)		3,195,000		11.3%
Gregory “Bruce” Golden		3,030,000		10.8%
Azure International (3)		1,680,000		6.0%
Michael Storey (4)		1,480,000		5.3%
Timothy Vail (5)		1,185,000		4.2%
David Eichinger (6)		700,000		2.5%
Denis Slavich (7)		115,000		*
Harry Rubin (8)		110,000		*
Executive Officers and Directors as a group (8 persons)		15,917,500		56.5%

__________________________

* Less than 1%

(1)

Based on 28,183,715 shares outstanding as of March 16, 2007.

(2)

Includes 25,000 shares of common stock issuable upon the exercise of options which are currently exercisable or exercisable within 60 days hereof.

(3)

Christopher J. Raczkowski, Stephen M. Terry and Juanli Han are the principals of, and exercise voting and investment authority over the shares held by, this stockholder.

(4)

Includes 80,000 shares of common stock issuable upon the exercise of options which are currently exercisable or exercisable within 60 days hereof.

(5)

Includes 965,000 shares of common stock issuable upon the exercise of options which are currently exercisable or exercisable within 60 days hereof.

(6)

Includes 700,000 shares of common stock issuable upon the exercise of options which are currently exercisable or exercisable within 60 days hereof.

(7)

Includes 105,000 shares of common stock issuable upon the exercise of options which are currently exercisable or exercisable within 60 days hereof.

(8)

Includes 40,000 shares of common stock issuable upon the exercise of options which are currently exercisable or exercisable within 60 days hereof.

EXECUTIVE COMPENSATION

Summary Compensation Table . The following table provides information concerning compensation paid or accrued during the fiscal years ended June 30, 2006 and 2005 to our principal executive officer and each of our other two most highly paid executive officers whose salary and bonus exceeded $100,000, collectively referred to as the Named Executive Officers, determined at the end of the last fiscal year:


Name and Principal Position	Year	Salary	Bonus	Stock Awards	Option Awards	Nonqualified Deferred Compensation Earnings	All Other Compensation	Total
Timothy Vail, President and CEO	2006 2005	$ 12,500 (1) $ -	- -	$ - $ -	$ 8,219,478 (2) $ -	- -	$ - $ -	$ 8,231,987 $ -
David Eichinger, CFO	2006 2005	$ 10,000 (3) $ -	- -	$ - $ -	$ 5,936,891 (2) $ -	- -	$ 46,573 (4) $ -	$ 5,993,464 $ -
Donald Bunnell, President and CEO Asia Pacific	2006 2005	$ 120,000 $ 24,000	- -	$ - $ 100,000 (5)	$ - $ -	- -	$ - $ -	$ 120,000 $ 124,000

(1)

Prior to May 30, 2006, Mr. Vail served only as a director, for which he did not receive any cash compensation.

(2)

Time vested options. Value determined using a Black-Sholes model. See Note 11 to the Consolidated Financial Statements for a discussion of assumptions made in the valuation of option grants.

(3)

Prior to May 30, 2006, Mr. Eichinger served as a consultant to the Company. His compensation for these services is listed under “All Other Compensation.”

(4)

Represents amounts paid under a consulting agreement between the Company and Mr. Eichinger which was effective from October 19, 2005 through May 1, 2006. Mr. Eichinger was hired by the Company as an employee on a permanent basis effective May 30, 2006.

(5)

Mr. Bunnell was one of the Company’s founders and received 7,402,500 shares in exchange for his work for the Company and his initial capital contribution of $100,000 subsequent to our merger with Tamborine on April 18, 2005.

We have entered into employment agreements with Timothy Vail, as our President and Chief Executive Officer, David Eichinger, as our Chief Financial Officer and Senior Vice President of Corporate Development and Donald Bunnell, as our President and Chief Executive Officer – Asia Pacific.

Our agreement with Mr. Vail became effective May 30, 2006 and is for a four-year term. He receives an annual base salary of up to $180,000, bonuses as may be awarded from time to time by the Board or any compensation committee thereof, including a performance bonus, and reimbursement of no more than $1,500 per month for all reasonable and customary medical and health insurance premiums incurred by Mr. Vail if he is not covered by insurance. Mr. Vail’s salary as of June 30, 2006 was $10,000 per month and was subject to increase upon the achievement of certain performance milestones. Mr. Vail met two of these milestones, one in August of 2006 and his salary was increased to $12,500 per month, and the second in March of 2007 and his salary was increased to $15,000 per month. The compensation committee of the Board shall also evaluate Mr. Vail’s salary on an annual basis and determine if any additional increases are warranted. Pursuant to the terms of the employment agreement, we have also granted Mr. Vail options to purchase 2,350,000 shares of common stock. The options have an exercise price of $3.00 and vest in five equal annual installments, with the first installment vesting on the effective date of the employment agreement. The options are subject to the terms and conditions outlined in the Company’s Amended and Restated 2005 Incentive Plan (the “Plan”). If the employment agreement is terminated by us other than by reason of death, disability or cause, we will continue to pay Mr. Vail his

salary for the remaining term of the employment agreement, but in no event less than 6 months and all options shall automatically vest. All vested options must be exercised within six months of the termination date, regardless of the reason for termination. The employment agreement prohibits Mr. Vail from competing with us during his employment and for a period of 18 months after termination of his employment. In addition, all options shall automatically vest upon a change of control, as such term is defined in the employment agreement.

Mr. Vail was also granted an option to purchase 50,000 shares of common stock pursuant to the terms of a nonstatutory stock option agreement dated effective November 7, 2005. The option has an exercise price of $2.50 and vest in four equal annual installments, with the first installment vesting on the effective date of the grant. The option expires on November 7, 2010. The option is subject to the terms and conditions outlined in the Plan. In addition, the option shall automatically vest upon a change of control, as such term is defined in the grant agreement.

Our agreement with Mr. Eichinger became effective May 30, 2006 and is for a four-year term. He receives an annual base salary of up to $180,000, bonuses as may be awarded from time to time by the Board or any compensation committee thereof, including a performance bonus, and reimbursement of no more than $1,500 per month for all reasonable and customary medical and health insurance premiums incurred by Mr. Eichinger if he is not covered by insurance. Mr. Eichinger’s current salary is $15,000 per month and is subject to increase upon the achievement of certain performance milestones. The compensation committee of the Board shall also evaluate Mr. Eichinger’s salary on an annual basis and determine if any additional increases are warranted. We have also granted Mr. Eichinger options to purchase 1,750,000 shares of common stock. The options have an exercise price of $3.00 and vest in five equal annual installments, with the first installment vesting on the date of the option grant. The options are subject to the terms and conditions outlined in the Plan. If the employment agreement is terminated by us other than by reason of death, disability or cause, we will continue to pay Mr. Eichinger his salary for the remaining term of the employment agreement, but in no event less than 6 months and all options shall automatically vest. All vested options must be exercised within six months of the termination date, regardless of the reason for termination. The employment agreement prohibits Mr. Eichinger from competing with us during his employment and for a period of 18 months after termination of his employment. In addition, all options shall automatically vest upon a change of control, as such term is defined in the employment agreement.

Our agreement with Mr. Bunnell was amended and restated effective July 14, 2006 and is for a term ending on April 18, 2009. Mr. Bunnell receives an annual base salary of $120,000, bonuses as may be awarded from time to time by the Board or any compensation committee thereof, including a performance bonus, and reimbursement of no more than $1,500 per month for all reasonable and customary medical and health insurance premiums incurred by Mr. Bunnell if he is not covered by insurance. Mr. Bunnell’s salary is subject to increase upon the achievement of certain performance milestones. The compensation committee of the Board shall also evaluate Mr. Bunnell’s salary on an annual basis and determine if any additional increases are warranted. If the employment agreement is terminated by us other than by reason of death, disability or cause, we will continue to pay Mr. Bunnell his salary for the remaining term of the employment agreement, but in no event less than 6 months and all options shall automatically vest. All vested options must be exercised within six months of the termination date, regardless of the reason for termination. The employment agreement prohibits Mr. Bunnell from competing with us during his employment and for a period of 18 months after termination of his employment.


OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
	Option Awards					Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable	Number of Securities Underlying Unexercised Options (#) Unexercisable	Equity Incentive Plan Awards Number of Securities Underlying Unexercised Unearned Options (#)	Option Exercise Price ($)	Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#)	Market Value of Shares or Units of Stock That Have Not Vested ($)	Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)	Equity Incentive Plan Awards Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
(a)	(b)	(c)	(d)	(e)	(f)	(g)	(h)	(i)	(j)
Timothy Vail	482,500	1,917,500 (1)	-	(1)	(1)	-	-	-	-
David Eichinger	350,000	1,400,000 (2)	-	$3.00	(2)	-	-	-	-
Donald Bunnell	-	-	-	-	-	-	-	-	-

______________________

(1)

Mr. Vail has received two option grants: (a) an option to purchase 50,000 shares at an exercise price of $2.50 on November 7, 2005, and (b) an option to purchase 2,350,000 shares at an exercise price of $3.00 on May 30, 2006. The options expire on November 7, 2010 and May 30, 2011, respectively. The November 7, 2005 option vests in four equal annual installments, with the first installment vesting on the date of grant. The May 30, 2006 option vests in five equal annual installments, with the first installment vesting on the date of grant.

(2)

Mr. Eichinger received an option to purchase 1,750,000 shares on May 30, 2006 which vests in five equal annual installments, with the first installment vesting on the date of grant. The option expires on May 30, 2011.

The description of the terms of the employment agreements of Messrs. Vail and Eichinger also includes a summary description of the terms of their May 30, 2006 option grants.


DIRECTOR COMPENSATION
Name	Fees Earned or Paid in Cash	Stock Awards	Option Awards	Non-Equity Incentive Compensation	1	Nonqualified Deferred Compensation Earnings	All Other Compensation	Total
(a)	(b)	(c)	(d)	(e)		(f)	(g)	(h)
Lorenzo Lamadrid	$ 60,000	-	$ 212,317 (1)	-		-	-	$ 272,317
Michael Storey	$ -	-	$ 770,437 (2)	-		-	-	$ 770,437
Denis Slavich	$ -	-	$ 770,437 (2)	-		-	-	$ 770,437
Harry Rubin	$ -	-	$ - (3)	-		-	-	$ -

_________________

(1)

Mr. Lamadrid was granted an option to purchase 50,000 shares of common stock at an exercise price of $2.50 on November 7, 2005. The option vests in four equal annual installments, with the first installment vesting on the date of grant. The option expires on November 7, 2010.

(2)

Each of Mr. Storey and Mr. Slavich were granted (i) an option to purchase 50,000 shares of common stock at an exercise price of $2.50 per share on November 7, 2005 and (ii) an option to purchase 200,000 shares of common stock at an exercise price of $3.00 per share on May 30, 2006. The options vest in four and five equal annual installments, respectively, with the first installment vesting on the date of grant. The options expire on November 7, 2010 and May 30, 2011, respectively.

(3)

Mr. Rubin began serving as a director on August 4, 2006. On that date, he was granted an option to purchase 160,000 shares of common stock at an exercise price of $3.00 per share. The option vests in five equal annual installments, with the first installment vesting on the date of grant. The option expires on August 4, 2011. Additionally, on March 26, 2007, Mr. Rubin was granted an option to purchase an additional 40,000 shares of common stock at an exercise price of $6.00 per share. The option vests in five equal annual installments, with the first installment vesting on the date of the grant. The option expires on February 7, 2010.

Mr. Lamadrid has a consulting agreement with us for his service as Chairman of our Board. The agreement is for a four-year term effective August 1, 2006. Mr. Lamadrid receives an annual consulting fee of $60,000 and reimbursement for reasonable expenses incurred in the performance of his services. The compensation committee of the Board shall also evaluate Mr. Lamadrid’s consulting fee on an annual basis and determine if any additional increases are warranted.

INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS

None.

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock has been quoted on the Pink Sheets since March 23, 2005. On May 23, 2005, we changed our symbol on the Pink Sheets from “TMBH” to “SYMX” and our common stock is currently trading on the Pink Sheets under that symbol.

The following table sets forth the range of the high and low closing prices, as reported by the Pink Sheets, for our common stock for the periods indicated.


	Sales Price
Year Ending June 30, 2005:	High	Low
Third Quarter (beginning March 23, 2005)	$ 6.75	$ 3.00
Fourth Quarter	$ 6.00	$ 4.75

Year Ending June 30, 2006:
First Quarter	$ 6.00	$ 5.00
Second Quarter	$ 7.25	$ 5.75
Third Quarter	$ 9.75	$ 5.00
Fourth Quarter	$ 6.50	$ 3.00

Year Ending June 30, 2007:
First Quarter	$ 8.00	$ 5.75
Second Quarter	$ 7.50	$ 6.25
Third Quarter (as of March 28, 2007)	$ 6.75	$ 5.00

Our authorized capital stock consists of 100,000,000 shares of common stock. As of March 16, 2007, 28,183,715 shares of common stock were issued and outstanding. As of such date, there were approximately 290 holders of record of our common stock.

We have not paid dividends on our common stock and do not anticipate paying cash dividends in the immediate future as we contemplate that our cash flows will be used for continued growth of our operations. The payment of future dividends, if any, will be determined by our Board of Directors in light of conditions then existing, including our earnings, financial condition, capital requirements, and restrictions in financing agreements, business conditions and other factors.

DESCRIPTION OF COMMON STOCK

General

Our authorized capital stock consists of 100,000,000 shares of common stock, $0.01 par value per share, of which 28,183,715 shares of our common stock are issued and outstanding as of March 27, 2007. All of our outstanding shares of common stock are duly authorized, validly issued and outstanding and fully paid and non-assessable.

Common Stock

Voting . The holders of our common stock have one vote for each share they hold on all matters presented to them and do not have cumulative voting rights.

Dividends . Holders of our common stock are entitled to receive dividends equally, if any, as may be declared by the Board out of funds legally available therefore after taking into account various factors, including, among others, our financial condition, results of operations, cash flows from operations, current and anticipated capital requirements and expansion plans.

Liquidation . Upon our liquidation, dissolution or winding up, the holders of our common stock will be entitled to a ratable portion (based upon the number of shares of our common stock held by each such holder or issuable upon the exercise of any securities convertible in shares of our common stock) of our available net assets.

Preemptive Rights . Holders of our common stock have no preemptive, subscription, redemption, or conversion rights.

Transfer Restrictions . Holders of our common stock may only transfer, sell or otherwise dispose of our common stock held pursuant to an effective registration statement under the Securities Act, pursuant to an available exemption from the registration requirements of the Securities Act or Rule 144 promulgated under the Securities Act. In connection with any transfer, sale or disposition of any of our common stock other than pursuant to an effective registration statement or Rule 144, we may require you to provide us a written opinion of counsel providing that such transfer, sale or disposition does not require registration under the Securities Act.

Anti-Takeover Effects of Provisions of Our Certificate of Incorporation and Our Amended and Restated Bylaws

Some provisions of our certificate of incorporation and our amended and restated bylaws contain provisions that could make it more difficult to acquire us by means of a merger, tender offer, proxy contest or otherwise, or to remove our incumbent officers and directors. These provisions, summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging such proposals because negotiation of such proposals could result in an improvement of their terms.

Stockholder meetings . Our amended and restated bylaws provide that a special meeting of stockholders may be called only by the Chairman of the Board, the Chief Executive Officer or by a resolution adopted by a majority of our board of directors.

Requirements for advance notification of stockholder nominations and proposals . Our amended and restated bylaws establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors, other than nominations made by or at the direction of the board of directors.

Stockholder action by written consent . Our amended and restated bylaws provide that no action that is required or permitted to be taken by our stockholders at any annual or special meeting may be effected by written consent of stockholders in lieu of a meeting of stockholders, unless the action to be effected by written consent of stockholders and the taking of such action by such written consent have expressly been approved in advance by our board of directors. This provision, which may not be amended except by the affirmative vote of holders of at least 66 2/3% of the voting power of all then outstanding shares of capital stock entitled to vote generally in the election of directors, voting together as a single class, makes it difficult for stockholders to initiate or effect an action by written consent that is opposed by our board of directors.

Amendment of the bylaws . Under Delaware law, the power to adopt, amend or repeal bylaws is conferred upon the stockholders. A corporation may, however, in its certificate of incorporation also confer upon the board of directors the power to adopt, amend or repeal its bylaws. Our charter and amended and restated bylaws grant our board the power to adopt, amend and repeal our amended and restated bylaws at any regular or special meeting of the board on the affirmative vote of a majority of the directors then in office. Our stockholders may adopt, amend or repeal our amended and restated bylaws but only at any regular or special meeting of stockholders by an affirmative vote of holders of at least 66 2/3% of the voting power of all then outstanding shares of capital stock entitled to vote generally in the election of directors, voting together as a single class.

These provisions of our certificate of incorporation and amended and restated bylaws could have the effect of discouraging others from attempting hostile takeovers and, as a consequence, they may also inhibit temporary fluctuations in the market price of our common stock that often result from actual or rumored hostile takeover attempts. These provisions may also have the effect of preventing changes in our management. It is possible that these provisions could make it more difficult to accomplish transactions which stockholders may otherwise deem to be in their best interests.

Agreement with Union Charter Financial

In March 2005, we entered into an agreement with Union Charter Capital VII, Inc. (“UCF”) which covered certain capital commitment obligations of UCF and the Company and set forth certain rights of UCF if certain commitment thresholds were met. Effective November 30, 2006, we have amended and restated this agreement in its entirety to clarify certain statements in the original agreement. As amended and restated, UCF is entitled to purchase up to 2,000,000 shares of the Company’s common stock at a purchase price of $2.50 per share on or prior to June 30, 2007. Upon exercise of this right, UCF may purchase all or a portion of the shares.

RELATIONSHIPS WITH ISSUER OF EXPERTS NAMED IN REGISTRATION STATEMENT

None.

LEGAL PROCEEDINGS

None.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

In November 2006, KPMG LLP, a US based accounting firm, became our independent auditor. We were formerly audited by KPMG Huazhen, the China member firm of KPMG International. The decision to move the audit function to the United States from China was deemed the best course of action given our recent opening of our corporate headquarters in Houston, Texas. There were no disagreements between us and KPMG Huazhen over accounting principles or practices, and the audit firm did not issue an adverse opinion or disclaimer, regarding our financial statements for the years ending June 30, 2006 and 2005 and the period from November 4, 2003 (inception) to June 30, 2006. Additionally, their opinions were not qualified and did not have any modifications as to uncertainty, audit scope or accounting principle.

We did not consult with KPMG LLP regarding the application of accounting principles or application before their appointment as our auditors. Our audit committee approved the change to KPMG LLP.

DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION OF SECURITIES ACT LIABILITIES

Our bylaws provide that each officer and director of our company shall be indemnified by us against all costs and expenses actually and necessarily incurred by him or her in connection with the defense of any action, suit or proceeding in which he or she may be involved or to which he or she may be made a party by reason of his or her being or having been such director or officer, except in relation to matters as to which he or she has been finally adjudged in such action, suit or proceeding to be liable for negligence or misconduct in the performance of duty.

The indemnification provisions of our bylaws diminish the potential rights of action, which might otherwise be available to shareholders by affording indemnification against most damages and settlement amounts paid by a director in connection with any shareholders derivative action. However, there are no provisions limiting the right of a shareholder to enjoin a director from taking actions in breach of his fiduciary duty, or to cause the Company to rescind actions already taken, although as a practical matter courts may be unwilling to grant such equitable remedies in circumstances in which such actions have already been taken. Although we presently have directors' liability insurance, there is no assurance that it will provide coverage to the extent directors would be indemnified under the provisions, and as such, we may be forced to bear a portion or all of the cost of the director's claims for indemnification under such provisions. If we are forced to bear the costs for indemnification, the value of our stock may be adversely affected.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

LEGAL MATTERS

Certain legal matters in connection with the common stock offered hereby will be passed on for us by Porter & Hedges, L.L.P., 1000 Main Street, Suite 3600, Houston, Texas 77002. Any underwriters will be advised about other issues relating to any offering by their own legal counsel.

EXPERTS

The consolidated financial statements of Synthesis Energy Systems, Inc. as of June 30, 2006 and 2005, and for each of the years in the two-year period ended June 30, 2006 and 2005 and the period from November 4, 2003 (inception) to June 30, 2006, have been included herein in reliance upon the report of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.

INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

F-2

Consolidated Balance Sheets as of June 30, 2006 and 2005

F-3

Consolidated Statements of Operations for the years ended
June 30, 2006 and 2005 and the period from November 4, 2003 (inception)
to June 30, 2006

F-4

Consolidated Statement of Stockholders' Equity for years ended
June 30, 2006 and 2005 and the period from November 4, 2003 (inception)
to June 30, 2006

F-5

Consolidated Statements of Cash Flows for years ended
June 30, 2006 and 2005 and the period from November 4, 2003 (inception)
to June 30, 2006

F-6

Notes to the Consolidated Financial Statements for years ended
June 30, 2006 and 2005 and the period from November 4, 2003 (inception)
to June 30, 2006

F-7

Condensed Consolidated Balance Sheets as of December 31, 2006
(unaudited) and June 30, 2006

F-20

Condensed Consolidated Statements of Operations for the six months
ended December 31, 2006 and 2005 and the period from November 4, 2003
(inception) to December 31, 2006 (unaudited)

F-21

Condensed Consolidated Statements of Operations for the three months
ended December 31, 2006 and 2005 (unaudited)

F-22

Condensed Consolidated Statement of Stockholders’ Equity for the
three months ended December 31, 2006 (unaudited)

F-23

Condensed Consolidated Statements of Cash Flows for the six months
ended December 31, 2006 and 2005 and the period from November 4, 2003
(inception) to December 31, 2006 (unaudited)

F-24

Notes to Unaudited Condensed Consolidated Financial Statements for the
three and six months ended December 31, 2006 and 2005 and the period from
November 4, 2003 (inception) to December 31, 2006 (unaudited)

F-25

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Synthesis Energy Systems, Inc.:

We have audited the accompanying consolidated balance sheets of Synthesis Energy Systems, Inc. and subsidiaries (a development-stage enterprise) as of June 30, 2006 and 2005, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended June 30, 2006 and for the period from November 4, 2003 (inception) to June 30, 2006. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Synthesis Energy Systems, Inc. and subsidiaries (a development-stage enterprise) as of June 30, 2006 and 2005, and the results of their operations and their cash flows for each of the years in the two-year period ended June 30, 2006 and for the period from November 4, 2003 (inception) to June 30, 2006, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

Houston, Texas

January 25, 2007

F-2

SYNTHESIS ENERGY SYSTEMS, INC.

(A Development Stage Enterprise)


Consolidated Balance Sheets
	June 30, 2006	June 30, 2005
ASSETS
Current assets:
Cash	$ 3,154,096	$ 2,706,602
Prepaid expenses and other currents assets (Note 3)	42,037	30,818
Total current assets	$ 3,196,133	$ 2,737,420
Property, plant and equipment, net (Note 4)	9,854	5,929
Intangible asset, net (Note 5)	7,561	8,561
Total assets	$ 3,213,548	$ 2,751,910

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accrued expenses and other payables (Note 6)	$ 328,198	$ 114,003
Loan from a shareholder	-	1,150
Total liabilities	328,198	115,153
Stockholders’ Equity:
Common stock, $0.01 par value: 100,000,000 shares authorized: 24,647,500 and 28,030,000 shares issued and outstanding, respectively (Note 10)	246,475	280,300
Additional paid-in capital (Note 10)	8,179,604	2,714,810
Deficit accumulated during development stage	(5,540,729)	(358,353)
Total stockholders’ equity	$ 2,885,350	$ 2,636,757
Commitments and contingencies (Note 9)	-	-
Total liabilities and stockholders’ equity	$ 3,213,548	$ 2,751,910

See accompanying notes to the condensed consolidated financial statements.

F-3

SYNTHESIS ENERGY SYSTEMS, INC.

(A Development Stage Enterprise)


Consolidated Statements of Operations
	Year Ended June 30, 2006	Year Ended June 30, 2005	November 4, 2003 (inception) To June 30, 2006

Net Sales	$ -	$ -	$ -
Costs of goods sold	-	-	-
Gross Profit	-	-	-
General and administrative expenses and other expenses:
General and administrative expenses	(1,023,229)	(237,463)	(1,261,132)
Stock-based compensation	(3,042,979)	-	(3,042,979)
Project development expenses	(871,882)	(43,679)	(915,561)
Technical development	(373,282)	(87,954)	(461,236)
Operating loss	$ (5,311,372)	$ (369,096)	$ (5,680,908)


Non-operating income:
Interest Income	128,996	13,623	142,619
Interest expense	-	(2,440)	(2,440)
Net loss before income tax benefit	(5,182,376)	(357,913)	(5,540,729)

Income tax benefit	-	-	-
Net loss	$ (5,182,376)	$ (357,913)	$ (5,540,729)

Net loss per share (Note 8):
Basic and diluted	$ (0.19)	$ (0.01)	$ (0.20)

Weighted average common shares outstanding:
Basic and diluted shares	27,754,139	27,180,446	27,351,936
See accompanying notes to the consolidated financial statements.

F-4

SYNTHESIS ENERGY SYSTEMS, INC.

(A Development Stage Enterprise)


Consolidated Statement of Stockholders’ Equity
	Common Stock				Additional Paid-in Capital	Deficit Accumulated During the Development Stage	Total
	Shares		Common Stock		Additional Paid-in Capital	Deficit Accumulated During the Development Stage	Total

Balance at November 4, 2003 (inception)	100,000		$ -		$ -	$ -	$ -
Net loss for the period November 4, 2003 to June 30, 2004	-		-		-	(440)	(440)
Balance at June 30, 2004	100,000		$ -		$ -	$ (440)	$ (440)
Shares Forfeited in Merger	(94,000,000)	(1)	-		-	-	-
Shares Issued in Merger	21,000,000	(1)	-		-	-	-
Net loss for the year	-		-		-	(357,913)	(357,913)
Investor contributions	-		264,190	(1)	235,810	-	500,000
Conversion of debt to equity	-		5,810	(1)	5,190	-	11,000
Net proceeds from private placement offering	1,030,000		10,300		2,473,810	-	2,484,110

Balance at June 30, 2005	28,030,000		$ 280,300		$ 2,714,810	$ (358,353)	$ 2,636,757
Net loss for the year	-		-		-	(5,182,376)	(5,182,376)
Net proceeds from private placement offering	970,000		9,700		2,378,290	-	2,387,990
Stock-based compensation	-		-		3,042,979	-	3,042,979
Adjustment related to return of shares	(4,392,500)		(43,525)		43,525	-	-
Balance at June 30, 2006	24,647,500		$ 246,475		$ 8,179,604	$ (5,540,729)	$ 2,885,350
(1) Merger related transactions See accompanying notes to the consolidated financial statements

F-5

SYNTHESIS ENERGY SYSTEMS, INC.

(A Development Stage Enterprise)


Consolidated Statements of Cash Flows
	Year Ended June 30, 2006	Year Ended June 30, 2005	November 4, 2003 To June 30, 2006 (Since Inception)

Cash flows from operating activities:
Net loss	$ (5,182,376)	$ (357,913)	$ (5,540,729)
Adjustments to reconcile net loss to net cash provided by operating activities:
Stock-based compensation	3,042,979	-	3,042,979
Depreciation of property, plant, and equipment	3,960	302	4,262
Amortization of intangible asset	1000	999	2,439
Increase in prepaid expenses and other current assets	(11,219)	(30,818)	(42,037)
Increase in accrued expenses and other payables	214,195	114,003	328,198
Net cash used in operating activities	$ (1,931,461)	$ (273,427)	$ (2,204,888)


Cash flows from investing activities:
Capital expenditures	(7,885)	(6,321)	(24,116)
Net cash used in investing activities	(7,885)	(6,231)	(24,116)

Cash flows form financing activities:
Proceeds from issuance of common stock	2,387,990	2,984,110	5,372,100
Loans from (repayments to) shareholders	(1,150)	150	11,000
Net cash provided by financing activities	$ 2,386,840	$ 2,984,260	$ 5,383,100
Net increase in cash	447,494	2,704,602	3,154,096
Cash and cash equivalents at beginning of the period	2,706,602	2,000	-
Cash and cash equivalents at end of the period	$ 3,154,096	$ 2,706,602	$ 3,154,096

Supplemental cash flow information:
Cash paid for interest	$ 150	$ 2,290	$ 2,440
Cash received for interest	$ 128,996	$ 13,623	$ 142,619
Non-cash transactions:
Stock-based compensation	$ 3,042,979	$ -	$ 3,042,979
Conversion of debt to equity	$ -	$ 11,000	$ 11,000
See accompanying notes to the condensed consolidated financial statements.

F-6

SYNTHESIS ENERGY SYSTEMS, INC.

(A Development Stage Enterprise)

Notes to the Consolidated Financial Statements

For the years ended June 30, 2006 and 2005 and the
period from November 4, 2003 (inception) to June 30, 2006

Note 1 – Summary of Significant Accounting Policies

(a) Organization and description of business :

Synthesis Energy Systems, Inc. (“SES” or “the Company”) is an emerging development stage technology company involved in the global development and commercialization of gasification technology. Its principal asset is a license with the Gas Technology Institute (“GTI”), a U.S. based non-profit research organization, for U-GAS ^® technology. See Note 13 “Subsequent events - License Agreement with GTI”.

The Company’s strategy is to commercialize GTI’s technology with the initial focus on development in Shanghai, China. The Company’s headquarters are located in Houston, Texas.

On April 18, 2005, SES Acquisition Corporation, a Florida corporation and wholly-owned subsidiary of Tamborine Holdings, Inc. (“Tamborine”), a Mississippi corporation, merged with and into Synthesis Energy Holdings, Inc., a Florida corporation (“Synthesis Florida”), whereby the holders of common stock of Synthesis Florida became shareholders of, and Synthesis Florida became a wholly-owned subsidiary of, Tamborine. The Company accounted for this reverse merger for financial reporting purposes as an issuance of securities whereby the parties exchanged stock in one company for stock in another company; therefore, no goodwill or intangibles were recorded in this transaction. On April 27, 2005, Tamborine changed its name to Synthesis Energy Systems, Inc. and on June 27, 2005, reincorporated in the State of Delaware.

As a condition of the above merger, Synthesis Florida completed a restructuring whereby two predecessor entities (Synthesis Energy Systems, Inc., a corporation formed under the laws of the British Virgin Islands, and Synthesis Energy Systems, LLC, a West Virginia limited liability company) and two entities formed in connection with the restructuring (International Hydrogen Technologies, a Florida corporation and Innovative Engines, Inc., a Florida corporation) became wholly owned subsidiaries of Synthesis Florida. The Company accounted for this transaction as an acquisition between entities under common control. Therefore, the results of operations, of these new subsidiary companies from the acquisition date of April 18, 2005 are included in the Company’s consolidated financial statements as if the restructuring had been formed at the earliest inception date of each of the subsidiaries. Accordingly, no goodwill was recorded as a result of this transaction.

(b) Basis of presentation and principles of consolidation

The accompanying consolidated financial statements are in US dollars and include SES, all of its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The Company has reclassified certain prior year amounts to conform to the current year presentation. The Company is currently in development stage and has not generated any operating revenue to date.

(c) Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Management considers many factors in selecting appropriate operational and financial accounting policies and controls, and in developing the assumptions that are used in the preparation of these financial statements. Management must apply significant judgment in this process. Among the factors, but not fully inclusive of all factors that may be considered by management in these processes are: the range of accounting policies permitted by accounting principles generally accepted in the United States of America; management’s understanding of the Company’s business – both historical results and expected future results; the extent to which operational controls exist that provide high degrees of assurance that all desired information to assist in the estimation is available and reliable or whether there is greater uncertainty in the information that is available upon

F-7

which to base the estimate; expectations of the future performance of the economy, both domestically, and globally, within various areas that serve the Company’s principal customers and suppliers of goods and services; expected rates of exchange, sensitivity and volatility associated with the assumptions used in developing estimates; and whether historical trends are expected to be representative of future trends. The estimation process often times may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that lies within that range of reasonable estimates based upon the quantity, quality and risks associated with the variability that might be expected from the future outcome and the factors considered in developing the estimate. This estimation process may result in the selection of estimates which could be viewed as conservative or aggressive by others. Management attempts to use its business and financial accounting judgment in selecting the most appropriate estimate, however, actual amounts could and will differ from those estimates.

(d) Cash and cash equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash equivalents are carried at cost, which approximates market value.

(e) Property, plant, and equipment

Property and equipment are stated at cost. Depreciation is computed by using the straight-line method at rates based on the estimated useful lives of the various classes of property. Estimates of useful lives are based upon a variety of factors including durability of the asset, the amount of usage that is expected from the asset, the rate of technological change and the Company’s business plans for the asset. Leasehold improvements are amortized on a straight line basis over the shorter of the lease term or estimated useful life of the asset. Should the Company change its plans with respect to the use and productivity of property and equipment, it may require a change in the useful life of the asset or incur a charge to reflect the difference between the carrying value of the asset and the proceeds expected to be realized upon the asset’s sale or abandonment. Expenditures for maintenance and repairs are expensed as incurred and significant major improvements are capitalized.

(f) Impairment of assets

The Company evaluates fixed assets for impairment if an event or circumstance occurs that triggers an impairment test. Substantial judgment is necessary in the determination as to whether an event or circumstance has occurred that may trigger an impairment analysis and in the determination of the related cash flows from the asset. Estimating cash flows related to long-lived assets are a difficult and subjective process that applies historical experience and future business expectations to revenues and related operating costs of assets. Should impairment appear to be necessary, subjective judgment must be applied to estimate the fair value of the asset, for which there may be no ready market, which oftentimes results in the use of discounted cash flow analysis and judgmental selection of discount rates to be used in the discounting process. If the Company determines an asset has been impaired based on the projected undiscounted cash flows of the related asset or the business unit over the remaining amortization period, and if the cash flow analysis indicates that the carrying amount of an asset exceeds related undiscounted cash flows, the carrying value is reduced to the estimated fair value of the asset or the present value of the expected future cash flows.

(g) Intangible asset

Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with FASB Statement No. 144, Accounting for Impairment or Disposal of Long-Lived Assets.

(h) Provision for income taxes

The Company accounts for income taxes using the asset and liability method. Deferred tax liabilities and assets are determined based on temporary differences between the basis of assets and liabilities for income tax and financial reporting purposes. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences. Valuation allowances are established when necessary based upon the judgment of management to reduce deferred tax assets to the amount expected to be

F-8

realized and could be necessary based upon estimates of future profitability and expenditure levels over specific time horizons in particular tax jurisdictions.

(i) Foreign currency translation

Assets and liabilities of the Company’s foreign subsidiaries are translated into U.S. dollars at year-end rates of exchange and income and expenses are translated at average exchange rates during the year. Adjustments resulting from translating financial statements into U.S. dollars for the years ended June 30, 2006 and 2005 were immaterial and therefore the Company’s financial statements do not reflect any cumulative translation adjustments which would normally be shown as a separate component of other comprehensive income (loss). Gains and losses from foreign currency transactions are included in net loss.

(j) Research and development costs

Research and development costs are expensed as incurred.

(k) Stock option plan

In accordance with the provisions of Statement of Financial Accounting Standard (SFAS) No. 123, “Accounting for Stock-Based Compensation,” we have elected to account for our stock-based compensation plans under the intrinsic value method established by Accounting Principles Board Opinion (APB) No. 25, “Accounting for Stock Issued to Employees.” In accordance with the provisions of APB No. 25, amounts recorded in net income reflect only the amount by which fair market value is greater than the exercise price of the option at the date of grant. Due to the thinly traded nature of the Company’s stock, the Company uses an average of several days of trades to calculate fair market value. In accordance with SFAS No. 148, “ Accounting for Stock-Based Compensation - Transition and Disclosure, an Amendment of SFAS No. 123,” the effect on our net loss per share as if we had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation (in thousands, except per share amounts):


	Year Ended June 30,		November 4, 2003 (inception) to June 30, 2006
	2006	2005	November 4, 2003 (inception) to June 30, 2006
Net loss, as reported	$ (5,182,376)	$ (357,913)	$ (5,540,729)
Add: Total stock-based compensation recorded, net of tax	3,042,979	-	3,042,979
Less: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects ( 1 )	(4,132,917)	-	(4,132,917)
Pro forma net loss	$ (6,272,314)	$ (357,913)	$ (6,630,667)

Net loss per share:
Basic and diluted, as reported	$ (0.19)	$ (0.01)	$ (0.20)
Basic and diluted pro forma	(0.23)	(0.01)	(0.24)

Weighted-average fair value per share of options granted (1)	$ 3.49	$ N/A	$ 3.49

___________________

(1) See Note 11 to the Consolidated Financial Statements for additional information regarding the computations presented above.

F-9

Note 2 - Recently issued accounting standards

In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based Payment" ("SFAS No.123(R)") requiring the compensation cost relating to share-based payments be recognized over their vesting periods in the income statement based on their estimated fair values. In April 2005, the SEC issued Staff Accounting Bulletin No. 107, "Shared-Based Payment" providing for a phased-in implementation process for SFAS No. 123(R). The Statement will be effective for the Company for the fiscal year beginning July 1, 2006. The Company expects to record approximately $12.0 million of stock-based compensation over the next four years based upon options outstanding at June 30, 2006.

In May 2005, the FASB issued SFAS No. 154 "Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3" ("SFAS No. 154") . This pronouncement applies to all voluntary changes in accounting principle and revises the requirements for accounting for and reporting a change in accounting principle. SFAS No. 154 requires retrospective application to prior periods’ financial statements of a voluntary change in accounting principle, unless it is impracticable to do so. This pronouncement also requires changes to the method of depreciation, amortization, or depletion for long-lived, non-financial assets are accounted for as a change in accounting estimate that is affected by a change in accounting principle. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. SFAS No. 154 does not change the transition provisions of any existing accounting pronouncements, including those which are in a transition phase (such as SFAS No. 123(R)) as of the effective date of SFAS No. 154. The Company does not expect the adoption of SFAS No. 154 to have a material impact on its financial position, results of operations or cash flows.

In June 2006, the FASB issued FIN 48, "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109," which clarifies the accounting for uncertainty in tax positions. FIN 48 requires we recognize in our financial statements the impact of a tax position, if the position is more likely than not of being sustained on audit, based on the technical merits of the position. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company does not expect the adoption of FIN 48 to have a material input on its financial position, results of operation or cash flows.

Note 3 - Prepaid expenses and other current assets

Prepaid expenses and other current assets consisted of the following:


	As of June 30,
	2006	2005
Prepaid insurance	$ 13,158	$ -
Prepaid legal & consulting services	17,781	10,000
Prepaid rent & related deposits	3,243	9,022
Employee advances	4,389	11,796
Other	3,466	-
	$ 42,037	$ 30,818

F-10

Note 4 - Property, plant and equipment

Property, plant and equipment consisted of the following:


		As of June 30,
	Estimated useful lives	2006	2005
Furniture and fixtures	2 to 3 years	$ 3,129	$ 2,957
Leasehold improvements	Lease term	2,298	2,297
Computer equipment	3 years	8,689	977
		$ 14,116	$ 6,231
Less: Accumulated depreciation		4,262	302
Net book value		$ 9,854	$ 5,929

Depreciation expense for the years ended June 30, 2006 and 2005 and the period from November 4, 2003 (inception) to June 30, 2006 was $3,960, $302 and $4,262, respectively.

Note 5 - Intangible asset

The Company’s only intangible asset is a license with the Gas Technology Institute (“GTI”); a U.S. based non-profit research organization, for U-GAS ^® technology in several world-wide geographic markets, including China, the Appalachian Mountain regions of the United States, India, Pakistan, Australia and the United Kingdom. This agreement was amended and restated on August 31, 2006. See Note 13 – “Subsequent Events - License Agreement with GTI.”


		As of June 30, 2006		As of June 30, 2005
	Estimated useful life	Gross carrying amount	Accumulated amortization	Gross carrying amount	Accumulated amortization

Use rights of “U-GAS ^® ”:	10 years	$ 10,000	$ 2,439	$ 10,000	$ 1,439

Amortization expense for the years ended June 30, 2006 and 2005 and the period from November 4, 2003 (inception) to June 30, 2006 was $1,000, $999 and $2,439, respectively. Based upon the GTI Agreement that existed as of June 30, 2006, the annual estimated amortization expense, related to an intangible asset, for the next five years is $1,000 per year.

Note 6 – Accrued expenses and other payables

The components of the accrued expenses and other payables are as follows:


	As of June 30,
	2006	2005

Reimbursable expenses	$ 87,595		$ 11,929
Technical, engineering and design services	118,143		-
Audit, tax and other consulting	91,269		-
Accrued payroll	24,153		55,000
Other	7,038		47,074

	$ 328,198		$ 114,003

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Note 7 - Income taxes

For financial reporting purposes, net loss before income taxes showing domestic and foreign sources was as follows:


	Year ended June 30,
	2006	2005

Domestic	$ (3,396,737)	$ (36,598)
Foreign	(1,785,639)	(321,315)
Net loss	$ (5,182,376)	$ (357,913)

Provision for income taxes

The following is a reconciliation of income taxes at the statutory federal income tax rate of 35% to the income tax provision (benefit) recorded:


	Year ended June 30,
	2006	2005

Net loss	$ (5,182,376)		$ (357,913)
Computed tax benefit at statutory rate	(1,813,832)		(125,270)
Other	1,347		516
Tax on income/(losses) from foreign operations	616,389		112,460
Valuation allowance	1,196,096		12,294
	$ -		$ -

Deferred tax assets (liabilities)

The components of the net deferred asset (liabilities) are as follows:


	Year ended June 30,
	2006	2005
Deferred tax assets:
Net operating loss carry forward	$ 144,999	$ 12,294
Depreciation and amortization	58	-
Accrued professional fees	10,500	-
Stock-based compensation	1,024,501	-
Other accruals	28,332	-
Subtotal	1,208,390	12,294
Valuation allowance	(1,208,390)	(12,294)
Net deferred assets (liabilities)	$ -	$ -

At June 30, 2006 we had approximately $390,107 of federal net operating loss (“NOL”) carry forwards, and $56,412 of China NOL carry forwards. The federal NOL carry forwards have expiration dates through the year 2026. The China NOL carry forwards will expire in 2011.

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The Company has established valuation allowances for uncertainties in realizing the benefit of tax losses, and other deferred tax assets in all jurisdictions. Future changes in estimates of taxable income or in tax laws may change the need for the valuation allowance.

Note 8 – Net loss per share data

Historical net loss per common share is computed using the weighted average number of common shares outstanding. Basic loss per share excludes dilution and is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding for the period. For the years ended June 30, 2006 and 2005 and the period from November 4, 2003 (inception) to June 30, 2006, the number of weighted average shares included in the calculation was 27,754,139, 27,180,446 and 27,351,936 respectively. Stock options are the only potential dilutive share equivalents the Company has outstanding for the periods presented. No shares related to options were included in diluted earnings per share for the years ended June 30, 2006 and 2005 and the period from November 4, 2003 (inception) to June 30, 2006 as their effect would have been antidilutive as the Company incurred net loss during those periods.

Note 9 - Commitments and contingencies

Lease commitments

The Company’ occupies approximately 3,000 square feet of leased office space in Houston, Texas, approximately 3,500 square feet of office space in Shanghai, China and small offices in Miami, Florida, and Beijing, China. Rental expenses incurred under operating leases for the years ended June 30, 2006 and 2005 and for the period from November 4, 2003 (inception) to June 30, 2006 were approximately $27,085, $6,267 and $33,352, respectively. Future minimum lease payments under non-cancelable operating lease (with initial or remaining lease terms in excess of one year) as of June 30, 2006 are as follows:


Year Ending June 30,
2007		$ 8,033
2008		1,501

Total future minimum lease payments		$ 9,534

License agreement

On February 27, 2006, the Company amended its license agreement with the Gas Technology Institute (“GTI”), a U.S. based non-profit research organization, for U-GAS ^® technology. Commitments under the amended agreement at June 30, 2006 were as follows:


Year Ending June 30,
2007		$ 60,000
2008		5,000

Total future minimum lease payments		$ 65,000

On August 31, 2006, the Company entered into an Amended and Restated License Agreement with GTI for which the company paid $500,000 in cash and issued 190,500 shares of common stock in lieu of the payments above. (See Note 13 “Subsequent events - License Agreement with GTI”).

Employment agreements

The Company has entered into employment agreements with several of its top management executives which contain specific guaranteed bonuses and/or pay increases based upon certain specific targets. As of June 30, 2006 none of the specified targets had been met therefore no accrual has been made for these events.

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Equity and financing transaction

In March 2005, in connection with a private placement for a maximum of 2,000,000 shares of common stock, (See Note 10 – “Stockholders Equity”) the Company entered into an agreement with Union Charter Capital VII, Inc. (“UCF”) which covered certain capital commitment obligations of UCF and the Company and set forth certain rights of UCF if certain commitment thresholds were met. UCF met these commitments in connection with the August 2006 private placement of 3,345,715 shares of common stock. On November 30, 2006, the Company amended and restated its agreement with UCF in its entirety to clarify certain statements in the previous agreement. As amended and restated, UCF is entitled to purchase up to 2,000,000 shares of the Company’s common stock at a purchase price of $2.50 per share on or prior to June 30, 2007. Upon exercise of this right, UCF may purchase all or a portion of the 2,000,000 shares. The Company estimates the fir value of these options to be $9.8 million dollars, using a Black Scholes options pricing model. The following weighted average assumption used were as follows: risk-free interest rates of 5.10%, dividend rate of 0.00%, expected life of 10 months and expected volatility of 58.66%

Tamborine merger related representations and warranties

Synthesis Energy Systems, Inc., a corporation formed under the laws of the British Virgin Islands (“Synthesis BVI”), and Synthesis Energy Systems, LLC, a West Virginia limited liability company (“Synthesis LLC”), were formed as sister companies in November of 2003 to engage in the business of development and commercialization of the U-GAS ^® technology. The founders of SES BVI believed that it was important to be a publicly traded company in order to obtain the capital necessary to engage in this business. Tamborine Holdings, Inc., a shell company trading on the Pink Sheets (“Tamborine”), a centralized quotation service that collects and publishes market maker quotes for securities traded in the over-the-counter market (the “Pink Sheets”), was receptive to a combination transaction with SES BVI. As such, on April 18, 2005, pursuant to the terms of an Agreement and Plan of Merger (the “Agreement”), SES Acquisition Corporation, a wholly-owned subsidiary of Tamborine, merged with and into Synthesis Energy Holdings, Inc., a Florida corporation (“Synthesis Florida”), whereby the holders of common stock of Synthesis Florida became shareholders of, and Synthesis Florida became a wholly-owned subsidiary of, Tamborine. As a condition of the above merger, Synthesis Florida completed a restructuring whereby each of Synthesis BVI and Synthesis LLC became wholly owned subsidiaries of Synthesis Florida. On April 27, 2005, Tamborine changed its name to “Synthesis Energy Systems, Inc.” and on June 27, 2005, reincorporated in the state of Delaware. At the time of the merger, there were 100,000,000 shares of Tamborine common stock outstanding, 94,000,000 of which were cancelled in connection with the merger. The remaining 6,000,000 shares became shares of the Company as the surviving entity as a result of the name change and the reincorporation. An additional 21,000,000 “restricted” shares were issued as consideration in the merger to former shareholders of Synthesis Florida, all of whom were accredited investors.

