Phoslock Reports $776K Operating Deficit with Stable 385 Tonne Sales

Cash Flow Improves but Remains Negative

Phoslock Environmental Technologies (ASX:PET) closed the March 2026 quarter with $4.3 million in cash, down $892,000 from December. The operating cash flow deficit narrowed to $776,000, an improvement on the $953,000 shortfall in the same quarter last year. Despite lower sales receipts of $466,000, the company cut net operating outlays more sharply, including a significant $282,000 in legal fees offset by $274,000 reimbursed by AXA Insurance.

Production Restart Faces Early Equipment Setbacks

After resuming operations in early January, Phoslock's Changxing factory experienced initial equipment failures that limited production to 37 of 62 available weekdays in the quarter. However, the last three weeks saw near full-capacity operation at 14.7 tonnes per day, supporting a production total of 356 tonnes. Sales volumes remained steady at 385 tonnes, distributed primarily across Brazil (60%), Europe (24%), Australia (13%), and the USA (3%). The factory restart follows the earlier corrected quarterly funding figures and builds on the company’s efforts to stabilize manufacturing after a prolonged hiatus.

R&D Advances with Lanthanum-Enhanced Product

Research and development in China continues with promising progress on a new product containing 10% lanthanum. This formulation demonstrates strong phosphorus-binding properties and free lanthanum characteristics. Phoslock is preparing a patent application and planning bulk sample production for third-party laboratory and in-lake testing, aiming to validate efficacy and expand market appeal.

Legal Challenges Persist with Mediation Scheduled

The company remains engaged in legacy legal matters, including a shareholder class action initiated by the Banton Group. The case is in the discovery phase with mediation set for 11 June 2026. Phoslock has expressed commitment to complying with regulatory requirements and vigorously defending its interests, though the ultimate outcome and financial impact remain uncertain.

No Financing Activity, Solid Inventory Position

Phoslock did not undertake any financing activities during the quarter. Product inventory stood at 1,151 tonnes at quarter end, including 466 tonnes in China, providing a buffer as production scales. The company’s focus remains on operational stability, R&D progress, and navigating legal risks while maintaining its global footprint through strategic alliances and distribution partners across key markets.