Sino Clean Energy, Inc. Announces Record Third Quarter 2009 Financial Results

- Third Quarter 2009 Revenues Increase 214.6% to $10.8 million, adjusted net income increased 132.8% to $2.8 million with Adjusted EPS of $0.028

- First Nine Months 2009 Revenues Increase 191.2% to $26.7 million, adjusted net income increased 149.5% to $6.3 million with Adjusted EPS of $0.066

- Cash flow from operations was $5.1 million for the first nine months of 2009 - Company Provided 2009 and 2010 Guidance: 2009 Revenues of at least $40 million and Net Income of at least $10 million; 2010 Revenues of at least $70 million and Net Income of at least $15 million

- Management to Host Earnings Conference Call on Tuesday, November 17, 2009 at 8:30 a.m. ET

BEIJING, Nov. 17 /PRNewswire-Asia-FirstCall/ -- Sino Clean Energy, Inc. (OTC Bulletin Board: SCLX; "Sino Clean Energy," the "Company"), which produces and distributes coal-water mixture in the People's Republic of China ("PRC"), today announced the Company's financial results for the third quarter 2009.

    SUMMARY FINANCIALS

    Third Quarter 2009 Results
                                  Q3 2009*       Q3 2008          CHANGE
    Sales                      $10.8 million  $3.4 million        +214.6 %
    Gross Profit                $3.9 million  $1.1 million        +251.4 %
    Adjusted Net Income         $2.8 million  $1.2 million        +132.8 %
    GAAP Net Income (Loss)    ($30.9 million) $1.1 million      -2,800.6 %
    Adjusted EPS                   $0.03          $0.01           +200.0 %
    GAAP EPS (Diluted)            ($0.31)         $0.01         -3,200.0 %

*Q3 2009 included a $7.0 million non-cash charge related to the changes in the value of warrants and $24.8 million from the beneficial conversion feature of the notes issued in the July 2009 financing.

    Nine Months 2009 Results
                                    2009*           2008          CHANGE
    Sales                      $26.7 million    $9.2 million      +191.2 %
    Gross Profit                $9.0 million    $2.9 million      +206.1 %
    Adjusted Net Income         $6.3 million    $2.5 million      +149.5 %
    GAAP Net Income (Loss)    ($28.8 million)   $2.5 million    -1,261.5 %
    Adjusted EPS                    $0.07           $0.03         +133.3 %
    GAAP EPS (Diluted)             ($0.30)          $0.03       -1,100.0 %

* The first nine months of 2009 included a $8.2 million non-cash charge related to the changes in the value of warrants and $24.8 million from the beneficial conversion feature of the notes issued in the July 2009 financing.

Third Quarter 2009 Financial Results

Sales -- Sales for the third quarter of 2009 were $10.8 million compared to $3.4 million in the third quarter of 2008, an increase of 214.6%. The increase was mainly due to the expansion of production capacity commencing in early 2009 and growth in the Company's coal water mixture production compared the same period in 2008. The average selling prices of CWM were higher than the same period of 2008 by approximately 16.9%. Sales volume for CWM production was 94,400 tons, compared to 35,200 tons in the same period in 2008.

Cost of Goods Sold -- Cost of goods sold for the third quarter of 2009 was $6.8 million compared to $2.3 million in 2008, an increase of 196.6%. The increase was due to the rise in production and sales activities. Cost of sales as a percentage of sales was approximately 63.3% for the third quarter of 2009 and 67.2% for same period in 2008. The decrease was due to higher selling prices of CWM, compared to the same period in 2008.

Gross Profit and Gross Margin -- Gross profit was $3.9 million for the third quarter of 2009 compared to $1.1 million for the same period in 2008, an increase of 251.4% and represented gross margins of approximately 36.7% and 32.8%, respectively. The 3.9% variance in gross margins was mainly attributable to higher selling prices of CWM.

Selling, General, and Administrative Expenses -- Selling, general, and administrative expenses for the third quarter of 2009 were approximately $0.9 million compared to $0.2 million for the same period in 2008, an increase of 327%. Total selling, general, and administrative expenses as a percentage of sales for the third quarter of 2009 and 2008 were 8.3% and 6.1%, respectively, with the increase being attributed to transportation costs and financing expenses. Operating income for the third quarter of 2009 and 2008 was $3.1 million and $0.9 million, respectively, representing operating margins of 28.4% for the third quarter of 2009 compared to the third quarter 2008 operating margin of 26.7%.

Net Income (Loss) -- GAAP net loss for the third quarter was $30.9 million, compared to $1.1 million reported in the same period in the prior year. Earnings per diluted share were a negative $0.31 for the third quarter in 2009 compared to $0.01 for the third quarter in 2008, which was based on 100 million shares outstanding. The Company incurred taxes of $0.46 million and $71 in 2009 and 2008, respectively.