Tamborine was formed in May 2004, and in connection with its formation, issued 100,000,000 shares of its common stock to its three founders, including IFG Investment Services (“IFG”). The certificates issued to two of the three founders contained the appropriate restrictive legend limiting transfer of the shares as is customary in an unregistered private placement. However, the certificate issued to IFG for 7,500,000 shares was apparently issued without such restrictive legends. In June 2004, IFG delivered its certificate to Transfer Online, which thereafter began acting as the transfer agent for Tamborine’s common stock. Subsequently, on December 2, 2004, IFG sold these shares to Ford Allen, Inc., which is owned by Clifford Grossman. 1,500,000 of these shares were subsequently cancelled by Tamborine. In January 2005, a broker-dealer diligence form was filed by Tamborine with the Pink Sheets under Rule 15c2-11 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) stating

F-14

that 6,000,000 shares of Tamborine common stock had been sold in 2004 pursuant to an exemption from registration under Rule 504 of the Securities Act of 1933, as amended (the “Securities Act”). The Company’s current management team believes that this Rule 15c2-11 form was filed to permit trading of the common stock of Tamborine on the Pink Sheets. On March 29, 2005, a second Rule 15c2-11 filing was made by Tamborine which stated that there were 7,500,000 freely tradable shares in the “float,” meaning that those shares could be traded on the Pink Sheets, and also stating that 6,000,000 shares had been sold in 2004 to three investors in Texas under Rule 504.

The Company’s current management team believes that 6,000,000 shares of the 7,500,000 shares that were represented to be “freely tradable” in Tamborine’s second 15c2-11 filing, and which remained outstanding after the merger, were not in fact freely tradable when issued. As noted above, there are no available definitive records, other than the two Rule 15c2-11 filings, regarding the issuance of those shares or the possible exemptions from registration under federal and state securities laws that were used to issue the shares or permit trading of the shares on the Pink Sheets. IFG has not provided an opinion of counsel confirming that these shares were issued, and subsequently transferred, subject to an available exemption. Moreover, the representation in the 15c2-11 filing that issuing these shares under Rule 504 permits those shares to become “freely tradable” is likely not correct. Under Rule 504, any shares sold thereunder are “restricted” shares and may not be sold in the public markets without the use of an exemption from registration. We believe that IFG may have based its view on an incorrect and outdated interpretation of Rule 504. This means that resales of these shares by IFG and subsequently Ford Allen, Inc. on the Pink Sheets may have been in violation of applicable securities laws because the shares were in fact restricted. Trading by subsequent holders may have been in accordance with applicable securities laws based on other available exemptions, but we do not have any documentation to confirm any such conclusions.

The Company is taking a number of steps to deal with these issues and have notified its transfer agent to cease any further transfers of the Company’s common stock without the approval of management. Additionally, the Company may request that Ford Allen, Inc. surrender its remaining shares of common stock in return for restricted shares and/or for cancellation. Current Management of the Company has no reason to believe, at this time, that Ford Allen, Inc. will respond to their request. They also intend to contact all stockholders who purchased shares of common stock in our May 2005 and August 2006 private placements to inform them of these issues and give them the opportunity to have the aggregate purchase price that they paid returned, plus interest. We are also filing a registration statement on Form SB-2 to (a) cause the Company to become a reporting company under the Exchange Act, which simplifies the use of Rule 144 to trade Company securities for eligible stockholders, provides information that is more complete to stockholders and is a key requirement for listing on a national securities exchange, and (b) register resales of shares held by investors in the private placements noted above, which provides them with an opportunity to dispose of shares using the registration statement without any limitations on volume or concerns about the issues noted above. Lastly, the Company has filed an updated 15c2-11 filing on August 11, 2006 and intends to file another updated 15c2-11 filing in connection with the filing of the registration statement to provide current and correct information about the Company and the above matters. Tamborine’s ‘‘promoters’’ or their ‘‘affiliates’’ and their transferees, within the meaning of the Securities Act, both before and after the Merger (as described in “Business–General”), are deemed to be ‘‘underwriters’’ within the meaning of the Securities Act. Any commissions or discounts given to any such broker-dealer may be regarded as underwriting commissions or discounts under the Securities Act. As such, regardless of technical compliance with Rule 144 under the Act, because Tamborine was a shell company prior to the Merger, Rule 144 will be unavailable to its promoters and affiliates and their transferees.

As noted above, many aspects of these events cannot be corroborated by documentary evidence or otherwise. In addition, there is not sufficient evidence relating to the trading history of the Company’s common stock to analyze the range of potential damages, if any, arising out of these events. In fact, the trading price for our stock has generally increased since it began trading on the Pink Sheets, and we have made progress in executing its business plan, so it is possible that these events have not generated significant liabilities. Of course, federal and state regulatory agencies could also examine these events and commence proceedings against the Company, its officers and directors (former and current) and the other individuals involved. We do maintain officer and director liability insurance, and would of course utilize that coverage, if it is available under the terms of the policy, in the event any liabilities are assessed against officers and directors. Given the above facts, it is not possible at this time to predict the likelihood that the Company will in fact have any liability arising out of these events or the amount of such liability, if any. See Note 13 “Subsequent Events – Tamborine Merger Repurchase Offer” for a discussion of the completion of the rescission offer.

F-15

Note 10 - Stockholders equity

The authorized capital stock of the Company consists of 100,000,000 shares of common stock. Prior to the merger transaction between the Company and Synthesis Florida effective on April 18, 2005 as described in Note 1(a), the Company’s total issued and outstanding common stock was 100,000,000 shares. After the effective date of the merger, 94,000,000 shares of the issued and outstanding common stock of the Company were forfeited, and 21,000,000 shares of the Company were issued to the original shareholders of Synthesis Florida as consideration for the merger. As a result, 27,000,000 shares of the Company’s common stock were issued and outstanding on the effective date of the merger.

Subsequent to the merger, the Company offered for private placement a maximum of 2,000,000 shares of its common stock at a price of $2.50 per share for a maximum aggregate amount of $5,000,000 to certain accredited investors in 2005. The offering was fully subscribed and, after deducting for legal and other related expenses, net proceeds of $4,872,100 were received by the Company. The difference between the offered price and the Company’s par value is recorded under “additional paid-in capital”. As a result, 29,000,000 shares of the Company’s common stock were issued and outstanding after the close of the private placement.

As part of the reincorporation of the Company from Mississippi to Delaware as described in Note 1(a), the par value of the Company’s common stock was converted from $0.001 per share to $0.01 per share, with the total number of outstanding shares remaining unchanged. The “capital stock” amount and the “additional paid-in capital” amount in the accompanying financial statements, including the prior period comparative figures, have been reclassified and recapitalized to reflect such par value change, with nil net impact on stockholders’ equity.

During the year ended June 30, 2006, two of the founding shareholders of the Company elected to take lesser roles in the day-to-day operation of the Company and agreed to surrender a total of 4,352,500 shares of the Company’s common stock which were initially issued in the merger. As a result, the issued and outstanding shares of the Company were reduced from 29,000,000 shares to 24,647,500 shares. The “capital stock” amount and the “additional paid-in capital” amount in the accompanying financial statements have been reclassified and recapitalized to reflect such reduction in the number of issued and outstanding shares, with no net impact on stockholders’ equity.

Note 11 – Accounting for stock-based compensation

Under our 2005 SES 2005 Incentive Plan we may grant (a) non-qualified stock options to our employees, directors and eligible consultants, (b) incentive stock options to employees only in accordance with the terms and conditions of the plan or (c) restricted stock. The total number of shares of common stock that may be subject to the granting of incentive awards under the plan is 15% of the Company’s issued and outstanding shares on the last day of each calendar quarter preceding a grant. (See Note 13 “Subsequent Events – Amendment to the 2005 Incentive Plan”). The plan options vest up to five years and expire five years from the grant date.

F-16

The following is a summary of the status of our 2005 Incentive Plan at June 30, 2006 and 2005, and changes during the years then ended:


	2006		2005		November 4, 2003 (inception) to June 30, 2006
	Shares	Weighted Average Exercise Price	Shares	Weighted Average Exercise Price	Shares	Weighted Average Exercise Price

Outstanding beginning of year		$ -		$ -	-	$ -
Granted	5,000,000	2.97	-	-	5,000,000	2.97
Exercised	-	-	-	-	-	-
Forfeited or canceled	197,500	2.91	-	-	197,500	2.91
Outstanding, end of year	4,802,500	2.97	-	-	4,802,500	2.97
Exercisable, end of year	1,015,000	$ 2.96	-	-	1,015,000	$ 2.96

Weighted average grant-date fair value of options granted		$ 3.49		$ -		$ 3.49

The following table summarizes information about our outstanding stock options at June 30, 2006:


Range of Exercise Prices	Number Outstanding	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price	Number Exercisable	Weighted Average Exercise Price

$2.50 to $3.00	4,802,500	4.9	$ 2.97	1,015,000	$ 2.96

For purposes of the pro forma disclosures in Note 1(k), under SFAS No. 123, the fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model. The following weighted average assumptions were used for grants during the years ended June 30, 2006 and 2005 and the period for November 4, 2003 (inception) to June 30, 2006, respectively: risk-free interest rates of 4.96%, 0.00% and 4.96%; dividend rates of $0, $0 and $0; expected lives of 3.50, 0.00 and 3.50 years; expected volatility of 67.6%, 0.00% and 67.6%.

The Black-Scholes option pricing model and other existing models were developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of, and are highly sensitive to, subjective assumptions including the expected stock price volatility. Our employee stock options have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value estimate.

Note 12 - Related party transactions

Companies are considered to be related if a company has the ability, directly or indirectly, to control a second company or exercise significant influence over a second company in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence. There was no material related party transactions during the year ended June 30, 2006.

On December 27, 2004, a shareholder advanced $1,050,000 to the Company at an interest rate of approximately 1.6% per annum. The advance was repaid with interest expense, approximately $2,290 on February 17, 2005. Since the net amount is zero these amounts are not shown on the Company’s Statement of Cash Flows for the year ended June 30, 2005.

In 2005, loans from shareholders in the amount of $11,000 were converted into paid-in-capital upon the Agreement of Forgiveness of loan signed on April 18, 2005.

F-17

Note 13 - Subsequent events

Joint Venture Project in China

On July 6, 2006, one of the Company’s wholly-owned subsidiaries, Synthesis Energy Systems Investments, Inc., entered into a cooperative joint venture contract with Shandong Hai Hua Coal & Chemical Company Ltd. (“Hai Hua”) which established Synthesis Energy Systems (Zaozhuang) New Gas Company Ltd. (“SES Zaozhuang”), a joint venture company that has the primary purpose of developing, constructing and operating a synthesis gas production plant utilizing the U-GAS ^® technology. Pursuant to the terms of the contract, in exchange for their respective ownership shares in SES Zaozhuang, SES Investments will contribute capital, and Hai Hua will contribute land use rights, storage facilities and certain other management services to the Company. Hai Hua will buy synthesis gas from the joint venture company at a specified contract amount. The contract has a term of fifty years, subject to earlier termination if either SES Zaohuang files for bankruptcy or becomes insolvent or if the tolling contract between SES Zaozhuang and Hai Hua (discussed in more detail below) is terminated. Hai Hua has also agreed that the License Agreement is the sole property of SES Investments and its affiliated entities and that it will not compete with SES Investments, or its affiliated entities, with respect to fluidized bed gasification technology for the term of the contract.

The Company is currently estimating that it will contribute approximately $9.1 million as equity into the newly formed joint venture company. Construction of the plant is expected to be completed in the second half of the calendar year 2007. The Company and Hai Hua have received government approvals for the establishment of the joint venture company. As of September 30, 2006 the Company had paid $232,279 to equipment suppliers for downpayments on equipment to be built for the Hai Hua project.

On October 22, 2006, SES Zaozhuang entered into purchase and sale contract with Hai Hua pursuant to which Hai Hua will buy, once the plant is completed, synthesis gas from SES Zaozhuang at a specified contract amount. Pursuant to the terms of the contract, Hai Hua will pay a tolling fee based upon the available gasification capacity and an energy charge based upon the actual syngas consumed. Hai Hua is obligated to pay the tolling fee regardless of whether they use the gasification capacity. If SES Zaozhuang produces more syngas than the capacity that Hai Hua is required to purchase under the contract, Hai Hua shall have a right of first refusal to purchase such excess amount. The agreement terminates twenty years from the date the plant becomes operational.

On February 12, 2007 the Company and Hai Hua amended their joint venture agreement whereby, Hai Hua was required to contribute approximately $480,000 in cash to the joint venture in addition to the land use rights, storage facilities and certain other management services.

License Agreement with GTI

On August 31, 2006, the Company entered into an Amended and Restated License Agreement with GTI for which the Company paid $500,000 in cash and issued 190,500 shares of common stock. Pursuant to the Amended and Restated License Agreement between the Company and GTI (the “License Agreement”), the Company has an exclusive license to manufacture, make, use and sell U-GAS ^® systems using the technology of GTI worldwide as to coal gasification, biomass blends up to 40% biomass, systems and non-exclusive license to manufacture, make, use and sell 40% biomass and coal mixture gasification systems. The License Agreement has an initial term of ten years, but may be extended for two additional ten years terms (total of 30 years) at the option of the Company. This agreement also outlines certain restrictive covenants relating to competing, gasification technologies. Additionally, for each U-GAS ^® unit for which the Company licenses, designs, builds or operates which uses coal, or a coal and biomass mixture, as the feed stock, the Company must pay a royalty and must also provide GTI with a copy of each contract that the Company enters into relating to a U-GAS ^® system and report to GTI with their progress on development of the technology every six months. A failure to comply with any of the above requirements could result in the termination of the License Agreement by GTI.

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to disclose to GTI any improvements related to the U-GAS ^® system which are developed and implemented by the Company and the manner of using and applying such improvements. Failure to satisfy the requirements as to these milestones could lead to the revocation of the license by GTI; provided, however, that GTI is required to give a twelve-month notice of termination and the Company is able to cure the default and continue the Agreement prior to the expiration of such time period.

Without the prior written consent of GTI, the Company has no right to sublicense any U-GAS ^® system other than to customers for which the Company has constructed a U-GAS ^® system. For a period of ten years, the Company is restricted from disclosing any confidential information (as defined in the license) to any person other than employees of its affiliates or contractors who are required to deal with such information, and such persons will be bound by the confidentiality provisions of the license. The Company further indemnified GTI and its affiliates from any liability or loss resulting from unauthorized disclosure or use of any confidential information that it receives.

Amendment to the 2005 Incentive Plan

Effective August 5, 2006, the Company’s amended and restated its 2005 Incentive Plan. The Amended and Restated 2005 Incentive Plan (the “Plan”) increases the number of shares reserved under the plan to 6,000,000 shares of common stock. The Company’s Board of Directors adopted the Plan as amended and restated on August 5, 2006 and shareholder approval was obtained at the Annual Meeting of Stockholders on September 25, 2006.

Issuance of Common Stock

In August 2006, the Company received approximately $16,000,000 and issued 3,345,715 shares of common stock in a round of private placement financing which closed on November 30, 2006.

Amendment to the Union Charter Agreement

On November 30, 2006, the Company amended and restated its agreement with UCF in its entirety to clarify certain statements in the previous agreement. As amended and restated, UCF is entitled to purchase up to 2,000,000 shares of the Company’s common stock at a purchase price of $2.50 per share on or prior to June 30, 2007. Upon exercise of this right, UCF may purchase all or a portion of the 2,000,000 shares. The Company estimates the fair value of these options to be $9.8 million dollars, using a Black Scholes options pricing model. The weighted average assumptions used were as follows: risk-free interest rates of 5.10%, dividend rate of 0.00%, expected life of 10 months and expected volatility of 58.66%.

Amendment to the Merger Agreement

On December 29, 2006, the Company amended the Agreement for the sole purpose of correcting the number of shares of common stock issued in the merger with Tamborine. The Agreement stated that 21,050,000 shares were issued when in actuality only 21,000,000 shares were issued.

Tamborine Merger Related Repurchase Offer

In March 0f 2007, the Company contacted all stockholders who purchased shares of common stock in the Company’s May 2005 and August 2006 private placements to inform them of the issues discussed in Note 10 “Stockholders equity – Tamborine Merger Related Representation and Warranties, above, and gave them the opportunity to have the aggregate purchase price that they paid returned, plus interest. The offer period expired on March 20, 2007, and none of the stockholders elected to accept the offer.

F-19

SYNTHESIS ENERGY SYSTEMS, INC.

(A Development Stage Enterprise)


Condensed Consolidated Balance Sheets
	December 31, 2006	June 30, 2006
	(Unaudited)
ASSETS
Current assets:
Cash	$ 15,470,097	$ 3,154,096
Prepaid expenses and other currents assets	136,096	42,037
Total current assets	15,606,193	3,196,133
Property, plant and equipment, net	202,858	9,854
Construction-in-progress	405,137	-
Project prepayment	657,078	-
Intangible asset, net	1,820,875	7,561
Total assets	$ 18,692,141	$ 3,213,548

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accrued expenses and other payables	$ 445,009	$ 328,198
Total liabilities	445,009	328,198
Stockholders’ Equity:
Common stock, $0.01 par value: 100,000,000 shares authorized: 28,183,715 and 24,647,500 shares issued and outstanding	281,837	246,475
Additional paid-in capital	29,422,810	8,179,604
Deficit accumulated during development stage	(11,469,461)	(5,540,729)
Accumulated other comprehensive income	11,946	-
Total stockholders’ equity	18,247,132	2,885,350
Commitments and contingencies	-	-
Total liabilities and stockholders’ equity	$ 18,692,141	$ 3,213,548

See accompanying notes to the condensed consolidated financial statements.

F-20

SYNTHESIS ENERGY SYSTEMS, INC.

(A Development Stage Enterprise)


Unaudited Condensed Consolidated Statements of Operations
	Six Months Ended December 31,		November 4, 2003 (Inception) to December 31, 2006
	2006	2005

Net Sales	$ -	$ -	$ -
Costs of goods sold	-	-	-
Gross profit	-	-	-
General and administrative expenses and other expenses:
General and administrative expenses	(1,770,034)	(314,929)	(3,031,166)
Stock-based compensation	(3,742,405)	(392,323)	(6,785,384)
Project development costs	(539,836)	(303,792)	(1,455,397)
Technical development	(174,956)	(151,242)	(636,192)
Operating loss	$ (6,227,231)	$ (1,162,286)	$ (11,908,139)


Non-operating income
Interest income	298,499	57,719	441,118
Interest expense	-	-	(2,440)
Net loss before income tax benefit	(5,928,732)	(1,104,567)	(11,469,461)

Income tax benefit	-	-	-
Net loss	$ (5,928,732)	$ (1,104,567)	$ (11,469,461)

Net loss per share:
Basic and diluted	$ (0.22)	$ (0.04)	$ (0.42)

Weighted average common shares outstanding:
Basic and diluted shares	27,272,018	28,881,444	27,315,228
See accompanying notes to the condensed consolidated financial statements.

F-21

SYNTHESIS ENERGY SYSTEMS, INC.

(A Development Stage Enterprise)


Unaudited Condensed Consolidated Statements of Operations
	Three Months Ended December 31,
	2006	2005

Net Sales	$ -	$ -
Costs of goods sold	-	-
Gross profit	-	-
General and administrative expenses and other expenses:
General and administrative expenses	(1,042,828)	(203,281)
Stock-based compensation	(1,962,860)	(392,323)
Project development costs	(164,004)	(201,087)
Technical development	(26,349)	(67,528)
Operating loss	$ (3,196,041)	$ (864,219)


Non-operating income
Interest income	202,376	31,741
Interest expense	-	-
Net loss before income tax benefit	(2,993,665)	(832,478)

Income tax benefit	-	-
Net loss	$ (2,993,665)	$ (832,478)

Net loss per share:
Basic and diluted	$ (0.11)	$ (0.02)

Weighted average common shares outstanding:
Basic and diluted shares	28,183,715	29,000,000
See accompanying notes to the condensed consolidated financial statements.

F-22

SYNTHESIS ENERGY SYSTEMS, INC.

(A Development Stage Enterprise)


Unaudited Condensed Consolidated Statement of Stockholders’ Equity
	Common Stock		Additional Paid-in Capital	Deficit Accumulated During the Development Stage	Accumulated Other Comprehensive Income	Total
	Shares	Amount	Additional Paid-in Capital	Deficit Accumulated During the Development Stage	Accumulated Other Comprehensive Income	Total
Balance at June 30, 2006	24,647,500	$ 246,475	$ 8,179,604	$ (5,540,729)	$ -	$ 2,885,350
Net loss for the period	-	-	-	(5,928,732)	-	(5,928,732)
Currency translation adjustment	-	-	-	-	11,946	11,946
Net proceeds from private placement offering	3,345,715	33,457	16,126,343	-	-	16,159,800
Stock-based compensation	-	-	3,742,405	-	-	3,742,405
Shares issued for amended GTI license	190,500	1,905	1,374,458	-	-	1,376,363
Balance at December 31, 2006	28,183,715	$ 281,837	$ 29,422,810	$ (11,469,461)	$ 11,946	$ 18,247,132
See accompanying notes to the condensed consolidated financial statements.

F-23

SYNTHESIS ENERGY SYSTEMS, INC.

(A Development Stage Enterprise)


Unaudited Condensed Consolidated Statements of Cash Flows
	Six Months Ended December 31,		November 4, 2003 (Inception) to December 31, 2006
	2006	2005

Cash flows from operating activities:
Net loss	$ (5,928,732)	$ (1,104,567)	$ (11,469,461)
Adjustments to reconcile net loss to net cash provided by operating activities:
Stock-based compensation	3,742,405	392,323	6,785,384
Depreciation of property, plant and equipment	15,084	1,732	19,346
Loss on disposal of property, plant and equipment	2,159	-	2,159
Amortization of intangible assets	63,049	504	65,488
Increase in prepaid expenses and other current assets	(94,059)	(181,768)	(136,096)
Increase (decrease) in accrued expenses and other payables	116,811	96,089	445,009
Net cash used in operating activities	$ (2,083,283)	$ (795,687)	(4,288,171)


Cash flows from investing activities:
Capital expenditures	(615,384)	(5,225)	(639,500)
Amendment of GTI license rights	(500,000)	-	(500,000)
Project prepayment	(657,078)	-	(657,078)
Net cash used in investing activities	$ (1,772,462)	$ (5,225)	$ (1,796,578)

Cash flows from financing activities:
Proceeds from issuance of common stock	16,159,800	2,387,990	21,531,900
Loans from (repayments to) stockholders	-	(1,150)	11,000
Net cash provided by financing activities	$ 16,159,800	$ 2,386,840	$ 21,542,900
Net increase in cash	12,304,055	1,585,928	15,458,151
Cash, beginning of the period	3,154,096	2,706,602	-
Effect of exchange rates on cash	11,946	-	11,946
Cash, end of the period	$ 15,470,097	$ 4,292,530	$ 15,470,097

See accompanying notes to the condensed consolidated financial statements.

F-24

SYNTHESIS ENERGY SYSTEMS, INC.

(A Development Stage Enterprise)

Notes to the Unaudited Condensed Consolidated Financial Statements

For the three and six months ended December 31, 2006 and 2005

Note 1 – Summary of Significant Accounting Policies

(a) Organization and description of business

Synthesis Energy Systems, Inc. (“the Company”) is an emerging development stage technology company involved in the global development and commercialization of gasification technology. Its principal asset is a license with the Gas Technology Institute (“GTI”), a U.S. based non-profit research organization, for U-GAS® technology. The Company’s strategy is to commercialize GTI’s technology with the initial focus on development in Shanghai, China. The Company’s headquarters is located in Houston, Texas.

(b) Basis of presentation and principles of consolidation

The accompanying consolidated financial statements are in US dollars and include Synthesis Energy Systems, Inc. and all of its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The Company has reclassified certain prior year amounts to conform to the current year presentation. The Company is currently in development stage and has not generated any operating revenue to date.

The accompanying unaudited consolidated financial statements for the three and six month periods ended December 31, 2006 and 2005 and the period from November 4, 2003 (inception) to December 31, 2006 have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America and pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and disclosures normally present in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. The company believes that the disclosures provided are adequate to make the information presented not misleading.

These financial statements should be read in conjunction with the audited financial statements and explanatory notes for the years ended June 30, 2006 and 2005 and the period from November 4, 2003 (inception) to June 30, 2006.

The results of the three and six month periods ended December 31, 2006 are not necessarily indicative of the results of operations to be expected for the twelve-month period ending June 30, 2007.

(c) Use of estimates

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rates of exchange, sensitivity and volatility associated with the assumptions used in developing estimates; and whether historical trends are expected to be representative of future trends. The estimation process often times may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that lies within that range of reasonable estimates based upon the quantity, quality and risks associated with the variability that might be expected from the future outcome and the factors considered in developing the estimate. This estimation process may result in the selection of estimates which could be viewed as conservative or aggressive by others. Management attempts to use is business and financial accounting judgment in selecting the most appropriate estimate, however, actual amounts could and will differ from those estimates.

(d) New accounting pronouncements

On July 1, 2006, the Company adopted SFAS No. 154, “Accounting Changes and Error Corrections” (SFAS 154). SFAS 154 replaces APB Opinion No. 20, “Accounting Changes,” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements,” and changes the requirements for the accounting for and reporting of a change in accounting principle. The adoption of SFAS 154 did not have an impact on the Company’s results of operations or its financial condition.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108 (SAB 108), effective for fiscal years ending after November 15, 2006. SAB 108 provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement for the purpose of a materiality assessment. The adoption did not have an effect on the Company’s financial statements.

On September 15, 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, “Fair Value Measurements” (SFAS 157). SFAS 157 establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company is required to adopt the provisions of SFAS 157, as applicable, as of January 1, 2008. The Company is currently evaluating this standard but has not yet determined the impact, if any, this adoption will have on its financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statements No. 115” (SFAS 159). SFAS 159 permits the Company to choose, at specified election dates, to measure eligible items at fair value (the “fair value option”). The Company would report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting period. This accounting standard is effective as of the beginning of the first fiscal year that begins after November 15, 2007. The Company is evaluating the effect of adoption of this new standard on its financial position, results of operations and cash flows.

Note 2 – Accounting for stock-based compensation

Under our 2005 SES 2005 Incentive Plan, we may grant (a) non-qualified stock options to our employees, directors and eligible consultants, (b) Incentive Stock options to employees only in accordance with the terms and conditions of the plan or (c) restricted stock. The total number of shares of common Stock that may be subject to the granting of incentive awards under the plan is 15% of the Company’s issued and outstanding shares on the last day of each calendar quarter preceding a grant. The plan options vest up to five years and expire five years from the grant date.

Prior to July 1, 2006, we accounted for our stock option and stock-based compensation plans using the intrinsic-value method outlined by Accounting Principles Board (“APB”) Opinion No. 25. Accordingly, we computed compensation cost for each employee stock option granted as the amount by which the fair market value was greater than the exerciser price of the option at the date of grant. Due to the thinly traded nature of the Company’s stock, the Company uses an average of several days of trades to calculate fair market value. The amount of compensation cost was expensed over the vesting period. During the year ended June 30, 2006 the Company recognized $3,042,979 of stock-based compensation.

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Effective July 1, 2006, we adopted the provisions of the Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standard (“SFAS”) No. 123R, “Share Based Payment” and elected to use the modified prospective transition method. Under this method, compensation cost recognized for the three months ended December 31, 2006, includes the applicable amounts of: (a) compensation cost of all stock-based awards granted prior to, but not yet vested, as of June 30, 2006 based on the grant-date fair value estimated in accordance with the original provisions of SFAS No. 123 and previously presented in pro forma footnote disclosures, and (b) compensation cost for all stock-based awards granted subsequent to June 30, 2006 (based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123(R)). Results for prior periods have not been restated.

SFAS No. 123R amends SFAS No. 95, “Statement of Cash Flows,” to require reporting of tax benefits as a financing cash flow, rather than as a reduction of taxes paid. These tax benefits result from tax deductions in excess of the compensation expense recognized for options exercised. Prior to the adoption of SFAS No. 123R, no stock options were exercised.

On March 29, 2005, the SEC issued Staff Accounting Bulletin (“SAB”) 107 to address certain issues related to SFAS No. 123R. SAB 107 provides guidance on transition methods, valuation methods, income tax effects and other share-based payment topics, and we had also applied this guidance in our adoption of SFAS No. 123R.

On November 10, 2005, the Financial Accounting Standards Board (the “FASB”) issued FASB Staff Position (“FSP”) No. FAS 123(R)-3, “Transition Election Related to Accounting for Tax Effects of Share-Based Payment Awards” (“FSP 123R-3”). FSP 123R-3 provides for an alternative transition method for establishing the beginning balance of the additional paid-in capital pool (“APIC pool”) related to the tax effects of employee share-based compensation, which is available to absorb tax deficiencies recognized subsequent to the adoption of SFAS No. 123R. We have elected to adopt this alternative transition method, otherwise known as the “simplified method,” in establishing our beginning APIC pool at July 1, 2006

Effect of Adopting SFAS No. 123(R)

The following is the effect of adopting SFAS No. 123(R) as of July 1, 2006:


	Six Months Ended December 31, 2006	Three Months Ended December 31, 2006
Stock-based compensation	$ 3,742,405	$ 1,962,860
Related deferred income tax benefit	-	-

Decrease in basic and diluted earnings per share	$ (0.14)	$ (0.07)

The amounts above relate to the impact of recognizing compensation expense related to stock options.

The Company recognizes expense for our stock-based compensation over the vesting period, which represents the period in which an employee is required to provide service in exchange for the award and recognizes compensation expense for stock-based awards immediately if the award has immediate vesting.

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Prior Period Pro Forma Presentation

Under the modified prospective application method, results for prior periods have not been restated to reflect the effects of implementing SFAS No, 123 (R). The following pro forma information, as required by SFAS No. 148, “Accounting for Stock-Based Compensation Transition and Disclosure, an Amendment of FASB Statement No. 123” is presented for comparative purposes and illustrates the pro forma effect on net loss per share for the period presented as if we had applied the fair value recognition provisions of SFAS No. 123 to stock-based compensation prior to July 1, 2006:


	Six Months Ended December 31, 2005	Three Months Ended December 31, 2005
Net loss, as reported	$ (1,104,567)	$ (832,478)
Add: total stock-based compensation recorded, net of tax	$ 392,323	$ 392,323
Less: total stock-based employee compensation expense determined under fair value based method for all awards, net of tax	$ -	$ -
Pro forma net loss	$ (712,244)	$ (440,155)

Net loss per share:
Basic and diluted as reported	$ (0.03)	$ (0.02)
Basic and diluted pro forma	$ (0.03)	$ (0.02)

Assumptions

The fair values for the significant stock-based awards granted during the three months ended December 31, 2006 were estimated at the date of grant using a Black-Scholes option-pricing model with the following weighted-average assumptions. No stock-based awards were issued during the three months ended December 31, 2005.


		Three Months Ended December 31, 2006
Risk-free rate of return		4.71 %
Expected life of award		3.5 years
Expected dividend yield		0.00 %
Expected volatility of stock		66.31 %
Weighted-average fair value		$2.67

F-28

The expected volatility of stock assumption was derived by referring to changes in the historical volatility of comparable companies. Forfeiture rates are estimated due to a lack of historical forfeiture data.

In accordance with SAB 107, we used the “simplified” method for “plain vanilla” options to estimate the expected term of options granted during 2006.

Stock-based award activity during the three months ended December 31, 2006 was as follows (aggregate intrinsic value in millions):


	Number of Shares	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at September 30, 2006	5,142,500	$ 3.10	4.4	$ 15.1
Granted	225,000	$ 6.27	5.0	$ 0.6
Exercised	-	-	-	-
Canceled	-	-	-	-

Outstanding at December 31, 2006	5,367,500	$ 3.24	4.4	$ 15.7

As of December 31, 2006, approximately $11.8 million of estimated expense with respect to non-vested stock-based awards has yet to be recognized and will be recognized in expense over the employee’s remaining weighted average service period of approximately 4.4 years. As of December 31, 2006, 1,187,500 of the above options were exercisable.

The following table summarizes information with respect to stock options outstanding and exercisable at December 31, 2006:


Range of Exercise Prices	Number Outstanding	Weighted Average Remaining Life (Years)	Weighted Average Exercise Price	Number Exercisable	Weighted Average Exercise Price
$2,50 to $3.00	4,962,500	4.4	$ 2.97	1,109,500	$ 2.94
$3.01 to $7.00	405,000	4.8	$ 6.45	78,000	$ 6.43
Total	5,367,500			1,187,500

Stock-based award activity for non-vested awards during the three months ended December 31, 2006 is as follows:


	Number of Shares	Weighted Average Grant Date Fair Value
Non-vested at September 30, 2006	$ 4,059,500	$ 2.85
Granted	225,000	2.67
Vested	(104,500)	3.71
Canceled	-	-

Non-vested at December 31, 2006	$ 4,180,000	$ 2.82

F-29

Note 3 - Intangible asset

The Company’s only intangible asset is a license with the Gas Technology Institute (“GTI”), a U.S. based non-profit research organization, for U-GAS ^® technology.

On August 31, 2006, the Company entered into an Amended and Restated License Agreement with GTI. Pursuant to the Amended and Restated License Agreement between the Company and GTI (the “License Agreement”), the Company has an exclusive license to manufacture, make, use and sell U-GAS ^® systems using the technology of GTI worldwide as to coal gasification, biomass blends up to 40% biomass, systems and non-exclusive license to manufacture, make, use and sell 40% biomass and coal mixture gasification systems. The License Agreement has an initial term of ten years, but may be extended for two additional ten-year terms (total of 30 years) at the option of the Company.

As consideration for the license, the Company paid $500,000, and issued 190,500 shares of restricted stock to GTI. Due to the thinly traded nature of the Company’s stock, the Company determined the fair value of the 190,500 shares of restricted stock by using an average of actual trades (5 trading days prior to August 31, 2006 and 5 trading days after August 31, 2006) of the Company’s stock on www.pinksheets.com. As a part of the agreement the Company is restricted from offering a competing gasification technology within any market covered by the License Agreement. Additionally, for each U-GAS ^® unit for which the Company licenses, designs, builds or operates which uses coal, or a coal and biomass mixture as the feed stock, the Company must pay a royalty and must also provide GTI with a copy of each contract that the Company enters into relating to a U-GAS ^® system and report to GTI with their progress on development of the technology every six months. A failure to comply with any of the above requirements could result in the termination of the License Agreement by GTI.

In addition, the Company is required to (i) have a contract for the sale of a U-GAS ^® system with a customer in the territory covered by the License Agreement no later than August 31, 2007, (ii) fabricate and put into operation at least one U-GAS ^® system within the territory covered by the License Agreement by July 31, 2008 and (iii) fabricate and put into operation at least one U-GAS ^® system for each calendar year of the License Agreement, beginning with the calendar year 2009. The Company is required to disclose to GTI any improvements related to the U-GAS ^® system which are developed and implemented by the Company and the manner of using and applying such improvements. Failure to satisfy the requirements as to these milestones could lead to the revocation of the license by GTI; provided, however, that GTI is required to give a twelve-month notice of termination and the Company is able to cure the default and continue the Agreement prior to the expiration of such time period.


		As of December 31, 2006		As of December 31, 2005
	Estimated useful life	Gross carrying amount	Accumulated amortization	Gross carrying amount	Accumulated amortization

Use rights of “U-GAS ^®” :	10 years	$ 1,886,363	$ 65,488	$ 10,000	$ 1,943

Amortization expense for the three months ended December 31, 2006 and 2005 and the period from November 4, 2003 (inception) to December 31, 2006 was $47,161, $252 and $65,488, respectively.

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Note 4 - Income taxes

Income taxes are recorded utilizing an asset and liability approach. This method gives consideration to the future tax consequences associated with the differences between the financial accounting basis and tax basis of the assets and liabilities, and the ultimate realization of any deferred tax asset resulting from such differences.

Note 5 - Net loss per share data

Historical net loss per common share is computed using the weighted average number of common shares outstanding. Basic loss per share excludes dilution and is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding for the period. Stock options are the only potential dilutive share equivalents the Company has outstanding for the periods presented. No shares related to options were included in diluted earnings per share for the three and six months ended December 31, 2006 and 2005 and the period from November 4, 2003 (inception) to December 31, 2006 as their effect would have been antidilutive as the Company incurred net losses during those periods.

Note 6 – Commitments and contingencies

In March 2005, in connection with a private placement for a maximum of 2,000,000 shares of common stock, the Company entered into an agreement with Union Charter Capital VII. Inc. (“UCF”) which covered certain capital commitment obligations of UCF and the Company and set forth certain rights of UCF if certain commitment thresholds were met. UCF met these commitments in connection with the August 2006 private placement of 3,345,715 shares of common stock.

On November 30, 2006, the Company amended and restated its agreement with UCF in its entirety to clarify certain statements in the previous agreement. As amended and restated, UCF is entitled to purchase up to 2,000,000 shares of the Company’s common stock at a purchase price of $2.50 per share on or prior to June 30, 2007. Upon exercise of this right, UCF may purchase all or a portion of the 2,000,000 shares. The Company estimates the fair value of these options to be $9.8 million dollars, using a Black Scholes options pricing model. The following weighted average assumptions used were as follows: risk-free interest rates of 5.10%, dividend rate of 0.00%, expected life of 10 months and expected volatility of 58.66%.

Note 7 – Subsequent events

Amendment to Joint Venture Agreement

Financing of the Joint Venture Project in China

On March 22, 2007 the Company entered into a seven year loan agreement and received approximately $12 million of loan proceeds pursuant to the terms of a Fixed Asset Loan Contract with the Industrial and Commercial Bank of China (“ICBC”) to complete the project financing of the Joint Venture. Additionally during March 2007, the Company funded the final portion of its $9.1 million equity contribution and fully funded a $3.3 million intercompany loan to the Joint Venture. Key terms of the Fixed Asset Loan Contract with ICBC are as follows:

•

Term of the loan is 7 years from the commencement date (March 22, 2007) of the loan.

•

Principal payments of approximately $1.0 million are due in March and September of each year beginning on September 22, 2008 and end on March 21, 2014.

F-31

•

Hai Hua is a guarantor on the loan.

•

The Project assets are pledged as collateral on the loan.

•

The Company agreed to covenants that, among other things, prohibit pre-payment without the consent of ICBC and permit ICBC to be involved in the review and inspection of the Project.

•

Additionally, on March 20, 2007, the Joint Venture entered into and funded a Shareholder’s Loan Agreement with Synthesis Investments for a loan of approximately $3.3 million (the “Shareholder Loan”). The Shareholder Loan bears interest per annum at a rate of 1-Year LIBOR plus 0.6% and is due and payable on the date which is 720 days after the ICBC loan described above is paid in full. The shareholder Loan is unsecured and is subordinated to the above described ICBC loan, and any other subsequent ICBC loans. The Joint Venture may not prepay the Shareholder Loan until the ICBC loan is either paid in full or is fully replaced by another loan. Proceeds of the Shareholder Loan may only be used for the purpose of developing, constructing, owning, operating and managing the Project.

Tamborine Merger Related Repurchase Offer

In March of 2007, the Company contacted all stockholders who purchased shares of common stock in its May 2005 and August 2006 private placements to inform them of the Tamborine Merger related issues and gave them the opportunity to have the aggregate purchase price that they paid returned, plus interest. The offer period expired on March 20, 2007, and none of the stockholders elected to accept the offer.

F-32

PART II – INFORMATION NOT REQUIRED IN PROSPECTUS

Item 24.

Indemnification of Directors and Officer

Delaware Law

Section 145 of the Delaware General Corporation Law, or the DGCL, permits a corporation, under specified circumstances, to indemnify its directors, officers, employees or agents against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlements actually and reasonably incurred by them in connection with any action, suit or proceeding brought by third parties by reason of the fact that they were or are directors, officers, employees or agents of the corporation, if such directors, officers, employees or agents acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reason to believe their conduct was unlawful. In a derivative action, i.e., one by or in the right of the corporation, indemnification may be made only for expenses actually and reasonably incurred by directors, officers, employees or agents in connection with the defense or settlement of an action or suit, and only with respect to a matter as to which they shall have acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification shall be made if such person shall have been adjudged liable to the corporation, unless and only to the extent that the court in which the action or suit was brought shall determine upon application that the defendant directors, officers, employees or agents are fairly and reasonably entitled to indemnity for such expenses despite such adjudication of liability.

Our certificate of incorporation provides that no director shall be personally liable to us or any of our stockholders for monetary damages resulting from breaches of their fiduciary duty as directors, except to the extent such limitation on or exemption from liability is not permitted under the DGCL. The effect of this provision of our certificate of incorporation is to eliminate our rights and those of our stockholders (through stockholders’ derivative suits on our behalf) to recover monetary damages against a director for breach of the fiduciary duty of care as a director, including breaches resulting from negligent or grossly negligent behavior, except, as restricted by the DGCL:

•

for any breach of the director’s duty of loyalty to we or its stockholders;

•

for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;

•

in respect of certain unlawful dividend payments or stock redemptions or repurchases; and

•

for any transaction from which the director derives an improper personal benefit.

This provision does not limit or eliminate our rights or the rights of any stockholder to seek non-monetary relief, such as an injunction or rescission, in the event of a breach of a director’s duty of care.

If the DGCL is amended to authorize corporate action further eliminating or limiting the liability of directors, then, in accordance with our certificate of incorporation, the liability of our directors to us or our stockholders will be eliminated or limited to the fullest extent authorized by the DGCL, as so amended. Any repeal or amendment of provisions of our certificate of incorporation limiting or eliminating the liability of directors, whether by our stockholders or by changes in law, or the adoption of any other provisions inconsistent therewith, will (unless otherwise required by law) be prospective only, except to the extent such amendment or change in law permits us to further limit or eliminate the liability of directors on a retroactive basis.

II-1

Certificate of Incorporation and Bylaws

Our certificate of incorporation provides that we will, to the fullest extent authorized or permitted by applicable law, indemnify our current and former directors and officers, as well as those persons who, while directors or officers of our corporation, are or were serving as directors, officers, employees or agents of another entity, trust or other enterprise, including service with respect to an employee benefit plan, in connection with any threatened, pending or completed proceeding, whether civil, criminal, administrative or investigative, against all expense, liability and loss (including, without limitation, attorney’s fees, judgments, fines, ERISA excise taxes and penalties and amounts paid in settlement) reasonably incurred or suffered by any such person in connection with any such proceeding. Notwithstanding the foregoing, a person eligible for indemnification pursuant to our certificate of incorporation will be indemnified by us in connection with a proceeding initiated by such person only if such proceeding was authorized by our board of directors, except for proceedings to enforce rights to indemnification.

The right to indemnification conferred by our certificate of incorporation is a contract right that includes the right to be paid by us the expenses incurred in defending or otherwise participating in any proceeding referenced above in advance of its final disposition, provided, however, that if the DGCL requires, an advancement of expenses incurred by our officer or director (solely in the capacity as an officer or director of our corporation) will be made only upon delivery to us of an undertaking, by or on behalf of such officer or director, to repay all amounts so advanced if it is ultimately determined that such person is not entitled to be indemnified for such expenses under our certificate of incorporation or otherwise.

The rights to indemnification and advancement of expenses will not be deemed exclusive of any other rights which any person covered by our certificate of incorporation may have or hereafter acquire under law, our certificate of incorporation, our amended and restated bylaws, an agreement, vote of stockholders or disinterested directors, or otherwise.

Any repeal or amendment of provisions of our certificate of incorporation affecting indemnification rights, whether by our stockholders or by changes in law, or the adoption of any other provisions inconsistent therewith, will (unless otherwise required by law) be prospective only, except to the extent such amendment or change in law permits us to provide broader indemnification rights on a retroactive basis, and will not in any way diminish or adversely affect any right or protection existing at the time of such repeal or amendment or adoption of such inconsistent provision with respect to any act or omission occurring prior to such repeal or amendment or adoption of such inconsistent provision. Our certificate of incorporation also permits us, to the extent and in the manner authorized or permitted by law, to indemnify and to advance expenses to persons other that those specifically covered by our certificate of incorporation.

Our amended and restated bylaws include the provisions relating to advancement of expenses and indemnification rights consistent with those set forth in our certificate of incorporation. In addition, our amended and restated bylaws provide for a right of indemnity to bring a suit in the event a claim for indemnification or advancement of expenses is not paid in full by us within a specified period of time. Our amended and restated bylaws also permit us to purchase and maintain insurance, at our expense, to protect us and/or any director, officer, employee or agent of our corporation or another entity, trust or other enterprise against any expense, liability or loss, whether or not we would have the power to indemnify such person against such expense, liability or loss under the DGCL.

Any repeal or amendment of provisions of our amended and restated bylaws affecting indemnification rights, whether by our board of directors, stockholders or by changes in applicable law, or

II-2

the adoption of any other provisions inconsistent therewith, will (unless otherwise required by law) be prospective only, except to the extent such amendment or change in law permits us to provide broader indemnification rights on a retroactive basis, and will not in any way diminish or adversely affect any right or protection existing thereunder with respect to any act or omission occurring prior to such repeal or amendment or adoption of such inconsistent provision.

Item 25.

Other Expenses of Issuance and Distribution

The following table sets forth the various expenses, all of which will be borne by us, in connection with the sale and distribution of the securities being registered, other than the underwriting discounts and commissions. All amounts shown are estimates except for the SEC registration fee.


Securities and Exchange Commission registration fee	$ 4,922
Accounting fees and expenses	$ 165,000
Legal fees and expenses	$ 75,000
Printing and engraving expenses	$ 30,000
Miscellaneous	$ 10,000
Total	$ 284,922

Item 26.

Recent Sale of Unregistered Securities

In May of 2005, we issued 2,000,000 shares of common stock to 23 accredited investors in a private placement. The aggregate consideration paid for such shares was approximately $5 million. All the shares of common stock were offered and sold pursuant to the exemption from the registration requirements of the Securities Act provided by Rule 506 of Regulation D.

In August of 2006, we issued 3,345,715 shares of common stock to 4 accredited investors in a private placement. The aggregate consideration paid for such shares was approximately $18 million. All the shares of common stock were offered and sold pursuant to the exemption from the registration requirements of the Securities Act provided by Rule 506 of Regulation D. Union Charter Financial acted as the sole and exclusive placement agent for the private placement and received a fee of $1.4 million, or 8% of the total offering amount, plus expenses. The offering terminated on November 30, 2006.

II-3

Item 27.

Index to Exhibits.


