Phoslock Environmental Technologies : PET Annual Report - FY 2021

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ii	Corporate Directory
01	Chairman's Letter
04	Managing Director and CEO's Report
06	Directors' Report
30	Auditor's Independence Declaration
31	Corporate Governance Statement
43	Statement of Profit or Loss and Other Comprehensive Income
44	Statement of Financial Position
45	Statement of Changes in Equity
46	Statement of Cash Flows
47	Notes to the Financial Statements
85	Directors' Declaration
86	Independent Auditor's Report to the Members of Phoslock
Environmental Technologies Limited
92	Shareholder Information

PHOSLOCK ENVIRONMENTAL TECHNOLOGIES LIMITED ABN 88 099 555 290

ANNUAL REPORT - 31 DECEMBER 2021

CONTENTS

CORPORATE DIRECTORY

DIRECTORS

David Krasnostein AM - Chairman Brenda Shanahan AO

Lachlan McKinnon Barry Sechos Bob Prosser

COMPANY SECRETARY

Matthew Parker

NOTICE OF ANNUAL GENERAL MEETING

The details of the annual general meeting of Phoslock Environmental Technologies Limited are: 27 May 2022. Notification of the time and venue for the meeting will be released separately

REGISTERED OFFICE

Unit D, Level 2, Como Centre 650 Chapel Street

South Yarra, VIC 3141

PRINCIPAL PLACE OF BUSINESS

Unit D, Level 2, Como Centre

650 Chapel Street

South Yarra VIC 3141

SHARE REGISTER

Computershare Investor Services Pty Limited

Level 3, 60 Carrington Street Sydney, NSW 2000 Australia Phone: [phone]

AUDITOR

ShineWing Australia Level 10

530 Collins Street Melbourne VIC 3000 Phone: [phone]

STOCK EXCHANGE LISTING

Phoslock Environmental Technologies Limited shares are listed on the Australian Securities Exchange (ASX code: PET)

WEBSITEwww.phoslock.com.au

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World Leaders in Water Remediation

We are an Australian company that seeks to improve water quality across the globe. Our international community of scientists and water specialists strive for cleaner water through the use of innovative technologies.

30

Countries 300+

Water Bodies Treated 20 +

Years Of Experience

PET ANNUAL REPORT JAN-DEC 2021

CHAIRMAN'S LETTER

1

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CHAIRMAN'S LETTER

Dear Shareholder,

This past year at PET has been dominated by both continuing challenges and positive renewal. When I was appointed Chair in May, the quantum and seriousness of the challenges facing the Company were daunting for both directors and management. The fraud and mismanagement that emerged in 2020 has had far reaching impacts on PET's accounts, our listing on the ASX, compliance, management and recruitment, and importantly - our culture. Together with our CEO and CFO, the Board dedicated itself to dealing with these issues and laying the groundwork for renewal.

I am greatly heartened by the progress that has been made. This is a very different company to one I observed early last year. Our new management team in China, Europe, and the USA, along with a senior appointment in Australia, have brought new skills and experience to PET, and a level of enthusiasm and focus that is very gratifying to see. With exciting new ideas and approaches, we expect to see these benefit our operations in 2022.

As Covid starts to recede globally, our team is more able to travel and meet customers and pursue new business. And governments around the world are better able to revisit their other priorities, including mounting environmental issues that have been only worsening during these past two years. The world more than ever needs our first in class product Phoslock® to remediate pollution in many of the lakes and water catchments across the planet. Time and again we have brought back to life these lakes that were choked with algae and unable to support marine life or be used for recreational activities.

With a number of our legacy issues having now been managed, this has freed up more management time to look to the future and redirect their focus and energies on renewal. We have done much of the work in terms of restructuring the business and putting in place processes and other governance standards that ensure these matters cannot recur.

I want to acknowledge the hard work, wise counsel and determination of my fellow directors to restore the Company to its full potential. Barry Sechos joined the Board in January 2021 and Chairs our Remuneration Committee. Bob Prosser joined the Board in March 2021 and agreed to assume the Chair of the Audit and Risk Committee. And my thanks also to Brenda Shanahan for her depth of knowledge and providing us with invaluable continuity over this difficult period.

The Company has provided shareholders with regular and detailed updates on these events, but I believe it is important that we again place on record how these matters evolved and how the Company has responded.

When our new CEO Lachie McKinnon and CFO Matthew Parker joined the Company in January and May 2020, respectively, their early priority was to familiarise themselves with the quality and rigour of the systems and procedures in place at the Company, and, in particular, with respect to our China operations. During that process, potential irregularities were identified which led the internal investigations to clarify and validate those matters. In August 2020 Arnold Bloch Leibler, our external legal counsel, was instructed to retain KPMG forensic to assist with the investigations.

Separately, PET notified the irregularities to KPMG's audit department which undertook additional investigations focusing on potential accounting irregularities, particularly those associated with related parties. KPMG's preliminary findings were subsequently reported to the Board, and it was decided that the Company should seek a trading halt on the ASX and then request a suspension of trading, which came into effect on 21 September 2020. The suspension ensured the Company's shares were not being traded while the Company continued with the investigations and attempted to quantify the impact of irregularities.