XI'AN, China, May 18 /PRNewswire-Asia-FirstCall/ --

    -- First Quarter 2010 revenue increased 215.1% to $24.5 million; adjusted
       net income increased 241.6% to $4.9 million, with adjusted EPS of $0.33
    -- Company reaffirmed 2010 revenue and adjusted net income of at least
       $105 million and $25 million, respectively, representing an increase of
       approximately 128.3% and 127.3% compared to 2009
    -- Management to host Earnings Conference Call on Tuesday May 18, 2010 at
       10:30 a.m. EDT

Sino Clean Energy, Inc. (OTC Bulletin Board: SCLX; "Sino Clean Energy," or the "Company"), a leading producer and distributor of coal-water slurry fuel ("CWSF") in the People's Republic of China ("China"), today announced the Company's financial results for the first quarter of 2010.


    First Quarter Results (USD)
    (three months ended March 31)
                                     2010               2009         CHANGE
    Revenue                    $24.5 million        $7.8 million     +215.1%
    Gross Profit               $10.1 million        $2.4 million     +316.0%
    GAAP Net Income (Loss)     $20.5 million        $1.6 million     +1,270%
    Adjusted Net Income         $4.9 million(1)     $1.4 million(2)  +241.6%
    GAAP EPS (Diluted)                 $1.37               $0.17     +705.9%
    Adjusted EPS (Diluted)             $0.33(1)            $0.15(2)  +120.0%

    (1) Excludes non-cash gain of $28.4 million related to extinguishment of
        derivative liability, non-cash charges of $4.2 million for the changes
        in fair value of warrants, and $8.6 million for amortization of notes
        discount.
    (2) Excludes non-cash gain of $0.6 million for the changes in fair value
        of warrants, non-cash charges of $0.3 million for amortization of
        notes discount, and $0.1 million related to the shares of common stock
        placed in escrow in connection with the Company's September 2008
        financing.

Please note: For more information about the non-GAAP financial measures contained in this press release, please see "About Non-GAAP Financial Measures" below.

Revenue -- Revenue for the first quarter ended March 31, 2010 increased 215.1% to $24.5 million from $7.8 million in the first quarter of 2009. The significant increase is primarily attributable to increased production resulting from the addition in 2009 of two new production lines, which has led to an increase in sales from new and existing customers. The Company's annual production capacity at March 31, 2010 was 650,000 metric tons, reflecting the contribution of the new CWSF production lines which increased annual output capacity by 550,000 metric tons. As of March 31, 2010, Sino Clean Energy had 35 customers under CWSF supply agreements totaling approximately 800,000 metric tons per year, compared to 30 customers totaling approximately 600,000 metric tons of CWSF per year at December 31, 2009.

Cost of Goods Sold -- Cost of goods sold was $14.4 million for the first quarter of 2010, compared to $5.3 million for the first quarter of 2009, an increase of 169.3%, less than the increase in sales.

Gross Profit and Gross Profit Margin -- Gross profit increased 316.0% to $10.1 million in the first quarter of 2010 from $2.4 million in the first quarter of 2009, as gross profit margin improved to 41.2% from 31.2% as a result of better pricing for CWSF in Shenyang. As a result of the new production line added in 2009, depreciation of plant and machinery for the first quarter of 2010 was $0.5 million as compared to $0.4 million in the first quarter of 2009.

Operating Expenses -- Operating expenses for the first quarter of 2010 were approximately $1.6 million, up 195.1% from $0.6 million for the first quarter of 2009. Selling expenses totaled $0.9 million for the first quarter of 2010, as compared to $3,559 for the first quarter of 2009. The increase was mainly in transportation cost, which totaled $0.89 million, due to the growth of the Company's business in 2010. General and administrative expenses totaled $0.7 million for the first quarter of 2010, as compared to $0.5 million for the first quarter of 2009, an increase of 31.0% due primarily to the expansion of the Company's operations.

Income from Operations -- Income from operations in the first quarter of 2010 increased 220.6% to $8.5 million from $1.9 million in the same period in 2009, with operating margins of 30.8% compared to 31.0% in the respective periods.

Net Income -- For the first quarter of 2010, the Company reported net income of $20.4 million compared to net income of $1.6 million for the first quarter of 2009, with a corresponding net income per share of $1.37 compared to net income per share of $0.17 based on 14.9 million and 9.3 million diluted shares, respectively. The increase in net income for the first quarter of 2010 is primarily attributable to a gain on extinguishment of derivative liability, offset by charges for the change in the fair value of certain derivative liabilities and amortization of notes discount. Results for the first quarter of 2009 included charges related to the shares of common stock held by the Company's Chief Executive Officer and placed in escrow in connection with the Company's September 2008 financing transaction and to charges for amortization of notes discount, offset by a gain related to the change in the fair value of certain derivative liabilities. Excluding these items, adjusted net income for the first quarter of 2010 and 2009 would have been $4.9 million and $1.4 million, respectively, with corresponding adjusted net income per share of $0.33 and $0.15 based on 14.9 million and 9.3 million diluted shares, respectively. (See "Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income" table below.)