3.1	Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement (Registration No. 333-140367) on Form SB-2 filed on January 31, 2007).
3.2**	Amended and Restated Bylaws of the Company
4.1	Specimen Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement (Registration No. 333-140367) on Form SB-2 filed on January 31, 2007).
5.1	Opinion of Porter & Hedges, L.L.P., with respect to legality of the securities, including consent (incorporated by reference to Exhibit 5.1 to the Company’s Registration Statement (Registration No. 333-140367) on Form SB-2 filed on January 31, 2007).
10.1**	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. dated April 4, 2005.
10.2	First Amendment to the Amended and Restated Agreement and Plan of Merger by and among the Company, SES Acquisition Corporation, Synthesis Energy Holdings, Inc., and the shareholders listed on the signature page thereto dated December 29, 2006 (incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement (Registration No. 333-140367) on Form SB-2 filed on January 31, 2007).
10.3*	Amended and Restated License Agreement by and between Synthesis Energy Systems, Inc. and Gas Technology Institute dated August 31, 2006 (incorporated by reference to Exhibit 10.3 to the Company’s Registration Statement (Registration No. 333-140367) on Form SB-2 filed on January 31, 2007).
10.4	Cooperative Joint Venture Contract of SES (Zaozhuang) New Gas Company Ltd. between Shandong Hai Hua Coal & Chemical Company Ltd. and Synthesis Energy Systems Investments, Inc. dated July 6, 2006 (incorporated by reference to Exhibit 10.4 to the Company’s Registration Statement (Registration No. 333-140367) on Form SB-2 filed on January 31, 2007).
10.5	Amendment to Cooperative Joint Venture Contract of SES (Zaozhuang) New Gas Company Ltd. between Shandong Hai Hua Coal & Chemical Company Ltd. and Synthesis Energy Systems Investments, Inc. dated November 8, 2006 (incorporated by reference to Exhibit 10.5 to the Company’s Registration Statement (Registration No. 333-140367) on Form SB-2 filed on January 31, 2007).
10.6*	Contract for Synthesis Gas Purchase and Sales by and between Shandong Hai Hua Coal & Chemical Company Ltd. and Synthesis Energy Systems (Zaozhuang) New Gas Company Ltd. dated October 22, 2006 (incorporated by reference to Exhibit 10.6 to the Company’s Registration Statement (Registration No. 333-140367) on Form SB-2 filed on January 31, 2007).
10.7**+	Employment Agreement between the Company and Timothy E. Vail dated May 30, 2006.
10.8+	Amendment to Employment Agreement between the Company and Timothy E. Vail dated November 15, 2006 (incorporated by reference to Exhibit 10.8 to the Company’s Registration Statement (Registration No. 333-140367) on Form SB-2 filed on January 31, 2007).
10.9+	Employment Agreement between the Company and David Eichinger dated May 30, 2006 (incorporated by reference to Exhibit 10.9 to the Company’s Registration Statement (Registration No. 333-140367) on Form SB-2 filed on January 31, 2007).
10.10+	Amended and Restated Employment Agreement between the Company and Donald P. Bunnell dated July 14, 2006 (incorporated by reference to Exhibit 10.10 to the Company’s Registration Statement (Registration No. 333-140367) on Form SB-2 filed on January 31, 2007).
10.11+	Consulting Agreement between the Company and Lorenzo Lamadrid dated May 30, 2006 (incorporated by reference to Exhibit 10.11 to the Company’s Registration Statement (Registration No. 333-140367) on Form SB-2 filed on January 31, 2007).
10.12+	Amended and Restated 2005 Incentive Plan (incorporated by reference to Exhibit 10.12 to the Company’s Registration Statement (Registration No. 333-140367) on Form SB-2 filed on January 31, 2007).
10.13+	Form of Nonstatutory Stock Option Agreement (four year vesting) (incorporated by reference to Exhibit 10.13 to the Company’s Registration Statement (Registration No. 333-140367) on Form SB-2 filed on January 31, 2007).

II-4


10.14+	Form of Nonstatutory Stock Option Agreement (five year vesting) (incorporated by reference to Exhibit 10.14 to the Company’s Registration Statement (Registration No. 333-140367) on Form SB-2 filed on January 31, 2007).
10.15**	Shareholder’s Loan Agreement by and between Synthesis Energy Systems Investments, Inc. and Synthesis Energy Systems (Zaozhuang) dated March 20, 2007.
10.16**	Fixed Assets Loan Contract between Synthesis Energy Systems (Zaozhuang) New Gas Company Ltd. and Industrial and Commercial Bank of China dated March 27, 2007.
16.1**	Letter from KPMG Huazhen regarding change in certifying accountants.
10.15	Amended and Restated Commitment Agreement dated November 30, 2006 between the Company and Union Charter Capital VII, Inc. (incorporated by reference to Exhibit 10.15 to the Company’s Registration Statement (Registration No. 333-140367) on Form SB-2 filed on January 31, 2007).
21.1	Subsidiaries of the Company (incorporated by reference to Exhibit 21.1 to the Company’s Registration Statement (Registration No. 333-140367) on Form SB-2 filed on January 31, 2007).
23.1	Consent of Porter & Hedges, L.L.P. (included in Exhibit 5.1).
23.2**	Consent of KPMG LLP, Independent Registered Public Accounting Firm.
24.1	Power of Attorney (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement (Registration No. 333-140367) on Form SB-2 filed on January 31, 2007).

Portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission and this exhibit has been filed separately with the Securities and Exchange Commission in connection with such request.

Filed herewith

Management contract or compensatory plan or arrangement

II-5

Item 28.

Undertakings

(a)

The undersigned registrant will:

(1)

File, during any period in which it offers or sells securities, a post-effective amendment to this registration statement to:

(i)

Include any prospectus required by section 10(a)(3) of the Securities Act.

(ii)

Reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.

(iii)

Include any additional or changed material information on the plan of distribution.

(2)

For determining any liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered and the offering of such securities at that time to be the initial bona fide offering.

(3)

File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering.

(4)

For determining liability of the undersigned small business issuer under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned small business issuer undertakes that in a primary offering of securities of the undersigned small business issuer pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned small business issuer will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i)

Any preliminary prospectus or prospectus of the undersigned small business issuer relating to the offering required to be filed pursuant to Rule 424 (§ 230.424 of this chapter);

(ii)

Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned small business issuer or used or referred to by the undersigned small business issuer;

(iii)

(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned small business issuer or its securities provided by or on behalf of the undersigned small business issuer; and

II-6

(iv)

Any other communication that is an offer in the offering made by the undersigned small business issuer to the purchaser

(b)

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

(c)

That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:

(i)

If the registrant is relying on Rule 430B:

(A)

Each prospectus filed by the registrant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and

(B)

Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or

(d)

If the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or

II-7

made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

II-8

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement of Form SB-2 to be signed on its behalf by the undersigned, thereunto duly authorized.


		SYNTHESIS ENERGY SYSTEMS, INC.



Date: March 30, 2007	By:	/s/ Timothy E. Vail
			Timothy E. Vail, President
			and Chief Executive Officer

II-9

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, Amendment No. 1 to this registration statement has been signed by the following persons in the capacities and on the dates indicated.


Signature	Capacity In Which Signed	Date
/s/ Timothy E. Vail	President and Chief Executive Officer and Director (Principal Executive Officer)	March 30, 2007
Timothy E. Vail
*	Chief Financial Officer and Senior Vice President of Corporate Development (Principal Financial Officer)	March 30, 2007
David Eichinger
*	Corporate Controller and Secretary (Principal Accounting Officer)	March 30, 2007
Carol Pearson
*	President, Chief Executive Officer – Asia Pacific and Director	March 30, 2007
Donald Bunnell
*	Director	March 30, 2007
Lorenzo Lamadrid
*	Director	March 30, 2007
Michael Storey
*	Director	March 30, 2007
Denis Slavich
*	Director	March 30, 2007
Harry Rubin
* /s/ Timothy E. Vail		March 30, 2007
Timothy E. Vail	as Attorney-in-Fact

II-10

Appendix A

GLOSSARY OF TERMS

The following is a description of the meanings of some of the industry terms used and not otherwise defined in this Form SB-2.

Agglomerates . To form or collect into a rounded mass.

Bar . A unit of pressure measurement equal to 100,000 pascals.

Biomass . Living and recently living biological material that can be used as fuel or for industrial production.

Bituminous coal . A relatively hard coal containing a tar-like substance called bitumen.

Btu . A British Thermal Unit, which is a unit of measurement for the quantity of heat required to raise the temperature of one pound of water by one degree Fahrenheit.

Byproduct . Secondary or incidental product derived from a manufacturing process or chemical reaction, which is not the primary product being produced.

Carbonaceuous . The defining attribute of a substance rich in carbon.

Coke . Solid carbonaceous residue derived from destructive distillation of low-ash, low-sulfur bituminous coal

Engineering Block . A phase of development whereby all mechanical systems are specified and designed.

Fines . Coal with a maximum particle size between one-sixteenth inch and one-eighth inch, occasionally exceeding this maximum.

Fluidized bed . Type of combustion used in power plants and which suspends solid fuels on upward-blowing jets of air during the combustion process.

Flux . A substance used to promote fusion of metals or minerals.

Fuel cell . An electrochemical energy conversion device designed for continuous replenishment of the reactants consumed and which produces electricity from an external supply of fuel and oxidant.

Gasifier . A vessel which covers carbonaceous materials, such as coal, petroleum, petroleum coke or biomass, into carbon monoxide and hydrogen and other constituent materials.

High rank . Coals with higher purity of carbon and less hydrogen, oxygen and nitrogen content.

Integrated gasification combined cycle . A type of power plant using syngas as a source

of clean fuel.

Low rank . Coals with lower purity of carbon and less hydrogen, oxygen and nitrogen content.

A-1

MMBtu . Million British Thermal Units.

MW . Mega watt, or one million watts, which is a unit of measurement of power.

Ncum . Normal cubic meter.

Oxidant . A chemical compound that readily transfers oxygen atoms or a substance that gains electrons in a redox chemical reaction.

Particulates . Tiny particles of solid (a smoke) or liquid (an aerosol) suspended in a gas.

Poly-generation configuration . The arrangement of equipment which allows for the use of a number of commodities, including hydrogen, carbon monoxide, steam and power.

Psia . A unit of measurement for pressure which means “pounds per square inch absolute.”

Reactant gases . A gas which is the starting material for a chemical reaction.

Slagging . The process of removing a nonmetallic material produced from the mutual dissolving of flux and nonmetallic materials.

Syngas . A mixture of hydrogen, carbon monoxide and other products also referred to as synthesis gas.

A-2

Exhibit 3.2

AMENDED AND RESTATED

BYLAWS

SYNTHESIS ENERGY SYSTEMS, INC.

A DELAWARE CORPORATION

(THE “CORPORATION”)

(ADOPTED AS OF FEBRUARY 8, 2007)

BYLAWS

SYNTHESIS ENERGY SYSTEMS, INC.

ARTICLE I
OFFICES

Section 1.1

Registered Office . The registered office of the Corporation within the State of Delaware shall be located at either (a) the principal place of business of the Corporation in the State of Delaware or (b) the office of the corporation or individual acting as the Corporation’s registered agent in Delaware.

Section 1.2

Additional Offices . The Corporation may, in addition to its registered office in the State of Delaware, have such other offices and places of business, both within and outside the State of Delaware, as the Board of Directors of the Corporation (the “ Board ”) may from time to time determine or as the business and affairs of the Corporation may require.

ARTICLE II
STOCKHOLDERS MEETINGS

Section 2.1

Annual Meetings . The annual meeting of stockholders shall be held at such place and time and on such date as shall be determined by the Board and stated in the notice of the meeting, provided that the Board may in its sole discretion determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication pursuant to Section 9.5(a) . At each annual meeting, the stockholders shall elect directors of the Corporation and may transact any other business as may properly be brought before the meeting.

Section 2.2

Special Meetings . Except as otherwise required by applicable law or provided in the Corporation’s Certificate of Incorporation, as the same may be amended or restated from time to time (the “ Certificate of Incorporation ”), special meetings of stockholders, for any purpose or purposes, may be called only by the Chairman of the Board, Chief Executive Officer or the Board pursuant to a resolution adopted by a majority of the Whole Board (as defined below). Special meetings of stockholders shall be held at such place and time and on such date as shall be determined by the Board and stated in the Corporation’s notice of the meeting, provided that the Board may in its sole discretion determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication pursuant to Section 9.5(a) . “ Whole Board ” shall mean the total number of directors the Corporation would have if there were no vacancies.

Section 2.3

Notices . Notice of each stockholders meeting stating the place, if any, date, and time of the meeting, and the means of remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting, shall be given in the manner permitted by Section 9.3 to each stockholder entitled to vote thereat by the Corporation not less than 10 nor more than 60 days before the date of the meeting. If said

notice is for a stockholders meeting other than an annual meeting, it shall in addition state the purpose or purposes for which the meeting is called, and the business transacted at such meeting shall be limited to the matters so stated in the Corporation’s notice of meeting (or any supplement thereto). Any meeting of stockholders as to which notice has been given may be postponed, and any special meeting of stockholders as to which notice has been given may be cancelled, by the Board upon public announcement (as defined in Section 2.7(c) ) given before the date previously scheduled for such meeting.

Section 2.4

Quorum . Except as otherwise provided by applicable law, the Certificate of Incorporation or these Bylaws, the presence, in person or by proxy, at a stockholders meeting of the holders of shares of outstanding capital stock of the Corporation representing a majority of the voting power of all outstanding shares of capital stock of the Corporation entitled to vote at such meeting shall constitute a quorum for the transaction of business at such meeting, except that when specified business is to be voted on by a class or series of stock voting as a class, the holders of shares representing a majority of the voting power of the outstanding shares of such class or series shall constitute a quorum of such class or series for the transaction of such business. If a quorum shall not be present or represented by proxy at any meeting of the stockholders, the chairman of the meeting may adjourn the meeting from time to time in the manner provided in Section 2.6 until a quorum shall attend. The stockholders present at a duly convened meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the voting power of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation or any such other corporation to vote shares held by it in a fiduciary capacity.

Section 2.5

Voting of Shares .

(a)

Voting Lists . The Secretary shall prepare, or shall cause the officer or agent who has charge of the stock ledger of the Corporation to prepare, at least 10 days before every meeting of stockholders, a complete list of the stockholders of record entitled to vote thereat arranged in alphabetical order and showing the address and the number of shares registered in the name of each stockholder. Nothing contained in this Section 2.5(a) shall require the Corporation to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least 10 days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the Corporation. In the event that the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If a meeting of stockholders is to be held solely by means of remote communication as permitted by Section 9.5(a) , the list shall be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of meeting. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the list required by this Section 2.5(a) or to vote in person or by proxy at any meeting of stockholders.

(b)

Manner of Voting . At any stockholders meeting, every stockholder entitled to vote may vote in person or by proxy. If authorized by the Board, the voting by stockholders or proxyholders at any meeting conducted by remote communication may be effected by a ballot submitted by electronic transmission (as defined in Section 9.3 ), provided that any such electronic transmission must either set forth or be submitted with information from which the Corporation can determine that the electronic transmission was authorized by the stockholder or proxyholder. The Board, in its discretion, or the chairman of the meeting of stockholders, in such person’s discretion, may require that any votes cast at such meeting shall be cast by written ballot.

(c)

Proxies . Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. Proxies need not be filed with the Secretary of the Corporation until the meeting is called to order, but shall be filed with the Secretary before being voted. Without limiting the manner in which a stockholder may authorize another person or persons to act for such stockholder as proxy, either of the following shall constitute a valid means by which a stockholder may grant such authority.

(i)

A stockholder may execute a writing authorizing another person or persons to act for such stockholder as proxy. Execution may be accomplished by the stockholder or such stockholder’s authorized officer, director, employee or agent signing such writing or causing such person’s signature to be affixed to such writing by any reasonable means, including, but not limited to, by facsimile signature.

(ii)

A stockholder may authorize another person or persons to act for such stockholder as proxy by transmitting or authorizing the transmission of an electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission, provided that any such electronic transmission must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the stockholder.

Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission authorizing another person or persons to act as proxy for a stockholder may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used; provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission.

(d)

Required Vote . Subject to the rights of the holders of one or more series of preferred stock of the Corporation (“ Preferred Stock ”), voting separately by class or series, to elect directors pursuant to the terms of one or more series of Preferred Stock, the election of directors shall be determined by a plurality of the votes cast by the stockholders present in person or represented by proxy at the meeting and entitled to vote thereon. All other matters shall be determined by the vote of a majority of the votes cast by the stockholders present in person or represented by proxy at the meeting and entitled to vote thereon, unless the matter is one upon which, by applicable law, the Certificate of Incorporation, these Bylaws or applicable stock exchange rules, a different vote is required, in which case such provision shall govern and control the decision of such matter.

(e)

Inspectors of Election . The Board may appoint one or more persons as inspectors of election, who may be employees of the Corporation or otherwise serve the Corporation in other capacities, to act at any meeting of stockholders or any adjournment thereof and to make a written report thereof. The Board may appoint one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspectors of election or alternates are appointed by the Board, the chairman of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before discharging his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall ascertain and report the number of outstanding shares and the voting power of each; determine the number of shares present in person or represented by proxy at the meeting and the validity of proxies and ballots; count all votes and ballots and report the results; determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors; and certify their determination of the number of shares represented at the meeting and their count of all votes and ballots. No person who is a candidate for an office at an election may serve as an inspector at such election. Each report of an inspector shall be in writing and signed by the inspector or by a majority of them if there is more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors.

Section 2.6

Adjournments . Any meeting of stockholders, annual or special, may be adjourned by the chairman of the meeting, from time to time, whether or not there is a quorum, to reconvene at the same or some other place. Notice need not be given of any such adjourned meeting if the date, time, place, if any, thereof, and the means of remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the stockholders, or the holders of any class or series of stock entitled to vote separately as a class, as the case may be, may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

Section 2.7

Advance Notice for Business .

(a)

Annual Meetings of Stockholders . No business may be transacted at an annual meeting of stockholders, other than business that is either (i) specified in the Corporation’s notice of meeting (or any supplement thereto) given by or at the direction of the Board, (ii) otherwise properly brought before the annual meeting by or at the direction of the Board or (iii) otherwise properly brought before the annual meeting by any stockholder of the Corporation (x) who is a stockholder of record on the date of the giving of the notice provided for in this Section 2.7(a) and on the record date for the determination of stockholders entitled to vote at such annual meeting and (y) who complies with the notice procedures set forth in this Section 2.7(a) . Notwithstanding anything in this Section 2.7(a) to the contrary, only persons nominated for election as a director at an annual meeting pursuant to Section 3.2 will be considered for election at such meeting.

(i)

In addition to any other applicable requirements, for business (other than nominations) to be properly brought before an annual meeting by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation and such business must otherwise be a proper matter for stockholder action. Subject to Section 2.7(a)(iii) , a stockholder’s notice to the Secretary with respect to such business, to be timely, must be received by the Secretary at the principal executive offices of the Corporation not later than the close of business on the 90th day nor earlier than the opening of business on the 120th day before the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within 45 days before or after such anniversary date, notice by the stockholder to be timely must be so received not earlier than the opening of business on the 120th day before the meeting and not later than the later of (x) the close of business on the 90th day before the meeting or (y) the close of business on the 10th day following the day on which public announcement of the date of the annual meeting is first made by the Corporation. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder’s notice as described in this Section 2.7(a) .

(ii)

To be in proper written form, a stockholder’s notice to the Secretary with respect to any business (other than nominations) must set forth as to each such matter such stockholder proposes to bring before the annual meeting (A) a brief description of the business desired to be brought before the annual meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event such business includes a proposal to amend these Bylaws, the language of the proposed amendment) and the reasons for conducting such business at the annual meeting, (B) the name and record address of such stockholder and the name and address of the beneficial owner, if any, on whose behalf the proposal is made, (C) the class or series and number of shares of capital stock of the Corporation that are owned beneficially and of record by such stockholder and by the beneficial owner, if any, on whose behalf the proposal is made, (D) a description of all arrangements or understandings between such stockholder and the beneficial owner, if any, on whose behalf the proposal is made and any other person or persons (including their names) in connection with the proposal of such business by such stockholder, (E) any material interest of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made in such business, and (F) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting.

(iii)

The foregoing notice requirements of this Section 2.7(a) shall be deemed satisfied by a stockholder as to any proposal (other than nominations) if the stockholder has notified the Corporation of such stockholder’s intention to present such proposal at an annual meeting in compliance with Rule 14a-8 (or any successor thereof) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and such stockholder has complied with the requirements of such Rule for inclusion of such proposal in a proxy statement prepared by the Corporation to solicit proxies for such annual meeting. No business shall be conducted at the annual meeting of stockholders except business brought before the annual meeting in accordance with the procedures set forth in this Section 2.7(a) , provided, however, that once business has been properly brought before the annual meeting in accordance with such procedures, nothing in this Section 2.7(a) shall be deemed to preclude discussion by any stockholder of any such business. If the Board or the chairman of the annual meeting determines that any stockholder proposal was not made in accordance with the provisions of this Section 2.7(a) or that the information provided in a stockholder’s notice does not satisfy the information requirements of this Section 2.7(a) , such proposal shall not be presented for action at the annual meeting. Notwithstanding the foregoing provisions of this Section 2.7(a) , if the stockholder (or a qualified representative of the stockholder) does not appear at the annual meeting of stockholders of the Corporation to present the proposed business, such proposed business shall not be transacted, notwithstanding that proxies in respect of such matter may have been received by the Corporation.

(iv)

In addition to the provisions of this Section 2.7(a) , a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth herein. Nothing in this Section 2.7(a) shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

(b)

Special Meetings of Stockholders . Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of meeting only pursuant to Section 3.2 .

(c)

Public Announcement . For purposes of these Bylaws, “ public announcement ” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.

Section 2.8

Conduct of Meetings . The chairman of each annual and special meeting of stockholders shall be the Chairman of the Board or, in the absence (or inability or refusal to act) of the Chairman of the Board, the Chief Executive Officer (if he or she shall be a director) or, in the absence (or inability or refusal to act of the Chief Executive Officer or if the Chief Executive Officer is not a director, the President (if he or she shall be a director) or, in the absence (or inability or refusal to act) of the President or if the President is not a director, such other person as shall be appointed by the Board. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting by the chairman of the meeting. The Board may adopt such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with these Bylaws or such rules and regulations as adopted by the Board, the chairman of any meeting of stockholders shall have the right and authority to convene and to adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board or prescribed by the chairman of the meeting, may include, without limitation, the following: (a) the establishment of an agenda or order of business for the meeting; (b) rules and procedures for maintaining order at the meeting and the safety of those present; (c) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the chairman of the meeting shall determine; (d) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (e) limitations on the time allotted to questions or comments by participants. Unless and to the extent determined by the Board or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure. The secretary of each annual and special meeting of stockholders shall be the Secretary or, in the absence (or inability or refusal to act) of the Secretary, an Assistant Secretary so appointed to act by the chairman of the meeting. In the absence (or inability or refusal to act) of the Secretary and all Assistant Secretaries, the chairman of the meeting may appoint any person to act as secretary of the meeting.

Section 2.9

Consents in Lieu of Meeting . Except as otherwise expressly provided by the terms of any series of Preferred Stock permitting the holders of such series of Preferred Stock to act by written consent, any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of the stockholders of the Corporation, unless the Board approves in advance the taking of such action by means of written consent of stockholders, in which case such action may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum voting power that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation to its registered office in the State of Delaware, the Corporation’s principal place of business, or the Secretary of the Corporation. Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within 60 days of the date the earliest dated consent is delivered to the Corporation, a written consent or consents signed by a sufficient number of holders to take such action are delivered to the Corporation by delivery to the Corporation’s registered office in the State of Delaware, the Corporation’s principal place of business, or the Secretary. Delivery made to the Corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested. An electronic transmission consenting to the action to be taken and transmitted by a stockholder, proxyholder or a person or persons authorized to act for a stockholder or proxyholder shall be deemed to be written, signed and dated for purposes hereof if such electronic transmission sets forth or is delivered with information from which the Corporation can determine that such transmission was transmitted by a stockholder or proxyholder (or by a person authorized to act for a stockholder or proxyholder) and the date on which such stockholder, proxyholder or authorized person transmitted such transmission. The date on which such electronic transmission is transmitted shall be deemed to be the date on which such consent was signed. No consent given by electronic transmission shall be deemed to have been delivered until such consent is reproduced in paper form and delivered to the Corporation by delivery either to the Corporation’s registered office in the State of Delaware, the Corporation’s principal place of business, or the Secretary of the Corporation. Delivery made to the Corporation’s registered office shall be made by hand or by certified or registered mail, return receipt requested. Notwithstanding the limitations on delivery in the previous sentence, consents given by electronic transmission may be otherwise delivered to the Corporation’s principal place of business or to the Secretary if, to the extent, and in the manner provided by resolution of the Board. Any copy, facsimile or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all purposes for which the original writing could be used; provided that such copy, facsimile or other reproduction shall be a complete reproduction of the entire original writing. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of holders were delivered to the Corporation as provided in this Section 2.9 .

ARTICLE III
DIRECTORS

Section 3.1

Powers . The business and affairs of the Corporation shall be managed by or under the direction of the Board, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these Bylaws required to be exercised or done by the stockholders. Directors need not be stockholders or residents of the State of Delaware.

Section 3.2

Advance Notice for Nomination of Directors .

(a)

Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation, except as may be otherwise provided by the terms of one or more series of Preferred Stock with respect to the rights of holders of one or more series of Preferred Stock to elect directors. Nominations of persons for election to the Board at any annual meeting of stockholders, or at any special meeting of stockholders called for the purpose of electing directors as set forth in the Corporation’s notice of such special meeting, may be made (i) by or at the direction of the Board or (ii) by any stockholder of the Corporation (x) who is a stockholder of record on the date of the giving of the notice provided for in this Section 3.2 and on the record date for the determination of stockholders entitled to vote at such meeting and (y) who complies with the notice procedures set forth in this Section 3.2 .

(b)

In addition to any other applicable requirements, for a nomination to be made by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a stockholder’s notice to the Secretary must be received by the Secretary at the principal executive offices of the Corporation (i) in the case of an annual meeting, not later than the close of business on the 90th day nor earlier than the opening of business on the 120th day before the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within 45 days before or after such anniversary date, notice by the stockholder to be timely must be so received not earlier than the opening of business on the 120th day before the meeting and not later than the later of (x) the close of business on the 90th day before the meeting or (y) the close of business on the 10th day following the day on which public announcement of the date of the annual meeting was first made by the Corporation; and (ii) in the case of a special meeting of stockholders called for the purpose of electing directors, not later than the close of business on the 10th day following the day on which public announcement of the date of the special meeting is first made by the Corporation. In no event shall the public announcement of an adjournment of an annual meeting or special meeting commence a new time period for the giving of a stockholder’s notice as described in this Section 3.2 .

(c)

Notwithstanding anything in paragraph (b) to the contrary, in the event that the number of directors to be elected to the Board at an annual meeting is greater than the number of directors whose terms expire on the date of the annual meeting and there is no public announcement by the Corporation naming all of the nominees for the additional directors to be elected or specifying the size of the increased Board before the close of business on the 90th day prior to the anniversary date of the immediately preceding annual meeting of stockholders, a stockholder’s notice required by this Section 3.2 shall also be considered timely, but only with respect to nominees for the additional directorships created by such increase that are to be filled by election at such annual meeting, if it shall be received by the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the date on which such public announcement was first made by the Corporation.

(d)

To be in proper written form, a stockholder’s notice to the Secretary must set forth (i) as to each person whom the stockholder proposes to nominate for election as a director (A) the name, age, business address and residence address of the person, (B) the principal occupation or employment of the person, (C) the class or series and number of shares of capital stock of the Corporation that are owned beneficially or of record by the person and (D) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder; and (ii) as to the stockholder giving the notice (A) the name and record address of such stockholder and the name and address of the beneficial owner, if any, on whose behalf the nomination is made, (B) the class or series and number of shares of capital stock of the Corporation that are owned beneficially and of record by such stockholder and the beneficial owner, if any, on whose behalf the nomination is made, (C) a description of all arrangements or understandings relating to the nomination to be made by such stockholder among such stockholder, the beneficial owner, if any, on whose behalf the nomination is made, each proposed nominee and any other person or persons (including their names), (D) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice and (E) any other information relating to such stockholder and the beneficial owner, if any, on whose behalf the nomination is made that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected.

(e)

Except as otherwise provided by the terms of one or more series of Preferred Stock with respect to the rights of one or more series of Preferred Stock to nominate and elect directors, no person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 3.2 . If the Board or the chairman of the meeting of stockholders determines that any nomination was not made in accordance with the provisions of this Section 3.2 , then such nomination shall not be considered at the meeting in question. Notwithstanding the foregoing provisions of this Section 3.2 , if the stockholder (or a qualified representative of the stockholder) does not appear at the meeting of stockholders of the Corporation to present the nomination, such nomination shall be disregarded, notwithstanding that proxies in respect of such nomination may have been received by the Corporation.

(f)

In addition to the provisions of this Section 3.2 , a stockholder shall also comply with all of the applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth herein. Nothing in this Section 3.2 shall be deemed to affect any rights of the holders of Preferred Stock to elect directors pursuant to the Certificate of Incorporation.

Section 3.3

Compensation . Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, the Board shall have the authority to fix the compensation of directors. The directors may be reimbursed their expenses, if any, of attendance at each meeting of the Board and may be paid either a fixed sum for attendance at each meeting of the Board or other compensation as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of committees of the Board may be allowed like compensation and reimbursement of expenses for service on the committee.

ARTICLE IV
BOARD MEETINGS

Section 4.1

Annual Meetings . The Board shall meet as soon as practicable after the adjournment of each annual stockholders meeting at the place of the annual stockholders meeting unless the Board shall fix another time and place and give notice thereof in the manner required herein for special meetings of the Board. No notice to the directors shall be necessary to legally convene this meeting, except as provided in this Section 4.1 .

Section 4.2

Regular Meetings . Regularly scheduled, periodic meetings of the Board may be held without notice at such times, dates and places as shall from time to time be determined by the Board.

Section 4.3

Special Meetings . Special meetings of the Board (a) may be called by the Chairman of the Board and (b) shall be called by the Chairman of the Board or Secretary on the written request of at least a majority of directors then in office, or the sole director, as the case may be, and shall be held at such time, date and place as may be determined by the person calling the meeting or, if called upon the request of directors or the sole director, as specified in such written request. Notice of each special meeting of the Board shall be given, as provided in Section 9.3 , to each director (i) at least 24 hours before the meeting if such notice is oral notice given personally or by telephone or written notice given by hand delivery or by means of a form of electronic transmission and delivery; (ii) at least two days before the meeting if such notice is sent by a nationally recognized overnight delivery service; and (iii) at least five days before the meeting if such notice is sent through the United States mail. If the Secretary shall fail or refuse to give such notice, then the notice may be given by the officer who called the meeting or the directors who requested the meeting. Any and all business that may be transacted at a regular meeting of the Board may be transacted at a special meeting. Except as may be otherwise expressly provided by applicable law, the Certificate of Incorporation, or these Bylaws, neither the business to be transacted at, nor the purpose of, any special meeting need be specified in the notice or waiver of notice of such meeting. A special meeting may be held at any time without notice if all the directors are present or if those not present waive notice of the meeting in accordance with Section 9.4 .

Section 4.4

Quorum; Required Vote . A majority of the Whole Board shall constitute a quorum for the transaction of business at any meeting of the Board, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board, except as may be otherwise specifically provided by applicable law, the Certificate of Incorporation or these Bylaws. If a quorum shall not be present at any meeting, a majority of the directors present may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.

Section 4.5

Consent In Lieu of Meeting . Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board or any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions (or paper reproductions thereof) are filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

Section 4.6

Organization . The chairman of each meeting of the Board shall be the Chairman of the Board or, in the absence (or inability or refusal to act) of the Chairman of the Board, the Chief Executive Officer (if he or she shall be a director) or, in the absence (or inability or refusal to act) of the Chief Executive Officer or if the Chief Executive Officer is not a director, the President (if he or she shall be a director) or in the absence (or inability or refusal to act) of the President or if the President is not a director, a chairman elected from the directors present. The Secretary shall act as secretary of all meetings of the Board. In the absence (or inability or refusal to act) of the Secretary, an Assistant Secretary shall perform the duties of the Secretary at such meeting. In the absence (or inability or refusal to act) of the Secretary and all Assistant Secretaries, the chairman of the meeting may appoint any person to act as secretary of the meeting.

ARTICLE V
COMMITTEES OF DIRECTORS

Section 5.1

Establishment . The Board may designate one or more committees, each committee to consist of one or more of the directors. Each committee shall keep regular minutes of its meetings and report the same to the Board when required. The Board shall have the power at any time to fill vacancies in, to change the membership of, or to dissolve any such committee.

Section 5.2

Available Powers . Any committee established pursuant to Section 5.1 hereof, to the extent permitted by applicable law and by resolution of the Board, shall have and may exercise all of the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers that may require it.

Section 5.3

Alternate Members . The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of such committee.

Section 5.4

Procedures . Unless the Board otherwise provides, the time, date, place, if any, and notice of meetings of a committee shall be determined by such committee. At meetings of a committee, a majority of the number of members of the committee (but not including any alternate member, unless such alternate member has replaced any absent or disqualified member at the time of, or in connection with, such meeting) shall constitute a quorum for the transaction of business. The act of a majority of the members present at any meeting at which a quorum is present shall be the act of the committee, except as otherwise specifically provided by applicable law, the Certificate of Incorporation, these Bylaws or the Board. If a quorum is not present at a meeting of a committee, the members present may adjourn the meeting from time to time, without notice other than an announcement at the meeting, until a quorum is present. Unless the Board otherwise provides and except as provided in these Bylaws, each committee designated by the Board may make, alter, amend and repeal rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board is authorized to conduct its business pursuant to Article III and Article IV of these Bylaws.

ARTICLE VI
OFFICERS

Section 6.1

Officers . The officers of the Corporation elected by the Board shall be a Chief Executive Officer, a President, a Secretary and such other officers (including without limitation a Chief Financial Officer, Vice Presidents, Assistant Secretaries and Assistant Treasurers) as the Board from time to time may determine. Officers elected by the Board shall each have such powers and duties as generally pertain to their respective offices, subject to the specific provisions of this Article VI . Such officers shall also have such powers and duties as from time to time may be conferred by the Board. The Chief Executive Officer or President may also appoint such other officers (including without limitation one or more Vice Presidents and Controllers) as may be necessary or desirable for the conduct of the business of the Corporation. Such other officers shall have such powers and duties and shall hold their offices for such terms as may be provided in these Bylaws or as may be prescribed by the Board or, if such officer has been appointed by the Chief Executive Officer or President, as may be prescribed by the appointing officer.

(a)

Chairman of the Board . The Chairman of the Board shall preside when present at all meetings of the stockholders and the Board. The Chairman of the Board shall advise and counsel the Chief Executive Officer and other officers and shall exercise such powers and perform such duties as shall be assigned to or required of the Chairman of the Board from time to time by the Board or these Bylaws.

(b)

Chief Executive Officer . The Chief Executive Officer shall be the chief executive officer of the Corporation, shall have general supervision of the affairs of the Corporation and general control of all of its business subject to the ultimate authority of the Board, and shall be responsible for the execution of the policies of the Board. In the absence (or inability or refusal to act) of the Chairman of the Board, the Chief Executive Officer (if he or she shall be a director) shall preside when present at all meetings of the stockholders and the Board.

(c)

President . The President shall be the chief operating officer of the Corporation and shall, subject to the authority of the Chief Executive Officer and the Board, have general management and control of the day-to-day business operations of the Corporation and shall consult with and report to the Chief Executive Officer. The President shall put into operation the business policies of the Corporation as determined by the Chief Executive Officer and the Board and as communicated to the President by the Chief Executive Officer and the Board. The President shall make recommendations to the Chief Executive Officer on all operational matters that would normally be reserved for the final executive responsibility of the Chief Executive Officer. In the absence (or inability or refusal to act) of the Chairman of the Board and Chief Executive Officer, the President (if he or she shall be a director) shall preside when present at all meetings of the stockholders and the Board.

(d)

Vice Presidents . In the absence (or inability or refusal to act) of the President, the Vice President (or in the event there be more than one Vice President, the Vice Presidents in the order designated by the Board) shall perform the duties and have the powers of the President. Any one or more of the Vice Presidents may be given an additional designation of rank or function.

(e)

Secretary .

(i)

The Secretary shall attend all meetings of the stockholders, the Board and (as required) committees of the Board and shall record the proceedings of such meetings in books to be kept for that purpose. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board and shall perform such other duties as may be prescribed by the Board, the Chairman of the Board, Chief Executive Officer or the President. The Secretary shall have custody of the corporate seal of the Corporation and the Secretary, or any Assistant Secretary, shall have authority to affix the same to any instrument requiring it, and when so affixed, it may be attested by his or her signature or by the signature of such Assistant Secretary. The Board may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing thereof by his or her signature.

(ii)

The Secretary shall keep, or cause to be kept, at the principal executive office of the Corporation or at the office of the Corporation’s transfer agent or registrar, if one has been appointed, a stock ledger, or duplicate stock ledger, showing the names of the stockholders and their addresses, the number and classes of shares held by each and, with respect to certificated shares, the number and date of certificates issued for the same and the number and date of certificates cancelled.

(f)

Assistant Secretaries . The Assistant Secretary or, if there be more than one, the Assistant Secretaries in the order determined by the Board shall, in the absence (or inability or refusal to act) of the Secretary, perform the duties and have the powers of the Secretary.

(g)

Treasurer . The Treasurer shall perform all duties commonly incident to that office (including, without limitation, the care and custody of the funds and securities of the Corporation which from time to time may come into the Treasurer’s hands and the deposit of the funds of the Corporation in such banks or trust companies as the Board, the Chief Executive Officer or the President may authorize).

(h)

Assistant Treasurers . The Assistant Treasurer or, if there shall be more than one, the Assistant Treasurers in the order determined by the Board shall, in the absence (or inability or refusal to act) of the Treasurer, perform the duties and exercise the powers of the Treasurer.

Section 6.2

Term of Office . The elected officers of the Corporation shall be elected annually by the Board at its first meeting held after each annual meeting of stockholders. All officers elected by the Board shall hold office until the next annual meeting of the Board and until their successors are duly elected and qualified or until their earlier death, resignation, retirement, disqualification, or removal from office. Any officer may be removed, with or without cause, at any time by the Board. Any officer appointed by the Chairman of the Board, Chief Executive Officer or President may also be removed, with or without cause, by the Chairman of the Board, Chief Executive Officer or President, as the case may be, unless the Board otherwise provides. Any vacancy occurring in any elected office of the Corporation may be filled by the Board. Any vacancy occurring in any office appointed by the Chairman of the Board, Chief Executive Officer or President may be filled by the Chairman of the Board, Chief Executive Officer or President, as the case may be, unless the Board then determines that such office shall thereupon be elected by the Board, in which case the Board shall elect such officer.

Section 6.3

Other Officers . The Board may delegate the power to appoint such other officers and agents, and may also remove such officers and agents or delegate the power to remove same, as it shall from time to time deem necessary or desirable.

Section 6.4

Multiple Officeholders; Stockholder and Director Officers . Any number of offices may be held by the same person, unless the Certificate of Incorporation or these Bylaws otherwise provide. Officers need not be stockholders or residents of the State of Delaware.

ARTICLE VII
SHARE CERTIFICATES

Section 7.1

Entitlement to Certificates . The shares of the Corporation shall be represented by certificates, provided that the Board may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed in accordance with Section 7.3 representing the number of shares registered in certificate form. The Corporation shall not have power to issue a certificate representing shares in bearer form.

Section 7.2

Multiple Classes of Stock . If the Corporation shall be authorized to issue more than one class of stock or more than one series of any class, the Corporation shall (a) cause the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences or rights to be set forth in full or summarized on the face or back of any certificate which the Corporation issues to represent shares of such class or series of stock or (b) in the case of uncertificated shares, within a reasonable time after the issuance or transfer of such shares, send to the registered owner thereof a written notice containing the information required to be set forth on certificates as specified in clause (a) above; provided, however, that, except as otherwise provided by applicable law, in lieu of the foregoing requirements, there may be set forth on the face or back of such certificate or, in the case of uncertificated shares, on such written notice a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences or rights.

Section 7.3

Signatures . Each certificate representing capital stock of the Corporation shall be signed by or in the name of the Corporation by (a) the Chairman of the Board, the Chief Executive Officer, the President or a Vice President and (b) the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of the Corporation. Any or all the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar on the date of issue.

Section 7.4

Consideration and Payment for Shares . 1) Subject to applicable law and the Certificate of Incorporation, shares of stock may be issued for such consideration, having in the case of shares with par value a value not less than the par value thereof, and to such persons, as determined from time to time by the Board. The consideration may consist of any tangible or intangible property or benefit to the Corporation including cash, promissory notes, services performed, contracts for services to be performed or other securities.

(b)

Subject to applicable law and the Certificate of Incorporation, shares may not be issued until the full amount of the consideration has been paid, unless upon the face or back of each certificate issued to represent any partly paid shares of capital stock or upon the books and records of the Corporation in the case of partly paid uncertificated shares, there shall have been set forth the total amount of the consideration to be paid therefor and the amount paid thereon up to and including the time said certificate representing certificated shares or said uncertificated shares are issued.

Section 7.5

Lost, Destroyed or Wrongfully Taken Certificates .

(a)

If an owner of a certificate representing shares claims that such certificate has been lost, destroyed or wrongfully taken, the Corporation shall issue a new certificate representing such shares or such shares in uncertificated form if the owner: (i) requests such a new certificate before the Corporation has notice that the certificate representing such shares has been acquired by a protected purchaser; (ii) if requested by the Corporation, delivers to the Corporation a bond sufficient to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, wrongful taking or destruction of such certificate or the issuance of such new certificate or uncertificated shares; and (iii) satisfies other reasonable requirements imposed by the Corporation.

(b)

If a certificate representing shares has been lost, apparently destroyed or wrongfully taken, and the owner fails to notify the Corporation of that fact within a reasonable time after the owner has notice of such loss, apparent destruction or wrongful taking and the Corporation registers a transfer of such shares before receiving notification, the owner shall be precluded from asserting against the Corporation any claim for registering such transfer or a claim to a new certificate representing such shares or such shares in uncertificated form.

Section 7.6

Transfer of Stock .

(a)

If a certificate representing shares of the Corporation is presented to the Corporation with an indorsement requesting the registration of transfer of such shares or an instruction is presented to the Corporation requesting the registration of transfer of uncertificated shares, the Corporation shall register the transfer as requested if:

(i)

in the case of certificated shares, the certificate representing such shares has been surrendered;

(ii)

(A) with respect to certificated shares, the indorsement is made by the person specified by the certificate as entitled to such shares; (B) with respect to uncertificated shares, an instruction is made by the registered owner of such uncertificated shares; or (C) with respect to certificated shares or uncertificated shares, the indorsement or instruction is made by any other appropriate person or by an agent who has actual authority to act on behalf of the appropriate person;

(iii)

the Corporation has received a guarantee of signature of the person signing such indorsement or instruction or such other reasonable assurance that the indorsement or instruction is genuine and authorized as the Corporation may request;

(iv)

the transfer does not violate any restriction on transfer imposed by the Corporation that is enforceable in accordance with Section 7.8(a) ; and

(v)

such other conditions for such transfer as shall be provided for under applicable law have been satisfied.

(b)

Whenever any transfer of shares shall be made for collateral security and not absolutely, the Corporation shall so record such fact in the entry of transfer if, when the certificate for such shares is presented to the Corporation for transfer or, if such shares are uncertificated, when the instruction for registration of transfer thereof is presented to the Corporation, both the transferor and transferee request the Corporation to do so.

Section 7.7

Registered Stockholders . Before due presentment for registration of transfer of a certificate representing shares of the Corporation or of an instruction requesting registration of transfer of uncertificated shares, the Corporation may treat the registered owner as the person exclusively entitled to inspect for any proper purpose the stock ledger and the other books and records of the Corporation, vote such shares, receive dividends or notifications with respect to such shares and otherwise exercise all the rights and powers of the owner of such shares, except that a person who is the beneficial owner of such shares (if held in a voting trust or by a nominee on behalf of such person) may, upon providing documentary evidence of beneficial ownership of such shares and satisfying such other conditions as are provided under applicable law, may also so inspect the books and records of the Corporation.

Section 7.8

Effect of the Corporation’s Restriction on Transfer .

(a)

A written restriction on the transfer or registration of transfer of shares of the Corporation or on the amount of shares of the Corporation that may be owned by any person or group of persons, if permitted by the Delaware General Corporation Law (“ DGCL ”) and noted conspicuously on the certificate representing such shares or, in the case of uncertificated shares, contained in a notice sent by the Corporation to the registered owner of such shares within a reasonable time after the issuance or transfer of such shares, may be enforced against the holder of such shares or any successor or transferee of the holder including an executor, administrator, trustee, guardian or other fiduciary entrusted with like responsibility for the person or estate of the holder.

(b)

A restriction imposed by the Corporation on the transfer or the registration of shares of the Corporation or on the amount of shares of the Corporation that may be owned by any person or group of persons, even if otherwise lawful, is ineffective against a person without actual knowledge of such restriction unless: (i) the shares are certificated and such restriction is noted conspicuously on the certificate; or (ii) the shares are uncertificated and such restriction was contained in a notice sent by the Corporation to the registered owner of such shares within a reasonable time after the issuance or transfer of such shares.

Section 7.9

Regulations . The Board shall have power and authority to make such additional rules and regulations, subject to any applicable requirement of law, as the Board may deem necessary and appropriate with respect to the issue, transfer or registration of transfer of shares of stock or certificates representing shares. The Board may appoint one or more transfer agents or registrars and may require for the validity thereof that certificates representing shares bear the signature of any transfer agent or registrar so appointed.

ARTICLE VIII
INDEMNIFICATION

Section 8.1

Right to Indemnification . Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “ proceeding ”), by reason of the fact that he or she is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter a “ Covered Person ”), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent, or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized or permitted by applicable law, as the same exists or may hereafter be amended, against all expense, liability and loss (including, without limitation, attorneys’ fees, judgments, fines, ERISA excise taxes and penalties and amounts paid in settlement) reasonably incurred or suffered by such Covered Person in connection with such proceeding; provided, however, that, except as provided in Section 8.3 with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify a Covered Person in connection with a proceeding (or part thereof) initiated by such Covered Person only if such proceeding (or part thereof) was authorized by the Board.

Section 8.2

Right to Advancement of Expenses . In addition to the right to indemnification conferred in Section 8.1, a Covered Person shall also have the right to be paid by the Corporation the expenses (including, without limitation, attorneys’ fees) incurred in defending, testifying, or otherwise participating in any such proceeding in advance of its final disposition (hereinafter an “ advancement of expenses ”); provided, however, that, if the DGCL requires, an advancement of expenses incurred by a Covered Person in his or her capacity as a director or officer of the Corporation (and not in any other capacity in which service was or is rendered by such Covered Person, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking (hereinafter an “ undertaking ”), by or on behalf of such Covered Person, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a “ final adjudication ”) that such Covered Person is not entitled to be indemnified for such expenses under this Article VIII or otherwise.

