31 Oct, 2023
Directors resolve to proceed with potential asset sale and wind-up of the Company.
Phoslock Environmental Technologies (ASX: PET) (the ‘Company’) today announced that Directors have resolved to proceed with a proposed asset sale and to seek a de-listing from the ASX and a winding-up of the Company. The resolution follows a comprehensive but ultimately unsuccessful process to identify options to secure the necessary capital to continue the operations of the Company. Consistent with these decisions, the Company will take steps to reduce costs and wind down operations.
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.
As announced on 28 April 2023 (‘Strategic Review’), Resolute Advisory Pty Ltd (Resolute), a leading independent corporate advisory firm, was engaged to undertake a strategic review of the business. Resolute sought potential investors and industry players that may be interested in contributing capital support or partnering with PET.
Interest from those third parties has been negatively impacted by ongoing regulatory and potential legal actions relating to PET’s legacy issues and past management. PET has, however, remained focused at all times on exploring all potential strategic pathways to maximise shareholder value.
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.
The winding-up process will include consultation with the relevant regulatory authorities and other stakeholders. The proposed de-listing, and business wind down will help to reduce administration costs pending the winding-up of the Company.
The Company has come to these decisions now, as foreshadowed in announcements made over recent months: having invested an appropriate amount of time and effort in exploring and pursuing the potential opportunities afforded by the Company’s products; having investigated the legacy issues and activities as appropriate; having appointed Resolute to advise, examine and negotiate options on its behalf; and while the Company still has cash reserves, this decision now takes due account of creditor obligations, and the interests of PET shareholders in that context.
The Company will provide an update on the status of the proposed asset sale and next steps in due course.
XingYun Lake Receivable Update
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.
This amount represented a 25% reduction of the remaining principal amount owed which, under the Settlement Agreement, was accepted by the Company as satisfaction of the full amount owed, being RMB 28,915,650.
It should be noted that the payment was made to PET’s Chinese subsidiary BEST. Steps will need to be taken to try to repatriate the funds to Australia.
While this one-off payment has contributed to the capital base of the Company while winding-up liabilities and potential shareholder capital returns are considered, it does not alter the view of Directors as to the current and longer-term viability of the business in terms of its ongoing operations.
This announcement has been approved by the Managing Director and Chairman
For the full announcement and Quarterly cash flow report Download PDF.