Adjusted Net Income -- During the third quarter of 2009 the Company incurred a non-cash charge of $7.0 million for the change in the value of warrants and $24.8 million from the conversion feature of the notes issued in the July 2009 financing. Adjusting for non-cash charges in each respective period, net income for the third quarter of 2009 and 2008 was $2.8 million and $1.2 million, with $0.03 and $0.01 in earnings per diluted share.

"We are pleased with our results for the third quarter which was propelled by a rise in sales of our coal water mixture," stated Baowen Ren, Chairman of Sino Clean Energy. "Our business continues to be driven by a number of factors including the government's support in the development and utilization of clean energy, as well as government mandate for improved utilization of coal. We are optimistic that demand from existing and new industrial, government and residential users for CWM, coupled with continuing government support, will further drive growth during 2010."

2009 Nine Months Financial Results

For the first nine months of 2009 sales increased 191.2% to $26.7 million from $9.2 million in the same period of the prior year. Cost of sales increased 184.1% to $17.7 million yielding gross profit of $9.0 million, an increase of 206.1% from $2.9 million reported in the year ago period. Gross margins were 33.6% compared to 32.0% during the first nine months of 2009 and 2008, respectively. Selling, general, and administrative expenses increased 213.3% to $1.9 million during the first nine months of 2009 from $0.6 million during the year ago period. Income from operations increased 204.2% to $7.1 million from $2.3 million with operating margins of 26.6% compared to 25.4% in the year ago period. GAAP Net loss for the first nine months of 2009 was $28.8 million for the nine months ended September 30, 2009, a decrease from $2.5 million with corresponding basic earnings per share of negative $0.30 compared to $0.03 based on 96.1 million and 87.2 million shares, respectively. During the first nine months of 2009 the Company incurred a non-cash charge of $8.2 million for the change in the value of warrants and a $24.8 million non-cash charge related to the beneficial conversion feature of notes issued in the July 2009 financing. Adjusting for non-cash charges during each respective period, net income was $6.3 million and $2.5 million, yielding $0.07 and $0.03 in earnings per basic share.

"Based on the recent expansion in total production capacity to 650,000 metric tons and customer orders on hand, we are projecting sales volume of coal water mixture to increase over the next year," continued Baowen Ren. "We recently commenced operations at our new CWM production facility in Shenyang with annual output capacity of 300,000 metric tons which expanded our total annual production capacity to 650,000 metric tons. We currently serve 35 customers under CWM supply agreements totaling approximately 559,000 metric tons per year and we are negotiating with 13 additional customers for supply agreements which could potentially represent up to 333,000 metric tons of CWM. With increased production capacity, an expanding customer base, accelerating demand of clean energy supported by the government's effort to reduce pollution emission and increase energy yields, we are confident that we are well positioned to capitalize on this growth opportunity in China."

Liquidity and Capital Resources

Cash and cash equivalents were $14.0 million on September 30, 2009, which includes net proceeds of $9.3 million from the July 2009 financing, compared to $3.9 million on December 31, 2008. The Company had working capital of $19.9 million on September 30, 2009 and a current ratio of 12-to-1. Inventories were $0.5 million and the accounts receivable balance was $2.5 million on September 30, 2009, compared to $45 thousand and $0.9 million on December 31, 2008, respectively. The annualized days sales outstanding for the third quarter 2009 were 25 days. Net cash provided by operations was $5.1 million for the first nine months of 2009, compared to $34 thousand used by operations in the same period of 2008. The net cash inflow increased during the first nine months of 2009 was primarily due to a large increase in turnover. The Company had an effective tax rate of 16.76% and 0.98% for the third quarters of 2009 and 2008 respectively, excluding the $8.2 million non-cash charge related to the changes in fair value of warrants and $24.8 million non-cash charge related to the beneficial conversion feature of notes issued in the July 2009 financing.

Financial Outlook for 2009 and 2010

Management provided 2009 guidance and expects to report calendar 2009 sales of at least $40 million and adjusted net income of at least $10 million, representing an increase of 189.9% and 233.3% compared to 2008 sales and net income, respectively. Management provided 2010 guidance and expects to report calendar 2010 sales of at least $70 million and net income of $15 million. Guidance includes the expansion of total production capacity to 900,000 metric tons during 2010.

Government Support in China

China is the world's largest producer and consumer of coal and is also one of the world's leading emitters of greenhouse gas (GHG). It is reported that some 70 percent of China's energy comes from coal, the greatest part of which is burned in outdated power plants that are primary contributors to GHG. To address environmental concerns from the use of coal, the Chinese central government in August 1995 formulated the "9th Five-Year Plan for Clean Coal Technology in China and a Development Program to 2010," which emphasizes the need to strengthen research and development of clean coal technologies and to promote commercialization of proven clean coal technologies including CWM. The China State Environmental Protection Agency (SEPA) states that over $190 billion will be spent by industrial companies for environmental cleanup as part of the 11th Five Year Plan (2006-2010).