Section 8.3

Right of Indemnitee to Bring Suit . If a claim under Section 8.1 or Section 8.2 is not paid in full by the Corporation within 60 days after a written claim therefor has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be 20 days, the Covered Person may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Covered Person shall also be entitled to be paid the expense of prosecuting or defending such suit. In (a) any suit brought by the Covered Person to enforce a right to indemnification hereunder (but not in a suit brought by a Covered Person to enforce a right to an advancement of expenses) it shall be a defense that, and (b) in any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that, the Covered Person has not met any applicable standard for indemnification set forth in the DGCL. Neither the failure of the Corporation (including its directors who are not parties to such action, a committee of such directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the Covered Person is proper in the circumstances because the Covered Person has met the applicable standard of conduct set forth in the DGCL, nor an actual determination by the Corporation (including a determination by its directors who are not parties to such action, a committee of such directors, independent legal counsel, or its stockholders) that the Covered Person has not met such applicable standard of conduct, shall create a presumption that the Covered Person has not met the applicable standard of conduct or, in the case of such a suit brought by the Covered Person, shall be a defense to such suit. In any suit brought by the Covered Person to enforce a right to indemnification or to an advancement of expenses hereunder, or by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the Covered Person is not entitled to be indemnified, or to such advancement of expenses, under this Article VIII or otherwise shall be on the Corporation.

Section 8.4

Non-Exclusivity of Rights . The rights provided to Covered Persons pursuant to this Article VIII shall not be exclusive of any other right which any Covered Person may have or hereafter acquire under applicable law, the Certificate of Incorporation, these Bylaws, an agreement, a vote of stockholders or disinterested directors, or otherwise.

Section 8.5

Insurance . The Corporation may maintain insurance, at its expense, to protect itself and/or any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL.

Section 8.6

Indemnification of Other Persons . This Article VIII shall not limit the right of the Corporation to the extent and in the manner authorized or permitted by law to indemnify and to advance expenses to persons other than Covered Persons. Without limiting the foregoing, the Corporation may, to the extent authorized from time to time by the Board, grant rights to indemnification and to the advancement of expenses to any employee or agent of the Corporation and to any other person who is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan, to the fullest extent of the provisions of this Article VIII with respect to the indemnification and advancement of expenses of Covered Persons under this Article VIII .

Section 8.7

Amendments . Any repeal or amendment of this Article VIII by the Board or the stockholders of the Corporation or by changes in applicable law, or the adoption of any other provision of these Bylaws inconsistent with this Article VIII , will, to the extent permitted by applicable law, be prospective only (except to the extent such amendment or change in applicable law permits the Corporation to provide broader indemnification rights to Covered Persons on a retroactive basis than permitted prior thereto), and will not in any way diminish or adversely affect any right or protection existing hereunder in respect of any act or omission occurring prior to such repeal or amendment or adoption of such inconsistent provision.

Section 8.8

Certain Definitions . For purposes of this Article VIII , (a) references to “other enterprise” shall include any employee benefit plan; (b) references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; (c) references to “serving at the request of the Corporation” shall include any service that imposes duties on, or involves services by, a person with respect to any employee benefit plan, its participants, or beneficiaries; and (d) a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interest of the Corporation” for purposes of Section 145 of the DGCL.

Section 8.9

Contract Rights . The rights provided to Covered Persons pursuant to this Article VIII shall be contract rights and such rights shall continue as to a Covered Person who has ceased to be a director, officer, agent or employee and shall inure to the benefit of the Covered Person’s heirs, executors and administrators.

Section 8.10

Severability . If any provision or provisions of this Article VIII shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Article VIII shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Article VIII (including, without limitation, each such portion of this Article VIII containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

ARTICLE IX
MISCELLANEOUS

Section 9.1

Place of Meetings . If the place of any meeting of stockholders, the Board or committee of the Board for which notice is required under these Bylaws is not designated in the notice of such meeting, such meeting shall be held at the principal business office of the Corporation; provided, however, if the Board has, in its sole discretion, determined that a meeting shall not be held at any place, but instead shall be held by means of remote communication pursuant to Section 9.5 hereof, then such meeting shall not be held at any place.

Section 9.2

Fixing Record Dates .

(a)

In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board may fix a record date, which shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall not be more than 60 nor less than 10 days before the date of such meeting. If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the business day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting.

(b)

In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.

(c)

In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which date shall not be more than 10 days after the date upon which the resolution fixing the record date is adopted by the Board. If no record date has been fixed by the Board, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board is otherwise required, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or the Secretary of the Corporation. Delivery made to the Corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board and prior action by the Board is otherwise required, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board adopts the resolution taking such prior action.

Section 9.3

Means of Giving Notice .

(a)

Notice to Directors . Whenever under applicable law, the Certificate of Incorporation or these Bylaws notice is required to be given to any director, such notice shall be given either (i) in writing and sent by hand delivery, through the United States mail, or by a nationally recognized overnight delivery service for next day delivery, (ii) by means of facsimile telecommunication or other form of electronic transmission, or (iii) by oral notice given personally or by telephone. A notice to a director will be deemed given as follows: (i) if given by hand delivery, orally, or by telephone, when actually received by the director, (ii) if sent through the United States mail, when deposited in the United States mail, with postage and fees thereon prepaid, addressed to the director at the director's address appearing on the records of the Corporation, (iii) if sent for next day delivery by a nationally recognized overnight delivery service, when deposited with such service, with fees thereon prepaid, addressed to the director at the director's address appearing on the records of the Corporation, (iv) if sent by facsimile telecommunication, when sent to the facsimile transmission number for such director appearing on the records of the Corporation, (v) if sent by electronic mail, when sent to the electronic mail address for such director appearing on the records of the Corporation or (vi) if sent by any other form of electronic transmission, when sent to the address, location or number (as applicable) for such director appearing on the records of the Corporation.

(b)

Notice to Stockholders . Whenever under applicable law, the Certificate of Incorporation or these Bylaws notice is required to be given to any stockholder, such notice may be given (i) in writing and sent either by hand delivery, through the United States mail, or by a nationally recognized overnight delivery service for next day delivery or (ii) by means of a form of electronic transmission consented to by the stockholder, to the extent permitted by, and subject to the conditions set forth in Section 232 of the DGCL. A notice to a stockholder shall be deemed given as follows: (i) if given by hand delivery, when actually received by the stockholder, (ii) if sent through the United States mail, when deposited in the United States mail, with postage and fees thereon prepaid, addressed to the stockholder at the stockholder's address appearing on the stock ledger of the Corporation, (iii) if sent for next day delivery by a nationally recognized overnight delivery service, when deposited with such service, with fees thereon prepaid, addressed to the stockholder at the stockholder's address appearing on the stock ledger of the Corporation, and (iv) if given by a form of electronic transmission consented to by the stockholder to whom the notice is given and otherwise meeting the requirements set forth above, (A) if by facsimile transmission, when directed to a number at which the stockholder has consented to receive notice, (B) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice, (C) if by a posting on an electronic network together with separate notice to the stockholder of such specified posting, upon the later of (1) such posting and (2) the giving of such separate notice and (D) if by any other form of electronic transmission, when directed to the stockholder. A stockholder may revoke such stockholder’s consent to receiving notice by means of electronic communication by giving written notice of such revocation to the Corporation. Any such consent shall be deemed revoked if (1) the Corporation is unable to deliver by electronic transmission two consecutive notices given by the Corporation in accordance with such consent and (2) such inability becomes known to the Secretary or an Assistant Secretary or to the Corporation’s transfer agent, or other person responsible for the giving of notice; provided, however, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.

(c)

Electronic Transmission . “ Electronic transmission ” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process, including but not limited to transmission by telex, facsimile telecommunication, electronic mail, telegram and cablegram.

(d)

Notice to Stockholders Sharing Same Address . Without limiting the manner by which notice otherwise may be given effectively by the Corporation to stockholders, any notice to stockholders given by the Corporation under any provision of the DGCL, the Certificate of Incorporation or these Bylaws shall be effective if given by a single written notice to stockholders who share an address if consented to by the stockholders at that address to whom such notice is given. A stockholder may revoke such stockholder’s consent by delivering written notice of such revocation to the Corporation. Any stockholder who fails to object in writing to the Corporation within 60 days of having been given written notice by the Corporation of its intention to send such a single written notice shall be deemed to have consented to receiving such single written notice.

(e)

Exceptions to Notice Requirements . Whenever notice is required to be given, under the DGCL, the Certificate of Incorporation or these Bylaws, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the Corporation is such as to require the filing of a certificate with the Secretary of State of Delaware, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful.

Whenever notice is required to be given by the Corporation, under any provision of the DGCL, the Certificate of Incorporation or these Bylaws, to any stockholder to whom (1) notice of two consecutive annual meetings of stockholders and all notices of stockholder meetings or of the taking of action by written consent of stockholders without a meeting to such stockholder during the period between such two consecutive annual meetings, or (2) all, and at least two payments (if sent by first-class mail) of dividends or interest on securities during a 12-month period, have been mailed addressed to such stockholder at such stockholder’s address as shown on the records of the Corporation and have been returned undeliverable, the giving of such notice to such stockholder shall not be required. Any action or meeting which shall be taken or held without notice to such stockholder shall have the same force and effect as if such notice had been duly given. If any such stockholder shall deliver to the Corporation a written notice setting forth such stockholder’s then current address, the requirement that notice be given to such stockholder shall be reinstated. In the event that the action taken by the Corporation is such as to require the filing of a certificate with the Secretary of State of Delaware, the certificate need not state that notice was not given to persons to whom notice was not required to be given pursuant to Section 230(b) of the DGCL. The exception in subsection (1) of the first sentence of this paragraph to the requirement that notice be given shall not be applicable to any notice returned as undeliverable if the notice was given by electronic transmission.

Section 9.4

Waiver of Notice . Whenever any notice is required to be given under applicable law, the Certificate of Incorporation, or these Bylaws, a written waiver of such notice, signed before or after the date of such meeting by the person or persons entitled to said notice, or a waiver by electronic transmission by the person entitled to said notice, shall be deemed equivalent to such required notice. All such waivers shall be kept with the books of the Corporation. Attendance at a meeting shall constitute a waiver of notice of such meeting, except where a person attends for the express purpose of objecting to the transaction of any business on the ground that the meeting was not lawfully called or convened.

Section 9.5

Meeting Attendance via Remote Communication Equipment .

(a)

Stockholder Meetings . If authorized by the Board in its sole discretion, and subject to such guidelines and procedures as the Board may adopt, stockholders and proxyholders not physically present at a meeting of stockholders may, by means of remote communication:

(i)

participate in a meeting of stockholders; and

(ii)

be deemed present in person and vote at a meeting of stockholders, whether such meeting is to be held at a designated place or solely by means of remote communication, provided that (A) the Corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder or proxyholder, (B) the Corporation shall implement reasonable measures to provide such stockholders and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings and (C) if any stockholder or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such votes or other action shall be maintained by the Corporation.

(b)

Board Meetings . Unless otherwise restricted by applicable law, the Certificate of Incorporation or these Bylaws, members of the Board or any committee thereof may participate in a meeting of the Board or any committee thereof by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other. Such participation in a meeting shall constitute presence in person at the meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting was not lawfully called or convened.

Section 9.6

Dividends . The Board may from time to time declare, and the Corporation may pay, dividends (payable in cash, property or shares of the Corporation’s capital stock) on the Corporation’s outstanding shares of capital stock, subject to applicable law and the Certificate of Incorporation.

Section 9.7

Reserves . The Board may set apart out of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve.

Section 9.8

Contracts and Negotiable Instruments . Except as otherwise provided by applicable law, the Certificate of Incorporation or these Bylaws, any contract, bond, deed, lease, mortgage or other instrument may be executed and delivered in the name and on behalf of the Corporation by such officer or officers or other employee or employees of the Corporation as the Board may from time to time authorize. Such authority may be general or confined to specific instances as the Board may determine. The Chairman of the Board, the Chief Executive Officer, the President or any Vice President may execute and deliver any contract, bond, deed, lease, mortgage or other instrument in the name and on behalf of the Corporation. Subject to any restrictions imposed by the Board, the Chairman of the Board Chief Executive Officer, President or any Vice President may delegate powers to execute and deliver any contract, bond, deed, lease, mortgage or other instrument in the name and on behalf of the Corporation to other officers or employees of the Corporation under such person’s supervision and authority, it being understood, however, that any such delegation of power shall not relieve such officer of responsibility with respect to the exercise of such delegated power.

Section 9.9

Fiscal Year . The fiscal year of the Corporation shall be fixed by the Board.

Section 9.10

Seal . The seal of the Corporation shall be in such form as shall from time to time be adopted by the Board. The seal may be used by causing it or a facsimile thereof to be impressed, affixed or otherwise reproduced.

Section 9.11

Books and Records . The books and records of the Corporation may be kept within or outside the State of Delaware at such place or places as may from time to time be designated by the Board.

Section 9.12

Resignation . Any director, committee member or officer may resign by giving notice thereof in writing or by electronic transmission to the Chairman of the Board, the Chief Executive Officer, the President or the Secretary. The resignation shall take effect at the time specified therein, or at the time of receipt of such notice if no time is specified or the specified time is earlier than the time of such receipt. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

Section 9.13

Surety Bonds . Such officers, employees and agents of the Corporation (if any) as the Chairman of the Board, Chief Executive Officer, President or the Board may direct, from time to time, shall be bonded for the faithful performance of their duties and for the restoration to the Corporation, in case of their death, resignation, retirement, disqualification or removal from office, of all books, papers, vouchers, money and other property of whatever kind in their possession or under their control belonging to the Corporation, in such amounts and by such surety companies as the Chairman of the Board, Chief Executive Officer, President or the Board may determine. The premiums on such bonds shall be paid by the Corporation and the bonds so furnished shall be in the custody of the Secretary.

Section 9.14

Securities of Other Corporations . Powers of attorney, proxies, waivers of notice of meeting, consents in writing and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the Chairman of the Board, Chief Executive Officer, President or any Vice President. Any such officer, may, in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities, or to consent in writing, in the name of the Corporation as such holder, to any action by such corporation, and at any such meeting or with respect to any such consent shall possess and may exercise any and all rights and power incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed. The Board may from time to time confer like powers upon any other person or persons.

Section 9.15

Amendments . The Board shall have the power to adopt, amend, alter or repeal these Bylaws. The affirmative vote of a majority of the Whole Board shall be required to adopt, amend, alter or repeal these Bylaws. These Bylaws also may be adopted, amended, altered or repealed by the stockholders; provided, however, that in addition to any vote of the holders of any class or series of capital stock of the Corporation required by applicable law or the Certificate of Incorporation, the affirmative vote of the holders of at least 66⅔% of the voting power of all outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required for the stockholders to adopt, amend, alter or repeal these Bylaws.

Exhibit 10.1

Execution Copy

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.

APRIL 4, 2005

AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER

THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER is made and entered into on this 4th day of April 2005 (this “ Agreement ”), by and among Tamborine Holdings, Inc., a Mississippi corporation (the “ Purchaser ”), SES Acquisition Corporation, a Florida corporation and wholly owned Subsidiary of the Purchaser (“ Acquisition ”), Synthesis Energy Holdings, Inc., a Florida corporation (the “ Corporation ”), and the shareholders of the Corporation who are listed on the signature pages hereto, which represents all of the shareholders of the Corporation (collectively, the “ Sellers ”). Terms used herein and not otherwise defined shall have the meanings set forth in Section 11.3 hereof.

WHEREAS, upon consummation of the Restructuring, the Corporation will be a holding company that through its Subsidiaries will provide energy and utility solutions, equipment and technology to its customers (the “ Business ”);

WHEREAS, the Purchaser, Acquisition and the Corporation intend to effect a merger of Acquisition with and into the Corporation (the “ Merger ”) in accordance with terms and subject to the conditions of this Agreement and in accordance with the Florida Business Corporation Act (the “ FBCA ”);

WHEREAS, upon the consummation of the Merger, Acquisition will cease to exist, and the Corporation will be the surviving corporation and become a wholly owned Subsidiary of the Purchaser;

WHEREAS, the respective Boards of Directors of the Purchaser, Acquisition and the Corporation have each (i) determined that this Agreement, the Merger and the transactions contemplated hereby and thereby are advisable and in the best interests of their respective shareholders and (ii) adopted this Agreement and approved the Merger and the transactions contemplated hereby and thereby;

WHEREAS, the Board of Directors of the Purchaser, as the sole shareholder of Acquisition, has determined that the Merger is advisable and in the best interests of Acquisition and has adopted this Agreement and approved the Merger and the transactions contemplated hereby and thereby; and

WHEREAS, for United States income tax purposes, it is intended that the Merger qualify as a “reorganization” under the provisions of Section 368 of the Code;

NOW, THEREFORE, in consideration of the representations and warranties, covenants and agreements, and subject to the conditions contained herein, the Sellers, the Corporation, the Purchaser and Acquisition hereby agree as follows:

ARTICLE I

THE MERGER

1.1.

The Merger . Subject to the terms and conditions contained herein, at the Effective Time, pursuant to the Merger, Acquisition shall be merged with and into the

Corporation in accordance with the requirements of the FBCA. Thereupon, the corporate existence of the Corporation, with all its rights, privileges, immunities, powers and purposes, shall continue unaffected and unimpaired by the Merger, and the Corporation, as the corporation surviving the Merger, shall be fully vested therewith, the separate existence of Acquisition shall cease upon the Merger becoming effective as herein provided and thereupon the Corporation and Acquisition shall be a single corporation (sometimes referred to herein as the “ Surviving Corporation ”).

1.2.

Filing . As soon as practicable following fulfillment of the conditions specified in Article VI and Article VII hereof, and provided that this Agreement has not been terminated and

abandoned pursuant to Article IX hereof, Acquisition and the Corporation will cause an executed counterpart of the Articles of Merger in substantially the form of Exhibit 1.2 hereto (the “ Articles of Merger ”) to be filed with the Secretary of State of the State of Florida in accordance with the

provisions of Section 607.1109 of the FBCA.

1.3.

Effective Time of the Merger . The Merger shall be effective at the time that the filing of the counterpart of the Articles of Merger with the Secretary of State of the State of Florida referred to in Section 1.2 is completed, which time is sometimes referred to herein as the “ Effective Time .”

1.4.

Effect of the Merger . The Merger shall have the effects set forth in Sections 607.1106 and 607.11101 of the FBCA. As promptly as practicable after the Effective Time, the Purchaser shall change its name to “SES, Inc.”

1.5.

Certificate of Incorporation . At the Effective Time, the certificate of incorporation of the Corporation, as amended pursuant to the Articles of Merger, shall be the certificate of incorporation of the Surviving Corporation, which may be amended from time to time after the Effective Time as provided by law.

1.6.

Bylaws . At the Effective Time, the bylaws of the Corporation shall be the bylaws of the Surviving Corporation, which may be amended from time to time after the Effective Time as provided by the certificate of incorporation or said bylaws.

1.7.

Directors and Officers.

(a)

From and after the Effective Time, the members of the Board of Directors of the Corporation immediately prior to the Effective Time set forth on Schedule 1.7(a) attached hereto shall become the members of the Board of Directors of the Surviving Corporation and the Purchaser. At or immediately prior to the Effective Time, all members of the boards of directors of Acquisition and of the Purchaser shall tender their resignations and such vacancy(ies) shall be filled solely by the members of the board of directors of the Corporation set forth on Schedule 1.7(a) attached hereto.

(b)

From and after the Effective Time, the officers of the Corporation immediately prior to the Effective Time set forth on Schedule 1.7(a) attached hereto shall become the officers of the Surviving Corporation and the Purchaser in the same capacities they respectively held in the Corporation. At or immediately prior to the Effective Time, all officers of Acquisition and of the Purchaser shall tender their resignations and all officers of the

-2-

Surviving Corporation set forth on Schedule 1.7(a) attached hereto shall be such persons who shall be designated as the officers of the Surviving Corporation and the Purchaser.

1.8.

Conversion . At the Effective Time, all of the issued and outstanding shares of capital stock of Acquisition and the Corporation Capital Stock shall, by virtue of the Merger and without any action on the part of the respective holders thereof, become and be converted into shares of capital stock of the Surviving Corporation or into the right to receive the Purchaser Common Stock, par value $0.01 share (the “ Purchaser Common Stock ”), or be canceled, as the case may be, as follows:

(a)

Each outstanding share of common stock, par value $0.01 per share, of Acquisition shall be converted into one share of common stock, par value $0.01 per share, of the Surviving Corporation.

(b)

Each treasury share of capital stock of the Corporation, if any, shall be canceled, and no payment shall be made in respect thereof.

(c)

All of the issued and outstanding shares of capital stock of the Corporation (the “ Corporation Capital Stock ”) that shall be issued and outstanding at the Effective Time (other than shares of the Corporation's common stock, $0.01 par value per share (the “ Corporation Common Stock ”), held in the treasury of the Corporation) (the “ Shares ”) shall be converted into the right to receive an aggregate of 21,050,000 shares of the Purchaser Common Stock subject to adjustment as provided in Section 1.9 (the “ Merger Consideration ”), which shall be equal to 75% of the aggregate number of shares of Purchaser's capital stock on a fully diluted basis to be issued and outstanding after giving effect to (i) the issuance of 21,050,000 shares of the Purchaser Common Stock as Merger Consideration, (ii) the consummation of the sale of 1,000,000 shares of the Purchaser Common Stock in the Private Placement, and (iii) the forfeiture of 94,000,000 shares of Purchaser Common Stock by Alexander Gomez, the majority shareholder of the Purchaser, or his nominees or assigns (“Tamborine Majority Shareholder ”) immediately prior to the Effective Time (the “ Exchange Ratio ”) (items (i), (ii) and (iii) shall be referred to as the “ Merger Transactions ”). The allocation of the shares of the Purchaser Common Stock to be issued as Merger Consideration to the Sellers pursuant to the Merger is set forth on Schedules 1.8(c) attached hereto, which shares are subject to the Merger Consideration adjustments set forth in Sections 1.9(a) through (d) below.

(d)

No fractional shares of the Purchaser Common Stock shall be issued.

1.9.

Merger Consideration Adjustments .

(a)

If, between the date of this Agreement and the Effective Time, the issued and outstanding shares of the Corporation Capital Stock or the Purchaser Common Stock are changed into a different number or class or series of shares by reason of any stock split, stock dividend, reverse stock split, reclassification, recapitalization exchange, extraordinary distribution, redemption or other similar transaction then, if the effect of the same is not already accommodated in the calculation of the Exchange Ratio, the Exchange Ratio shall be appropriately and correspondingly adjusted downward or upward (as the case may be) to the extent the record date for any such event is prior to the Effective Time whereby the Sellers shall

maintain 75% of the aggregate number of shares of the Purchaser's capital stock on a fully diluted basis after giving effect to the Merger Transactions.

(b)

At the Closing, the Sellers shall be issued 21,050,000 shares of the Purchaser Common Stock as the aggregate Merger Consideration and, as a result, the Sellers shall own 80.19% of the aggregate number of shares of the Purchaser's capital stock on a fully diluted basis after giving effect to the Merger, the sale of 200,000 shares of the Purchaser Common Stock in the Private Placement, and the forfeiture of 94,000,000 of Purchaser Common Stock to the Purchaser by the Tamborine Majority Shareholder pursuant to Section 5.14; provided , however, that if 1,000,000 shares of the Purchaser Common Stock is sold in the Private Placement, such percentage shall be reduced to 75% of the aggregate number of shares of the Purchaser's capital stock on a fully diluted basis.

(c)

If the number of shares of Purchaser Common Stock sold in the Private Placement is less than 1,000,000, then the Sellers shall maintain the percentage of the Purchaser's capital stock on a fully diluted basis after giving effect to the Merger Transactions determined by a fraction (i) the numerator of which shall be the 21,050,000 shares of the . Purchaser Common Stock issued to the Sellers as Merger Consideration and (ii) the denominator of which shall be (x) the number of shares of Purchaser Common Stock outstanding immediately prior to the Merger after giving effect to the forfeiture of 94,000,000 shares of the Purchaser Common Stock to the Purchaser by Tamborine Majority Shareholder pursuant to Section 5.14, plus (y) the 21,050,000 shares of the Purchaser Common Stock issued to the Sellers as Merger Consideration, plus (z) the actual number of shares sold in the Private Placement.

(d)

If pursuant to Section 5.14 the Tamborine Majority Shareholder forfeits and tenders to the Purchaser a number of shares of Purchaser Common Stock that is greater or less than 94,000,000, the number of share of Purchaser Common Stock to be issued as Merger Consideration shall be adjusted upward or downward to provide that the Sellers shall maintain the same percentage ownership of the Purchaser's capital stock on a fully diluted basis as determined pursuant to Sections 1.9(a), (b) and (c).

1.10.

Payment for Shares.

(a)

At the Effective Time, each holder of a certificate or certificates (the “ Certificate ”) theretofore representing issued and outstanding Shares entitled to receive the

Merger Consideration therefore may surrender such Certificates to the Purchaser or the Surviving Corporation and receive in exchange therefore, the Merger Consideration as provided in Section 1.8 immediately upon such surrender. In case any payment pursuant to this Section 1.10 is to be made to a holder other than the registered owner of a surrendered Certificate, it shall be a condition of such payment that the certificate so surrendered shall be properly endorsed or otherwise in proper form for transfer and that all applicable transfer and other similar Taxes shall have been paid by the Corporation (or the Surviving Corporation). Until surrendered in accordance with the provisions of this Section 1.10, the Certificate or Certificates which immediately prior to the Effective Time represented all the issued and outstanding Shares shall represent for all purposes only the right to receive the Merger Consideration.

(b)

In the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed, the Purchaser or the Surviving Corporation shall issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration payable in exchange therefore pursuant to this Article 1. The Board of Directors of the Purchaser or the Surviving Corporation may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed Certificate to give the Purchaser or the Surviving Corporation, as the case may be, a bond in such sum as it may direct as indemnity against any Claim that may be made against the Surviving Corporation with respect to the Certificate alleged to have been lost, stolen or destroyed.

(c)

Promptly following the date which is six months after the Closing Date, each holder of a Certificate may surrender such Certificate to the Surviving Corporation and, subject to applicable abandoned property, escheat and similar laws, receive in exchange therefore the Merger Consideration payable pursuant to this Article I without any interest thereon.

1.11.

Stock Options, Stock Appreciation Rights and Warrants . The Corporation and none of its Subsidiaries have or will have issued Options, stock appreciation rights, or warrants or have any outstanding Options, stock appreciation rights or warrants to purchase any of their respective shares of capital stock.

1.12.

Closing of Transfer Books . At the Effective Time, the stock transfer books of the Corporation shall be closed and no transfer of Shares or Options shall thereafter be made. If, after the Effective Time, Certificates are presented to the Purchaser or the Surviving Corporation, they shall be canceled and exchanged for the Merger Consideration in accordance with Section 1.8. From and after the Effective Time, no Shares shall be deemed to be outstanding, and holders of Certificates shall cease to have any rights with respect thereto except as provided herein or by law.

1.13.

Actions Taken at Closing . At the Closing, (a) the Corporation shall deliver to the Purchaser the various certificates, instruments, Contracts, consents and documents required to be delivered to the Purchaser by the Corporation and the Sellers as a condition precedent to the. Purchaser's obligations hereunder pursuant to Article VI; (b) the Purchaser shall deliver to the Corporation the various certificates, instruments, Contracts, consents and documents required to be delivered to the Corporation and the Sellers by the Purchaser as a condition precedent to the Corporation's obligations hereunder pursuant to Article VII; (c) the Corporation and Acquisition shall execute and file with the Secretary of State of the State of Florida the Articles of Merger and shall have the executed plan of merger attached thereto; and (d) the Purchaser shall deliver the Merger Consideration in accordance with Section 1.10.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE CORPORATION AND THE

SELLERS

The Corporation represents and warrants to the Purchaser and Acquisition as of the date hereof and as of the Closing Date, except for the representations and warranties in Sections

2.6(b), 2.24, and 2.25 in which each Seller severally and the Corporation represents and warrants to the Purchaser and Acquisition as of the date hereof and as of the Closing Date as follows, it being acknowledged and agreed that the representations and warranties set forth in this Article II are based on the assumption that the Restructuring has occurred:

2.1.

Corporate Organization, Etc . The Corporation is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation with full corporate power and authority to carryon its business as it is now being conducted and to own, operate and lease its properties and assets. The Corporation is duly qualified or licensed to do business and is in corporate and Tax good standing in every jurisdiction in which the conduct of its business, the ownership or lease of its properties, require it to be so qualified or licensed. Such jurisdictions are set forth in Schedule 2.1(a) attached hereto. True, complete and correct copies of the Corporation's articles of incorporation and bylaws as presently in effect are set forth in Schedule 2.1 (b) attached hereto.

2.2.

Subsidiaries . Set forth on Schedule 2.2(a) attached hereto is a complete and accurate list of all Subsidiaries of the Corporation after the Restructuring. Each Subsidiary is a corporation duly organized, validly existing and in corporate and Tax good standing under the laws of its jurisdiction of incorporation with full corporate power and authority to carryon its business as it is now being conducted and to own, operate and lease its properties and assets. Each Subsidiary is duly qualified or licensed to do business and is in corporate and Tax good standing in every jurisdiction in which the conduct of its business, the ownership or lease of its properties, require it to be so qualified or licensed. Such jurisdictions are set forth in Schedule 2.2(b) attached hereto. All of the outstanding shares of the capital stock, all Options to acquire capital stock, and all securities that are exchangeable or convertible into capital stock, of each Subsidiary are owned or will be owned after the Restructuring by the Corporation or a wholly-owned Subsidiary of the Corporation, are duly authorized, validly issued, fully paid and nonassessable, and have been issued in compliance with all applicable Regulations and Contracts. The Corporation or its wholly-owned Subsidiary has good and marketable title to all of the shares of outstanding capital stock, all Options to acquire capital stock, and an securities that are exchangeable or convertible into capital stock, of each Subsidiary, free and clear of all Liens, Contracts, Options or other limitations whatsoever. True, complete and correct copies of each Subsidiary's charter and bylaws as presently in effect are set forth in Schedule 2.2(c) attached hereto. No shares of capital stock of any Subsidiary are reserved for issuance and there are no outstanding Options, Claims, Contracts, convertible or exchangeable securities or other commitments, contingent or otherwise, relating to the capital stock of any Subsidiary or pursuant to which any Subsidiary is or may become obligated to issue or exchange any shares of capital stock. Except as set forth in Schedule 2.2(d) attached hereto, the Corporation does not have any obligation to make any additional Investments in any Person.

2.3.

Capitalization . The authorized, issued and outstanding capital stock, Options, and securities that are convertible into, or exchangeable for, capital stock of the Corporation on a fully diluted basis as of the date hereof, and without giving effect to any of the transactions contemplated hereby, including after the Restructuring, are held beneficially and of record by the Persons as set forth in Schedule 2.3(a) attached hereto. The Corporation does not have any Contracts containing any profit participation features, stock appreciation rights or phantom stock options, or similar Contracts that allow any Person to participate in the equity of the Corporation

except as set forth on Schedule 2.3(a) attached hereto. The Corporation is not subject to any obligation or Contract (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital stock or any Options. All of the outstanding shares of the Corporation's capital stock are validly issued, fully paid and non-assessable. There are no shares of capital stock of the Corporation held in the treasury of the Corporation and no shares of capital stock of the Corporation are currently reserved for issuance for <my purpose or upon the occurrence of any event or condition. There are no existing Contracts or Options between a Seller, on the one hand, and any other Person, on the other hand, regarding the Shares. Except as set forth in Schedule 2.3(b) attached hereto, there are no Contracts between or among any of the Corporation's shareholders or any other Persons that are binding upon the Corporation with respect to the voting, transfer, encumbrance of the Corporation's capital stock or Options to acquire capital stock or securities that are exchangeable or convertible into capital stock of the Corporation or with respect to any aspect of the Corporation's governance or dividends or distributions. The stock record books of the Corporation that have been delivered to Purchaser for inspection prior to the date hereof are complete and correct in all material respects. The Corporation does not have any issued and outstanding shares of preferred stock.

2.4.

Books and Records. The corporate minute books of the Corporation that have been made available to Purchaser for inspection are complete and correct in all material respects and contain all of the proceedings of the shareholders and directors of the Corporation. A true and complete list of the incumbent directors and officers of the Corporation is set forth in Schedule 2.4 attached hereto. Neither the Corporation nor any Subsidiary has any of its records, systems, controls, data or information recorded, stored, maintained, operated or otherwise wholly or partly dependent upon or held by any means (including any electronic, mechanical or photographic process, whether computerized or not) which (including all means of access thereto and therefrom) are not under the exclusive ownership and direct control of the Corporation or a wholly-owned Subsidiary.

2.5.

Title to Stock . All of the outstanding the Corporation Capital Stock is owned by the Sellers, are duly authorized, validly issued, fully paid and nonassessable, are free of all Liens and Contracts, and have been issued in compliance with all applicable securities laws. All of the Shares were acquired from third parties or the Corporation in compliance with all applicable Regulations, free and clear of any rescission and Contract rights. There is no outstanding Contract with the Corporation or any other Person to purchase, redeem or otherwise acquire any outstanding shares of the capital stock or Options of the Corporation, or securities or obligations of any kind convertible into any shares of the capital stock of the Corporation. The Corporation has not redeemed any securities in violation of any Contract, Order or Regulation. Upon

payment of the Merger Consideration to the Sellers at the Closing, the Sellers will convey good and marketable title to the Shares, free and clear of all Liens, Orders, Contracts or other limitations whatsoever. The assignments, endorsements, stock powers and other instruments of transfer delivered by the Sellers to Purchaser at the Closing will be sufficient to transfer the Sellers' entire interest, legal and beneficial, in the Shares to Purchaser.

2.6.

Authorization, Etc.

(a)

The Corporation has full power and authority to enter into this Agreement and the agreements contemplated hereby to which the Corporation is a party and to consummate

the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and all other agreements and transactions contemplated hereby have been duly authorized by the Board of Directors and prior to the Closing will be authorized by the shareholders of the Corporation and no other corporate proceedings on their part are necessary to authorize this Agreement and the agreements contemplated hereby and the transactions contemplated hereby and thereby. This Agreement and all other agreements contemplated hereby to be entered into by the Corporation each constitutes a legal, valid and binding obligation of the Corporation enforceable against the Corporation in accordance with its terms.

(b)

Each Seller is the sole owner of and has full right, power and authority to sell and vote the Shares set forth opposite the signature line for such Seller's name below. Each Seller has full power and authority to enter into this Agreement and the agreements contemplated hereby and to deliver the Shares and the certificates evidencing such Shares to the Purchaser as provided for herein, free and clear of all Liens. This Agreement and all other agreements contemplated hereby to be entered into by the Sellers each constitute a legal, valid and binding obligation of the Seller who is a party thereto enforceable against such Seller in accordance with its terms.

(c)

Except as set forth in Schedule 2.6 attached hereto, the execution, delivery and performance by the Corporation and the Sellers of this Agreement, and all other agreements contemplated hereby, and the fulfillment of and compliance with the respective terms hereof and thereof by the Corporation and the Sellers, do not and will not (a) conflict with or result in a breach of the terms, conditions or provisions of, (b) constitute a default or event of default under (whether with or without due notice, the passage of time or both), (c) result in the creation of any Lien upon the Corporation's capital stock or assets pursuant to, (d) give any third party the right to modify, terminate or accelerate any obligation under, (e) result in a violation of, or (f) require any authorization, consent, approval, exemption or other action by, notice to, or filing with any third party or Authority pursuant to, the charter or bylaws of the Corporation or any applicable Regulation, Order or Contract to which the Corporation, the Sellers or their respective properties or the Shares are subject. Each of the Sellers and the Corporation has complied with all applicable Regulations and Orders in connection with the execution, delivery and performance of this Agreement, the agreements contemplated hereby and the transactions contemplated hereby and thereby.

2.7.

Financial Statements.

(a)

Attached as Schedule 2.7(a) attached hereto are (i) unaudited year-end balance sheets of Synthesis Energy Systems, Inc., a company organized under the laws of the British Virgin Islands (“ SESI ”), as of December 31, 2003 and 2004 and Synthesis Energy Systems, LLC, a West Virginia limited liability company (“ SESLLC ”), as of December 31, 2004 and statements of income, shareholders' equity and cash flow of the Corporation for each of the fiscal years then ended, as applicable, (ii) an unaudited balance sheet of SESI and SESLLC as of February 28,2005 and unaudited statements of income, shareholders' equity and cash flow for the two-month period then ended, and (iii) financial projections of the Corporation and its Subsidiaries as if the Restructuring had been consummated as of January 1, 2005 and for the calendar years 2005, 2006, 2007, 2008 and 2009. Such balance sheets and the notes thereto fairly present the financial position of the Corporation at the respective dates thereof, and such

statements of income, shareholders' equity and cash flow and the notes thereto fairly present the results of operations for the periods referred to therein. All of the foregoing financial statements and projections were prepared from the books and records of the Corporation. The Corporation does not utilize any percentage of completion or similar method of accounting for revenue, income or cost recognition purposes. The Corporation has not written off any research and development costs, incurred any reorganization, restructuring or similar costs or changed the book value of any assets, liabilities or goodwill of any Subsidiary or business acquired by the Corporation. Except as set forth in Schedule 2.2(d) attached hereto, the Corporation does not have any obligation to make any additional Investments in any Person. All properties used in the Corporation's business operations during the period covered by the foregoing financial statements are reflected in the financial statements. The foregoing balance sheets and statements of operations, shareholders' equity and cash flows and the notes thereto are herein collectively referred to as the “ Financial Statements ” and December 31, 2004 is herein referred to as the “ Financial Statement Date .”

(b)

Except as set forth in Schedule 2.7(b) attached hereto, the Corporation does not have any Indebtedness, obligation or liability (whether accrued, absolute, contingent, unliquidated or otherwise, known or unknown to the Corporation, whether due or to become due) arising out of transactions entered into at or prior to the Closing Date, or any state of facts existing at or prior to the Closing Date, other than: (i) liabilities set forth in the December 31, 2004 sheet of the Corporation, (ii) liabilities and obligations that have arisen after December 31, 2004 in the ordinary course of business (none of which is a liability resulting from breach of a Contract, Regulation, Order or warranty, tort, infringement or Claim), or (iii) liabilities incurred in connection with the transactions by this Agreement.

(c)

There is no Person that has Guaranteed, or provided any financial accommodation of, any Indebtedness, obligation or liability of the Corporation or for the benefit of the Corporation for the periods covered by the Financial Statements other than as set forth in the Financial Statements. The management of the Corporation has disclosed to the Corporation's independent auditors and the Purchaser all facts and circumstances known to them that are material and bear upon the accuracy of the financial statements. The Corporation's accounting systems and controls are sufficient to detect material fraud and inaccuracies in the financial reporting processes and reports.

2.8.

Employees . Schedule 2.8 attached hereto sets forth a list of all officers, directors and key employees (meaning those earning more than $50,000 annually) of the Corporation, together with a description of the rate and basis for their total compensation. The Corporation has conducted its business in compliance with all Regulations and Orders affecting employment and employment practices applicable to the Corporation, including the payment of wages and hours. The Corporation has no collective bargaining agreements and there have been no strikes, work stoppages nor any demands for collective bargaining by any union, labor organization or other Person. There is no dispute or controversy with any union or other organization of the Corporation's employees and no arbitration proceedings are pending or, to the best knowledge of the Corporation, threatened involving a dispute or controversy affecting the Corporation. At the Closing the Corporation will not have any liability or obligation to any of its current or former employees, officers or directors (including unaccrued year end bonuses) other than for the payment of salaries to be paid in the ordinary course of business. Except as set forth on

Schedule 2.8 attached hereto, the Corporation has not taken any action, or failed to take any action, that has or would be reasonably likely to result in any Claim by an employee that he has been constructively terminated or due severance payments. Upon the consummation of the transactions contemplated hereby and pursuant to the agreements referred to herein, the Corporation will not have any “change in control” bonus or other obligations to any of its employees, consultants or other Persons performing services for the Corporation.

2.9.

Absence of Certain Changes . Since the Financial Statement Date, there has not

been any (a) Material Adverse Change in the business, operations, properties, assets, condition (financial or otherwise), results, plans, strategies or prospects of the Corporation; (b) damage,

destruction or loss, whether covered by insurance or not, having a cost of $100,000 or more, with regard to the Corporation's property and business; (c) declaration, setting aside or payment of any dividend or distribution (whether in cash, stock or property) in respect of the Corporation's capital stock, Options or securities convertible into or exchangeable for capital stock; (d) redemption or other acquisition of capital stock, Options or securities convertible into or exchangeable for capital stock by the Corporation or any payment of any stock appreciation right or other profit participation; (e) increase in the compensation payable to or to become payable by the Corporation to its officers or employees or any adoption of or increase in any bonus, insurance, pension or other employee benefit plan, payment or arrangement made to, for or with any such officers or employees or any Affiliate of the Corporation; (f) entry into any material Contract not in the ordinary course of business, including without limitation, any borrowing from any new lender or in excess of the existing credit limits or capital expenditure (except for the capital expenditures set forth in Schedule 2.18 attached hereto); (g) change by the Corporation in accounting methods or principles or any write-down, write-up or revaluation of any assets of the Corporation except depreciation accounted for in the ordinary course of business and write downs of inventory which reflect the lower of cost or market and which are in the ordinary course of business; (h) failure to promptly pay and discharge current liabilities or agree with any party to extend the payment of any current liability; (i) Lien placed on any property of the Corporation other than Permitted Liens; (j) sale, assignment, transfer, lease, license or otherwise placement of a Lien on any of the Corporation's tangible assets, except in the ordinary course of business consistent with past practice, or canceled any material debts or Claims; (k) sale, assignment, transfer, lease, license or otherwise placement of a Lien on any Intellectual Property rights or other intangible assets, disclosure of any material confidential information to any Person or abandoned or permitted to lapse any Intellectual Property rights; (1) commitment to make any charitable contributions or pledges exceeding in the aggregate $25,000; or (m) agreement, whether orally or in writing, to do any of the foregoing.

2.10.

Contracts .

(a)

Except as set forth in Schedule 2.10(a) attached hereto, as of the Closing Date, the Corporation is not a party to any written or oral: (1) pension, profit sharing, Option, employee stock purchase, stock appreciation right, phantom stock option or other plan providing for deferred or other compensation to employees or any other employee benefit plan (other than as set forth in Schedule 2.15 attached hereto), or any Contract with any labor union or labor group; (2) Contract relating to loans to officers, directors, Sellers or their Affiliates; (3) Contract relating to the borrowing of money or the mortgaging, pledging or otherwise placing a Lien on any asset of the Corporation; (4) Guarantee of any obligation; (5) Contract under which the

Corporation has advanced or loaned, or agreed to advance or loan, any Person amounts in the aggregate exceeding $10,000; (6) Contract pursuant to which the Corporation is lessor of or permits any third party to hold or operate any property, real or personal, owned or controlled by the Corporation; (7) warranty Contract with respect to its services rendered or its products sold or leased; (8) Contract or non-competition provision in any Contract prohibiting it from freely engaging in any business or competing anywhere in the world; (9) Contract for the purchase, acquisition or supply of inventory and other property and assets, whether for resale or otherwise in excess of $10,000; (10) Contracts with independent agents, brokers, dealers or distributors which provide for annual payments in excess of $10,000; (11) employment, consulting, sales, commissions, advertising or marketing Contracts; (12) Contracts providing for “take or pay” or similar unconditional purchase or payment obligations; (13) Contracts with Persons with which, directly or indirectly, a Seller also has a Contract; (14) Contract that requires the consent of any Person, or contains any provision that would result in a modification of any rights or obligation of any Person thereunder upon a change in control of the Corporation or which would provide any Person any remedy (including rescission or liquidated damages), in connection with the execution, delivery or performance of this Agreement and the agreements contemplated hereby and the consummation of the transactions contemplated hereby and thereby; (15) nondisclosure or confidentiality Contracts; (16) power of attorney or other similar Contract or grant of agency; or (17) any other Contract which is material to its operations and business prospects or involves a consideration in excess of $25,000 annually, excluding any purchase orders in the ordinary course of business.

(b)

The Corporation has performed in all material respects all obligations required to be performed by it and is not in default in any respect under or in breach of nor in receipt of any Claim of default or breach under any material Contract to which the Corporation is subject (including without limitation all performance bonds, warranty obligations or otherwise); no event has occurred which with the passage of time or the giving of notice or both would result in a default, breach or event of non-compliance under any material Contract to which the Corporation is subject (including without limitation all performance bonds, warranty obligations or otherwise); the Corporation does not have any present expectation or intention of not fully performing all such obligations; the Corporation does not have any knowledge of any breach or anticipated breach by the other Persons to any such Contract to which it is a party.

(c)

The Corporation has delivered to the Purchaser true and complete copies of all the Contracts and documents listed in the schedules to this Agreement.

(d)

Schedule 2.10(d) attached hereto sets forth a complete and accurate list of each outstanding bid or proposal for business submitted by the Corporation in excess of $25,000.

2.11.

Title and Related Matters .

(a)

Except as set forth in Schedule 2.1l( a) attached hereto, the Corporation has good and marketable title to all real and personal, tangible and intangible, property and other assets reflected in the Financial Statements or acquired after the Financial Statement Date, free and clear of all Liens, except Permitted Liens. All properties used in the Corporation's business operations for the periods covered by the Financial Statements are reflected in the Financial Statements, except as to those assets that are leased. Schedule 2.11(b) attached hereto sets forth

a complete and accurate summary of all leased assets that have annual rental payments in excess of $12,000, describing the expiration date of such lease, the name of the lessor, the annual rental payment and whether a consent is required from the lessor to consummate the transactions contemplated hereby.

(b)

All the Corporation's leases are in full force and effect, and valid and enforceable in accordance with their respective terms. The Corporation has not received any notice of any, and there exists no event of default or event which constitutes or would constitute (with notice or lapse of time or both) a default by the Corporation or any other Person under any lease. All rent and other amounts due and payable with respect to the Corporation's leases have been paid through the date of this Agreement and all rent and other amounts due and payable with respect to the Corporation's leases that are due and payable on or prior to the Closing Date will have been paid prior to the Closing Date. All lessors under the Corporation's real property leases have consented (where such consent is necessary) or prior to the Closing will have consented (where such consent is necessary) to the consummation of the transactions contemplated by this Agreement without requiring material modification in the rights or obligations thereunder. The Corporation has received no written notice that the landlord with respect to any real property lease would refuse to renew such lease upon expiration of the period thereof upon substantially the same terms, except for rent increases consistent with past experience or market rentals.

