- Phoslock Environmental Technologies (PET) continues to dig through its China operations after accounting irregularities were uncovered in September
- Auditor KPMG has found false accounting and falsification of invoices and service contracts, as well as potential improper tax reporting and misappropriation of funds
- A number of employees at PET’s China operations have been stood down or fired, including Deputy Chairman, Zhigang Zhang and non-executive director Ningping Ma
- Investigations are ongoing and PET has secured an extension from the Australian Securities and Investment Commission to file its half-year accounts
- Otherwise, the company continues to expand its operations across Europe and the Americas, supported by a solid balance sheet
- Phoslock Environmental Technologies shares remain suspended; they last traded for 24.5 cents on September 17
Phoslock Environmental Technologies (PET) continues to dig through its China operations after accounting irregularities were uncovered in September.
China reset
PET stocks have been suspended from trade since mid-September at the request of the company after the accounting irregularities were discovered.
On September 30, the water treatment specialist announced the board had accepted the immediate resignations of the Deputy Chairman, Zhigang Zhang and non-executive director Ningping Ma.
PET’s auditor, KPMG, reported its preliminary findings on October 8. The audit revealed false accounting and falsification of invoices and service contracts, as well as potential improper tax reporting and misappropriation of funds.
Several more China-based employees were either stood down or terminated in relation to the irregularities.
KPMG has continued to investigate the extent of the dubious dealings, and the Australian Securities and Investment Commission (ASIC) has allowed PET an extension to lodge its audited half year accounts until the end of the 2020.
Phoslock said it “will actively investigate and consider its rights in relation to pursuing legal action against individuals and/or entities found to have been involved in any fraudulent activity and to securing the recovery of amounts associated with all irregularities.”
In addition to KPMG’s investigations, PET has also appointed a corporate finance consultant specialising in financial due diligence to its China bureau to assist in cleaning up its operations.
The company has also initiated comprehensive reviews to to strengthen its China office’s financial reporting procedures, delegated authority policies and general risk management framework.
PET global
Things are looking far more positive for the company’s global operations, with solid progress being made in Europe and the Americas.
Successful trials have been completed or are continuing in a number of U.S. states, while works are proceeding as planned across a number of projects in Brazil.
The company has also been expanding its European operations with a number of smaller projects across the Netherlands, Germany, and Belgium. It’s anticipated these projects should give Phoslock expanded market opportunities in the future.
The company has also signed a memorandum of understanding with a Thai distribution company for development work in Thailand.
With over $34 million in cash and cash equivalents on hand, PET remains well financed to continue its global expansion while it seeks to clean up its China operations.
Phoslock Environmental Technologies shares remain suspended; they last traded for 24.5 cents on September 17.