"We are pleased with our strong revenue growth and operating results during the first quarter of 2010, and expect robust growth to continue during 2010 due to our increased production capacity and growing demand for coal water slurry fuel in China," stated Baowen Ren, Chairman of Sino Clean Energy. "Our total production capacity today is 850,000 metric tons and we plan to expand our production capacity to 1,050,000 metric tons by the end of 2010. Currently, we have 35 customers under CWSF supply agreements totaling approximately 800,000 metric tons per year. The CWSF market continues to expand due to growing customer demand for clean and efficient sources of energy and the government's mandate for reduced emissions through improved utilization of coal. CWSF increases burning efficiency and reduces air pollution, coal consumption and coal material costs for end users while generating attractive gross profit margins for energy producers. As a result, we believe we are well-positioned to further drive incremental revenue and earnings growth and will continue to build upon being a leading producer of CWSF in China."

Liquidity and Capital Resources

Cash and cash equivalents were $25.8 million at March 31, 2010 compared to $18.3 million at December 31, 2009. For the first quarter of 2010, the Company generated $11.3 million in net cash flow from operations, compared to $2.4 million in the first quarter of 2009. The Company had working capital of $6.9 million at March 31, 2009 and a current ratio of 1.26-to-1. Inventories were $0.8 million and the accounts receivable balance was $2.8 million at March 31, 2010, compared to approximately $0.9 million and $3.7 million respectively at December 31, 2009. The annualized days sales outstanding for the first quarter of 2010 were 41 days.

Financial Outlook for 2010

For the year ending December 31, 2010, management reaffirmed guidance and expects revenues of at least $105 million in revenues and adjusted net income of at least $25 million, representing an increase of approximately 128.3% and 127.3% compared to 2009 revenues and adjusted net income, respectively. This guidance assumes total sales volume of 850,000 metric tons of CWSF in 2010. The Company expects to end 2010 with 1,050,000 metric tons of total CWSF production capacity.

Conference Call

The conference call will take place at 10:30 a.m. ET on Tuesday, May 18, 2010. Interested participants should call 1-877-941-1427 when calling within the United States or 1-480-629-9664 when calling internationally.

A playback will be available through May 25, 2010. To listen, please call 1-800-406-7325 within the United States or 1-303-590-3030 when calling internationally. Utilize the pass code 4299949 for the replay.

This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link http://viavid.net/dce.aspx?sid=00007551 , or visiting ViaVid's website at http://www.viavid.net , where the webcast can be accessed through May 25, 2010.

About Sino Clean Energy

Sino Clean Energy is a U.S. publicly traded company and a China-based producer and distributor of coal-water slurry fuel ("CWSF"). With locations in Shaanxi Province and Liaoning Province, Sino Clean Energy is the largest CWSF producer in Northwestern China with 850,000 metric tons of total annual capacity. For more information about Sino Clean Energy, please visit http://www.sinocei.net/ .

About Non-GAAP Financial Measures

The following table excludes from net income (loss) certain items related to the cost of escrow shares put in escrow by the Company's chairman as a guarantee on the issuance of Sino Clean Energy's convertible notes, the change in fair value of the derivatives created upon issuance of the Company's private placement related to the conversion feature of the notes and the fair value during the period of the warrants issued to the convertible note holders, as well as the extinguishment of a portion of the derivative upon conversion of the notes, and amortization of the valuation discount recorded as interest expense relating to these convertible notes. The Company believes that these non-GAAP financial measures are useful to investors because they exclude non- cash charges that management excludes when it internally evaluates the performance of the Company's business and makes operating decisions, including internal budgeting, and performance measurement, because these measures provide a consistent method of comparison to historical periods. Moreover, management believes these non-GAAP measures reflect the essential operating activities of Sino Clean Energy. Accordingly, management excludes these items when making operational decisions. The Company believes that providing to its investors the non-GAAP measures that management uses is useful to investors for a number of reasons. The non-GAAP measures provide a consistent basis for investors to understand the Company's financial performance in comparison to historical periods. In addition, it allows investors to evaluate the Company's performance using the same methodology and information as that used by our management. Non-GAAP measures are subject to inherent limitations because they do not include all of the expenses included under GAAP and because they involve the exercise of judgment of which charges are excluded from the non- GAAP financial measure. However, our management compensates for these limitations by providing the relevant disclosure of the items excluded.



    Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income
    (Unaudited)

                                              2010                   2009
    GAAP Net (loss) income                $20,460,621             $1,562,160
    Non-GAAP
      Expense related to escrow
       shares                                      --               $120,167
      Gain on extinguishment of
        derivative liability             $(28,404,181)                    --
      Change in fair value of
       derivative liabilities              $4,239,929              $(578,978)
      Amortization of notes
       discount                            $8,601,975               $329,338
    Adjusted Net income                    $4,894,334             $1,432,687

Safe Harbor Statement

This press release contains certain "forward-looking statements," as defined in the United States Private Securities Litigation Reform Act of 1995, that involve a number of risks and uncertainties. There can be no assurance that such statements will prove to be accurate and the actual results and future events could differ materially from management's current expectations. Such factors include, but are not limited to uncertainties in product demand, the impact of competitive products and pricing, our ability to obtain regulatory approvals, changing economic conditions around the world, release and sales of new products and other factors detailed from time to time in the Company's filings with the United States Securities and Exchange Commission and other regulatory authorities. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

    For further information please contact:

    Company:
     Ming Lee
     Assistant to the Chairman
     Tel:   +86-29-8406-7376 (China)
     Email: marin_lm@163.com

    Investor Relations:
     HC International, Inc.
     Ted Haberfield
     Executive VP
     Tel:   +1-760-755-2716
     Email: thaberfield@hcinternational.net
     Web:   http://www.hcinternational.net


                           FINANCIAL TABLES FOLLOW



                   Sino Clean Energy Inc. and Subsidiaries
                    Condensed Consolidated Balance Sheets

                                                    March 31,     December 31,
                        ASSETS                         2010           2009
    Current assets                                 (Unaudited)
      Cash and cash equivalents                     $25,760,626    $18,302,558
      Accounts receivable, net                       2,791,092      3,655,473
      Inventories                                      809,277        892,609
      Prepaid inventories                            4,254,320      5,453,095
      Prepaid expenses                                  22,084        259,627
      Tax recoverable                                       --        138,495
      Other receivables                                 18,469         65,584
      Land use right - current portion                  38,750         38,739

    Total current assets                            33,694,618     28,806,180

    Property, plant and equipment, net              15,634,747     12,557,691
    Land use right - non current portion             1,769,369      1,778,562
    Goodwill                                           762,018        762,018
    Prepayments and deposits                         1,228,390        729,328

    Total assets                                   $53,089,142    $44,633,779

          LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)

    Current liabilities
      Accounts payable and accrued expenses         $3,605,237     $2,672,211
      Taxes payable                                  2,132,203      1,577,249
      Amount due to directors                           73,466         73,466
      Derivative liabilities                        20,992,787     16,752,858

    Total current liabilities                       26,803,693     21,075,784

    Convertible notes, net of discount                      --      1,615,025
    Derivative liabilities                                  --     28,404,181

    Total liabilities                               26,803,693     51,094,990

    Commitments and Contingencies

    Shareholders' Equity (Deficiency)
      Preferred stock, $0.001 par value,
       50,000,000 shares authorized, none
       issued and outstanding                               --             --
      Common stock, $0.001 par value,
       30,000,000 shares authorized,
       16,556,250 and 10,849,863 issued
       and outstanding as of March 31, 2010
       and December 31, 2009 respectively               16,557         10,850
    Additional paid-in capital                      37,700,930     25,432,804
    Accumulated deficit                            (15,342,366)   (35,802,987)
    Statutory reserves                               1,758,553      1,758,553
    Accumulated other comprehensive income           2,151,775      2,139,569

    Total Shareholders' equity (deficiency)         26,285,449     (6,461,211)

    Total liabilities and shareholders' equity
     (deficiency)                                  $53,089,142    $44,633,779





                   Sino Clean Energy, Inc. and Subsidiaries
  Condensed Consolidated Statements of Income and Other Comprehensive Income
                                  (Unaudited)

                                                 Three Months ended March 31,
                                                    2010               2009

    Revenue                                     $24,509,004        $7,778,277

    Cost of goods sold                          (14,400,177)       (5,348,107)

    Gross profit                                 10,108,827         2,430,170

    Selling expenses                                911,079             3,559
    General and administrative expenses             719,182           548,899

    Income from operations                        8,478,566         1,877,712

    Other income (expense)
      Interest and finance costs                (10,444,563)         (485,747)
      Expense related to escrow shares                   --          (120,167)
      Interest income                                12,871             3,986
      Change in fair value of derivative
       liabilities                               (4,239,929)          578,978
      Gain on extinguishment of
       derivative liability                      28,404,181                --

    Total other income (expense)                 13,732,560           (22,950)