(c)

None of the assets belonging to the Corporation is or will be on the Closing Date subject to any (i) Contracts of sale or lease except as set forth in Schedule 2.11(c) attached hereto, except Contracts for the sale of inventory in the ordinary and regular course of business or (ii) Liens, except for Permitted Liens and the Liens set forth in Schedule 2.11 (c) attached hereto.

(d)

There has not been since the Financial Statement Date and will not be prior to the Closing Date, any sale, lease, or any other disposition or distribution by the Corporation of any of its assets or properties, now or hereafter owned by it, except transactions in the ordinary and regular course of business or as otherwise consented to by the Purchaser. Immediately after the Closing, the Purchaser will own, or have the unrestricted right to use, all properties and assets that are used (or necessary) in connection with the Corporation's business on the same economic basis as before the Closing.

2.12.

Litigation. Schedule 2.12 attached hereto sets forth a true and complete list of all Claims and Orders involving the Corporation since November 3, 2003. Except as set forth in Schedule 2.12 attached hereto, to the best knowledge of the Corporation, there is no Claim or Order threatened against the Corporation nor is there any reasonable basis therefor. Except as set forth on Schedule 2.12 attached hereto, the Corporation is fully insured with respect to each of the matters set forth on Schedule 2.12 attached hereto and the Corporation has not received any opinion or a memorandum or advice from legal counsel to the effect that it is exposed, from a legal standpoint, to any liability or obligations which could have an adverse effect in excess of $10,000.

2.13. Tax Matters .

(a)

Tax Returns . The Corporation has timely filed or caused to be timely filed with the appropriate taxing authorities all tax returns, statements, forms and reports (including elections, declarations, disclosures, schedules, estimates and information Tax Returns) for Taxes (“ Tax Returns ”) that are required to be filed by, or with respect to, the Corporation on or prior to the Closing Date. Such Tax Returns have been correct and complete in all material respects.

(b)

Payment of Taxes . All Taxes and Tax liabilities due by or with respect to the income, assets or operations of the Corporation for all taxable years or other taxable periods that end on or before the Closing Date and, with respect to any taxable year or other taxable period beginning on or before and ending after the Closing Date, the portion of such taxable year or period ending on and including the Closing Date (“ Pre-Closing Period ”) have been timely paid or will be timely paid in full on or prior to the Closing Date or accrued and adequately disclosed and fully provided for in accordance with GAAP on the Financial Statements.

(c)

Except as set forth in Schedule 2.13(c) attached hereto,

(i)

the Corporation has not been the subject of an audit or other examination of Taxes by the tax authorities of any nation, state or locality; (ii) no such audit is contemplated or pending; and (1ii) the Corporation has not received any written notices from any taxing authority relating to any issue which could affect the Tax liability of the Corporation;

(ii)

the Corporation, as of the Closing Date, (A) has not entered into an agreement or waiver or been requested to enter into an agreement or waiver extending any statute of limitations relating to the payment or collection of Taxes of the Corporation that has not expired, or (B) is not presently contesting the Tax liability of the Corporation before any court, tribunal or agency;

(iii)

the Corporation has not been included in any “consolidated,” “unitary” or “combined” Tax Return provided for under the law of the United States, any foreign jurisdiction or any state or locality with respect to Taxes for any taxable period for which the statute of limitations has not expired (other than a group of which the Corporation and/or its subsidiaries are the only members);

(iv)

all Taxes which the Sellers, the Corporation and each of its subsidiaries is (or was) required by law to withhold or collect in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party have been duly withheld or collected, and have been timely paid over to the proper authorities to the extent due and payable;

(v)

no written claim has ever been made by any taxing authority in a jurisdiction where the Corporation does not file Tax Returns that the Corporation is or may be subject to taxation by that jurisdiction;

(vi)

there are no tax sharing, allocation, indemnification or similar agreements in effect as between the Corporation or any predecessor or affiliate thereof and any other party (including the Sellers and any predecessors or affiliates thereof) under which the Purchaser or the Corporation could be liable for any Taxes or other claims of any party after the Closing Date;

(vii)

the Corporation has not applied for, been granted, or agreed to any accounting method change for which it will be required to take into account any adjustment under Section 481 of the Code or any similar provision of the Code or the corresponding tax laws of any nation, state or locality;

(viii)

there are no deferred intercompany transactions between the Corporation and any of its subsidiaries or between its subsidiaries and there is no excess loss account (within the meaning of Treasury Regulations Section 1.1502-19 with respect to the stock of the Corporation) which will or may result in the recognition of income upon the consummation of the transaction contemplated by this Agreement;

(ix)

no indebtedness of the Corporation consists of “corporate acquisition indebtedness” within the meaning of Section 279 of the Code; and

(x)

the Corporation has not been a “United States real property holding corporation” within the meaning of Section 897(c)(2) of the Code at any time during the five year period ending on the Closing Date; and

(xi)

the Corporation is not a party to any agreement that would require the Corporation or any affiliate thereof to make any payment that would constitute an “excess parachute payment” for purposes of Sections 280G and 4999 of the Code or that would not be deductible pursuant to Section 162(m) of the Code.

2.14.

Compliance with Law and Certifications.

(a)

The Corporation has operated in compliance with regard to its operations, practices, real property, plants, structures, machinery, equipment and other property, employees, products and services and all other aspects of its business, with all applicable Regulations and Orders, including, without limitation, all Regulations relating to the safe conduct of business, environmental protection, quality and labeling, antitrust, consumer protection, equal opportunity, discrimination, health, sanitation, fire, zoning, building and occupational safety. There are no Claims pending, or threatened, nor has the Corporation received any written notice, regarding any violations of any Regulations or Orders enforced by any Authority claiming jurisdiction over the Corporation.

(b)

The Corporation holds all material registrations, accreditations and other certifications required for the conduct of its business by any Authority or trade group and the Corporation has operated in compliance with the terms and conditions of all such registrations, accreditations and certifications. The Corporation has not received any notice alleging that it has failed to hold any such material registration, accreditation or other certification.

2.15.

ERISA and Related Matters .

(a)

List of Plans . Set forth in Schedule 2.15(a) attached hereto is an accurate and complete list of all domestic and foreign (i) “employee benefit plans,” within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, and the Regulations thereunder (“ ERISA ”); (ii) bonus, stock option, stock purchase, restricted stock, incentive, fringe benefit, “voluntary employees' beneficiary associations” (“ VEBAs ”) under

Section 501 (c )(9) of the Code, profit-sharing, pension or retirement, deferred compensation, medical, life insurance, disability, accident, salary continuation, severance, accrued leave, vacation, sick pay, sick leave, supplemental retirement and unemployment benefit plans, programs, arrangements, commitments and/or practices (whether or not insured); and (iii) employment, consulting, termination, and severance Contracts; in each case for active, retired or former employees or directors, whether or not any such plans, programs, arrangements, commitments, Contracts, agreements and/or practices (referred to in (i), (ii) or (iii) above) are in writing or are otherwise exempt from the provisions of ERISA; that have been established, maintained or contributed to (or with respect to which an obligation to contribute has been undertaken) or with respect to which any potential liability is borne by the Corporation (including, for this purpose and for the purpose of all of the representations in this Section 2.15, any predecessors to the Corporation or any of its Subsidiaries and all employers (whether or not incorporated) that would be treated together with the Corporation, and/or the Sellers as a single employer (1) within the meaning of Section 414 of the Code, or (2) as a result of the Corporation or any Subsidiary and/or the Sellers being or having been a general partner of any such employer), since September 2, 1974 (“ Employee Benefit Plans ”).

(b)

Status of Plans . Except as set forth in Schedule 2.15(b) attached hereto, each Employee Benefit Plan (including any related trust) complies in form with the requirements of all applicable Regulations, including, without limitation, ERISA, the Code, and foreign tax, labor, securities, data privacy, currency exchange control and other Regulation, and has at all times been maintained and operated in substantial compliance with its terms and the requirements of all applicable Regulation, including, without limitation, ERISA and the Code. No complete or partial termination of any Employee Benefit Plan has occurred or is expected to occur. Neither the Corporation nor or any of its Subsidiaries has any commitment, intention or understanding to create, modify or terminate any Employee Benefit Plan. Except as required to maintain the tax-qualified status of any Employee Benefit Plan intended to qualify under Section 401(a) of the Code, no condition or circumstance exists that would prevent the amendment or termination of any Employee Benefit Plan. No event has occurred and no condition or circumstance has existed that could result in a material increase in the benefits under or the expense of maintaining any Employee Benefit Plan from the level of benefits or expense incurred for the most recent fiscal year ended thereof, and no benefits under any Employee Benefit Plan have been increased subsequent to the date as of which documents have been provided.

(c)

No Pension Plans . No Employee Benefit Plan is an “employee pension benefit plan” (within the meaning of Section 3(2) of ERISA) subject to Section 412 of the Code or Section 302 or Title IV of ERISA. Neither the Corporation nor or any of its Subsidiaries has ever maintained or contributed to, or had any obligation to contribute to (or borne any liability with respect to) any “multiple employer plan” (within the meaning of the Code or ERISA) or any “multiemployer plan” (as defined in Section 4001 (a)(3) of ERISA). Neither the Corporation nor or any of its Subsidiaries maintains or contributes to any VEBA.

(d)

Liabilities.

(i)

Neither the Corporation nor or any of its Subsidiaries maintains any Employee Benefit Plan which is a “group health plan” (as such term is defined

in Section 607(1) of ERISA or Section 5000(b)(1) of the Code) that has not been administered and operated in all respects in compliance with the applicable requirements of Part 6 of Subtitle B of Title I of ERISA and Section 4980B of the Code and neither the Corporation nor or any of its Subsidiaries is subject to any material liability, including, without limitation, additional contributions, fines, taxes, penalties or loss of tax deduction as a result of such administration and operation. No Employee Benefit Plan which is such a group health plan is a “multiple employer welfare arrangement,” within the meaning of Section 3(40) of ERISA. Except as set forth in Schedule 2.15(d) attached hereto, each Employee Benefit Plan that is intended to meet the requirements of Section 125 of the Code meets such requirements, and each program of benefits for which employee contributions are provided pursuant to elections under any Employee Benefit Plan meets the requirements of the Code applicable thereto. The Corporation does not maintain any Employee Benefit Plan which is an “employee welfare benefit plan” (as such term is defined in Section 3(1) of ERISA) that has provided any “disqualified benefit” (as such term is defined in Section 4976(b) of the Code) with respect to which an excise tax could be imposed.

(ii)

Neither the Corporation nor or any of its Subsidiaries maintains any Employee Benefit Plan (whether qualified or non-qualified under Section 401(a) of the Code) providing for post-employment or retiree health, life insurance and/or other welfare benefits and having unfunded liabilities, and neither the Corporation nor or any of its Subsidiaries have any obligation to provide any such benefits to any retired or former employees or active employees following such employees' retirement or termination of service. Neither the Corporation nor or any of its Subsidiaries has any unfunded liabilities pursuant to any Employee Benefit Plan that is not intended to be qualified under Section 401(a) of the Code. No Employee Benefit Plan holds as an asset any interest in any annuity Contract, guaranteed investment Contract or any other investment or insurance Contract, policy or instrument issued by an insurance company that, to the best knowledge of the Sellers and the Corporation, is or may be the subject of bankruptcy, conservatorship, insolvency, liquidation, rehabilitation or similar proceedings.

(iii)

Neither the Corporation nor or any of its Subsidiaries has incurred any liability for any tax or excise tax arising under Chapter 43 of the Code, and no event has occurred and no condition or circumstance has existed that could give rise to any such liability.

(iv)

There are no actions, suits, claims or disputes pending, or, to the best belief and knowledge of the Corporation and the Sellers, threatened, anticipated or expected to be asserted against or with respect to any Employee Benefit Plan or the assets of any such plan (other than routine claims for benefits and appeals of denied routine claims). No civil or criminal action brought pursuant to the provisions of Title I, Subtitle B, Part 5 of ERISA is pending, or to the best knowledge of the Corporation and the Sellers threatened, anticipated, or expected to be asserted against the Corporation or any fiduciary of any Employee Benefit Plan, in any case with respect to any Employee Benefit Plan. No Employee Benefit Plan or any fiduciary thereof has been the direct or indirect subject of an audit, investigation or examination by any governmental or quasi-governmental agency.

(e)

Contributions . Full payment has been timely made of all amounts which the Corporation or any of its Subsidiaries is required, under applicable law or under any Employee Benefit Plan or any agreement relating to any Employee Benefit Plan to which the

Corporation or any of its Subsidiaries is a party, to have paid as contributions or premiums thereto as of the last day of the most recent fiscal year of such Employee Benefit Plan ended prior to the date hereof or have been accrued on the Corporation's Financial Statements. All such contributions and/or premiums have been fully deducted for income tax purposes and no such deduction has been challenged or disallowed by any governmental entity, and to the best knowledge and belief of the Sellers and the Corporation and its Subsidiaries no event has occurred and no condition or circumstance has existed that could give rise to any such challenge or disallowance. The Corporation and each of its Subsidiaries have made adequate provision for reserves to meet contributions and premiums and any other liabilities that have not been paid or satisfied because they are not yet due under the terms of any Employee Benefit Plan, applicable law or related agreements. Benefits under all Employee Benefit Plans are as represented and have not been increased subsequent to the date as of which documents have been provided.

(f)

Tax Qualification . Each Employee Benefit Plan intended to be qualified under Section 401(a) of the Code has, as currently in effect, been determined to be so qualified by the Internal Revenue Service (or has submitted, or is within the remedial amendment period for submitting an application for a determination letter with the Internal Revenue Service, and is waiting receipt of a response). Each trust established in connection with any Employee Benefit Plan which is intended to be exempt from Federal income taxation under Section 50l(a) of the Code has, as currently in effect (or has submitted, or is within the remedial amendment period for submitting an application for a determination letter with the Internal Revenue Service, and is waiting receipt of a response), been determined to be so exempt by the Internal Revenue Service. Since the date of each most recent determination referred to in this paragraph (f), no event has occurred and no condition or circumstance has existed that resulted or is likely to result in the revocation of any such determination or that could adversely affect the qualified status of any such Employee Benefit Plan or the exempt status of any such trust.

(g)

Transaction s. Neither the Corporation nor any of its Subsidiaries nor any of their respective directors, officers, employees or, to the best belief and knowledge of the Sellers and the Corporation, other persons who participate in the operation of any Employee Benefit Plan or related trust or funding vehicle, has engaged in any transaction with respect to any Employee Benefit Plan or breached any applicable fiduciary responsibilities or obligations under Title I of ERISA that would subject any of them to a tax, penalty or liability for prohibited transactions or breach of any obligations under ERISA or the Code or would result in any claim being made under, by or on behalf of any such Employee Benefit Plan by any party with standing to make such claim.

(h)

Triggering Events . Except as set forth on Schedule 2.15(h) attached hereto or as provided in Section 1.8 of this Agreement, the execution of this Agreement and the consummation of the transactions contemplated hereby, do not constitute a triggering event under any Employee Benefit Plan, policy, arrangement, statement, commitment or agreement, whether or not legally enforceable, which (either alone or upon the occurrence of any additional or subsequent event) will or may result in any payment (whether of severance pay or otherwise), “parachute payment” (as such term is defined in Section 280G of the Code), acceleration, vesting or increase in benefits to any employee or former employee or director of the Corporation or any of its Subsidiaries. Except as set forth on Schedule 2.15(h) attached hereto, no Employee Benefit

Plan provides for the payment of severance, termination, change in control or similar-type payments or benefits.

(i)

Classification . The Corporation and its Subsidiaries have classified all individuals who perform services for them correctly under each Employee Benefit Plan, ERISA, the Code and other applicable law as common law employees, independent contractors or leased employees.

(j)

Documents . The Sellers have delivered or caused to be delivered to Purchaser and its counsel true and complete copies of all material documents in connection with

each Employee Benefit Plan, including, without limitation (where applicable): (i) all Employee Benefit Plans as in effect on the date hereof, together with all amendments thereto, including, in the case of any Employee Benefit Plan not set forth in writing, a written description thereof; (ii) all current summary plan descriptions, summaries of material modifications, and material

communications; (iii) all current trust agreements, declarations of trust and other documents establishing other funding arrangements (and all amendments thereto and the latest financial

statements thereof); (iv) the most recent IRS determination letter obtained with respect to each

Employee Benefit Plan intended to be qualified under Section 40l(a) of the Code or exempt under Section 50l(a) or 50l(c)(9) of the Code; (v) the annual report on Internal Revenue Service Form 5500-series for each of the last three years for each Employee Benefit Plan required to file such form; (vi) the most recently prepared financial statements for each Employee Benefit Plan for which such statements are required; and (vii) all Contracts relating to each Employee Benefit Plan, including, without limitation, service provider agreements, insurance Contracts, annuity Contracts, investment management Contracts, subscription Contracts, participation Contracts, and record keeping Contracts and collective bargaining Contracts.

2.16. Intellectual Property .

(a)

Schedule 2.16(a) attached hereto is a complete and accurate list of all domestic and foreign patents, patent applications, trademarks, service marks and other indicia of origin, trademark and service mark registrations and applications for registrations thereof, registered copyrights and applications for registration thereof, Internet domain names and URLs, corporate and business names, trade names, brand names and material computer software programs used or held for use in the business of the Corporation. To the extent indicated on such schedule, the Intellectual Property listed on Schedule 2.16( a) attached hereto has been duly registered in, filed in or issued by the United States Patent and Trademark Office, United States Copyright Office, a duly accredited and appropriate domain name registrar, the appropriate offices in the various states of the United States and the appropriate offices of other jurisdictions (foreign and domestic), and each such registration, filing and issuance remains in full force and effect as of the Closing Date. Copies of all items of the Corporation Intellectual Property which have been reduced to writing or other tangible form have been delivered by the Corporation to the Purchaser (including, without limitation true and complete copies of all related licenses, and amendments and modifications thereto).

(b)

Except as set forth in Schedule 2.16(b) attached hereto, the Corporation is not a party to any license or Contract, whether as licensor, licensee, or otherwise with respect to any Intellectual Property. To the extent any Intellectual Property is used under license in the

business of the Corporation, no notice of a material default has been sent or received by the Corporation under any such license which remains uncured and the execution, delivery or performance of the Corporation's obligations hereunder will not result in such a default. Each such license agreement is a legal, valid and binding obligation of the Corporation and each of the other parties thereto, enforceable in accordance with the terms thereof.

(c)

Except as set forth in Schedule 2.l6(c) attached hereto, the Corporation and/or its wholly-owned Subsidiaries owns or is licensed to use, all of the Corporation Intellectual Property, free and clear of any Liens, Orders and other adverse Claims, without obligation to pay any royalty or any other fees with respect thereto. The Corporation's use of the Intellectual Property (including, without limitation, the manufacturing, marketing, licensing, sale or distribution of products and the general conduct and operations of the business of the Corporation) does not violate, infringe, misappropriate or misuse any intellectual property rights of any third party. None of the Corporation Intellectual Property has been cancelled, abandoned or otherwise terminated and all renewal and maintenance fees in respect thereof have been duly paid. There are no actions that must be taken or payments that must be made by the Corporation within 180 days following the Closing Date that, if not taken, will adversely affect the Corporation Intellectual Property. The Corporation has the exclusive right to file, prosecute and maintain all applications and registrations with respect to the Intellectual Property that is owned by the Corporation.

(d)

Except as set forth in Schedule 2.16( d) attached hereto, the Corporation has not received any written notice or Claim from any third party challenging the right of the Corporation to use any of the Intellectual Property. The Corporation Intellectual Property constitutes all the Intellectual Property necessary to operate the business of the Corporation as of the Closing Date and thereafter, in the manner in which it is presently operated.

(e)

Except as set forth in Schedule 2.16(e) attached hereto, the Corporation has not made any Claim in writing of a violation, infringement, misuse or misappropriation by any third party (including, without limitation, any employee or former employee of the Corporation) of its rights to, or in connection with any Intellectual Property, which Claim is still pending. Except as set forth in Schedule 2.16(e) attached hereto, the Corporation has not entered into any Contract to indemnify any other Person against any charge of infringement of any Intellectual Property, other than indemnification provisions contained in purchase orders or license agreements arising in the ordinary course of business.

(f) Except as set forth in Schedule 2.16(f) attached hereto, to the best knowledge of the Corporation, there is no pending or threatened Claims by any Person or Authority of a violation, infringement, misuse or misappropriation by the Corporation of any Intellectual Property owned by any third party, or of the invalidity of any patent or registration of a copyright, trademark, service mark, domain name, or trade name included in the Corporation Intellectual Property. To the best knowledge of the Corporation, the Corporation does not know of any valid basis for any such Claims.

(g) Except as set forth in Schedule 2.16( g) attached hereto, there are no interferences or other contested proceedings, either pending or, to the best knowledge of the Corporation, threatened, in the United States Copyright Office, the United States Patent and

Trademark Office, or any governmental Authority (foreign or domestic) relating to any pending application with respect to the Corporation Intellectual Property.

(h)

the Corporation has secured valid written assignments from all Persons (including, without limitation, consultants and employees) who contributed to the creation or development of the Corporation Intellectual Property of the rights to such contributions that the Corporation does not already own by operation of law.

(i)

the Corporation has taken all necessary and reasonable steps to protect and preserve the confidentiality of all trade secrets, know-how, source codes, databases, customer

lists, schematics, ideas, algorithms and processes and all use, disclosure or appropriation thereof by or to any third party has been pursuant to the terms of a written agreement between such third party and the Corporation. The Corporation has not breached any Contracts of non-disclosure or confidentiality.

(j)

Except as set forth in Schedule 2.16(j) attached hereto, for the twelve month period prior to the Closing Date, the Internet domain names and URLs of the Corporation

Intellectual Property (together with any content and other materials accessible and/or displayed thereon, the “ Sites ”) direct and resolve to the appropriate Internet protocol addresses and are and have been maintained and accessible to Internet users on those certain computers used by the Corporation to make the Sites so accessible (the “ Server ”) approximately twenty-four (24) hours per day, seven (7) days per week (“ 24/7 ”) and are and have been operational for downloading content from the Server on a 24/7 basis.

2.17.

Environmental Matters .

(a)

The Corporation has operated in compliance with all applicable Environmental Laws and the terms and conditions of permits issued under such Environmental Laws with respect to any property owned, leased or occupied by it.

(b)

There are no pending or, to the knowledge of the Corporation or the Sellers, threatened environmental Claims against the Corporation or, to the knowledge of the Corporation or the Sellers, any property owned, leased or occupied by the Corporation.

(c)

There are no facts, circumstances, conditions or occurrences on any property owned, leased or occupied by the Corporation that could reasonably be anticipated (i) to form a basis of an environmental Claim against the Corporation, including without limitation any Claim related to the release of Hazardous Substances or (ii) to cause such property or any of the Corporation's assets to be subject to any restrictions on the ownership, occupancy, use or transferability thereof under any applicable Environmental Law.

2.18.

Capital Expenditures and Investments . The Corporation has outstanding Contracts and a budget for capital expenditures and investments as set forth in Schedule 2.18 attached hereto which includes a schedule of all monies disbursed on account of capital expenditures and investments made by the Corporation since the Financial Statement Date.

2.19.

Dealings with Affiliates . Schedule 2.19 attached hereto sets forth a complete and accurate list and description of the economic terms, including the parties, of all Contracts to

which the Corporation is, will be or has been a party, at any time from November 3, 2003 to the Closing Date, and to which anyone or more of (a) the Sellers, (b) the Corporation's Affiliates, (c) a Seller's Affiliate, or (d) any Person in which a Seller, an Affiliate of the Corporation or a Seller has, directly or indirectly, made an Investment, is also a party. Except as set forth on Schedule 2.19 attached hereto, since November 3,2003, the Corporation has not made any payments, loaned or borrowed any funds or property or made any credit arrangement or accommodation with any Seller, Affiliate or employee of the Corporation except for the payment of employee salaries and director compensation in the ordinary course of business.

2.20.

Insurance . The Corporation and its Subsidiaries do not have or maintain any insurance Policies.

2.21.

Customers and Suppliers . Schedule 2.21 attached hereto sets forth a complete and accurate list of (a) each customer that accounted for more than 5% of the consolidated revenues and/or income of the Corporation during the last full fiscal year and the interim period through February 28, 2005 and the amount of revenues accounted for by such customer during each such period and (b) each supplier that is the sole supplier of any significant product or component to the Corporation. No material customer of the Corporation has advised the Corporation in writing within the past year that it will stop, or decrease the rate of, buying materials, products or services from the Corporation. No unfilled customer order or commitment obligating the Corporation to process, manufacture or deliver products or perform services will result in an anticipated loss to the Corporation upon completion of performance. No material supplier of the Corporation has advised the Corporation in writing within the past year that it will stop, or decrease the rate of, supplying materials, products, or services to the Corporation. The consummation of the transactions contemplated hereby will not have a material adverse effect on the Corporation's relationship with any customer or supplier listed on Schedule 2.21 attached hereto.

2.22. Permits . The Permits listed on Schedule 2.22 attached hereto are the only Permits that have been required for the Corporation to conduct its business in accordance with applicable Regulations and Orders of any Authority. The Corporation has duly and validly held all such

Permits, and each such Permit has been in full force and effect and, to the best of the knowledge of the Corporation, no suspension or cancellation of any such Permit is threatened and there is no basis for believing that such Permit will not be renewable upon expiration.

2.23. Improper and Other Payments . Except as set forth on Schedule 2.23 attached hereto, neither the Corporation nor any of its Subsidiaries, nor any director, officer, agent, representative, employee or other person acting on behalf of the Corporation or any of its Subsidiaries has, directly or indirectly, in the course of its actions for, or on behalf of, the Corporation or any of its Subsidiaries, (a) made, paid or received any unlawful bribes, rebates, payoffs, influence payments, kickbacks or any other similar unlawful payments to or from any Person or Authority, (b) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity, (c) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds, and (d) made any improper foreign payment (as defined in the Foreign Corrupt Practices Act of 1977, as amended). The internal accounting controls of the Corporation are

believed by the Corporation's management to be adequate to detect any of the foregoing under current circumstances.

2.24.

Securities Laws Matters . Each Seller is acquiring the Purchaser Common Stock hereunder for his own account for investment and not with a view to, or for the sale in connection with, any “distribution” of the Purchaser Common Stock, as such term is used in Section 2(11) of the Securities Act. Each Seller has had the opportunity to discuss the transactions contemplated hereby with the Purchaser and has been afforded, prior to execution of this Agreement, the opportunity to ask questions of, and receive answers from the Purchaser and to obtain any additional information relating to the transactions contemplated hereby as such Seller has requested. Each Seller is an “accredited investor” within the meaning of Regulation D promulgated under the Securities Act and has such knowledge and experience in business or financial matters that he is capable of evaluating the merits and risks of an investment in the Purchaser Common Stock. Each Seller can bear the economic risk of losing his investment in the Purchaser Common Stock and has adequate means for providing for his current financial needs and contingencies. Each Seller acknowledges and agrees that the Purchaser Common Stock will be “restricted securities” within the meaning of Rule 144 and can not be sold or otherwise disposed of, except (a) pursuant to an exemption from the registration requirements under applicable state securities laws and the Securities Act, (b) in accordance with Rule 144 or (c) pursuant to an effective registration statement filed by the Purchaser with the Securities and Exchange Commission under applicable state securities laws and the Securities Act. Each Seller is a resident of, and the Purchaser Common Stock will come to rest, in the states set forth in the addresses on the signature pages hereto. Each Seller acknowledges and agrees that the Purchaser may, unless a registration statement is in effect covering such Purchaser Common Stock or unless the holders thereof comply with Rule 144, place stop transfer orders with its transfer agent with respect to such certificates in accordance with federal securities laws.

2.25.

Legend. Each Seller acknowledges and agrees that each certificate evidencing the Purchaser Common Stock and each certificate issued in exchange therefor or upon the transfer of any Purchaser Common Stock shall be stamped or otherwise imprinted with a legend in substantially the following form:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ ACT ”), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE CORPORATION'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE.”

2.26.

Private Placement Memorandum . None of the information supplied or to be

supplied by or on behalf of the Corporation or any of its Affiliates or Subsidiaries (including the entities included in the Restructuring pursuant to Section 5.17) for inclusion or incorporation by reference in the Private Placement Memorandum will contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light

of the circumstances under which they were made, not misleading; provided that no representation or warranty is made by the Corporation or any of its Affiliates or Subsidiaries (including the entities included in the Restructuring pursuant to Section 5.17) with respect to statements made or incorporated by reference in the Private Placement Memorandum based on information by the Purchaser or Acquisition for inclusion or incorporation by reference therein.

2.27.

Board Approval . The Board of Directors of the Corporation, by unanimous written consent or by resolutions duly adopted by unanimous vote of those voting at a meeting duly called and held and not subsequently rescinded or modified in any way (the “ Corporation Board Approval ”), has duly authorized (a) this Agreement, the Merger and the transactions contemplated hereby and thereby, (b) an amendment to the articles of incorporation of the Corporation, and (c) the appointment of certain directors to the Corporation Board of Directors as set forth on Schedule 1.7(a) attached hereto. The Corporation Board Approval constitutes approval of this Agreement and the Merger for purposes of Sections 607.0821 and 607.1103 of the FBCA Article II of the by-laws of the Corporation.

2.28.

Shareholders' Approval . On or prior to the Closing Date and after the Restructuring has been consummated, the shareholders of the Corporation will approve in accordance with the FBCA by resolutions duly adopted by a written consent or a vote of a majority of the Corporation's shareholders entitled to vote at a meeting duly called and held and not subsequently rescinded or modified in any way this Agreement, the Merger and the transactions contemplated hereby and thereby (the “ Corporation Shareholders' Approval ”).

2.29.

Banks . (i) the name of each bank, trust company or other financial institution and stock or other broker with which the Corporation has an account, credit line or safe deposit box or vault, (ii) the names of all persons authorized to draw thereon or to have access to any safe deposit box or vault, (iii) the purpose of each such account, safe deposit box or vault, and (iv) the names of all persons authorized by proxies, powers of attorney or other like instrument to act on behalf of the Corporation in matters concerning any of its business or affairs is set forth on Schedule 2.29 attached hereto. No such proxies, powers of attorney or other like instruments are irrevocable.

2.30.

Disclosure . Neither this Agreement nor any of the Contracts, exhibits, attachments, written statements, documents, certificates or other items prepared for or supplied to the Purchaser by or on behalf of the Corporation or the Sellers with respect to the transactions contemplated hereby contains any untrue statement of a material fact or omits a material fact necessary to make each statement contained herein or therein not misleading. There is no fact which the Sellers or the Corporation has not disclosed to the Purchaser herein and of which the Sellers or the Corporation, or any of their respective officers, directors or executive employees is aware which could reasonably be anticipated to have a Material Adverse Effect on the Corporation or the ability of the Purchaser to continue the businesses of the Corporation in the same manner as the Corporation conducted its business prior to the Closing Date.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

The Purchaser represents and warrants to the Sellers and the Corporation as follows as of the date hereof and as of the Closing Date:

3.1.

Corporate Organization, Etc . The Purchaser is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation with full corporate power and authority to carryon its business as it is now being conducted and to own, operate and lease its properties and assets. The Purchaser is duly qualified or licensed to do business and is in corporate and Tax good standing in every jurisdiction in which the conduct of its business, the ownership or lease of its properties, require it to be so qualified or licensed.

3.2.

Authorization, Etc . The Purchaser has full power and authority to enter into this Agreement and the agreements contemplated hereby to which the Purchaser is a party and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and all other agreements and transactions contemplated hereby have been duly authorized by the Board of Directors and prior to the Closing will be authorized by the shareholders of the Purchaser and no other corporate proceedings on its part are necessary to authorize this Agreement and the agreements contemplated hereby and the transactions contemplated hereby and thereby. This Agreement and all other agreements contemplated hereby to be entered into by the Purchaser each constitutes a legal, valid and binding obligation of the Purchaser enforceable against the Purchaser in accordance with its terms.

3.3.

No Violation . Except as set forth in Schedule 3.3 attached hereto, the execution, delivery and performance by the Purchaser of this Agreement, and all other agreements contemplated hereby, and the fulfillment of and compliance with the respective terms hereof and thereof by the Purchaser, do not and will not (a) conflict with or result in a breach of the terms,

conditions or provisions of, (b) constitute a default or event of default under (whether with or without due notice, the passage of time or both), (c) result in a violation of, or (d) require any authorization, consent, approval, exemption or other action by, or notice to, or filing with any third party or Authority pursuant to, the charter or bylaws of the Purchaser or any applicable

Regulation, Order or Contract to which the Purchaser or its properties are subject. The Purchaser has complied with all applicable Regulations and Orders in connection with its execution, delivery and performance of this Agreement, the agreements contemplated hereby and the transactions contemplated hereby and thereby.

3.4.

Investment Intent . The Purchaser is purchasing the Shares for investment purposes and not with a view to distribution thereof and agrees that it will not make any sale, transfer or other disposition of the Shares in violation of any applicable securities law.

3.5.

Capitalization . The authorized, issued and outstanding capital stock, Options, and securities that are convertible into, or exchangeable for, capital stock of the Purchaser on a fully diluted basis as of the date hereof, and without giving effect to any of the transactions contemplated hereby, are held beneficially and of record by the Persons as set forth in Schedule 3.5(a) attached hereto. The Purchaser does not have any Contracts containing any

profit participation features, stock appreciation rights or phantom stock options, or similar Contracts that allow any Person to participate in the equity of the Purchaser except as set forth on Schedule 3.5(a) attached hereto. The Purchaser is not subject to any obligation or Contract (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital stock or any Options. All of the outstanding shares of the Purchaser's capital stock are validly issued, fully paid and non-assessable. There are no shares of capital stock of the Purchaser held in the treasury of the Purchaser and no shares of capital stock of the Purchaser are currently reserved for issuance for any purpose or upon the occurrence of any event or condition. There are no existing Contracts or Options between a shareholder of the Purchaser, on the one hand, and any other Person, on the other hand, regarding the Purchaser's capital stock. Except as set forth in Schedule 3.5(b) attached hereto, there are no Contracts between or among any of the Purchaser's shareholders or any other Persons that are binding upon the Purchaser with respect to the voting, transfer, encumbrance of the Purchaser's capital stock or Options to acquire capital stock or securities that are exchangeable or convertible into capital stock of the Purchaser or with respect to any aspect of Purchaser's governance or dividends or distributions. The stock record books of the Purchaser that have been delivered to the Purchaser for inspection prior to the date hereof are complete and correct in all material respects. As of the date hereof, the authorized capital stock of the Purchaser consists solely of 100,000,000 shares of the Purchaser Common Stock, of which 100,000,000 shares of the Purchaser Common Stock are currently issued and outstanding. Prior to the Closing Date, Tamborine Majority Shareholder pursuant to Section 5.14 shall cause 94,000,000 shares of issued and outstanding Purchaser Common Stock to be forfeited and returned to the treasury of the Purchaser and cancelled, so that at the Closing Date and prior to issuance of the Merger Consideration, not more than 6,000,000 shares of the Purchaser Common Stock shall be issued and outstanding. At the Effective Time, assuming (i) the maximum number of shares have been sold pursuant to the Private Placement and (ii) 94,000,000 shares of issued and outstanding Purchaser Common Stock has been forfeited to the Purchaser pursuant to Section 5.14, the authorized capital stock of the Purchaser shall consist of 100,000,000 shares of the Purchaser Common Stock of which 29,050,000 shares of the Purchaser Common Stock shall be issued and outstanding and 1,000,000 shares of the Purchaser Common Stock will be subject to a stock option plan to be adopted and implemented by the Purchaser as soon as practicable after the Closing Date (the “ Purchaser Stock Option Plan ”). All offers and sales of capital stock of the Purchaser prior to the date of this Agreement were, at all relevant times, duly registered or exempt from the registration requirements of the Securities Act and were duly registered or subject to an available exemption from the registration requirements of the applicable state securities or blue sky laws, as the case may be. The shares of the Purchaser Common Stock comprising the Merger Consideration (excluding, without limitation, any shares issuable pursuant to the Purchaser Stock Option Plan) will be issued in material compliance (assuming each recipient of the Purchaser Common Stock as Merger Consideration is an “accredited investor” and has otherwise complied in all material respects with the applicable state and federal securities laws) with the registration and qualification requirements of all applicable state and federal securities laws.

3.6.

Books and Records . The corporate minute books of the Purchaser that have been made available to the Purchaser for inspection are complete and correct in all material respects and contain all of the proceedings of the shareholders and directors of the Purchaser. A true and complete list of the incumbent directors and officers of the Purchaser is set forth in Schedule 3.6 attached hereto. Neither the Purchaser nor Acquisition has any of its records, systems, controls,

data or information recorded, stored, maintained, operated or otherwise wholly or partly dependent upon or held by any means (including any electronic, mechanical or photographic process, whether computerized or not) which (including all means of access thereto and therefrom) are not under the exclusive ownership and direct control of the Purchaser or a wholly-owned Subsidiary.

3.7.

Acquisition . Acquisition is the only Subsidiary of the Purchaser, was formed solely for the purpose of engaging in the transactions contemplated hereby, has engaged in no other business activities and has conducted its operations only as contemplated hereby. As of the date hereof, the Purchaser does not have any joint ventures.

3.8.

Operations of Purchaser and Acquisition . Since December 31, 2004, the Purchaser (i) has not engaged in any business activities of any type whatsoever, except with respect to its maintenance as a public company and except as in furtherance of this Agreement and the transactions contemplated hereby, (ii) does not own any properties or other assets, (iii) has less than $100 of cash (or cash equivalents) and has no material liabilities, whether fixed, accrued or contingent, and (iv) is not a party to or bound by any contract, commitment, agreement or understanding (whether written or oral), except for this Agreement, any subscription or other documents in connection with the Private Placement. The Purchaser and Acquisition do not have any paid employees. At the Effective Time, the Purchaser shall have no liabilities other than up to an aggregate amount equal to $100,000 in fees, expenses or disbursements incurred in connection with this Agreement, the Merger, the Private Placement and the consummation of the transactions contemplated hereby and thereby.

3.9

Financial Condition and Reports.

(a)

Attached as Schedule 3.9(a) attached hereto are the Purchaser's Form 15c2-11, which presents fairly the financial condition, assets, liabilities, and shareholders' equity of the Purchaser as of the date thereof; each such statement of income and statement of retained earnings presents fairly and accurately the results of operations of the Purchaser for the period indicated; and each such statement of changes in financial position presents fairly and accurately the information purported to be shown therein.

(b)

As of the date hereof and except as set forth in the Purchaser's Form 15c2-11, Section 3.8, the Purchaser and Acquisition have no liabilities or obligations of any nature (whether asserted, unasserted, accrued, unaccrued, absolute, fixed, contingent, liquidated, unliquidated, due, to become due, or otherwise), and there is no fact, condition or circumstance which could reasonably be expected to result in such liabilities or obligations. The Purchaser and Acquisition have filed all necessary federal, state and foreign income and franchise Tax Returns due prior to the date of this Agreement and have paid all Taxes shown as due thereon. There are no unpaid Taxes claimed to be due by the Taxing Authority of any jurisdiction, and the officers of the Purchaser know of no basis for such claim. The properties and assets of the Purchaser and Acquisition are owned by the Purchaser free and clear of all Liens.

(c)

The Purchaser has filed all forms, reports and documents with the SEC and applicable state laws and regulations required to be filed by it pursuant to the federal and state securities laws, and SEC rules and regulations thereunder, and all such forms, reports and

documents, as amended, filed with the SEC or any secretary of state have complied with all applicable requirements of the federal and state securities laws and the SEC rules and regulations promulgated thereunder.

3.10.

Contracts . As of the Closing Date, the Purchaser and Acquisition are only party to the Contracts set forth in Schedule 3.10 attached hereto. Each of the Purchaser and Acquisition has performed in all material respects all obligations required to be performed by it and is not in default in any respect under or in breach of nor in receipt of any Claim of default or breach under any material Contract to which the Purchaser or Acquisition is subject (including without limitation all performance bonds, warranty obligations or otherwise); no event has occurred which with the passage of time or the giving of notice or both would result in a default, breach or event of non-compliance under any material Contract to which the Purchaser or Acquisition is subject (including without limitation all performance bonds, warranty obligations or otherwise); each of the Purchaser and Acquisition does not have any present expectation or intention of not fully performing all such obligations; each of the Purchaser and Acquisition does not have any knowledge of any breach or anticipated breach by the other Persons to any such Contract to which it is a party. The Purchaser and Acquisition have delivered to the Corporation true and complete copies of all the Contracts and documents listed in the schedules to this Agreement.

3.11.

Title and Related Matters .

(a)

Except as set forth in Schedule 3.11(a) attached hereto, the Purchaser has good and marketable title to all real and personal, tangible and intangible, property and other assets reflected in the Financial Statements or acquired after the Financial Statement Date, free and clear of all Liens, except Permitted Liens. All properties used in the Purchaser's business operations for the periods covered by the Financial Statements are reflected in the Financial Statements, except as to those assets that are leased. Schedule 3.11 (b) attached hereto sets forth a complete and accurate summary of all leased assets that have annual rental payments in excess of $12,000, describing the expiration date of such lease, the name of the lessor, the annual rental payment and whether a consent is required from the lessor to consummate the transactions contemplated hereby.

(b)

All the Purchaser's leases are in full force and effect, and valid and enforceable in accordance with their respective terms. The Purchaser has not received any notice of any, and there exists no event of default or event which constitutes or would constitute (with notice or lapse of time or both) a default by the Purchaser or any other Person under any lease. All rent and other amounts due and payable with respect to the Purchaser's leases have been paid through the date of this Agreement and all rent and other amounts due and payable with respect to the Purchaser's leases that are due and payable on or prior to the Closing Date will have been paid prior to the Closing Date. All lessors under the Purchaser's real property leases have consented (where such consent is necessary) or prior to the Closing will have consented (where such consent is necessary) to the consummation of the transactions contemplated by this Agreement without requiring material modification in the rights or obligations thereunder. The Purchaser has received no written notice that the landlord with respect to any real property lease would refuse to renew such lease upon expiration of the period thereof upon substantially the same terms, except for rent increases consistent with past experience or market rentals.

(c) None of the assets belonging to the Purchaser is or will be on the Closing Date subject to any (i) Contracts of sale or lease except as set forth in Schedule 3.11(c) attached hereto, except Contracts for the sale of inventory in the ordinary and regular course of business

or (ii) Liens, except for Permitted Liens and the Liens set forth in Schedule 3.11(d) attached hereto.

3.12. Litigation . Schedule 3. 12 attached hereto sets forth a true and complete list of all Claims and Orders involving the Purchaser since May 28, 2004. Except as set forth in Schedule 3.12 attached hereto, to the best knowledge of the Purchaser, there is no Claim or Order

threatened against the Purchaser nor is there any reasonable basis therefor. Except as set forth on Schedule 3.12 attached hereto, the Purchaser is fully insured with respect to each of the matters set forth on Schedule 3.12 attached hereto and the Purchaser has not received any opinion or a memorandum or advice from legal counsel to the effect that it is exposed, from a legal standpoint, to any liability or obligations which could have an adverse effect in excess of $10,000.

3.13.

Tax Matters .

(a)

Tax Returns . The Purchaser has timely filed or caused to be timely filed with the appropriate taxing authorities all Tax Returns that are required to be filed by, or with respect to, the Purchaser on or prior to the Closing Date. Such Tax Returns have been correct and complete in all material respects.

(b)

Payment of Taxes . All Taxes and Tax liabilities due by or with respect to the income, assets or operations of the Purchaser for all taxable years or other taxable periods that end on or before the Closing Date and, with respect to any taxable year or other taxable period beginning on or before and ending after the Closing Date, the portion of such taxable year or period ending on and including the Closing Date (“ Pre-Closing Period ”) have been timely paid or will be timely paid in full on or prior to the Closing Date or accrued and adequately disclosed and fully provided for in accordance with GAAP on the Financial Statements.

(c)

Except as set forth in Schedule 3.13(c) attached hereto,

(i)

the Purchaser has not been the subject of an audit or other examination of Taxes by the tax authorities of any nation, state or locality; (ii) no such audit is contemplated or pending; and (iii) the Purchaser has not received any written notices from any taxing authority relating to any issue which could affect the Tax liability of the Purchaser;

(ii)

the Purchaser, as of the Closing Date, (A) has not entered into an agreement or waiver or been requested to enter into an agreement or waiver extending any statute of limitations relating to the payment or collection of Taxes of the Purchaser that has not expired, or (B) is not presently contesting the Tax liability of the Purchaser before any court, tribunal or agency;

(iii)

the Purchaser has not been included in any “consolidated”, “unitary” or “combined” Tax Return provided for under the law of the United States, any foreign jurisdiction or any state or locality with respect to Taxes for any taxable period for which the

statute of limitations has not expired (other than a group of which the Purchaser and/or its subsidiaries are the only members);

(iv)

all Taxes which the Purchaser is (or was) required by law to withhold or collect in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party have been duly withheld or collected, and have been timely paid over to the proper authorities to the extent due and payable;

(v)

no written claim has ever been made by any taxing authority in a jurisdiction where the Purchaser does not file Tax Returns that the Purchaser is or may be subject to taxation by that jurisdiction;

(vi)

there are no tax sharing, allocation, indemnification or similar agreements in effect as between the Purchaser or any predecessor or affiliate thereof and any other party under which the Purchaser or the Corporation could be liable for any Taxes or other claims of any party after the Closing Date;

(vii)

the Purchaser has not applied for, been granted, or agreed to any accounting method change for which it will be required to take into account any adjustment under Section 481 of the Code or any similar provision of the Code or the corresponding tax laws of any nation, state or locality;

(viii) there are no deferred intercompany transactions between the Purchaser and any of its subsidiaries and there is no excess loss account (within the meaning of Treasury Regulations Section 1.1502-19 with respect to the stock of the Purchaser) which will or may result in the recognition of income upon the consummation of the transaction contemplated by this Agreement;

(ix) no indebtedness of the Purchaser consists of “corporate acquisition indebtedness” within the meaning of Section 279 of the Code; and

(x) the Purchaser has not been a “United States real property holding corporation” within the meaning of Section 897(c)(2) of the Code at any time during the five year period ending on the Closing Date; and

(xi) the Purchaser is not a party to any agreement that would require the Purchaser or any affiliate thereof to make any payment that would constitute an “excess parachute payment” for purposes of Sections 280G and 4999 of the Code or that would not be deductible pursuant to Section 162(m) of the Code.

3.14.

Compliance with Law and Certifications.

(a)

The Purchaser has operated in compliance with regard to its operations, practices, real property, plants, structures, machinery, equipment and other property, employees, products and services and all other aspects of its business, with all applicable Regulations and Orders, including, without limitation, all Regulations relating to the safe conduct of business, environmental protection, quality and labeling, antitrust, consumer protection, equal opportunity,

discrimination, health, sanitation, fire, zoning, building and occupational safety. There are no Claims pending, or threatened, nor has Purchaser received any written notice, regarding any violations of any Regulations or Orders enforced by any Authority claiming jurisdiction over the Purchaser.

