Hi Shortblack. Why is that I am not surprised that you felt...

Hi Shortblack. Why is that I am not surprised that you felt obliged to respond to that post?

My arguments do somewhat fly in the face of the narrative you've consistently peddled in your approximately 505 contributions on this forum (but seemingly nowhere else on Hotcopper?).

Having now invested so much time and energy asserting that this company is some kind of fraud, I guess you naturally feel a compulsion to attack any argument offering up a plausible alternative perspective.

But I thought I may as well respond, as I do find it intriguing how many of the arguments you've raised in your post cut both ways.

1)...In it's 20 odd years of existence, this company has never turned a profit. In fact all it has achieved over this time is to accumulated $84 million in accumulated losses. The one and only reason it managed to survive so long is because of the incredibily large "donations" given to it by shareholders (largely used to prop up the ongoing salaries & lifestyles of directors and management)...

It is true that Phoslock has been listed for a long time. There are very few small stocks that have had a business model that has been as steadfast as that of this company.

If you take a step back in time, and read through the Phoslock announcements from 2003, just after the company listed, what astounds me the degree to which the company of twenty years ago resembles the Phoslock of 2023.

Putting aside the rather curious early announcements mooting Phoslock's potential dual use as kitty-litter and as a sarin gas absorbent, it is surprising how many of the announcements in 2003 echo developments of more recent years.

Of course, there is one not insubstantial difference between now and then. You'll find it buried away in that announcement at the end of last month ('Potential Asset Sale and Wind-up', 31/10/23):

... On 31 August 2023, the Company updated shareholders on the XingYun Lake Project debt recovery matter in China after the customer made a partial payment of RMB 3,000,000 (equating to approximately $A 642,000) to PET’s Beijing based subsidiary, Beijing Ecosystime Environmental Science and Technology Co., Ltd (“BEST”).

PET is pleased to report that following negotiation with the customer, a settlement agreement was entered into between the parties (“Settlement Agreement”). Under the Settlement Agreement the customer paid BEST the amount of RMB 21,686,737.50 (equating to approximately $A 4,650,000) on 27 October 2023...

The present-day Phoslock is able to successfully secure multi-million dollar contracts. In this case, the customer has been rather tardy in doling out the funds, but this of course wasn't the only multi-million dollar contract the company has bagged in recent years.

Indeed, so often on this forum, it's forgotten that the first million-dollar contract secured by the company wasn't even in China. The very first was actually the Lake Pampulha project in Brazil, first announced back in 2016.

In the realm of small cap-stocks, a territory with which I am well acquainted, Phoslock is a rare bird.

About once every year, I run the ruler over hundreds of small ASX stocks, in the hope of upturning some diamond in the rough. It is a laborious and painful job, like looking for a needle in a haystack: the reality is that vast majority of small industrial stocks have never turned a buck, and many of them never will.

Phoslock, however, doesn't fall into that mould. It has proven that it is able to consistently win contracts, and not just that: increasingly, the contracts it has been scoring have been worth millions of dollars. There are hundreds of small listed companies who would love to be in a position to do what Phoslock has been doing.

The hackneyed argument about Phoslock not having gone anywhere in its twenty years as a listed stock is so much guff.

The perennial problem Phoslock has faced has had more to do with the business model: Their business is notoriously lumpy, and the good years haven't been enough to offset the lean ones. They've never managed to quite find a model that works. But there is no doubt the company has made giant strides over the years with respect to the size of contracts they are winning.

By the way, I agree with your other point regarding the excessive salaries of the executives. Various management regimes have indeed benefited generously from the company's resources. There is no doubt about that.

But once again, your observation rather undermines your central argument. Notwithstanding the succession of over-renumerated exectutives, Phoslock has somehow managed to stay afloat for two decades.

You have to wonder: if Phoslock has been able to survive for two decades despite being constantly milked by its executives, how well could the company have done if we had instead had managers who were content to get paid just a regular managerial wage?

2)...Given the lack of consistent sales by the business from its inception and the ongoing investment necessary to support product development and market expansion, a significant capital injection was required to support the ongoing long term operations of the business, at a level that could achieve sustainable business profitability...

In other words, the level of capital injection required to support the business into a profitable situation is just not tenable...

I take it that you don't have much interest in the small-cap mining space? Because if you did, you'd be aware that the description you've outlined above could be equally applied to hundreds of mining exploration stocks currently listed on the ASX.

Do you know how many of these little exploration stocks currently have a market capitalisation of less than ten million dollars? At the moment, there are some 300 that fit into that ballpark.

And do you have any idea as to how much of an injection of capital it would take to make these companies profitable? Getting any mining operation up and running is invariably going to cost a motza. Certainly, the cost would be many times the market cap of any of any of these companies.

So why do the management of these 300 companies even bother? Why aren't they all putting out announcements stating that '...the level of capital injection required to support the business into a profitable situation is just not tenable, etc...' before winding up their operations?

