Fertoz : Annual Report December 2021

Fertoz limited | 1

CORPORATE DIRECTORY

DIRECTORS

Mr. Patrick Avery - Executive Chairman

Mr. James Chisholm - Non-Executive Director Mr. Stuart Richardson - Non- Executive Director

Mr. Justyn Stedwell - Non-Executive Director (Resigned on 14 February 2022) Mr. Greg West - Non-Executive Director (Appointed on 14 February 2022)

COMPANY SECRETARY

Mr. Justyn Stedwell (Resigned on 14 February 2022)

Ms. Nova Taylor and Ms Rebecca Woodman (Appointed on 14 February 2022)

REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS

Level 5, 126 Phillip Street,

Sydney NSW 2000

SHARE REGISTER

Computershare Investor Services Pty Limited Yarra Falls, 452 Johnston St

Abbotsford VIC 3067

AUDITOR

BDO Audit Pty Ltd Level 10,

12 Creek Street

Brisbane QLD 4000 Australia

CANADIAN LAWYERS Ontario Lawyers

Peterson Law Professional Corporation 390 Bay Street, Suite 806

Toronto, Ontario, Canada, M5H

AUSTRALIAN LAWYERS Sierra Legal Pty Ltd. Level 5, 9 Sherwood Road Toowong QLD 4066

BANKERS

Commonwealth Bank of Australia Ltd

STOCK EXCHANGE

Fertoz Limited shares are listed on the Australian Securities Exchange (ASX code: FTZ)

WEBSITEwww.fertoz.com

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CONTENTS

Corporate Directory
Chairman's Message
Operations Review
Auditor's Independence Declaration	26
Statement of Profit or Loss and Other Comprehensive Income	28
Statement of Financial Position	29
Statement of Changes in Equity	30
Statement of Cash Flows	31
Notes to the Financial Statements	32
Directors' Declaration	53
Independent Auditor's Report	54
Shareholder information	58
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CHAIRMAN'S MESSAGE

Dear Fellow Shareholder,

I am pleased to present the 2021 Annual Report for Fertoz Limited (ASX: FTZ) and provide an overview of our achievements for the financial year. We made significant progress during 2021 in ferliser sales, strategy development, markeng reach, joint ventures and establishing the new division Fertoz Carbon. The Group remains focused on developing a sustainable land management company with ESG leadership focused on developing two clearly defined business units: organic farm inputs and nature-based carbon credit generaon from projects developed and managed by Fertoz Carbon.

Fertoz achieved record ferliser sales in 2021 and established the Fertoz Carbon division in May 2021.

Ferliser sales recorded in North America were at record levels including extracng 8,000 tonnes from our Fernie, BC (Brish Colombia, Canada) deposit, and the Montana and Mexico stockpiles adding valuable high-quality ore to the sales mix. Solid sales volumes achieved in the Australia/ Asian operaon contributed to the result.

The ferliser division connues to expand, with the addion of two new sales personnel in the USA expanding the geographic reach of our sales team. We formed an excing new partnership with Western Alfalfa Milling Company (WAMCO) to develop and produce North America's first full spectrum organic approved NPKS ferliser for use in regenerave and sustainable agricultural applicaons. This is a North American first and paves the way to boost sales with the branding labelled "Nutrient Vigour

"and "Nutrient Vigour Plus" providing the 4 major nutrients in agricultural inputs, namely nitrogen, phosphate, potassium, and sulphur, all cerfied organic. Further efforts we announced throughout 2021 added partnerships and new distributorships, all seng the ferliser group up for a strong 2022 year ahead.

Fertoz Carbon started strongly with two drone seeded forestry trials completed in Brish Columbia, Canada and West Virginia, USA and the first "carbon-in-soil" protocols successfully registered in Canada. Mr Derek Squair, an experienced carbon expert and agronomist was appointed head of Fertoz Carbon.

Fertoz Carbon announced the first partnerships in July 2021 to accelerate the development of this new growth opportunity. MOU's were signed (which subsequently have developed into operang agreements) with Trimble Inc (NASDAQ: TRMB) to provide soſtware and consulng assistance to establish carbon protocols focused on carbon in annual row crops and soils. These protocols will ulise Trimble's blockchain for secure reporng of all farm acres signed to a range of planned protocols designed to provide addional income to farmers and to improve soil health wherever the pracces are adopted, ulmately globally.