(b)

The Purchaser holds all material registrations, accreditations and other certifications required for the conduct of its business by any Authority or trade group and the Purchaser has operated in compliance with the terms and conditions of all such registrations,

accreditations and certifications. The Purchaser has not received any notice alleging that it has failed to hold any such material registration, accreditation or other certification.

3.15.

Intellectual Property . The Purchaser does not own any Intellectual Property.

3.16.

Dealings with Affiliates . Schedule 3.16 attached hereto sets forth a complete and accurate list and description of the economic terms, including the parties, of all Contracts to which the Purchaser is, will be or has been a party, at any time from May 28, 2004 to the Closing Date, and to which anyone or more of (a) the Purchaser's Affiliates, or (b) any Person in which

an Affiliate of the Purchaser has, directly or indirectly, made an Investment, is also a party. Since May 28, 2004, the Purchaser has not made any payments, loaned or borrowed any funds or property or made any credit arrangement or accommodation with any Affiliate of the Purchaser except for the payment of employee salaries and director compensation in the ordinary course of business.

3.17.

Insurance . The Purchaser has had, and through the Closing Date will have, Policies in full force and effect that provide for coverages that are usual and customary as to amount and scope in the business of the Purchaser. All of the Policies have been in full force and effect, all premiums with respect thereto covering all periods up to and including the Closing Date have been paid or accrued therefor, and no notice of cancellation or termination has been received with respect to any Policy. Schedule 3.17 attached hereto sets forth a complete and accurate summary of all Policies, including name of insurer, the types, dates and amounts of coverage, any material coverage exclusion and a statement of the Claims paid out, and Claims pending, as to each Policy for each of the last three (3) full fiscal years and any interim period. The Purchaser has not breached or otherwise failed to perform in any material respect its obligations under any of the Policies nor has the Purchaser received any adverse notice or communication from any of the insurers party to the Policies with respect to any such alleged breach or failure in connection with any of the Policies. All Policies are sufficient for compliance with all Regulations and all Contracts to which the Purchaser is subject, are to the Purchaser's knowledge valid, outstanding, collectible and enforceable policies, and will not in any way be affected by, or terminate or lapse by reason of, the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby. Except as set forth in Schedule 3.17 attached hereto, all of the Policies remain in full force and effect through thirty (30) days after the Closing Date. The Purchaser has not during the last five (5) years been refused any insurance with respect to its assets or operations, nor has coverage ever been limited by any insurance carrier to which the Purchaser has applied for any Policy or with which it has carried a Policy.

3.18.

Permits . The Permits listed on Schedule 3.18 attached hereto are the only Permits that have been required for the Purchaser to conduct its business in accordance with applicable

Regulations and Orders of any Authority. The Purchaser has duly and validly held all such Permits, and each such Permit has been in full force and effect and, to the best of the knowledge of the Purchaser, no suspension or cancellation of any such Permit is threatened and there is no basis for believing that such Permit will not be renewable upon expiration.

3.19.

Improper and Other Payments . Except as set forth on Schedule 3.19 attached hereto, neither the Purchaser nor any of its Subsidiaries, nor any director, officer, agent, representative, employee or other person acting on behalf of the Purchaser or any of its Subsidiaries has, directly or indirectly, in the course of its actions for, or on behalf of, the Purchaser or any of its Subsidiaries, (a) made, paid or received any unlawful bribes, rebates, payoffs, influence payments, kickbacks or other unlawful payments to or from any Person or Authority, (b) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity, (c) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds, and (d) made any improper foreign payment (as defined in the Foreign Corrupt Practices Act of 1977, as amended). The internal accounting controls of the Purchaser are believed by the Purchaser's management to be adequate to detect any of the foregoing under current circumstances.

3.20.

Private Placement Memorandum . None of the information supplied or to be supplied by or on behalf of each of the Purchaser and Acquisition for inclusion or incorporation by reference in the Private Placement Memorandum will contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided that no representation or warranty is made by each of the Purchaser and Acquisition with respect to statements made or incorporated by reference in the Private Placement Memorandum based on information by the Corporation or any of its Affiliates or Subsidiaries (including the entities included in the Restructuring pursuant to Section 5.17) for inclusion or incorporation by reference therein. The Private Placement Memorandum and any other documents to be filed with the SEC or any other Authority in connection with the Merger and other transactions contemplated hereby will comply as to form in all material respects with the provisions of the Securities Act and the Exchange Act and the rules and regulations thereunder.

3.21.

Board Approval . The Board of Directors of the Purchaser, by unanimous written consent or by resolutions duly adopted by unanimous vote of those voting at a meeting duly called and held and not subsequently rescinded or modified in any way (the “ Purchaser Board Approval ”), has duly authorized (a) this Agreement, the Merger and the transactions contemplated hereby and thereby, (b) an amendment to the articles of incorporation of the Purchaser, (i) amending its corporate purpose, and (ii) changing its corporate name, and ( c) the appointment of certain directors to Purchaser Board of Directors as set forth on Schedule 1.7(a) attached hereto. The Purchaser Board Approval constitutes approval of this Agreement and the Merger for purposes of Sections 79-4-8.21 and 79-4-11.02 of the Mississippi Business Corporation Act (the “ MBCA ”) and Article 3 of the by-laws of the Purchaser. Each of Acquisition's Board of Directors and shareholders has approved this Agreement and the Merger for purposes of Sections 607.0821 and 607.1103 of the FBCA and Article II of the by-laws of Acquisition.

3.22.

Purchaser Shareholders' Approval . On or prior to the Closing Date, the shareholders of the Purchaser will approve in accordance with the MBCA by resolutions duly adopted by a written consent or a vote of a majority of the Purchaser's shareholders entitled to vote at a meeting duly called and held and not subsequently rescinded or modified in any way (i) this Agreement, the Merger and the transactions contemplated hereby and thereby, (ii) an amendment to the articles of incorporation of the Purchaser (a) amending its corporate purpose, (b) changing its corporate name, and (c) increasing the Purchaser's Board of Directors to five (5) members from three (3), and (iii) the appointment of certain directors to the Purchaser's Board of Directors as set forth on Schedule 1.7(a) attached hereto (the “ Purchaser Shareholders' Approval ”).

3.23.

Banks . (i) the name of each bank, trust company or other financial institution and stock or other broker with which the Purchaser has an account, credit line or safe deposit box or vault, (ii) the names of all persons authorized to draw thereon or to have access to any safe deposit box or vault, (iii) the purpose of each such account, safe deposit box or vault, and (iv) the names of all persons authorized by proxies, powers of attorney or other like instrument to act on behalf of the Purchaser in matters concerning any of its business or affairs is set forth on Schedule 3.23 attached hereto. No such proxies, powers of attorney or other like instruments are irrevocable.

3.24.

Absence of Certain Changes . Since the Financial Statement Date, there has not been any (a) Material Adverse Change in the business, operations, properties, assets, condition (financial or otherwise), results, plans, strategies or prospects of the Purchaser; (b) damage, destruction or loss, whether covered by insurance or not, having a cost of $100,000 or more, with regard to the Purchaser's property and business; (c) declaration, setting aside or payment of any dividend or distribution (whether in cash, stock or property) in respect of the Purchaser's capital stock, Options or securities convertible into or exchangeable for capital stock; (d) redemption or other acquisition of capital stock, Options or securities convertible into or exchangeable for capital stock by the Purchaser or any payment of any stock appreciation right or other profit participation; (e) increase in the compensation payable to or to become payable by the Purchaser to its officers or employees or any adoption of or increase in any bonus, insurance, pension or other employee benefit plan, payment or arrangement made to, for or with any such officers or employees or any Affiliate of the Purchaser; (f) entry into any material Contract not in the ordinary course of business, including without limitation, any borrowing from any new lender or in excess of the existing credit limits or capital expenditure; (g) change by the Purchaser in accounting methods or principles or any write-down, write-up or revaluation of any assets of the Purchaser except depreciation accounted for in the ordinary course of business and write downs of inventory which reflect the lower of cost or market and which are in the ordinary course of business; (h) failure to promptly pay and discharge current liabilities or agree with any party to extend the payment of any current liability; (i) Lien placed on any property of the Purchaser other than Permitted Liens; (j) sale, assignment, transfer, lease, license or otherwise placement of a Lien on any of the Purchaser's tangible assets, except in the ordinary course of business consistent with past practice, or canceled any material debts or Claims; (k) sale, assignment, transfer, lease, license or otherwise placement of a Lien on any Intellectual Property rights or other intangible assets, disclosure of any material confidential information to any Person or abandoned or permitted to lapse any Intellectual Property rights;

(1) commitment to make any charitable contributions or pledges exceeding in the aggregate $25,000; or (m) agreement, whether orally or in writing, to do any of the foregoing.

3.25.

Disclosure . Neither this Agreement nor any of the Contracts, exhibits, attachments, written statements, documents, certificates or other items prepared for or supplied to the Purchaser by or on behalf of the Purchaser with respect to the transactions contemplated hereby contains any untrue statement of a material fact or omits a material fact necessary to make each statement contained herein or therein not misleading. There is no fact which the Purchaser has not disclosed to the Corporation herein and of which the Purchaser, or any of their respective officers, directors or executive employees is aware which could reasonably be anticipated to have a Material Adverse Effect on Purchaser or the ability of Purchaser to continue the businesses of the Purchaser in the same manner as the Purchaser conducted its business prior to the Closing Date.

ARTICLE IV

COVENANTS OF THE PURCHASER, ACQUISITION AND THE CORPORATION

4.1.

Covenants of the Corporation . Until the Closing Date, except as otherwise consented to or approved by the Purchaser in writing or as necessary or beneficial to effect the Restructuring, the Corporation and the Sellers agree that they shall act, or refrain from acting where required hereinafter, to comply (and in the case of the Sellers, to cause the Corporation to comply) with the following:

(a)

Regular Course of Business . The Corporation shall (a) operate its business diligently and in good faith, consistent with past management practices; (b) maintain all of its properties in customary repair, order and condition, reasonable wear and tear excepted; (c) maintain (except for expiration due to lapse of time) all leases and Contracts in effect without change except as expressly provided herein; (d) comply with the provisions of all Regulations and Orders applicable to the Corporation and the conduct of its business; (e) not cancel, release, waive or compromise any debt, Claim or right in its favor having a value in excess of $5,000 other than in connection with returns of inventory for credit or replacement in the ordinary course of business; (f) not alter the rate or basis of compensation of any of its officers, directors or employees other than in the ordinary course of business consistent with past practice and immaterial in amount; (g) maintain its books, accounts and records in accordance with past custom and practice as used in the preparation of the Financial Statements; (h) maintain in full force and effect the existence of all Intellectual Property Rights; (i) use its reasonable best efforts to preserve the goodwill and organization of its business and its relationships with its customers, suppliers, employees and other Persons having business relations with it; G) not take or omit to take any action that would require disclosure under Article II, or that would otherwise result in a breach of any of the representations, warranties or covenants made by the Corporation in this Agreement or in any of the agreements contemplated hereby; and (k) not take any action or omit to take any action which act or omission would reasonably be anticipated to have a Material Adverse Effect.

(b)

Capital Changes . The Corporation shall not issue or sell any shares of its capital stock or issue or sell any securities convertible or exchangeable into, or Options to

subscribe for, any shares of its capital stock and the Corporation shall not pledge or otherwise encumber any shares of its capital stock. The Corporation shall not redeem, retire, purchase or otherwise acquire directly or indirectly any of its issued and outstanding capital stock, Options or any outstanding rights or securities exercisable or exchangeable for or convertible into its capital stock. The Corporation shall not declare, pay or set aside for payment any dividend or other distribution in respect of its capital stock, Options or any outstanding rights or securities exercisable or exchangeable for or convertible into its capital stock. The Corporation shall not issue any additional Options or enter into any Contracts containing any profit participation features, stock appreciation rights or phantom stock option plans, or similar Contracts that allows any Person to participate in the equity of the Corporation. The Corporation shall not amend its charter or bylaws or merge into or consolidate with any other Person or change the character of its business. In addition, the Corporation shall not allow the transfer of any shares of its capital stock on the stock transfer ledger or other books and records.

(c)

Capital and Other Expenditures . The Corporation shall not make any Investments or capital expenditures, or commitments with respect thereto, except as provided in its budget set forth in Schedule 2.18 attached hereto. The Corporation shall not make any loan or advance to any Person (other than accounts receivable made in the ordinary course of business) and shall collect in full any amounts outstanding now due from any Affiliate. The Corporation shall not make any charitable or other contributions to any Person nor shall it make any commitments therefor.

(d)

Borrowing . The Corporation shall not incur, assume or Guarantee any Indebtedness not reflected on the Financial Statements except in the ordinary course of business under existing credit facilities as such credit facilities exist on the date hereof.

(e)

Other Commitments . Except as set forth in this Agreement, incurred or transacted in the ordinary course of business, or permitted in writing by the Purchaser, the Corporation shall not enter into any material Contract or transaction or make any commitment or incur any material obligation or liability (including entering into any real property leases).

(f)

Interim Financial Information and Audit . The Corporation shall supply the Purchaser with unaudited monthly operating statements within thirty (30) days after the end of each month ending between the date hereof and the Closing Date, certified by the Corporation's chief financial officer as having been prepared in accordance with procedures employed by the Corporation in preparing prior monthly operating statements necessary to fairly present the Corporation's financial position, results of operations and changes in financial position at and for such periods.

(g)

Full Access and Disclosure . The Corporation shall afford to the Purchaser and its counsel, accountants, agents and other authorized representatives and to financial institutions specified by the Purchaser reasonable access during business hours to the Corporation's plants, properties, books and records in order that the Purchaser may have full opportunity to make such reasonable investigations as it shall desire to make of the affairs of the Corporation. The Corporation shall cause its officers, employees, counsel and auditors to furnish such additional financial and operating data and other information as the Purchaser shall from time to time reasonably request including, without limitation, any internal control

recommendations made by its independent auditors in connection with any audit of the Corporation. From time to time prior to the Closing Date, the Corporation shall promptly supplement or amend information previously delivered to the Purchaser with respect to any matter hereafter arising which, if existing or occurring at the date of this Agreement, would have been required to be set forth or disclosed herein; provided, however, that such supplemental information shall not be deemed to be an amendment to any schedule hereto and shall not change the risk allocation of this Agreement between the Purchaser and the Sellers.

(h)

Tax Matters . The Corporation shall not make or change any election, file a Tax Return not in accordance with past practice, change an annual accounting period, adopt or

change any accounting method, file any amended Tax Return, enter into any closing agreement, settle any Tax Claim or assessment relating to the Corporation or any of its Subsidiaries, surrender any right to claim a refund of Taxes, consent to any extension or waiver of the limitation period applicable to any Tax Claim or assessment relating to the Corporation, or any of its Subsidiaries, or take any other similar action, or omit to take any action relating to the filing of any Tax Return or the payment of any Tax, if such election, adoption, change, amendment, Contract, settlement, surrender, consent or other action or omission, would have the effect of increasing the present or future Tax liability or decreasing any present or future Tax asset of the Corporation.

(i)

Fulfillment of Conditions Precedent . The Corporation and the Sellers shall use their reasonable best efforts to obtain at the Corporation's expense all such waivers, Permits, consents, approvals or other authorizations from third Persons and Authorities, and to do all things as may be necessary or desirable in connection with transactions contemplated by this Agreement.

(j)

Satisfaction of Closing Conditions . Except as required by applicable law, the Corporation shall not, and shall not permit any of its Subsidiaries to, take any action that would, or would reasonably be expected to, result in (i) any of the conditions to the Merger set forth in Article VI not being satisfied or (ii) a material delay in the satisfaction of such conditions.

(k)

Tax-Free Qualification . The Corporation shall use its reasonable best efforts not to, and shall use its reasonable best efforts not to permit any of its respective Subsidiaries to, take any action that would prevent or impede the Merger from qualifying as a reorganization under Section 368 of the Code.

4.2.

Covenants of the Purchaser . Until the Closing Date, except as otherwise consented to or approved by the Corporation in writing or as necessary or beneficial to effect the Restructuring, the Purchaser and Acquisition agree that they shall act, or refrain from acting where required hereinafter, to comply with the following:

(a)

Regular Course of Business . The Purchaser shall (a) operate its business diligently and in good faith, consistent with past management practices; (b) maintain all of its properties in customary repair, order and condition, reasonable wear and tear excepted; (c) maintain (except for expiration due to lapse of time) all leases and Contracts in effect without change except as expressly provided herein; (d) comply with the provisions of all Regulations

and Orders applicable to the Purchaser and the conduct of its business; (e) not cancel, release, waive or compromise any debt, Claim or right in its favor having a value in excess of $5,000 other than in connection with returns of inventory for credit or replacement in the ordinary course of business; (f) not alter the rate or basis of compensation of any of its officers, directors or employees other than in the ordinary course of business consistent with past practice and immaterial in amount; (g) use its reasonable best efforts to preserve the goodwill and organization of its business and its relationships with its customers, suppliers, employees and other Persons having business relations with it; (h) not take or omit to take any action that would require disclosure under Article III, or that would otherwise result in a breach of any of the representations, warranties or covenants made by the Purchaser in this Agreement or in any of the agreements contemplated hereby; and (i) not take any action or omit to take any action which act or omission would reasonably be anticipated to have a Material Adverse Effect.

(b)

Capital Changes . Other than the shares of the Purchaser Common Stock to be sold in the Private Placement, the Purchaser shall not issue or sell any shares of its capital stock or issue or sell any securities convertible or exchangeable into, or Options to subscribe for, any shares of its capital stock and the Purchaser shall not pledge or otherwise encumber any shares of its capital stock. Other than the 94,000,000 shares of the Purchaser Common Stock to be forfeited by the Tamborine Majority Shareholder pursuant to Section 5.14, the Purchaser shall not redeem, retire, purchase or otherwise acquire directly or indirectly any of its issued and outstanding capital stock, Options or any outstanding rights or securities exercisable or exchangeable for or convertible into its capital stock. The Purchaser shall not declare, payor set aside for payment any dividend or other distribution in respect of its capital stock, Options or any outstanding rights or securities exercisable or exchangeable for or convertible into its capital stock. The Purchaser shall not issue any additional Options or enter into any Contracts containing any profit participation features, stock appreciation rights or phantom stock option plans, or similar Contracts that allows any Person to participate in the equity of the Purchaser. The Purchaser shall not amend its charter or bylaws or merge into or consolidate with any other Person or change the character of its business. In addition, other than the shares of the Purchaser Common Stock to be sold in the Private Placement, the Purchaser shall not allow the transfer of any shares of its capital stock on the stock transfer ledger or other books and records.

(c)

Capital and Other Expenditures . The Purchaser shall not make any Investments or capital expenditures, or commitments with respect thereto. The Purchaser shall not make any loan or advance to any Person (other than accounts receivable made in the ordinary course of business) and shall collect in full any amounts outstanding now due from any Affiliate. The Purchaser shall not make any charitable or other contributions to any Person nor shall it make any commitments therefor.

(d)

Borrowing . The Purchaser shall not incur, assume or Guarantee any Indebtedness not reflected on the Financial Statements except in the ordinary course of business under existing credit facilities as such credit facilities exist on the date hereof.

(e)

Other Commitments . Except as set forth in this Agreement, incurred or transacted in the ordinary course of business, or permitted in writing by the Purchaser, the Purchaser shall not enter into any material Contract or transaction or make any commitment or incur any material obligation or liability (including entering into any real property leases).

(f)

Interim Financial Information and Audit . The Purchaser shall supply the Corporation with unaudited monthly operating statements within thirty (30) days after the end of each month ending between the date hereof and the Closing Date, certified by the Purchaser's president or chief financial officer as having been prepared in accordance with procedures employed by the Corporation in preparing prior monthly operating statements necessary to fairly present the Purchaser's financial position, results of operations and changes in financial position at and for such periods.

(g)

Full Access and Disclosure . The Purchaser shall afford to the Corporation and its counsel, accountants, agents and other authorized representatives and to financial institutions specified by the Corporation reasonable access during business hours to the Corporation's plants, properties, books and records in order that the Corporation may have full opportunity to make such reasonable investigations as it shall desire to make of the affairs of the Purchaser. The Purchaser shall cause its officers, employees, counsel and auditors to furnish such additional financial and operating data and other information as the Corporation shall from time to time reasonably request including, without limitation, any internal control recommendations made by its independent auditors in connection with any audit of the Purchaser. From time to time prior to the Closing Date, the Purchaser shall promptly supplement or amend information previously delivered to the Purchaser with respect to any matter hereafter arising which, if existing or occurring at the date of this Agreement, would have been required to be set forth or disclosed herein; provided, however, that such supplemental information shall not be deemed to be an amendment to any schedule hereto and shall not change the risk allocation of this Agreement between the Purchaser and the Sellers.

(h)

Tax Matters . The Purchaser shall not make or change any election, change an annual accounting period, adopt or change any accounting method, file any amended Tax Return, enter into any closing agreement, settle any Tax Claim or assessment relating to the Purchaser or any of its Subsidiaries, surrender any right to claim a refund of Taxes, consent to any extension or waiver of the limitation period applicable to any Tax Claim or assessment relating to the Purchaser, or any of its Subsidiaries, or take any other similar action, or omit to take any action relating to the filing of any Tax Return or the payment of any Tax, if such election, adoption, change, amendment, Contract, settlement, surrender, consent or other action or omission, would have the effect of increasing the present or future Tax liability or decreasing any present or future Tax asset of the Purchaser.

(i)

Fulfillment of Conditions Precedent . The Purchaser shall use its reasonable best efforts to obtain at their expense all such waivers, Permits, consents, approvals or other authorizations from third Persons and Authorities, and to do all things as may be necessary or desirable in connection with transactions contemplated by this Agreement.

(j)

Satisfaction of Closing Conditions . Except as required by applicable law, the Purchaser shall not, and shall not permit any of its Subsidiaries to, take any action that would, or would reasonably be expected to, result in (i) any of the conditions to the Merger set forth in Article VII not being satisfied or (ii) a material delay in the satisfaction of such conditions.

(k)

Tax-Free Qualification . The Purchaser shall use its reasonable best efforts not to, and shall use its reasonable best efforts not to permit any of its respective

Subsidiaries to, take any action that would prevent or impede the Merger from qualifying as a reorganization under Section 368 of the Code.

ARTICLE V

ADDITIONAL AGREEMENTS

5.1.

Confidentiality . Except as may be required by lawful Order of an Authority of competent jurisdiction, each party agrees that each party and its representatives and its Affiliates and their representatives and advisors will hold in strict confidence all data and information obtained from the other party in connection with the transactions contemplated hereby, except any of the same which (a) was, is now, or becomes generally available to the public (but not as a result of a breach of any duty of confidentiality by which a party and its representatives and advisors arc bound); (b) was known to a party prior to its disclosure to such other as demonstrated by such party's written records; (c) is disclosed to a party by a third party not subject to any duty of confidentiality to the other party prior to its disclosure to such party by the other party, or (d) may be disclosed pursuant to Section 5.7. Each party will use such data and information solely for the specific purpose of evaluating the transactions contemplated hereby. If this Agreement is properly terminated, each party and its Affiliates and their representatives and advisors will promptly return to the other party or destroy all such data, information and other written material (including all copies thereof) which has been obtained by such party, and such party will make no further use whatsoever of any of such or the information and knowledge contained therein or derived therefrom. The provisions of this Section 5.1 shall supersede any confidentiality or similar Contract that may exist between the parties prior to the date hereof.

5.2.

Agreement to Defend . In the event any action, suit, proceeding or investigation is commenced, whether before or after the Closing Date, all the parties hereto agree to cooperate and use their best efforts to defend against and respond thereto.

5.3.

Further Assurances . Subject to the terms and conditions of this Agreement, the parties hereto shall use their best efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper or advisable under applicable Regulations and Orders to consummate and make effective as promptly as possible the transactions contemplated by this Agreement and the agreements contemplated hereby, and to cooperate with each other in connection with the foregoing, including without limitation using their best efforts (a) to obtain all necessary waivers, consents, and approvals from other parties to loan agreements, leases, mortgages and other Contracts; (b) to obtain all necessary Permits, consents, approvals and authorizations as are required to be obtained under any Regulation or Order; (c) to lift or rescind any injunction or restraining order or other Order adversely affecting the ability of the parties to consummate the transactions contemplated hereby; (d) to effect all necessary registrations and filings including, but not limited to, filings and submissions of information requested by Authorities; and (e) to fulfill all conditions to the obligations of the parties under this Agreement. Each of the Purchaser and the Corporation further covenants and agrees that it shall use its respective best efforts to prevent, with respect to a threatened or pending preliminary or permanent injunction or other Regulation or Order the entry, enactment or promulgation thereof, as the case may be.

5.4.

No Solicitation or Negotiation . The Purchaser, the Corporation and the Sellers shall not, and the Purchaser and the Corporation shall use their best efforts to ensure that its shareholders, and any of its and its shareholders' Affiliates, representatives, officers, employees, directors or agents shall not, directly or indirectly (a) submit, solicit, initiate, encourage or discuss any proposal or offer from any Person or enter into any Contract or accept any offer relating to or to consummate any (i) reorganization, liquidation, dissolution or recapitalization of the Purchaser or the Corporation, as the case may be; (ii) merger or consolidation involving the Purchaser or the Corporation, as the case may be; (iii) purchase or sale of any of the assets or capital stock, Options, stock appreciation rights, phantom stock options or other similar equity based participations (or any rights to acquire, or securities convertible into or exchangeable for, any such capital stock, Options, stock appreciation rights, phantom stock options or other such securities) of the Purchaser or the Corporation, as the case may be (other than a purchase or sale of inventory and worn-out or obsolete assets in the ordinary course of business consistent with past custom and practice and in accordance with the terms of this Agreement); (iv) similar transaction or business combination involving the Purchaser or the Corporation, as the case may be, or their assets; or (v) acquisition by the Purchaser or the Corporation, as the case may be, of other businesses, whether by the purchase of assets or capital stock of another Person; or (b) furnish any information with respect to, assist or participate in or facilitate in any other manner any effort or attempt by any Person to do or seek to do any of the foregoing; provided however, nothing herein shall limit or restrict in any way the Purchaser or the Corporation, as the case may be, from communicating with its legal, accounting and other professional advisors or lenders for the purpose of facilitating the transactions contemplated by this Agreement. Each party shall notify the other party immediately if any Person makes any proposal, offer, inquiry or contact to the such party or, to the such party's knowledge, any other Person for the purpose of effectuating one or more of the foregoing transactions.

5.5.

No Termination of the Corporation's and the Sellers' Obligations by Subsequent Incapacity, Dissolution, Etc . Each Seller specifically agrees that the obligations of such Seller hereunder, shall not be terminated by the dissolution of such Seller, by operation of law or by the death or incapacity of any individual Seller. The Corporation hereby agrees that its obligations pursuant to this Agreement shall not be terminated by the dissolution of the Corporation, by operation of law or otherwise.

5.6.

Deliveries After Closing . From time to time after the Closing, at the Purchaser's request and without expense to the Corporation or any Subsidiary and without further consideration from the Purchaser, the Corporation or any Subsidiary, the Sellers shall execute and deliver such other instruments of conveyance and transfer and take such other action as the Purchaser reasonably may' require to convey, transfer to and vest in the Purchaser and to put the Purchaser in possession of any rights or property to be sold, conveyed, transferred and delivered hereunder.

5.7.

Public Announcements . Prior to the Closing, neither the Sellers, the Corporation nor the Purchaser nor any Affiliate, representative or shareholder of such Persons, shall disclose any of the terms of this Agreement to any third party without the other party's prior written

consent. The form, content and timing of all press releases, public announcements or publicity statements with respect to this Agreement and transactions contemplated hereby shall be subject to the prior approval of both the Corporation and the Purchaser, which approval shall not be

unreasonably withheld. No press releases, public announcements or publicity statements shall be released by either party without such prior mutual agreement.

5.8.

Information for the Private Placement Memorandum . On or prior to the date hereof, the Purchaser completed the Private Placement as described in the Private Placement Memorandum. Each of the parties has furnished and shall furnish all information concerning itself that is required or customary for inclusion in the Private Placement Memorandum. If at any time prior to the Effective Time any information relating to the Purchaser, Acquisition or the Corporation, or any of their respective affiliates, trustees, directors or officers, is discovered that should be set forth in an amendment or supplement to the Private Placement Memorandum, so that any of such documents would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the party that discovers such information shall promptly notify the other parties hereto and an appropriate amendment or supplement describing such information shall be made to the Private Placement Memorandum and, to the extent required by applicable law, disseminated to the purchasers and prospective purchasers of the Purchaser Common Stock pursuant to the Private Placement Memorandum.

5.9.

Current Information . During the period from the date of this Agreement to the Effective Time, the Corporation and the Purchaser will cause one or more of their designated representatives to confer on a regular and frequent basis (not less than weekly) with each other and to report the general status of the ongoing operations of each of the Purchaser and the Corporation. The Corporation will promptly notify the Purchaser of any material change in the normal course of business or in the operation of the properties of the Corporation and of any governmental complaints, investigations or hearings (or communications indicating that the same may be contemplated), or the institution or the threat of significant litigation involving the Corporation and will keep the Purchaser fully informed of such events. The Purchaser will promptly notify the Corporation of any material change in the normal course of business or in the operation of the properties of the Purchaser and of any governmental complaints, investigations or hearings (or communications indicating that the same may be contemplated), or the institution or the threat of significant litigation involving the Purchaser and will keep the Corporation fully informed of such events.

5.10.

Directors and Officers of the Purchaser and the Surviving Corporation .

(a)

The Purchaser and the Corporation shall take, or cause to be taken, all action necessary so that at the Effective Time, the directors and officers of the Purchaser shall be as set forth on Schedule 1.7(a) attached hereto.

(b)

The Purchaser, Acquisition and the Corporation shall take, or cause to be taken, all action necessary so that at or immediately after the Effective Time, the directors and officers of the Surviving Corporation shall be as set forth on Exhibits 1.7(a) attached hereto, respectively.

5.11.

Certain Employee Agreements . The Purchaser and its Subsidiaries shall honor, without modification, all contracts, agreements, collective bargaining agreements and commitments of the Corporation and its Subsidiaries that apply to any current or former

employees or current or former directors of the Corporation and its Subsidiaries; provided, however, that this undertaking is not intended to prevent the Purchaser from enforcing such contracts, agreements, collective bargaining agreements and commitments in accordance with their terms, or from enforcing any right to amend, modify, suspend, revoke or terminate any such contract, agreement, collective bargaining agreement or commitment.

5.12.

Available Cash . Immediately prior to the Effective Time, the Purchaser shall have not less than $500,000 of cash (or cash equivalents) net of any Indebtedness and shall have no liabilities, whether fixed, accrued or contingent other than not more than an aggregate of $100,000 in fees, expenses or disbursements incurred in connection with this Agreement, the Merger, the Private Placement and the consummation of the transactions contemplated herby and thereby.

5.13.

Conveyance Taxes . The Purchaser and the Corporation shall cooperate in the preparation, execution and filing of all returns, questionnaires, applications or other documents regarding any real property transfer or gains, sales, use, transfer, value added, stock transfer and stamp Taxes, any transfer, recording, registration and other fees, and any similar Taxes which become payable in connection with the transactions contemplated by this Agreement that are required or permitted to be paid on or before the Effective Time.

5.14.

Purchaser Capitalization Adjustment . On or prior to the Closing Date, the Tamborine Majority Shareholder solely as it relates to the Purchaser's representations and warranties contained in Section 3.5 “Capitalization” of this Agreement, shall forfeit and tender to the Purchaser for cancellation 94,000,000 shares of the Purchaser Common Stock that is beneficially owned by Tamborine Majority Shareholder.

5.15.

Audited Financial Statement . On or prior to June 30, 2005, an audit of the Corporation's financial statements for the calendar year ending December 31,2004 shall have been completed and prepared in accordance with GAAP by a recognized independent accounting firm, and a copy of such audited financial statement shall have been delivered to the Purchaser.

5.16.

Stock Incentive Plan . As soon as practicable after the Closing, the Purchaser shall adopt and implement the Purchaser Stock Option Plan pursuant to which the Purchaser shall have the right to issue up to 1,000,000 shares of the Purchaser Common Stock in the form of Options or restricted stock to the Purchaser employees, non-employee directors, consultants and advisors.

5.17.

Restructuring . Prior to the Closing, as described on Schedule 5.17 attached hereto, the Corporation shall effectuate a restructuring of its assets, Affiliates and Subsidiaries whereby (i) each of International Hydrogen Technologies, Inc., a Florida corporation (“ IHTI ”), and Innovative Engines, Inc. a Florida corporation (“ IEI ”), shall be formed as wholly owned Subsidiaries of the Corporation, and (ii) each of the shareholders and members, as the case ay be, of SESI and SESLLC, shall exchange their respective shares or membership interests, as the case may be, for shares of the Corporation (the “ Restructuring ”). Upon consummation of the Restructuring, each of IHTI, IEI, SESI and SESLLC shall be wholly owned Subsidiaries of the Corporation, and any and all assets relating to the Business shall be owned by the Corporation or its Subsidiaries free and clear of any Liens, Contracts or Orders. Any and all Taxes resulting

from the Restructuring shall be the responsibility of the Surviving Corporation and the Purchaser and may be paid from the $100,000 allocated for expenses pursuant to Section 5.12.

5.18.

Private Placement . Prior to the Closing, the Purchaser shall sell at least 200,000 shares of the Purchaser Common Stock pursuant to the Private Placement. Pursuant to the terms of the Private Placement, the Purchaser shall sell an additional 1,800,000 shares of the Purchaser Common Stock pursuant to the Private Placement.

5.19.

Termination of Corporation Shareholders Agreements . The Sellers shall cause any and all shareholders agreements of the Corporation, IHTI, IEI, SESI and SES LLC to be terminated at or prior to Closing without any further liability or obligation to the Corporation.

5.20.

Payment of Taxes.

(a)

The Sellers shall be responsible and liable for the timely payment of any and all Taxes imposed on or with respect to the properties, income and operations of the Corporation and its Subsidiaries for all Pre-Closing Periods, including the portion of the Overlap Period up to and including the Closing Date. In addition, the Sellers shall pay Purchaser the amount of any Taxes allocated to the Sellers pursuant to Section 5.20(b) below (to the extent that the Sellers are liable therefor and to the extent not already paid by the Sellers on or before the Closing Date) five (5) business days prior to the due date of such Taxes.

(b)

All Taxes and Tax liabilities with respect to the income, property or operations of the Corporation and its Subsidiaries that relate to the Overlap Period shall be apportioned between the Sellers and Purchaser as follows: (i) in the case of Taxes other than income, sales and use and withholding Taxes, on a per diem basis, and (ii) in the case of income, sales and use and withholding Taxes, as determined from the books and records of the Corporation and its Subsidiaries as though the taxable year of the Corporation or any Subsidiary terminated at the close of business on the Closing Date. The Sellers shall be liable for Taxes of the Corporation and its Subsidiaries which are attributable to the portion of the Overlap Period ending on and including the Closing Date.

(c)

All transfer, sales and use, value added, registration, documentary, stamp and similar Taxes imposed in connection with the Merger Consideration or any other transaction that occurs pursuant to this Agreement shall be borne solely by the Sellers.

ARTICLE VI

CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER AND ACQUISITION

Each and every obligation of the Purchaser under this Agreement shall be subject to the satisfaction, on or before the Closing Date, of each of the following conditions unless waived in writing by the Purchaser:

6.1.

Representations and Warranties; Performance . The representations and warranties of the Corporation and the Sellers contained in Article II and elsewhere in this Agreement and all information contained in any exhibit and schedule hereto delivered by, or on behalf of, the Corporation and/or the Sellers to the Purchaser, which are modified by materiality

shall be true and correct (and all other representations shall be true and correct in all material respects) when made and on the Closing Date as though then made, except as expressly provided herein. The Corporation and the Sellers shall have performed and complied with all agreements, covenants and conditions required by this Agreement to be performed and complied with by them prior to the Closing Date. The president of the Corporation shall have delivered to the Purchaser a certificate (which shall be addressed to the Purchaser), dated the Closing Date, in the form designated Exhibit 6.1 hereto, certifying to the foregoing.

6.2.

Consents and Approvals . The Purchaser and the Corporation shall have obtained any and all consents, approvals, Orders, Permits or other authorizations required by all applicable Regulations, Orders and Contracts involving the Corporation or binding on its properties and assets, with respect to the execution, delivery and performance of the Agreement and the agreements contemplated hereby, the financing and consummation of the transactions contemplated herein and the conduct of the business of the Corporation in the same manner after the Closing Date as before the Closing Date.

6.3.

No Material Adverse Change . There shall have been no Material Adverse Change since the date of this Agreement. The Purchaser shall have received certificates (which shall be addressed to the Purchaser), dated the Closing Date, of the president and chief financial officer of the Corporation, in the form of Exhibit 6.3 attached hereto, certifying to the foregoing.

6.4.

No Proceeding or Litigation . No preliminary or permanent injunction or other Order issued by a court of competent jurisdiction or by any Authority, or any Regulation or Order promulgated or enacted by any Authority shall be in effect which would prevent the consummation of the transactions contemplated hereby.

6.5.

Accounting Matters . The Purchaser shall have received a certificate, dated the Closing Date, of the Corporation's chief financial officer in form and substance satisfactory to the Purchaser, as to the accuracy of all of the Financial Statements in the form of Exhibit 6.5 attached hereto.

6.6.

Proceedings and Documents . All corporate and other proceedings in connection with the transactions contemplated hereby and all documents and instruments incident to such transactions shall be reasonably satisfactory in form and substance to the Purchaser and the Purchaser's counsel, and the Corporation shall have made available to the Purchaser for examination the originals or true, complete and correct copies of all records and documents relating to the business and affairs of the Corporation that the Purchaser may reasonably request in connection with said transaction.

6.7.

Secretary's Certificate . The Purchaser shall have received a certificate, by the secretary of the Corporation, as to the charter and bylaws of the Corporation, the resolutions adopted by the directors and shareholders of the Corporation in connection with this Agreement, the incumbency of certain officers of the Corporation and the jurisdictions in which the Corporation is qualified to conduct business in the form of Exhibit 6.7 attached hereto.

6.8.

Certificates of Good Standing . At the Closing, the Corporation shall have delivered to the Purchaser certificates issued by the appropriate governmental Authorities

evidencing the good standing, with respect to both the conduct of business and the payment of all Taxes, of the Corporation and each of its Subsidiaries as of a date not more than fifteen (15) days prior to the Closing Date as a corporation organized under the laws of the state and as a foreign

corporation authorized to do business under the laws of the jurisdictions listed in the schedules hereto.

6.9.

Employment Agreements . Messrs. Donald P. Bunnell, Gregory B. Golden and Lorenzo C. Lamadrid shall have each executed and delivered employment agreements in a form mutually agreed to by the Purchaser and the employee signatory thereto providing for the continued employment of such Persons with the Corporation and containing non-compete and non-solicitation provisions (the “ Employment Agreements ”).

6.10.

Private Placement . The Purchaser shall have completed the Private Placement and at least 200,000 shares of the Purchaser Common Stock shall have been sold in connection with the Private Placement.

6.11.

Directors and Officers of the Surviving Corporation . Prior to or at the Effective Time, the Corporation shall have taken, or caused to be taken, all necessary corporate action so that, at or immediately after the Effective Time, the directors and officers of the Surviving

Corporation shall be as set forth on Schedule 1.7(a) .

6.12.

The Corporation Shareholders' Approval . The Corporation shall have delivered to the Purchaser the Corporation Shareholders' Approval and the matters set forth therein shall have been effectuated.

6.13

Restructuring . The Corporation shall have effectuated the Restructuring.

6.14.

Delivery of Stock Certificates . Each Seller shall have delivered at the Closing stock certificates representing all of its Shares, duly endorsed to the Purchaser, together with stock powers executed in blank.

6.15.

Termination of Corporation Shareholders Agreements . The Sellers shall have caused any and all shareholders agreements of the Corporation, IHTI, IEI, SESI and SES LLC to be terminated at or prior to Closing without any further liability or obligation to the Corporation.

6.16.

Other Documents . The Corporation shall have furnished the Purchaser with such other and further documents and certificates, including certificates of the Corporation's officers and others, as the Purchaser shall reasonably request to evidence compliance with the conditions set forth in this Agreement.

ARTICLE VII

CONDITIONS TO THE OBLIGATIONS OF THE CORPORATION AND THE SELLERS

Each and every obligation of the Corporation and the Sellers under this Agreement shall be subject to the satisfaction, on or before the Closing Date, of each of the following conditions unless waived in writing by the Corporation and the Sellers:

7.1.

Representations and Warranties; Performance . The representations and warranties of the Purchaser contained in Article III and elsewhere in this Agreement and all information contained in any exhibit or schedule hereto delivered by, or on behalf of, the Purchaser to the Corporation and the Sellers, which are modified by materiality shall be true and correct (and all other representations shall be true and correct in all material respects) when made and on the Closing Date as though then made, except as expressly provided herein. The Purchaser shall have performed and complied with all agreements, covenants and conditions required by this Agreement to be performed and complied with by it prior to the Closing Date. The president of the Purchaser shall have delivered to the Corporation and the Sellers a certificate, dated the Closing Date, in the form designated Exhibit 7.1 attached hereto, certifying to the foregoing.

7.2.

Consents and Approvals . The Purchaser shall have obtained any and all consents, approvals, Orders, Permits or other authorizations required by all applicable Regulations or Orders involving the Purchaser, with respect to the execution, delivery and performance of the Agreement and the consummation of the transactions contemplated hereby.

7.3.

No Material Adverse Change . There shall have been no Material Adverse Change since the date of this Agreement. The Corporation shall have received certificates (which shall be addressed to the Corporation), dated the Closing Date, of the president of the Purchaser, in the form of Exhibit 7.3 attached hereto, certifying to the foregoing.

7.4.

7.5.

Accounting Matters . The Corporation shall have received a certificate, dated the Closing Date, of the Purchaser's president in form and substance satisfactory to the Corporation, as to the accuracy of all of the Purchaser's financial statements in the form of Exhibit 7.5 attached hereto.

7.6.

Proceedings and Documents . All corporate and other proceedings in connection with the transactions contemplated hereby and all documents and instruments incident to such transactions shall be reasonably satisfactory in form and substance to the Corporation and the Corporation's counsel, and the Purchaser shall have made available to the Corporation for examination the originals or true, complete and correct copies of all records and documents relating to the business and affairs of the Purchaser that the Corporation may reasonably request in connection with said transaction.

7.7.

Certificates of Good Standing . At the Closing, the Purchaser shall have delivered to the Corporation certificates issued by the appropriate governmental Authorities evidencing the good standing, with respect to both the conduct of business and the payment of all Taxes, of the Purchaser and each of its Subsidiaries as of a date not more than fifteen (15) days prior to the Closing Date as a corporation organized under the laws of the state and as a foreign corporation authorized to do business under the laws of the jurisdictions listed in the schedules hereto.

7.8.

Secretary's Certificate . The Sellers shall have received a certificate, by the secretary of the Purchaser, dated the Closing Date, as to the charter and bylaws of the Purchaser, the resolutions adopted by the directors of the Purchaser in connection with this Agreement, the incumbency of certain officers of the Purchaser and the jurisdictions in which Purchaser is qualified to conduct business in the form of Exhibit 7.8 hereto.

7.9.

Employment Agreements . The Corporation shall have executed the Employment Agreements

7.10.

Directors and Officers of the Surviving Corporation . Prior to or at the Effective Time, the Purchaser and Acquisition shall have taken, or caused to be taken, all necessary corporate action so that, at or immediately after the Effective Time, the directors and officers of the Surviving Corporation shall be as set forth on Schedule 1.7 (a) attached hereto.

7.11.

Purchaser Shareholders' Approval . The Purchaser shall have delivered to the Corporation the Purchaser Shareholders' Approval and the matters set forth therein shall have been effectuated.

7.12.

The Corporation Agreements . The Purchaser shall have assumed the obligations of the Corporation under the Corporation Employment Agreements on terms reasonably satisfactory to the Corporation.

7.13.

The Purchaser Cash . Immediately prior to the Effective Time, the Purchaser shall have not less than $500,000 of cash (or cash equivalents) net of any Indebtedness and shall have no liabilities, whether fixed, accrued or contingent other than not more than an aggregate of $100,000 in fees, expenses or disbursements incurred in connection with this Agreement, the Merger, the Private Placement and the consummation of the transactions contemplated herby and thereby.

7.14.

Purchaser Capitalization Adjustment . Tamborine Majority Shareholder shall have forfeited and tendered to the Purchaser for cancellation 94,000,000 shares of the Purchaser Common Stock that is beneficially owned by Tamborine Majority Shareholder.

7.15.

Private Placement . The Purchaser shall have completed the Private Placement and at least 200,000 shares of the Purchaser Common Stock shall have been sold in connection with the Private Placement.

7.16.

Shareholder Notice . Pursuant to Section 79-4-11.03 of the MBCA, the Purchaser shall have delivered notice to its shareholders informing them that the Purchaser's Board of Directors and a majority of the Purchaser's shareholders entitled to vote adopted this Agreement and approved the Merger, the Private Placement and the transactions contemplated hereby and thereby.

7.17.

Other Documents . The Purchaser shall have furnished the Corporation with such other and further documents and certificates, including certificates of the Purchaser's officers and others, as the Corporation shall reasonably request to evidence compliance with the conditions set forth in this Agreement.

ARTICLE VIII

CLOSING

8.1.

Closing. Unless this Agreement shall have been terminated or abandoned pursuant to the provisions of Article IX hereof, a closing of the transactions contemplated by this Agreement (the “Closing”) shall be held on or before March 30, 2005 or on such other date (the “Closing Date”) as mutually agreed to by the Purchaser and the Corporation in the offices of White & Case LLP, 200 South Biscayne Boulevard, Suite 4900, Miami, Florida 33131, provided that the Closing shall not occur, in any event, after April 18, 2005.

8.2.

Intervening Litigation . If prior to the Closing Date any preliminary or permanent injunction or other Order issued by a court of competent jurisdiction or by any other Authority shall restrain or prohibit this Agreement or the consummation of the transactions contemplated hereby for a period of fifteen (15) days or longer, the Closing shall be adjourned at the option of either party for a period of not more than thirty (30) days. If at the end of such thirty (30) day period such injunction or Order shal1 not have been favorably resolved, either party may, by written notice thereof to the other, terminate this Agreement, without liability or further obligation hereunder.

ARTICLE IX

TERMINATION

9.1.