About CWM

Coal Water Mixture is a clean coal alternative and is the backbone of Sino Clean Energy's business. CWM is comprised of approximately 71% coal, 29% water, and less than 1% of chemical catalyst. Compared to coal, on average, CWM increases the burning efficiency, reduces air pollution, reduces coal consumption, and reduces cost in coal material for end users.

About Sino Clean Energy

Sino Clean Energy is a U.S. publicly traded company and a China-based producer and distributor of coal-water mixture ("CWM"). Based in Shaanxi Province, Sino Clean Energy is the largest CWM producer in Northwestern China with 650,000 metric tons of total annual capacity. For more information about Sino Clean Energy, please visit http://www.sinocei.net/ .

About Non-GAAP Financial Measures

This press release contains non-GAAP financial measures for the change in the fair value of the Company's warrants under EITF 07-5. The Company believes that these non-GAAP financial measures are useful to investors because they exclude non-cash charges that our 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 the change in the fair value of the Company's warrants under EITF 07-5 when making operational decisions. The Company believes that providing the non-GAAP measures that management uses to its investors 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.

The following table provides the non-GAAP financial measure and the related GAAP measure and provides a reconciliation of the non-GAAP measure to the equivalent GAAP measure.

                             Adjusted Net Income

                                             Three months     Nine months
                                                 ended          ended
                                            Sept. 30, 2009 Sept. 30, 2009
    GAAP Net Income                          $(30,915,068)  (28,807,763)
    GAAP Basic Earnings Per Share                   (0.31)        (0.30)

    Addition (deduction):
    Change in fair value of warrants            7,035,248     8,236,238
      Cost of private placement                24,794,842    24,794,842
      Others                                    1,851,345     2,072,545
    Non GAAP Net Income                         2,766,367     6,295,862
    Non GAAP Basic Earnings Per Share                0.03          0.07

    Shares used in computing net
     income per basic share                   100,419,101    96,091,295

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:

     Ben Z. Fang
     Advisor to the Chairman and CEO
     Tel:   +1-212-521-3884
     Fax:   +1-212-521-3888
     Email: bfang@axiomcapital.com

     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

                                             September 30,      December 31,
                                                  2009              2008
                                               (Unaudited)
    ASSETS
    Current assets
    Cash and cash equivalents                 $13,970,487        $3,914,306
    Accounts receivable, net                    2,462,248           899,629
    Inventories                                   480,173            45,068
    Prepaid inventories                         4,164,559         1,996,584
    Prepaid expenses                               59,767            86,958
    Refundable advance                                 --           731,861
    Government grant receivable                        --           146,314
    Other receivables                              24,798            16,986
    Loans receivable                              543,048                --
    Land use right - current portion               38,735            38,703

    Total current assets                       21,743,815         7,876,409

    Property, plant and equipment, net
     of accumulated depreciation and
     amortization of $1,561,097 and
     $491,247, respectively                     8,362,457         9,394,416
    Land use right - non current portion        1,776,705         1,804,277
    Deposits                                    4,728,203           994,395
    Goodwill                                      762,018           762,018
    Deferred debt issuance costs, net
     of accumulated amortization of
     $114,233 at December 31, 2008                     --           274,278

    Total assets                              $37,373,198       $21,105,793

    LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)

    Current liabilities
    Convertible notes, current
     position, net                                    $--          $383,490
    Accounts payable and accrued expenses         945,747         1,004,999
    Income and other taxes payable                789,824           305,903
    Due to directors                               70,229           465,049

    Total current liabilities                   1,805,800         2,159,441

    Convertible notes, less current position,
     net (includes $151,233, net amount of
     related party convertible notes)           2,921,819                --
    Fair value of derivative
     liabilities                               44,299,127                --

    Total liabilities                          49,026,746         2,159,441

    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,
     300,000,000 shares authorized,
     101,261,786 and 92,181,750 issued
     and outstanding as of September 30,
     2009 and December 31, 2008
     respectively                                 101,262            92,182

    Additional paid-in capital                 14,137,202        12,696,549
    Retained earnings (accumulated
     deficit)                                 (28,375,818)        3,686,087
    Statutory reserves                            348,309           348,309
    Accumulated other comprehensive
     income                                     2,135,497         2,123,225

    Total shareholders' equity
     (deficiency)                             (11,653,548)       18,946,352

    Total liabilities and
     shareholders' equity
     (deficiency)                             $37,373,198       $21,105,793



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

                           Three months ended           Nine months ended
                             September 30,                September 30,
                          2009          2008          2009           2008
    Revenue           $10,757,826    $3,419,941   $26,659,312     $9,156,293