Basically, the management of these companies know something that the Phoslock management apparently haven't cottoned on to: Namely, that the stock market is dynamic, and the share price of any company is fluid. A company worth ten million today, could quite possibly be worth one hundred million in a year or two .... assuming things go right for them. And of course, as the share price rises, so does the market cap of the stock, and with that its capacity to raise capital. Often, you find it becomes a virtuous circuit: as the stock gets bigger, the vision of the company becomes increasingly more realistic, which attracts more investors, and so the share price of the stock continues to rise.

What is true for these junior mining stocks is no less true for Phoslock. The primary job of the management of this company was to drive the share price higher. And this aim was certainly a viable one: As previously noted, Phoslock has proven that it is able to win multi-million dollar contracts, and both the current and former management have consistently indicated that there were numerous large contracts in the pipeline, so we have no good reason to doubt this.

Once again, the claim that the company isn't viable because it needs a large capital injection is so much nonsense. Were the management seriously expecting someone to waltz past and pass them a large bag of funds, Santa-Klaus style? If that was so, then alas, they were sadly deluded.

The core job of the management of a small listed entity is to get the share price higher. There was no reason to believe that this wasn't achieveable with Phoslock, given enough time. For whatever reason, the management of this company have simply decided that they weren't going to even try.

3)...For a while now it has been evident to many (or at least those who are capable of reading and interpreting financial statements) that this company was going under in the near term...

If only we'd all been as diligent as you, we would have likewise known that it was inevitable that the company wasn't going to be able to continue to meet its obligations for much longer.

But there are two small problems with that cute line.

Firstly, I'm going to return to the question I mooted in my previous post: where is the capital raising? If Phoslock's cash reseveres are rapidly depleting, why aren't they intitating a capital raising, like almost every one of the other stocks I hold seems to be doing at current?

Based on the content of your previous post, I think I might be able to predict your response: things were deteriorating so rapidly for the company that even a capital raising wouldn't have saved them.

But is that really true?.

Let's take a closer look at one curious passage in one of the recent announcements, one which you negelected to mention in your last post ('Potential asset sale and Wind-up', 31/10/2023):

'...PET is currently negotiating with a third party regarding a potential divestment of PET’s key assets in exchange for cash. While these negotiations are incomplete and there can be no guarantee that a transaction will be consummated, should the parties agree on terms, completion will be contingent on shareholder approval and other conditions precedent. In that event, further information will be provided to all PET shareholders, including a notice of meeting with resolutions to consider the proposed transaction. PET will continue to monitor and satisfy the Company’s liabilities including costs associated with the necessary administration steps leading to a wind-up of the Company. Depending on the quantum of proceeds and the extent of liabilities/costs, there may be a return of capital to PET shareholders....'

Here we find the second problem.

According to Shortblack's brilliant analysis, Phoslock's financial position was so dire, that even a capital raising couldn't save them.

But given that the outlook is obviously so grim, I wonder, exactly how is it that the mangement can even contemplate paying out a capital return to shareholders?

Perhaps, because things aren't quite as dire as the management would have us believe...(?)

4)...Well that was an extremely long winded and drawn out read of the fantasies you hold in your head about Phoslock...

Yes, it was a bit long, wasn't it. I'm sorry to have wasted your time.

Bear in mind, though, that the reason for the extensive length is because I pasted extended passages from a series of past Phoslock anouncements throughout the post, in order to provide evidence to support my arguments.

But of course, most of the evidence I presented didn't quite marry with the rather trite 'Phoslock is a big fraud' line of argument that you've been trotting out here for over two years now. Which I would guess is probably the real issue you had with the post?

By the way Shortblack, given your obsession with irregularities, I am sure you won't mind if I point out a few observations of my own that I've formed here over the years?

When I read through your posts, I often get a strange sense of deja vu.

To be more specifc, you remind me quite a lot of another poster who used to frequently pop up on this forum, a certain 'Edshann'. It often strikes me that your persective on the company and knowledge of the ins-and -outs of the company is uncannily similar to that of Ed's.

There is, however, one notable difference between your posts and those of our old friend: you seem to have a much snarkier, meaner and more conceited personality than Edshann.

That is curious.

One thing that I've noticed over the years while obseving posters on this platform, real and suspicious ones alike, is that one of the key differences between the smurf accounts and the genunine ones is that the fakesters tend to be snarkier, meaner and more conceited than real posters. Which makes sense.

It's a bit like hoons who scream abuse at passer-bys from speeding cars. You find they tend to be far less expressive when they are pounding the pavement at regular walking pace. It is so much easier to be a knob when it is hard for anyone to identify you.

So, if we assume that the same person is behind the EdShann and Shortblack accounts, why exactly did they suddenly decide to start posting with a new account a few years ago?