Methods of Termination . This Agreement may be terminated and the

transactions herein contemplated may be abandoned at any time:

(a)

by mutual consent of the Purchaser, the Corporation and the Sellers;

(b)

by the Purchaser or the Corporation if this Agreement is not consummated on or before April 18, 2005; provided that if any party has breached or defaulted with respect to its obligations under this Agreement on or before such date, such party may not terminate this Agreement pursuant to this Section 9.1 (b), and each other party to this Agreement may at its option enforce its rights against such breaching or defaulting party and seek any remedies against such party, in either case as provided hereunder and by applicable Regulation;

(c)

by the Purchaser if as of the Closing Date any of the conditions specified in Article VI hereof have not been satisfied or if the Sellers or the Corporation is otherwise in default under this Agreement;

(d)

by the Corporation if as of the Closing Date any of the conditions specified in Article VII hereof have not been satisfied or if the Purchaser is otherwise in default under this Agreement;

(e)

by the Purchaser, if the Corporation shall have failed to obtain the Corporation Shareholders' Approval; or

(f)

by the Corporation, if the Purchaser shall have failed to obtain the Purchaser Shareholders' Approval.

9.2.

Procedure Upon Termination . In the event of termination and abandonment pursuant to Section 9.1 hereof, and subject to the proviso contained in Section 9.1(b) this Agreement shall terminate and shall be abandoned, without further action by any of the parties hereto. If this Agreement is terminated as provided herein:

(a)

each party shall either destroy or redeliver all documents and other material of any other party relating to the transactions contemplated hereby, whether obtained before or after the execution hereof, to the party furnishing the same;

(b)

all information received by any party hereto with respect to the business of any other party (other than information which is a matter of public knowledge or which has heretofore been or is hereafter published in any publication for public distribution or filed as public information with any governmental authority) shall not at any time be used for the advantage of, or disclosed to third parties by, such party to the detriment of the party furnishing

such information; and

(c)

other than as provided in Section 11.13 no non-breaching party hereto shall have any liability or further obligation to any other party to this Agreement.

ARTICLE X

INDEMNIFICATION

10.1.

Indemnification of Officers and Directors .

(a)

Indemnification. To the extent, if any, not provided by an existing right of indemnification or other agreement or policy, from and after the Effective Time, the Purchaser and the Surviving Corporation shall, to the fullest extent not prohibited by applicable law, indemnify, defend and hold harmless each person who is now, or has been at any time prior to the date hereof, or who becomes prior to the Effective Time, an officer, director or management employee of the Corporation and the Purchaser and their respective Subsidiaries (each an “ Indemnified Party ” and, collectively, the “ Indemnified Parties ”) against (i) all losses, expenses (including reasonable attorneys' fees and expenses), Claims, damages, costs, liabilities, judgments or (subject to the proviso of the next succeeding sentence) amounts that are paid in settlement of or in connection with any Claim based in whole or in part on or arising in whole or in part out of the fact that such person is or was a director, officer or management employee of such party or any Subsidiary thereof, whether pertaining to any matter existing or occurring after the Effective Time and whether asserted or claimed after the Effective Time and (ii) all liabilities based in whole or in part on, or arising in whole or in part out of, or pertaining to this Agreement, or the transactions contemplated hereby; provided , however, that no such indemnification shall be required to be paid to an Indemnified Party with respect to any losses, expenses, Claims, damages, costs, liabilities, judgments or amounts that are finally determined by a court of competent jurisdiction (after exhaustion of all appeals) or in an arbitration conducted in accordance with this Agreement), or as

may be mutually determined, and set forth in a writing signed, by the Purchaser, the Surviving Corporation and the Indemnified Party (each in its sole discretion), to have resulted solely from the fraud, gross negligence or willful misconduct of such Indemnified Party. In the event of any such loss, expense, Claim, damage, cost, liability, judgment or settlement (whether or not arising before the Effective Time), (A) the Purchaser and the Surviving Corporation shall pay the reasonable fees and expenses of counsel selected by the Indemnified Parties, which counsel shall be reasonably satisfactory to the Purchaser and the Surviving Corporation, promptly after statements therefor are received, and otherwise advance to the Indemnified Parties upon request reimbursement of documented expenses reasonably incurred, (B) the Purchaser and the Surviving Corporation shall cooperate in the defense of any such matter and (C) any determination required to be made with respect to whether an Indemnified Party's conduct complies with the standards under applicable law or as set forth in the Purchaser's or the Surviving Corporation's articles of incorporation or bylaws, as applicable, shall be made by independent counsel mutually acceptable to the Purchaser, the Surviving Corporation and the Indemnified Party; provided , however, that the Purchaser and the Surviving Corporation shall not be liable for any settlement effected without their written consent (which consent shall not be unreasonably withheld or delayed). The Indemnified Parties as a group may retain only one law firm (other than local counsel) with respect to each related matter except to the extent there is, in the sole opinion of counsel to an Indemnified Party, under applicable standards of professional conduct, a conflict on any significant issue between positions of any two or more Indemnified Parties, in which case each Indemnified Party with a conflicting position on a significant issue shall be entitled to separate counsel.

(b)

Successors . In the event the Purchaser or any of its successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any person, then and in either such case, the Purchaser shall use reasonable efforts to provide a provision that the successors and assigns of the Purchaser shall assume the obligations set forth in this Section 10.1.

(c)

Survival of Indemnification . To the fullest extent not prohibited by law, from and after the Effective Time, all rights to indemnification now existing in favor of the employees, agents, directors or officers of the Purchaser and the Corporation and their respective Subsidiaries with respect to their activities as such prior to or at the Effective Time, as provided in their respective articles of incorporation or bylaws or indemnification agreements in effect on the date of such activities or otherwise in effect on the date hereof, shall survive the Merger and shall continue in full force and effect for a period of not less than six (6) years from the Effective Time.

(d)

Benefit . The provisions of this Section 10.1 are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party, his or her heirs and his or her representatives.

(e)

Taxes . Notwithstanding any provision to the contrary contained in this Agreement, each Seller agrees to indemnify, defend and hold harmless the Purchaser, its Affiliates (including the Surviving Corporation, the Corporation and their Subsidiaries) and the successors to the foregoing (and their respective shareholders, officers, directors, employees and agents) on an after-tax basis against (i) all Taxes, losses, claims and expenses resulting from,

arising out of, or incurred with respect to, any claims that may be asserted by any party based upon, attributable to, or resulting from the failure of any representation or warranty made pursuant to Section 2.13 of this Agreement to be true and correct as of the Closing Date; (ii) all Taxes imposed on or asserted against the properties, income or operations of the Corporation or its Subsidiaries, or for which the Corporation or any of its Subsidiaries may otherwise be liable, for all Pre-Closing Periods; (iii) all Taxes imposed on the Corporation or any of its Subsidiaries, or for which the Corporation or any of its Subsidiaries may be liable, as a result of any transaction contemplated by this Agreement; and (iv) all Taxes imposed on the Corporation or any of its Subsidiaries as a result of the provisions of Treasury Regulations Section 1.1502-6 or the analogous provisions of any state, local or foreign law.

ARTICLE XI

MISCELLANEOUS PROVISIONS

11.1.

Amendment and Modification . This Agreement may be amended, modified and supplemented only by written agreement of all the parties hereto with respect to any of the terms contained herein. No course of dealing between or among the parties shall be deemed effective to modify, amend, waive or discharge any part of this Agreement or any rights or obligations of any party under or by reason of this Agreement.

11.2.

Waiver of Compliance; Consents . Any failure of any party hereto to comply with any obligation, covenant, agreement or condition herein may be waived in writing by the other parties hereto, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Whenever this Agreement requires or permits consent by or on behalf of any party hereto, such consent shall be given in writing to be effective.

11.3.

Certain Definitions .

“ 24/7 ” shall have the meaning set forth in 2.16(j).

“ AAA ” shall have the meaning set forth in Section 11.17.

“ Acquisition ” shall have the meaning set forth in the preamble.

“ Affiliate ” means, with regard to any Person, (a) any Person, directly or indirectly, controlled by, under common control of, or controlling such Person; (b) any Person, directly or indirectly, in which such Person holds, of record or beneficially, 5% or more of the equity or voting securities; (c) any Person that holds, of record or beneficially, 5% or more of the equity or voting securities of such Person; (d) any Person that, through Contract, relationship or otherwise, exerts a substantial influence on the management of such Person's affairs; (e) any Person that, through Contract, relationship or otherwise, is influenced substantially in the management of its affairs by such Person; (f) any director, officer, partner or individual holding a similar position in respect of such Person; or (g) as to any natural Person, any Person related by blood, marriage or adoption and any Person owned by such Persons.

“ Agreement ” shall have the meaning set forth in the preamble.

“ Articles of Merger ” shall have the meaning set forth in Section 1.2.

“ Authority ” means any governmental, regulatory or administrative body, agency, commission, board, arbitrator or authority, any court or judicial authority, any public, private or industry regulatory authority, whether international, national, federal, state or local.

“ Business ” shall have the meaning set forth in the preamble.

“ CERCLA : means Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, and the Regulations thereunder.

“ Certificates ” shall have the meaning set forth in Section 1.10(a).

“ Claim ” means any action, suit, claim, lawsuit, demand, suit, inquiry, hearing, investigation, notice of a violation or noncompliance, litigation, proceeding, arbitration, appeals or other dispute, whether civil, criminal, administrative or otherwise.

“ Closing ” shall have the meaning set forth in Section 8.1.

“ Closing Date ” shall have the meaning set forth in Section 8.1.

“ Code ” shall mean the Internal Revenue Code of 1986, as amended, and the Regulations thereunder.

“ Contract ” means any agreement, contract, commitment, instrument, document, certificate or other binding arrangement or understanding, whether written or oral.

“ Corporation ” shall mean, notwithstanding any definition in the preamble, Synthesis Energy Holdings Corporation, Inc., a Florida corporation, and its Subsidiaries, including without limitation 1HTI, IEI, SESI, and SESLLC, taken as a whole,.

“ Corporation Board Approval ” shall have the meaning set forth in Section 2.27.

“ Corporation Capital Stock ” shall have the meaning set forth in Section 1.8.

“ Corporation Common Stock ” shall have the meaning set forth in Section 1.8.

“ Corporation Intellectual Property ” shall mean all Intellectual Property owned by the Corporation or used in connection with the business of the Corporation and/or any of its Subsidiaries.

“ Corporation Shareholders' Approval ” shall have the meaning set forth in Section 2.28.

“ Effective Time ” shall have the meaning set forth in Section 1.3.

“ Employee Benefit Plans ” shall have the meaning set forth in Section 2.15(a).

“ Employment Agreements ” shall have the meaning set forth in Section 6.9.

“ Environmental Law ” shall mean any Regulation, Order, settlement agreement or Authority requirement, which relates to or otherwise imposes liability or standards of conduct concerning the environment, health, safety or Hazardous Substances, including without limitation, discharges, emissions, releases or threatened releases of noises, odors or any Hazardous Substances, whether as matter or energy, into ambient air, water, or land, or otherwise relating to the manufacture, processing, generation, distribution, use, treatment, storage, disposal, cleanup, transport or handling of Hazardous Substances, including but not limited to CERCLA, the Superfund Amendments and Reauthorization Act of 1986, the Hazardous Material Transportation Act, the Resource Conservation and Recovery Act of 1976, the Toxic Substances

Control Act, the Federal Water Pollution Control Act, the Clean Water Act, the Clean Air Act, the Occupational Safety and Health Act, any so-called “Superlien” law, all as now or hereafter amended or supplemented, and the Regulations promulgated thereunder, and any other similar Federal, state or local Regulations.

“ ERISA ” shall have the meaning set forth in Section 2.l5(a).

“ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended.

“ Exchange Ratio ” shall have the meaning set forth in Section 1.8(c).

“ FBCA ” shall have the meaning set forth in the preamble.

“ Financial Statements ” shall have the meaning set forth in Section 2.7(a).

“ Financial Statement Date ” shall have the meaning set forth in Section 2.7(a).

“ GAAP ” means U.S. generally accepted accounting principles, consistently applied, as in existence at the date hereof.

“ Guarantee ” means any guarantee or other contingent liability (other than any endorsement for collection or deposit in the ordinary course of business), direct or indirect with respect to any obligations of another Person, through a Contract or otherwise, including, without limitation, (a) any endorsement or discount with recourse or undertaking substantially equivalent to or having economic effect similar to a guarantee in respect of any such obligations and (b) any Contract (i) to purchase, or to advance or supply funds for the payment or purchase of, any such obligations, (ii) to purchase, sell or lease property, products, materials or supplies, or transportation or services, in respect of enabling such other Person to pay any such obligation or to assure the owner thereof against loss regardless of the delivery or nondelivery of the property, products, materials or supplies or transportation or services or (iii) to make any loan, advance or capital contribution to or other Investment in, or to otherwise provide funds to or for, such other Person in respect of enabling such Person to satisfy an obligation (including any liability for a dividend, stock liquidation payment or expense) or to assure a minimum equity, working capital or other balance sheet condition in respect of any such obligation.

“ Hazardous Substances ” shall be construed broadly to include any toxic or hazardous substance, material, or waste, any petroleum or petroleum products, radioactive materials, asbestos in any form that has become friable, ura formaldehyde foam insulation, dielectric fluid containing levels of polychlorinated biphenyls, and radon gas, any chemicals,

materials or substances defined or included in the definition of “hazardous substances,” “restricted hazardous wastes,” “toxic substances,” “toxic pollutants,” or words of similar import, under any applicable Environmental Law, any other chemical, material or substance, exposure to which is prohibited, limited, or regulated by any governmental Authority and any other contaminant, pollutant or constituent thereof, whether liquid, solid, semi-solid, sludge and/or gaseous, including without limitation, chemicals, compounds, by-products, pesticides, asbestos containing materials, petroleum or petroleum products or by-products, and polychlorinated biphenyls, the presence of which requires investigation or remediation under any Environmental Law or which are or could reasonably be expected to become regulated, listed or controlled by, under or pursuant to any Environmental Law, or which has been or shall be determined or interpreted at any time by any Authority to be a hazardous or toxic substance regulated under any other Regulation or Order.

“ IEI ” shall have the meaning set forth in Section 5 .17.

“ IHTI ” shall have the meaning set forth in Section 5 .17.

“ Indebtedness ” with respect to any Person means (a) any obligation of such Person for borrowed money, but in ~U1y event shall include: (i) any obligation or liabilities

incurred for all or any part of the purchase price of property or other assets or for the cost of property or other assets constructed or of improvements thereto, other than accounts payable

included in current liabilities and incurred in respect of property purchased in the ordinary course of business, (whether or not such Person has assumed or become liable for the payment of such obligation) (whether accrued, absolute, contingent, unliquidated or otherwise, known or unknown, whether due or to become due); (ii) the face amount of all letters of credit issued for the account of such Person and all drafts drawn thereunder; (iii) obligations incurred for all or any part of the purchase price of property or other assets or for the cost of property or other assets constructed or of improvements thereto, other than accounts payable included in current liabilities and incurred in respect of property purchased in the ordinary course of business (whether or not such Person has assumed or become liable for the payment of such obligation) secured by Liens; (iv) capitalized lease obligations; and (v) all Guarantees of such Person; (b) accounts payable of such Person that have not been paid within sixty (60) days of their due date and are not being contested; (c) annual employee bonus obligations that are not accrued on the Financial Statements; and (d) retroactive insurance premium obligations.

“ Indemnified Party ” shall have the meaning set forth in Section 10.1 (a).

“ Indemnified Parties ” shall have the meaning set forth in Section lO.l(a).

“ Intellectual Property ” means all domestic and foreign patents, patent applications, trademarks, service marks and other indicia of origin, trademark and service mark registrations and applications for registrations thereof, copyrights, copyright registrations and applications for registration thereof, Internet domain names and universal resource locators (“ URLs ”), trade secrets, inventions (whether or not patentable), invention disclosures, moral and economic rights of authors and inventors (however denominated), technical data, customer lists, corporate and business names, trade names, trade dress, brand names, know-how, show-how, maskworks, formulae, methods (whether or not patentable), designs, processes, procedures,

technology, source codes, object codes, computer software programs, databases, data collectors and other proprietary information or material of any type, whether written or unwritten (and all goodwill associated with, and all derivatives, improvements and refinements of, any of the foregoing).

“ Investment ” shall mean (a) any direct or indirect ownership, purchase or other acquisition by a Person of any notes, obligations, instruments, capital stock, Options, securities or ownership interests (including partnership interests and joint venture interests) of any other Person; and (b) any capital contribution or similar obligation by a Person to any other Person.

“ Lien ” means any (a) security interest, lien, mortgage, pledge, hypothecation, encumbrance, Claim, easement, charge, restriction on transfer or otherwise, or interest of another Person of any kind or nature, including any conditional sale or other title retention Contract or lease in the nature thereof; (b) any filing or agreement to file a financing statement as debtor under the Uniform Commercial Code or any similar statute; and (c) any subordination arrangement in favor of another Person.

“ Material Adverse Change ” means any developments or changes which would have a Material Adverse Effect.

“ Material Adverse Effect ” means any circumstances, state of facts or matters which might reasonably be expected to have a material adverse effect in respect of the Corporation's business, operations, properties, assets, condition (financial or otherwise), results, plans, strategies or prospects.

“ MBCA ” shall have the meaning set forth in Section 3.21.

“ Merger ” shall have the meaning set forth in the preamble.

“ Merger Consideration ” shall have the meaning set forth in Section 1.8(c).

“ Merger Transactions ” shall have the meaning set forth in Section 1.8(c).

“ Option ” means any subscription, option, warrant, right, security, Contract, commitment, understanding, stock appreciation right, phantom stock option, profit participation or arrangement by which (a) with respect the Corporation, the Corporation is bound to issue any additional shares of its capital stock or an interest in the equity or equity appreciation of the Corporation or rights pursuant to which any Person has a right to purchase shares of the Corporation's capital stock or an interest in the equity or equity appreciation of the Corporation or (b) with respect to a Seller, the Seller is bound to sell or allow another Person to vote, encumber or control the disposition of any shares of the Corporation's capital stock or rights pursuant to which any Person has a right to purchase, vote, encumber or control the disposition of shares of the Corporation's capital stock from the Seller.

“ Order ” means any writ, decree, order, judgment, injunction, rule, ruling, Lien, voting right, consent of or by an Authority.

“ Overlap Period ” means a taxable year or other taxable period that begins on or before the Closing Date and ends after the Closing Date.

“ Permits ” means all permits, licenses, registrations, certificates, Orders, qualifications or approvals required by any Authority or other Person.

“ Permitted Liens ” means (a) statutory Liens not yet delinquent and immaterial in amount; (b) such imperfections or irregularities of title or Liens as do not materially detract from or interfere with the present use of the properties or assets subject thereto or affected thereby, otherwise impair present business operations at such properties, or do not detract from the value of such properties and assets; ( c) Liens reflected in the Financial Statements or the notes thereto; (d) the rights of customers of the Corporation with respect to inventory or work in progress under purchase orders or Contracts entered into by the Corporation in the ordinary course of business; (e) mechanics', carriers', workers', repairmen's, warehousemen's, or other similar Liens arising in the ordinary course of business in respect of obligations not overdue and immaterial in amount or which arc being contested in good faith and covered by a bond in an amount at least equal to the amount of the Lien; and (f) deposits or pledges to secure workmen's compensation, unemployment insurance, old age benefits or other social security obligations in connection with, or to secure the performance of, bids, tenders, trade Contracts not for the payment of money or leases, or to secure statutory obligations or surety or appeal bonds or other pledges or deposits for purposes of like nature in the ordinary course of business and immaterial in amount.

“ Person ” means any corporation, partnership, joint venture, limited liability company, organization, entity, Authority or natural person.

“ Policies ” means all Contracts that insure (a) the Corporation's or any of its Subsidiaries, properties, plant and equipment for loss or damage; and (b) the Corporation or any of its Subsidiaries or their officers, directors, employees or agents against any liabilities, losses or damages (or lost profits) for any reason or purpose.

“ Private Placement ” means that certain offering of up to 2,000,000 shares of Purchaser Common Stock for a maximum aggregate amount equal to $5,000,000 pursuant to the terms and conditions set forth in the Private Placement Memorandum.

“ Private Placement Memorandum ” means that certain Confidential Private Placement Memorandum, dated as of March 9, 2005, as amended by that certain Amended and Restated Confidential Private Placement Memorandum, dated as of March 30, 2005, and as may be amended or supplemented, describing the Private Placement.

“ Purchaser ” shall have the meaning set forth in the preamble.

“ Purchaser Board Approval ” shall have the meaning set forth in Section 3.22.

“ Purchaser Common Stock ” shall have the meaning set forth in Section 1.8.

“ Purchaser Shareholders' Approval ” shall have the meaning set forth in Section 3.23.

“ Purchaser Stock Option Plan ” shall have the meaning set forth in Section 3.5.

“ Regulation ” means any rule, law, code, statute, regulation, ordinance, requirement, announcement, policy, guideline, rule of common law or other binding action of or by an Authority and any judicial interpretation thereof.

“ Restructuring ” shall have the meaning set forth in Section 5.17.

“ Rules ” shall have the meaning set forth in Section 11.17.

“ SEC ” shall mean the Securities and Exchange Commission.

“ Securities Act ” shall have the meaning set forth in Section 2.25.

“ Sel1ers ” shall have the meaning set forth in the preamble.

“ Server ” shall have the meaning set forth in Section 2.16(j).

“ SESI ” shall have the meaning set forth in Section 2.7(a).

“ SESLLC ” shall have the meaning set forth in Section 2.7(a).

“ Shares ” shall have the meaning set forth in Section 1.8(c).

“ Sites ” shall have the meaning set forth in 2.16(j).

“ Subsidiary ” any Person in which the Corporation has (a) an Investment; (b) advanced funds or provided financial accommodations to which, in each case, is secured by an Investment in; or (c) has an Option to acquire an Investment in such Person.

“ Surviving Corporation ” shall have the meaning set forth in Section 1.1.

“ Tax Returns ” shall have the meaning set forth in Section 2.13(a).

“ Tamborine Majority Shareholder ” shall have the meaning set forth in Section 1.8 (c).

“ Taxes ” shall mean all taxes, assessments, charges, duties, fees, levies or other governmental charges, including, without limitation, all Federal, state, local, foreign and other income, franchise, profits, gross receipts, capital gains, capital stock, transfer, property, sales, use, value-added, occupation, property, excise, severance, windfall profits, stamp, license, payroll, social security, withholding and other taxes, assessments, charges, duties, fees, levies or other governmental charges of any kind whatsoever (whether payable directly or by withholding and whether or not requiring the filing of a Tax Return), all estimated taxes, deficiency assessments, additions to tax, penalties and interest and shall include any liability for such amounts as a result either of being a member of a combined, consolidated, unitary or affiliated group or of a contractual obligation to indemnify any person or other entity.

“ Taxing Authorities ” means Internal Revenue Service and any other Federal, state, or local Authority which has the right to impose Taxes on the Corporation or the Sellers.

“ VEBA ” shall have the meaning set forth in Section 2.15(a).

11.4.

Notices . All notices, requests, demands and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given (a) one (1) business day after being delivered by hand, (b) five (5) business days after being mailed first class or certified with postage paid or (c) one (1) business day after being couriered by overnight receipted courier service:

(a)

If to the Corporation or the Sellers, to:

Synthesis Energy Holdings, Inc. 1424 West 28th Street

Miami Beach, Florida 33140 Attn: Lorenzo C. Lamadrid

and

Synthesis Energy Holdings, Inc.

Level 21 HSBC Tower - 21 Yin Cheng E Road Shanghai 200120 China

Attn: Donald P. Bunnell

(b)

If to the Purchaser, to:

Tamborine Holdings, Inc. 1450 Fifth Avenue

Suite 2200

Seattle, Washington 98101 Attn: Alexander E. Gomez

or to such other Person or address as the Purchaser shall furnish by notice to the Corporation in writing.

11.5.

Assignment . This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto without the prior written consent of the other parties.

11.6.

Governing Law . The Agreement shall be governed by the internal laws of the State of Florida as to all matters, including but not limited to matters of validity, construction, effect and performance.

11.7.

Counterparts . This Agreement may be executed in two or more counterparts (including by means of telecopied signature pages), each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterpart signatures

need not be on the same page and shall be deemed effective upon receipt. If this Agreement is executed by the Purchaser and one or more Sellers, it shall be deemed to be a valid Contract as between 3l1d among such signatories notwithstanding that other Sellers may be named herein.

Sellers subsequently executing this Agreement shall become parties hereto as and when their executed signature pages are delivered to the Purchaser and the Corporation.

11.8.

Headings . The article and section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

11.9.

Entire Agreement . This Agreement, including the schedules and exhibits hereto and the Contracts, documents, certificates and instruments referred to herein, embodies the entire agreement and understanding of the parties hereto in respect of the transactions contemplated by this Agreement and supersedes all prior Contracts, representations, warranties, promises, covenants, arrangements, communications and understandings, oral or written, express or implied, between the parties with respect to such transactions. There are no Contracts, representations, warranties, promises, covenants, arrangements or understandings between the parties with respect to the transactions contemplated hereby, other than those expressly set forth or referred to herein.

11.10.

Injunctive Relief . The parties hereto agree that in the event of a breach of any provision of this Agreement or a failure by a party to perform in accordance with the specific

terms herein, the aggrieved party or parties may be damaged irreparably and without an adequate remedy at law. The parties therefore agree that in the event of a breach of any provision of this Agreement, the aggrieved party or parties may elect to institute and prosecute proceedings in any court of competent jurisdiction to enforce specific performance or to enjoin the continuing breach of such provision without the requirement of a posting of a bond, as well as to obtain damages for breach of this Agreement. By seeking or obtaining any such relief, the aggrieved party shall not be precluded from seeking or obtaining any other relief to which it may be entitled.

11.11.

Delays or Omissions . No delay or omission to exercise any right, power or remedy accruing to any party hereto, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party hereto of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement must be made in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

11.12.

Severability . Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable Regulations, but if any provision of this Agreement or the application of any such provision to any Person or circumstance shall be held to be prohibited by, illegal or unenforceable under applicable law in

any respect by a court of competent jurisdiction, such provision shall be ineffective only to the extent of such prohibition or illegality or unenforceability, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

11.13.

Expenses . The Purchaser and the Corporation (for itself and on behalf of the Sellers) shall each bear its own expenses, including without limitation, legal fees and expenses, with respect to this Agreement and the transactions contemplated hereby. If any legal action or other proceeding relating to this Agreement, the agreements contemplated hereby, the transactions contemplated hereby or thereby or the enforcement of any provision of this Agreement or the agreements contemplated hereby is brought against any party, the prevailing party in such action or proceeding shall be entitled to recover all reasonable expenses relating thereto (including attorney's fees and expenses) from the party against which such action or proceeding is brought in addition to any other relief to which such prevailing party may be entitled.

11.14.

No Third Party Beneficiaries . This Agreement is for the sole benefit of the parties and their permitted successors and assigns and nothing herein express or implied shall be construed to give any person, other than the parties of such permitted successors and assigns, any legal or equitable rights hereunder.

11.15.

Schedules . No exceptions to any representations or warranties disclosed on one schedule shall constitute an exception to any other representation or warranties made in this Agreement unless the substance of such exception is disclosed as provided herein on each such applicable schedule or a specific cross reference to a disclosure on another schedule is made. All schedules and exhibits attached hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein.

11.16.

No Strict Construction . The parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.

11.17.

Dispute Resolution . If the parties should have a dispute arising out of or relating to this Agreement or the parties' respective rights and duties hereunder, then the parties will resolve such dispute in the following manner: (i) any party may at any time deliver to the others a written dispute notice setting forth a brief description of the issue for which such notice initiates the dispute resolution mechanism contemplated by this Section 11.17; (ii) during the forty-five (45) day period following the delivery of the notice described in Section 11.17(i) above, appropriate representatives of the various parties will meet and seek to resolve the disputed issue through negotiation, (iii) if representatives of the parties arc unable to resolve the disputed issue through negotiation, then within fifteen (15) days after the period described in

Section 11.17(ii) above, the parties will refer the issue (to the exclusion of a court of law) to final and binding arbitration in Miami, Florida in accordance with the then existing rules (the “ Rules ”) of the American Arbitration Association (“ AAA ”), and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof; provided , however , that the

law applicable to any controversy shall be the law of the State of Florida, regardless of principles

of conflicts of laws; provided , further , that the foregoing provisions of this Section 11.17 shall not apply with respect to any equitable or prejudgment remedies available to a party hereunder or pursuant to any applicable law. In any arbitration pursuant to this Agreement, (i) discovery shall be allowed and governed by the Florida Rules of Civil Procedure and (ii) the award or decision shall be rendered by a majority of the members of a Board of Arbitration consisting of three (3) members, one of whom shall be appointed by each of the respective parties and the third of whom shall be the chairman of the panel and be appointed by mutual agreement of said two party-appointed arbitrators. In the event of failure of said two arbitrators to agree within thirty (30) days after the commencement of the arbitration proceeding upon the appointment of the third arbitrator, the third arbitrator shall be appointed by the AAA in accordance with the Rules. In the event that either party shall fail to appoint an arbitrator within fifteen (15) days after the commencement of the arbitration proceedings, such arbitrator and the third arbitrator shall be appointed by the AAA in accordance with the Rules. Nothing set forth above shall be interpreted to prevent the parties from agreeing in writing to submit any dispute to a single arbitrator in lieu of a three (3) member Board of Arbitration. Upon the completion of the selection of the Board of Arbitration (or if the parties agree otherwise in writing, a single arbitrator), an award or decision shall be rendered within no more than thirty (30) days.

Notwithstanding the foregoing, the request by either party for preliminary or permanent injunctive relief, whether prohibitive or mandatory, shall not be subject to arbitration and may be adjudicated only by the courts of the State of Florida or the Federal District Court for the Southern District of Florida. EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MA Y LEGALLY AND EFFECTIVELY DO SO, TRIAL BY WRY IN ANY SUIT, ACTION OR PROCEEDING ARISING HEREUNDER.

11.18.

Arm's Length Negotiations . Each party herein expressly represents and warrants to all other parties hereto that (a) before executing this Agreement, said party has fully informed itself of the terms, contents, conditions and effects of this Agreement; (b) said party has relied solely and completely upon its own judgment in executing this Agreement; (c) said party has had the opportunity to seek and has obtained the advice of counsel before executing this Agreement; (d) said party has acted voluntarily and of its own free will in executing this Agreement; ( e) said party is not acting under duress, whether economic or physical, in executing this Agreement; and (f) this Agreement is the result of arm's length negotiations conducted by and among the parties and their respective counsel.

*****

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement and Plan of Merger to be executed and delivered on its behalf by one of its duly authorized officers, all as of the day and year first above written.


TAMBORINE HOLDINGS. INC.

By:	/s/ Alexander E. Gomez
Name:	Alexander E. Gomez
Title:	President


SES ACQUISITION CORPORATION

By:	/s/ Alexander E. Gomez
Name:	Alexander E. Gomez
Title:	President


SYNTHESIS ENERGY HOLDINGS, INC.

By:	/s/ Lorenzo Lamadrid
Name:	Lorenzo Lamadrid
Title:	Chairman


SELLERS:

/s/ Lorenzo Lamadrid
Lorenzo Lamadrid

/s/ Gregory B. Golden
Gregory B. Golden

/s/ Donald P. Bunnell
Donald P. Bunnell

/s/ Fred A. Breidenbach
Fred A. Breidenbach

/s/ Huang Da Li
Huang Da Li


AZURE INTERNATIONAL HOLDINGS LTD.

By:	/s/ Stephen M. Terry
Name:	Stephen M. Terry
Title:	Chief Financial Officer

/s/ Chen Xiao Dong
Chen Xiao Dong

/s/ Wang Yi
Wang Yi

/s/ Alexander Gomez
Alexander Gomez Alexander Gomez (solely with respect to Section 5.14 of this Agreement


LIST OF EXHIBITS AND SCHEDULES

EXHIBITS

1.2	Articles of Merger
6.1	Officer’s Certificate – Corporation
6.3	Officer’s Certificate – Corporation – No Material Adverse Change
6.5	Accounting Certificate
6.7	Secretary’s Certificate – Corporation
7.1	Officer’s Certificate – Purchaser
7.3	Officer’s Certificate – Purchaser – No material Adverse Change
7.5	Accounting Certificate – Purchaser
7.8	Officer’s Certificate – Purchaser

SCHEDULES
1.7(a)	Board of Directors and Officers
1.8(c)	Allocation of Merger Consideration
2.1(a)	Qualifications
2.1(b)	Articles of Incorporation and Bylaws
2.2(a)	Subsidiaries
2.2(b)	Subsidiary Qualifications
2.2(c)	Subsidiary Articles of Incorporation and Bylaws
2.2(d)	Investments
2.3(a)	Capitalization
2.3(b)	Contracts in Respect of Securities
2.4	Officers and Directors of the Corporation
2.6	Consent and Authorizations
2.7(a)	Financial Statements
2.7(b)	Indebtedness
2.8	Employees
2.10(a)	Contracts
2.10(d)	Bids and Proposals
2.11(a)	Title and Related Matters
2.11(b)	Leased Assets
2.11(c)	Contracts for Sale or Lease and Liens
2.12	Litigations
2.13(c)	Tax Matters
2.15(a)	List of Plans
2.15(b)	Status of Plans
2.15(d)	Section 125 Plans
2.15(h)	Triggering Events
2.16(a)	Intellectual Property
2.16(b)	Licenses or Contracts for Intellectual Property
2.16(c)	Intellectual Property Liens and Orders
2,16(d)	Intellectual Property Claims Against the Corporations
2.16(e)	Intellectual Property Claims By the Corporation
2.16(f)	Pending or Threatened Intellectual Property Claims
2.16(g)	Intellectual Property Proceedings
2.16(j)	Internet Domain Names


LIST OF EXHIBITS AND SCHEDULES (Continued)
SCHEDULES
2.18	Capital Expenditures
2.19	Dealings with Affiliates
2.21	Customers and Suppliers
2.22	Permits
2.23	Improper and Other Payments
2.30	Banks
3.3	No Violations
3.5(a)	Capitalization of Purchaser
3.5	Contracts in Respect of Purchaser Securities
3.6	Incumbent Officers and Directors of Purchaser
3.9(a)	Purchaser’s Form 15c2-11
3.10	Contracts
3.11	Titles and Related Matters
3.11(b)	Leased Assets
3.11(c)	Contracts for Sale or Lease
3.11(d)	Liens
3.12	Litigation
3.13(c)	Tax Matters
3.16	Dealing with Affiliates
3.17	Insurance
3.18	Permits
3.19	Improper and Other Payments
3.23	Banks
5.17	Restructuring

Exhibit 10.7

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (the “ Agreement ”) is entered into on the 30th day of May, 2006 (the “ Effective Date ”) by and between Synthesis Energy Systems, Inc., a Delaware corporation (the “ Corporation ”), and Timothy E. Vail, an individual residing at 5106 Doliver, Houston, Texas 77056 (the “ Executive ”) under the following terms and conditions:

RECITALS:

WHEREAS , the Corporation desires to employ the Executive in the capacity hereinafter stated, and the Executive desires to enter into the employ of the Corporation in such capacity for the period and on the terms and conditions set forth herein.

NOW, THEREFORE , in consideration of the mutual covenants and agreements set forth below, it is hereby covenanted and agreed by the Corporation and the Executive as follows:

Employment Period . The Corporation hereby agrees to employ the Executive as its Chief Executive Officer, and the Executive, in such capacities, agrees to provide services to the Corporation for the period beginning on or before the date the Corporation closes its first round of financing in connection with the Corporation’s approximately $15-30 million private placement of its common stock, with Union Charter Financial, Ltd. acting as the placement agent, or such earlier date as may be mutually agreed upon in writing by the Corporation and the Executive (the “ Commencement Date ”) and ending on the fourth anniversary of the Commencement Date (the “ Employment Period ”).

Position/Duties .

(a)

The Executive agrees that during the Employment Period, while he is employed by the Corporation, he shall, except as otherwise expressly provided herein, devote his full-time energies and talents exclusively to serving in the capacities of Chief Executive Officer of the Corporation in the best interests of the Corporation. As Chief Executive Officer of the Corporation, the Executive shall perform the duties and functions that are normal and customary to such position, including, without limitation, the usual duties of a Chief Executive Officer and those duties assigned to him from time to time by the Board of Directors of the Corporation (the “ Board ”). In such capacity, the Executive will be responsible, subject to the direction of the Board, for all aspects of the operations, financial performance, marketing, sales, recruiting, technology, budgeting, accounting, legal, regulatory, administrative and general management of the Corporation’s business.

(b)

In addition, the Executive shall not, without prior written consent from the Board (which consent shall not be unreasonably withheld):

(i)

serve as or be a consultant to or employee, officer, agent or director of any corporation, partnership or other entity other than (A) the Corporation, (B) civic, charitable, or other public service organizations or (C) The Village School, a private school in Houston, Texas owned and controlled by Executive; or

(ii)

have more than a five percent (5%) ownership interest in any

enterprise other than the Corporation if such ownership interest would have a material adverse effect upon the ability of the Executive to perform his duties hereunder; provided , however , the Executive shall (X) disclose to the Board any 5% ownership interest in any enterprise, (Y) disclose any financial relationship or ownership (regardless of such percentage), with any supplier, customer or partner of the Corporation or any of its subsidiaries, and (Z) not cause a conflict of interest between the Corporation or any of its subsidiaries on the one hand and any supplier, customer or partner of the Corporation or any of its subsidiaries on the other hand.

(c)

Notwithstanding the foregoing, the Corporation acknowledges that the Executive has disclosed that he is currently involved in a number of outside activities listed on Schedule 2 attached hereto. Such involvement is approved by the Corporation and the Corporation acknowledges that the Executive’s mere participation in such activities will not be deemed a breach of this Agreement by the Executive. In connection with approving the Executive’s outside activities, it is anticipated that such outside activites shall not, on average, consume more than two (2) business days per month of the Executive’s schedule. Schedule 2 may be changed from time to time to accommodate the Executive’s activities upon disclosure by the Executive and approval by the Board.

(d)

The Executive is currently a member of the Board. During the Employment Period, the Board shall nominate the Executive for re-election as a member of the Board at the expiration of his then current term.

Compensation . Subject to the terms and conditions of this Agreement, during the Employment Period, while he is employed by the Corporation, the Executive shall be compensated by the Corporation for his services as follows:

(a)

Beginning on the Commencement Date, the Executive shall be entitled to an initial base salary of $10,000 per month (the “ Base Salary ”), payable at the end of each month during the Employment Period (except that the salary to be paid during the first and last month of the Employment Period shall be on a pro rata basis determined by a fraction the numerator of which is the number of business days the Executive worked during such month and the denominator of which is the number of business days in such month) and subject to normal tax withholding.

(b)

Upon the closing of the Corporation’s next round of equity financing, the Executive’s Base Salary shall increase to $12,500 per month, payable as provided in paragraph (a), above.

(c)

Upon the closing of the Corporation’s first development project (which shall be deemed to occur when project financing is approved and made available to such project), the Executive’s Base Salary shall increase to $15,000 per month, payable as provided in paragraph (a), above.

(d)

During the Employment Period, the amount of the Executive’s Base Salary shall be reviewed by the Compensation Committee of the Board, which shall be established by the Board and consist of at least two (2) non-employee directors (the “ Compensation Committee ”), on or before each anniversary of the Commencement Date to

determine whether an increase in the Executive’s Base Salary is appropriate. Currently the Executive is a member of the Compensation Committee. In concurrence with the Commencement Date, the Executive will resign his position on the Compensation Committee.

(e)

For each fiscal year of the Corporation (the “Bonus Period”), in addition to receiving the Base Salary, the Executive shall be entitled to a performance bonus (the “ Bonus ”) if the Executive has met the performance criteria set by the Compensation Committee for such Bonus Period. Notiwthstanding the foregoing, the first Bonus Period shall include the remainder of the calendar year 2006 through the end of the Corporation’s fiscal year that expires in the calendar year 2007. The Bonus for the Executive shall, at a minimum, be at least fifty percent (50%) of the Executive’s yearly Base Salary for meeting established criteria, but otherwise shall be at the discretion of the Compensation Committee (provided, however, that the minimum Bonus for the remainder of the calendar year 2006 shall be 50% of the Base Salary actually received by the Executive during the calendar year 2006). The performance criteria for the first Bonus Period is as follows:

(i)

the Executive shall successfully conclude the Corporation’s SEC Registration as well as the listing of the Corporation on the American Stock Exchange; however, if events beyond the control of the Executive prevent the timely completion of either of these tasks, the Compensation Committee may waive this performance criteria;

(ii)

the Executive shall successfully coordinate and manage the Corporation’s project development efforts in both China and the United States;

(iii)

the Executive shall successfully manage and oversee the development of a strategic alliance, partnership and/or relationship effort headed by the Corporation’s Chief Financial Officer; and

(iv)

the Executive shall successfully build the Corporation’s technical and engineering competency with an immediate focus on the development of U-Gas® gasification technologies and supporting engineering.

(f)

Performance criteria for all subsequent Bonus Periods shall be set by the Employer so that all performance criteria are reasonably achievable in light of business conditions that exist at the time such criteria are set. The Corporation shall set the performance criteria as soon as practicable for such Bonus Period (but in no event later than 30 days before the commencement of the Bonus Period) and the Executive shall have the opportunity to meet with and discuss such criteria with the Compensation Committee prior to the finalization of such criteria. Upon completion of the performance criteria for the applicable Bonus Period, such criteria shall be communicated to the Executive in writing. If the Executive meets the performance criteria set by the Compensation Committee, the Corporation shall pay the Executive the earned bonus within 30 days after the end of such applicable Bonus Period.

(g)

The Executive shall be a participant in certain executive benefit plans adopted by the Corporation if and when such plans are adopted, on substantially the same terms and conditions as other senior executives of the Corporation.

(h)

The Executive shall be entitled to receive the following perquisites:

(i)

Reimbursement of no more than $1,500 per month for all reasonable and customary medical and health insurance premiums incurred by the Executive (including dental, vision, accidental death and dismemberment, disability and life insurance (such life insurance policy not to exceed $1 million in value)) from the date hereof until the Corporation is able to provide comparable insurance policies for the Executive. The Corporation has the right, but not the obligation, to purchase, replace or assume responsibility for any such insurance policies; provided , however , that under any and all circumstances the Executive shall receive at least the same benefits as contained in any of the policies purchased, replaced or assumed by the Corporation and prior to taking any such action, the Corporation shall consult with the Executive to ensure that the Executive remains covered by and receives at least the same benefits under such policies during the period after which the Corporation exercises its rights under this paragraph 3(g)(i) and consummates the purchase, replacement or assumption of such policies. Prior to making any reimbursements pursuant to this paragraph 3(g)(i), the Corporation may request appropriate documentation as evidence of such premium payments.

(ii)

Reimbursement of any relocation expenses if such relocation is requested by the Corporation and the Executive relocates pursuant to such request.

(iii)

The Executive shall be entitled to an annual paid vacation equal to the greater of (i) the Corporation's policy applicable to senior executives, or (ii) four weeks per year (as prorated for partial years), which vacation may be taken at such times as the Executive elects with due regard to the needs of the Corporation.

(i)

The Executive shall be entitled to participate in the Corporation’s 2006 Stock Option Plan (the “ Plan ”) pursuant to the terms and conditions set forth therein and the discretion of the Board. In connection with the Plan, the Executive shall be granted options to purchase up to 2,350,000 shares of the Corporation’s capital stock at an exercise price equal to $3.00 per share, which options shall vest as follows: 470,000 shares shall vest as of the Effective Date, and the remainder of such options shall vest on the following four (4) annual anniversary dates of the Effective Date in equal installments of 470,000 shares. Such options shall also be subject to such other requirements set forth in a Stock Option Agreement to be entered into by and between the Corporation and the Executive.

(j)

To the extent it is determined that the stock options granted to the Executive hereunder are subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), then the Executive shall be entitled to receive additional payments from the Corporation in amounts necessary to cover the taxes (including any interest or penalties imposed with respect to such taxes) imposed upon the Executive as a result of (i) Section 409A of the Code covering the grant of options hereunder, and (ii) receiving such additional payments to cover the taxes imposed under Section 409A of the Code.

(k)

The Executive shall be reimbursed by the Corporation for all reasonable business, promotional, travel and entertainment expenses incurred or paid by the Executive during the Employment Period in the performance of his services under this Agreement: (i) provided that such expenses constitute business deductions from taxable income for the Corporation and are excludable from taxable income to the Executive under the governing laws and regulations of the Internal Revenue Code; (ii) to the extent that such expenses do not exceed

the amounts allocable for such expenses in budgets that are approved from time to time by the Corporation and are not in violation of the Corporation’s expense reimbursement policies; and (iii) provided that the Executive provides the Corporation with the corresponding expense reports in a timely manner consistent with the Corporation’s policies. Notwithstanding the foregoing, in the event of extraordinary or unusual expenses, the Executive shall first obtain the Compensation Committee’s approval prior to incurring such expenses. In order that the Corporation reimburse the Executive for such allowable expenses, the Executive shall furnish to the Corporation, in a timely fashion, the appropriate documentation required by the Internal Revenue Code in connection with such expenses and shall furnish such other documentation and accounting as the Corporation may from time to time reasonably request. The Corporation acknowledges that the Executive may decide to utilize his personal aircraft for Corporation business. The Corporation will reimburse the executive the lesser of (i) the cost of a comparable commercial airline fare for all company employees traveling with the Executive or; (ii) the actual operating cost of the flight, which shall be deemed to include fuel costs, pilot expenses and engine reserves. The Executive will be responsible for preparing and presenting acceptable documentation to the Corporation related to the aforementioned costs.