    Cost of goods
     sold              (6,812,469)   (2,297,227)  (17,695,505)    (6,227,606)

    Gross profit        3,945,357     1,122,714     8,963,807      2,928,687

    Selling, general
     and admini-
     stra tive
     expenses             888,249       208,021     1,875,380        598,590

    Income from
     operations         3,057,108       914,693     7,088,427      2,330,097

    Other income
     (expense)
    Interest expense   (3,149,499)           --    (4,231,344)            --
    Expense related
     to escrow
     shares            (1,054,548)           --    (1,294,881)            --
    Commission
     income               131,970        80,072       323,261        224,947
    Rental income,
     net                       --           230                       79,843
    Interest income        11,708         8,026        22,979         19,537
    Extinguishment
     of derivative
     liabilities        2,381,333            --     3,370,593             --
    Change in fair
     value of
     derivative
     liabilities
                       (7,035,248)           --    (8,236,238)            --
    Cost of private
     placement        (24,794,842)           --   (24,794,842)            --
    Sundry income              --            78            --         26,921
    Gain on disposal
     of property               --            95            --         33,095
    Government grant           --       141,614            --        141,614

    Total other
     income (expense) (33,509,126)      230,115   (34,840,472)       525,957

    Income (loss)
     before income
     taxes and non-
     controlling
     interest         (30,452,018)    1,144,808   (27,752,045)     2,856,054

    Provision for
     income taxes         463,050            71     1,055,718         24,779

    Net income
     (loss)           (30,915,068)    1,144,737   (28,807,763)     2,831,275

    Net Income
     attributable to
     non-controlling
     interest                  --            --            --       (351,149)

    Net Income (loss)
     attributable to
     Sino Clean
     Energy, Inc.
                      (30,915,068)    1,144,737    (28,807,763)    2,480,126

    Other
     comprehensive
     income
    Foreign currency
     translation
     adjustment             3,578       124,319         12,932       934,996

    Comprehensive
     income
     (loss)          $(30,911,490)   $1,269,056   $(28,794,831)   $3,415,122

    Weight average
     number of
     shares

    - Basic           100,419,101    92,181,750     96,091,295    87,181,750

    - Diluted         100,419,101    92,734,390     96,091,295    87,365,963

    (Loss) income
     per common share
    - Basic               $(0.31)         $0.01         $(0.30)        $0.03
    - Diluted             $(0.31)         $0.01         $(0.30)        $0.03



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

                                            Nine months ended September 30,
                                                 2009             2008
    Cash flows from operating activities:

    Net income (loss) attributable to Sino
    Clean Energy, Inc.                      $(28,807,763)       $2,480,126
    Adjustments to reconcile net income to
     cash provided by operating activities:
    Gain attributable to noncontrolling
     interest                                         --           351,149
    Depreciation and amortization              1,069,850           175,399
    Amortization of land use right                29,064            28,031
    Gain on disposal of property                      --           (33,095)
    Amortization of deferred debt issuance
     costs                                       274,278             8,399
    Amortization of discount on
     convertible notes                         3,873,979            35,127
    Expense related to escrow shares           1,294,881                --
    Fair value of shares issued for
     services                                    454,935                --
    Cost of private placement                 24,794,842                --
    Change in fair value of derivative
     liabilities                               8,236,238                --
    Extinguishment of derivative liability    (3,370,593)               --
    Change in operating assets and
     liabilities
    Accounts receivable                       (1,563,019)       (4,923,476)
    Inventories                                 (435,105)         (240,670)

    Prepaid inventories                       (2,167,975)        1,605,350
    Prepaid expenses                              27,191           127,689
    Refundable advance                           731,861                --
    Government grant receivable                  146,314           411,000
    Other receivables                             (7,812)          (14,227)
    Accounts payable and accrued expenses         37,982          (196,665)
    Income and other taxes payables              483,921            10,143
    Assets on discontinued operation
    Other receivables                                 --           141,795
    Net cash provided by (used in)
     operating activities                      5,103,069           (33,925)

    Cash flows from investing activities:

    Deposits                                  (3,733,408)          188,332
    Loans receivable                            (540,365)               --
    Purchase of property, plant and
    equipment                                    (29,767)       (2,747,052)
    Proceeds from disposal of property                --         1,025,437
    Net cash provided by (used in)
    investing activities                      (4,303,540)       (1,533,283)

    Cash flows from financing activities:
    Repayment of amount due to directors        (394,820)           (7,427)
    Proceeds from issuance of convertible
     debentures                               11,592,000         1,148,491


    Cost of private placement paid in cash    (1,543,152)               --
    Redemption of convertible debenture         (400,000)               --
    Obligations under capital leases                  --           (27,318)
    Net cash provided by financing
     activities                                9,254,028         1,113,746

SOURCE Sino Clean Energy, Inc.

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