Well, quite possibly, the answer to that question might be found in one of Mickem's posts in response to Edshann at the end of 2020:

...I have freely told them who Mickem is would not be surprised if other have as well. With your hc handle is that hidden your name ? I could be wrong but I think I know who you might be...

For those who didn't pick up the inference, what Mickem is pointing to is this: Brenda Shanahan

I wonder, could it be that by the end of 2020, the person posting under 'EdShann' started to become concerned that this particular handle was becoming too obvious, and so felt obliged to start posting under a second, much less discernible account in early 2021?

Of course, all of the above is pure speculation on my part, and I'm in no way inferring that Brenda Shanahan is linked to either the Shortblack or Edshann account. After all, it is hard to believe that a company director, who is paid $100K a year, would spend their spare time using Hotcopper to bag out the company that they work for. Perish the thought.

I was going to dust off this post by adding more evidence in support of the argument relating to the continuing viability of the business, but just within the past 48 hours, a couple of article about Phoslock have been published on two local news sites. In the event, these articles make a much more compelling case than anything I could offer.

Firstly, as is indicated in an article from the West Australian, it looks as if Phoslock has secured the Vasse River contract that was previously mentioned here by Mickem, Chand and other posters. The article is behind a paywall, but it does sound as if the company has secured yet another contract.

The second article featured on a local news site from the state of Wyoming in the USA, where Phoslock had planned to establish a manufacturing plant. The local media have cottoned on to the fact that, in light of the recent announcements put out by the company, this is unlikely to go ahead.

The article includes some interesting comments from Bush Heathman, Phoslock's USA manager, so I've pasted the text below, highlighting the relevant passages in bold:

...CASPER, Wyo. — Phoslock Environmental Technologies will not set up a manufacturing plant in Casper as hoped, but Advance Casper has other options for property originally bought on behalf of the Australian-based company.

In April, the State Loan and Investment Board awarded the Natrona County-City of Casper Economic Development Joint Powers Board a $600,000 Wyoming Business Council grant to buy a manufacturing plant that would allow Phoslock Environmental Technologies, or PET, to move from China to Casper.

To provide a facility where PET could manufacture and export Wyoming-made products within the United States and across the globe, Advance Casper and the Economic Development Joint Powers Board combined funds with the state grant to buy property at 2199 Pyrite in Casper in August.

On Oct. 31, Phoslock Environmental Technologies announced a decision by company directors to proceed with a proposed asset sale while taking steps to reduce costs and wind down operations.

According to its website, Phoslock Environmental Technologies is a global leader in the treatment and remediation of fresh waters, particularly those impacted by excessive levels of phosphorus. Headquartered in Melbourne, Australia, PET also has offices in Shanghai and the United Kingdom, and sales resources in China, Australia, New Zealand, Europe and the United States. It has registered entities in Canada, the United States and Belgium. Manufacturing operations are based in Changxing, China.

“The wheels came off, and we just happened to be caught up in that,” said Advance Casper President Justin Farley on Nov. 8, referencing the company announcement, provided below. “They were moving in what seemed to be a good direction … and were slowly divesting themselves from China.”

With PET’s official announcement, the entities involved must go through protocol as they determine with the state whether to move forward with other options for the Casper property. “The good news is multiple companies could use that building,” Farley said.

The water treatment product Phoslock, trademarked, permanently binds excess phosphorus in the water column and sediments. Developed in the 1990s by the Australian national science agency CSIRO, it consists of lanthanum-modified bentonite.

Farley described Phoslock as a bentonite-based water treatment product.

With a proven product that had shown success in Asia and Europe, Phoslock Environmental Technologies was just breaking into the United States market, Farley said. The company wanted to expand its manufacturing beyond China, and had shown interest in Casper due to the availability of bentonite.

“The Wyoming community really came together for us,” Bush Heathman, PET general manager, said by email.

“Phoslock USA has been a great success story, here in Casper and across the U.S.,” he said.

Heathman said the nearly 150 metric tonnes in 2023 alone were an 83% increase over 2022.

“Unfortunately, the company’s growth in the U.S. was overcome by poor corporate legacy management issues, which resulted in responsibilities to the Australian Stock Exchange and PET shareholders,” Healthman said.

Given the potential PET sale, whether a new entity would still look to Casper for bentonite to manufacture is unknown, Farley said.

The Oct. 31 announcement did make it clear PET is not going forward with a manufacturing plant at the Casper Pyrite site.

Now the Wyoming Business Council must reconsider the grant award....


So, it looks like wev'e just won a new contract in Western Australia, our USA sales are up by 83% year-on-year, according to Heathman, and of course, we've also just managed to finally secure the multi-million dollar payment for the XingYun Lake Project in China....

...and the management want to drive this company off a cliff? Really?

If anyone here is still harbouring any doubts about the capacity of the company to continue as a going concern, look no further than the two above articles.