Restrictive Covenants . The Executive acknowledges and agrees that: (i) the Executive has a major responsibility for the operation, development and growth of the Corporation’s business; (ii) the Executive’s work for the Corporation has brought him and will continue to bring him into close contact with confidential information of the Corporation and its customers; and (iii) the agreements and covenants contained in this paragraph 4 are essential to protect the business interests of the Corporation and that the Corporation will not enter into the Agreement but for such agreements and covenants. Accordingly, the Executive covenants and agrees to the following:

(a)

Confidential Information . Except as may be required by the lawful order of a court or agency of competent jurisdiction, the Executive agrees to keep secret and confidential, both during the Employment Period and for five (5) years after the Executive’s employment with the Corporation terminates, all non-public information concerning the Corporation and its affiliates that was acquired by, or disclosed to, the Executive during the course of his employment by the Corporation or any of its affiliates, including information relating to customers (including, without limitation, credit history, repayment history, financial information and financial statements), costs, and operations, financial data and plans, whether past, current or planned and not to disclose the same, either directly or indirectly, to any other person, firm or business entity, or to use it in any way; provided , however , that the provisions of this paragraph 4(a) shall not apply to information that: (a) was, is now, or becomes generally available to the public (but not as a result of a breach of any duty of confidentiality by which the Executive is bound); (b) was disclosed to the Executive by a third party not subject to any duty of confidentiality to the Corporation prior to its disclosure to the Executive; or (c) is disclosed by the Executive in the ordinary course of the Corporation’s business as a proper part of his employment in connection with communications with customers, vendors and other proper parties, provided that it is for a proper purpose solely for the benefit of the Corporation. The Executive further agrees that he shall not make any statement or disclosure that (i) would be prohibited by applicable Federal or state laws, or (ii) is intended or reasonably likely to be detrimental to the Corporation or any of its subsidiaries or affiliates

(b)

Non Competition . The Executive agrees that for the period commencing

on the Commencement Date and ending on the eighteen (18) month anniversary if the Executive is terminated for cause or voluntarily resigns (the “ Non-Competition Period ”), the Executive shall not directly or indirectly, alone or as a partner, officer, director, employee, consultant, agent, independent contractor, member or stockholder of any person or entity (“ Person ”), engage in any business activity in the People’s Republic of China, the Republic of India, the United States of America or any other country in which the Corporation or any of its subsidiaries is then doing business, which is directly or indirectly in competition with the Business of the Corporation or which is directly or indirectly detrimental to the Business or business plans of the Corporation or its affiliates; provided , however , that the record or beneficial ownership by the Executive of five percent (5%) or less of the outstanding publicly traded capital stock of any company for investment purposes shall not be deemed to be in violation of this paragraph 4(b) so long as the Executive is not an officer, director, employee or consultant of such Person. The “ Business ” of the Corporation shall mean the actual or intended business of the Corporation during the Employment Period and as of the date the Executive leaves the employment of the Corporation, including, but not limited to, poly-generation and syngas production. As of the date hereof, the Business of the Corporation is to provide distributed power, utility services and coal gasification plant development, operations and maintenance based on coal gasification technology. The restrictions set forth in this paragraph 4(b) are not applicable to large scale public utilities that may have gasification operations , provided that these utilities do not utilize U-Gas or other low-Btu coal gasification technologies or the downstream products derived from these technologies. The Executive further agrees that during the Non-Competition Period, he shall not in any capacity, either separately or in association with others: (i) employ or solicit for employment or endeavor in any way to entice away from employment with the Corporation or its affiliates any employee of the Corporation or its affiliates; (ii) solicit, induce or influence any supplier, customer, agent, consultant or other person or entity that has a business relationship with the Corporation to discontinue, reduce or modify such relationship with the Corporation; nor (iii) solicit any of the Corporation’s identified potential acquisition candidates.

(c)

Remedies . If the Executive breaches, or threatens to commit a breach of any of the provisions contained in paragraphs 4(a) or 4(b) (the “ Restrictive Covenants ”), the Executive acknowledges and agrees that the Corporation shall have no adequate remedy at law and shall therefore be entitled to enforce each such provision by temporary or permanent injunction or mandatory relief obtained in any court of competent jurisdiction without the necessity of proving damages, posting any bond or other security, and without prejudice to any other rights and remedies that may be available at law or in equity.

(d)

Severability . If any of the Restrictive Covenants, or any part thereof, are held to be invalid or unenforceable, the same shall not affect the remainder of the covenant or covenants, which shall be given full effect, without regard to the invalid or unenforceable portions. Without limiting the generality of the foregoing, if any of the Restrictive Covenants, or any part thereof, are held to be unenforceable because of the duration of such provision or the area covered thereby, the parties hereto agree that the court making such determination shall have the power to reduce the duration and/or area of such provision and, in its reduced form, such provision shall then be enforceable.

(e)

Proprietary Rights . The Executive acknowledges and agrees that all know-how, documents, reports, plans, proposals, marketing and sales plans, client lists, client files, and any materials made by the Executive or by the Corporation are the property of the

Corporation and shall not be used by the Executive in any way adverse to the Corporation’s interests. The Executive shall not deliver, reproduce or in any way allow such documents or things to be delivered or used by any third party without specific direction or consent of the Board. The Executive hereby assigns to the Corporation any rights which he may have in any such trade secret or proprietary information.

Termination and Compensation Due Upon Termination . Except as otherwise provided under the executive benefit plans maintained by the Corporation in which the Executive participates in accordance with paragraph 3(f), the Executive’s right to compensation for periods after the date the Executive’s employment with the Corporation terminates shall be determined in accordance with the following:

(a)

Termination Without Cause . The Executive may only be terminated without cause by a majority vote of the Board (with the Executive recusing himself from such vote); provided that the Executive shall be entitled to be heard by the Board with respect to such termination prior to the Board’s vote. In the event the Corporation terminates the Executive’s employment under this Agreement without cause, the Corporation shall pay the Executive any compensation and benefits the Corporation owes to the Executive through the effective date of termination. Additionally, and conditioned upon the Executive’s voluntary execution of a written release (to be drafted and provided by the Corporation) of any and all claims, including without limitation any claims for lost wages or benefits, stock options, compensatory damages, punitive damages, attorneys’ fees, equitable relief, or any other form of damages or relief the Executive may assert against the Corporation, the Executive shall be entitled to receive:

(i)

all payment of his Base Salary (as of the date of termination date) in accordance with the provisions of paragraph 3(a) for the remainder of the Employment Period; provided , however , that any such payments shall not be for less than six (6) months;

(ii)

payment of any Bonus that otherwise would have been payable to the Executive under paragraph 3(e) through the effective date of termination; and

(iii)

any unvested stock options described in paragraph 3(h) shall automatically vest as of the date of such termination.

In the event the Board elects to terminate the Executive in connection with the Corporation materially and continuously (i.e., for a period of at least 6 consecutive quarters) failing to meet the financial targets reasonably established by the Board, then such termination shall be deemed a termination without cause and the Executive shall be entitled to receive all of the payments and benefits described in this paragraph 5(a) except that any unvested stock options described in paragraph 3(h) shall be deemed terminated and of no further force of effect.

(b)

Voluntary Resignation . The Executive may terminate his employment with the Corporation for any reason (or no reason at all) at any time by giving the Corporation one hundred twenty (120) days prior written notice of voluntary resignation; provided , however , that the Corporation may decide that the Executive’s voluntary resignation be effective (i) immediately upon notice of such resignation, or (ii) or such period that is less than the 120-day period set forth in the Executive’s notice of resignation. The Corporation shall have no

obligation to make payments to the Executive in accordance with the provisions of paragraph 3 for periods after the date on which the Executive’s employment with the Corporation terminates due to the Executive’s voluntary resignation. However, for purposes of this paragraph 5, the Executive’s termination of employment with the Corporation shall not be construed as a voluntary resignation and shall be construed as “good reason” if the Executive resigns following the occurrence of one of the following events:

(i)

the relocation of the Executive’s office outside of the greater Houston, Texas metropolitan area;

(ii)

a material breach of any of the provisions of this Agreement; or

(iii)

the failure by the Corporation to re-elect the Executive as a member of the Board.

If the Executive terminates his employment with the Corporation for “good reason”, then the Executive shall be entitled to receive:

(x)

(y)

payment of any Bonus that otherwise would have been payable to the Executive under paragraph 3(e) through the effective date of termination; and

(z)

any unvested stock options described in paragraph 3(h) shall automatically vest as of the date of such termination.

(c)

Termination for Cause . The Executive may only be terminated for cause by a majority vote of the Board; provided that the Executive shall be entitled to be heard by the Board with respect to such termination prior to the Board’s vote. The Corporation shall have no obligation to make payments to the Executive in accordance with the provisions of paragraph 3 or otherwise for periods after the Executive’s employment with the Corporation is terminated on account of the Executive’s discharge for cause. For purposes of this Agreement, the Executive shall be considered terminated for “ cause ” if he is discharged by the Corporation on account of the occurrence of one or more of the following events:

(i)

the Executive becomes habitually addicted to drugs or alcohol;

(ii)

the Executive discloses confidential information in violation of paragraph 4(a) and such disclosure has a material adverse effect on the Corporation, or engages in competition in violation of paragraph 4(b);

(iii)

the Corporation is directed by regulatory or governmental authorities to terminate the employment of the Executive or the Executive engages in activities that cause actions to be taken by regulatory or governmental authorities that have a material adverse effect on the Corporation;

(iv)

the Executive is indicted of a felony crime (other than a felony resulting from a minor traffic violation);

(v)

the Executive flagrantly disregards his duties under this Agreement after (A) written notice has been given to the Executive by the Board that it views the Executive to be flagrantly disregarding his duties under this Agreement and (B) the Executive has been given a period of ten (10) days after such notice to cure such misconduct;

(vi)

any event of egregious misconduct involving serious moral turpitude to the extent that, in the reasonable judgment of the Board, the Executive’s credibility and reputation no longer conform to the standard of the Corporation’s executives; or

(vii)

the Executive commits an act of fraud against the Corporation.

(d)

Disability . The Corporation shall have no obligation to make payments to the Executive in accordance with the provisions of paragraph 3 for periods after the date the Executive’s employment with the Corporation terminates on account of disability, except payments due and owing through the effective date of termination. The Executive, however, shall be entitled to retain all shares of stock that have vested as of such date. For purposes of this paragraph 5(d), determination of whether the Executive is disabled shall be determined in accordance with the Corporation’s long term disability plan (if any) and applicable law.

(e)

Death . The Corporation shall have no obligation to make payments to the Executive in accordance with the provisions of paragraph 3 for periods after the date of the Executive’s death, except payments due and owing as of such date. The Executive’s estate, however, shall be entitled to retain all shares of stock that have vested as of such date.

(f)

Stock Options . In the event of the termination of this Agreement (regardless of reason), and notwithstanding anything to the contrary contained herein, the Executive must exercise all vested stock options issued to the Executive pursuant to this Agreement within six (6) months after the effective termination date of this Agreement.

Change in Control; Gross-Up Payments .

(a)

A “ Change in Control ” shall be deemed to have occurred if in the context of a single event or series of related events, more than 50% of the voting power of the Corporation’s outstanding securities shall be acquired by any person (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) other than the shareholders of the Corporation as of December 31, 2005. If a Change in Control and any Change in Control Qualifying Event (as defined below) shall occur, the Executive shall be permitted to terminate his employment within sixty (60) days of such Change in Control Qualifying Event (to the extent that such Change in Control Qualifying Event is not the termination of this Agreement by the Corporation as provided below). For purposes hereof, a “ Change in Control Qualifying Event ” shall include the occurrence of any of the following within one hundred eighty (180) days following the occurrence of the Change in Control: (i) a termination of this Agreement by the Corporation other than for Cause, (ii) a significant diminution, without mutual agreement of the parties, in the

nature and scope of the Executive’s authority, power, functions or duties, (iii) the Corporation assigns to the Executive, without mutual agreement of the parties, substantial additional duties or responsibilities which are inconsistent with the duties of the Executive under this Agreement, or (iv) the Corporation’s requirement, without the Executive’s prior written consent, that the Executive perform the duties required of him under this Agreement at a home office location other than the greater Houston, Texas metropolitan area. Upon the occurrence of a Change of Control or a Change of Control Qualifying Event, all unvested stock options held by the Executive shall automatically vest on the effective date of the Change of Control, regardless of whether the Executive terminates his employment with the Corporation.

(b)

Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that the Executive shall become entitled to payments and/or benefits provided by this Agreement or any other amounts in the "nature of compensation" (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Corporation or any affiliate, any person whose actions result in a change of ownership or effective control of the Corporation covered by Section 280G(b)(2) of the Code or any person affiliated with the Corporation or such person) as a result of such change in ownership or effective control of the Corporation (a " Payment ") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the " Excise Tax "), then the Executive shall be entitled to receive an additional payment (a " Gross-Up Payment ") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.

(c)

All determinations required to be made under this paragraph 6, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by a nationally or regionally recognized accounting firm (the " Accounting Firm ") which shall provide detailed supporting calculations both to the Corporation and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Corporation. The Accounting Firm shall be jointly selected by the Corporation and the Executive and shall not, during the two years preceding the date of its selection, have acted in any way on behalf of the Corporation or its affiliated companies. All fees and expenses of the Accounting Firm shall be borne solely by the Corporation. Any Gross-Up Payment, as determined pursuant to this paragraph 6, shall be paid by the Corporation to the Executive within five (5) days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive with a written opinion, based upon "substantial authority" (within the meaning of Section 6230 of the Code), that failure to report the Excise Tax on the Executive's applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon the Corporation and the Executive, absent manifest error. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Corporation should have been made (" Underpayment "), consistent with the calculations required to be made hereunder. In

the event that Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Corporation to or for the benefit of the Executive.

Successors and Assignment . Subject to the Executive’s rights under paragraph 6, this Agreement shall be binding on, and inure to the benefit of the Corporation and its successors and assigns and any person acquiring, whether by merger, consolidation, purchase of all or substantially all of the Corporation’s assets and business, or otherwise without further action by the Executive; provided however, that Executive hereby agrees to execute an acknowledgement of assignment if requested to do so by the successor, assign or acquiring person. The Corporation may assign this agreement to any of its direct and indirect subsidiaries.

Nonalienation . The interests of the Executive under this Agreement are not subject to the claims of his or her creditors, other than the Corporation, and may not otherwise be voluntarily or involuntarily assigned, alienated or encumbered except to the Executive’s estate upon his or her death.

Waiver of Breach . The waiver by either the Corporation or the Executive of a breach of any provision of this Agreement shall not operate as, or be deemed a waiver of, any subsequent breach by either the Corporation or the Executive.

10.

Notice . Any notice to be given hereunder by a party hereto shall be in writing and shall be deemed to have been given when received or, when deposited in the U.S. mail, certified or registered mail, postage prepaid:

(a)

to the Executive addressed as follows:

Timothy E. Vail

5106 Doliver

Houston, Texas 77056

Tel: (713) 898 - 0444

Fax: (713) 979 - 9341

(b)

to the Corporation addressed as follows:

Synthesis Energy Systems, Inc.

13077 Westella Drive

Houston, Texas 77077

Attn: Chairman of the Board

Tel: (713) 898 - 0444

Fax: (713) 979 - 9341

11.

Amendment . This Agreement may be amended or canceled by mutual agreement of the parties in writing without the consent of any other person and no person, other than the parties hereto (and the Executive’s estate upon his death), shall have any rights under or interest in this Agreement or the subject matter hereof. The parties hereby agree that no oral

conversations shall be deemed to be a modification of this Agreement and neither party shall assert the same.

12.

Applicable Law; Jurisdiction . The provisions of this Agreement shall be construed in accordance with the internal laws of the State of Delaware. Harris County district courts shall have jurisdiction with regard to all matters relating to the interpretation and enforcement of this Agreement.

13.

ATTORNEY AND TRIAL COSTS . IN REGARD TO ANY CIVIL ACTION THAT MAY ARISE FROM THIS AGREEMENT, OR THE RELATIONSHIP OF THE PARTIES HERETO, THE PREVAILING PARTY IN SUCH ACTION SHALL BE ENTITLED TO RECOVER ITS ATTORNEYS’ FEES AND COSTS INCURRED TO ENFORCE ANY OF ITS RIGHTS HEREUNDER; PROVIDED, HOWEVER, THAT A PARTY SHALL NOT BE DEEMED A PREVAILING PARTY IN THE EVENT A TEMPORARY RESTRAINING ORDER OR A TEMPORARY INJUNCTION IS ISSUED IN FAVOR OF SUCH PARTY.

14.

Termination . All of the provisions of this Agreement shall terminate after the expiration of the Employment Period, except that paragraph 4(a) shall survive for five (5) years after the expiration of this Agreement and paragraph 4(b) shall terminate upon the expiration of the Non-Competition Period.

* * *

IN WITNESS WHEREOF, the Executive and the Corporation have executed this Agreement as of the day and year first above written.


/s/ Timothy E. Vail
TIMOTHY E. VAIL
SYNTHESIS ENERGY SYSTEMS, INC

By:	/s/ Lorenzo Lamadrid
Its:	Chairman

SCHEDULE 2

EXECUTIVE’S OUTSIDE ACTIVITIES

The Village Partnership Ltd, The Village School, L.P.

Position – Owner and Director

Business – Pre-K through 8 ^th grade private school

Kelvin Networks, LLC

Position – Founder and Director

Business – Remotely managed HVAC control system developer

First Element, LLC

Position – Director

Business – Hydrogen and Fuel Cell consulting services

Peter R Vail Oil and Gas Partners

Position – Partner

Business – Oil and Gas Investments

Ciboney Partners, LLC

Position – Partner

Business – Aviation Charter

Reposado, Inc.

Position – Principal and director

Business – Boat Charter

Exhibit 10.15

SHAREHOLDER’S LOAN AGREEMENT

THIS SHAREHOLDER’S LOAN AGREEMENT (the "Agreement") is entered into and effective as of the 20th day of March , 2007, by and between Synthesis Energy Systems Investments, Inc., a company incorporated in Mauritius ("Party A") and Synthesis Energy Systems (Zaozhuang) New Gas Company Ltd., a sino-foreign joint venture company established in Zaozhuang, Shandong Province, PRC (“Party B”).

Party A is willing to provide to Party B the shareholder’s loan, subject to certain terms and conditions; and

Party B desires to borrow from Party A the shareholder’s loan to partially finance the difference between its total investment amount and its registered capital.

NOW, THEREFORE, Party A and Party B agree as follows:

The Loan .

1.1

Amount . Party A agrees upon the terms and conditions of this Agreement, to loan to Party B, and Party B agrees to borrow from Party A, the shareholder’s loan of amount US$ 3,271,330 (“the Loan”).

1.2

Subordinate Loan . Party A and Party B hereby agree and acknowledge that (i) the Loan shall be subordinate to any other loans that Party B may borrow from Industrial and Commercial Bank of China from time to time to finance the difference between its total investment amount and its registered capital (“ICBC Loans”), and (ii) any repayment of principal of the Loan would not commence until the ICBC Loans are fully repaid unless otherwise expressly permitted by the lender(s) of the ICBC Loans.

1.3

Use Purpose . The Loan may only be used for the purposes of developing, constructing, owning, operating and managing a gasification production plant as described in Article 7 and Article 8 of the Articles of Association of Party B.

1.4

Interest . The Loan shall bear interest on the aggregate unpaid principal amount at any given time, at a rate per annum of 6%. Interest shall be settled annually

SESI – SESZZH Shareholder’s Loan Agreement

1 / 4

at each anniversary of the disbursement of the Loan, and shall be payable annually to Party A within 21 days of receiving notice in writing from Party A. Any principal amount which is not paid when due under this Agreement shall bear interest from and including the date due until the date of payment in full thereof at a rate per annum equal to18%. Interest shall be accrued, compounded annually and payable upon payment in full or any prepayment of the unpaid principal amount thereof. Any tax on interest income, whether in the PRC or abroad, shall be borne by Party A.

1.5

Repayment of Principal . This Loan shall have a term of 9 years (i.e. shall be payable immediately on the 720 ^th calendar day after the ICBC Loans are fully repaid). Party B may repay the principal in part or in full (i) within the above 720-day period or (ii) at any time after the ICBC Loans are fully replaced by other loan(s).

Disbursement .

2.1

General . Party A agrees to make a single full disbursement of the Loan to Party B within 5 days of receiving notice in writing from Party B, provided that the conditions set forth herein have been satisfied.

2.2

Conditions to Disbursement . The obligation of Party A to disburse the Loan shall be subject to the following conditions:

(a)

Party B providing to Party A document evidencing that the Agreement has been properly registered with the relevant authority in charge of the administration of foreign exchange of China; and

(b)

Party B providing to Party A a copy of the board resolution of Party B that approves and accepts the Agreement.

Defaults and Remedies .

3.1

Events of Default . Any of the following events shall constitute an "Event of Default."

(a)

Failure of Party B to pay when due any principal, interest or other amounts owing pursuant to this Agreement;

SESI – SESZZH Shareholder’s Loan Agreement

2 / 4

(b)

If Party B admits in writing its inability to pay its debts as they mature, applies to any tribunal for the appointment of a trustee or receiver of any substantial part of its assets, or commences any proceedings with respect to itself under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution, liquidation or other similar law of any jurisdiction;

(c)

If any such application or any such proceedings described in (b) above are filed or commenced against Party B and Party B indicates its approval, consent or acquiescence, or an order is entered adjudicating Party B bankrupt or insolvent, or approving the application or petition in any such proceedings, and such order remains in effect for 30 days;

(d)

If the Board of Director of Party B approves the dissolution or winding up of Party B.

3.2

Remedies . Upon the occurrence and during the continuance of an Event of Default, Party A at its option and with notice as provided in Section 4.1 below to Party B may do any one or more of the following and such rights shall not be prejudiced by any other terms of this Agreement:

(a)

Declare all indebtedness arising hereunder immediately due and payable and credit any sums received thereafter in such manner as it elects, in its sole discretion, against such indebtedness. Such application shall not operate to waive or cure any default existing under this Agreement or to invalidate any notice of default or any action pursuant to such notice and shall not prejudice any rights of Party A under document contemplated in or by this Agreement.

(b)

Exercise any or all rights and remedies granted pursuant to this Agreement or any other agreement or document contemplated in or by this Agreement or otherwise permitted by law.

Miscellaneous .

4.1

Notices . All notices and communications required or permitted under this Agreement must be in writing and sent by electronic mail. Such notices and

SESI – SESZZH Shareholder’s Loan Agreement

3 / 4

communications will be deemed to have been given upon receipt.

4.2

Governing Law . Both Party A and Party B shall strictly comply with the relevant laws and regulations of the PRC and each Party shall effectively carry out its own obligations and responsibilities. The interest shall be paid and the principal shall be repaid according to the agreed schedule. Repayment of the Loan and payment of interest shall require the approval of the relevant authority in charge of the administration of foreign exchange in the location where Party B is registered.

4.3

Successors . This Agreement shall be binding upon and shall inure to the benefit of Party A and Party B and their respective successors.

4.4

Counterparts . This Agreement may be executed in any number of counterparts, each of which when so delivered will be deemed an original, and all of which will constitute but one and the same instrument.

4.5

Amendment; Waiver . This Agreement may not be amended or modified except by writing executed by Party A and Party B. No right under this Agreement may be waived except by writing signed by the party waiving such right, and no waiver of one breach of this Agreement will constitute a waiver of subsequent breaches of the same or of a different nature.

4.6

Entire Agreement . This Agreement constitutes the entire agreement and understanding of the parties regarding the subject matter hereof and supersedes all prior and contemporaneous agreements or understandings, whether written or oral, with respect thereto.

IN WITNESS WHEREOF, Party A and Party B have each caused this Agreement to be executed and delivered on the date first set forth above.

SYNTHESIS ENERGY SYSTEMS

SYNTHESIS ENERGY SYSTEMS (ZAOZHUANG)

INVESTMENTS, INC.

NEW GAS COMPANY LTD.


By:	/s/ Donald P. Bunnell	By:	/s/ Da Li Huang
	Donald P. Bunnell, Director		Huang Da Li, Director

SESI – SESZZH Shareholder’s Loan Agreement

4 / 4

Exhibit 10.16

Contract No.: 16050051-2007 Year （Xuecheng） Zi No. 0008

Industrial and Commercial Bank of China

Fixed Assets Loan Contract


Borrower (Party A):	Synthesis Energy Systems (Zaozhuang) New Gas Company Ltd.
Domicile (address):	68 Lin Quan Road Xuecheng
Legal Representative:		Timothy E. Vail


Lender (Party B):	Industrial and Commercial Bank of china Zaozhuang Xuecheng Branch
Domicile (address):		4 Yong Fu Road, Xuecheng District
Legal Representative (Person in Charge):			Chen Wei Dong

Content

Article 1

Party A’s Representations and Warranties

Article 2

Type of Loan

Article 3

Purpose of Loan

Article 4

Amount and Term of Loan

Article 5

Interest Rate and Calculation of Interest

Article 6

Conditions of Drawdown

Article 7

Drawdown Arrangement

Article 8

Source of Repayment and Repayment

Article 9

Security

Article 10

Rights and Obligations of Each Party

Article 11

Liability for Breach of Contract

Article 12

Effectiveness, Amendment and Termination of Contract

Article 13

Dispute Resolution

Article 14

Other Matters

Article 15

Supplementary Provisions

Party A has made an application to Party B for a loan for the purpose as set out in Article 3.1 of this Contract. Party B has agreed to provide such a loan to Party A. In order to set out the rights and obligations of each Party, Party A and Party B, upon negotiations on an equal basis and agreement, hereby enter into this Contract according to the PRC Contract Law, General Provisions on Loans and other relevant laws and regulations.

Article 1 Party A’s Representations and Warranties

1.1

It is a lawfully established entity with the status of a legal person (or a branch duly authorized by a legal person) which is competent at law in performing this Contract.

1.2

The proposed project for which the loan is borrowed under this Contract has been approved by the competent government authority.

1.3

The accounting statements and materials provided in relation to investigation, review and management of the project financing are authentic, accurate and complete.

Article 2 Type of Loan

2.1

The loan under this Contract shall be a fixed assets loan.

Article 3 Purpose of Loan

3.1

The purpose of the loan under this Contract shall be: Comprehensive Utilization of
Resource Gasification Project.

3.2

Without written consent of Party B, Party A shall not change the purpose of loan specified in this Contract.

Article 4 Amount and Term of the Loan

4.1

The amount of the loan under this Contract shall be RMB Ninety Two Million (in words), 92,000,000 (in number) (in case of any discrepancy between the two, the former shall prevail; the same will apply below).

4.2

The term of loan under this Contract shall be 84 month(s) effective from
March 22, 2007 and expiring upon March 21, 2014 .

Article 5 Interest Rate and Calculation of Interest

5.1

The interests on the loan under this Contract shall be calculated from the actual drawdown date and on the basis of the actual borrowing days (daily interest rate = annual interest rate/360). The interests shall be settled monthly (monthly/quarterly) and the settlement date shall be the 20 ^th of each month (the 20th of each month/the 20th of the last month of each quarter) or the next working day if the aforesaid date falls on a non-working day of bank. Upon maturity of the loan,

the interests shall be paid together with the repayment the principal sum.

5.2

The interest rate for the loan under this Contract shall be determined according to Article 5.2.2 :

5.2.1

The interest rate per annum shall be a fixed rate of ---- %. No adjustment
shall be made during the term of the Contract.

5.2.2

The interest rate under this Contract shall be --- % ---- (above/below) the corresponding base rate as announced by the People’s Bank of China. The interest rate shall be adjusted once for each year (year/half year/quarter/month). The interest rate for the first period shall be determined on the effective date of the Contract by Party B based on the corresponding base rate of the People’s Bank of China on such a date and the fluctuating range agreed by both Parties, i.e. interest rate per annum of 7.11 %. The interest rate for the second period and subsequent periods shall be determined on the corresponding date(s) after the Contract comes into effect, which shall be determined by Party B based on the corresponding base rate of the People’s Bank of China on such date and the fluctuating range agreed by both Parties. If any adjustment is made in a certain month where there exists no such a corresponding to the effective date of the Contract, the last day of such month shall be the corresponding date.

In case of installment drawdowns, the interest rate for each drawdown within the same period shall be the rate for such a period as determined on the effective date of the Contract or its corresponding date regardless of the number of drawdowns during the same period and the interest rate of such drawdowns will be adjusted on the corresponding date for next period.

The date corresponding to the effective date of the Contract refers to the corresponding date of upon expiry of one period from the Contract effective date of the Contract upon expiry of one installment period, e.g, if the effective date of the Contract is the 9 ^th of May and period is one month, the corresponding day of the second period shall be the 9 ^th of June in the same year; in case the period is one quarter, the 9 ^th of August in the same year; in case the period is 6 months, 9 ^th of November in the same; in case the period is one year, the 9 ^th of May in the following year, and this principle shall apply to any subsequent period by analogy.

5.2.3

Others:             --

                     .

Party B shall notify Party A in writing within 30 days of the date the interest rate is changed, provided whether such notice has been delivered to Party A shall not affect the implementation of such change.

5.3

In case the interest rate or the method to calculate the rate has been adjusted by the People’s Bank of China, the matters shall be handled in accordance with the relevant stipulations of the People’s Bank of China.

Article 6 Conditions for Drawdown

6.1

Party A shall satisfy the following conditions prior to each drawdown:

6.1.1

the guaranty contract is lawfully executed and has become effective;

6.1.2

the project funds or other funds to be raised for the proposed project for which loans are borrowed under this Contract are in place in full in accordance with the specified time(s) and proportion(s);

6.1.3

there is no overrun of cost or any overrun of cost has been resolved through self-financing;

6.1.4

the project is in progress as scheduled;

6.1.5

the formalities for drawdown have been completed according to the provisions of the Contract;

6.1.6

no event of default under this Contract has occurred; and

6.1.7

other relevant materials in relation to the loaning have been provided according to Party B’s request.

Article 7 Drawdown Arrangement

7.1 The drawdown of the loan under this Contract shall be in accordance with the 7.1.1 of the following:

7.1.1

Party A shall draw the loan in full amount on March 22, 2007 and transfer the entire loan into the account opened with Party B;

7.1.2

Party A shall draw the loan by -- installments, the detail amounts and dates are as follows:

7.1.2.1 amount -- (in words) -- (in number) on -- ( dd/mm/yyyy);

7.1.2.2 amount -- (in words) -- (in number) on -- ( dd/mm/yyyy);

7.1.2.3 amount -- (in words) -- ( in number) on -- ( dd/mm/yyyy);

7.1.2.4 amount -- (in words) -- (in number) on -- ( dd/mm/yyyy);

7.1.2.5 amount -- (in words) -- (in number) on -- ( dd/mm/yyyy);

7.1.3

Other methods of drawdown:

7.2

Party A shall draw the loan according to Article 7.1 of this Contract. In case of changing the drawdown date, Party A shall submit a written application stating the reasons for the change, and with the written consent of Party B, Party A may have an early drawdown or defer the drawdown for -- days.

7.3

If Party A requests to cancel the loan not drawn totally or partially, it shall submit a written application 30 days prior to the drawdown date as determined under this Contract, and may cancel such amounts with the written consent of Party B.

7.4

The particular drawdown date(s) and repayment date(s) under this Contract shall be the actual date(s) recorded on the credit note(s) concluded between the two Parties. The credit note(s) or loan voucher(s) are integral part of this Contract. In case of any discrepancy between the matters (excluding the dates) recorded on such note(s) or voucher(s), the Contract shall prevail.

Article 8 Source of Repayment and Repayment

8.1

The source of funds for repaying the principal and interests under this Contract by Party A includes but not limited to:

8.1.1

All revenue of the entire company

;

8.1.2

8.2

WHATEVER AGREEMENTS IN RESPECT TO PARTY A’S SOURCE OF REPAYMENT ARE MADE UNDER ANY OTHER CONTRACTS TO WHICH PARTY A IS A PARTY, SUCH AGREEMENTS SHALL NOT AFFECT PARTY A’S REPAYMENT OBLIGATIONS UNDER THIS CONTRACT. UNDER NO CIRCUMSTANCES WILL PARTY A BE ALLOWED TO REFUSE PERFORMING ITS REPAYMENT OBLIGATIONS UNDER THIS CONTRACT ON THE BASIS OF ARTICLE 8.1.

8.3

Party A shall pay the interests in full and at the agreed time under this Contract and repay the principal according to the following:

8.3.1

one time repayment: Party A shall repay the principal in full on -- ;

8.3.2

repayment in installments, the detail repayment amounts and dates are as follows:

8.3.2.1

RMB Seven Million Seven Hundred Thousand (in words) ( RMB 7,700,000 in number) on September 22, 2008 ;

8.3.2.2

RMB Seven Million Seven Hundred Thousand (in words) ( RMB 7,700,000 in number) on March 20, 2009 ;

8.3.2.3

RMB Seven Million Seven Hundred Thousand (in words) ( RMB 7,700,000 in number) on September 22, 2009 ;

8.3.2.4

RMB Seven Million Seven Hundred Thousand (in words) ( RMB 7,700,000 in number) on March 20, 2010 ;

8.3.2.5

RMB Seven Million Seven Hundred Thousand (in words) ( RMB 7,700,000 in number) on September 22, 2010 ;

8.3.2.6

RMB Seven Million Seven Hundred Thousand (in words) ( RMB 7,700,000 in number) on March 22, 2011 ;

8.3.2.7

RMB Seven Million Seven Hundred Thousand (in words) ( RMB 7,700,000 in number) on September 22, 2011 ;

8.3.2.8

RMB Seven Million Seven Hundred Thousand (in words) ( RMB 7,700,000 in number) on March 22, 2012 ;

8.3.2.9

RMB Seven Million Seven Hundred Thousand (in words) ( RMB 7,700,000 in number) on September 21, 2012 ;

8.3.2.10

RMB Seven Million Seven Hundred Thousand (in words) ( RMB 7,700,000 in number) on March 22, 2013 ;

8.3.2.11

RMB Seven Million Seven Hundred Thousand (in words) ( RMB 7,700,000 in number) on September 20, 2013 ;

8.3.2.12

RMB Seven Million Three Hundred Thousand (in words) ( RMB 7,300,000 in number) on March 21, 2014 .

8.3.3

Other method of repayment:

8.4

If Party A intends to make an early repayment of the loan, it shall submit a written application to Party B 30 days prior to the proposed repayment date and obtain the written consent from Party B.

8.5

Party A’s early repayment shall be subject to Party B’s consent and Party A shall compensate Party B for the loss of anticipated income and other expenses. The principal to be repaid shall be no less than RMB -- (in words) which shall be the integer times of RMB -- (in words).

8.6

THE PRINCIPAL REPAID EARLY BY PARTY A SHALL BE OFFSET OR DEDUCED IN THE

REVERSE ORDER OF REPAYMENT AS SET OUT IN ARTICLE 8.3.2.

8.7

Party A shall deposit sufficient amount in the account opened by Party B to cover the interests or principal payable for the current period on the interest settlement date or principal repayment date as agreed under this Contract, and authorize Party B to draw such amount on its own initiative from Party A’s account on such agreed settlement date or repayment date.

Article 9 Security

9.1

The security for the loan under this Contract shall be: Guaranty

9.2

Party A shall assist Party B and procure that Party B and the guarantor execute the security contract (No. 16050051-2007year(Guranty)Zi No. 00034 ) in relation to the security matters under this Contract.

9.4

If any change has occurred to the security under this Contract which has an adverse effect on Party B’s right as a creditor, upon Party B’s notification, Party A shall provide a separate security satisfactory to Party B as requested.

Article 10 Rights and Obligations of Each Party

10.1

Party A’s rights and obligations:

Party A shall

10.1.1 draw and use the loan according to the time limits and purpose provided in this Contract;

10.1.2 not pre-repay the loan without Party B’s written consent;

10.1.3

accept Party B’s investigation into and supervision over the use of the loan under this Contract;

10.1.4

cooperate actively with Party B in its investigation into and supervision over relevant production, operation, project construction and financial conditions, assume the obligations to provide Party B with the relevant statements and materials such as profit and loss statements and balance sheets for each period;

10.1.5

support Party B in its involvement in the review of the “three matters” (budgetary estimate, budgeting and final accounting) for the financed project, project tendering and inspection and acceptance upon completion and relevant matters;

10.1.6

repay the principal and interests of the loan under this Contract according to the provisions in this Contract;

10.1.7

bear the relevant costs incurred under this Contract, including but not limited to the fees for matters such as notarization, appraisal, evaluation and registration;

10.1.8

in respect of the collection letter(s) or collection documents posted or otherwise delivered by Party B, send out the return receipt within 3 days upon receipt and signature;

10.1.9

IN CASE PARTY A HAS CARRIED OUT A CONTRACTING OUT OF THE WHOLE BUSINESS, RESTRUCTURE OF SHAREHOLDING, CONSOLIDATION, MERGER, ACQUISITION, JOINT VENTURE, SEPARATION, CAPITAL REDUCTION, CHANGE IN SHAREHOLDING, TRANSFER OF MAJOR ASSETS AND OTHER ACTS WHICH MAY AFFECT PARTY B’S RIGHTS AND INTERESTS, NOTIFY PARTY B WITH A 30 DAYS PRIOR NOTICE AND OBTAIN PARTY B’S WRITTEN CONSENT, OR NO AFORESAID ACT SHALL BE CARRIED OUT BEFORE ALL THE DEBTS HAVE BEEN REPAID;

10.1.10

notify Party B in writing any change of the registered matters with the industry and commerce bureau including domicile, address, business scope and legal representative within 7 days after change of the relevant matters;

10.1.11

notify Party B in writing any other occurrences which may endanger its normal operation or has significant adverse consequences on its performance of repayment obligations under this Contract, including but not limited to involving in major economic disputes, bankruptcy, deterioration of financial conditions; and

10.1.12

in case of business close-down, dissolution, suspension for rectification, business license revocation or cancellation, notify Party B within 5 days upon occurrence of such event and repay the principal and interests promptly.

10.1

Party B’s rights and obligations:

Party B shall

10.2.1

request Party A to provide all the materials in relation to the loan under the Contract;

10.2.2

transfer from Party A’s account the principal, interests, compound interests, penalty interests, and all other payable expenses Party A is obliged to pay hereunder according to the provisions of this Contract or law;

10.2.3

IN RESPECT PARTY A EVADES PARTY B’S SUPERVISION, DEFERS PAYMENT OF THE PRINCIPAL AND INTERESTS OR OTHER MATERIAL BREACH OF CONTRACT, BE ENTITLED TO IMPOSE CREDIBILITY SANCTIONS, REPORT

TO THE RELEVANT AUTHORITIES OR UNITS AND PUBLISH THE COLLECTION NOTICE THROUGH THE NEWS MEDIA;

10.2.4

provide Party A the loan in full and on time according to the provisions of this Contract (except where delay is caused due to Party A’s reason); and

10.2.5

keep confidential the materials and circumstances provided by Party A in relation to its debts, finance, production and operation, unless otherwise agreed in this Contract or required by laws and regulations.

Article 11 Liability for Breach of Contract

11.1 After the Contract comes into effect, Party A and Party B shall perform respectively the obligations agreed in this Contract. The Party who has failed to perform the agreed obligations hereunder entirely or partially shall bear the liability for breach of the Contract according to law.

11.2

If Party A fails to handle and draw the loan according to Article 7.1 under this Contract, Party B has the right to collect delay damages for the days delayed at the contracted interest rate;

11.3

If Party B fails to handle and provide the loan according to Article 7.1 under this Contract, it shall pay the delay damages for the days delayed at the contracted interest rate.

11.4

IF PARTY A REPAYS THE LOAN UNDER THIS CONTRACT EARLY WITHOUT PARTY B’S WRITTEN CONSENT, PARTY B SHALL HAVE THE RIGHT TO COLLECT THE INTERESTS ACCORDING TO THE TERM AND RATE AGREED IN THIS CONTRACT;

11.5

IF PARTY A FAILS TO REPAY THE PRINCIPAL AND INTERESTS THEREON UNDER THIS CONTRACT UPON MATURITY, PARTY B SHALL HAVE THE RIGHT TO REQUEST REPAYMENT WITHIN A SPECIFIED PERIOD. PARTY A AUTHORIZES PARTY B TO DEDUCT FROM ALL ITS ACCOUNTS OPENED AT THE INDUSTRIAL AND COMMERCIAL BANK OF CHINA AND ALL ITS BRANCHES TO REPAY THE DEBTS UNDER THIS CONTRACT. IN ADDITION, PENALTY INTERESTS MAY BE IMPOSED ON THE OVERDUE LOAN AT A RATE OF CONTRACTED RATE PLUS 50% (30-50%), AND COMPOUND INTERESTS MAY BE IMPOSED ON THE OVERDUE INTERESTS AT A RATE OF CONTRACTED RATE PLUS 50% (30-50%).

IN CASE COLLECTION IS BASED ON FOREIGN CURRENCY, IT SHALL BE CONVERTED BASED ON THE BUYING RATE PUBLISHED BY PARTY B ON THE COLLECTION DATE.

11.6

If Party A uses the loan for other purpose other than the purpose agreed in this Contract, Party B is entitled to cease its provision of the loan, pre-draw back the loan entirely or partially, or terminate the Contract, and collect penalty interests for the loan used by Party A in breach of the Contract based on the dates of such use at a rate of contracted rate plus 50% (50-100%), and collect compound interests for the overdue interests at a rate of contracted rate plus 50% (50-100%).

11.7

Within the term of loan, the compound interests on any overdue interests shall be collected at the contracted rate. Upon expiry of loan term, the compound interests shall be collected at the rate(s) agreed in Article 11.5.

11.8

In case of simultaneous occurrence of circumstances set out in Article 15 and 16 in respect to Party A’s use of loan, Party B may impose penalty using the more onerous one but not both.

11.9

IF PARTY A COMMITTED ANY OF THE FOLLOWING, IT SHALL RECTIFY AND ADOPT REMEDIAL MEASURES SATISFACTORY TO PARTY B WITHIN 7 DAYS UPON RECEIPT OF PARTY B’S NOTICE. PARTY B MAY OTHERWISE CEASE OR CANCEL THE LOAN WHICH HAS NOT BEEN DRAWN AND USED BY PARTY A, PRE-DRAW BACK THE LOAN ENTIRELY OR PARTIALLY. IF THE LOAN CANNOT BE DRAWN BACK, DAMAGES WILL BE IMPOSED AT A DAILY OVERDUE INTEREST RATE:

11.9.1

providing Party B with false balance sheets, profit and loss statements and other financial materials or conceal important facts in connection therewith;

11.9.2

failing to cooperate with or refuse to accept Party B’s supervision over its use of loan and the relevant production, operation and financial activities;

11.9.3

transferring or disposing, or threatening to transfer or dispose its major assets without Party B’s consent;

11.9.4

the substantial part of or its entire assets are in possession of other creditor(s), or under custody of the designated trustee, receiver or similar person(s), or seized or frozen, which may cause Party B to suffer substantial losses;

11.9.5

carrying out a contracted lease, restructure of shareholding, consolidation, merger, acquisition, joint venture, separation, capital reduction, change in shareholding, transfer of major assets and other acts which may affect Party B’s rights and interests, without Party B’s consent, which may endanger Party B’s rights as a creditor;

11.9.6

changing matters registered with the industry and commerce bureau including the domicile, address, business scope, legal representative or such circumstances of major investment made, which has significant consequences on or has threatened Party B’s realization of its creditor rights;

11.9.7

involving in major economic disputes or deterioration of financial conditions, which has significant consequences on or has threatened Party B’s realization of creditor rights; or

11.9.8

any other matters which may threaten Party B’s realization of creditor rights under this Contract or cause Party B to suffer substantial losses.

Article 12 Effectiveness, Amendment and Termination of Contract

12.1

The Contract shall come into effect upon signature and chop by Party A and Party B, (where security is involved, the Contract shall come into effect after the security contract becomes effective), and expires on the date that the principal, interests, compound interests, penalty interests, damages and all other payable expenses under this Contract are fully settled.

12.2

UNDER ANY OF THE FOLLOWING CIRCUMSTANCE, PARTY B IS ENTITLED TO TERMINATE THE CONTRACT AND REQUEST PARTY A TO REPAY THE PRINCIPAL AND INTERESTS IN ADVANCE AND COMPENSATE FOR THE LOSSES:

12.2.1

PARTY A IS CLOSED DOWN, DISSOLVED, SUSPENDED FOR RECTIFICATION, OR ITS BUSINESS LICENSE IS REVOKED OR CANCELLED;

12.2.2

ANY CHANGE TO THE SECURITY UNDER THIS CONTRACT HAS OCCURRED WHICH HAS AN ADVERSE EFFECT TO PARTY B’S RIGHT AS A CREDITOR, AND PARTY A HAS FAILED TO PROVIDE SEPARATE SECURITY AS REQUESTED BY PARTY B; OR

12.2.3

Party A has failed to repay the loan as scheduled, failed to use the loan for purpose as agreed, OR FAILED TO PAY THE INTERESTS OR OTHER MATERIAL BREACH OF THE CONTRACT.

12.3

If Party A intends to extend the term of the loan, it shall submit a written application and a written statement indicating that the guarantor agrees to provide continuous security to Party B 30 days prior to expiry date of this Contract. Upon Party B’s review and consent and after the agreement to extend the loan is signed, the loan under this Contract shall be extended accordingly. This Contract shall remain in force before the agreement to extend the loan is signed.

12.4

After the Contract become effective, unless otherwise provided, neither Party shall amend the Contract or have an early termination of the Contract without consent of the other Party. In case the Contract needs to be amended or terminated, the Parties shall enter into a written agreement based on negotiations between the Parties. Before any such a written agreement has been entered into between the Parties, the Parties shall continue to perform the Contract.

Article 13 Dispute Resolution

13.1

Any dispute between Party A and Party B arising out of the performance of the Contract shall be settled through negotiation by the Parties.

If no settlement can be reached through negotiations, it shall be settled according to 13.1.2
of the following:

13.1.1

submit the dispute to -- for arbitration; or

13.1.2

file a lawsuit in the court where Party B is located.

Article 14 Other Matters

14.1

Party A and Party B are to enter into Project Construction Fund Supervision Agreement and to authorize Party B to supervise the payments under the project funds to ensure that funds are used on project construction.

14.2

All sales proceeds after construction completion shall be settled through Party B. Without the consent from Party B, no addition in external financing shall be allowed. Party B’s consent shall be required before engaging in large scale project investments.

14.3

Annual profit distribution plans shall require the approval from Party B, and no profit distribution shall be made for a period if loans due during that period are not repaid according to plan. Assets of the completed project shall be mortgaged to the Loan. Insurance shall be bought for the project assets, and proceeds from insurance claims shall be a source of loan repayment. If any of the above provisions are breached, the lending bank has the right to declare that the loan repayments are immediately due, to halt the loan drawdown or to recover the loan early.

Article 15 Supplementary Provisions

15.1

The attachment(s) hereto shall be integral parts of this Contract and have the same legal effect and force of the Contract.

15.2

During the performance of the Contract, a drawdown date or repayment date shall be the next working day where such date falls on a non-working day of the bank.

15.3

The Contract is made in two originals, Party A, Party B and -- Party shall each have one original copy and each copy has the same legal effect and force.

Party A (Company Chop):

Party B (Company Chop):

[Official chop of Party A stamped]

[Official chop of Party B stamped]

Legal Representative:

Legal Representative (or Person in Charge):

/s/ Don Bunnell

/s/ Chen Wei Dong

(or Authorized Representative)

Date:

March 22, 2007

Date:

March 22, 2007

Exhibit 16.1

March 30, 2007

Securities and Exchange Commission

100 F Street, NE

Washington, D.C. 20549

Ladies and Gentlemen:

We have read Synthesis Energy Systems, Inc.’s statements concerning our Firm included in the “Changes in and Disagreement with Accountants” section of the Registration Statement on Form SB-2 (No. 333-140367) dated January 31, 2007, as amended on March 30, 2007, which has been filed with the Securities and Exchange Commission. We agree with the statements concerning our Firm contained therein.

Very truly yours,

/s/ KPMG Huazhen

Exhibit 16 1 - Letter regarding change in certifying accountants (2)

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

The Board of Directors

Synthesis Energy Systems, Inc.:

We consent to the use of our report dated January 25, 2007, with respect to the consolidated balance sheets of Synthesis Energy Systems, Inc. as of June 30, 2006 and 2005, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the years in the two year period ended June 30, 2006 and the period from November 4, 2003 (inception) to June 30, 2006 included herein and to the reference to our firm under the heading “Experts” in the registration statement.

/s/ KPMG LLP

Houston, Texas

March 28, 2007