The first protocol was announced in December 2021, a "no-ll conservaon protocol" allowing Canadian farmers to generate carbon credits through environmentally friendly no-ll pracces. Rollout across Canada commenced in late 2021 with acres being signed up in Q1 2022 and expanding. All nature-based carbon credits managed by Fertoz and generated under this protocol are tracked, measured, verified, and registered to the Canadian central registry and enter the voluntary market with Microsoſt (NASDAQ: MSFT) the contracted buyer of these nature-based carbon credits managed by Fertoz Carbon.

Fertoz Carbon partnered with both Brightspot and DataPLP to provide consulng services in carbon sequestraon programs. Brightspot, a leading Canadian consultancy, will work closely with Fertoz Carbon to develop projects through to verificaon stage, applying innovave soluons that in turn assist in migang climate change. DataPLP, a data services company, will provide valuable proprietary soſtware used to evaluate satellite data across the agricultural and environmental space, generang valuable analycs for beer project level decision making.

As Fertoz enters 2022, we are witnessing a volale start to the year in the agricultural sector in all the markets in which the Company operates. According to commodity consulng group CRU, prices for raw materials that constute the convenonal, synthec ferlizer marketplace - ammonia, nitrogen, phosphates, potash, and sulphates - are all up approximately 30% since the start of 2022. Further to this, since the beginning of 2020, nitrogen ferliser prices have increased up to fourfold, while phosphate and potash prices are up over threefold. The group's research is discussed in more detail at this link:hps://www.cnbc.com/2022/03/22/ferlizer-prices-are-at-record-highs-heres-what-that-means.html

In the wake of Russia's invasion of Ukraine, the world is experiencing price spikes dominated by energy, providing a supply shock to the synthec ferliser manufacturers resulng in surging ferliser prices. Wheat and grain prices have both soared, feeding through the supply chain to a material increase in the price of food to the consumer. Transport both in trucking and rail has been disrupted across North America, part impacted by COVID and part rising energy / diesel costs, resulng in escalang transport costs and ongoing inefficiencies in the transport supply chain.

Fertoz is capitalising on the fact that North America is heavily reliant on the imporng of phosphate rock from countries including Morocco, South America, Russia and Saudi Arabia. Fertoz supplies the North American farm sector from deposits and stockpiles located close to the farming customer and is beginning to display this compeve advantage, as sales in Q1 2022 are materially higher year-on-year. Management remains confident that these trends should see 2022 exceed the 2021 year with a record volume of ferliser sales.

The carbon division has already signed acres under the no-ll protocol and as such Fertoz Carbon is developing a recurring income stream for the Group. The carbon team is working hard to bring addional protocols to market in 2022 and also commence commercial carbon forestry projects in 2022.

Protocols in development include:

• • Nitrous Oxide Reducons Program (NERP) with encouraged use of Fertoz organic, sustainable, low carbon nitrogen ferlizers.

• • Protocols that encourage the use of cover crops to migate the use of synthec nitrogen ferlizer, reduce nitrous oxide emissions, and sequester and lock carbon into the soil.

• • Using rock phosphate to increase crop producon, yield, and sequester carbon.

• • Replacing ammonium phosphate ferlizer with rock phosphate to encourage scope 3 carbon emissions reducons upstream at the manufacturing level.

• • Livestock methane emission reducons protocol through altered cale feed and supplementaon

• • Full cycle canola strategy that is developed through various connecons among shareholders including canola producers, grain elevators/processors, food and feed suppliers, biodiesel manufacturers and cale producers.

Every aspect of Fertoz's business is directed towards improving environmental outcomes and the sustainability of all markets in which we operate.

I would like to thank shareholders for their support over 2021 and welcome new shareholders who parcipated in the $5.0 million capital raising conducted in July 2021, providing valuable expansion capital to the Group. As Fertoz expands its products and offerings and grows the employee headcount to drive the Company's growth plans, management and the Board of Directors remain focused on delivering earnings growth and posive cash generaon in FY2022 and beyond.

Pat Avery Execuve Chairman Fertoz Limited

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