    Income before provision for income
     taxes                                       22,211,126         1,854,762

    Provision for income taxes                    1,750,505           289,286

    Net income                                   20,460,621         1,565,476

    Other comprehensive income (loss)
      Foreign currency translation
       adjustment                                    12,206            (3,316)

    Comprehensive income                        $20,472,827        $1,562,160

    Weight average number of shares
     -Basic                                      12,851,265         9,219,471
     -Diluted                                    14,933,797         9,275,123

    Income per common share
     -Basic                                           $1.59             $0.17
     -Diluted                                         $1.37             $0.17





                   Sino Clean Energy, Inc. and Subsidiaries
     Condensed Consolidated Statements of Changes in Shareholders' Equity
                  For the three months ended March 31, 2010
                                 (Unaudited)

                                                     Additional
                               Common stock           paid-in      Statutory
                             Shares      Amount       capital       reserves

    Balance, January 1,
     2010                  10,849,863    $10,850    $25,432,804    $1,758,553
    Shares issued for
     exercise of warrants
     and options               62,632         63        173,917            --
    Fair value of options
     granted                       --         --         18,152            --
    Shares issued upon
     conversion of notes
     payables               5,643,755      5,644     12,076,057            --
    Net income                     --         --             --            --
    Foreign currency
     translation gain              --         --             --            --
    Balance, March 31,
     2010                  16,556,250    $16,557    $37,700,930    $1,758,553


                                   Retained       Accumulated
                                   earnings          other
                                 (Accumulated    comprehensive
                                    Deficit)        income           Total


    Balance, January 1, 2010      $(35,802,987)    $2,139,569     $(6,461,211)
    Shares issued for exercise
     of warrants and options                --             --         173,980
    Fair value of options
     granted                                --             --          18,152
    Shares issued upon
     conversion of notes
     payables                               --             --      12,081,701
    Net income                      20,460,621             --      20,460,621
    Foreign currency
     translation gain                       --         12,206          12,206
    Balance, March 31, 2010       $(15,342,366)    $2,151,775     $26,285,449





                     Sino Clean Energy, Inc. and Subsidiaries
                 Condensed Consolidated Statements of Cash Flows
                                   (Unaudited)

                                                 Three Months ended March 31,
                                                   2010               2009
    Cash flow from operating activities:
      Net income                                $20,460,621        $1,565,476
      Adjustments to reconcile net income
       to cash provided by operating
       activities:
      Depreciation and amortization                 469,002           356,063
      Amortization of deferred debt
       issuance costs                                    --            97,128
      Amortization of discount on
       convertible notes                          8,601,975           329,338
      Fair value of common stock issued
       for payment of interest expense            1,864,701                --
      Expense related to escrow shares                   --           120,167
      Fair value of common stock issued
       for services                                      --           233,300
      Fair value of vested options                   18,152                --
      Change in fair value of
       derivative liabilities                     4,239,929          (578,978)
      Gain on extinguishment of
       derivative liabilities                   (28,404,181)               --
      Change in operating assets and
       liabilities:
            Accounts receivable                     864,382          (874,993)
            Other receivables                        47,115               820
            Prepaid expenses                        237,543                --
            Inventories                              83,332           (97,682)
            Prepaid inventories                   1,198,775                --
            Tax recoverable                         138,495                --
            Accounts payable and accrued
             expenses                               933,026           178,809
            Taxes payable                           554,955           261,239

      Net cash provided by operating
       activities                                11,307,822         1,590,687

    Cash flows from investing activities:
      Prepayments and deposits                     (499,062)          848,397
      Purchase of property, plant and
       equipment                                 (3,532,523)               --
      Net cash used in investing
       activities                                (4,031,585)          848,397

    Cash flows from financing activities:
      Payment of advances from director                  --          (394,956)
      Cash received from exercise of
       warrants and options                         173,980                --
      Net cash provided by (used in)
       financing activities                         173,980          (394,956)

    Effect of foreign currency
     translation                                      7,851              (523)

    Net increase in cash and cash
     equivalents                                  7,458,068         2,043,605

    Cash and cash equivalents, beginning
     of period                                   18,302,558         3,914,306

    Cash and cash equivalents, end of
     period                                     $25,760,626        $5,957,911

    Supplemental disclosure information
      Interest paid                             $        --        $       --
      Income taxes paid                          $1,616,656          $542,632

    Supplemental non-cash investing and
     financing activities
      Issuance of shares upon conversion
       of convertible notes                     $10,217,000        $       --
      Issuance of shares to consultant          $        --          $233,300

    Cumulative effect of change in
     accounting principle on convertible
     notes and warrants                         $        --        $4,589,792

SOURCE Sino Clean Energy, Inc.

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